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<P align="center"><font size="2" face="sans-serif"><B>UNITED STATES<br>
  SECURITIES AND EXCHANGE COMMISSION<br>
  Washington, D.C. 20549</B></font></P>
<hr align="center" width="166" size="1">
<P align="center"><font size="2" face="sans-serif"><B>FORM 20-F</B></font></P>
<P><font size="2" face="sans-serif"> (Mark One)</font></P>
<P><FONT size=2 face="sans-serif"><img src="emptybox.gif" width="12" height="12">
  &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
  THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>
<p align="center"><font size="2" face="sans-serif">OR</font></P>
<p><FONT size=2 face="sans-serif"><img src="tickedbox.gif" width="12" height="12">
  &nbsp;&nbsp;&nbsp;ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934 </FONT></P>
<p align="center"><FONT size=2 face="sans-serif">FOR THE FISCAL YEAR ENDED JULY
  31, 2006</FONT></P>
<p align="center"><font size="2" face="sans-serif">OR</font></P>
<p><FONT size=2 face="sans-serif"><img src="emptybox.gif" width="12" height="12">
  &nbsp;&nbsp;&nbsp;TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934&nbsp; </FONT></P>
<P align="center"><font size="2" face="sans-serif"> <B>Commission File Number
  1-15186<br>
  <br>
  <font size="3">WOLSELEY plc<br>
  </font></B>(Exact Name of Registrant as Specified in its Charter)</font></P>
<P align="center"><font size="2" face="sans-serif"><B>England and Wales<br>
  </B>(Jurisdiction of Incorporation or Organization)<br>
  <B>Parkview 1220<br>
  Arlington Business Park<br>
  Theale, Reading, Berkshire, RG7 4GA, United Kingdom<br>
  </B>(Address of Principal Executive Offices)</font></P>
<p>
<hr align="center" width="166" size="1">

<p align="center"><font face="sans-serif" size="2"><b>Securities Registered or
  to be Registered Pursuant to Section 12(b) of the Act:</b></font></p>

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    <td align="center"><div style="margin-left:3%; text-indent:-3%"><font face="sans-serif" size="2"><b>Title
        of each class</b></font></div></td>
    <td width="2%"><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="center" width="48%"><font face="sans-serif" size="2"><b>Name of
      each exchange</b></font></td>
    <td width="2%"><font face="sans-serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><div style="margin-left:3%; text-indent:-3%"><font size="2" face="sans-serif">American
        Depositary Shares, evidenced by<br>
        American Depositary Receipts, each<br>
        representing one (1) Ordinary Share </font></div></td>
    <td width="2%"><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="center" width="48%"><font face="sans-serif" size="2">New York Stock
      Exchange</font></td>
    <td width="2%"><font face="sans-serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><div style="margin-left:3%; text-indent:-3%"><font face="sans-serif" size="2">Ordinary
        Shares of 25p each*</font></div></td>
    <td><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="sans-serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="sans-serif" size="2">New York Stock Exchange</font></td>
    <td><font face="sans-serif" size="2">&nbsp;</font></td>
  </tr>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td> <hr noshade size="1" align="left" width="100"></td>
  </tr>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="sans-serif" size="1">&#8226;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*</font></td>
    <td width="3%"><font face="sans-serif" size="1">&#8226;</font></td>
    <td align="left"><font size="1" face="sans-serif">Listed, not for trading,
        but only in connection with the registration of American Depositary Shares,
        pursuant to the requirements of the Securities and Exchange Commission.</font></td>
  </tr>
</table>
<P align="center"><font size="2" face="sans-serif"><B>Securities Registered or
  to be Registered Pursuant to Section 12(g) of the Act:<br>
  </B>None</font> </P>
<P align="center"><font size="2" face="sans-serif"> <B> Securities for Which There
  is a Reporting Obligation Pursuant to Section 15(d) of the Act:<br>
  </B>None</font> </P>
<P><font size="2" face="sans-serif"> Indicate the number of outstanding shares
  of each of the issuer&#146;s classes of capital or common stock as of July 31,
  2006.</FONT></P>
<P align="center"><font size="2" face="sans-serif"> Ordinary Shares of 25p each&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;597,696,216*</font></P>
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    <td> <hr noshade size="1" align="left" width="100"> </td>
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  <tr valign="top">
    <td width="3%"><font face="sans-serif" size="1">&#8226;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*</font></td>
    <td width="3%"><font face="sans-serif" size="1">&#8226;</font></td>
    <td align="left"><font size="1" face="sans-serif">Includes
        American Depositary Shares representing Ordinary Shares.</font></td>
  </tr>
</table>
<P><font size="2" face="sans-serif"> Indicate by checkmark whether the registrant
  (1) has filed all reports required to be filed by Section 13 or 15(d) of the
  Securities Exchange Act of 1934 during the preceding 12 months (or for such
  shorter period that the registrant was required to file such reports), and (2)
  has been subject to such filing requirements for the past 90 days.</FONT></P>
<p align="center"><font size="2" face="sans-serif"><img src="tickedbox.gif" width="12" height="12">&nbsp;&nbsp;YES&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif" width="12" height="12">
  &nbsp;&nbsp;&nbsp;&nbsp;NO</font></p>
<P><font size="2" face="sans-serif"> Indicate by check mark whether the registrant
  is a large accelerated filer, an accelerated filer, or a non-accelerated filer.</FONT></P>
<p align="center"><font size="2" face="sans-serif"><img src="tickedbox.gif" width="12" height="12">&nbsp;&nbsp;Large
  Accelerated filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;Accelerated
  filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;Non-accelerated
  filer</font></P>
<P><font size="2" face="sans-serif">Indicate by check mark which financial statement
  item the registrant has elected to follow.</FONT></P>
<p align="center"><font size="2" face="sans-serif"><img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
  17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="tickedbox.gif" width="12" height="12">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ITEM
  18</font></p>
<P><font size="2" face="sans-serif"> If this is an annual report, indicate by
  check mark whether the registrant is a shell company (as defined in Rule 12b-2
  of the Exchange Act)</font></P>
<p align="center"><font size="2" face="sans-serif"><img src="emptybox.gif" width="12" height="12">&nbsp;&nbsp;YES&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="tickedbox.gif" width="12" height="12">
  &nbsp;&nbsp;&nbsp;&nbsp;NO</font></p>
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<font face="sans-serif"><page><a name="contents"></a> <font size="2" face="sans-serif">
</font></font>
<P align="center"><font size="2" face="sans-serif"><B>TABLE OF CONTENTS</B></font></P>
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    <TD width="10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width=5% align="right"><font size="1" face="sans-serif"><B>Page</B></font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan="2"><a href="#p3"><FONT size=2 face="sans-serif">GENERAL</FONT></a></TD>
    <TD align="right"><a href="#p3"><font size="2" face="sans-serif">3</font></a></TD>
  </TR>
  <TR>
    <TD colspan="2"><a href="#p3a"><FONT size=2 face="sans-serif">CAUTIONARY STATEMENT
      REGARDING FORWARD LOOKING STATEMENTS</FONT></a></TD>
    <TD align="right"><a href="#p3a"><font size="2" face="sans-serif">3</font></a></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><a href="#p4"><FONT size=2 face="sans-serif">PART I</FONT></a></TD>
    <TD><a href="#p4"></a></TD>
    <TD align="right"><a href="#p4"><font size="2" face="sans-serif">4</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p4a"><FONT size=2 face="sans-serif">ITEM 1.</FONT></a></TD>
    <TD><a href="#p4a"><FONT size=2 face="sans-serif">IDENTITY OF DIRECTORS, SENIOR
      MANAGEMENT AND ADVISERS</FONT></a></TD>
    <TD align="right"><a href="#p4a"><font size="2" face="sans-serif">4</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p4b"><FONT size=2 face="sans-serif">ITEM 2.</FONT></a></TD>
    <TD><a href="#p4b"><FONT size=2 face="sans-serif">OFFER STATISTICS AND EXPECTED
      TIMETABLE</FONT></a></TD>
    <TD align="right"><a href="#p4b"><font size="2" face="sans-serif">4</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p4c"><FONT size=2 face="sans-serif">ITEM 3.</FONT></a></TD>
    <TD><a href="#p4c"><FONT size=2 face="sans-serif">KEY INFORMATION</FONT></a></TD>
    <TD align="right"><a href="#p4c"><font size="2" face="sans-serif">4</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p14"><FONT size=2 face="sans-serif">ITEM 4.</FONT></a></TD>
    <TD><a href="#p14"><FONT size=2 face="sans-serif">INFORMATION ON THE GROUP</FONT></a></TD>
    <TD align="right"><a href="#p14"><font size="2" face="sans-serif">14</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p24"><FONT size=2 face="sans-serif">ITEM 4A.</FONT></a></TD>
    <TD><a href="#p24"><FONT size=2 face="sans-serif">UNRESOLVED STAFF COMMENTS</FONT></a></TD>
    <TD align="right"><a href="#p24"><font size="2" face="sans-serif">24</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p24a"><FONT size=2 face="sans-serif">ITEM 5.</FONT></a></TD>
    <TD><a href="#p24a"><FONT size=2 face="sans-serif">OPERATING AND FINANCIAL
      REVIEW AND PROSPECTS</FONT></a></TD>
    <TD align="right"><a href="#p24a"><font size="2" face="sans-serif">24</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p40"><FONT size=2 face="sans-serif">ITEM 6.</FONT></a></TD>
    <TD><a href="#p40"><FONT size=2 face="sans-serif">DIRECTORS, SENIOR MANAGEMENT
      AND EMPLOYEES</FONT></a></TD>
    <TD align="right"><a href="#p40"><font size="2" face="sans-serif">40</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p67"><FONT size=2 face="sans-serif">ITEM 7.</FONT></a></TD>
    <TD><a href="#p67"><FONT size=2 face="sans-serif">MAJOR SHAREHOLDERS AND RELATED
      PARTY TRANSACTIONS</FONT></a></TD>
    <TD align="right"><a href="#p67"><font size="2" face="sans-serif">67</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p67a"><FONT size=2 face="sans-serif">ITEM 8.</FONT></a></TD>
    <TD><a href="#p67a"><FONT size=2 face="sans-serif">FINANCIAL INFORMATION</FONT></a></TD>
    <TD align="right"><a href="#p67a"><font size="2" face="sans-serif">67</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p68"><FONT size=2 face="sans-serif">ITEM 9.</FONT></a></TD>
    <TD><a href="#p68"><FONT size=2 face="sans-serif">THE OFFER AND LISTING</FONT></a></TD>
    <TD align="right"><a href="#p68"><font size="2" face="sans-serif">68</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p70"><FONT size=2 face="sans-serif">ITEM 10.</FONT></a></TD>
    <TD><a href="#p70"><FONT size=2 face="sans-serif">ADDITIONAL INFORMATION</FONT></a></TD>
    <TD align="right"><a href="#p70"><font size="2" face="sans-serif">70</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p75"><FONT size=2 face="sans-serif">ITEM 11.</FONT></a></TD>
    <TD><a href="#p75"><FONT size=2 face="sans-serif">QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK</FONT></a></TD>
    <TD align="right"><a href="#p75"><font size="2" face="sans-serif">75</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p77"><FONT size=2 face="sans-serif">ITEM 12.</FONT></a></TD>
    <TD><a href="#p77"><FONT size=2 face="sans-serif">DESCRIPTION OF SECURITIES
      OTHER THAN ORDINARY SHARES</FONT></a></TD>
    <TD align="right"><a href="#p77"><font size="2" face="sans-serif">77</font></a></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><a href="#p78"><FONT size=2 face="sans-serif">PART II</FONT></a></TD>
    <TD><a href="#p78"></a></TD>
    <TD align="right"><a href="#p78"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78a"><FONT size=2 face="sans-serif">ITEM 13.</FONT></a></TD>
    <TD><a href="#p78a"><FONT size=2 face="sans-serif">DEFAULTS, DIVIDEND ARREARAGES
      AND DELINQUENCIES</FONT></a></TD>
    <TD align="right"><a href="#p78a"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78b"><FONT size=2 face="sans-serif">ITEM 14.</FONT></a></TD>
    <TD><a href="#p78b"><FONT size=2 face="sans-serif">MATERIAL MODIFICATIONS
      TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</FONT></a></TD>
    <TD align="right"><a href="#p78b"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78c"><FONT size=2 face="sans-serif">ITEM 15.</FONT></a></TD>
    <TD><a href="#p78c"><FONT size=2 face="sans-serif">CONTROLS AND PROCEDURES</FONT></a></TD>
    <TD align="right"><a href="#p78c"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78d"><FONT size=2 face="sans-serif">ITEM 16A.</FONT></a></TD>
    <TD><a href="#p78d"><FONT size=2 face="sans-serif">AUDIT COMMITTEE FINANCIAL
      EXPERT</FONT></a></TD>
    <TD align="right"><a href="#p78d"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78e"><FONT size=2 face="sans-serif">ITEM 16B.</FONT></a></TD>
    <TD><a href="#p78e"><FONT size=2 face="sans-serif">CODE OF ETHICS</FONT></a></TD>
    <TD align="right"><a href="#p78e"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78f"><FONT size=2 face="sans-serif">ITEM 16C.</FONT></a></TD>
    <TD><a href="#p78f"><FONT size=2 face="sans-serif">PRINCIPAL ACCOUNTANT FEES
      AND SERVICES</FONT></a></TD>
    <TD align="right"><a href="#p78f"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p78g"><FONT size=2 face="sans-serif">ITEM 16D.</FONT></a></TD>
    <TD><a href="#p78g"><FONT size=2 face="sans-serif">EXEMPTIONS FROM THE LISTING
      STANDARDS FOR AUDIT COMMITTEES</FONT></a></TD>
    <TD align="right"><a href="#p78g"><font size="2" face="sans-serif">78</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p79"><FONT size=2 face="sans-serif">ITEM 16E.</FONT></a></TD>
    <TD><a href="#p79"><FONT size=2 face="sans-serif">PURCHASES OF EQUITY SECURITIES
      BY THE ISSUER AND AFFILIATED PURCHASERS</FONT></a></TD>
    <TD align="right"><a href="#p79"><font size="2" face="sans-serif">79</font></a></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><a href="#p80"><FONT size=2 face="sans-serif">PART III</FONT></a></TD>
    <TD><a href="#p80"></a></TD>
    <TD align="right"><a href="#p80"><font size="2" face="sans-serif">80</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p80a"><FONT size=2 face="sans-serif">ITEM 17.</FONT></a></TD>
    <TD><a href="#p80a"><FONT size=2 face="sans-serif">FINANCIAL STATEMENTS</FONT></a></TD>
    <TD align="right"><a href="#p80a"><font size="2" face="sans-serif">80</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p80b"><FONT size=2 face="sans-serif">ITEM 18.</FONT></a></TD>
    <TD><a href="#p80b"><FONT size=2 face="sans-serif">FINANCIAL STATEMENTS</FONT></a></TD>
    <TD align="right"><a href="#p80b"><font size="2" face="sans-serif">80</font></a></TD>
  </TR>
  <TR>
    <TD><a href="#p80c"><FONT size=2 face="sans-serif">ITEM 19.</FONT></a></TD>
    <TD><a href="#p80c"><FONT size=2 face="sans-serif">EXHIBITS</FONT></a></TD>
    <TD align="right"><a href="#p80c"><font size="2" face="sans-serif">80</font></a></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD height="20" colspan=2><a href="#p81"><FONT size=2 face="sans-serif">SIGNATURE</FONT></a></TD>
    <TD align="right"><a href="#p81"><font size="2" face="sans-serif">81</font></a></TD>
  </TR>
</TABLE>
<P align="center"> <FONT face="sans-serif" size="2">2</FONT></P>
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<font face="sans-serif"><page>  <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P align="center"><font face="sans-serif"><a name="p3"></a></font><font size="2" face="sans-serif"><B>GENERAL</B></font></P>
<P><FONT size=2 face="sans-serif">As used in this Annual Report, &#147;Company&#148;
  refers to Wolseley plc, and &#147;Wolseley&#148; or the &#147;Group&#148; refers
  collectively to Wolseley plc and its consolidated subsidiaries.</FONT></P>
<P><FONT size=2 face="sans-serif">The consolidated financial statements of Wolseley
  appearing in this Annual Report (the &#147;Consolidated Financial Statements&#148;)
  are presented in pounds sterling and are prepared in accordance with International
  Financial Reporting Standards  as adopted by the European
  Union (&#147;EU&#148;) (&#147;IFRS&#148;). There are no material differences between IFRS as adopted
  by the EU and complied with in the preparation of these accounts and IFRS as
  published by the IASB, for the Group. The 2006 financial statements are the
  Group&#146;s first consolidated financial statements prepared under IFRS, with
  a transition date of August 1, 2005. Consequently, the comparative figures for
  fiscal year 2004 and the Group&#146;s balance sheet as at August 1, 2005 have
  been restated to comply with IFRS. IFRS differs in certain respects from accounting
  principles generally accepted in the United States (&#147;US&#148;) (&#147;US
  GAAP&#148;). The significant differences between IFRS and US GAAP relevant to
  Wolseley are identified beginning on page </FONT><font face="sans-serif"><font size="2">F-57</font><FONT size=2>
  of the Consolidated Financial Statements. </FONT></font> </P>
<P><FONT size=2 face="sans-serif">This Annual Report contains amounts in British
  pounds sterling (&#147;&pound;&#148;) or pence (&#147;p&#148;) (1p is equivalent
  to 1/ 100 of &pound;1). For information on exchange rates between British pounds
  sterling and US dollars (&#147;US dollars&#148; or &#147;$&#148;) or cents (&#147;&cent;&#148;),
  see &#147;Item 3 &#150; Key Information &#150; British Pounds Sterling Exchange
  Rate Information&#148;.</FONT></P>
<P align="center"><font face="sans-serif"><a name="p3a"></a></font><font size="2" face="sans-serif"><B>CAUTIONARY
  STATEMENT REGARDING FORWARD LOOKING STATEMENTS</B></font></P>
<P><FONT size=2 face="sans-serif">This Annual Report contains forward looking
  statements. The Company desires to take advantage of the safe harbor provisions
  of the US Private Securities Litigation Reform Act of 1995 and is including
  this statement for the express purpose of availing itself of the protections
  of the safe harbor with respect to all forward looking statements. Several important
  factors, in addition to the specific factors discussed in connection with such
  forward looking statements individually, could affect Wolseley&#146;s future
  results and could cause those results to differ materially from those expressed
  in the forward-looking statements contained in this Annual Report. These forward
  looking statements may generally, but not always, be identified by the use of
  words such as &#147;will&#148;, &#147;expects&#148;, &#147;is expected to&#148;,
  &#147;should&#148;, &#147;may&#148;, &#147;is likely to&#148;, &#147;intends&#148;,
  &#147;believes&#148; or similar expressions. Statements, other than statements
  of historical fact, included in this Annual Report including, without limitation,
  the statements under &#147;Key Information&#148;, &#147;Information on the Group&#148;,
  &#147;Operating and Financial Review and Prospects&#148; and &#147;Quantitative
  and Qualitative Disclosures about Market Risk&#148; are, or may be deemed to
  be, forward-looking statements within the meaning of Section 21E of the US Securities
  Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;). By their nature,
  forward looking statements involve risk and uncertainty because they relate
  to events and depend on circumstances that will o ccur in the future and are
  outside Wolseley&#146;s control.</FONT></P>
<P><FONT size=2 face="sans-serif">Important factors that could cause actual results
  to differ materially from those discussed in such forward looking statements
  include, but are not limited to, changes in economic conditions, including in
  particular the general strength or weakness of the plumbing and heating and
  building materials industries in North America and Europe, in both the private
  (residential and commercial) and public sectors; risks related to Wolseley&#146;s
  growth strategy; fluctuations in product pricing; Wolseley&#146;s ability to
  manage its growth; actions of competitors; risks related to Wolseley&#146;s
  international operations; risks related to litigation in the jurisdictions in
  which Wolseley operates; Wolseley&#146;s ability to identify and successfully
  integrate acquisitions and realize synergies from acquired companies; Wolseley&#146;s
  ability to finance acquisitions; changes in government regulations in countries
  in which Wolseley has operations; Wolseley&#146;s ability to retain and attract
  personnel; continued development of e-business distribution alternatives; changes
  in exchange rates and other factors discussed elsewhere in this Annual Report,
  in particular under &#147;Item 3 &#150; Key Information &#150; Risk Factors
  Relating to Wolseley&#146;s Industry and Business&#148; (all such factors, and
  cautionary statements with respect thereto, collectively, &#147;Cautionary Statements&#148;).
  All subsequent written and oral forward-looking statements attributable to Wolseley
  or persons acting on behalf of Wolseley are expressly qualified in their entirety
  by such Cautionary Statements. In addition to factors set forth elsewhere in
  this Annual Report, the factors set forth above are important factors, although
  not exhaustive, that may cause actual results and developments to differ materially
  from those expressed or implied by these forward looking statements.</FONT></P>
<P><FONT size=2 face="sans-serif">The Company wishes to caution each reader of
  this Annual Report to consider carefully these factors as well as the specific
  factors that may be discussed with each forward-looking statement in this Annual
  Report or disclosed in the Company&#146;s filings with the US Securities and
  Exchange Commission (the &#147;SEC&#148;) as such factors, in some cases, could
  affect Wolseley&#146;s ability to implement its business strategy and cause
  actual results to differ materially from those contemplated by the statements
  expressed herein.</FONT></P>
<P align="center"><font size="2" face="sans-serif">3</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P align="center"><font face="sans-serif"><a name="p4"></a></font><font size="2" face="sans-serif"><B>PART
  I</B></font></P>
<P> <font face="sans-serif"><a name="p4a"></a></font><font size="2" face="sans-serif"><B>ITEM
  1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</B></font></P>
<P><FONT size=2 face="sans-serif">Not applicable.</FONT></P>
<P> <font face="sans-serif"><a name="p4b"></a></font><font size="2" face="sans-serif"><B>ITEM
  2. OFFER STATISTICS AND EXPECTED TIMETABLE</B></font></P>
<P><FONT size=2 face="sans-serif">Not applicable.</FONT></P>
<P> <font face="sans-serif"><a name="p4c"></a></font><font size="2" face="sans-serif"><B>ITEM
  3. KEY INFORMATION</B></font></P>
<P> <font size="2" face="sans-serif"><B>A. Selected Financial Data</B></font></P>
<P><FONT size=2 face="sans-serif">For the year ended July 31, 2006, the Group
  is required to prepare its audited annual consolidated financial statements
  in accordance with IFRS, as adopted by the EU and those parts of the UK Companies
  Act 1985 applicable to companies reporting under IFRS.</FONT></P>
<P><FONT size=2 face="sans-serif">Previously the Group prepared its audited annual
  financial statements under UK generally accepted accounting principles (UK GAAP).
  The financial statements for the 2005 financial year have therefore been restated
  as part of the first-time adoption of IFRS. As allowed by the SEC rules in relation
  to first-time adoption of IFRS, only two years of comparative IFRS financial
  statements are presented in this Annual Report. The policies set out on pages
  F-6 to F-12 of this Annual Report have been applied consistently to the 2006
  and 2005 financial years. The selected financial data on page 5 of this Annual
  Report are shown in accordance with IFRS for 2006 and 2005. IFRS differs in
  certain respects from accounting principles generally accepted in the United
  States. The material differences between IFRS and US GAAP relevant to the Group
  are explained on pages F-57 to F-71 of this report.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">4</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p5"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font></font>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Year Ended July 31,</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3"><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center" colspan=3><font size="1" face="sans-serif"><B>(Amounts in millions,</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center" colspan=3><font size="1" face="sans-serif"><B>except per share amounts)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2" face="sans-serif"><B>Amounts in accordance with IFRS <br>
      Consolidated
    Income Statement</B></font></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif"><B>Revenue</B></font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">11,256</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="2" face="sans-serif"><B>Operating profit</B></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">834</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">702</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Profit on ordinary activities before finance
      expense</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">834</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">702</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Net finance expense</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(65</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(37</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif"><B>Profit on ordinary activities before
      tax</B></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">769</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">665</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Taxation</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(232</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(186</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif"><B>Profit on ordinary activities after
      tax</B></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">537</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">479</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Basic earnings per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">90.77</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">81.61</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Diluted earnings per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">90.02</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">80.75</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Dividends declared, net per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">29.40</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">26.40</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR>
    <TD><font size="2" face="sans-serif"><B>Other Data</B></font></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(48</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD><font size="2" face="sans-serif"><B>Consolidated Balance Sheet Data</B></font></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Total assets (fixed assets plus current assets)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">8,078</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,499</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Net assets</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,592</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,301</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Share capital</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">148</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Number of shares in issue at period end</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">598</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">592</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT face="sans-serif" size="2">5</FONT> </P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p6"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2004</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2003</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2002</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2" face="sans-serif"><B>Amounts in accordance with US GAAP<SUP>(1)
      (2)</SUP></B></font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Revenue</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">11,258</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">10,128</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">8,221</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">7,968</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Operating profit</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">783</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">639</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">577</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">452</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">401</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Net income</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">510</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">444</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">404</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">311</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">244</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Basic earnings per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">86.21p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">75.61p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">69.33p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">53.64p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">42.26p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Diluted earnings per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">85.42p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">74.94p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">68.53p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">53.21p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">41.84p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Total assets</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">8,357</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,760</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,645</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,141</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,101</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Shareholders&#146; funds</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,869</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,613</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,200</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,047</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,852</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Declared dividends per share</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">29.40p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">26.40p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">23.80p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">21.20p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">18.90p</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Share capital</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">149</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">148</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">146</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">145</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">144</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Shares in issue at period end (millions)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">598</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">592</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">585</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">581</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">578</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD colspan="2" valign="top"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
  <TR>
    <TD width="3%" valign="top"><FONT size=1 face="sans-serif">(1)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">See Note 44<b> </b>of the
      Consolidated Financial Statements for a description of significant differences
      between IFRS and US GAAP<BR>
      relevant to the Group.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(2)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">Following the adoption of
         the new US accounting standards for business combinations and goodwill,

      goodwill on acquisitions completed since July 1, 2001 has not been amortized
         under US GAAP. Goodwill amortization included in the determination of
        net
      income under US GAAP in the years ended July 31, 2002 and 2001 was &pound;46.0
       million and &pound;3.3 million, respectively. From August 1, 2002, goodwill
        has ceased to be amortized under US GAAP.</FONT></TD>
  </TR>
</TABLE>
<P align="center"> <FONT face="sans-serif" size="2">6</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p7"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P> <font size="2" face="sans-serif"><I>British Pounds Sterling Exchange Rate Information</I></font></P>
<P> <FONT size=2 face="sans-serif">The following tables set forth, for the months
  indicated, the high and low exchange rates and for the years indicated the average
  exchange rate between British pounds sterling and US dollars based on the noon
  buying rate in New York City for cable transfers in foreign currencies as certified
  for customs purposes by the Federal Reserve Bank of New York (the &#147;Noon
  Buying Rate&#148;) on the date of the information so translated (expressed in
  US dollars per pound sterling). These rates are provided solely for the reader&#146;s
  convenience and are not necessarily the exchange rates (if any) used by the
  Company in the preparation of the Consolidated Financial Statements included
  elsewhere in this Annual Report.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="78%"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>US Dollars per British</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Pounds Sterling</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Exchange Rate</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3"><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Month</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>High</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Low</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><hr align="left" width="50" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">February 2006</FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">1.7807</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">1.7343</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.7567</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.7256</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8220</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.7389</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8911</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8286</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">June 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8817</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8108</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8685</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8203</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">August 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.9102</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8711</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">September 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.9050</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8630</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">October 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.9084</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8548</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1" face="sans-serif"><B>US Dollars per British Pounds</B></font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1" face="sans-serif"><B>Sterling Average of the Noon</B></font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1" face="sans-serif"><B>Buying Rate on the Last
      Business</B></font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Company fiscal year ended
      July 31,</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1" face="sans-serif"><B>Day of Each Full Month</B></font></TD>
  </TR>
  <TR>
    <TD><hr align="left" width="170" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD align="left"><FONT size=2 face="sans-serif">2002</FONT></TD>
    <TD width=2%><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width=17% align="right"><FONT size=2 face="sans-serif">1.4594</FONT></TD>
  </TR>
  <TR>
    <TD align="left"><FONT size=2 face="sans-serif">2003</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.5915</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD align="left"><FONT size=2 face="sans-serif">2004</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.7590</FONT></TD>
  </TR>
  <TR>
    <TD align="left"><FONT size=2 face="sans-serif">2005</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.8547</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD align="left"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD><font size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1.7899</FONT></TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">On October 31, 2006, the most recent practicable
  date for this Annual Report, the Noon Buying Rate was $1.9084 = &pound;1.00
  (consequently, $1.00 = &pound;0.52 at this rate).</FONT></P>
<P> <FONT size=2 face="sans-serif">Fluctuations in the exchange rate between British
  pounds sterling and US dollars will affect the US dollar equivalent of the British
  pounds sterling denominated prices of the Company&#146;s ordinary shares and,
  as a result, will affect the market prices of the Company&#146;s American Depositary
  Shares (&#147;ADSs&#148;) in the US.</FONT></P>
<P> <font size="2" face="sans-serif"><B>B. Capitalization and Indebtedness </B>
  </font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</FONT></P>
<P> <font size="2" face="sans-serif"><B>C. Reasons for the Offer and Use of Proceeds
 </B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</FONT></P>
<P> <font size="2" face="sans-serif"><B>D. Risk Factors Relating to Wolseley&#146;s
  Industry and Business</B></font></P>
<P> <FONT size=2 face="sans-serif">You should carefully consider the risk factors
  discussed below, as well as all other information included in this Annual Report.
  Wolseley&#146;s business, financial condition and results of operations could
  be materially adversely affected by any or all of these risks.</FONT></P>
<P align="center"> <FONT size="2" face="sans-serif">7</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p8"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font></font>
<P> <font size="2" face="sans-serif"><B>Wolseley is subject to inherent risks
  of the commercial and residential construction and building materials industries.</B></font></P>
<P> <FONT size=2 face="sans-serif">Many of Wolseley&#146;s products are distributed
  to professional contractors in connection with commercial, industrial and residential
  construction projects. The level of activity in residential construction markets
  depends on many factors Wolseley cannot control. These include general economic
  conditions, mortgage and other interest rates, the extent of unsold new housing
  inventory, inflation, unemployment, demographic trends, gross domestic product
  growth, the price of oil and other commodities notably lumber, and consumer
  confidence in each of the countries and markets in which Wolseley operates.
  Historically, both new housing starts and residential remodeling decrease in
  slow economic periods. The level of activity in the commercial and industrial
  construction market depends largely on vacancy rates, commercial investment
  and general economic conditions. Because residential and commercial and industrial
  construction markets are sensitive to changes in the economy, downturns (or
  lack of substantial improvement) in the economy in any of Wolseley&#146;s geographic
  markets could adversely affect Wolseley&#146;s business, financial condition
  and results of operations. The US building materials business is particularly
  dependent upon the new residential housing market, which may be adversely affected
  by significant rises in interest rates and unemployment and by the extent of
  unsold new housing inventory. Such factors could also have an adverse impact
  on loss ratios in Wolseley&#146;s construction loan lending program. The new
  residential housing market in the US, which in fiscal year 2006 accounted for
  approximately 30% of Wolseley&#146;s revenue and on which the US building materials
  business is particularly dependent, has seen a substantial recent decline in
  activity with housing starts reported on an annualized basis by the US Census
  bureau falling by 21.8% to 1.772 million in September 2006 from 2.265 million
  in January 2006. To the extent recovery from these soft market conditions does
  not materialize or otherwise takes place over an extended period of time, Wolseley&#146;s
  business, financial condition and results of operations may be adversely affected.
  In addition, the commercial and residential construction and building materials
  industries may be affected by weather conditions. Because of these factors,
  there may be fluctuations in Wolseley&#146;s operating results, and the results
  for any period may not be indicative of results for any future period.</FONT></P>
<P> <font size="2" face="sans-serif"><B>There are risks related to Wolseley&#146;s
  operating and growth strategies.</B></font></P>
<P> <FONT size=2 face="sans-serif">A key element of Wolseley&#146;s strategy is
  to increase the profitability and revenues of its existing businesses as well
  as that of the businesses it acquires. Although Wolseley has been implementing
  this strategy over the past several years, it cannot provide assurances that
  it will continue to be able to do so successfully. There are risks related to
  Wolseley&#146;s ability to grow its businesses organically, such as those set
  forth below, and it may not be possible for Wolseley to complete the number
  of acquisitions at the same rate that it has done so in the past. Another key
  component of Wolseley&#146;s strategy is to operate its businesses on a basis
  where local management is responsible for day-to-day operations, profitability
  and the organic growth of the individual businesses. Local management is overseen
  by European and North American continental management teams. As a result, Wolseley&#146;s
  overall profitability could be adversely affected if it is unable to maintain
  the efficiencies of operating in this manner.</FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s ability to generate organic
  growth will be affected by various factors, including its ability to:</FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%">&#8211;</td>
    <td><FONT size=2 face="sans-serif">increase sales to existing customers;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">introduce new products or lines of business;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">attract new customers;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">acquire or develop new brands or outlets;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">improve operating efficiency;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">reduce operating and overhead expenses;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">increase net margins; and</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">hire and retain employees.</FONT></td>
  </tr>
</table>
<P align="center"> <FONT face="sans-serif" size="2">8</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p9"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif">Many of the factors affecting Wolseley&#146;s
  ability to generate organic growth may be beyond its control. Wolseley cannot
  be sure that its strategies will be successful or that it will be able to generate
  enough cash flow from operations to fund its operations and support these strategies.
  This could materially and adversely affect its business, financial condition
  and results of operations.</FONT></P>
<P> <font size="2" face="sans-serif"><B>Fluctuating product prices and unexpected
  product shortages may impair Wolseley&#146;s operating results.</B></font></P>
<P> <FONT size=2 face="sans-serif">The market price and availability of lumber,
     gypsum, steel, aluminum, copper, nickel alloys, plastic and other products
    (or
  commodities used in such products) distributed by Wolseley can fluctuate quickly
     and significantly. These fluctuations may adversely affect Wolseley&#146;s
     results  of operations. For example, the monthly average price for framing
     lumber, a
  significant product for Wolseley&#146;s US Building Materials business, at
  September  2006 was $292 per thousand board feet, compared to $396 for September
  2005,
  a decline of 26.3%. Lower lumber prices have the effect of reducing sales and
   profitability in the period affected. For additional information on the effect

  of lumber prices, see &#147;Item 4 &#150; Information on the Group &#150; Business
   Overview &#150; Raw Materials and Commodities&#148;. In another example Ferguson
   Enterprises, Inc., the US part of the North American Plumbing and Heating
   business, saw significant price inflation in copper during the second half
   of the 2006 fiscal year. Although in recent years, Wolseley has generally
   been

  able to pass raw material price increases on to its customers, there can be
    no assurance that it will be able to do so in the future, and even if Wolseley

  is ultimately able to pass on such price increases, delays in doing so may
   adversely  affect results of operations in those periods.</FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley distributes plumbing and heating materials
  and building supplies, including lumber, from a wide variety of manufacturers
  and suppliers. No one supplier or manufacturer accounted for more than 5% of
  the Group&#146;s total material and supply purchases during the 2006 fiscal
  year. Nevertheless, Wolseley may still experience shortages as a result of unexpected
  demand or production difficulties. If Wolseley is unable to obtain sufficient
  products from manufacturers and suppliers, there could be a short-term material
  adverse effect on the Group&#146;s business.</FONT></P>
<P> <font size="2" face="sans-serif"><B>Wolseley&#146;s business growth could
  outpace the capability of its management and systems.</B></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley expects to grow both organically and
  through acquisitions. Wolseley expects to expend significant time and effort
  in evaluating, completing and integrating acquisitions, opening new facilities
  and pursuing organic growth opportunities. Further expenditure was incurred
  during the 2006 fiscal year in the Group&#146;s infrastructure, logistics, systems
  and human resources. However, Wolseley cannot be certain that its existing systems,
  including supply chain and logistics, will be adequate to support its expanding
  operations and acquisitions without the need to spend additional resources to
  extend capacity and upgrade as necessary. Significant future growth also will
  impose substantial additional responsibilities on Wolseley&#146;s senior management
  and executive officers. Wolseley&#146;s success and ability to undertake new
  and concurrent business change initiatives will therefore depend on recruiting
  new, and retaining existing, senior level managers and officers and the successful
  implementation of infrastructure, logistics and system changes. To the extent
  Wolseley cannot accomplish these matters, its business, financial condition
  and results of operations could be materially and adversely affected.</FONT></P>
<P> <font size="2" face="sans-serif"><B>Wolseley may lose business to competitors
  and otherwise be unable to compete favorably in its industries.</B></font></P>
<P> <FONT size=2 face="sans-serif">The plumbing and heating and building materials
  industries in most of the countries in which Wolseley operates are fragmented.
  The principal competitive factors are availability of materials and supplies,
  pricing of products, customer service, availability of credit, technical product
  knowledge with respect to application and usage, and advisory and other service
  capabilities. Wolseley&#146;s competition varies by product line, type of customer
  and geographic market. Wolseley competes with many local, regional, and, in
  several markets and product categories, other national distributors including
  specialist subsidiaries of large home center chains such as The Home Depot and
  product manufacturers. Wolseley, to a more limited extent, also competes with
  the large home center chains, such as The Home Depot and Lowe&#146;s in the
  US and B&amp;Q in the UK, for business from professional contractors. Wolseley
  cannot be sure that competition from such large home center chains or consolidation
  in an otherwise fragmented market will not, in the future, include greater competition
  for the business of professional contractors. Several of the companies that
  compete with Wolseley may have substantially greater financial and other resources.
  No assurance can be given that Wolseley will be able to respond effectively
  to such competitive pressures. Increased competition by existing and future
  competitors could result in reductions in sales, prices, volumes and gross margins
  that could materially adversely affect Wolseley&#146;s business, financial condition
  and results of operations. Furthermore, Wolseley&#146;s success will depend,
  in part, on its ability to gain market share from competitors.</FONT></P>
<P align="center"> <FONT face="sans-serif" size="2">9</FONT></P>
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</font></font>
<P> <font size="2" face="sans-serif"><B>Wolseley is subject to risks related to
  its international operations.</B></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley has its principal operations in the
  US, Canada and Europe and plans to continue to expand in each area. Accordingly,
  Wolseley is subject to specific risks of conducting business in these geographic
  regions. For example:</FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%">&#8211;</td>
    <td><font size="2" face="sans-serif">At July 31, 2006, Wolseley had operations
        in 19 countries, and the Group currently operates in 27 countries following
        the acquisition of DT Group on September 25, 2006 and Woodcote - stavebni
    materialy a.s. on October 31, 2006;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><font size="2" face="sans-serif">Wolseley may have difficulty managing
        and administering an internationally dispersed business. In particular,
        the management of Wolseley&#146;s personnel across these countries can
        present logistical and management challenges. Additionally, international
        operations present challenges related to operating under different business
    cultures, laws and languages;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">fluctuations in currency exchange rates may
    negatively affect Wolseley&#146;s operating results and its financial position;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">economic, social or political instability
    in some international markets may adversely affect Wolseley&#146;s businesses
    in those regions;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">Wolseley may have to comply with unexpected
    changes in foreign laws and regulatory requirements;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">export controls or other regulatory restrictions
    could prevent Wolseley from sourcing and shipping its products into and from
    some markets;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">Wolseley may not be able to protect adequately
    its trademarks and other intellectual property overseas due to uncertainty
    of laws and enforcement in a number of countries relating to the protection
    of intellectual property rights;</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">changes in tax regulation and international
    tax treaties could adversely affect the level of taxation paid by Wolseley;
    and</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">Wolseley may have difficulty sourcing on
    a multinational basis products of a sufficiently good quality and specification
    to be supplied to all Group companies.</FONT></td>
  </tr>
</table>
<P> <font size="2" face="sans-serif"><B>Wolseley&#146;s success may be limited
  by its inability to identify and successfully integrate acquisitions.</B></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley intends to continue to grow by acquiring
  additional plumbing and heating, building materials and construction materials
  distribution businesses. Competition for these acquisitions may limit the number
  of acquisitions and lead to higher acquisition prices. There can be no assurance
  that Wolseley will be able to identify, acquire or manage profitably additional
  businesses or to successfully integrate any acquired businesses into Wolseley
  without substantial costs, delays or other operational or financial problems.
  Acquisitions also involve a number of special risks, including possible lower
  margins, failure to achieve expected results, diversion of management&#146;s
  attention, failure to retain key personnel of the acquired business, the risks
  inherent in the systems of the acquired business and risks associated with unanticipated
  events or liabilities, any of which could have a material adverse effect on
  Wolseley&#146;s business, financial condition and results of operations.</FONT></P>
<P> <font size="2" face="sans-serif"><B>Wolseley may not have access to sufficient
  funding to finance future acquisitions or organic growth.</B></font></P>
<P> <FONT size=2 face="sans-serif">If Wolseley cannot secure acceptable financing,
  it may be unable to pursue its acquisition and organic growth strategies successfully.
  Wolseley cannot predict the timing, size and success of its acquisitions or
  the capital it will need for those efforts. Using cash for acquisitions could
  limit Wolseley&#146;s financial flexibility and increases the likelihood that
  Wolseley will need to seek additional capital through future debt or equity
  financings. Additional debt may include financial covenants limiting Wolseley&#146;s
  operational and financial flexibility. Ordinary shares may be used as a component
  of the consideration for future acquisitions. Issuances of ordinary shares for
  acquisitions or additional equity financing may dilute the ownership interests
  of the Company&#146;s shareholders, including holders of American Depositary
  Receipts (&#147;ADRs&#148;) evidencing the Company&#146;s ADSs. If the Company&#146;s
  ordinary shares do not maintain a sufficient market value or potential acquisition
  candidates are unwilling to accept ordinary shares, Wolseley may be required
  to use more of its cash resources to pursue its acquisition program. Wolseley
  cannot provide assurances that additional debt or equity financing will be available
  on acceptable terms.</FONT></P>
<P align="center"> <FONT size="2" face="sans-serif">10</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <font size="2" face="sans-serif"><B>Wolseley may be adversely affected by
  governmental regulations. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s operations are affected by
  various statutes, regulations and laws in the countries and markets in which
  it operates. While Wolseley is not engaged in a &#147;regulated&#148; industry,
  it is subject to various laws applicable to businesses generally, including
  laws affecting land usage, zoning, the environment (including laws and regulations
  affecting the supply of lumber), health and safety, transportation, labor and
  employment practices (including pensions), competition and other matters. Additionally,
  building codes may affect the products Wolseley&#146;s customers are allowed
  to use, and consequently, changes in building codes may affect the saleability
  of Wolseley products. Wolseley cannot provide assurance that it will not incur
  material costs or liabilities in connection with regulatory requirements. </FONT>
</P>
<P> <FONT size=2 face="sans-serif">Wolseley cannot predict whether future developments
  in laws and regulations concerning its businesses will affect its business,
  financial condition and results of operations in a negative manner. Similarly,
  Wolseley cannot assess whether its operating units will be successful in meeting
  future demands of regulatory agencies in a manner which will not materially
  adversely affect the business, financial condition or results of its operations.
  </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Litigation may have an adverse impact
  on Wolseley&#146;s financial results. </B> </font></P>
<P> <FONT size=2 face="sans-serif">The international nature of Wolseley&#146;s
  operations increases its exposure to the potential for litigation from third
  parties. In the US, the risk of litigation is generally higher than that in
  Europe in such areas as workers&#146; compensation, general employer liability
  and environmental and asbestos litigation. </FONT> </P>
<P> <FONT size=2 face="sans-serif">In the case of asbestos litigation, Wolseley
  employs independent professional advisors to actuarially assess the potential
  gross liability. Their work, which results in a range of high, likely and low
  estimates, necessitates the application of a number of assumptions relating
  to claims development and the cost of settling such claims over the maximum
  anticipated remaining lifetime of the potential litigants, which is approximately
  50 years. Whilst actual experience is reviewed against the assumptions each
  year and the liability is adjusted in the financial statements, there can be
  no assurance that these assumptions will prove correct over the long term. </FONT>
</P>
<P> <FONT size=2 face="sans-serif">Wolseley has insurance which significantly
  exceeds the current estimated liability relating to asbestos claims. Based on
  current estimates, no profit or cash flow impact is therefore expected to arise
  in the foreseeable future. However, there can be no assurance that these assumptions
  will prove correct. In accordance with IFRS, Wolseley has recognized as at July
  31, 2006 a discounted liability of &pound;31 million in respect of asbestos
  litigation. The liability of &pound;31 million represents the most likely outcome
  of a range of high, likely and low estimates determined by the independent professional
  advisors employed by Wolseley. An equal receivable amount of &pound;31 million
  is shown in other receivables reflecting the discounted sum recoverable from
  insurers in respect of this liability. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Factors which could cause actual results to
  differ from these estimates and expectations include: (i) adverse trends in
  the ultimate number of asbestos claims filed against any of Wolseley&#146;s
  subsidiaries; (ii) increases in the cost of resolving current and future asbestos
  claims as a result of adverse trends relating to settlement costs, dismissal
  rates, legal fees and/or judgment sizes; (iii) decreases in the amount of insurance
  available to cover asbestos claims as a result of adverse changes in the interpretation
  of insurance policies or the insolvency of insurers; (iv) the emergence of new
  trends or legal theories that enlarge the scope of potential claimants; (v)
  the impact of bankruptcies of other companies whose share of liability may be
  imposed on Wolseley&#146;s subsidiaries under state or national liability laws;
  (vi) the unpredictable aspects of the litigation process; (vii) adverse changes
  in the mix of asbestos-related diseases with respect to which asbestos claims
  are made against Wolseley&#146;s subsidiaries; (viii) potential legislative
  changes; and (ix) changes in the discount rate used to determine the discounted
  liability. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>The departure of key personnel could disrupt
  Wolseley&#146;s business. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley depends on the efforts of its executive
  officers, including the senior management of all its businesses, including those
  recently acquired, to run its businesses and to implement business change initiatives.
  It customarily negotiates employment agreements and agreements not to compete
  with key personnel of companies it acquires in order to maintain key customer
  relationships and manage the transition of the acquired business. The loss of
  key personnel, or the inability to hire and retain qualified replacements, could
  adversely affect Wolseley&#146;s business, financial condition and results of
  operations. </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">11</FONT> </P>
<hr noshade align="center" width="100%" size="2"><<<<</font>
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p12"></a> <font size="2" face="sans-serif">
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</font>
<P> <font size="2" face="sans-serif"><B>Wolseley may be unable to attract and
  retain qualified employees. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s ability to provide high-quality
  products and services on a timely basis requires an adequate number of qualified
  employees. Accordingly, Wolseley&#146;s ability to increase its productivity
  and profitability and support its growth strategy may be limited by its ability
  to employ, train, motivate and retain skilled personnel. Wolseley&#146;s labor
  expenses may also increase as a result of a shortage in the supply of skilled
  personnel. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Collective bargaining agreements, work
  stoppages and other labor relations matters may have an adverse </B> </font><font size="2" face="sans-serif"><B>effect on Wolseley. </B> </font></P>
<P> <FONT size=2 face="sans-serif">A small proportion of Wolseley&#146;s employees
  are covered by collective bargaining or other similar labor agreements. Historically,
  the effects of collective bargaining and other similar labor agreements on the
  Group have not been significant. Any inability by Wolseley to negotiate acceptable
  new contracts under these collective bargaining arrangements could cause strikes
  or other work stoppages, and new contracts could result in increased operating
  costs. If any such strikes or other work stoppages occur, or if other employees
  become represented by a union, Wolseley could experience a disruption of its
  operations and higher labor costs. Labor relations matters affecting Wolseley&#146;s
  suppliers of products and services could also adversely affect Wolseley&#146;s
  business from time to time. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Investors may be subject to both United
  States and United Kingdom taxes. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Investors are strongly urged to consult with
  their tax advisers concerning the consequences of investing in the Company by
  purchasing ADRs. The Company&#146;s ADRs are traded in the US, but the Company
  is organized under the laws of England and Wales. A US holder of the Company&#146;s
  ADRs will be treated as the owner of the underlying ordinary shares for the
  purposes of US and UK tax laws. Therefore, US federal, state and local tax laws
  and UK tax laws will apply to the ownership of the Company&#146;s ADRs and the
  underlying ordinary shares. Tax laws of other jurisdictions may also apply.
  For a more detailed discussion of tax issues with respect to the ADRs, see &#147;Item
  10 &#150; Additional Information, paragraph E &#150; Taxation&#148;. </FONT>
</P>
<P> <font size="2" face="sans-serif"><B>The price of the Company&#146;s ADRs may
  be subject to foreign exchange fluctuations. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Fluctuations in the exchange rate between the
  British pound sterling and the US dollar could have an adverse effect on the
  market price of the Company&#146;s ADRs. See &#147;Item 3 &#150; Key Information
  &#150; British Pounds Sterling Exchange Rate Information&#148; for a discussion
  of exchange rates. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Voting rights with respect to the ADRs
  are limited by the terms of the Deposit Agreement. </B> </font></P>
<P> <FONT size=2 face="sans-serif">ADR holders may exercise voting rights with
  respect to the ordinary shares represented by ADRs only in accordance with the
  provisions of the Deposit Agreement (as defined in &#147;Item 9 &#150; The Offer
  and Listing, paragraph C &#150; Markets&#148;) relating to the ADRs. There are
  no provisions under English law or under the Company&#146;s Memorandum and Articles
  of Association that limit ADR holders&#146; ability to exercise their voting
  rights through the Depositary (as defined in &#147;Item 9 &#150; The Offer and
  Listing, paragraph C &#150; Markets&#148;) with respect to the underlying ordinary
  shares. However, there are practical limitations upon the ability of ADR holders
  to exercise their voting rights due to the additional procedural steps involved
  in communicating with such holders. For example, the Company&#146;s Memorandum
  and Articles of Association require the Company to notify its shareholders at
  least 21 days in advance of any annual or other general meeting. The Company&#146;s
  ordinary shareholders will receive notice directly from the Company and will
  be able to exercise their voting rights by either attending the meeting in person
  or voting by proxy. </FONT> </P>
<P> <FONT size=2 face="sans-serif">ADR holders, by comparison, will not receive
  notice directly from the Company. Rather, in accordance with the Deposit Agreement,
  the Company will provide the notice to the Depositary, which will in turn, as
  soon as practicable thereafter, mail to ADR holders: </FONT> </P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&#8211;</td>
    <td><FONT size=2 face="sans-serif">the notice of such meeting;</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">voting instruction forms; and</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">a statement as to the manner in which instructions
    may be given by ADR holders.</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
</table>
<P align="center"> <FONT face="sans-serif" size="2">12</FONT> </P>
<hr noshade align="center" width="100%" size="2">
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<font face="sans-serif"><page><a name="p13"></a> <font size="2" face="sans-serif">
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</font></font>
<P> <FONT size=2 face="sans-serif">To exercise their voting rights, ADR holders
  must then instruct the Depositary how to vote their shares. Because of this
  extra procedural step involving the Depositary, the process for exercising voting
  rights will take longer for ADR holders than for holders of ordinary shares.
  ADRs for which the Depositary does not receive timely voting instructions will
  not be voted at any meeting. ADR holders are only able to exercise voting rights
  through the Depositary as described in this Annual Report. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Limitations Relating to Dividend and Other
  Distribution Rights of ADR Holders. </B> </font></P>
<P> <FONT size=2 face="sans-serif">ADR holders are entitled to receive dividends
  and cash distributions paid by the Company in proportion to the number of ordinary
  shares their ADRs represent. The Depositary will convert cash dividends and
  other cash distributions into US dollars for distribution to ADR holders, to
  the extent such cash dividends and distributions are declared in British pounds
  sterling. Periodically, the Depositary may be unable to convert the foreign
  currency into US dollars, in which case the Deposit Agreement permits the Depositary,
  among other things, to hold on to such foreign currency it cannot convert for
  the account of ADR holders who have not been paid. Consequently, ADR holders
  may be delayed in receiving their dividend payments and other cash distributions.
  Additionally, if the exchange rate fluctuates during the time when the Depositary
  cannot convert the foreign currency, ADR holders may lose some or all of the
  value of the distribution or alternatively receive a greater US dollar amount
  than would have been received had the conversion been effected at exchange rates
  prevailing during that period. </FONT> </P>
<P> <FONT size=2 face="sans-serif">The Company may, from time to time, distribute
  rights to its shareholders, including rights to acquire securities under the
  Deposit Agreement relating to ADRs. The Depositary will not offer rights to
  ADR holders unless both the rights and the securities to which such rights relate
  are either exempt from registration under the US Securities Act of 1933, as
  amended (the &#147;Securities Act&#148;) or are registered under the Securities
  Act. However, the Company is under no obligation to file a registration statement
  with respect to any such rights or underlying securities or to endeavor to cause
  such a registration statement to be declared effective. Accordingly, ADR holders
  may be unable to participate in rights offerings by the Company and may experience
  dilution of their holdings as a result. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>ADR holders&#146; rights will be governed
  by English law and differ from the rights of shareholders under US </B> </font><font size="2" face="sans-serif"><B>law. </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley plc is a public limited company incorporated
  under the laws of England and Wales. The rights of shareholders, including holders
  who hold their shares in the form of ADRs, are, therefore, governed by English
  law and by the Company&#146;s Memorandum and Articles of Association. These
  rights differ from the typical rights of shareholders in US corporations. In
  particular, a majority of the Company&#146;s directors and executive officers
  and the experts named in this Annual Report are residents of countries other
  than the US. Further, all or a substantial portion of their assets and the Company&#146;s
  assets are located outside the US. As a result, it may not be possible for ADR
  holders to: </FONT> </P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&#8211;</td>
    <td><FONT size=2 face="sans-serif">effect service of process within the US upon
    a majority of the Company&#146;s directors, executive officers and the experts
    named in this Annual Report or on the Company; or</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">enforce in the US courts or outside the US
    judgments obtained against a majority of the Company&#146;s directors, executive
    officers and the experts named in this Annual Report or the Company in the
    US courts in any action, including actions under the civil liability provisions
    of US securities laws; or</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&#8211;</td>
    <td><FONT size=2 face="sans-serif">enforce US court judgments obtained against
    the Company or a majority of the Company&#146;s directors, executive officers
    and the experts named in this Annual Report in courts situated in jurisdictions
    outside the US in any action, including actions under the civil liability
    provisions of US securities laws.</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
</table>
<P> <FONT size=2 face="sans-serif">ADR holders also may have difficulties enforcing,
  in original actions brought in courts in jurisdictions located outside the US,
  liabilities under US securities laws. </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">13</FONT> </P>
<hr noshade align="center" width="100%" size="2">
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<font face="sans-serif"><page>  <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font></font>
<P> <font face="sans-serif"><a name="p14"></a></font><font size="2" face="sans-serif"><B>ITEM
  4. INFORMATION ON THE GROUP </B> </font></P>
<P> <font size="2" face="sans-serif"><B>A. History and Development of the Company
  </B> </font></P>
<P> <FONT size=2 face="sans-serif">The Company and its subsidiaries form an international
  group of companies, engaged primarily in the wholesale distribution and supply
  of plumbing, heating and industrial products and building materials, with operations
  in the US, Canada and Europe. The Company is organized under the laws of England
  and Wales, and its registered office is located at Parkview 1220, Arlington
  Business Park, Theale, Nr Reading, RG7 4GA, United Kingdom. Its telephone number
  is 011 44 118 929 8700. The ordinary shares of 25p each of the Company are listed
  on the London Stock Exchange, and the ADSs of the Company (each ADS representing
  one ordinary share) are listed on the New York Stock Exchange (&#147;NYSE&#148;).
  The ratio of ADSs to ordinary shares was reduced from five ordinary shares to
  two ordinary shares on February 2, 2004 and from two ordinary shares to one
  ordinary share on June 30, 2006. The ADSs are evidenced by ADRs issued by The
  Bank of New York. The market capitalization of the Company as of October 31,
  2006 was &pound;8,143,996,523.</FONT> </P>
<P> <FONT size=2 face="sans-serif">The Company was incorporated on October 9,
  1889 under the name The Wolseley Sheep Shearing Machine Company Limited, and
  in its early years manufactured sheep shearing machines, automobiles, machine
  tools and agricultural equipment. The Company sold its automobile and machine
  tool businesses in the early 1900s. During World War I and World War II, the
  Company devoted its activities to support England&#146;s war effort. In the
  1950s, Wolseley began to manufacture a range of electric fencing and pedestrian
  controlled motor cultivators and in 1955 changed its name to Wolseley Engineering
  Limited. In 1958, Wolseley acquired Geo H. Hughes Limited, a wheel manufacturer,
  and became Wolseley-Hughes Limited.</FONT> </P>
<P> <FONT size=2 face="sans-serif">During the 1960s and 1970s, Wolseley acquired
  other engineering companies, including companies involved in heating products,
  such as radiators and boilers. In 1979, the Company acquired John James Group
  of Companies Limited. Within the John James Group was a distributor of industrial
  pipe, valves and fittings, which today trades as &#147;Pipe Center&#148; within
  Wolseley&#146;s UK distribution business, Wolseley UK Limited (&#147;Wolseley
  UK&#148;).</FONT> </P>
<P> <FONT size=2 face="sans-serif">On January 4, 1982, the Company registered
  as a public limited company and on April 14, 1986, it changed its name from
  Wolseley-Hughes plc to Wolseley plc, which is the current name of the Group&#146;s
  parent company. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Throughout the past 26 years, Wolseley has
     expanded its businesses through organic growth and acquisitions in the US,
    Canada
  and Europe. During the 1980s, the Company expanded its operations into the
    US  with the acquisition of Ferguson Enterprises Inc. (&#147;Ferguson&#148;)
    in  1982, Carolina Holdings Inc. (now known as Stock Building Supply Holdings,
    Inc.
  or &#147;SBS&#148;) in 1986, and has made further acquisitions since that time.
   Wolseley&#146;s European expansion included the acquisition of Brossette SA
    (&#147;Brossette&#148;) in France in 1992, followed by the acquisition of &Ouml;AG
     Handelsbeteiligungs AG (now known as &Ouml;AG A.G.) (&#147;&Ouml;AG&#148;)
     in  Austria in 1994 and the acquisitions in 1999 of Heatmerchants Limited
     (&#147;Heatmerchants&#148;)
  in the Republic of Ireland, Manzardo SpA (&#147;Manzardo&#148;) in Italy and
   Comptoir des Fers et M&eacute;taux SA (&#147;CFM&#148;) in Luxembourg. In
   July  2001, Wolseley expanded into Canada with the acquisition of Westburne
   Plumbing
  &amp; Waterworks Inc., Westburne Refrigeration &amp; HVAC Inc. and Westburne
   Industrial Products, Inc. (together, &#147;Wolseley Canada&#148;). During
   2000  and 2001, Wolseley sold its remaining manufacturing businesses and focused
   its
  activities entirely on its distribution business, which consists of two distribution
    divisions: North American Distribution and European Distribution. In July
   2002
  Wolseley maintained this focus by expanding into the Netherlands with the acquisition
    of Wasco Holdings BV (&quot;Wasco&quot;) and in July 2003 completed the purchase of
   Pinault Bois
  et Mat&eacute;riaux SA (now known as PB &amp; M SA) (&#147;PBM&#148;), a French
   building materials distribution business. In December 2003, Wolseley entered

  into the Swiss market with the purchase of Tobler Management Holding AG (now
   known as Wolseley (Schweiz) AG), (&#147;Tobler&#148;), a Swiss plumbing and
    heating distribution business. In August 2004, Wolseley acquired the Irish
   building
  materials distribution group, Brooks Group Limited (&#147;Brooks Group&#148;).
   In October 2005, Wolseley entered into the Belgian market with the purchase

  of Centratec NV, a distributor of residential and commercial heating equipment
   and pipes, valves and fittings. In November 2005 Wolseley entered the electrical

  distribution market in the UK through its acquisitions of William Wilson and
   in May 2006 the electrical distribution market in the US through its acquisition

  of Efficient Electric. In September 2006, Wolseley entered the building materials
   distribution market in the Nordic region, through the acquisition of DT Group,

  which has operations in Denmark, Finland, Sweden and Norway. The acquisition
   of DT Group has also enabled Wolseley to enter the Do It Yourself (&#147;DIY&#148;)
    markets of Denmark and Sweden. On October 31, 2006, Wolseley completed the
   acquisition
  of Woodcote &#150; stavebni materialy, a.s., a general builders merchant, which
   has operations in the markets of the Czech Republic, the Slovak Republic,
  Hungary,
  Poland, Romania and Croatia. </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">14</FONT> </P>
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</font>
<P> <font size="2" face="sans-serif"><I>Acquisitions and Divestitures </I> </font></P>
<P> <font size="2" face="sans-serif"><B>Acquisitions </B> </font></P>
<P> <FONT size=2 face="sans-serif">A significant aspect of Wolseley&#146;s business
  strategy is growth through acquisitions. These acquisitions enable Wolseley
  to improve its service to customers through an expansion of its branch network
  and product offerings. During the fiscal year ended July 31, 2006, Wolseley
  completed a total of 53 acquisitions for an aggregate purchase price including
  debt acquired equal to approximately &pound;914 million. Wolseley&#146;s North
  American Distribution segment acquired a total of 31 companies for approximately
  &pound;497 million, whose last 12 months sales were &pound;904 million. Wolseley&#146;s
  European Distribution segment acquired 22 companies for approximately &pound;417
  million, whose last 12 months sales were &pound;514 million. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Between August 1, 2006 and October 31, 2006,
  Wolseley completed a total of 16 acquisitions for a total consideration of approximately
  &pound;1,570 million, including &pound;1,353 million in respect of the acquisition
  of DT Group. </FONT> </P>
<P> <FONT size=2 face="sans-serif">During the three fiscal years ended July 31,
  2006, Wolseley acquired a total of 94 companies for an aggregate consideration
  of &pound;1,469 million. Specifically, Wolseley&#146;s North American Distribution
  segment acquired 58 businesses for &pound;820 million, and its European Distribution
  segment acquired 36 businesses for &pound;649 million. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Divestitures </B> </font></P>
<P> <FONT size=2 face="sans-serif">During the two fiscal years ended July 31,
  2006, Wolseley did not make any material divestitures of operations and has
  not made any material divestitures since July 31, 2006. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>B. Business Overview </B> </font></P>
<P> <FONT size=2 face="sans-serif">The Company is a holding company that operates
  with strong experienced management teams leading each principal operating subsidiary.
  Wolseley&#146;s principal operating businesses are organized into two divisions:
  North American Distribution and European Distribution. During the fiscal year
  ended July 31, 2006, these two divisions accounted for all of Wolseley&#146;s
  sales. A North American management team oversees operations in North America
  and a European management team oversees the operations in Europe. Within the
  European division there were three geographical segments in the fiscal year
  ended July 31, 2006: UK and Ireland, France and Central Europe. DT Group acquired
  on September 25, 2006, forms a further Nordic region segment. The North American
  division comprises 3 businesses: US Plumbing and Heating (&#147;Ferguson&#148;),
  US Building Materials (&#147;SBS&#148; or &#147;Stock&#148;) and Wolseley Canada.
  Up until 2001, Wolseley had several manufacturing and other subsidiaries which
  were then sold. With the divestiture of these manufacturing subsidiaries, Wolseley
  is now focused almost entirely on the distribution and supply of construction
  materials. </FONT> </P>
<P> <FONT size=2 face="sans-serif">According to the May 2006 edition of </FONT><font face="sans-serif"><I><FONT size=2>Supply
  House Times</FONT></I><SUP><FONT size=2>(1)</FONT></SUP><FONT size=2>, a recognized
  US trade publication, Wolseley is the market leading<SUP>(2)</SUP> distributor
  of plumbing and heating products to professional contractors in the US. </FONT></font>
</P>
<P> <FONT size=2 face="sans-serif">Wolseley also believes that it has market
    leading  positions in the plumbing and heating business in the UK and Austria,
    based
  on its knowledge and experience in the plumbing and heating business in these
     countries. Additionally, according to the May 2006 edition of </FONT><font face="sans-serif"><I><FONT size=2>Supply
      House Times</FONT></I><FONT size=2>, Wolseley is the leading distributor
      of  industrial pipes, valves and fittings in the US. Wolseley also believes
      that
  it has a market leading position in this activity in the UK based on its knowledge
       and experience of the industrial pipes, valves and fittings distribution
      market
  in the UK. For the fiscal year ended July 31, 2006, Wolseley&#146;s plumbing
  and heating activities accounted for approximately 61% of Wolseley&#146;s revenue
   (sales). Wolseley&#146;s plumbing and heating activities include the distribution
    and supply of residential and commercial and industrial plumbing supplies,
   including
  pipes, valves and fittings, heating, ventilation and air conditioning products,
    industrial supplies and specialized plumbing products for utilities, mechanical

  contractors, irrigation, fire suppression and industrial and commercial users.
  </FONT></font> </P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR valign="top">
    <TD colspan="2"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
  <TR valign="top">
    <TD width="3%"><FONT size=1 face="sans-serif">(1)</FONT></TD>
    <TD><FONT size=1 face="sans-serif">Wolseley has neither funded nor is it otherwise
      affiliated with any trade publication ranking or report which is cited in
      this Annual Report&nbsp; as support for Wolseley&#146;s competitive market
      position.</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size=1 face="sans-serif">(2)</font></TD>
    <TD><font size=1 face="sans-serif">The references throughout this document
      to market leading positions are based on such positions measured against
      total sales.</font></TD>
  </TR>
</TABLE>
<P align="center"> <FONT face="sans-serif" size="2">15</FONT> </P>
<hr noshade align="center" width="100%" size="2">
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</font></font>
<P> <FONT size=2 face="sans-serif">According to the May 2006 edition of </FONT><font face="sans-serif"><I><FONT size=2>Pro
  Sales</FONT></I><FONT size=2>, a recognized US trade publication, Stock Building
  Supply, is the leading distributor of lumber products and building materials
  to professional contractors in the US. Wolseley also believes that it is a leading
  distributor of building materials in the UK, based on its knowledge and experience
  of the building materials market in the UK. Wolseley believes, based on its
  knowledge and experience in the French building materials distribution market,
  that PBM, its French building materials distribution business, is the number
  two distributor of heavyside building materials in France. Based on its knowledge
  and experience in the Irish market, Wolseley believes that the Brooks Group,
  its Irish building materials distribution business, acquired in August 2004,
  is the number one distributor of timber products and the number three distributor
  of building materials in Ireland. For the fiscal year ended July 31, 2006, Wolseley&#146;s
  building materials activities in the US, UK, Ireland and France accounted for
  approximately 34% of Wolseley&#146;s revenue. Wolseley&#146;s building materials
  activities include the distribution and supply of lumber, panels millwork, various
  lumber speciality products, including roofing, floor and roof trusses, wall
  panels, stairs, doors, windows, kitchen cabinets and various services to the
  professional contractor. Other significant Wolseley product lines are bricks,
  sand, cement, roof tiles, paving and drainage products, tool rentals, insulation
  and electrical supplies. </FONT></font> </P>
<P> <font size="2" face="sans-serif"><B>Strategy </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is committed to providing long-term
  value for its shareholders by pursuing a strategy of growing both organically,
  including new branch openings, and through acquisitions and competing internationally
  in the construction materials distribution market. Through the operations of
  the continental management teams the Group drives organic growth and profitability
  of the operations within its businesses. Central, groupwide functions in respect
  of supply chain, sourcing, acquisitions and business improvement operate to
  develop competitive advantage that can be leveraged across the group. </FONT>
</P>
<P> <font size="2" face="sans-serif"><B>Continental and operational activities
  to drive business performance </B> </font></P>
<P> <FONT size=2 face="sans-serif">At a continental level and local business level,
  Wolseley continues to pursue several activities designed to accelerate organic
  growth and drive improved business performance. These activities include: </FONT>
</P>
<P> <font face="sans-serif"><U><FONT size=2>New Branches.</FONT></U><FONT size=2>
  Wolseley has continued to invest in branch openings, enabling its businesses
  to further enhance their market leading positions, and has expanded its branch
  network into existing and new markets. During the last fiscal year, Wolseley
  added, net of closures, 279 new locations. </FONT></font> </P>
<P> <font face="sans-serif"><U><FONT size=2>Broadening of Product Lines.</FONT></U><FONT size=2>
  Wolseley seeks to broaden the product lines offered by its businesses in order
  to improve the overall product mix available to its customers. Management continually
  seeks opportunities to enhance Wolseley&#146;s product offerings through the
  establishment of relationships with additional suppliers and customers and the
  acquisition of companies and businesses offering complementary product lines.
  During the 2006 fiscal year the acquisitions of William Wilson and AC Electrical
  in the UK allowed Wolseley UK to expand into the complementary market of electrical
  distribution. </FONT></font> </P>
<P> <font face="sans-serif"><U><FONT size=2>People and Leadership Development.</FONT></U><FONT size=2>
  High quality training of employees is a key feature of Wolseley&#146;s service
  capability and growth strategy. Employees participate in Wolseley&#146;s own
  modular system of training at specialized in-house facilities and in co-operative
  programs with universities and other institutes of higher education. The Ferguson
  &#147;legacy of leadership&#148; program in the US is one of many training initiatives
  throughout the Group. This program focuses on preparing the next level of Ferguson
  leaders. The first graduates from this program have already successfully filled
  senior roles within Ferguson&#146;s management. Wolseley&#146;s management education
  and development programs are regarded as of primary importance to ensure that
  it has the right caliber of resources to keep pace with the development of its
  businesses. Wolseley has established an annual international executive management
  program in conjunction with the Darden School of Management, located at the
  University of Virginia, and subsequently complemented this with a management
  development program with IMD, a leading European business school based in Switzerland.
  A European graduate recruitment program was successfully launched during the
  2004 fiscal year, and a further 32 graduates were recruited during fiscal 2006.
  Across the Group 1,400 graduates were recruited in fiscal 2006. </FONT></font>
</P>
<P align="center"> <FONT face="sans-serif" size="2">16</FONT> </P>
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</font></font>
<P> <font size="2" face="sans-serif"><B>Supply Chain</B></font> </P>
<P> <FONT size=2 face="sans-serif">Wolseley believes that its supply chain can
  be developed to provide competitive advantage, both by giving suppliers their
  most efficient route to market and by being able to offer customers the broadest
  product offering with the best fill rates. Wolseley believes that a key differentiator
  of its supply chain to that of its competitors is its distribution center network,
  particularly in the plumbing and heating businesses. Both the plumbing and heating
  businesses of the North American Distribution segment and the plumbing and heating
  business of the European Distribution segment continue to open DCs to improve
  customer service and generate operating efficiencies. Wolseley opened a new
  pipeyard in Stockton, California in September 2005, and development is being
  undertaken of DCs in Florida and Northern California. Volumes through the Ferguson
  distribution center network during the 2006 fiscal year increased by 34% over
  the previous year, and more than 50% of branch sales now go through the network.
  In Canada, the second of three regional distribution centers for larger inventory
  items was opened in Quebec in October 2005, with the third planned to open near
  Toronto in December 2006. In the UK, the new national distribution center at
  Leamington Spa was completed and started operation in August 2006, while the
  work has now started on a new regional distribution center in the North West
  of England. In Italy a new DC is under construction in Bologna and is expected
  to come on stream before the end of calendar 2006. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Sourcing </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley believes that by using its international
  size it can further enhance its performance from sales of its suppliers&#146;
  proprietary brands and expand the performance from Wolseley&#146;s own brands.
  Through a groupwide focus on the sourcing of products for sale Wolseley believes
  it can drive further improvements in its margins while enhancing its sales performance
  by supplying its customers with a wider range of competitively priced products.</FONT>
</P>
<P> <font size="2" face="sans-serif"><B>Business improvement </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley believes that it can achieve further
  improvements in performance through the integration of activities and collaboration
  to share formats. Wolseley believes that information technology to support organization-wide
  decision making is critical to achieving its business improvement, sales growth
  and profit objectives.</FONT> </P>
<P> <font face="sans-serif"><U><FONT size=2>Integration and Leveraging Activities.</FONT></U><FONT size=2>
  An important element of Wolseley&#146;s growth strategy is the integration of
  facets of Wolseley operations to obtain cost savings, synergies and accelerate
  growth opportunities. </FONT></font> </P>
<P> <font face="sans-serif"><U><FONT size=2>International Collaboration.</FONT></U><FONT size=2>
  Collaboration across the Group should help shorten development time cycles as
  each of the businesses continues to focus on its unique marketplace and offer
  customers the service and responsiveness they require in a changing business
  environment. During the 2006 fiscal year 64 further XpressNet locations, which
  are based on the Wolseley UK Plumb Center Express model, were opened by Ferguson
  in the USA, bringing the total to 124 locations. The Wolseley UK Hire Center
  model is being rolled out to PBM in France and </FONT></font><FONT size=2 face="sans-serif">&Ouml;AG
  in Austria, with further progress expected in the coming year.</FONT> </P>
<P> <font face="sans-serif"><U><FONT size=2>Information Technology.</FONT></U><FONT size=2>
  Wolseley continues to pursue the development of enhanced IT systems, and has
  continued to invest in developing a common IT platform. Wolseley expects that
  this initiative will bring about a greater cohesion across its operating units
  through leveraging of its international purchasing, international sourcing and
  supply chain efficiencies. The platform will further enable the sharing of best
  practices and ideas between Wolseley&#146;s businesses for the benefit of the
  Group as a whole. </FONT></font> </P>
<P align="center"> <FONT face="sans-serif" size="2">17</FONT> </P>
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</font></font>
<P> <font size="2" face="sans-serif"><B>Acquisitions </B> </font></P>
<P> <FONT size=2 face="sans-serif">A significant aspect of Wolseley&#146;s business
  strategy is growth through acquisitions. Over the past several years, Wolseley&#146;s
  acquisition strategy has resulted in the expansion of its operations across
  the US, within Europe and into Canada. Going forward, Wolseley intends to continue
  to expand through acquisitions in order to achieve its growth objectives and
  strengthen its international distribution network. In evaluating future acquisition
  candidates, Wolseley will target companies that are expected to bring benefits
  through additional expansion of its branch network and increased market share
  or through the addition of new products or customers. Such acquisition candidates
  must generally offer the prospect of sustainable growth in an existing or complementary
  market, or provide Wolseley with a platform for expansion into new areas. After
  acquiring a new company, Wolseley concentrates on expanding the customer base
  and product lines at each location and improving its operational efficiency
  through purchasing economies, inventory management and administrative savings.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley has invested significantly in recent
  years to extend its geographic and product spread, improve operational efficiency
  and provide a platform for future growth. Wolseley has spent approximately &pound;1,469
  million on acquisitions over the last three fiscal years, including &pound;914
  million in the 2006 fiscal year. For a more detailed discussion of acquisitions,
  see &#147;Item 4 &#150; Information on the Group, paragraph A &#150; History
  and Development of the Company &#150; Acquisitions and Divestitures&#148;. </FONT>
</P>
<P> <font size="2" face="sans-serif"><I>North American Distribution </I> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s North American Distribution
  segment is comprised of the businesses of Ferguson and Wolseley Canada, both
  of which supply plumbing, waterworks and heating products, including industrial
  pipes, valves and fittings, to markets in North America, together with the business
  of SBS, which supplies lumber and building materials to markets in the US.</FONT>
</P>
<P> <font size="2" face="sans-serif"><B>Ferguson </B> </font></P>
<P> <FONT size=2 face="sans-serif">Ferguson is a wholesale distributor of plumbing,
  heating, waterworks and piping products to professional contractors and the
  industrial market. Ferguson customers include plumbing, mechanical and utility
  contractors and air conditioning dealers, plants, utilities, irrigation and
  fire suppression equipment installers. Ferguson is headquartered in Newport
  News, Virginia and operates in 50 states, Washington DC, Puerto Rico, Trinidad
  &amp; Tobago and Mexico. The May 2006 edition of </FONT><font face="sans-serif"><I><FONT size=2>Supply
  House Times</FONT></I><FONT size=2> ranks Ferguson as the largest distributor
  in the US of both plumbing supplies, and pipes, valves and fittings and the
  third largest distributor for heating and cooling systems. Ferguson also provides
  integrated purchasing services for third party customers.</FONT></font> </P>
<P> <FONT size=2 face="sans-serif">Based on Wolseley&#146;s knowledge and experience
  in the US plumbing and heating market, Wolseley believes that Ferguson is the
  leading &#147;coast to coast&#148; brand name in the US supplying plumbing and
  heating products to professional contractors. Its sales have grown at a compound
  growth rate of 17.6% per annum over the last five years. Ferguson had 22,030
  employees and operated from 1,237 branches and 9 distribution centers as of
  July 31, 2006. Ferguson&#146;s distribution center network provides significant
  competitive advantages through:</FONT> </P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">enabling it to stock a wider product range,
      which is easily accessible to the branch network;</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">improving customer service in reducing
      delivery times and improving fill rates;</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">increasing purchasing leverage with suppliers
      through bulk orders and deliveries;</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">reducing costs in the supply chain;</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">facilitating the integration of acquisitions
      and the opening of new branches; and</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">improved inventory control.</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
</table>
<P align="center"> <FONT face="sans-serif" size="2">18</FONT> </P>
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</font>
<P> <font size="2" face="sans-serif"><B>Wolseley Canada </B> </font></P>
<P> <FONT size=2 face="sans-serif">In July 2001, the Company acquired the Westburne
  Group for &pound;255 million, thereby expanding its plumbing and heating operations
  into Canada, as Wolseley Canada. Wolseley Canada distributes plumbing, heating
  and piping products, including heating, ventilation and air conditioning (&#147;HVAC&#148;),
  waterworks, refrigeration and fire protection products as well as industrial
  plumbing supplies. Wolseley Canada customers include professional contractors,
  utilities and machine shop operators. Wolseley Canada, which comprises the operations
  of Wolseley Canada, Inc. and Wolseley Industrial Products Group, Inc., conducts
  business solely in Canada. Wolseley Canada, headquartered in Toronto, operates
  locations across Canada, including Calgary, Montreal, Ottawa and Vancouver,
  Winnipeg and Edmonton. Wolseley continues to expand Wolseley Canada through
  a combination of acquisitions, new branch openings and product diversification.
  Westburne Supply, Inc. was the US component of the Westburne Group. Wolseley
  has integrated the Westburne Supply Inc. business into its existing US plumbing
  and heating operations. Wolseley believes it is the second largest distributor
  of plumbing and heating products in Canada.</FONT> </P>
<P> <FONT size=2 face="sans-serif">As of July 31, 2006, Wolseley Canada had 2,815
  employees based in Canada and operated from 246 branches.</FONT> </P>
<P> <font size="2" face="sans-serif"><B>Stock Building Supply </B> </font></P>
<P> <FONT size=2 face="sans-serif">SBS supplies lumber and building materials,
  including value added pre-assembled components such as roof and floor trusses,
  wall panels, floor systems, doors, windows and staircases to house builders
  and professional contractors. In addition, SBS supplies installation services
  to major house builders together with the provision of secured loans to builders.
  According to the May 2006 edition of </FONT><font face="sans-serif"><I><FONT size=2>Pro
  Sales</FONT></I><FONT size=2>, SBS is the leading supplier of residential construction
  materials in the US. SBS is headquartered in Raleigh, North Carolina and, through
  wholly-owned subsidiaries, operates in 33 states. Through more recent acquisitions
  in California, Utah, Texas and Nevada, SBS has significantly increased its presence
  in the Western and Southwestern regions, and these acquisitions have given SBS
  a &#147;coast to coast&#148; presence with 314 branches nationwide, including
  a number with millwork plants and roof truss manufacturing facilities, and 10
  distribution facilities, as of July 31, 2006. SBS&#146;s compound growth rate
  of sales in the last five years has been 15.7% per annum. Approximately 42%
  of its current product range relates to framing lumber and panels, and approximately
  84% of the current business relates to new residential housing based on sales
  in fiscal 2006. SBS had 18,305 employees as of July 31, 2006.</FONT></font>
</P>
<P> <FONT size=2 face="sans-serif">An important part of SBS&#146;s strategy is
  to expand its geographic presence, its product range, market sectors, and its
  value added capability in terms of roof truss and panel plant assembly capability
  together with its ability to provide installation services to major home builders.
  As part of this strategy, SBS has acquired 24 businesses over the last five
  years for an aggregate consideration of approximately &pound;559 million.</FONT>
</P>
<P> <FONT size=2 face="sans-serif">In addition to distributing lumber products,
  SBS provides construction loans to builders, secured principally against homes
  in the course of construction or completed homes awaiting sale. Construction
  loan receivables as of July 31, 2006 amounted to &pound;313 million compared
  to &pound;262 million at the previous year end. Net interest receivable on construction
  loan lending amounted to &pound;12 million as of July 31, 2006 compared to &pound;9
  million in the prior year. SBS expects to continue to adopt a cautious approach
  with the loan portfolio, which turned in fiscal 2006 at the rate of 1.41 times
  compared to 1.53 times in the prior year.</FONT> </P>
<P> <font size="2" face="sans-serif"><I>European Distribution </I> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley believes it is one of the largest
  specialist distributors of plumbing and heating products to the professional
  contractor and specialist installer in Europe. Wolseley&#146;s European strategy
  is to extend the branch network in existing territories through a combination
  of branch openings, acquisitions, a proactive cross-border transfer of know-how
  and product diversification. Wolseley also intends to enter new territories
  in Europe as opportunities arise. The principal driver of the European businesses
  is the repairs, maintenance and installation (&#147;RMI&#148;) market. Approximately
  28% of the sales of the European Distribution division in the year ended July
  31, 2006 related to new residential housing. The European Distribution division
  was comprised of three segments; UK and Ireland, France and Central Europe
  in
  fiscal 2006. DT Group, acquired
  on September 25, 2006, will form a further, Nordic region, segment within the
  European Distribution division.</FONT> </P>
<P align="center"> <FONT size="2" face="sans-serif"> 19</FONT> </P>
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</font>
<P> <FONT size=2 face="sans-serif">Wolseley had 29,441 employees in Europe as
  of July 31, 2006. (See &#147;Item 6 &#150; Directors, Senior Management and
  Employees, paragraph D &#150; Employees&#148; for a more detailed discussion
  of Wolseley employees.)</FONT> </P>
<P> <font size="2" face="sans-serif"><B>United Kingdom </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s UK business is headquartered
  in Leamington Spa, Warwickshire and is organized into brand driven units, which
  focus on specialized customer groups. These organizations are as follows:</FONT>
</P>
<P> <FONT size=2 face="sans-serif">Plumb Center is in the opinion of management
  the country&#146;s largest distributor of plumbing and bathroom products through
  branches across the UK. Its principal markets are both new housing and RMI as
  well as light commercial construction.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Build Center is a national network supplying
  a wide range of building materials and equipment, including timber, glass, bulk
  materials and ironmongery.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Drain Center provides pressurized and non-pressurized
  drainage solutions for the commercial and domestic sectors, and incorporates
  the operations of Capper Plastics.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Hire Center offers a full range of tools for
  commercial and domestic hire, including access and site equipment, power tools,
  carpet cleaning equipment and pumps. Brandon Hire, acquired in May 2006, further
  expanded Wolseley&#146;s presence in this market. Wolseley is now re-branding
  all Hire Center branches as Brandon Hire.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Pipe Center, in the opinion of management,
  has a market leading position in the supply of pipes, valves and fittings to
  the commercial and industrial sectors.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Climate Center is, in the opinion of Wolseley
  management, the UK&#146;s largest wholesaler and distributor of commercial refrigeration
  and air conditioning products to professional installation, service and maintenance
  contractors.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Parts Center is, in the opinion of Wolseley
  management, the UK&#146;s largest specialist supplier of spare parts to trade
  customers.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Electric Center, created in the 2006 fiscal
  year through the acquisition of William Wilson in October 2005 and AC Electrical
  in April 2006, is in the opinion of management the fifth largest distributor
  of electrical products in the UK.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley UK also includes: Broughton Crangrove
  and Galley Matrix, distributors of bathroom, kitchen and heating products to
  &#147;do-it-yourself&#148; centers, boutiques and independent merchants; Unifix,
  which sells fixings, fasteners, power tools and accessories to the building
  trade; Encon Insulation, a distributor of insulation and related products, and
  Bathstore, which supplies bathroom fittings through its showrooms to retail
  customers. As of July 31, 2006, there were 1,778 Wolseley UK branches in the
  UK, serviced by 9 distribution centers.</FONT> </P>
<P> <font size="2" face="sans-serif"><B>Republic of Ireland </B> </font></P>
<P> <FONT size=2 face="sans-serif">Heatmerchants, in the Republic of Ireland,
  was acquired by Wolseley in fiscal year 1999 and had 61 branches and one DC
  as of July 31, 2006. Brooks Group in the Republic of Ireland and Northern Ireland
  was acquired by Wolseley in August 2004 and had 19 branches as of July 31, 2006.
  Wolseley UK&#146;s management in the UK is responsible for both the Heatmerchants
  and Brooks businesses, which include the distribution of plumbing and heating
  products as well as tiles and building materials.</FONT> </P>
<P> <font size="2" face="sans-serif"><B>France </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s French plumbing and heating
  distribution business, Brossette, is based in Lyon. According to the June 2006
  edition of </FONT><font face="sans-serif"><I><FONT size=2>N&eacute;goce</FONT></I><FONT size=2>,
  a French trade publication, Brossette is the second largest distributor of plumbing
  and heating equipment in France with national coverage. Brossette also distributes
  underground drainage products and pipes, valves and fittings to professional
  contractors and public authorities. It was acquired by Wolseley in 1992 and
  has grown from 199 branches at that date to 438 branches and 6 regional distribution
  centers as of July 31, 2006.</FONT></font> </P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s French building materials distribution
  business, PBM, is based in Paris. Wolseley believes, based on its knowledge
  and experience in the French building materials distribution market, that, based
  on sales, PBM is the number two integrated distributor of heavyside building
  materials in France. As of July 31, 2006, it had 347 branches and 9 regional
  distribution centers.</FONT> </P>
<P align="center"> <FONT size="2" face="sans-serif"> 20</FONT> </P>
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</font>
<P> <FONT size=2 face="sans-serif">As of May 2006, Wolseley moved to manage its
  businesses in France through a central French management team. </FONT> </P>
<P> <font size="2" face="sans-serif"><B>Central Europe</B></font> </P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s Central European segment comprises
  the Group&#146;s businesses in Italy, Switzerland, Luxembourg, Netherlands,
  Belgium, Austria, Hungary and the Czech Republic and Electro Oil in Denmark
  and following the acquisition of Woodcote-stavebni materialy, a.s. (&#147;Woodcote&#148;)
  on October 31, 2006 businesses in the Slovak Republic, Poland, Romania and Croatia.
  A central management team based in Switzerland oversees the operations of these
  businesses. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s Austrian business, &Ouml;AG,
  which trades principally as &Ouml;AG Haustechnik, Kontinentale and FAP, is based
  in Vienna and was acquired by Wolseley in 1994. It operated from 64 branches
  as of July 31, 2006 and has 7 distribution centers in Austria. Wolseley believes
  &Ouml;AG is the leading distributor of plumbing and heating products to professional
  contractors in Austria, based on Wolseley&#146;s knowledge and experience in
  the Austrian plumbing and heating market. Wolseley&#146;s subsidiary, Wolseley
  Czech Republic spol. S.r.o., has 24 branches in the Czech Republic, and Mart
  kft has 31 branches in Hungary, plus a distribution center in both countries.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">In Italy, Manzardo SpA (&#147;Manzardo&#148;)
     was acquired by Wolseley in the fiscal year 1999 and is based in Bolzano.
    Manzardo
  significantly expanded its business during the fiscal years 2003 to 2006. In
     January 2005, Wolseley acquired Iser Zauli SpA, which operated 15 branches
    in
  the Romagna and Marche regions south of Venice. This acquisition has made Wolseley&#146;s
   operations in Italy, based on the opinion and knowledge of management, one
  of
  the largest companies in the Italian sanitary and heating market. As of July
   31, 2006, Manzardo operates from 42 branches and has 520 employees. </FONT>
</P>
<P> <FONT size=2 face="sans-serif">Comptoir des Fers et M&eacute;taux (&#147;CFM&#148;),
  Wolseley&#146;s Luxembourg business, operates from two locations in Luxembourg.
  Wolseley believes CFM is the market leading plumbing and heating distributor
  in Luxembourg based on Wolseley&#146;s knowledge and experience in the Luxembourg
  plumbing and heating market. CFM was acquired by Wolseley in fiscal year 2000.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Electro-Oil International AS operates from
  three locations in Denmark. It is primarily involved in the distribution of
  spares for oil burners, boilers and gas systems. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wasco Holding BV (&#147;Wasco&#148;), based
  in the Netherlands, was acquired in July 2002 and operates from 15 branches
  throughout the Netherlands. The majority of Wasco&#146;s revenue comes from
  the sale of boilers and radiators, but Wasco has, in recent years, expanded
  its product range and developed its offering to the RMI market. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley (Schweiz) AG, which continues to trade
  as Tobler (&#147;Tobler&#148;), based in Switzerland, was acquired in December
  2003 and operates from 28 branches throughout Switzerland. Wolseley believes
  Tobler is the leading wholesaler for heating and &#147;behind the wall&#148;
  sanitation products and is also one of the leading providers of technical maintenance
  services in Switzerland based on Wolseley&#146;s knowledge and experience in
  the Swiss plumbing and heating market. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Centratec N.V. was acquired in October 2005
  and operates from 9 locations in the central and eastern regions of Belgium.
  In July 2006 it expanded its operations through the acquisition of Marmon Keystone
  Anbuma, a distributor of carbon and stainless steel pipe with 3 branches in
  Belgium. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Woodcote &#150; stavebni materialy, a.s. was
     acquired on October 31, 2006 and operates from 37 outlets in the Czech Republic,

  the Slovak Republic, Hungary, Poland, Romania and Croatia. Woodcote is a general
     builder&#146;s merchant and also imports and distributes doors, ceilings,
     flooring,  batons, insulation and dry lining to primarily professional
     contractors. </FONT>
</P>
<P> <font size="2" face="sans-serif"><B>Nordic Region</B> </font></P>
<P> <FONT size=2 face="sans-serif">DT Group was acquired on September 25, 2006
  and operates from 247 locations in Denmark, Sweden, Norway and Finland. It operates
  building materials distribution businesses in all four countries and has DIY
  retail stores in Denmark and Sweden.</FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">21</FONT></P>
<hr noshade align="center" width="100%" size="2"><<<<</font>
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</font>
<P> <font size="2" face="sans-serif"><I>Revenues </I> </font></P>
<P> <FONT size=2 face="sans-serif">The table below indicates sales generated by
  Wolseley&#146;s North American Distribution and European Distribution segments
  in each of the last two fiscal years. </FONT> </P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Fiscal Year Ended
      July 31,</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan="3"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><b>Segment</b></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><hr align="left" width="50" size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">US Plumbing &amp; Heating</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">5,396</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">3,858</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">US Building Materials</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,966</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,249</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Canada</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">646</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">512</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">North American Distribution Segment</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,619</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">UK &amp; Ireland</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,351</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,725</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,644</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Central Europe</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">735</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">642</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">European Distribution</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,150</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,637</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Total</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11,256</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <font size="2" face="sans-serif"><B>Divestitures </B> </font></P>
<P> <FONT size=2 face="sans-serif">During fiscal year 2006, Wolseley did not make
  any material divestitures of operations.</FONT> </P>
<P> <font size="2" face="sans-serif"><I>Governmental Regulation</I> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s operations are affected by
  various statutes, regulations and laws in the countries and markets in which
  it operates. While Wolseley is not engaged in a &#145;regulated&#146; industry,
  it is subject to various laws applicable to businesses generally, including
  laws affecting land usage, zoning, the environment (including laws and regulations
  affecting the supply of lumber), health and safety, transportation, labor and
  employment practices (including pensions), competition and other matters. These
  laws are administered by various regulatory bodies in the countries in which
  Wolseley operates. In the US, among other regulatory bodies, Wolseley is subject
  to the jurisdiction of the Environmental Protection Agency, the Occupational
  Safety and Health Administration and the Federal Trade Commission on a federal
  level and various local land use commissions and labor and employment commissions
  on a state and local level. In Canada, Wolseley is subject to many federal and
  various provincial regulations including but not limited to employment standards,
  health and safety, human rights, competition and foreign investment. Additionally,
  differing municipal building codes across Canada may also affect the building
  related products sold by Wolseley Canada. In Europe, Wolseley is subject to
  the jurisdiction of the relevant regulatory bodies of the European countries
  in which it operates, including these countries&#146; respective commissions
  or departments of health and safety, data protection, competition and environmental
  protection, as well as equivalent respective governing bodies of the European
  Union. </FONT> </P>
<P> <FONT size=2 face="sans-serif">None of the governmental regulations to which
  the Group is subject has had a material adverse effect on Wolseley&#146;s financial
  condition, and Wolseley is not aware of any existing matters it presently expects
  to have a material adverse effect. </FONT> </P>
<P> <font size="2" face="sans-serif"><I>Patents and Trademarks</I> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s operating units have various
  US and foreign patents, registered trademarks, trade names and applications
  for, or licenses in respect of, the same that relate to various businesses.
  While its business is not significantly dependent upon any patents or trademarks,
  Wolseley believes that the important patents, trademarks and trade names of
  its operating subsidiaries and divisions are adequately protected and that the
  expiration of patents and patent licenses will not have a material adverse effect
  upon Wolseley&#146;s business, financial condition or results of operations.
  </FONT> </P>
<P align="center"> <FONT size="2" face="sans-serif"> 22</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <font size="2" face="sans-serif"><I>Legal Proceedings </I> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is involved in various legal proceedings
  incidental to the nature of its business and maintains various insurance coverages
  to reduce financial risk associated with claims related to these proceedings.
  Although it is not possible to predict the outcome of these proceedings, or
  any claim against Wolseley related thereto, in the opinion of management, uninsured
  losses, if any, resulting from the ultimate resolution of these matters will
  not have a material effect on Wolseley&#146;s business, financial position and
  results of operations. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Provisions for liabilities and charges in the
  balance sheet include the estimated liability for asbestos claims on a discounted
  basis. This liability has been determined actuarially as at July 31, 2006 by
  independent professional actuarial advisors. The estimated liability relating
  to asbestos related claims is fully covered by insurance, and accordingly an
  equivalent insurance receivable has been included in non-current assets &#150;
  other receivables. The level of insurance coverage available significantly exceeds
  the estimated liability, and no profit or cash flow impact is therefore expected
  to arise in the foreseeable future. There were 246 (2005: 235) claims outstanding
  at the July 31, 2006 fiscal year end. </FONT> </P>
<P> <font size="2" face="sans-serif"><I>Raw Materials and Commodities </I> </font></P>
<P> <FONT size=2 face="sans-serif">With the exception of lumber and certain commodities
  such as copper, steel and plastics, the financial performance of the Group is
  not significantly influenced by the supply and cost of commodity products. Wolseley&#146;s
  products such as industrial pipes, valves and fittings, plumbing supplies and
  heating and ventilation equipment are generally pre-assembled and do not require
  Wolseley to engage in bulk purchases of raw materials and other commodities.
  Wolseley is not dependent on contracts with suppliers for pre-assembled products
  such as industrial pipes, valves, fittings, plumbing supplies and heating and
  ventilation equipment that are material to its business and profitability. However,
  Wolseley&#146;s building materials business in the US (and, to a lesser extent,
  the businesses in the UK, Ireland and France) is significantly dependent on
  lumber products. Wolseley purchases its lumber supplies from a number of major
  producers both within the US and Canada and in Europe and is not dependent on
  any material supply contracts. Any restriction in supply from any one supplier
  is unlikely to have a significant impact on the total lumber supply available
  to Wolseley. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s building materials business
     can be adversely affected by the fluctuation of lumber prices. For example,

  the average price for framing lumber, a significant product for Wolseley&#146;s
  US Building Materials Distribution business, over the five fiscal years from
  2002 to 2006 has ranged between $400 and $287 per thousand board feet, with
  the average for the year ended July 31, 2006, being $362 per thousand board
  feet. Lower lumber prices had the effect of reducing sales and profitability
  of that business during the 2006 fiscal year. In the last three years there
  has been significant fluctuation in the price of many raw materials, notably
  in
  North America. Ferguson, for example, saw price inflation in commodity products,
  particularly copper during the 2006 fiscal year which accounted for some $35
  million of unusually large profits in the second half of the year, in addition
  to unusually large gains of around $8 million in the first half. There can
  be
  no assurance that continued volatility of lumber prices and other commodities
  and sustained periods of low lumber prices or commodities will not materially
  adversely affect the financial performance of Wolseley. See &#147;Item 5 &#150;
  Operating and Financial Review and Prospects &#150; Year Ended July 31, 2006
   compared to Year Ended July 31, 2005 &#150; US Building Materials Distribution&#148;
  for additional information on the effect of lumber prices and other raw material
   prices. </FONT> </P>
<P> <font size="2" face="sans-serif"><I>Seasonality</I> </font></P>
<P> <FONT size=2 face="sans-serif">The businesses of the Group, particularly its
  heating and building materials business, are, to a degree, seasonal. Since many
  of Wolseley&#146;s products are intended for exterior use, sales by the Group
  tend to be lower during periods of inclement weather; this is particularly true
  with respect to Wolseley&#146;s Northern US, Canadian and Northern European
  operations. Accordingly, weather conditions occurring during the second and
  third quarters (November &#150; April) of the Group&#146;s fiscal year may result
  in the generation of lower sales revenues during those periods than in other
  periods of the Group&#146;s fiscal year. These seasonal fluctuations are likely
  to continue in the future. Management closely monitors operating expenses and
  inventory levels during seasonally affected periods and, to the extent possible,
  controls variable operating costs to minimize seasonal effects on profitability.
  </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">23</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<a href="#contents">Back to Contents</a>
</font>
<P> <font size="2" face="sans-serif"><B>C. Organizational Structure </B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley plc is a holding company that operates
  with strong, experienced management teams leading each principal operating subsidiary.
  Wolseley&#146;s principal operating businesses are organized into two divisions:
  North American Distribution and European Distribution, with a management team
  based in each territory. During fiscal 2006 the European Distribution division
  had three geographical segments: UK and Ireland, France and Central Europe.
  Following the acquisition of DT Group on September 25, 2006 the division added
  a further, Nordic Region, geographical segment. The North American division
  comprises 3 businesses, US Plumbing and Heating (&#147;Ferguson&#148;), US Building
  Materials (&#147;SBS&#148;) and the Canadian business. The table below sets
  forth Wolseley&#146;s principal operating subsidiaries, including for each such
  subsidiary the applicable segment and country of operation. Each of the following
  subsidiaries is wholly owned, either directly or indirectly, by Wolseley plc.</FONT>
</P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD colspan="2"><font size="1" face="sans-serif"><B>Segment</B></font></TD>
    <TD>&nbsp;</TD>
    <TD><font size="1" face="sans-serif"><B>Principal Operating Companies</B></font></TD>
    <TD>&nbsp;</TD>
    <TD><font size="1" face="sans-serif"><B>Country of Operation</B></font></TD>
  </TR>
  <TR>
    <TD colspan="2">
      <hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan="2"><FONT size=2 face="sans-serif">North American </FONT><FONT size=2 face="sans-serif">Distribution</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Ferguson Enterprises Inc.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">US</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width=20%>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=35%><FONT size=2 face="sans-serif">Wolseley Canada, Inc.</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=35%><FONT size=2 face="sans-serif">Canada</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Stock Building Supply Holdings, Inc.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">US</FONT></TD>
  </TR>
  <TR>
    <TD colspan=2><FONT size=2 face="sans-serif">European Distribution</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">UK &amp; Ireland</font></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Wolseley UK Limited</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Heatmerchants Limited</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Republic of Ireland</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Brooks Group Limited</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Republic of Ireland</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">France</font></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Brossette SA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">PB &amp; M SA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">Central Europe</font></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">OAG AG</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Austria</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Mart Kft</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Hungary</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Manzardo SpA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Italy</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Comptoir des Fers et M&eacute;taux SA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Luxembourg</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Wasco Holding B.V.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">The Netherlands</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Wolseley (Schweiz) AG</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Switzerland</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Wasco - Centratec N.V.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Belgium</FONT></TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="sans-serif">Wolseley Czech Republic spol. s r.o.</font></td>
    <td>&nbsp;</td>
    <td><font size=2 face="sans-serif">Czech Republic</font></td>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Woodcote &#150; stavebni materialy, a.s.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><font face="sans-serif" size="2">Czech Republic</font></TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="sans-serif">Electro-Oil International A/S</font></td>
    <td>&nbsp;</td>
    <td><font size=2 face="sans-serif">Denmark</font></td>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">Nordic Region </font></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">DT Group A/S (from September 25, 2006)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Denmark</FONT></TD>
  </TR>
</TABLE>
<P> <font size="2" face="sans-serif"><B>D. Property, Plant and Equipment </B>
  </font></P>
<P> <FONT size=2 face="sans-serif">As of July 31, 2006, Wolseley operated from
     4,720 outlets, including 4,658 branches and 62 regional and national distribution

  centers and facilities. In North America, including the US and Canada, Wolseley
     operated from 1,816 outlets, including 1,797 branches and 19 distribution
    centers
  and facilities. In Europe, Wolseley operated from 2,904 outlets, including
    2,861  branches and 43 distribution centers and facilities. The majority
    of these properties
  are leased, and none is considered to have a value that is significant in relation
     to Wolseley&#146;s assets as a whole. Wolseley owns approximately 650 of
     its  properties, and none of its owned properties is subject to any material
     encumbrances.</FONT> </P>
<P> <font face="sans-serif"><a name="p24"></a></font><font size="2" face="sans-serif"><B>ITEM
  4A. UNRESOLVED STAFF COMMENTS</B> </font></P>
<P> <FONT size=2 face="sans-serif">None.</FONT> </P>
<P> <font face="sans-serif"><a name="p24a"></a></font><font size="2" face="sans-serif"><B>ITEM
  5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B> </font></P>
<P> <FONT size=2 face="sans-serif">The following discussion is based on Wolseley&#146;s
  Consolidated Financial Statements included in Item 18 of this Annual Report.
  These financial statements have been prepared in accordance with IFRS, which
  differs in certain significant respects from US GAAP. Reconciliations and discussions
  of the significant differences between IFRS and US GAAP are set forth in Note
  44 to the Consolidated Financial Statements. In addition, various terms used
  in financial statements prepared in accordance with IFRS (such as Wolseley&#146;s)
  differ from terms commonly used in US financial statements. For example, operating
  profit is the equivalent of net income before interest and taxes.</FONT></P>
<P align="center"> <FONT size="2" face="sans-serif">24</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font>
<a name="p25"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif">During the periods presented, the operations
     of Wolseley were conducted principally in the US, Canada and Europe. For
    purposes
  of the Company&#146;s Consolidated Financial Statements, the results of its
  US, Canadian and other overseas subsidiaries were translated at the average
  exchange rate for the period in respect of the income statement and the relevant
  period end rate in respect of the balance sheet (see Item 11. Quantitative
  and Qualitative Disclosures About Market Risk &#8211; Foreign Currency Risk).
  Consequently, Wolseley&#146;s
  reported results were affected  by fluctuations in the rates of exchange between
  the British pound sterling
  and the other currencies in which it received revenues and incurred expenses,
   principally the US dollar, the Euro and the Canadian dollar. </FONT> </P>
<P> <FONT size=2 face="sans-serif">The residential and commercial and industrial
  construction markets in which Wolseley operates are sensitive to changes in
  the economy, and as a result, downturns (or lack of substantial improvement)
  in the economy in any of Wolseley&#146;s geographic markets could adversely
  affect Wolseley&#146;s business, financial condition and results of operations.
  The US economy showed significant momentum during fiscal years 2005 and 2006
  but from the third quarter of calendar 2006 has shown a substantial slowdown
  in the market for new residential housing. The markets in Continental Europe
  (excluding the UK and Ireland), which accounted for approximately 17% of Wolseley&#146;s
  sales in the fiscal year ended July 31, 2006, showed limited improvement during
  the fiscal year 2006, having been soft during the fiscal year 2005. To the extent
  recovery from these soft market conditions does not materialize or otherwise
  takes place over an extended period of time, Wolseley&#146;s business, financial
  condition and results of operations may be adversely affected.</FONT> </P>
<P> <font size="2" face="sans-serif"><B>A. Operating Results</B> </font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3" align="center"><font size="1" face="sans-serif"><B>Revenue</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3" align="center"><font size="1" face="sans-serif"><B>Year Ended July 31</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">US Plumbing &amp; Heating</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">5,396</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">3,858</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">US Building Materials</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,966</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,249</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Canada</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">646</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">512</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">North American Distribution</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,619</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">UK &amp; Ireland</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,351</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,725</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,644</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Central Europe</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">735</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">642</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">European Distribution</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,150</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,637</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">TOTAL</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11,256</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<p>&nbsp;</p>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Operating Profit</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Year Ended July
      31,</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan="3"><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">US Plumbing &amp; Heating</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">378</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">260</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">US Building Materials</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">192</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">131</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Canada</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">36</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">North American Central Costs</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(11</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">North American Distribution</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">603</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">426</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
    <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
<TR>
    <TD><FONT size=2 face="sans-serif">UK &amp; Ireland</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">201</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">183</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">91</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">98</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Central Europe</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">European Central Costs</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
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  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">European Distribution</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">316</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">307</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
    <TR>
    <TD>&nbsp;</TD>
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<TR>
    <TD><FONT size=2 face="sans-serif">Group Central Costs</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(37</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(25</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
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    <TD>&nbsp;</TD>
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  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Trading Profit</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">882</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">708</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(48</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
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  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Operating profit</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">834</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">702</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
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</TABLE>
<p align="center"> <FONT size="2" face="sans-serif"> 25</FONT></p>
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</font>
<P> <FONT size=2 face="sans-serif">Following its adoption of IFRS, Wolseley determined
  that its primary segments for reporting in accordance with IFRS were on a geographical
  basis and in fiscal 2005 and 2006 comprised UK and Ireland, France, Central
  Europe and North America. Under US GAAP Wolseley considers that its North American
  segment would be reported as three further segments: US Plumbing and Heating,
  US Building Materials, and Canada, as these further segments reflect the manner
  in which the principal decision makers of the Group receive information. Management
  considers that this further segmental information required under US GAAP but
  not in accordance with IFRS provides valuable additional information to users
  of the financial statements as it reflects the performance of the business on
  a basis consistent with that used by managers in discussing and directing the
  business.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Trading profit, being defined as operating
  profit before amortization of acquired intangibles, is a measure set out in
  Note 9 to the accounts on page F-</FONT><font face="sans-serif"><font size="2">21
  and is a non GAAP measure. The performances of Wolseley&#146;s segments and
  businesses are discussed using this measure. </font></font> </P>
<P> <FONT size=2 face="sans-serif">This measure, trading profit, closely reflects
  the way in which operating targets are defined and performance is monitored
  by the Group&#146;s management. The current businesses within Wolseley have
  arisen through internal organic growth and through acquisition. Operating profit
  includes the amortization of acquired intangibles arising from those businesses
  that have been acquired subsequent to July 31, 2004 and as such does not reflect
  equally the performance of businesses acquired prior to August 1, 2004 (where
  no amortization of acquired intangibles was recognized), businesses that have
  developed organically (where no acquired intangibles are attributed), and those
  businesses more recently acquired. Wolseley believes that trading profit provides
  valuable additional information for users of the financial statements in assessing
  the Group&#146;s performance since it provides information on the performance
  of the business that local managers are most directly able to influence and
  on a basis consistent across businesses. Wolseley uses trading profit for planning,
  budgeting and reporting purposes and for its internal assessment of management
  performance. Trading margin is trading profit expressed as a percentage of revenue.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Also in discussing the performance of the businesses
  certain information is presented on a constant currency basis. This removes
  the translation effect of foreign exchange movements and enables an understanding
  of the underlying performance of the business that is most closely influenced
  by the actions of each business&#146; management. The risk of foreign exchange
  movements on the translation of overseas earnings is managed centrally and is
  not a factor over which managers have any control. In discussing performance
  Wolseley also considers &#147;organic&#148; performance. The change in organic
  performance is the total increase or decrease in the year adjusted for the impact
  of foreign exchange, new acquisitions (and, where applicable, divestitures)
  in the year and the incremental impact of acquisitions (and divestitures) in
  the prior year. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Whilst these measures are important in the
  management of the business, they should not be viewed as replacements for, but
  rather as complementary to, the comparable GAAP measures such as revenue and
  reported (rather than organic) movements in individual income statement captions.
  These GAAP measures reflect all the factors which affect the business, and the
  discussion by segment and business should be read in the context of the discussion
  of the overall Group performance. </FONT> </P>
<P> <font size="2" face="sans-serif"><I>Year Ended July 31, 2006 Compared To Year
  Ended July 31, 2005 </I> </font></P>
<P> <font size="2" face="sans-serif"><B><I><U>Revenue</U></I></B> </font></P>
<P> <FONT size=2 face="sans-serif">Revenue increased by 25.8% in fiscal year
  2006 from &pound;11,256 million to &pound;14,158 million. The impact of currency
  translation on the Group&#146;s reported sterling results for the year compared
  to the previous year was to increase sales by &pound;274 million (2.4%) principally
  as a result of the depreciation of sterling pounds in relation to the US dollar.
  Excluding the effects of foreign currency translation, revenues increased by
  22.8%. Revenues increased by &pound;862 million due to acquisitions made in
  the fiscal year 2006 and &pound;507 million due to acquisitions made in the
  fiscal year 2005. Excluding the effect of these acquisitions and currency translation,
  revenues grew by &pound;1,259 million, with the North American Distribution
  segment responsible for 90% of this growth and the European Distribution division
  responsible for the remaining 10%. </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">26</FONT> </P>
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</font>
<P> <font size="2" face="sans-serif"><B><I><U>Operating profit</U></I></B> </font></P>
<P> <FONT size=2 face="sans-serif">Operating profit increased by 18.8% from &pound;702
  million to &pound;834 million. This was driven by an increase in trading profit
  of &pound;174 million (24.7%) offset in part by an increase in amortization
  of acquired intangibles of &pound;42 million. Amortization of acquired intangibles
  increased due to further acquisitions being made in fiscal 2006. Excluding the
  effects of foreign currency translation, Group operating profit for fiscal 2006
  increased by 15.9%. The effect of US dollar appreciation has been to increase
  translated US trading profits by &pound;14 million (1.9% of 2005 trading profit)
  compared to fiscal 2005. US dollar denominated profits account for around 63.4%
  of the Group&#146;s trading profit in fiscal 2006. There has been little movement
  in the Euro translation rate, with Euro denominated profits accounting for around
  15.2% of Group trading profit in fiscal 2006. </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I><U>Finance revenue and Finance costs</U></I></B>
  </font></P>
<P> <FONT size=2 face="sans-serif">Net finance costs of &pound;65 million in
    fiscal  year 2006 (2005: &pound;37 million) reflects an increase in Group
    debt as a  result of acquisitions and an increase in interest rates, together
    with a reduction
  in pension funding costs and interest received on the refund of French wood
     tax. </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I><U>Tax Expense</U></I></B> </font></P>
<P> <FONT size=2 face="sans-serif">The effective tax rate, being tax payable on
  profit before tax and amortization of acquired intangibles, increased marginally
  from 27.7% to 28.4%. </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I><U>North American Distribution</U></I></B>
  </font></P>
<P> <FONT size=2 face="sans-serif">The North American Distribution segment performed
  strongly with significant rises in revenue and profits and its highest ever
  trading margin, which increased from 6.4% to 6.7%. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Reported revenue of the segment was up 36.1%
  from &pound;6,619 million to &pound;9,008 million, reflecting organic growth
  of 16.4% (including gains from price fluctuations in commodities), acquisitions
  and the beneficial impact of currency translation. Trading profit, in sterling,
  increased by 41.5% from &pound;426 million to &pound;603 million, after an increase
  of &pound;10 million in North American central costs reflecting the creation
  of the new North American management structure with effect from August 1, 2005.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Currency translation increased segmental revenue
  by &pound;274 million (4.1%) and trading profit by &pound;18 million (4.2%).
  There was a net increase of 363 branches in North America to 1,797 (2005: 1,434).
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Amortization of acquired intangibles applicable
  to this segment was &pound;33 million in fiscal 2006. </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I>US Plumbing and Heating </I></B> </font></P>
<P> <FONT size=2 face="sans-serif">Ferguson produced another outstanding performance,
  generating strong organic growth from its focus on selected markets, new branch
  openings and driving further commercial advantage from its DC network. These
  factors contributed to, in the opinion of management, a significant market outperformance
  in the year.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Local currency revenue in the US plumbing
    and  heating operations rose by 35.1% to $9,651 million (&pound;5,396 million)
    from  $7,144 million (&pound;3,859 million), with trading profit up by 40.4%
    to $676  million (&pound;378 million) from $481 million (&pound;260 million).
    Organic  revenue growth was 24.3%. The second half gross margin benefited
    from further
  increases in commodity prices, mainly copper, towards the latter part of the
     financial year. Ferguson&#146;s scale and distribution capability allowed
     it  to take advantage of price movements in a rising commodity market to
     secure
  additional unusually large profits amounting to around $35 million in the second
      half in addition to the unusually large gains of around $8 million in the
     first
  half. Taking into account the unusually large commodity gains, the trading
     margin  increased from 6.7% to 7.0%. The underlying trading margin was approximately

  20 basis points higher, year on year, increasing from 6.5% to 6.7%, despite
      significant expenditure to develop the business for future profitable growth.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Volumes through the DC network grew by 34%
  compared to the prior fiscal year, and Ferguson believes more than 50% of branch
  sales as of July 31, 2006 went through the network. Further investment was made
  in the DCs with an additional 700,000 square feet of capacity added through
  the expansion of four existing facilities. Wolseley Board approval has recently
  been given for new DCs in both Florida and northern California, both of which
  are scheduled to become operational within twelve months.</FONT></P>
<P align="center"> <FONT size="2" face="sans-serif"> 27</FONT> </P>
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</font>
<P> <FONT size=2 face="sans-serif">In the markets in which Ferguson operates,
  the commercial and industrial sectors continued to improve, and although new
  housing slowed towards the end of the fiscal year, other housing related activity
  remained strong, with the positive economic environment benefiting the RMI sector.
  RMI is becoming an increasingly important element of overall construction spending
  in the US. To address this opportunity, Ferguson opened a further 64 XpressNet
  branches and 30 new showrooms during the fiscal year. More than 60 new specialist
  branches for heating, ventilation, and air-conditioning (HVAC) or waterworks
  were also opened, and this expansion is expected to lead to additional growth
  opportunities. </FONT> </P>
<P> <FONT size=2 face="sans-serif">As well as new branch openings, investment
  in people and IT continued during the fiscal year. More than 4,300 people joined
  the business, and the new warehouse management system is being introduced into
  the large branches. This system should lead to enhanced customer service as
  a result of faster and more accurate product picking and more efficient inventory
  management. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Ferguson&#146;s total branch numbers increased
  by 296 during the fiscal year to 1,237 locations (2005: 941 branches).</FONT>
</P>
<P> <font size="2" face="sans-serif"><B>US Building Materials </B> </font></P>
<P> <FONT size=2 face="sans-serif">The strong performance of SBS in fiscal 2006
  benefited from improved market focus which was brought about by the recent business
  restructuring and from acquisitions. Reported figures also benefited from currency
  translation.</FONT> </P>
<P> <FONT size=2 face="sans-serif">In local currency, SBS&#146;s revenue for fiscal
  2006 was up 27.4% to $5,305 million (&pound;2,966 million) from $4,164 million
  (&pound;2,249 million), with trading profit up by 40.6% from $244 million (&pound;131
  million) to $343 million (&pound;191 million). Organic revenue growth was 4.1%,
  reflecting some commodity price deflation in lumber and structural panels. These
  commodity price movements had the effect of decreasing SBS&#146;s local currency
  revenue by $167 million (4.0%) in the fiscal year compared to the prior fiscal
  year, with the greater impact being in the second half. Acquisitions contributed
  $970 million (23.3%) to revenue growth.</FONT> </P>
<P> <FONT size=2 face="sans-serif">SBS&#146;s trading margin increased significantly
  from 5.9% to 6.5% primarily as a result of a more favorable sales mix arising
  from increased management focus on value added products and installed services,
  both of which represent significant growth opportunities. </FONT> </P>
<P> <FONT size=2 face="sans-serif">For the majority of the fiscal year, new residential
  housing starts were around record levels at between 1.9 and 2.0 million starts,
  although there were significant regional variations. The markets in Georgia,
  Utah, Texas and the Carolinas have been the strongest throughout the fiscal
  year whereas the weakest markets have been in the upper midwest and the north
  east. As expected, housing starts declined in the final quarter of the fiscal
  year as a result of rising interest rates, increased inventory of unsold houses
  and a reversal in the trend of house price inflation. Housing starts ended the
  fiscal year at an annualized rate of just below 1.8 million per annum, with
  the previously buoyant markets such as Washington DC, Florida and Las Vegas
  showing significant fourth quarter year on year declines. Management action
  has already been taken to reduce headcount and indirect costs and to shift emphasis
  to the more resilient housing markets and to increase penetration of the RMI
  and industrial and commercial markets. Initiatives are also being taken to expand
  the product range throughout the branch network, which should help SBS to continue
  to outperform competitors in these softening market conditions. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Value-added sales in the 2006 fiscal year were
  up 31%, construction service and installed business sales were up more than
  140% and sales to commercial and RMI contractors increased by 47% and 20%, respectively.
  As well as achieving these increases through its existing branch network and
  acquisitions, SBS opened 19 new greenfield branches, and these initiatives further
  complement SBS&#146;s installed service expertise.</FONT> </P>
<P> <FONT size=2 face="sans-serif">SBS&#146;s branch numbers increased by 59 during
  the fiscal year to 314 locations (2005: 255 branches), and it now operates in
  33 states.</FONT> </P>
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</font>
<P> <font size="2" face="sans-serif"><B>Wolseley Canada </B> </font></P>
<P> <FONT size=2 face="sans-serif">In Canada, the construction and housing markets
  remained mostly strong in fiscal 2006, while the buoyant energy sector in Western
  Canada helped sales in the industrial and commercial sector.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Reported revenue for the division increased
  by &pound;134 million (26.8%) to &pound;646 million with the Canadian dollar-sterling
  exchange rate for the year strengthening from C$2.2997 to C$2.0595 (11.7%).
  Local currency revenue increased by 13.0% to C$1,330 million (&pound;646 million)
  from C$1,177 million (&pound;512 million). Of this increase, 10.7% was organic,
  which management believes to be ahead of the market generally. Gross margin
  improved and local currency trading profit rose by 12.4%, in line with revenue,
  resulting in an unchanged trading margin of 6.9%.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Work continued to consolidate back offices,
  recruit additional people to fill management and trainee positions and improve
  logistics. The second of three regional distribution centers for larger inventory
  items was opened in Quebec in October 2005, with the third scheduled to open
  near Toronto in December 2006. These regional distribution centers should lead
  to lower inventory levels and enable the branch network to be utilized more
  effectively.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley Canada&#146;s total branch numbers
  increased from 238 to 246 locations. </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I><U>European Distribution</U></I></B>
  </font></P>
<P> <FONT size=2 face="sans-serif">The European Distribution division produced
  36.4% (2005: 41.2%) of the Group&#146;s revenues and 35.8% (2005: 43.5%) of
  the Group&#146;s trading profit in fiscal 2006. </FONT> </P>
<P> <FONT size=2 face="sans-serif">Construction markets in Europe showed very
  little growth during the fiscal year. Nonetheless, with the exception of the
  Czech Republic, which had marginally lower revenue, all the continental European
  operations increased revenue, and most achieved profit improvements. The results
  benefited from the effect of acquisitions but were adversely affected by the
  fall in Brossette&#146;s profits due to its restructuring and lower profitability
  in Austria.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Reported revenue for this division increased
  by 11.1% from &pound;4,637 million to &pound;5,150 million, of which 2.8% was
  from organic growth. Acquisitions accounted for &pound;382 million (8.2%) of
  revenue growth. Trading profit, after European central costs, increased 2.9%
  from &pound;307 million to &pound;316 million. European central costs rose by
  &pound;3 million to &pound;7 million due to the planned expansion of the European
  infrastructure to drive future growth and margin improvement. </FONT> </P>
<P> <FONT size=2 face="sans-serif">The overall European distribution division
  trading margin, after European central costs, fell from 6.6% to 6.1% of revenue,
  primarily due to the lower trading margins in Brossette, Austria and the UK
  and the effect of acquisitions. Margin improvements were achieved in PBM (France),
  Manzardo (Italy), Cesaro (Czech Republic), Electro Oil (Denmark) and Wasco (Netherlands).</FONT>
</P>
<P> <FONT size=2 face="sans-serif">During the fiscal year, a further net 375 branches
  were added to the European distribution network, giving a total of 2,861 locations
  (2005 : 2,486). </FONT> </P>
<P> <font size="2" face="sans-serif"><B><I>UK and Ireland </I></B> </font></P>
<P> <FONT size=2 face="sans-serif">Wolseley UK&#146;s performance in fiscal 2006
  held up well against a UK building materials market which is estimated to be
  around 4-5% down as compared to the prior period. Whilst the fundamentals of
  the UK economy remained positive, with relatively low interest rates and low
  unemployment, RMI spending slowed in the first half of the fiscal year reflecting
  weaker consumer confidence, but sales trends started to show a gradual improvement
  in the final quarter. Government spending remained a relative bright spot, although
  there have been noticeable delays on planned social housing expenditure. </FONT>
</P>
<P> <FONT size=2 face="sans-serif">Against this more challenging background, Wolseley
  UK, which includes operations in Ireland, recorded a 14.4% increase in revenue
  to &pound;2,690 million (2005: &pound;2,351 million). Organic growth of 2.1%
  is believed by management to have outperformed the market generally, with Bathstore,
  the retail bathroom offering, and Heatmerchants and Brooks, the Irish businesses,
  performing particularly well, producing double-digit organic revenue growth.</FONT>
</P>
<P align="center"> <FONT face="sans-serif" size="2">29</FONT> </P>
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</font>
<P> <FONT size=2 face="sans-serif">Wolseley UK&#146;s trading profit increased
  by 9.9% on the prior year mainly as a result of the acquisitions of William
  Wilson, Encon, AC Electrical and Brandon Hire, all of which have outperformed
  expectations at the time of acquisition. Although the gross margin improved,
  the trading margin fell slightly from 7.8% to 7.5%. This was the result of the
  ongoing investment in the business to increase management resources, improve
  the supply chain and logistics and expand the branch opening program. These
  investments provide a platform for future growth in both the traditional brands
  as well as those market sectors recently entered.</FONT> </P>
<P> <FONT size=2 face="sans-serif">The new national DC in Leamington Spa, which
  is located alongside Wolseley UK&#146;s new headquarters, commenced deliveries
  to branches in August 2006. The regional DC in the north west of the UK is scheduled
  to open in autumn 2007. These investments and the current initiatives to centralize
  control of transport and branch inventory management should enhance customer
  service, improve efficiency and support continued growth in the business.</FONT>
</P>
<P> <FONT size=2 face="sans-serif">During the fiscal year, 288 net new locations
  were added in the UK and Ireland, including 262 branches added as a result of
  acquisitions, taking the total number of branches for Wolseley UK to 1,858 (2005:
  1,570 branches).</FONT> </P>
<P> <font size="2" face="sans-serif"><B><I>France </I></B> </font></P>
<P> <FONT size=2 face="sans-serif">In France, government tax incentives continue
  to underpin growth in the new residential market, but RMI, representing approximately
  two thirds of fiscal 2006 revenue for both Brossette and PBM, continued to show
  only marginal improvement against the background of little growth in the overall
  economy, weak consumer confidence and persistent high levels of unemployment.
  </FONT> </P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s French operations, which since
  May 2006 have been managed through one central management team, generated revenue
  increases of 4.8%, to &#8364;2,515 million (&pound;1,725 million) from &#8364;2,399
  million (&pound;1,644 million), including organic growth of 2.1%. Trading profit
  in fiscal 2006 for France decreased 7.7% to &#8364;132 million (&pound;91 million)
  from &#8364;143 million (&pound;98 million) with a trading margin of 5.3% (2005:
  6.0%) as a result of the lower level of profitability in Brossette.</FONT> </P>
<P> <FONT size=2 face="sans-serif">PBM achieved an increase in revenue of 6.8%
  in local currency in fiscal 2006, almost half of which was organic growth. The
  sales trends in PBM improved in the second half, and trends have continued to
  improve since the fiscal year end. Gross margin was down slightly. PBM&#146;s
  branch numbers increased by 57 during the fiscal year to 347 branches, including
  the opening of eight new satellites and twelve hire locations. The underlying
  trading profit, excluding a &#8364;11.5 million (&pound;8 million) wood import
  duties rebate from the French customs authority, showed an improvement, as did
  the underlying trading margin.</FONT> </P>
<P> <FONT size=2 face="sans-serif">Local currency revenue in Brossette was 1.8%
  up on the prior year. Trading profit was significantly lower, before taking
  account of a &#8364;7.6 million (&pound;5 million) fine from the French Competition
  Authorities relating to matters which took place more than ten years ago. Brossette&#146;s
  results reflect the ongoing reorganization of the district, branch and management
  structures and the move to centralization of purchasing and logistics, all of
  which are designed to enhance customer service and facilitate future expansion.
  In order to accelerate the changes being made at Brossette a number of management
  and employee changes were made during the fiscal year, with associated severance
  costs of &#8364;3.5 million. </FONT> </P>
<P> <FONT size=2 face="sans-serif">PBM is expanding the number of joint sites
  with Brossette, continuing to cross sell each others&#146; products in their
  respective branches and exploiting opportunities to create purchasing synergies
  and indirect cost savings in cooperation with other Group companies. </FONT>
</P>
<P> <font size="2" face="sans-serif"><B><I>Central Europe</I></B> </font></P>
<P> <FONT size=2 face="sans-serif">The Group&#146;s other Continental European
  operations enjoyed generally good results in fiscal 2006 despite broadly flat
  markets. Revenue in Central Europe was up by 14.6% to &pound;735 million (2005:
  &pound;642 million), reflecting organic growth of 7.4% and the benefit of acquisitions.
  Trading profit was up 3.9% to &pound;31 million (2005: &pound;30 million). </FONT>
</P>
<P> <FONT size=2 face="sans-serif">Tobler, in Switzerland, had another record
  year with revenue up 17.8% to more than CHF300 million for the first time, including
  10.1% organic growth. Despite competitive market conditions exerting pressure
  on prices and a change in the business mix to lower margin products, trading
  margin improved. </FONT> </P>
<P align="center"> <FONT face="sans-serif" size="2">30</FONT> </P>
<hr noshade align="center" width="100%" size="2">
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<p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif">In the Netherlands, Wasco continued to make
  good progress expanding its product range into sanitaryware, developing its
  offerings to the more profitable RMI market and focusing on cost control. Wasco
  achieved organic revenue growth of 16.1% in fiscal 2006 and trading profit improved
  by 57.0%. In Luxembourg, CFM&#146;s revenue increased by 3.6%, although trading
  profit was down, reflecting an increasingly competitive market. Centratec, the
  Belgian business acquired in October 2005, performed in line with expectations
  and is now working with Wasco in the Netherlands and CFM in Luxembourg to achieve
  improvements in sourcing, logistics and inventory management.</FONT></P>
<P> <FONT size=2 face="sans-serif">&Ouml;AG, in Austria, increased revenue by
  nearly 2.7% although trading profit fell due to continued competitive pressure
  on prices as a consequence of difficult housing and RMI markets and business
  restructuring. In Hungary and the Czech Republic, local market conditions remained
  difficult, but Wolseley Hungary achieved strong organic revenue growth and Cesaro
  in the Czech Republic improved profits.</FONT></P>
<P> <FONT size=2 face="sans-serif">In Italy, Manzardo increased revenue by 21.4%
  compared to the prior year, including 6.7% organic growth in a flat market and
  the incremental effect of Iser Zauli acquired in January 2005. The branch opening
  program of the past few years continued to benefit Manzardo&#146;s revenue growth.
  Trading profit rose by a lesser percentage than revenues, 13%, reflecting the
  costs of branch openings and preparations for the new DC opening. Four new branches
  were opened during the fiscal year. Progress on the &#8364;20 million new central
  DC in northern Italy continues, and the first branch deliveries are expected
  to commence before the end of calendar 2006, with other branches being rolled
  out over the following 12 to 18 months.</FONT></P>
<P> <FONT size=2 face="sans-serif">Further progress was made during the 2006 fiscal
  year to manage the businesses in a more integrated way across Europe. The focus
  was on sharing best practices in areas such as branch format and product/service
  offerings, rationalizing the product and supplier base, improving the supply
  chain and sourcing from low cost countries. All these initiatives are designed
  to enable the Group to benefit from cross-border synergies and accelerate growth
  in Europe.</FONT></P>
<P> <font size="2" face="sans-serif"><B><I>European Central Costs</I></B></font></P>
<P> <FONT size=2 face="sans-serif">European central costs, representing the costs
  of the European management team, increased by &pound;3 million to &pound;7 million
  as a result of additional team members.</FONT></P>
<P> <font size="2" face="sans-serif"><I><U><b>Group Central Costs</b></U></I></font></P>
<P> <FONT size=2 face="sans-serif">Group central costs representing the corporate
  office in Theale, UK and other centrally provided services, such as the captive
  insurance company, increased by 48% in fiscal 2006 to &pound;37 million (2005:
  &pound;25 million) as a result of the increasing operations of the office as
  a consequence of the continuing growth of the Group.</FONT></P>
<P> <font size="2" face="sans-serif"><B>B. Liquidity and Capital Resources</B></font></P>
<P> <font size="2" face="sans-serif"><I>Capital Resources</I></font><br>
  <FONT size=2 face="sans-serif">Wolseley believes the Group has adequate facilities
  and working capital to meet its current requirements. As of July 31, 2006, net
  debt amounted to &pound;1,950 million, compared to &pound;1,171 million at July
  31, 2005. Net debt includes both short-term and long-term borrowings less cash
  and current asset investments but excludes borrowings in respect of the construction
  loan portfolio, as disclosed in Note 35<b> </b>of the Consolidated Financial
  Statements. The principal reason for the increase in debt in fiscal 2006 was
  attributable to acquisitions. The Group seeks a balance between certainty of
  funding and a flexible, cost-effective borrowings structure. The overall policy
  is to ensure that, at a minimum, all projected net borrowing needs are covered
  by committed facilities arranged by the corporate office, supplemented where
  appropriate by locally arranged overdraft facilities. The principal sources
  of funds to the Group have been committed bank debt and a US private placement
  of fixed and floating senior unsecured notes.</FONT></P>
<P> <FONT size=2 face="sans-serif">As at November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. In June 2006 Wolseley entered into a 5 year, &#8364;2.8 billion multi
  currency revolving credit facility (&pound;1.9 billion at fiscal 2006 year-end
  exchange rates). The proceeds of both facilities were used principally to fund
  the Group&#146;s working capital, acquisition expenditures and to repay existing
  facilities.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">31</FONT></P>
<hr noshade align="center" width="100%" size="2"><<<<</font>
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</font>
<P> <FONT size=2 face="sans-serif">The year-end maturity profile of Wolseley&#146;s
  centrally managed facilities at July 31, 2006, was as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Facility</B></font></TD>
    <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>amount</B></font></TD>
    <TD><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Maturity Date</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><hr align="left" width="100" size="1" noshade></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Less than 1 year</FONT></TD>
    <TD width=2% align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">200</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">1-2 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">2-3 years</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">174</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">3-4 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">343</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">4-5 years</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">111</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Greater than 5 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,282</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size="2" face="sans-serif"><B>Total</B></font></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">3,144</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">On September 25, 2006, Wolseley completed the
  acquisition of DT Group, for a cash consideration of &pound;1,023 million. The
  indebtedness of DT Group of approximately &pound;330 million at that time was
  also assumed. To provide committed business facilities in respect of the funding
  of this acquisition, Wolseley entered into an 18 month &#8364;1,500 million
  multicurrency revolving facility agreement with a syndicate of banks on September
  13, 2006. A repayment of &#8364;1.0 billion was made on September 28, 2006 and the facility was reduced to &#8364;500 million. Also on September 25, 2006, to reduce the Group&#146;s total indebtedness
  as a result of the DT Group acquisition and that arising from the &pound;914
  million of acquisitions in fiscal 2006 and to provide appropriate headroom for
  further investment in the business, the Group undertook a placing of 10% of
  its issued ordinary share capital which raised &pound;655 million before fees.
  </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Cash Flows from Operations</I></FONT></P>
<P> <FONT size=2 face="sans-serif">Net cash flow from operating activities increased
  from &pound;765 million to &pound;850 million in fiscal 2006, due to improved
  profitability offset by increased working capital levels required to support
  organic growth.</FONT></P>
<P> <FONT size=2 face="sans-serif">There was a cashflow outflow of &pound;178
     million being cash absorbed into working capital in fiscal 2006 (2005: &pound;68
      million). Payables increased by &pound;217 million during fiscal 2006,
      compared  with an increase of &pound;168 million in the previous year.
      Receivables increased  by &pound;243 million, compared with an increase
      of &pound;180 million in the
  prior year, driven by the growth in revenues.</FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Borrowings</I></FONT></P>
<P> <FONT size=2 face="sans-serif">Net borrowings excluding construction loan
  borrowings, as set out in Note 35 of the Consolidated Financial Statements,
  increased during fiscal 2006 by &pound;779 million to &pound;1,950 million at
  July 31, 2006 from &pound;1,171 million at July 31, 2005. The increase in borrowings
  was primarily due to expenditure on acquisitions of &pound;914 million offset
  by operating cashflow. Construction loan borrowings relating to the US Building
  Materials Distribution segment increased to &pound;313 million at July 31, 2006
  from &pound;262 million at July 31, 2005. These loans relate to construction
  loan receivables, which also increased to &pound;313 million at July 31, 2006
  from &pound;262 million at July 31, 2005. The increase in construction loans
  in fiscal 2006 was due to an expanding loan book and additional business generated
  by five new construction lending offices. The construction loan receivables
  are funded principally from separately identifiable bank facilities; accordingly,
  it is considered appropriate that this specific funding should be separately
  identified from the Group&#146;s general debt on the balance sheet. In addition,
  this funding is excluded from the calculation of Wolseley&#146;s leverage or
  gearing figures. See Note 24 of the Consolidated Financial Statements for an
  additional description and maturity profile of borrowings. The Group&#146;s
  borrowings are not significantly affected by seasonality.</FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Financial Instruments and Treasury Policy</I></FONT></P>
<P> <FONT size=2 face="sans-serif">For a discussion of the Group&#146;s financial
  instruments and treasury policies, see Item 11 &#150; Quantitative and Qualitative
  Disclosures About Market Risk &#151; Treasury Risk Management.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">32</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size="2" face="sans-serif"><I>Capital Expenditure</I></FONT></P>
<P> <FONT size=2 face="sans-serif">Capital expenditure in fiscal 2006 increased
     by &pound;107 million (45%) compared to the prior year to &pound;346 million,
      reflecting Wolseley&#146;s policy of continued investment in the business.
      During  the period the DC and branch network in the US was expanded, investment
      continued
  in the UK and Italy, and further investments were made in the common IT platform.
       Capital expenditure is expected to remain at this relatively high level
      in fiscal
  2007 and 2008. At July 31, 2006, capital expenditure commitments amounted to &pound;91
   million. Future capital expenditure including these commitments is expected

  to be financed through borrowings and primarily relates to the expansion of
   the branch network, investment in DCs and investment in the common IT platform.</FONT></P>
<P> <FONT size=2 face="sans-serif">Cash received on the sale of fixed assets reduced
  from &pound;74 million to &pound;52 million in fiscal 2006, primarily due to
  the sale of properties acquired as part of the Brooks acquisition included in
  the cashflow for fiscal 2005.</FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Exchange Rate Fluctuations</I></FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley earns a significant proportion of
  its sales and profits in foreign currencies, principally the US dollar and to
  a lesser extent the Euro and Canadian dollar. The average US dollar exchange
  rate appreciated against the pound by 3.5% during fiscal 2006, compared to a
  weakening of 5.4% during the fiscal year 2005. The effect of this currency fluctuation
  was to increase reported revenue and trading profits for the North American
  Distribution segment by approximately 3.5% in fiscal year 2006. During fiscal
  2006 the Euro strengthened against the pound by 0.1% compared to a strengthening
  of 0.3% during fiscal 2005. The effect of this movement was to increase the
  reported revenues and trading profits of the European Distribution segment by
  0.1% and 0.2%, respectively. During fiscal 2006, the Canadian dollar appreciated
  against the pound by 11.7% compared to an appreciation of 2.1% during fiscal
  2005. The effect of this investment was to increase the reported revenues and
  trading profits of the Canadian division by the same amounts.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>C. Research and Development, Patents and
  Licenses</B></FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley did not incur any costs exceeding
  &pound;1 million on product research and development expenditure during the
  fiscal years 2006 or 2005. For a discussion related to patents and licenses,
  see &#147;Item 4 &#150; Information on the Group, paragraph B, &#150; Business
  Overview &#150; Patents and Trademarks&#148;.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>D. Trend Information</B></FONT></P>
<P> <FONT size=2 face="sans-serif">In the period since July 31, 2006, in the
    US,  new housing starts have continued to decline, but the repairs and remodelling

  market (&#147;RMI&#148;) is benefiting from the positive economic environment
   and the commercial and industrial sectors have continued to improve. In this

  environment, Ferguson has continued to perform well. At Stock, local currency revenue and trading

  profit have been impacted by the continued slowdown in the new residential
  market  and by the impact of significantly lower lumber and structural panel
  prices.
  Housing starts in North America have fallen from an annual rate of more than
   2.1 million in September 2005 to around 1.77 million in September 2006 and there

  continue to be significant regional variations. The prices of lumber and structural
  panels, which when combined account for around 45% of Stock&#146;s revenues,
    have fallen by around 26% and 45% respectively compared to the equivalent
   period
  in the prior year.</FONT></P>
<P> <FONT size=2 face="sans-serif">In Canada, whilst there has been the anticipated
     slowing in housing starts generally and in manufacturing activity levels
    in
  Eastern Canada, the repairs and remodelling market continued to grow.</FONT></P>
<P> <FONT size=2 face="sans-serif">In Europe there have been improving trends
  from a number of European businesses including the UK and France.</FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Recently Issued Accounting Standards</I></FONT></P>
<P> <FONT size=2 face="sans-serif">Several new standards, amendments and interpretations
  to existing standards have been published that are mandatory for the Group&#146;s
  accounting periods beginning on or after August 1, 2006 or later periods, but
  which the Group has not early adopted. The new standards which are expected
  to be relevant to the Group&#146;s operations are as follows:</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">33</FONT></P>
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</font>
<P> <FONT size="2" face="sans-serif"><B>Amendment to IAS 39 and IFRS 4 &#147;Financial
  Guarantee contracts&#148; (effective from August 1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">This amendment requires issued financial guarantees,
  other than those previously asserted by the entity to be insurance contracts,
  to be initially recognized at their fair value and subsequently measured at
  the higher of: (a) the unamortized balance of the related fees received and
  determined; and (b) the expenditure required to settle the commitment at the
  balance sheet date. Management is currently assessing the impact of this amendment
  on the Group&#146;s financial statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>Amendment to IAS 39 &#147;Cashflow Hedge
       Accounting of Forecast Intragroup Transactions&#148; (effective from</B></font> <FONT size="2" face="sans-serif"><B>August
       1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">This amendment allows the foreign currency
     risk of a highly probable forecast intragroup transaction to qualify as
    a hedged
  item in the consolidated financial statements, provided that: (a) the transaction
     is denominated in a currency other than the functional currency of the entity

  entering into that transaction; and (b) the foreign currency risk will affect
     consolidated profit or loss. Management does not expect adoption of this
    amendment
  to have a significant impact on the Group&#146;s financial statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>Amendment to IAS 39 &#147;The Fair Value
  Option&#148; (effective from August 1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">This amendment changes the definition of the
  financial instruments classified at fair value through the income statement
  and restricts the ability to designate financial instruments as part of this
  category. Management does not expect adoption of this amendment to have a significant
  impact on the Group&#146;s financial statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>IFRS 7 &#147;Financial Instruments: Disclosures&#148;
  (effective from August 1, 2007) and amendment to IAS 1</B></font> <FONT size="2" face="sans-serif"><B>&#147;Presentation
  of Financial Statements
  &#150; Capital Disclosures&#148; (effective from August 1, 2007)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">IFRS 7 introduces new disclosures of qualitative
     and quantitative information about exposure to risks arising from financial

  instruments including specified minimum disclosures about credit risk, liquidity
     risk and market risk, including sensitivity analysis to market risk. The
    amendment
  to IAS 1 introduces disclosures about the level of an entity&#146;s capital
   and how it manages capital. Management is currently assessing the impact of

  IFRS 7 and the amendment to IAS 1 on the Group&#146;s financial statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>IFRIC 7 &#147;Applying the restatement
  approach under IAS 29&#148; (effective from August 1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">IFRIC 7 deals with the accounting when an entity
  identifies the existence of hyperinflation in the economy of its functional
  currency and how deferred tax items in the opening balance sheet should be restated.
  The Group has no operations in hyperinflationary economies. The Group has assessed
  the impact of the interpretation and has concluded it not likely to have a significant
  impact on the Group&#146;s financial statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>IFRIC 8 &#147;Scope of IFRS 2&#148; (effective
  from August 1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">IFRIC 8 clarifies that transactions within
     the scope of IFRS 2 &#147;Share Based Payment&#148; include those in which
     the  entity cannot specifically identify some or all of the goods and services
     received.
  The Group has assessed the impact of this interpretation and has concluded
     it  is not likely to have a significant impact on the Group&#146;s financial
     statements.</FONT></P>
<P> <FONT size="2" face="sans-serif"><B>IFRIC 9 &#147;Reassessment of embedded
  derivatives&#148; (effective from August 1, 2006)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">IFRIC 9 clarifies that an entity should assess
  whether an embedded derivative is required to be separated from the host contract
  and accounted for as a derivative when the entity first becomes a party to the
  contract. Subsequent reassessment is prohibited unless there is a change in
  the contract terms, in which case it is required. The Group has assessed the
  impact of this interpretation and has concluded it is not likely to have a significant
  impact on the Group&#146;s financial statements.</FONT></P>
<P><FONT size="2" face="sans-serif"><B>IFRIC 10 &#147;Interim financial reporting
      and impairment&#148; (effective
      from August 1, 2007)</B></FONT></P>
<P> <FONT size=2 face="sans-serif">IFRIC 10 clarifies that an impairment losses
    on goodwill and certain financial assets recognised in an interim financial
    statement must not be reversed in subsequent interim or annual financial
    statements. The Group has assessed the impact of this interpretation and
    has concluded it is not likely to have a significant impact on the Group&#146;s financial statements.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2"></FONT></P>
<P align="center"><FONT face="sans-serif" size="2">34</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size="2" face="sans-serif"><I>New Accounting Developments under US GAAP</I>
  </FONT></P>
<P> <FONT size=2 face="sans-serif">In February 2006, the Financial Accounting
     Standards Board (&#147;FASB&#148;) issued SFAS No. 155 &#147;Accounting
     for  Certain Hybrid Financial Instruments, an amendment of FASB Statements
     No. 133
  and 140&#148;. For periods beginning after 15 September 2006, this statement:</FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">Permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded</FONT><FONT size="2" face="sans-serif">derivative
      that otherwise would require bifurcation;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">Clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of FAS </FONT><font size="2" face="sans-serif">133;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">Establishes a requirement to evaluate interests
      in securitized financial assets to identify interests that are freestanding
      derivatives or that are hybrid financial instruments that contain an embedded
      derivative requiring bifurcation</FONT><font face="sans-serif">;&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">Clarifies that concentrations of credit
      risk in the form of subordination are not embedded derivatives; and</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font size="2">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><FONT size=2 face="sans-serif">Amends FAS 140 to eliminate the prohibition
      on a qualifying special purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.</FONT><font face="sans-serif">&nbsp;</font></td>
  </tr>
</table>
<P> <FONT size=2 face="sans-serif">The adoption of SFAS No. 155 is not expected
  to have a material effect on the results of operations or net assets of the Group under US GAAP. </FONT></P>
<P> <FONT size=2 face="sans-serif">In March 2006, the FASB issued SFAS No. 156,
  &#147;Accounting for Servicing of Financial Assets, an amendment of FASB Statement
  No. 140&#148;, which amends FASB Statement No. 140 &#147;Accounting for Transfers
  and Servicing of Financial Assets and Extinguishments of Liabilities&#148;,
  with respect to the accounting for separately recognized servicing assets and
  servicing liabilities. The adoption of SFAS No. 156 is not expected to have
  a material effect on the results of operations or net assets of the Group under
  US GAAP. </FONT></P>
<P> <FONT size=2 face="sans-serif">In June 2006, the FASB issued FASB Interpretation
  No. 48, &#147;Accounting for Uncertainty in Income Taxes, an interpretation
  of FASB Statement No. 109&#148;. For periods beginning after 15 December 2006,
  this interpretation prescribes a recognition threshold and measurement attribute
  for the financial statement recognition and measurement of a tax position taken
  or expected to be taken in a tax return. This interpretation also provides guidance
  on derecognition, classification, interest and penalties, accounting in interim
  periods, disclosure, and transition. It is not yet possible to estimate the
  effect of the adoption of FIN 48 on the results of operations or net assets of the Group under US GAAP.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">In September 2006, the FASB issued SFAS No.
  157, &#147;Fair Value Measurements&#148;. For periods beginning after November
  15, 2007, this Statement defines fair value, establishes a framework for measuring
  fair value where that measurement attribute is permitted or required by other
  accounting pronouncements, and expands disclosures about fair value measurements,
  but does not require any new fair value measurements. It is not yet possible
  to estimate the effect of the adoption
  of SFAS No. 157 on the results of operations or net assets of the Group under US GAAP. </FONT></P>
<P align="center"><FONT face="sans-serif" size="2">35</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size=2 face="sans-serif">In September 2006, the FASB issued SFAS No
  158, &#147;Employers&#146; Accounting for Defined Benefit Pension and Other
  Postretirement Plans &#150; an amendment of FASB Statements No. 87, 88, 106,
  and 132(R).&#148; As of the end of any fiscal period ending on or after December
  15, 2006, this Statement requires an employer to recognize the overfunded or
  underfunded status of a defined benefit postretirement plan as an asset or liability
  in its statement of financial position and to recognize changes in that funded
  status in the year in which the changes occur through comprehensive income.
  Had SFAS No. 158 applied to the Group as of July 31, 2006, the impact would
  have been to increase the liability under US GAAP in respect of underfunded defined benefit
  postretirement plans by &pound;95 million, and to increase the deferred tax
  asset by &pound;29 million. The consequent reduction under US GAAP in the Group&#146;s net
  assets of &pound;66 million would have been charged to other comprehensive income.
  </FONT></P>
<P> <FONT size="2" face="sans-serif"><B>Critical Accounting Estimates </B> </FONT></P>
<P> <FONT size=2 face="sans-serif">The Group&#146;s principal and critical accounting
    policies are set out on pages F-6 to F-12 of the consolidated financial statements
    and conform with IFRS. The preparation of financial statements in accordance
    with IFRS and US GAAP requires management to make estimates and assumptions
    in certain circumstances that affect amounts reported in the accompanying
    consolidated
  financial statements and related footnotes. The most sensitive estimates affecting
    the financial statements are in the areas of assessing the recoverability
    of
  receivables, the net realizable value of inventory, the impairment of goodwill
    and long-lived intangible assets, the reserves in respect of self-insured
    insurance,
  the consideration received from vendors and pensions and other post-retirement
  benefits. </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Allowance for Doubtful Accounts </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">Provision is made against accounts receivable
  that in the estimation of management may be impaired. Within each of the businesses
  assessment is made locally of the likelihood of recoverability of accounts receivable
  based on a range of factors including the age of the receivable and the creditworthiness
  of the customer. The provision is assessed monthly with a detailed formal review
  of balances and security being conducted in conjunction with the publication
  of the full year and half year results. Determining the recoverability of an
  account receivable involves estimation as to the likely financial condition
  of the customer and its ability to subsequently make payment. If the Group is
  cautious as to the financial condition of the customer the Group may provide
  for accounts that are subsequently recovered. Similarly if the Group is optimistic
  as to the financial condition of the customer the Group may not provide for
  an account that is subsequently determined to be irrecoverable. Furthermore,
  while the Group has a large geographically dispersed customer base, a slowdown
  in the markets in which the Group operates may result in higher than expected
  uncollectible amounts and therefore higher than anticipated charges for irrecoverable
  receivables. In recent years Wolseley has not experienced significant variation
  in the amount charged to the income statement in respect of doubtful accounts,
  when compared to sales.</FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley held a provision for impairment of
  receivables at July 31, 2006 amounting to &pound;41 million (2005: &pound;32
  million). </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Inventories </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">For financial reporting purposes the Group
  evaluates its inventory to ensure it is carried at the lower of cost or net
  realizable value. Provision is made against slow moving, obsolete and damaged
  inventories. Damaged inventories are identified and written down through the
  inventory counting procedures conducted within each business. Provision for
  slow moving and obsolete inventories is assessed by each business as part of
  ongoing financial reporting. Obsolescence is assessed based on comparison of
  the level of inventory holding to the projected likely future sales. Future
  sales are assessed based on historical experience and adjusted where the manufacturer
  has indicated that it will no longer continue to manufacture the particular
  item. To the extent that future events impact the saleability of inventory these
  provisions could vary significantly. For example, changes in specifications
  or regulations may render inventory, previously considered to have a realizable
  value in excess of cost, obsolete and requiring such inventory to be fully written
  off. The Group held allowances in respect of inventory balances at July 31,
  2006 amounting to &pound;134 million (2005: &pound;99 million). </FONT></P>
<P align="center"><FONT size="2" face="sans-serif">36</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font></font>
<P> <FONT size="2" face="sans-serif"><I>Impairment of long-lived assets </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley periodically evaluates the net realizable
  value of long-lived assets, including goodwill, other intangible assets and
  tangible fixed assets, relying on a number of factors, including operating results,
  business plans and projected future cash flows. </FONT></P>
<P> <FONT size=2 face="sans-serif">Assets that have an indefinite useful life,
  such as goodwill, are not subject to amortization and are tested annually for
  impairment and whenever events or changes in circumstance indicate that the
  carrying amount may not be recoverable. Assets that are subject to amortization
  are tested for impairment whenever events or changes in circumstance indicate
  that the carrying amount may not be recoverable. An impairment loss is recognized
  for the amount by which the asset&#146;s carrying amount exceeds its recoverable
  amount. The recoverable amount is the higher of an asset&#146;s fair value less
  costs to sell and value in use. The fair value is in most cases based on the
  discounted present value of the future cash flows expected to arise from the
  cash generating unit to which the goodwill relates, or from the individual asset
  or asset group. Estimates are used in deriving these cash flows and the discount
  rate.</FONT></P>
<P> <FONT size=2 face="sans-serif">The complexity of the estimation process and
  issues related to the assumptions, risks and uncertainties inherent with the
  application of the intangible and tangible fixed asset accounting policies affect
  the amounts reported in the financial statements. In particular, if different
  estimates of the projected future cashflows or a different selection of an appropriate
  discount rate were made, these changes could materially alter the projected
  value of the cash flows of the asset, and as a consequence materially different
  amounts would be reported in the financial statements. </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Self-insured insurance </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">The Group operates a captive insurance company,
  Wolseley Insurance Limited, which is registered and operational in the Isle
  of Man. This company provides reinsurance exclusively to certain companies within
  the Group, principally to cover US casualty and property damage risks. Provision
  is made based on actuarial assessment of the liabilities arising from the insurance
  coverage provided. The actuarial assessment of the reserve for future claims
  necessarily includes estimates as to the likely trend of future claims costs
  and the estimates as to the emergence of further claims subsequent to the periods
  presented. An actuarial review of claims is performed annually. To the extent
  that actual claims differ from those projected the provisions could vary significantly.
  At July 31, 2006, the provision for claims arising from this insurance was &pound;47
  million (2005: &pound;35 million). </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Consideration received from vendors </I>
  </FONT></P>
<P> <FONT size=2 face="sans-serif">The Group enters into agreements with many
  of its vendors providing for inventory purchase rebates primarily upon achievement
  of specified volume purchasing levels with many of these agreements applying
  to purchases in a calendar year. For a number of agreements the rebate rises
  as a proportion of purchases as higher quantities or values of purchases are
  made. The Group accrues the receipt of vendor rebates as part of its cost of
  sales for products sold, taking into consideration cumulative purchases of inventory
  to date and projected purchases through the end of the qualifying period. Rebates
  are accrued for each reporting period with an extensive reassessment of the
  rebates earned being performed at the end of the financial year and half way
  through the financial year. The Group has agreements with numerous and geographically
  dispersed suppliers, but a slowdown in the markets in which the Group operates,
  or a significant change in the profile of products purchased, may result in
  purchases for the remainder of the year differing significantly from those projected.
  Consequently, the rebate actually received may vary from that accrued in the
  financial statements. </FONT></P>
<P align="center"><FONT face="sans-serif" size="2">37</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font></font>
<P> <FONT size="2" face="sans-serif"><I>Pensions and other post retirement benefits
  </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">The Group operates defined benefit pension
  schemes in the UK and in a number of overseas locations that are accounted for
  using methods that rely on actuarial assumptions to estimate costs and liabilities
  for inclusion in the financial statements. These actuarial assumptions include
  discount rates, assumed rates of return, salary increases, associate turnover
  rates and mortality rates. </FONT></P>
<P> <FONT size=2 face="sans-serif">While management believes that the actuarial
  assumptions are appropriate, any significant changes to those used would affect
  the balance sheet and income statement. The Group considers that the most significant
  assumptions are the discount rate, mortality assumptions and the expected return
  on plan assets. The Group has estimated the sensitivity of the financial statements
  to changes in those financial assumptions as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><b>Impact on</b></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="3" align="center"><font size="1" face="sans-serif"><B>Impact</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><b>balance</b></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>on income</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="center"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><b>sheet</b></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>statement</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align="right"><hr noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align="right"><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=1 face="sans-serif">Effect of a change in discount rate</FONT></TD>
    <TD width="2%" align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">&pound;m</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">&pound;m</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR align="left" width="170" size=1 noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Increase of 0.5%</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size="2" face="sans-serif"><B>55</B></font></TD>
    <TD width=2% align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">37</FONT></TD>
    <TD width=2% align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size="2" face="sans-serif"><B>3</B></font></TD>
    <TD width=2% align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">2</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Decrease of 0.5%</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size="2" face="sans-serif"><B>(64</B></font></TD>
    <TD><FONT size="2" face="sans-serif"><B>)</B>&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(40</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size="2" face="sans-serif"><B>(4</B></font></TD>
    <TD><FONT size="2" face="sans-serif"><B>)</B>&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Effect of a change in
      expected return on assets</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Increase of 0.5%</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size="2" face="sans-serif"><B>2</B></font></TD>
    <TD align="right" bgcolor="#eeeeee"><font size="2">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">2</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Decrease of 0.5%</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size="2" face="sans-serif"><B>(2</B></font></TD>
    <TD><FONT size="2" face="sans-serif"><B>)</B>&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
</TABLE>
<P> <FONT size="2" face="sans-serif"><B>E. Off balance sheet arrangements </B>
  </FONT></P>
<P> <FONT size=2 face="sans-serif">As at July 31, 2006, the Group had no material
  off balance sheet arrangements. </FONT></P>
<P align="center"><FONT face="sans-serif" size="2">38</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
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</font>
<P> <FONT size="2" face="sans-serif"><B>F. Contractual obligations and commercial
  commitments </B> </FONT></P>
<P> <FONT size=2 face="sans-serif">The following table sets forth the aggregate
  maturities of the Group&#146;s debt, operating leases and other long term obligations
  for the five fiscal years subsequent to July 31, 2006 and thereafter. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="9" align="center"><font size="1" face="sans-serif"><B>Fiscal Year ending
    July 31,</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="9"><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2007</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2008</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2009</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2010</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2011</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Thereafter</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Total</font></b></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">&pound;m</font></b></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Overdrafts</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">124</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">124</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Long-term borrowings</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">68</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">35</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">175</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">108</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">120</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">1,671</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">2,177</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Capital lease obligations</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">24</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">19</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">13</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">8</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">28</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">102</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Operating lease obligations</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">199</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">173</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">146</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">119</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">95</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">372</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">1,104</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Cash flow on derivative instruments</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">2</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size="2" face="sans-serif">&#8212;</font></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">416</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">229</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">335</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">237</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">222</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">2,064</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">3,503</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><HR align="left" width="100" size=1 noshade></td>
  </tr>
  <tr>
    <td><font size="1" face="sans-serif"><I>Notes:</I></FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=1 face="sans-serif">Borrowings are stated at the undiscounted
      contractual amount, are gross of cash and cash equivalents except where
      a right of set-off exists, and include construction loan borrowings, but
      exclude finance lease obligations. Borrowings due after five years include
      hedged fixed interest borrowings, and have a fair value of &pound;1,646
      million as of July 31, 2006.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=1 face="sans-serif">Cash flow on derivative instruments comprises
      two elements: the attributable interest component of short-term currency
      swaps, and the difference between the fixed and floating legs of interest
      rate swaps. Cash flows in respect of interest rate swaps reflect the difference
      between payments of interest at a contractually fixed rate, and receipts
      of interest at a variable rate, which have been estimated on the basis of
      a zero coupon yield curve as of July 31, 2006.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=1 face="sans-serif">The Group is committed by its senior unsecured
      notes to interest payments over the period to November 2020. Under the revolving
      credit facilities in effect as of July 31, 2006 amounts are drawn down for
      periods of up to six months at a variable interest rate which is determined
      at inception of the period. In respect of amounts drawn down as of July
      31, 2006, the Group was committed to interest payments of &pound; 28 million
      in the year ending July 31, 2007. Assuming (i) that amounts continue to
      be drawn down and repaid in accordance with the maturity profile shown above,
      (ii) that the weighted average variable interest rates, the currency mix
      and the exchange rates applicable to borrowings as of July 31, 2006 remain
      constant throughout the term of the facilities, and (iii) that the availability
      of set off for Group deposits and short-term borrowings is unchanged from
      that as of July 31, 2006, the Group estimates that interest payments in
      the five fiscal years subsequent to July 31, 2006 and thereafter would be
      as follows:</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="9" align="center"><font size="1" face="sans-serif"><B>Fiscal
      Year ending July 31,</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="9"><HR noshade size=1></TD>
    <TD width="2%"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width="2%"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width="2%"><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2007</B></font></TD>
    <TD width=2%><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2008</B></font></TD>
    <TD width=2%><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2009</B></font></TD>
    <TD width=2%><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2010</B></font></TD>
    <TD width=2%><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2011</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Thereafter</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Total</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=1 face="sans-serif">Senior unsecured notes</FONT></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">32</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">32</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">27</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">25</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">21</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">123</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">260</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><FONT size=1 face="sans-serif">Other borrowings</FONT></TD>
    <TD align="right"><FONT size=1 face="sans-serif">65</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">63</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">62</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">59</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">57</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size="1" face="sans-serif">&#8212;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><FONT size=1 face="sans-serif">306</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">97</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">95</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">89</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">84</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">78</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">123</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=1 face="sans-serif">566</FONT></TD>
    <TD bgcolor="#eeeeee"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">The foregoing tables do not give effect
  to the additional borrowings incurred after July 31, 2006 in connection with
  the DT Group acquisition and other post July 31, 2006 acquisitions. </FONT></P>
<P> <FONT size=2 face="sans-serif">In addition, the Group makes contributions
  to a number of retirement benefit plans. Contributions for the year ending July
  31, 2007 are estimated to be &pound;23 million in respect of the UK pension
  plan and &pound;15 million in respect of non-UK plans.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">39</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <FONT size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></p>
</font>
<P> <font face="sans-serif"><a name="p40"></a></font><FONT size="2" face="sans-serif"><B>ITEM
  6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES </B> </FONT></P>
<P> <FONT size="2" face="sans-serif"><B>A. Directors and Senior Management </B>
  </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s directors and senior management
  who served during fiscal 2006, and as at October 31, 2006, are as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Age as of</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>October 31,</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Name</B></font></TD>
    <TD width=2%><font size="1">&nbsp;</font></TD>
    <TD width=8% align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD width=2%><font size="1">&nbsp;</font></TD>
    <TD width=48%><font size="1" face="sans-serif"><B>Title</B></font></TD>
  </TR>
  <TR>
    <TD><HR align="left" width="100" size=1 noshade></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">John W. Whybrow<SUP>(1)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">59</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Chairman</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Executive Directors</B></font></TD>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Charles A. Banks<SUP>(1) (2) (5)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">65</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Group Chief Executive Officer</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">(retired from the Board on July 31, 2006)</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord<SUP>(2)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">60</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Chief Executive Officer, US Building</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Materials Distribution</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Claude A. S. Hornsby<SUP>(1) (2) (5) (8)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">50</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Group Chief Executive Officer designate</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">(until July 31, 2006) and</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Group Chief Executive Officer</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">(from August 1, 2006)</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Robert Marchbank<SUP>(2)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">46</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Chief Executive Officer, Europe</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Frank W. Roach<SUP>(2)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">55</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Chief Executive Officer, Wolseley North</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">America (from December 16, 2005)</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster<SUP>(2) (5)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">53</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Group Finance Director</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Non Executive Directors</B></font></TD>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Gareth Davis<SUP>(1) (3) (4)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">56</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Director</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Andrew J. Duff<SUP>(1) (4)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">47</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Director</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">James I. K. Murray<SUP>(3)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">60</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Director</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Nigel M. Stein<SUP>(3)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">51</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Director</FONT></TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Robert M. Walker<SUP>(1) (4)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">61</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Director</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Company Secretary</B></font></TD>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Mark J. White<SUP>(2) (6)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">46</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Group Company Secretary and Counsel</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Member of Executive Committee</B></font></TD>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Adrian Barden<SUP>(2)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">51</FONT></TD>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Chief Executive Officer, Wolseley UK Limited</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">(until September 30, 2006) and Group Senior</FONT></TD>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><FONT size=2 face="sans-serif">Vice President (from October 1, 2006)</FONT></TD>
  </TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR>
    <TD colspan="2" valign="top"><hr align="left" width="100" size=1 noshade></TD>
  </TR>
  <TR>
    <TD width="3%" valign="top"><font size="1" face="sans-serif"><I>(1)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Member of the nominations
      committee. Mr. Banks ceased to be a member of the nominations committee
      upon leaving the Board on July</I><BR>
      <I>31, 2006 and was succeeded by Mr. Hornsby, who became a member of the
      nominations committee on August 1, 2006.</I> </font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(2)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Member of the executive
      committee. Mr. Roach became a member of the executive committee upon his
      appointment to the Board on</I><BR>
      <I>December 16, 2005.</I> </font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(3)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Member of the audit committee.</I>
      </font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(4)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Member of the remuneration
      committee.</I> </font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(5)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Member of the treasury
      committee. Mr. Banks ceased to be a member of the treasury committee upon
      leaving the Board on July 31, 2006</I><BR>
      <I>and was succeeded by Mr. Hornsby, who became a member of the treasury
      committee on August 1, 2006.</I> </font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(6)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Trustee of the Wolseley
      UK and Irish Defined Benefit Pension Schemes.</I> </font></TD>
  </TR>
</TABLE>
<P align="center"><FONT size="2" face="sans-serif">40</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p41"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif"> As at July 31, 2006, Wolseley&#146;s board
  of directors (the &#147;Board&#148;) was made up of 12 members comprising the
  Chairman, six executive directors and five non executive directors. The non
  executive directors are considered by the Board to be independent of management
  and free of any relationship which could materially interfere with the exercise
  of their independent judgment. The Board considers that each of the non executive
  directors brings his own senior level of experience gained in their own fields
  of mainly international operations. Frank W. Roach was appointed to the Board
  with effect from December 16, 2005. Mr. Roach was appointed as Chief Executive
  Officer of North America to succeed Mr. Hornsby, who became Group Chief Executive
  on August 1, 2006 following Mr. Banks&#146; retirement on July 31, 2006. For
  the period from Mr. Roach&#146;s appointment until Mr. Bank&#146;s retirement,
  the provisions of the Combined Code on corporate governance as referred to in
  &#147;Item 6 &#150; Directors, Senior Management and Employees, Paragraph C
  &#150; Board Practices&#148; (the &#147;Code&#148;) requiring a balance between
  executive and non executive directors was not met, albeit that this was a temporary
  position in advance of Mr. Banks&#146; retirement. At the date of this annual
  report, there are 11 members of the Board, comprising the Chairman, five executive
  directors and five non executive directors. Accordingly, the Board considers
  that the Company once again satisfies the obligations under the Code.</FONT></P>
<P> <FONT size=2 face="sans-serif">The Board meets regularly during the year as
  well as on an ad hoc basis, as required by time-critical business needs. The
  Board has a formal schedule of matters reserved to it for its decision, which
  were reviewed during the year, although its primary role is to provide entrepreneurial
  leadership and to review the overall strategic development of the Group as a
  whole. Day-to-day operational decisions are delegated to the executive committee
  referred to in &#147;Item 6 &#150; Directors, Senior Management and Employees,
  Paragraph C &#150; Board Practices&#148;. The Board met 11 times during the
  year, and director attendance for each meeting is shown in &#147;Item 6 &#150;
  Directors, Senior Management and Employees, Paragraph A &#150; Meeting Attendance&#148;.
  The Board has established a procedure for directors, if deemed necessary, to
  take independent professional advice at Wolseley&#146;s expense in the furtherance
  of their duties. This is in addition to the access that every director has to
  the Group Company Secretary, who is charged with ensuring that Board procedures
  are followed and that good corporate governance and compliance is implemented
  within the Group. Board papers and other information are delivered at times
  to allow directors to be properly briefed in advance of meetings. In accordance
  with Wolseley&#146;s articles of association, directors are granted an indemnity
  from the Company to the extent permitted by law in respect of liabilities incurred
  as a result of their office. The indemnity would not provide any coverage to
  the extent that a director is proved to have acted fraudulently or dishonestly.
  Wolseley has also arranged appropriate insurance coverage in respect of legal
  action against its directors and officers. The differing roles of Chairman and
  Group Chief Executive are acknowledged and set out in writing. The Chairman
  has confirmed that he will not chair any other major company&#146;s board. </FONT></P>
<P> <FONT size=2 face="sans-serif">The Chairman addresses the developmental needs
  of the Board as a whole, with a view to developing its effectiveness as a team
  and assists in the development of skills, knowledge and expertise. During the
  year, the Board took forward the results of previous ongoing evaluation processes
  to assess its performance and that of its committees and to identify areas in
  which its effectiveness, policies and processes might be enhanced, utilizing
  both a questionnaire (in relation to the performance of the non executive directors)
  and discussions with Board members. </FONT></P>
<P> <FONT size=2 face="sans-serif">Performance evaluations, including the skills
  brought to the Board and the contributions each director made to it, were carried
  out for each member of the Board. Executive directors&#146; performance has
  been assessed by the Chairman and Mr. Banks, Mr. Banks&#146; performance was
  evaluated by the Chairman and the non executive directors. The senior non executive
  director led the review of the Chairman&#146;s performance in consultation with
  the executive and non executive directors. The non executive directors&#146;
  performances were reviewed by both Mr. Banks and the Chairman, as well as by
  the Board as a whole, which considered the results of the questionnaires referred
  to above. </FONT></P>
<P> <FONT size=2 face="sans-serif">Meetings between the non executive directors,
  both with and without the presence of the Chairman and the Group Chief Executive
  Officer, are scheduled in the Board&#146;s annual timetable. The Board has also
  arranged to hold at least two Board meetings each year at divisional locations
  to help all Board members gain a deeper understanding of the business. This
  also provides senior managers from across the Group the opportunity to make
  formal presentations to the Board as well as to meet the directors on more informal
  occasions. </FONT></P>
<P> <FONT size=2 face="sans-serif">In line with the Code on corporate governance,
  as referred to in &#147;Item 6 &#150; Directors, Senior Management and Employees,
  Paragraph C &#150; Board Practices&#148; and as part of their ongoing development,
  the executive directors are encouraged to take up an external non executive
  position on a non competitor board, for which they may retain payments received
  in respect of the appointment. In order to avoid any conflict of interest, all
  such appointments are subject to the Board&#146;s approval. Generally outside
  appointments for executive directors are limited to one company board only,
  although Mr. Banks, by exception, served on two outside boards. The Board is
  satisfied that these appointments did not conflict with his duties to Wolseley.
  The Board monitors the extent of directors&#146; other interests to ensure that
  the effectiveness of the Board is not compromised. Succession planning is considered
  to be a matter for the whole Board rather than for a committee. </FONT></P>
<P align="center"><FONT size="2" face="sans-serif">41</FONT></P>
<hr noshade align="center" width="100%" size="2"><<<<</font>
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p42"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s articles of association provide
  that one-third of the directors retire by rotation each year and that each director
  will seek re-election at the Annual General Meeting every three years. Additionally,
  new directors are subject to election by shareholders at the first opportunity
  after their appointment. Messrs. Davis, Hord, Roach and Stein have sought election
  or re-election at the Annual General Meeting of shareholders to be held on November
  29, 2006; Messrs. Duff, Hornsby and Murray no later than 2007; and Messrs. Marchbank,
  Walker, Webster and Whybrow no later than 2008. It is Board policy 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. It is also
  Board policy that non executive directors should not generally serve on the
  Board for more than nine years and that, in cases where it is proposed to exceed
  this period the director concerned will retire annually and offer himself for
  re-election. Following their appointment, a formal comprehensive and tailored
  induction is offered to all non executive directors supplemented by visits to
  key locations within the Group and meetings with members of the executive committee
  and other key senior executives. All the directors being proposed for re-election
  at the 2006 Annual General Meeting of Shareholders have been subject to a performance
  evaluation during the fiscal year ended July 31, 2006 and the Board is content
  that each has continued to be effective and has demonstrated his commitment
  to his respective role. </FONT></P>
<P> <FONT size=2 face="sans-serif">Although the non executive directors are not
  asked, at present, to meet the shareholders of Wolseley, their attendance at
  presentations of the annual and interim results is encouraged. The Chairman
  ensures that the Board maintains an appropriate dialogue with shareholders.
  Gareth Davis is the Company&#146;s senior independent non executive director.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">The formal terms of reference for the main
     Board committees, approved by the Board and complying with the Code to assist

  in the discharge of its duties, are available from the Group Company Secretary
     and can also be found on Wolseley&#146;s website at www.wolseley.com. Membership
      of the various committees is shown at &#147;Item 6</FONT> <FONT size=2 face="sans-serif">&#150; Directors,
      Senior Management and Employees,  Paragraph C &#150; Board Practices&#148;.
      The Group Company Secretary acts as secretary to all Board committees. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B>Meetings Attendance </B> </FONT></P>
<P> <FONT size=2 face="sans-serif">The following table shows the attendance of
  directors at meetings of the Board, audit, remuneration and nominations committees
  during the fiscal year ended July 31, 2006: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="right" valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Audit Committee</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Remuneration</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Nominations</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Board Meetings</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Meetings</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Committee Meetings</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Committee Meetings</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Eligible</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Eligible</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Eligible</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Eligible</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Attended</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>to attend</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Attended</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>to attend</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Attended</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>to attend</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Attended</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>to attend</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">C.A.Banks</FONT></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">G.Davis</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">A.J.Duff</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">F.N.Hord</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">C.S.Hornsby</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">R.H.Marchbank</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">J.I.K.Murray</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">F W Roach</FONT><FONT size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">N.M.Stein</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">R.M.Walker</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">S.P.Webster</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">J.W.Whybrow</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><hr align="left" width="100" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%" valign="top"><font size="1" face="sans-serif"><I>*</I></font></td>
    <td valign="top"><font size="1" face="sans-serif"><I>Chairman</I> </font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1" face="sans-serif"><I>(1)</I></font></td>
    <td valign="top"><font size="1" face="sans-serif"><I>Appointed as a director
      on December 16, 2005.</I> </font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" valign="top"><font size="1" face="sans-serif"><I>This table
      shows only those meetings which each director attended as a member rather
      than as an invitee.</I></FONT></td>
  </tr>
</table>
<P align="center"><FONT face="sans-serif" size="2">42</FONT></P>
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</font>
<P> <FONT size="2" face="sans-serif"><I>Background Information Concerning Current
  Directors and Senior Management at July 31, 2006.</I> </FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>John W. Whybrow.</FONT></I></B><FONT size=2>
  Mr. Whybrow was first appointed to the Board on August 1, 1997. Mr. Whybrow
  became Chairman on December 13, 2002. He is also Chairman of the nominations
  committee. Mr. Whybrow is a non executive director of DSG International plc
  and Chairman of CSR plc. He was President and Chief Executive Officer of Philips
  Lighting Holding B.V., based in The Netherlands, until 2001 and Executive Vice
  President, Philips Electronics N.V. from 1998 until March 2002, when he returned
  to the UK. Mr. Whybrow is also Chairman of Petworth Cottage Nursing Home.</FONT>
  </FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Claude A. S. Hornsby</FONT></I></B><FONT size=2>.
  Mr. Hornsby was first appointed to the Board on May 3, 2001. Mr. Hornsby was
  appointed Group Chief Executive on August 1, 2006 following Mr. Banks&#146;
  retirement. He was previously Chief Executive North America, having been President
  and Chief Executive Officer of Ferguson Enterprises Inc., the US Plumbing and
  Heating Distribution Division since 2001. He has spent 28 years with Ferguson.
  Mr. Hornsby is a Non Executive Director of Virginia Company Bank.</FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Fenton N. Hord.</FONT></I></B><FONT size=2>
  Mr. Hord was first appointed to the Board on October 2, 2000. Mr. Hord joined
  the Group as Chief Executive Officer of Stock Building Supply Inc., in 1987.
  Prior to joining the Group, Mr. Hord was President of Eskimo Pie Corporation,
  which was at the time a subsidiary of Reynolds Metals Co. He is a non executive
  director of Investors Management Corporation. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Robert H. Marchbank</FONT></I></B><FONT size=2>.
  Mr. Marchbank was first appointed to the Board on January 24, 2005 as Chief
  Executive of Europe and is responsible for all the European businesses. Mr.
  Marchbank joined the Group at Ferguson Enterprises Inc. in 1982. In 2001 he
  moved to the UK to join the newly created Wolseley Group headquarters as Director
  of Strategic Planning. Most recently, he was the Director of Information and
  Processes. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Frank W. Roach</FONT></I></B><I><FONT size=2>.</FONT></I><B><I><FONT size=2>
  </FONT></I></B><FONT size=2>Mr. Roach was first appointed to the Board on December
  16, 2005 as Chief Executive of North America and is responsible for the North
  American businesses. Mr. Roach first joined Ferguson Enterprises Inc. in 1976
  and held a number of business roles. In 2005, Mr. Roach was appointed as Senior
  Vice President of the Wolseley North America management team, playing a key
  part in developing and expanding the Group&#146;s North American businesses.</FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Stephen P. Webster</FONT></I></B><FONT size=2>.
  Mr. Webster was first appointed to the Board on August 1, 1994 as Group Finance
  Director designate. He was appointed as Group Finance Director on December 9,
  1994. Mr. Webster was formerly a partner in Price Waterhouse and is a Chartered
  Accountant. Mr. Webster is a non executive director of Bradford &amp; Bingley
  plc. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Gareth Davis</FONT></I></B><FONT size=2>.
  Mr. Davis was first appointed to the Board on July 1, 2003. He is a member of
  the audit, remuneration and nominations committees and is the Senior Independent
  Non Executive Director. Mr. Davis has been Chief Executive of Imperial Tobacco
  Group plc since its incorporation in 1996, having spent the last 34 years in
  the tobacco industry. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Andrew J. Duff</FONT></I></B><FONT size=2>.
  Mr. Duff was first appointed to the Board on July 1, 2004. He is Chairman of
  the remuneration committee and a member of the nominations committee. Mr. Duff
  is Chief Executive of RWE npower plc. He spent 14 years at BP plc where he held
  leading positions in marketing and oil trading and was latterly the Director
  of Strategic Planning for BP Oil, USA. Mr. Duff is a member of the Confederation
  of British Industry&#146;s President&#146;s committee. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>James I. K. Murray</FONT></I></B><FONT size=2>.
  Mr. Murray was first appointed to the Board on April 12, 2002. A Chartered Accountant,
  Mr. Murray is Chairman of the audit committee. He was Finance Director of Land
  Securities PLC from 1991 until his retirement in 2001. He served as a non executive
  director of UK Coal plc from 2003 to 2006. Mr. Murray is the Chairman of Trustees
  of the Land Securities Pension Fund. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Nigel M. Stein</FONT></I></B><FONT size=2>.
       Mr. Stein was first appointed to the Board on December 1, 2003. He is
      a member
  of the audit committee. Mr. Stein is a Chartered Accountant and has been Finance
       Director of GKN plc since August 2001. He has worked in a number of other
      senior
  financial roles during his 11 years with GKN plc, and prior to this, he held
       senior financial positions with Laird Security Systems and Hestair Duple
      Limited.
  Mr. Stein is the &#147;Audit Committee Financial Expert&#148; and is also considered
   to be independent. The report of the audit committee is set out at &#147;Item
    6 &#150; Directors, Senior Management and Employees, Paragraph C &#150; Board
     Practices, Audit committee&#148;. </FONT></FONT></P>
<P align="center"><FONT size="2" face="sans-serif">43</FONT></P>
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</font>
<P> <font face="sans-serif"><B><I><FONT size=2>Robert M. Walker</FONT></I></B><FONT size=2>.
  Mr. Walker was first appointed to the Board on July 1, 1999. He is a member
  of the remuneration and nominations committees. Mr. Walker is Non Executive
  Chairman of WHSmith PLC and a non executive director of Tate &amp; Lyle plc,
  Williams Lea Group Limited and Signet Group plc. Mr. Walker was, until February
  2005, Group Chief Executive of Severn Trent Plc and a Non Executive Director
  of BAA plc. He previously worked for Procter and Gamble, McKinsey and Company
  and for over 20 years with PepsiCo Inc., where he was a Division President.
  Mr. Walker is an advisor to Cinven. </FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Adrian Barden</FONT></I></B><FONT size=2>.
  Mr. Barden was appointed Chief Executive of Wolseley UK Limited on August 1,
  2003. He is a member of the executive committee. Mr. Barden has been employed
  by the Group since 1991 and was appointed Managing Director of the Heavyside
  Division in 1996. He has spent his working life in the building materials distribution
  industry. He is Vice President of the Construction Products Association (CPA).
  On October 1, 2006, Mr. Barden was appointed as Group Senior Vice President.</FONT></FONT></P>
<P> <font face="sans-serif"><B><I><FONT size=2>Mark J. White</FONT></I></B><FONT size=2>.
  Mr. White joined Wolseley on July 1, 2002 as the Group Company Secretary and
  Counsel. He is a solicitor and is secretary to the audit, nominations, treasury
  and remuneration committees. He is a member of the executive committee and a
  trustee of the UK and Irish defined benefit pension schemes. Mr. White was previously
  Company Secretary of Enterprise Oil plc and Rotork plc. </FONT></FONT></P>
<P> <FONT size="2" face="sans-serif"><B>B. Compensation </B> </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Director and Senior Management Compensation
  </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s policy now, and for the foreseeable
  future, is to provide remuneration packages that fairly reward executives for
  the contribution they make to the business, taking into account the size and
  complexity of the Group&#146;s operations and the need to attract, retain and
  motivate executives of the highest quality. Remuneration packages comprise salary,
  performance bonuses, share options, long-term incentives, benefits-in-kind and
  pensions. Wolseley takes a total approach to remuneration, which includes all
  these elements. None of the long-term awards or options is pensionable. The
  packages, which link corporate and individual performance with an appropriate
  balance between short and long-term elements, are designed to be broadly comparable
  with those offered by other similar international businesses and reflect competitive
  practices in the countries and markets in which the executive directors operate.
  The policy is designed to incentivize the directors to meet Wolseley&#146;s
  financial and strategic objectives such that a significant proportion of remuneration
  is performance related. The remuneration committee considers that the targets
  set for the different elements of performance related remuneration are appropriate
  and demanding in the context of Wolseley&#146;s trading environment and the
  business challenges it faces. Under Wolseley&#146;s articles of association,
  the maximum aggregate amount of remuneration payable to Wolseley&#146;s non
  executive directors (as a group) was increased to &pound;750,000 per annum with
  effect from January 1, 2005, following shareholder approval at the Annual General
  Meeting held on November 18, 2004. </FONT></P>
<P> <FONT size=2 face="sans-serif">For the fiscal year ended July 31, 2006, the
  aggregate compensation paid or accrued by Wolseley and its subsidiaries to or
  for all directors and senior management as a group (14 persons) for services
  in all capacities was &pound;9,321 million. Such compensation was primarily
  in the form of salaries and amounts paid as bonuses pursuant to performance
  linked bonus plans in which all executive directors participated. Bonuses paid
  to directors are supervised by the remuneration committee.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">44</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size=2 face="sans-serif">Remuneration during the fiscal year ended July
  31, 2006 of the directors and senior management in office during fiscal year
  2006 was as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Pension</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Total</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Total</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Salary/</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Annual</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Supplement/Life</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Fiscal</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Fiscal</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Fees</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Bonus</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Benefits</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Assurance<SUP>(i)</SUP></B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;&#146;000</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Non Executive Chairman</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">John W. Whybrow</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">300</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">300</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">210</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Executive Directors</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">397</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">667</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,065</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,379</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Claude A. S. Hornsby</FONT><FONT size="2" face="sans-serif"><SUP>(b)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">453</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">847</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">92</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">38</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,201</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT><FONT size="2" face="sans-serif"><SUP>(c)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">238</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">868</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">693</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Frank W. Roach </FONT><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">247</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">283</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">581</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT><FONT size="2" face="sans-serif"><SUP>(e)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">475</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">481</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">51</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">70</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,077</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,084</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Non Executive Directors</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Gareth Davis</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">43</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Andrew J. Duff</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">38</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">James I. K. Murray</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">63</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">63</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">48</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Nigel M. Stein</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">38</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Robert M. Walker</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">46</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Executive Committee Member</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Adrian Barden</FONT><FONT size="2" face="sans-serif"><SUP>(f)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">72</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">598</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">593</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Company Secretary</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Mark J. White</FONT><FONT size="2" face="sans-serif"><SUP>(g)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">245</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">157</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">452</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">380</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size="2" face="sans-serif"><B>Former Directors</B></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Charles A. Banks</FONT><FONT size="2" face="sans-serif"><SUP>(h)</SUP></font></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">936</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,407</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">234</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">94</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,671</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,329</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,242</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">674</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">353</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,321</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">8,531</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR>
    <TD colspan="2" valign="top"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan="2" valign="top"> <font size="1" face="sans-serif"><I>Notes: </I>
      </font></TD>
  </TR>
  <TR>
    <TD width="3%" valign="top"><font size="1" face="sans-serif">(a)</font></TD>
    <TD valign="top"> <font size="1" face="sans-serif"> &pound;50,176 (2005: &pound;150,000)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the 2002 Long Term Incentive Scheme referred
      in &#147;Item 6 &#150; Directors, Senior Management and Employees &#150;
      Paragraph B, compensation &#150; long-term cash incentive plans&#148;. </font>
    </TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(b)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">&pound;55,913 (2005: &pound;0)
      of the figure for benefits was paid by way of a one-off amount to assist
      with Mr. Hornsby&#146;s purchase of a house in the UK. Mr. Hornsby will
      receive an annual housing allowance of &pound;75,000 pa from August 1, 2006.
      &pound;65,283 (2005: &pound;174,194) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred in &#147;Item 6 &#150; Directors,
      Senior Management and Employees &#150; Paragraph B, compensation &#150;long-term
      cash incentive plans&#148;.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(c)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">&pound;185,080 (2005: &pound;191,018)
      of the figure for benefits relates to relocation from the USA to the UK.
      &pound;36,256 (2005: &pound;101,935) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred to in &#147;Item 6 &#150; Directors,
      Senior Management and Employees &#150; Paragraph B, compensation &#150;long-term
      cash incentive plans&#148;.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(d)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">Appointed December 16, 2005.
      &pound;17,867 of the figure for bonuses relates to the vesting on July 31,
      2006 of 34.5% of the award made in 2003 under the 2002 Long Term Incentive
      Scheme referred in &#147;Item 6 &#150; Directors, Senior Management and
      Employees &#150; Paragraph B, compensation &#150; long-term cash incentive
      plans&#148;.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(e)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">&pound;26,120 (2005: &pound;35,917)
      of the figure for benefits relates to relocation from Droitwich to Theale.
      &pound;66,412 (2005: &pound;167,500) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred to in &#147;Item 6 &#150; Directors,
      Senior Management and Employees &#150; Paragraph B, compensation &#150;
      long-term cash incentive plans&#148;.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(f)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">&pound;34,500 (2004: &pound;47,200)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the Long Term Incentive Scheme referred
      to in &#147;Item 6 &#150; Directors, Senior Management and Employees &#150;
      Paragraph B, compensation &#150;long-term cash incentive plans&#148;.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(g)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">&pound;21,390 (2004: &pound;56,000)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the Long Term Incentive Scheme referred
      to in &#147;Item 6 &#150; Directors, Senior Management and Employees &#150;
      Paragraph B, compensation &#150;long-term cash incentive plans&#148; .</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(h)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">Mr. Banks retired from the
      Company on July 31, 2006, and the emoluments shown in the table relate to
      the period from August 1, 2005 to July 31, 2006. &pound;70,000 (2005: &pound;70,000)
      of the figure for benefits relates to relocation from the USA to the UK.
      &pound;60,919 (2005: &pound;66,633) of the figure for benefits relates to
      currency protection. &pound;134,882 (2005: &pound;369,908) of the figure
      for bonuses relates to the vesting on July 31, 2006 of 34.5% of the award
      made in 2003 under the 2001 Long Term Incentive Scheme referred to in &#147;Item
      6 &#150;Directors, Senior Management and Employees &#150; Paragraph B, compensation
      &#150;long-term cash incentive plans&#148;. In addition, Wolseley has agreed
      to pay the removal costs as well as the legal and estate agent fees in connection
      with the disposal of Mr. Banks&#146; home in the UK in advance of his return
      to the US.</FONT></TD>
  </TR>
  <TR>
    <TD valign="top"><FONT size=1 face="sans-serif">(i)</FONT></TD>
    <TD valign="top"><FONT size=1 face="sans-serif">The payments in respect of
      life assurance relate to arrangements established before Messrs. Banks,
      Hord, Hornsby, Marchbank and Roach became Executive Directors. These payments
      will cease with effect from August 1, 2006 for Messrs. Hornsby, Marchbank
      and Roach. A final payment of &pound;54,235 was made in the fiscal year
      ended July 31, 2005 in respect of life assurance arrangements for Mr. Hord.
      Payments totalling &pound;1.55 million will be made over the next 16 years
      in respect of life assurance arrangements for Mr. Banks.</FONT></TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">45</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p46"></a> <FONT size="2" face="sans-serif"><P><a href="#contents">Back to Contents</a></p></font>
<P><FONT size="2" face="sans-serif"><B><I>Salaries</I></B></FONT></P>
<P><FONT size=2 face="sans-serif">Basic salaries of executive directors are determined
  having regard to competitive market data, the degree of individual responsibility
  and individual performance. Market data is derived from a group of companies
  selected on the basis of comparable size, geographic spread and business focus.
  Due consideration is also given to the wider economic and employment backdrop,
  including general pay and employment conditions elsewhere in the Group. The
  target salary is at the median with the opportunity to go above this level,
  subject to sustained individual performance. The remuneration committee reviewed
  the salaries of the executive directors with effect from August 1, 2005, having
  sought the views of both the Chairman and (other than in the case of his own
  salary) Mr. Banks, the Group Chief Executive at that time. As a US national,
  40% of Mr. Banks&#146; salary was currency protected based on an exchange rate
  of &pound;1:$1.50. Mr. Hornsby will not benefit from such currency protection
  arrangements.</FONT></P>
<P><FONT size="2" face="sans-serif"><B><I>Performance bonuses</I></B></FONT></P>
<P><FONT size=2 face="sans-serif">Performance bonus arrangements for the executive
  directors are designed to encourage individual performance, corporate operating
  efficiencies and profitable growth. The annual bonus awards are based on a mix
  of demanding financial targets derived from Wolseley&#146;s historic performance,
  annual long-term strategic business plan and annual budget, as well as market
  expectations and will depend on performance 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, account
  for 85% of the bonus, the majority of which relates to the profit before tax
  targets). The balance of 15% of the bonus depends on specific personal objectives
  set for each executive director.</FONT></P>
<P><FONT size=2 face="sans-serif">The following percentages of base salary, which
  vary between executive directors depending on their particular responsibilities
  and spheres of influence, were used to determine the bonuses paid for the fiscal
  year ended July 31, 2006, subject to the achievement of the minimum, on-target
  and maximum levels of performance (with the percentages increasing on a linear
  basis for achievement between each level). The table also sets out the actual
  percentages paid:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="right" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan=5 align="center"><b><font size="1" face="sans-serif">Percentage
      of base salary payable on achievement of:</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="5"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Actual awards</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Minimum</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Maximum</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">for the year (%</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD align="left"><b><font size="1" face="sans-serif">Name</font></b></TD>
    <TD><b><font size="1" face="sans-serif">Target</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">On-Target</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Target</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">of base salary)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><hr align="left" width="50" size="1" noshade></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Charles A. Banks</FONT></TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">60</FONT></TD>
    <TD width=2% align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">120</FONT></TD>
    <TD width=2% align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">170</FONT></TD>
    <TD width=2% align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">159.00</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">80</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">120</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">160</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">154.00</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Claude A. S. Hornsby</FONT></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">80</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">130</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">180</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">172.50</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">40</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">70</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">100</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">42.38</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">80</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">110</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">140</FONT></TD>
    <TD align="right" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">127.00</FONT></TD>
    <TD bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">40</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">70</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">100</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">87.25</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">Stretching targets are set for each element
  of the bonus, determined by the remuneration committee each year, which also
  considers the levels of performance targets to be achieved for bonus payments
  to be made in the succeeding year. For the fiscal year ending July 31, 2007,
  the remuneration committee has determined that there will be no change from
  2006 for the minimum, on-target and maximum targets, which will be 80/130/180%
  of base salary for Mr. Hornsby, 80/120/160% for Mr. Hord, 80/110/140% for Mr.
  Roach and 40/70/100% for Messrs. Marchbank and Webster.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">46</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p47"></a> <FONT size="2" face="sans-serif"><P><a href="#contents">Back to Contents</a></p>
</font>
<P><FONT size="2" face="sans-serif"><B><I>Other Senior Executives and Management</I></B></FONT></P>
<P><FONT size=2 face="sans-serif">There are a number of senior executives whose
  votes influence the ability of the Group to meet its strategic objectives. They
  include the members of the executive committee and other senior employees. The
  remuneration committee takes into account the level and structure of this group
  whose total remuneration including salary, target bonus and value of long-term
  incentives are summarized below:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Total remuneration bands</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">Number of senior executives in band</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">2005/6</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><b><font size="1" face="sans-serif">(2004/5 in brackets)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD width=5%>&nbsp;</TD>
    <TD width=30%><FONT size=2 face="sans-serif">201-250</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=30%><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">251-300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">301-350</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">0 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">351-400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">0 (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">401-450</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">451-500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">501-550</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">551-600</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">0 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">601-650</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">0 (1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">651-700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">0 (1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">701-750</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">2 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">751-800</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">1 (0)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">&nbsp; </FONT></TD>
  </TR>
</TABLE>
<P><FONT size="2" face="sans-serif"><B><I>Long-term incentive plans</I></B></FONT></P>
<P><FONT size=2 face="sans-serif">Wolseley currently operates a long-term incentive
  plan which provides ordinary shares in the capital of Wolseley conditional upon
  Wolseley&#146;s total shareholder return (&#147;TSR&#148;) over distinct three
  year periods. All awards are made subject to the achievement of stretching performance
  conditions, and TSR has been selected as the performance measure to more closely
  align the interests of the executive directors and senior executives with those
  of shareholders over the long-term. The plan rewards the relative out-performance
  of Wolseley against a defined list of comparator companies. Calculations are
  performed independently and are approved by the remuneration committee.</FONT></P>
<P><FONT size=2 face="sans-serif">The long-term incentive plan is discretionary.
  The remuneration committee&#146;s current policy is to make annual awards to
  the Group Chief Executive, the executive directors and other senior executives
  under the Wolseley plc 2002 Long Term Incentive Scheme (&#147;2002 Scheme&#148;),
  which was originally approved by shareholders in December 2002 and amended at
  the annual general meeting held on November 18, 2004. Prior to this date only
  cash awards were made. Since 2004, awards will normally be made in shares, save
  where there are material securities or tax law constraints in overseas jurisdictions
  where the scheme is to be operated, in which case conditional awards in cash
  would continue to be made.</FONT></P>
<P><FONT size=2 face="sans-serif">The maximum amount that can be granted under
  the amended 2002 Scheme for each award is 200% of base salary per annum; however,
  awards made to date have not exceeded 125% (or 150% in the case of the Group
  Chief Executive) of base salary. Each year the remuneration committee will assess
  the proportion of awards that should be made up of both share options and long-term
  incentive awards. It is the remuneration committee&#146;s intention that for
  the fiscal year ending July 31, 2007, awards will be made to the Group Chief
  Executive over 150% of salary with lower award levels for other executive directors.
  The vesting level for a maximum award under the amended 2002 Scheme requires
  performance to be in the upper decile. To better reflect market practice, shareholder
  approval was sought and received on November 18, 2004 so that 25% of awards
  made from that date would vest for achievement of performance at the median
  (with a straight line percentage to vest between median and upper decile). Extant
  awards remain subject to the achievement of performance conditions following
  a participant&#146;s agreed retirement and vesting is determined at the end
  of the performance period.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">47</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p48"></a> <FONT size="2" face="sans-serif"><P><a href="#contents">Back to Contents</a></p>
</font></font>
<P><FONT size=2 face="sans-serif">During the year, the remuneration committee
  reviewed whether future grants under the amended 2002 Scheme should be subject
  to a financial performance underpin, in addition to the satisfaction of a TSR
  performance target. The remuneration committee has decided that future awards
  under the amended 2002 Scheme may, if deemed appropriate, be subject to performance
  criteria in addition to the current TSR targets. The factors which the remuneration
  committee would take into account in deciding whether to impose further performance
  criteria include: a substantial drop in Wolseley&#146;s share price; the presence
  of significant bid speculation in the sector; the adoption of weaker targets
  for the TSR condition; or, a significant change in policy away from granting
  options to granting only long-term incentive awards. The remuneration committee
  will continue to monitor whether circumstances warrant the imposition of such
  additional criteria. The remuneration committee decided that for the 2005 award,
  the continuing use of EPS as a performance target under the Wolseley Share Option
  Plan 2003 and the use of financial measures for the annual bonus plan provided
  an appropriate balance to the use of TSR within the amended 2002 Scheme.</FONT></P>
<P><FONT size=2 face="sans-serif">The lists of comparator companies for awards
  made since 2001 under the 2001 cash plan (a plan introduced to facilitate Mr.
  Banks&#146; recruitment, which is similar in structure to the 2002 Scheme) and
  since 2002 under the 2002 Scheme are based upon the constituent members of the
  FTSE 100 as at the respective dates of grant, excluding banks, telecommunications,
  IT and utility companies but together with CRH plc and Travis Perkins plc, which
  compete in the same sector as Wolseley. A similar group of companies has been
  selected for the 2006 awards under the amended 2002 Scheme.</FONT></P>
<P><FONT size=2 face="sans-serif">Details of the awards conditionally made to
  the Executive Directors in office during the year under the amended 2002 scheme
  and outstanding at July 31, 2006, as well as at the date of this report, are
  shown in the table below:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Interests in</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">shares held at</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Interests in &pound;</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Interests in</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">July 31, 2006</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">held at</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">shares held</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Interests in</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Interests in &pound;</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">and at the</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">August 1,</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">at August</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">shares</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">held at July</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">date of this</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">2005</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">1, 2005</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">awarded</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">31, 2006</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">report (or</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">(or date of</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">(or date of</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">during the</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">(or date of</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">date of</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Performance</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><b><font size="1" face="sans-serif">Name of Director</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">appointment)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">appointment)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">year<SUP>1</SUP></font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">departure)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">departure)</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">periods</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Charles A. Banks</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width="9%" align="right"><FONT size=2 face="sans-serif">369,908</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width="9%" align="right"><FONT size=2 face="sans-serif">95,308</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width="9%" align="right"><FONT size=2 face="sans-serif">106,862<SUP>1</SUP></FONT></TD>
    <TD width=2%><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD width="10%" align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width="11%" align="right"><FONT size=2 face="sans-serif">202,170</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width="25%" align="right"><FONT size=2 face="sans-serif">August 1, 2003
      &#150;July 31, 2008</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Adrian Barden</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">100,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">14,332</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">18,994<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">33,326</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150; July
      31, 2008 </FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">145,439</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">38,843</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">35,347<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">74,190</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150;July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Claude A.S.</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">189,227</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">40,281</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,406<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,687</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150;July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Hornsby</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">105,091</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">23,595</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,817<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">51,412</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150; July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">51,789</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,905</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">19,409<SUP>2</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">26,314</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150; July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">192,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34,884</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">42,147<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">77,031</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150; July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Mark J. White</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">62,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">10,276</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">10,869<SUP>1</SUP></FONT></TD>
    <TD><FONT size="2" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">21,145</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">August 1, 2003 &#150; July
      31, 2008 </FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR>
    <TD colspan="2" valign="top"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
  <TR>
    <TD width="3%" valign="top"><font size="1" face="sans-serif"><I>1.</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>The share price on the
      date of grant of the award was 1127 pence per share.</I></font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>2.</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>The share price on the
      date of grant of the award was 1127 pence per share in respect of 9,409
      shares and 1281 pence per share in respect of 10,000 shares awarded on appointment
      as a director.</I></font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>3.</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>Awards granted in 2003
      (granted at 50% of salary as at August 1, 2003, save for Messrs. Barden,
      Marchbank, Roach and White whose awards were granted at 40% of salary) vested
      at 34.5% of the award on July 31, 2006. Subsequent awards were made in shares.</I></font></TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">48</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p49"></a> <FONT size="2" face="sans-serif"><P><a href="#contents">Back to Contents</a></p>
</font>
<P><FONT size=2 face="sans-serif">The following table sets out the percentage
  of each award which has vested and the percentage of each extant award had it
  vested on July 31, 2006:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">Percentage vested on
      maturity or indicative vesting percentage</font></b></TD>
  </TR>
  <TR valign="bottom">
    <TD><b><font size="1" face="sans-serif">Year of Award</font></b></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><b><font size="1" face="sans-serif">based on performance
      as at July 31, 2006</font></b></TD>
  </TR>
  <TR valign="bottom">
    <TD><hr align="left" width="70" size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"> <hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">2001</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=35% align="right"><FONT size=2 face="sans-serif">100% (vested July
      31, 2004)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">2002</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">100% (vested July 31, 2005)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">2003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34.5% (vested July 31, 2006)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">45% (performance after 24
      months)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">2005</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">0% (performance after 12
      months)</FONT></TD>
  </TR>
</TABLE>
<P><FONT size="2" face="sans-serif"><b><i>Restricted share scheme</i></b></FONT></P>
<P><FONT size=2 face="sans-serif">On October 19, 2006 the remuneration committee
  of Wolseley approved the Wolseley Restricted Share Plan 2006 (&#147;RSS&#148;),
  which will provide awards of ordinary shares in the capital of Wolseley. Awards
  will be made at the discretion of the remuneration committee to employees of
  Wolseley, excluding any executive director and the Chairman of Wolseley plc.</FONT></P>
<P><FONT size=2 face="sans-serif">Awards will be made on such terms as the remuneration
  committee shall determine. Awards may not be made later than October 18, 2016
  but may otherwise be made at any time by the remuneration committee, subject
  to obtaining any UK or overseas regulatory approval or consent. Awards under
  the RSS must be satisfied by the transfer of ordinary shares and no new ordinary
  shares may be issued.</FONT></P>
<P><FONT size=2 face="sans-serif">The maximum total market value of ordinary shares
  which may be granted as an award to any participant under the RSS in any fiscal
  year is one-third of base salary, unless determined otherwise by the remuneration
  committee. Awards will normally vest on the third anniversary of the date of
  grant to those participants still employed by the Group and will be subject
  to the payment of any tax and social security liability arising on vesting.
  Early vesting may occur for reasons of death, disability, redundancy, retirement
  or at the discretion of the remuneration committee, but will normally be subject
  to a pro rata reduction in the number of shares originally granted based on
  the period of time from the date of grant to the date of termination. Awards
  may vest in full in the event of a takeover. No awards have been made under
  the RSS at the date of this report and it is the remuneration committee&#146;s
  intention that for the fiscal year ending July 31, 2007, awards will be considered
  for a limited number of Wolseley employees below board-level.</FONT></P>
<P><FONT size="2" face="sans-serif"><B><I>Pensions</I></B></FONT></P>
<P><FONT size=2 face="sans-serif">Mr. Webster, as a UK executive director, participates
  in the Wolseley Group Retirement Benefits Plan (the &#147;Plan&#148;). The Plan
  is a defined benefit scheme and provides benefits based on final pensionable
  salaries. Wolseley makes contributions to the Plan based on the recommendation
  of the Plan actuary. Bonuses payable to UK executive directors are not pensionable.
  Mr. Webster currently contributes 7% per annum of his pensionable salary to
  the Plan.</FONT></P>
<P><FONT size=2 face="sans-serif">The Finance Act 1989 introduced an earnings
  cap (the &#147;Cap&#148;) for employees joining the Plan after May 31, 1989.
  This has the effect of limiting the amount of an employee&#146;s salary that
  can be pensioned through a tax approved pension scheme. A Plan specific earnings
  cap was introduced from April 6, 2006 when the Cap was prospectively abolished.
  The current Plan specific limit, which is part of the design of the Plan, to
  which Mr. Webster is subject, is &pound;107,400 per annum. Wolseley has agreed
  to provide Mr. Webster with benefits which are broadly comparable with those
  that would have applied under the Plan had the Cap not been introduced. This
  was, until April 6, 2006, provided for by payments into a Funded Unapproved
  Retirement Benefits Scheme (&#147;FURBS&#148;).</FONT></P>
<P><FONT size=2 face="sans-serif">The remuneration committee approved Wolseley&#146;s
  approach in response to the UK pensions simplification, which became effective
  on April 6, 2006 for those executive directors who are, or will become, members
  of the UK approved pension plan. Such directors have the option of either maintaining
  the existing pension promise, in which case the executive would be responsible
  for any additional taxation arising; or ceasing to accrue pension benefit above
  the lifetime allowance in respect of service from April 6, 2006 and instead,
  receiving a cash retirement benefit allowance, subject to income taxation consistent
  with Wolseley&#146;s cost neutral objective. Wolseley will not compensate Board
  members for any change in their personal tax liability. Mr. Webster elected
  to cease to accrue pension benefit above the lifetime allowance in the Plan
  and to receive a cash retirement allowance in respect of the excess and in respect
  of prior underfunding of the FURBS.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">49</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p50"></a> <FONT size="2" face="sans-serif"><P><a href="#contents">Back to Contents</a></p>
</font>
<P><FONT size=2 face="sans-serif">Past service benefit would remain linked to
  future salary increases subject to a cap similar to the existing Cap.</FONT></P>
<P><FONT size=2 face="sans-serif">Additionally, the Finance Act 1989 capped life
  assurance payable through an approved pension scheme in respect of such executives.
  Wolseley has taken out an insurance policy to cover that part of the life assurance
  for Mr. Webster which is in excess of the Cap. The amount charged to the profit
  and loss account during the 2006 fiscal year in respect of his future obligation
  was &pound;2,988 (2005: &pound;66,812).</FONT></P>
<P><FONT size=2 face="sans-serif">Messrs. Banks, Hornsby, Marchbank and Roach,
  who are US citizens, participate in the defined contribution pension arrangements
  of Ferguson Enterprises Inc. In line with current US practice, Messrs. Banks,
  Hornsby Marchbank and Roach received contributions in fiscal 2006 at the level
  of 15% of their earnings (for this purpose $420,000 for Mr. Banks, and $400,000
  for Messrs. Hornsby, Marchbank and Roach of bonus was included with base salary).
  Bonus ceased to be included in the calculation of pension contributions from
  August 1, 2006. Contributions will increase (but will be limited to base salary)
  to 20% for Mr. Hornsby and to 23% for Messrs. Marchbank and Roach.</FONT></P>
<P><FONT size=2 face="sans-serif">Mr. Hord, also a US citizen, participates in
  the defined benefit and defined contribution plans of Stock Building Supply,
  Inc. Mr. Hord&#146;s pensionable earnings include his bonus up to a maximum
  of $742,400 as agreed when the bonus scheme was introduced in order to preserve
  his pension entitlement at that time. Mr. Hord is also a member of a US non-qualified
  plan, which will provide a benefit for 20 years after retirement at age 60 of
  40% of final pensionable salary. At Mr. Hord&#146;s option, and with Wolseley&#146;s
  consent, the benefit can be paid over a period of 1, 5, 10 or 15 years with
  the total amount of the benefit, in cash terms, being the same.</FONT></P>
<P><FONT size=2 face="sans-serif">A US subsidiary of Wolseley has a commitment
  to a former Wolseley director, who is a United States citizen, to pay a joint
  survivor pension of $300,000 per annum for fifteen years from August 1, 1993.
  The net present value of the future obligation as of July 31, 2006 was &pound;298,000
  (July 31, 2005: &pound;460,110), which has been charged in prior years&#146;
  accounts.</FONT></P>
<P><FONT size=2 face="sans-serif">Additionally, Brossette, a French subsidiary
  of Wolseley, has a commitment to a former Wolseley director, who is a French
  citizen, to pay an annual pension of &#8364;221,833 (2005: &#8364;215,392),
  with a widow&#146;s entitlement of 60%, subject to an annual increase based
  on the agreed French pension index. The full actuarial cost of this arrangement
  was provided in previous years as part of Brossette&#146;s ongoing pension obligations.
  Wolseley is guarantor of this future pension commitment, which as of July 31,
  2006 was approximately &pound;2.3 million (2005: &pound;1.9 million).</FONT></P>
<P><FONT size=2 face="sans-serif">The following table shows the executive directors
  and senior management in office at July 31, 2006 who participated during the
  year in the Group&#146;s defined benefit plans and the amounts of benefit accrued
  at the end of the year as if the director or manager had left service on July
  31, 2006, the change in accrued benefit over the year, the transfer value at
  both the beginning and end of the year as well as the change in the transfer
  value over the year as required by the UK Directors&#146; Remuneration Report
  Regulations 2002. The increase in transfer value figures represents an obligation
  on the pension fund or Wolseley &#150; they are not sums due or paid to the
  director or manager. The UK Listing Rules require additional disclosure of the
  change in accrued benefit net of inflation and the transfer value of this change.
  These pension liabilities are calculated using the cash equivalent transfer
  value method prescribed in the Listing Rules of the UK Listing Authority.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="9" align="center"><font size="1" face="sans-serif"><B>UK Directors&#146;
      Remuneration Report/regulations</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="5" align="center"><font size="1" face="sans-serif"><B>UK Listing
      Rules</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="9" align="right"> <hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="5" align="right"> <hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Transfer value</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Increase/</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>of the</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(decrease) in</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>increase/</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>transfer value</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(decrease) in</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Increase in</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Pension</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Increase</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan=3 align="center"><font size="1" face="sans-serif"><B>Transfer
      Value</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(excluding</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Pension</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Pension 2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(excluding</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Age at</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>accumulated</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>in pension</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align="right"> <hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>member</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Accumulated</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(net of</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>member</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>July 31,</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>contributions)</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>revaluation)</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>contributions)</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><hr size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Adrian Barden</FONT></TD>
    <TD width=2% align="center"><font size="2">&nbsp;</font></TD>
    <TD width=6% align="right"><FONT size=2 face="sans-serif">51</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=7% align="right"><FONT size=2 face="sans-serif">32</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=6% align="right"><FONT size=2 face="sans-serif">2</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=6% align="right"><FONT size=2 face="sans-serif">348</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=6% align="right"><FONT size=2 face="sans-serif">304</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=7% align="right"><FONT size=2 face="sans-serif">37</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=7% align="right"><FONT size=2 face="sans-serif">32</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=11% align="right"><FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
    <TD width=7% align="right"><FONT size=2 face="sans-serif">6</FONT></TD>
    <TD width=2%><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">59</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">326</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">4,518</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">4,470</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">(110)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">326</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">(11)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">(134)</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster<SUP>(1)</SUP></FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">53</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">43</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">24</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">634</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">267</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">354</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">43</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">23</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">328</FONT></TD>
    <td>&nbsp;</td>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Mark J.White</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">46</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">8</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">2</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">71</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">46</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">18</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">8</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">2</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">13</FONT></TD>
    <td>&nbsp;</td>
  </TR>
</TABLE>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td colspan="2"><hr align="left" width="100" size="1" noshade></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="1" face="sans-serif">(1)</font></td>
    <td><FONT size=1 face="sans-serif">As previously noted, Mr. Webster elected,
      with effect from April 6, 2006, to cease to accrue pension benefit above
      the lifetime allowance in the Plan and to receive a cash retirement allowance
      in respect of the excess and in respect of prior underfunding of the FURBS,
      which became a defined contribution arrangement from the same date. The
      figures shown in the table above reflect this change and show the information
      required under the UK Listing Rules and under the UK Directors&#146; Remuneration
      Report Regulations 2002 in respect of that part of his arrangements that
      continue to accrue pension on a defined benefit basis notwithstanding the
      changes that came into effect from April 6, 2006. The figure of &pound;70,000
      included in the column headed &#147;pension/life assurance&#148; in the
      compensation table at &#147;Item 6 &#150; Directors, Senior Management and
      Employees, paragraph B &#150; Compensation&#148; includes &pound;23,117
      in respect of the cash retirement allowance.&nbsp;</FONT></td>
  </tr>
</table>
<P align="center"><FONT face="sans-serif" size="2">50</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p51"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font>
<P> <FONT size=2 face="sans-serif">The following table shows those directors participating
  in money purchase pension plans and the cost of Wolseley&#146;s contributions
  thereto: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2006</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>2005</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Pensions: Money Purchase Plans</B></font></TD>
    <TD width="2%" align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width="10%" align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD width="2%" align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width="10%" align="right"><font size="1" face="sans-serif"><B>&pound;000</B></font></TD>
    <TD width="2%"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <hr align="left" width="170" size="1" noshade></TD>
    <td>&nbsp;</td>
    <TD> <hr size="1" noshade></TD>
    <td>&nbsp;</td>
    <TD> <hr size="1" noshade></TD>
    <td>&nbsp;</td>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Charles A. Banks</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">151</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">138</FONT></TD>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">5</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">4</FONT></TD>
    <td>&nbsp;</td>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Claude S. Hornsby</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">99</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">88</FONT></TD>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">107</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">26</FONT></TD>
    <td>&nbsp;</td>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right"><FONT size=2 face="sans-serif">52</FONT></TD>
    <td>&nbsp;</td>
    <TD align="right">&#8212;</TD>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </TR>
  <TR>
    <TD colspan="6"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan="6"><FONT size=1 face="sans-serif">Mr. Roach was appointed to
      the board on December 16, 2005.</FONT></TD>
  </TR>
</TABLE>
<P> <FONT size="2" face="sans-serif"><B><I>Other benefits </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">Executive directors receive a number of other
  benefits principally related to the provision of company car benefits, life
  assurance, health care arrangements and, in the case of Messrs. Banks, Hornsby,
  Marchbank and Webster, relocation and housing allowances following, respectively,
  their relocations from the US to the UK (Messrs. Banks, Hornsby and Marchbank)
  and from Droitwich, UK to Theale, UK (Mr. Webster), where Wolseley&#146;s head
  office is located. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Non executive directors </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">The remuneration of non executive directors
  during the fiscal 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&#146;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&#146; 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 Wolseley&#146;s
  registered office during normal business hours and at the Annual General Meeting.
  </FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Executive share ownership </I></B>
  </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley introduced a share ownership program
  with effect from August 1, 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 Wolseley employee share plan (other than shares sold to pay a social security
  or income tax liability or sold to meet the price of the option). The program
  specifically excludes the need 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 program.
  The remuneration committee reviewed and noted the progress which has been made
  towards meeting these targets during the fiscal year. Directors&#146; and senior
  management&#146;s current shareholdings are set out at &#147;Item 6 &#150; Directors,
  Senior Management and Employees &#150; Paragraph B, compensation &#150; long-term
  cash incentive plans&#148;. </FONT></P>
<P align="center"><FONT face="sans-serif" size="2">51</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size="2" face="sans-serif"><B><I>Share option plans </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley has adopted seven share option plans:
  the 1984 Executive Share Option Scheme (the &#147;1984 Scheme&#148;), the 1989
  Executive Share Option Scheme (the &#147;1989 Scheme&#148;) and the Wolseley
  Share Option Plan 2003 (the &#147;2003 Scheme&#148;) (collectively, the &#147;Executive
  Option Schemes&#148;); the Wolseley Employees Savings Related Share Option Scheme
  1981 (the &#147;UK Option Scheme&#148;) and the Wolseley Irish Sharesave Scheme
  2000 (the &#147;Irish Option Scheme&#148;) (collectively, the &#147;Employees
  Savings Option Schemes&#148;); the Wolseley Employee Share Purchase Plan 2001
  (the &#147;Purchase Plan&#148;), which has now been extended to incorporate
  12 European countries; and the Wolseley Employees International Stock Appreciation
  Plan (the &#147;SAP&#148;), the final awards of which vested during the fiscal
  year ended July 31, 2006.</FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley monitors the awards made under the
  various employee and discretionary share plans which it operates. Options are
  either satisfied by the issue of new shares or shares purchased in the market
  (including treasury shares). The number of ordinary shares over which options
  may be granted under the Executive Option Schemes may not, in any ten year period,
  exceed five percent of the issued share capital of Wolseley from time to time.
  The number of ordinary shares over which options may be granted under the Employees
  Savings Option Schemes, the SAP and the Purchase Plan may not, in any ten year
  period, when aggregated with options under the Executive Option Schemes, exceed
  ten percent of the issued share capital of Wolseley from time to time. In addition,
  for US-based participants, the 2003 Scheme will be restricted such that the
  aggregate number of shares for which options may be granted to such participants
  during the life of the 2003 Scheme will not exceed 5% of the issued ordinary
  share capital at the date the 2003 Scheme was approved by shareholders. Shares
  are allotted under the Executive Option Schemes, the Employees Savings Option
  Schemes, the SAP and the Purchase Plan when the options are exercised. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Executive option schemes </I></B> </FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Eligibility</FONT></U><FONT size=2>
  &#150; All executive directors and other senior company management, as well
  as all other employees of Wolseley as recommended by the remuneration committee,
  are eligible to participate in the Executive Option Schemes. At July 31, 2006,
  there were approximately 950 participants in the Executive Option Schemes. The
  2003 Scheme received shareholder approval at the annual general meeting held
  in November 2003. Consequently, no further options will be granted under the
  1984 Scheme nor under the 1989 Scheme, which are now closed schemes. No options
  under any such Scheme have or will be granted at a discount to the relevant
  middle market price at the time of grant and no option under any such Scheme
  can be exercised unless performance conditions have been satisfied. The remuneration
  committee will formally review the 2003 Scheme by no later than November 2008.
  </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Options</FONT></U><FONT size=2> &#150;
  Options entitle the recipient to purchase Wolseley&#146;s ordinary shares and
  are evidenced by an option certificate, which includes the number of shares
  comprised in the option, the exercise price of the option and the date the option
  was granted to the recipient. Options are personal to the participant and his
  personal representatives and may not be transferred. No payment is required
  for the grant of an option. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Exercise price</FONT></U><FONT size=2>
  &#150; The exercise price of an option may not be less than the higher of (i)
  the nominal value of a share; and (ii) for European participants, an amount
  equal to the middle market quotation of a share on the dealing day immediately
  preceding the date of grant and for US participants, the dealing day of the
  date of grant, as derived from The London Stock Exchange Daily Official List.
  </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Performance conditions</FONT></U><FONT size=2>
  &#150; The remuneration committee considers annually the levels of option grants.
  An option becomes exercisable on the third anniversary of the date of grant,
  but in respect of options granted after May 31, 1994. Such options cannot be
  exercised unless a performance test has been satisfied. Thereafter, they may
  be exercised at any time until they lapse 10 years from the date of grant. Options
  granted between May 1994 and December 1996 may not be exercised unless the growth
  in earnings per share over a period of three consecutive fiscal years during
  the life of the option exceeds the growth in the UK Retail Price Index over
  the same period by at least 6%. Options granted in, and subsequent to, December
  1997 may not be exercised unless growth in earnings per share over a period
  of three consecutive fiscal years during the life of the option exceeds the
  growth in the UK Retail Price Index over the same period by at least 9%. In
  addition, the number of options exercisable by executive directors in respect
  of awards made between 1997 and 2002 is determined by the return on capital
  employed achieved over the same rolling three year period. For options granted
  in 1997 and 1998, achieving a return on capital employed of 15% per annum will
  enable 50% of such options granted in these years to become exercisable, rising
  on a sliding scale to 100% for achieving a return on capital employed of 20%
  or more. With effect from October 1999, the maximum return on capital employed
  required to permit exercise of 100% of options granted was reduced from 20%
  to 17.5% and the sliding scale was adjusted accordingly.</FONT></FONT></P>
<P align="center"><FONT size="2" face="sans-serif">52</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <FONT size=2 face="sans-serif">Options granted in, and subsequent to, November
  2003 may not be exercised unless growth in earnings per share over the period
  of three fiscal years (from the fiscal year immediately prior to date of the
  grant) exceeds growth in the UK Retail Price Index over the same period by at
  least 9%. For options so granted in excess of 100% of salary the earnings per
  share growth has to exceed the growth in the UK Retail Price Index by at least
  12%, rising to 21% for awards greater than 250% of salary. To the extent that
  the performance condition is not fully met for options granted in November 2003,
  the satisfaction of the condition will be retested on the fourth anniversary
  of the award, but from the same fixed base, with the further requirement that
  the earnings per share growth has to exceed the growth in the UK Retail Price
  Index by at least 12%, rising to 28% for awards greater than 250% of salary.
  Awards made from 2004 will not benefit from any such retest of the satisfaction
  of the performance condition. </FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Individual limit</FONT></U><FONT size=2>
  &#150; Under the 1984 and 1989 Schemes, the maximum number of shares over which
  a participant may be granted an option on any date is subject to the limit that
  the aggregate exercise price of that option, when added to the aggregate exercise
  prices of shares comprised in any extant options to subscribe for shares granted
  to the participant within the previous ten years under the Executive Option
  Schemes and any other employee share option scheme operated by Wolseley (excluding
  shares which are the subject of options granted under any savings related share
  option scheme and any shares issued upon the exercise of options), may not exceed
  four times the participant&#146;s total remuneration for Wolseley&#146;s current
  or preceding fiscal year (whichever of those years gives the greater amount)
  or, where the participant did not receive remuneration for the preceding fiscal
  year, four times his total remuneration for the 12 month period beginning with
  the first day of the current fiscal year in which the participant received remuneration.
  The maximum number of shares over which a participant may be granted an option
  under the 2003 Scheme may not exceed an amount equal to three times base salary
  for UK and other European-based executives and five times base salary for US
  based executives, although the remuneration committee may, as it so determines,
  also use the higher limit in exceptional circumstances. It is the remuneration
  committee&#146;s intention that for the year ending July 31, 2007, awards will
  not exceed 225% of base salary (or 300% in the case of the US executive directors).
  </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Exercise of options</FONT></U><FONT size=2>
  &#150; Unvested options may be exercised in whole or in part following the
  earliest  of (i) the expiration of three years from the date of grant of the
  option subject
  to the satisfaction of the relevant performance condition; (ii) the participant&#146;s
   termination of employment by reason of his death, injury or disability (and,

  in the case of the 1984 Executive Share Option Scheme, redundancy and, in the
   case of options granted under the 2003 Scheme subject to both the satisfaction

  of the relevant performance condition and to the exercise of a discretion by
   the remuneration committee); (iii) the participant&#146;s termination of employment
    for any reason other than death, injury or disability if the Board in its
   absolute
  discretion so determines (under the 1984 and 1989 Schemes and, in the case
   of  anticipated retirement, awards made under the 2003 Scheme will be exercisable

  only after the third anniversary of grant and subject to the satisfaction of
    the relevant performance condition); or (iv) the date the option becomes
   exercisable
  upon a change of control of Wolseley or the winding up of Wolseley (save in
    the case of options granted under the 2003 Scheme where, in addition, the
   remuneration
  committee must be satisfied that Wolseley&#146;s performance over the curtailed
   period justifies vesting). Upon a change of control of Wolseley whereby Wolseley

  is under the control of another company or the business of Wolseley is carried
   on by another company, and subject to the Companies Act 1985 (the &#147;Companies
    Act&#148;), the general corporations law of England and Wales, a participant
  generally may exercise an option at any time within a six month period following
  the later of the date on which control of Wolseley passes to an acquirer and
  the date on which the offer to acquire becomes unconditional to exercise any
  unexercised option then held by the participant. Upon the voluntary winding-up
  of Wolseley, the participant may exercise an option upon receipt of notice
  of
  a meeting to consider such matter. The exercise of vested options under the
  1984 and 1989 Schemes is governed by the provisions noted above. The exercise
  of vested options under the 2003 Scheme must take place within six months of
  termination of employment by reason of injury, disability, ill health, redundancy
  or by reason that the participant&#8217;s office or employment is in a company which
    ceases to be a Group company (or 12 months in the event of death), or within
    one
    month
    of
  termination of employment for those employees who resign or who are dismissed
  otherwise than for cause. </FONT></FONT></P>
<P align="center"><FONT face="sans-serif" size="2">53</FONT></P>
<hr noshade align="center" width="100%" size="2">
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</font>
<P> <font face="sans-serif"><U><FONT size=2>Lapse of options</FONT></U><FONT size=2>
  &#150; An option lapses under the 1984 and 1989 Schemes (to the extent that
  it has not been previously exercised) upon the earliest of (i) the expiration
  of ten years from its date of grant; (ii) the expiration of 12 months from the
  date of participant&#146;s death; (iii) the expiration of 12 months from the
  date upon which the participant&#146;s employment terminates by reason of injury
  or disability (and in the case of the 1984 Scheme, redundancy); (iv) the expiration
  of 18 months from the date on which the participant retires from employment;
  (v) the date on which the participant&#146;s employment is otherwise terminated;
  (vi) upon a change of control of Wolseley, the date that is immediately after
  the expiration of the applicable six month time period for exercise of options;
  or (vii) upon the voluntary winding-up of Wolseley, a date that is immediately
  after the commencement of such winding up of Wolseley. An option lapses under
  the 2003 Scheme (to the extent that it has not previously been exercised) upon
  the earliest of (i) the fourth anniversary of grant to the extent that awards
  granted in November 2003 and June 2004 have not satisfied the performance condition;
  (ii) the third anniversary of grant to the extent that awards granted after
  November 2004 have not satisfied the performance condition; (iii) six months
  (or 12 months in the case of death) after termination of employment (or death)
  to the extent that the option award has satisfied the performance condition
  where termination occurs otherwise than by resignation or dismissal for cause;
  (iv) one month after termination of employment to the extent that the award
  has satisfied the performance condition where termination occurs by resignation
  or dismissal otherwise than for cause; (v) immediately upon termination of employment
  by reason of death, injury, disability, ill health, expected retirement, redundancy
  and sale of a Group employing company, unless the remuneration committee otherwise
  exercises its discretion and, subject thereto, to the satisfaction of the proportionate
  part of the performance condition as at that time. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Issue of shares</FONT></U><FONT size=2>
  &#150; Shares issued and allotted to any person pursuant to the Executive Option
  Schemes are entitled to receive all dividends and other distributions paid by
  reference to a record date falling on or after the date on which the allottee
  is entered on the register of shareholders of Wolseley and shall in all other
  respects rank equally with other shares issued by Wolseley of the same class.
  </FONT></FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Employees Savings Option Schemes </I></B>
  </FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Eligibility</FONT></U><FONT size=2>
  &#150; Under the UK Option Scheme, all UK directors and employees of Wolseley
  with at least six months&#146; service prior to the applicable results announcement
  </FONT><font face="sans-serif"><font size=2>of Wolseley</font></font> <FONT size=2>which
  immediately precedes a grant of options are eligible to participate in the UK
  Option Scheme. Under the Irish Option Scheme, all Irish directors and employees
  of Wolseley with one year&#146;s service on the date of Wolseley&#146;s Annual
  General Meeting immediately preceding a grant of options are eligible to participate
  in the Irish Option Scheme. The Board has discretion to include other employees.
  At July 31, 2006, there were approximately 4,500 participants in the Employees
  Savings Option Schemes. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Options</FONT></U><FONT size=2> &#150;
  Options under the Employees Savings Option Schemes entitle the participant to
  acquire Wolseley&#146;s ordinary shares. Options will be personal to the participant
  and his or her personal representatives and may not be transferred or assigned.
  No payment is required for the grant of an option. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Exercise price</FONT></U><FONT size=2>
  &#150; The exercise price of an option under the Employees Savings Option Schemes
  is determined by the Board and may not be less than the greater of (i) the price
  which is the higher of (a) eighty percent and (b) such greater percentage as
  may be required by appropriate tax legislation, of the middle market quotation
  for ordinary shares for such dealing day falling as near to (but not earlier
  than) 30 days immediately preceding the date of grant, as derived from The London
  Stock Exchange Daily Official List; or (ii) the nominal value of an ordinary
  share. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Grant of options</FONT></U><FONT size=2>
  &#150; Options may be granted with durations of three, five or, for the UK Option
  Scheme, seven years. Participants choose the duration of their option at the
  time of grant. It is a condition of granting an option that participants enter
  into a savings contract with an approved savings institution under which participants
  save between &pound;10 and &pound;250 per month (for the UK Option Scheme) or
  &#8364;12 and &#8364;320 per month (for the Irish Option Scheme), for a three
  year (36 monthly contributions) or five and seven year (60 monthly contributions
  in each case) period depending on whether they have chosen a three, five or
  seven year option. After either 36 or 60 monthly contributions have been made,
  the three or five year option matures, a bonus is payable and participants may
  exercise their options and buy ordinary shares in Wolseley at the exercise price.
  Participants who choose a seven year option at the time of grant are required
  to leave their savings accumulated over five years undistributed for another
  two years, at which time a further bonus is payable and they may exercise their
  option. Options may be exercised only with the available proceeds of the savings
  contract together with the applicable bonus. Participants may withdraw from
  a savings contract at any time (though their options will then lapse) and are
  not obligated to exercise an option when the contract matures at the relevant
  bonus date. All savings contracts of any individual which are linked to options
  are aggregated for the purposes of an overall limit on savings of &pound;250
  or &#8364;320 per month (as the case may be) per participant. No options may
  be granted more than 10 years after the first grant of options under the Employees
  Savings Option Schemes. The UK Option Scheme was extended for ten years in 1991,
  and approval was further renewed until December 2011 at the Extraordinary General
  Meeting of Wolseley shareholders held on December 14, 2001. </FONT></FONT></P>
<P align="center"><FONT size="2" face="sans-serif">54</FONT></P>
<hr noshade align="center" width="100%" size="2">
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<font face="sans-serif"><page></font><a name="p55"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font>
<P> <font face="sans-serif"><U><FONT size=2>Exercise of options</FONT></U><FONT size=2>
  &#150; Upon the maturity of a savings contract, a participant has six months
  in which to use the savings from the savings contract and the bonus to exercise
  his option and purchase Wolseley&#146;s ordinary shares at the exercise price.
  Once six months have passed, the option lapses. In some circumstances, a participant
  may use his savings and exercise his option before it reaches maturity. These
  circumstances include (i) the death of a participant; (ii) termination of a
  participant&#146;s employment by reason of his injury, disability, redundancy
  or retirement (if a participant&#146;s employment terminates other than in these
  circumstances, his options will lapse upon the date of such termination); (iii)
  the participant attaining his retirement date but remaining employed thereafter;
  (iv) a change of control of Wolseley; and (v) the voluntary winding-up of Wolseley.
  </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Issue of ordinary shares</FONT></U><FONT size=2>
  &#150; Ordinary shares purchased on the exercise of options granted under a
  savings contract will rank equally with the issued ordinary shares, except for
  rights attaching to ordinary shares by reference to a record time or date preceding
  the time or date of purchase. </FONT></FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Individual limits</FONT></U><FONT size=2>
  &#150; The monthly contributions payable by participants under a savings contract
  (i) when added to any contributions payable in any month by such participant
  under other existing savings contracts, must not exceed &pound;250 or &#8364;320
  (as the case may be) per participant or such greater sum as may be permitted
  by appropriate tax legislation and which have been approved by the Board and
  (ii) shall not be less than &pound;10 (or the &#8364; equivalent). </FONT></FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Wolseley Employees International Stock
  Appreciation Plan (&#147;SAP&#148;) </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">On September 12, 1997, Wolseley established
  the SAP for employees who were not eligible to participate in the Employees
  Savings Option Schemes. Directors were not entitled to participate in the SAP.
  Participants in the SAP must have been employed by a participating company,
  as determined by the Board from time to time. Participants were granted awards
  comprised of units of ordinary shares with a base price per unit not to exceed
  the greater of (i) a price which is 80% of the middle market quotation for ordinary
  shares on the date immediately preceding the date of grant as derived from the
  London Stock Exchange Daily Official List and (ii) the nominal value of an ordinary
  share. </FONT></P>
<P> <FONT size=2 face="sans-serif">Upon exercise, participants received an award
  in an amount determined by a formula reflecting the value of the ordinary shares
  on the date of exercise. Awards were automatically exercisable upon the earlier
  to occur of a specified date during the year that was the fifth year anniversary
  of the date of grant or a specified date during the year in which there was
  a change of control of Wolseley or a resolution to wind up Wolseley had been
  approved. A participant&#146;s awards lapsed upon his termination of employment
  from a company participating in the SAP. The final awards granted under the
  SAP were exercised during the fiscal year ended July 31, 2006. There are no
  outstanding awards under the SAP. The SAP has been succeeded by the Wolseley
  Employee Share Purchase Plan 2001. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Wolseley Employee Share Purchase Plan
  2001 (the &#147;Purchase Plan&#148;) </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">On September 21, 2001, Wolseley established
  the Purchase Plan in place of the SAP noted above. The Purchase Plan (which
  is a US Revenue Code Section 423 Plan) offers to eligible employees of participating
  companies the opportunity to purchase ordinary shares (which include ADSs evidencing
  ordinary shares) through share options granted to them under the Purchase Plan.
  An employee or director of a participating company is eligible to participate
  in the Purchase Plan if he or she (i) has been employed continuously by a participating
  company for at least one year, (ii) customarily works more than twenty hours
  per week for a participating company and (iii) customarily works more than five
  months in a calendar year for a participating company. Wolseley directors may
  participate in the Purchase Plan if they satisfy the foregoing requirements.
  The Purchase Plan will be extended into 12 countries across Europe during 2007,
  and the rules of the Purchase Plan will be amended by means of a European schedule
  to allow the Purchase Plan to run in parallel with the UK and Irish Employees
  Savings Option Schemes, without amending the rules of the Purchase Plan. </FONT></P>
<P> <font face="sans-serif"><U><FONT size=2>Eligibility</FONT></U><FONT size=2>
  &#150; Employees participate in the Purchase Plan by submitting an enrollment
  form, which specifies the amount of their compensation that will be withheld
  and accumulated for Purchase Plan purposes. The amount of compensation to be
  withheld must be at least $25 per month but not more than $400 per month (or
  such other minimum or maximum amounts as may be established by the Board from
  time to time). Compensation that is withheld is applied to the purchase of ordinary
  shares as of the applicable exercise date unless the participant has terminated
  employment or withdrawn from the Purchase Plan before that date. </FONT></FONT></P>
<P align="center"><FONT face="sans-serif" size="2">55</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p56"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font></font>
<P> <font face="sans-serif"><U><FONT size=2>Option Price</FONT></U><FONT size=2>
  &#150; The option price per share for ordinary shares purchased on the exercise
  of an option granted under the Purchase Plan shall not be less than 85% of the
  Fair Market Value of the ordinary shares on the date of grant (but in all cases
  must be at least the nominal value of an ordinary share). The term &#147;Fair
  Market Value&#148; means, on any given date, the closing middle market quotation
  of an ordinary share as derived from the London Stock Exchange Daily Official
  List or the primary stock exchange on which the ordinary shares are listed.
  </FONT></FONT></P>
<P> <FONT size=2 face="sans-serif">A participant may discontinue his or her participation
  in the Purchase Plan at any time by giving written notice to that effect to
  the Board at any time prior to the exercise date. The amount credited to a participant&#146;s
  account will be distributed to the participant upon a withdrawal from the plan.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">The award made in March 2005, at an option
  price of 935.85 pence per share to purchase 2,780,555 ordinary shares was granted
  to 9,977 employees &#150; 2,457,792 options over ordinary shares were granted
  to 9,036 employees based in the US and 322,763 options over ordinary shares
  were granted to 941 employees based in Canada. A total of 1,448,272 options
  vested on May 15, 2006. The award made in March 2006, at an option price of
  1236 pence per share to purchase 817,439 ordinary shares was granted to 8,593
  employees &#150; 764,844 options over ordinary shares were granted to 8,151
  employees based in the US and 52,595 options over ordinary shares were granted
  to 442 employees based in Canada. These options over ordinary shares will be
  available for exercise no later than May 21, 2007. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B><I>Share option information </I></B> </FONT></P>
<P> <FONT size=2 face="sans-serif">As of October 31, 2006, there were outstanding
  options to purchase a total of 3,161,090 ordinary shares that had been granted
  by Wolseley to its directors and senior management. Details of options outstanding
  under the Executive Option Schemes and the Employees Savings Option Schemes
  and of the interests of the directors and senior management in such schemes
  as of October 31, 2006 are set out below: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Number of ordinary</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Range of exercise prices</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>shares issuable upon</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>per ordinary share</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Range of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif"><B>Title of plan</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>exercise</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(pence per share)</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>expiration dates</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD>
      <hr align="left" width="70" size="1" noshade>
    </TD>
    <TD><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Executive Option Schemes</FONT></TD>
    <TD width=12% align="right"><FONT size=2 face="sans-serif">14,582,218</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=12% align="right"><FONT size=2 face="sans-serif">349.75 &#150; 1281.00</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=12% align="right"><FONT size=2 face="sans-serif">11/2005 &#150;
      03/2016</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=2 face="sans-serif">Employees Savings Option Schemes</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">3,624,909</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">251.00 &#150; 1236.00</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">04/2006 &#150; 12/2013</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">56</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p57"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
<p> <B>Executive option schemes</B></p>
</font></font>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Exercise price per</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>October 31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>August 1, 2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>ordinary share</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>exercisable</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif"><B>Name of director/senior manager</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(pence per share)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>between</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>July 31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>resignation)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>appointment)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD>
      <hr align="left" width="175" size="1" noshade>
    </TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Charles A. Banks</FONT><FONT size="2" face="sans-serif"><SUP>(a)
      (b)</SUP></font></TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">483.50</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">2000-2007</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">22,615</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">22,615</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">22,615</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">381.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2001-2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,235</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">397.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2002-2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,815</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">468.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">400,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">400,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">400,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">135,400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">135,400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">135,400</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">213,161</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">213,161</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">225,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">263,098</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">263,098</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">263,098</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">153,429</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">153,429</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">153,429</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">138,010</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">138,010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=2 face="sans-serif">Adrian Barden</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">381.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2001-2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">6,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">397.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2002-2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">8,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">349.75</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2003-2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">13,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,600</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,600</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,924</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,924</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,294</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">36,279</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">36,279</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">349.75</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2003-2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">40,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">40,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">60,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">65,037</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">65,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">65,037</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">78,162</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">78,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">78,162</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">68,474</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">68,474</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=2 face="sans-serif">Claude A. S. Hornsby</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">485.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">14,762</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">14,600</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">80,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,871</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,871</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,321</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,321</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">101,321</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">117,179</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">117,179</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">349.75</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2003-2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">15,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34,195</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">34,195</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34,195</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top" bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1100.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">62,869</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">62,869</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">57</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p58"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
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<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Exercise price per</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>October 31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>August 1, 2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>ordinary share</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>exercisable</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Name of director/senior manager</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(pence per share)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>between</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>July 31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>resignation)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>appointment)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>
      <hr align="left" width="175" size="1" noshade>
    </TD>
    <TD align="right">
      <hr align="left" size="1" noshade>
    </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><hr align="left" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Frank W. Roach </FONT><FONT size="2" face="sans-serif"><SUP>(b)</SUP></font></TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">25,000</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">25,000</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">25,000</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">30,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">21,711</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">21,711</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">21,711</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,341</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,341</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,341</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1281.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2009-2016</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">483.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2000-2007</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">9,450</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">381.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2001-2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">5,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">25,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">397.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2002-2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">22,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">22,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">22,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">349.75</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2003-2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">467.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004-2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">80,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">80,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">80,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,679</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,679</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,679</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">79,293</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">79,293</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">79,293</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,189</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">90,189</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Mark J. White</FONT><FONT size="2" face="sans-serif"><SUP>(a)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">543.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005-2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">743.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006-2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,000</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">949.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007-2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,021</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,021</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1185.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008-2015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,675</FONT></TD>
    <TD><FONT size="2" face="sans-serif"><SUP>(d)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20,675</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR valign="top">
    <TD colspan="3">
      <hr align="left" width="100" size="1" noshade>
    </TD>
  </TR>
  <TR valign="top">
    <TD colspan="3"><font size="1" face="sans-serif">Notes:</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD width="3%"><FONT size=1 face="sans-serif">(a)</FONT></TD>
    <TD colspan="2"><FONT size=1 face="sans-serif">The following exercises of
      options took place during the 2006 fiscal year, and to October 31, 2006:</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width="3%"><FONT size=1 face="sans-serif">(i)</FONT></TD>
    <TD><FONT size=1 face="sans-serif">by Charles A. Banks of executive share
      options on December 16, 2005 in respect of 11,839 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1220.00
      pence);</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><FONT size=1 face="sans-serif">(ii)</FONT></TD>
    <TD><font size="1" face="sans-serif">by Adrian Barden of executive share options
      on January 16, 2006 in respect of 6,000 ordinary shares at a per share option
      price of 381.00 pence, 8,000 ordinary shares at a per share option price
      of 397.00 pence and 13,000 ordinary shares at a per share option price of
      349.75 pence (closing middle market price 1290.00 pence), and of executive
      share options on October 18, 2006 in respect of 7,600 ordinary shares at
      a per share option price of 467.00 pence and 20,000 ordinary shares at a
      per share option price of 543.00 pence (closing middle market price 1233.00
      pence); (iii) by Fenton N. Hord of executive share options on December 13,
      2005 in respect of 10,000 ordinary shares at a per share option price of
      349.75 pence (closing middle market price 1213.00 pence);</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><FONT size=1 face="sans-serif">(iv)</FONT></TD>
    <TD><FONT size=1 face="sans-serif">by Claude A. S. Hornsby of executive share
      options on December 12, 2005 in respect of 68,161 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1213.00
      pence); of executive share options on January 11, 2006 in respect of 14,762
      ordinary shares at a per share option price of 485.00 pence; 14,600 ordinary
      shares at a per share option price of 467.00 pence and 11,839 ordinary shares
      at a per share option price of 543.00 pence (closing middle market price
      1283.00 pence);</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><FONT size=1 face="sans-serif">(v)</FONT></TD>
    <TD><FONT size=1 face="sans-serif">by Robert H. Marchbank of executive share
      options on January 26, 2006 in respect of 15,000 ordinary shares at a per
      share option price of 349.75 pence (closing middle market price 1342.00
      pence);</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><FONT size=1 face="sans-serif">(vi)</FONT></TD>
    <TD><font size="1" face="sans-serif">by Stephen P. Webster of executive share
      options on January 26, 2006 in respect of 2,450 ordinary shares at a per
      share option price of 483.50 pence and 20,000 ordinary shares at a per share
      option price of 381.00 pence (closing middle market price 1342.00 pence);
      and </font></TD>
  </TR>

  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>


  <tr valign="top">
    <td><font size="1" face="sans-serif">&nbsp;</font></td>
    <td><font size="1" face="sans-serif">(vii)</font></td>
    <td><font size="1" face="sans-serif"> by Mark J. White of executive share
      options on November 10, 2005 in respect of 20,000 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1196.00
      pence);</font></td>
  </tr>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=1 face="sans-serif">(b)</FONT></TD>
    <TD colspan="2"><FONT size=1 face="sans-serif">Frank W. Roach was appointed
      to the board with effect from December 16, 2005. Charles A. Banks left the
      board on July 31, 2006.</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><FONT size=1 face="sans-serif">(c)</FONT></TD>
    <TD colspan="2"><FONT size=1 face="sans-serif">The highest middle-market per
      share price of Wolseley&#146;s ordinary shares during fiscal year 2006 was
      1462 pence and the lowest was&nbsp; 1079 pence. The year-end price at July
      31, 2006 was 1140 pence per share.</FONT></TD>
  </TR>
  <TR valign="top">
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="top">
    <TD><font size=1 face="sans-serif">(d)</font></TD>
    <TD colspan="2"><font size=1 face="sans-serif">Performance targets not yet
      met.</font></TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">58</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p59"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font></font>
<P> <FONT size="2" face="sans-serif"><B>Savings related share option schemes,
  including stock appreciation plan</B> </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>July 31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>and October</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options at</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Per Share</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>31, 2006</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>August 1, 2005</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Subscription</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Options Expire</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>(or date of</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><b>Name of Director/Senior Manager</b></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Price</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>in</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>resignation)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>appointment)</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR align="left" width="175" size=1 noshade> </TD>
    <TD align="right"><HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"> <HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Charles A. Banks</FONT></TD>
    <TD width=10% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">935.85</FONT></TD>
    <TD width=2% bgcolor="#eeeeee"><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD width=10% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align="right" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">272</FONT></TD>
    <TD width=2% bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">881.00</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,075</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1,075</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1236.00</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Adrian Barden</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">336</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,008</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">412</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">956</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">956</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">881</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">675</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">675</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1164</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">321</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">935.85</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">272</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1236.00</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Claude A. S. Hornsby</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">935.85</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">272</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1236.00</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">412</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,293</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">935.85</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">272</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1164</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">803</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><font face="sans-serif">__</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">935.85</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">272</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1236.00</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2007</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">412</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">917</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">1164</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2009</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">803</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Mark J. White</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">412</FONT></TD>
    <TD><FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">2008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">3,986</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">3,986</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">Messrs. Banks, Hord, Hornsby, Marchbank and
  Roach each exercised options over 270 ordinary shares (a reduction of 2 options
  over ordinary shares (which lapsed) from the total of options over 272 ordinary
  shares listed at August 1, 2005 due to exchange rate fluctuations) under the
  Group&#146;s Purchase Plan, all on May 15, 2006. The closing middle market price
  on May 15, 2006 was 1242.00 pence per share. Mr. Barden exercised options in
  respect of 2,008 ordinary shares on May 8, 2006 at a price of 336 pence per
  share under the UK Options Scheme. The closing middle market price on May 8,
  2006 was 1378 pence per share. Mr. Webster exercised options in respect of 917
  ordinary shares on June 5, 2006 at a price of 412 pence per share also under
  the UK Options Scheme. The closing middle market price on June 5, 2006 was 1203
  pence per share. </FONT></P>
<P> <FONT size="2" face="sans-serif"><B>C. Board Practices </B> </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Director Service Agreements </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">Wolseley is a party to director service agreements
  with each of the executive directors. The non executive directors do not have
  service agreements with Wolseley, but their appointments are terminable upon
  six months&#146; notice. All current service agreements with the executive directors
  are subject to a maximum 12 months&#146; notice of termination if given by Wolseley
  and 6 months&#146; 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 our shareholders. The date of each service agreement
  and the year in which each 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 remuneration committee will take a robust view of the mitigation, which
  should be taken into account when computing any compensation payable. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Name</B></font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Date of service contract</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Year of election / re-election</B></font></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR align="left" width="50" size=1 noshade></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD width=22% align="right"><FONT size=2 face="sans-serif">June 27, 2003</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=22% align="right"><FONT size=2 face="sans-serif">2003</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Claude A. S. Hornsby</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">July 18, 2003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2004</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">March 18, 2005</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">February 27, 2006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">to be elected at the 2006
      Annual</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">General Meeting</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Stephen P. Webster</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">September 25, 2002</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2005</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"><FONT face="sans-serif" size="2">59</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p60"></a> <FONT size="2" face="sans-serif"><p><a href="#contents">Back to Contents</a></p>
</font></font>
<P> <FONT size=2 face="sans-serif">Wolseley has entered into service agreements
  with the executive directors (each an &#147;Executive&#148;). Mr.Webster&#146;s
  agreement provides for his employment as Group Finance Director at a current
  annual base salary, plus commission or bonus on a basis determined by Wolseley
  from time to time. Mr. Hord&#146;s agreement provides for his employment as
  Chief Executive Officer of SBS at a current base salary, plus commission or
  bonus on a basis determined by Wolseley from time to time. Mr. Hornsby&#146;s
  agreement provides for his employment as Group Chief Executive, following his
  appointment on August 1, 2006, at a current base salary, plus commission or
  bonus on a basis determined by Wolseley from time to time. Mr. Marchbank&#146;s
  agreement provides for his employment as Chief Executive Officer of Wolseley
  Europe at a current annual base salary plus commission or bonus on a basis determined
  by Wolseley from time to time. Mr. Roach&#146;s agreement provides for his employment
  as Chief Executive of Wolseley North America at a current annual base salary
  plus commission or bonus on a basis determined by Wolseley from time to time.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">Each Executive&#146;s salary is subject to
  review on an annual basis. Each agreement provides for automatic termination
  at normal retirement age. Additionally, Wolseley may terminate the Executive&#146;s
  agreement at any time: (i) if the Executive, without reasonable cause, neglects
  or refuses to perform his duties under the agreement; (ii) if the Executive
  becomes insolvent or bankrupt in accordance with English or applicable US law;
  or (iii) if the Executive engages in dishonesty or other misconduct which, in
  the opinion of the Board, affects Wolseley&#146;s business. Each Executive&#146;s
  agreement contains restrictive covenants that would operate upon the Executive&#146;s
  termination of employment. </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Corporate governance </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">The Board is committed to high standards of
  corporate governance throughout the Group as set out in the Combined Code on
  corporate governance, published by the Financial Reporting Council (&#147;FRC&#148;)
  in July 2003 (the &#147;Code&#148;). The Board has applied the principles and
  provisions in the form set out in the revised draft Combined Code published
  by the FRC in June 2006 (the &#147;Revised Code&#148;) in advance of its commencement
  date. The Board is accountable to Wolseley&#146;s shareholders for good governance,
  and this report describes how the Board applied the principles of good governance
  set out in the Code and the Revised Code during the year under review. </FONT></P>
<P> <FONT size=2 face="sans-serif">The Board has established a number of committees,
  each of which has formal terms of reference (copies of which for the main committees
  are available from the Group Company Secretary and can be found on Wolseley&#146;s
  website at www.wolseley.com) approved by the Board and complying with the Code
  and the Revised Code to assist in the discharge of its duties. Members of the
  various committees are referred to in the following paragraphs. The Group Company
  Secretary acts as secretary to all Board committees. </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Nominations committee </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">The nominations committee meets on an as-needed
  basis and is comprised of Messrs. Whybrow (Chairman), Davis, Duff, Hornsby and
  Walker. Mr. Banks stepped down as a member of this committee upon his retirement
  on July 31, 2006 and was succeeded by Mr. Hornsby. Mr. Whybrow would not chair
  the committee when it considers the appointment of a successor chairman. The
  nominations 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 nominations committee also advises
  the Board on succession planning for executive Board appointments although the
  Board itself is responsible for succession generally. The nominations committee
  met once during the year, and attendance of members of the committee is shown
  at &#147;Item 6 &#150;Directors, Senior Management and Employees, Paragraph
  A &#150;Meeting Attendance&#148;, although, as reported last year, a working
  party of the remuneration committee members was established, which met on a
  number of occasions, to consider the issues arising out of Mr. Banks&#146; retirement.
  </FONT></P>
<P> <FONT size="2" face="sans-serif"><I>Audit committee </I> </FONT></P>
<P> <FONT size=2 face="sans-serif">The audit committee comprises Messrs. Davis,
  Stein and Murray (who chairs the committee). The audit committee&#146;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 audit committee is normally comprised of three
  independent non executive directors, and two members constitute a quorum.</FONT></P>
<P align="center"><FONT face="sans-serif" size="2">60</FONT></P>
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</font>
<P> <FONT size=2 face="sans-serif">Each member of the audit committee brings
    relevant financial experience from senior executive levels and is considered
    by the Board in its business judgment to be financially literate under the
    rules of the NYSE. The expertise and
    experience of the members of the audit committee are summarized at &#147;Item
    6 &#150; Directors, Senior
  Management and Employees, Paragraph A &#150; Directors and Senior Management&#148;.
   The Board considers that each member of the audit committee is independent
  within
  the definition set out in the Code and under the standards and rules of the
   NYSE and the Sarbanes-Oxley Act of 2002 as applicable. Mr. Stein, the Audit

  Committee Financial Expert, is considered to have significant, recent and relevant
   financial experience and expertise, as he is currently Finance Director of
  GKN
  plc. </FONT></P>
<P> <FONT size=2 face="sans-serif">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 Wolseley&#146;s approach, including corporate policies;
  company financing; systems of internal control; matters that require the use
  of judgment 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. </FONT></P>
<P> <FONT size=2 face="sans-serif">The audit committee meets regularly throughout
  the year, and its agenda is linked to events in Wolseley&#146;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.
  Director attendance for each meeting is shown at &#147;Item 6 &#150; Directors,
  Senior Management and Employees, Paragraph A &#150; Meeting Attendance&#148;.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">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 personnel are invited to
  present such reports as are required for the committee to discharge its duties.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">The chairman of the audit committee attends
  the Annual General Meeting to respond to any shareholder questions that might
  be raised on the committee&#146;s activities. The remuneration of the members
  of the audit committee is set out at &#147;Item 6 &#150; Directors, Senior Management
  and Employees, Paragraph B &#150; Compensation&#148;, and the policy with regard
  to the remuneration of non executive directors is set out at &#147;Item 6 &#150;
  Directors, Senior Management and Employees, Paragraph B &#150; Compensation,
  non executive directors&#148;. </FONT></P>
<P> <FONT size=2 face="sans-serif">The audit committee is required to assist members
  of the Board to fulfill their responsibilities related to external financial
  reporting and associated announcements. During the year, the audit 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 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 Wolseley&#146;s annual report on Form 20-F, 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 Wolseley&#146;s whistleblowing
  policy; litigation and contingent liabilities and tax matters, including contingencies
  against tax liabilities together with compliance with statutory tax obligations.
  </FONT></P>
<P> <FONT size=2 face="sans-serif">The audit committee is also responsible for
  the development, implementation and monitoring of Wolseley&#146;s policy on
  external audit. The audit committee reserves oversight responsibility for monitoring
  the independence, objectivity and compliance with ethical and regulatory requirements.
  The audit committee recommends the appointment and reappointment of Wolseley&#146;s
  external auditors and reviews the scope, results (including schedules of unadjusted
  errors, where applicable, and representation letters) and cost-effectiveness
  of the audit as well as the auditors&#146; remuneration and performance. The
  audit 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 Group audit engagement partner
  for the fiscal year ended July 31, 2006. The audit 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: </FONT></P>
<P align="center"><FONT size="2" face="sans-serif">61</FONT></P>
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<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">bookkeeping services related to accounting
        records or financial statements;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">financial information systems&#146; design
        and implementation;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">appraisal or valuation services, fairness
    opinions and contributions in kind reports;</font> </td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">actuarial services;</font> </td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">internal audit outsourcing services;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">management functions including
human resources;</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">broker or dealer, investment adviser or
    investment banking services; or</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><font size="2">&#8226;</font></td>
    <td><font size=2 face="sans-serif">legal and other services unrelated to
    the audit.</font> </td>
  </tr>
</table>
<P><FONT size=2 face="sans-serif">The policy requires pre-confirmation by the
    audit 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 UK and US rules, the external
    auditors
  undertake due diligence reviews and provide assistance on tax matters given
    their in-depth knowledge of the Group&#146;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 adviser 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&#146; robustness and the
  degree to which the external auditors were able to assess key accounting and
audit judgments and the context of the management letter.</FONT></P>
<P> <FONT size=2 face="sans-serif">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 audit committee also reviewed the terms, areas of responsibility and scope
  of the audit as set out in the external auditors&#146; 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 judgments; the level of errors identified
  during the audit; and the recommendations made to management by the auditors
  and management&#146;s response.</font></P>
<P> <FONT size=2 face="sans-serif">The total fees paid to PricewaterhouseCoopers
  LLP in fiscal year 2006 were &pound;9.6 million (2005: &pound;7.2 million),
  of which &pound;4.2 million (2005: &pound;3.4 million) related to non-audit
  work. The increase in audit fees relates principally to work in respect of
  Sarbanes-Oxley Section 404.</font></P>
<P> <FONT size=2 face="sans-serif">The audit committee also reviews the effectiveness
  of the Group&#146;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&#146;s plans and its achievements
  against plans. The audit committee considered the results of the audits undertaken
  by the internal audit function and considered the adequacy of management&#146;s
  response to matters raised, including the time taken to resolve any such matters.
  The committee has also monitored the established policy which it approved regarding
  the recruitment of staff from both the external auditors and from KPMG LLP.
  The audit committee reviews internal audit reports and considers the effectiveness
  of the function.</font></P>
<P> <FONT size=2 face="sans-serif">The audit committee also reviews, where practicable,
  all proposed announcements to be made by Wolseley 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 this report 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&#146;s financial controls. The committee
  monitors and reviews the effectiveness of the Group&#146;s internal control
  systems, accounting policies and practices, standards of risk management and
  risk management procedures and compliance controls as well as the Group&#146;s
  statements on internal controls before they are agreed by the Board for each
  year&#146;s annual report. The audit committee has also monitored Wolseley&#146;s
  response to the requirements of the 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.</FONT></P>
<P align="center"> <FONT size="2" face="sans-serif"> 62</FONT></P>
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<P> <FONT size=2 face="sans-serif">Wolseley&#146;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 Wolseley&#146;s website at www.wolseley.com as referred to at &#147;Item
  16B &#150; Code of Ethics&#148;.</font></P>
<P> <FONT size=2 face="sans-serif">Each year the audit committee critically reviews
  its own performance and considers where improvements can be made. The committee&#146;s
  terms of reference, which had been approved in October 2004, were reviewed during
  the year and it was agreed that no amendments were required.</font></P>
<P> <font size="2" face="sans-serif"><I>Remuneration committee </I></font></P>
<P> <FONT size=2 face="sans-serif">The remuneration committee comprises Messrs.
  Davis, Duff (who chairs the committee) and Walker, all of whom are independent
  within the definition set out in the Code. Mr. Duff succeeded Mr. Walker as
  chairman of the committee on November 1, 2005. The remuneration committee met
  five times during the fiscal year, and director attendance for each meeting
  is shown at &#147;Item 6 &#150; Directors, Senior Management and Employees,
  Paragraph A &#150; Meetings Attendance&#148;. The remuneration committee is
  responsible for making recommendations on remuneration to the Board. 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 Wolseley&#146;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&#146;s activities.</FONT></P>
<P> <font size="2" face="sans-serif"><I>Executive committee </I></font></P>
<P> <FONT size=2 face="sans-serif">The executive directors of Wolseley, together
  with Mr. Barden, who has been responsible for Wolseley UK Limited since August
  1, 2003 and who became Senior Vice President with effect from October 1, 2006
  and Mr. White, the Group Company Secretary &amp; Counsel, meet at least eight
  times each fiscal year, often on the day before formal Board meetings. The executive
  committee addresses operational business issues and shares best practise, thereby
  allowing the directors more time at Board meetings to focus on strategy.</font></P>
<P> <font size="2" face="sans-serif"><I>Treasury committee </I></font></P>
<P> <FONT size=2 face="sans-serif">The treasury 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 July 31, 2006 and was succeeded by Mr. Hornsby. The role of the
  committee is to consider treasury policy, tax matters and related party transactions
  on behalf of the Group within a framework delegated by the Board. The treasury
  committee meets approximately six times each fiscal year, as required by the
  demands of the business.</font></P>
<P> <font size="2" face="sans-serif"><I>Internal audit </I></font></P>
<P> <FONT size=2 face="sans-serif">The internal audit function is involved in
    the assessment of the quality of risk management and internal control and
    helps
  to promote and further develop effective risk management within the businesses.
    Certain internal audit assignments (such as those requiring specialist expertise)
    continue to be outsourced by the Head of Internal Audit to KPMG LLP as required.
    A policy has been established regarding the recruitment of staff from both
    KPMG
  LLP and PricewaterhouseCoopers LLP. The audit committee reviews internal audit
  reports and considers the effectiveness of the internal audit function.</font></P>
<P> <font size="2" face="sans-serif"><I>Compliance statement </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley applied all the principles set out
  in section 1 of the Code and the Revised Code for the period under review and
  has, throughout the fiscal year, complied with the detailed provisions set out
  therein, save that, during the period from December 16, 2005 to July 31, 2006
  there was an imbalance between executive and non executive directors on the
  Board, and following the introduction of a new directors&#146; bonus scheme
  in 2000, the pensionable salary of one executive director includes his bonus
  capped at a fixed amount.</font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s auditors, PricewaterhouseCoopers
  LLP, are required to review whether the above statement reflects Wolseley&#146;s
  compliance with the nine provisions of the Code specified for external auditor
  review by the Listing Rules of the UK Listing Authority and to report if it
  does not reflect such compliance. No such report has been made.</font></P>
<P align="center"> <FONT size="2" face="sans-serif"> 63</FONT></P>
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<P> <font size="2" face="sans-serif"><I>New York Stock Exchange &#150; corporate
  governance requirements </I></font></P>
<P> <FONT size=2 face="sans-serif">Whilst Wolseley, as a foreign private issuer,
  is not required to comply with the measures set by the board of the New York
  Stock Exchange, to strengthen corporate accountability it does comply in all
  material respects with those standards. Those standards state that companies
  should have a nominating/corporate governance committee composed entirely of
  independent directors with written terms of reference, which develops and recommends
  to the Board a set of corporate governance principles for the Company. Details
  of Wolseley&#146;s nominations committee are set out at &#147;Item 6 &#150;
  Directors, Senior Management and Employees, Paragraph C &#150; Board Practices&#148;.
  The nominations committee does not develop corporate governance principles for
  the Board to approve. The Board itself approves Wolseley&#146;s overall system
  of internal controls, governance and authority limits. A majority of the members
  of the nominations committee are independent non executive directors and all
  such directors sit on the Board. Wolseley&#146;s practice, in accordance with
  the UK Companies Act and the Code in relation to the appointment and termination
  of the external auditors, is that a recommendation is made by the audit committee
  to the Board, which will then make a recommendation to shareholders in general
  meeting. This differs from US procedures, where the external auditors are accountable
  to the audit committee, which has the authority to appoint or dismiss the external
  auditors without reference to the shareholders.</font></P>
<P> <FONT size=2 face="sans-serif">The Sarbanes&#150;Oxley Act, the Securities
  and Exchange Commission and the New York Stock Exchange introduced rules in
  July 2005 requiring Wolseley to comply with a number of provisions relating
  to the audit committee. These include a requirement related to the independence
  of audit committee members and procedures for the treatment of complaints regarding
  accounting or auditing matters. Wolseley is fully compliant with these requirements.</font></P>
<P> <font size="2" face="sans-serif"><I>Internal control </I></font></P>
<P> <FONT size=2 face="sans-serif">In a highly decentralized Group, where local
  management has considerable autonomy to run and develop their businesses, a
  well designed system of internal control is necessary to safeguard shareholders&#146;
  investment and Wolseley&#146;s assets. The directors acknowledge that they have
  overall responsibility for the Group&#146;s systems of internal control and
  for reviewing their effectiveness. In accordance with the guidance set out in
  the Turnbull Report &#147;Internal Control: Guidance for Directors on the Combined
  Code&#148;, an ongoing process had been established for identifying, managing
  and evaluating the risks faced by the Group. This process has been in place
  for the full fiscal year and up to the date on which the UK financial statements
  were approved.</FONT></P>
<P> <FONT size=2 face="sans-serif">The systems are designed to manage rather than
  eliminate the risk of failure to achieve the Group&#146;s objectives, safeguard
  the Group&#146;s assets against material loss, fairly report the Group&#146;s
  performance and position and to ensure compliance with relevant legislation,
  regulation and best practice including that related to social, environmental
  and ethical matters. The systems provide reasonable, not absolute, assurance
  against material misstatement or loss. Such systems are regularly reviewed by
  the Board to deal with changing circumstances. A summary of the key financial
  risks inherent in Wolseley&#146;s business is included under &#147;Item 3 &#150;
  Key Information, paragraph D &#150; Risk Factors Relating to Wolseley&#146;s
  Industry and Business&#148;. Risk assessment and evaluation is an integral part
  of the annual planning cycle. Each business documents the strategic objectives
  and the effectiveness of the Group&#146;s systems of internal control. As part
  of this review, each business area and function has been required to identify
  and document each significant risk, together with the mitigating actions implemented
  to manage, monitor and report to management on the effectiveness of these controls.
  Senior managers are also required to sign bi-annual confirmations of compliance
  with key procedures and to report any breakdowns in, or exceptions to, these
  procedures. Summarized results have been presented to senior management (including
  to the executive committee) and to the audit committee. These processes have
  been in place throughout the fiscal year ended July 31, 2006 and have continued
  to the date of this annual report. The Board has reviewed the effectiveness
  of the Group&#146;s system of internal control for the year under review, and
  a summary of the principal control structures and processes in place across
  the Group is set out below.</font></P>
<P> <font size="2" face="sans-serif"><I>Control structures </I></font></P>
<P> <FONT size=2 face="sans-serif">Whilst the Board has overall responsibility
  for the Group&#146;s system of internal control and for reviewing its effectiveness,
  it has delegated responsibility for the internal control and risk management
  program to the Group Finance Director. The detailed review of internal control
  and risk management has been delegated to the audit committee. The management
  of each Group company is responsible for internal control and risk management
  within its own business and for ensuring compliance with the Group&#146;s policies
  and procedures. Each Group company has appointed a risk director whose primary
  role in such capacity is to ensure compliance by local management with the Group&#146;s
  risk management and internal control program. Both the internal and external
  auditors have reviewed the overall approach adopted by the Group towards its
  risk management activities so as to reinforce these internal control requirements.</font></P>
<P align="center"> <FONT size="2" face="sans-serif"> 64</FONT></P>
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<P> <font size="2" face="sans-serif"><I>Control processes </I></font></P>
<P> <FONT size=2 face="sans-serif">The Board reviews its strategic plans and objectives
  on an annual basis and approves Group company budgets and strategies in light
  of these. Control is exercised at Group, continental and subsidiary boards level
  through monthly monitoring of performance by comparison to budgets, forecasts
  and cash targets, and by regular visits to Group companies by the Group Chief
  Executive, Group Finance Director and by the Chief Executives of each continent.
  Group companies approve and submit risk reports to the audit committee on a
  bi-annual basis, summarizing the key risks facing their businesses and the controls
  in place to manage those risks. These reports, together with reports on internal
  control and departures, if any, from established Group procedures prepared by
  the internal and external auditors, are reviewed by the Group Finance Director
  and the audit committee. Group companies also submit annual risk and internal
  control representation letters to the Group Finance Director on internal control
  and risk management issues, with comments on the control environment within
  their operations. The Group Finance Director summarizes these submissions for
  the audit committee, and the chairman of the audit committee reports to the
  Board on any matters which have arisen from the committee&#146;s review of the
  way in which the risk management and internal control processes have been applied.
  Key management of Group companies are also required to support the disclosures
  and attestations that the Group Chief Executive and Group Finance Director are
  required to give under the Sarbanes-Oxley Act.</font></P>
<P> <FONT size=2 face="sans-serif">The Board has formal procedures in place for
  the approval of investment and acquisition projects, with designated levels
  of authority, supported by post investment review processes for selected acquisitions
  and major capital expenditures. The Board considers social, environmental and
  ethical matters in relation to the Group&#146;s businesses and assesses these
  when reviewing the risks faced by the Group. The Board is conscious of the effect
  such matters may have on the short and long-term value of Wolseley. Wolseley&#146;s
  external auditors and the Head of Internal Audit attend audit committee meetings
  and receive its papers. The report of the audit committee is set out at &#147;Item
  6 &#150; Directors, Senior Management and Employees, Paragraph C &#150; Board
  Practices, Audit Committee&#148;, and the audit committee members regularly
  meet the Head of Internal Audit and the external auditors without the presence
  of executive management.</font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is required to comply with applicable
  US regulations, including the Sarbanes-Oxley Act, insofar as they apply to foreign
  private issuers. Accordingly, Wolseley has established a disclosure committee
  comprising the Group Chief Executive, Group Finance Director, Group Financial
  Controller, Director of Financial Reporting and Strategy and the Group Company
  Secretary and Counsel. The Group Chief Executive and Group Finance Director
  have evaluated the effectiveness of Wolseley&#146;s disclosure controls and
  procedures as of July 31, 2006. Based on such evaluation, such officers have
  concluded that, as of that date, Wolseley&#146;s disclosure controls and procedures
  were effective. There were no significant changes in Wolseley&#146;s disclosure
  controls and procedures or in other factors that could significantly affect
  those controls subsequent to the date that the evaluation was completed.</FONT></P>
<P> <FONT size=2 face="sans-serif">In accordance with the requirements of Section
  404 of the Sarbanes-Oxley Act, Wolseley&#146;s management is responsible for
  establishing and maintaining adequate internal control over financial reporting
  as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended.
  Wolseley&#146;s internal control over financial reporting is designed to provide
  reasonable assurance regarding the reliability of financial reporting and the
  preparation of financial statements for external purposes in accordance with
  IFRS, including the reconciliations required under US GAAP. Because of its inherent
  limitations, internal control over financial reporting is not intended to provide
  absolute assurance that a misstatement of Wolseley&#146;s financial statements
  would be prevented or detected.</font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s management conducted an evaluation
  of the effectiveness of its internal control over financial reporting based
  on the framework in</font><font face="sans-serif"><I><FONT size=2>&nbsp;Internal
  Control-Integrated Framework </font></I><FONT size=2>issued by the Committee
  of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
  management concluded that Wolseley&#146;s internal control over financial reporting
  was effective as of July 31, 2006.</font></font></P>
<P> <FONT size=2 face="sans-serif">PricewaterhouseCoopers LLP, which has audited
  the consolidated financial statements of the Group for the fiscal year ended
  July 31, 2006, has also audited management&#146;s assessment of the effectiveness
  of Wolseley&#146;s internal control over financial reporting; their report is
  included herein.</font></P>
<P> <FONT size=2 face="sans-serif">Certifications by the Group Chief Executive
  and Group Finance Director as required by the Sarbanes-Oxley Act are submitted
  as exhibits to this Form 20-F.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">65</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page></font><a name="p66"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font></font>
<P> <font size="2" face="sans-serif"><B>D. Employees</B></font></P>
<P> <FONT size=2 face="sans-serif">As of July 31, 2006, Wolseley had 72,750 employees,
  including 43,154 employees in North American Distribution and 29,441 employees
  in European Distribution.</font></P>
<P> <FONT size=2 face="sans-serif">A small proportion of Wolseley&#146;s employees
  are covered by collective bargaining or other similar labor agreements. Historically,
  the effects of collective bargaining and other similar labor agreements on the
  Group have not been significant. Any inability by Wolseley to negotiate acceptable
  new contracts with unions could cause strikes or other work stoppages, and new
  contracts could result in increased operating costs. While there are a few collective
  bargaining agreements covering Wolseley employees which are in the process of
  being renegotiated, the non-renewal of these contracts would not have a material
  impact on Wolseley&#146;s operations. At this time, Wolseley does not currently
  anticipate any problems re-negotiating acceptable contracts in these cases.</font></P>
<P> <font size="2" face="sans-serif"><B>E. Share Ownership</B></font></P>
<P> <FONT size=2 face="sans-serif">The following table sets forth information
  known to Wolseley with respect to the beneficial ownership of Wolseley&#146;s
  ordinary shares as of October 31, 2006 by each of Wolseley&#146;s executive
  and non executive directors and members of Wolseley&#146;s senior management
  in office on such date. Beneficial ownership is determined in accordance with
  the rules of the SEC and generally includes voting or investment power with
  respect to securities. Ordinary shares subject to stock options currently exercisable
  or exercisable within 60 days are deemed to be outstanding for computing the
  percentage ownership of the person holding these options and the percentage
  ownership of any group of which the holder is a member, but are not deemed outstanding
  for computing the percentage of any other person. Subject to community property
  laws where applicable, the persons named in the table have sole voting power
  and investment power with respect to all ordinary shares shown as beneficially
  owned by them.</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD width=2% align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>Number
      of Shares</B></font></TD>
    <TD width=2% align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>Beneficially</B></font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>Percentage</B></font></TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD colspan="2"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>Owned
      at</B></font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>of Shares</B></font></TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD colspan="2"><font size="1" face="sans-serif"><B>Name</B></font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>October
      31, 2006</B></font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align="right" valign="bottom"><font size="1" face="sans-serif"><B>Outstanding</B></font></TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"> <hr align="left" width="30" size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD> <hr size="1" noshade></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD> <hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">Adrian Barden</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD width="9%" align="right"><FONT size=2 face="sans-serif">19,735</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD width="9%" align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD width="2%" align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Gareth Davis</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10,664</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">Andrew J. Duff</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,006</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Fenton N. Hord</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">91,470</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">Claude A.S. Hornsby</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">57,709</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Robert H. Marchbank</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">26,462</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">James I. K. Murray</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">7,000</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Frank W. Roach</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">27,248</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">Nigel M. Stein</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,500</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Robert M. Walker</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">10,908</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">Stephen P. Webster</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">50,220</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2"><FONT size=2 face="sans-serif">Mark J. White</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,674</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><FONT size=2 face="sans-serif">John W. Whybrow</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">70,284</FONT></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">*</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan="2"><hr align="left" width="100" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="3%"><font size=1 face="sans-serif">*</font></TD>
    <TD><font size=1 face="sans-serif">denotes less than 1% of issued share capital
      of Wolseley.</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">As of both July 31, 2006 and October 31, 2006,
  none of the directors had any beneficial interest in the shares of any Wolseley
  subsidiary. Apart from contracts of employment, none of the persons listed above
  had a material beneficial interest in any contract of significance to which
  Wolseley or any of its subsidiaries was a party during the fiscal year ended
  July 31, 2006 or the period from then until October 31, 2006. For information
  regarding option ownership and equity plans, see &#147;Item 6 &#150; Directors,
  Senior Managers and Employees, Paragraph B &#150; Compensation&#148;.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">66</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page>  <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P>
</font>
<P> <font face="sans-serif"><a name="p67"></a></font><font size="2" face="sans-serif"><B>ITEM
  7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</B></font></P>
<P> <font size="2" face="sans-serif"><B>A. Major Shareholders</B></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley does not presently have any 5% or
  greater shareholders. Under the Companies Act 1985, holders of voting securities
  of a listed UK company must notify Wolseley of the level of their holding whenever
  it reaches, exceeds or falls below specified thresholds. These thresholds are
  3% (beneficial) and 10% (non-beneficial) and every one percentage movement in
  the number of shares held which have voting rights. The following table sets
  forth, as of October 31, 2006, the number of ordinary shares held by holders
  of more than 3% and their percentage ownership which have been notified to Wolseley
  in accordance with the provisions noted above.</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD><font size="1" face="sans-serif"><B>Name</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>%</B></font></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><hr align="left" width="30" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Lloyds TSB Group plc</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">4.126</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Barclays plc</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">3.020</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Legal &amp; General Investment Management
      Limited</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">3.000</FONT></TD>
    <TD align="right">&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">None of Wolseley&#146;s major shareholders
  has voting rights different from any other shareholder.</font></P>
<P> <FONT size=2 face="sans-serif">As of October 31, 2006, Wolseley had a total
  of 14,648 shareholders who owned a total of 657,303,997 ordinary shares. Of
  these, 14,238 were registered with addresses in the UK and collectively these
  shareholders owned a total of 651,857,106 ordinary shares, representing 99.17%
  of Wolseley&#146;s outstanding ordinary shares, including those held through
  ADSs. Wolseley is not directly or indirectly controlled by another corporation,
  government or by any other legal or natural person.</FONT></P>
<P> <FONT size=2 face="sans-serif">As of October 31, 2006, 790,195 ordinary shares
  were held on record in the US, held by 46 record holders and representing less
  than 0.0012% of the total number of ordinary shares outstanding and 49,635 ordinary
  shares were held on record in Canada by 13 record holders. As of October 31,
  2006, ADRs evidencing 8,510,349 ADSs were held by 36 record holders. There may
  be additional beneficial owners resident in the US that have not been specifically
  identified.</font></P>
<P> <font size="2" face="sans-serif"><B>B. Related Party Transactions</B></font></P>
<P> <FONT size=2 face="sans-serif">Details of the Group&#146;s material related
  party transactions are set out in Note 36 to the financial statements.</font></P>
<P> <font size="2" face="sans-serif"><B>C. Interests of Experts and Counsel</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font face="sans-serif"><a name="p67a"></a></font><font size="2" face="sans-serif"><B>ITEM
  8. FINANCIAL INFORMATION</B></font></P>
<P> <font size="2" face="sans-serif"><B>A. Consolidated Statements and Other Financial
  Information</B></font></P>
<P> <font size="2" face="sans-serif"><I>Financial information </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s financial condition is presented
  in the Consolidated Financial Statements and related notes filed as part of
  this Annual Report on Pages F-1 through F-71</FONT><font face="sans-serif"><B><font size="2"></font></B><FONT size=2>.</font></font></P>
<P> <font size="2" face="sans-serif"><I>Legal proceedings </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is involved in various legal proceedings
  incidental to the nature of its business. Although it is not possible to predict
  the outcome of these proceedings, or any claim against Wolseley related thereto,
  Wolseley believes that such proceedings will not, individually or in the aggregate,
  have a material adverse effect on its financial condition or results of operations.
  Wolseley maintains various insurance coverages to minimize financial risk associated
  with claims related to these proceedings. In the opinion of management, uninsured
  losses, if any, resulting from the ultimate resolution of these matters will
  not have a material effect on Wolseley&#146;s financial position or results
  of operations.</font></P>
<P align="center"> <FONT size="2" face="sans-serif"> 67</FONT></P>
<hr noshade align="center" width="100%" size="2">
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<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font></font>
<P> <font size="2" face="sans-serif"><I>Dividends </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley has paid cash dividends on its ordinary
  shares in every fiscal period since 1958. Cash dividends are paid to shareholders
  as of record dates that are fixed between Wolseley and the London Stock Exchange,
  and such record dates are also announced in accordance with applicable NYSE
  rules. Wolseley historically pays dividends twice a year. Future cash dividends
  will be dependent upon Wolseley&#146;s earnings, financial condition (including
  cash requirements), future earnings prospects and other factors.</font></P>
<P> <font size="2" face="sans-serif"><B>B. Significant Changes</B></font></P>
<P> <FONT size=2 face="sans-serif">None.</font></P>
<P> <font face="sans-serif"><a name="p68"></a></font><font size="2" face="sans-serif"><B>ITEM
  9. THE OFFER AND LISTING</B></font></P>
<P> <font size="2" face="sans-serif"><B>A. Offer and Listing Details</B></font></P>
<P> <font size="2" face="sans-serif"><I>Ordinary Shares Price History </I></font></P>
<P> <FONT size=2 face="sans-serif">The ordinary shares are listed on the London
  Stock Exchange and since May 2001 (in the form of ADSs) on the NYSE. The following
  table sets forth, for the periods indicated, the reported high and low market
  quotations based on the Daily Official List of the London Stock Exchange for
  the ordinary shares, and the reported high and low for ADSs quoted on the NYSE.</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>London Stock Exchange</b></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>NYSE (US Dollars per)</b></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>(pence per) Ordinary Share</b></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>ADS<sup>(1)</sup></b></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"> <hr size="1" noshade> </TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"> <hr size="1" noshade> </TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD align="left"><font size="1" face="sans-serif"><B>Period</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>High</B></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Low</B></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>High</B></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Low</B></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><hr align="left" width="35" size="1" noshade> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade> </TD>
    <TD align="left">&nbsp;</TD>
  </TR>
  <TR align="right" valign="bottom">
    <TD><font size="2">&nbsp;</font></TD>
    <TD valign="bottom"><font size="2">&nbsp;</font></TD>
    <TD valign="bottom"><FONT size=2 face="sans-serif">(p)</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD valign="bottom"><FONT size=2 face="sans-serif">(p)</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD valign="bottom"><FONT size=2 face="sans-serif">($)</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD valign="bottom"><FONT size=2 face="sans-serif">($)</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Fiscal year 2001</FONT></TD>
    <TD width=2% align="right" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">546.00</FONT></TD>
    <TD width=2% align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">260.00</FONT></TD>
    <TD width=2% align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">42.00</FONT></TD>
    <TD width=2% align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">26.01</FONT></TD>
    <TD width=2% align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fiscal year 2002</FONT></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">750.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">370.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">55.40</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">26.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD bgcolor="#eeeeee"><FONT size=2 face="sans-serif">Fiscal year 2003</FONT></TD>
    <TD align="right" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">706.75</FONT></TD>
    <TD align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">600.00</FONT></TD>
    <TD align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">60.24</FONT></TD>
    <TD align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
    <TD align="right" valign="bottom" bgcolor="#eeeeee"><FONT size=2 face="sans-serif">48.50</FONT></TD>
    <TD align="left" valign="bottom" bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fiscal year 2004</FONT></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">875.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">649.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">33.45</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">21.60</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Fiscal year 2005</FONT></TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font face="sans-serif">&nbsp;&nbsp;&nbsp;<FONT size=2>First Quarter</FONT></font></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">971.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">822.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">35.35</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">30.75</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD><font face="sans-serif">&nbsp;&nbsp;&nbsp;<FONT size=2>Second Quarter</FONT></font></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">1098.50</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">877.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">42.25</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">34.65</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font face="sans-serif">&nbsp;&nbsp;&nbsp;<FONT size=2>Third Quarter</FONT></font></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">1149.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">1048.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">44.59</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">40.77</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD><font face="sans-serif">&nbsp;&nbsp;&nbsp;<FONT size=2>Fourth Quarter</FONT></font></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">1202.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">1040.00</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">43.40</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT size=2 face="sans-serif">39.54</FONT></TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan="10"><hr align="left" width="100" size="1" noshade></TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr align="left" valign="top">
    <td width="3%"><font size="1" face="sans-serif">(1)</font></td>
    <td><font size="1" face="sans-serif"><I>Each ADS represented five Wolseley
      ordinary shares until February 2, 2004 when the ratio was altered such that
      each ADS represented two Wolseley ordinary shares. The market quotations
      shown in the table above for periods prior to February 2, 2004 have not
      been adjusted to reflect the subsequent ratio of two ordinary shares per
      ADS.</I></font></td>
  </tr>
</table>
<P align="center"> <FONT face="sans-serif" size="2">68</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p69"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font></font>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>London Stock Exchange</b></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>NYSE (US Dollars per)</b></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="center" valign="bottom">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>(pence per) Ordinary Share</b></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
    <TD colspan="3"><font size="1" face="sans-serif"><b>ADS<sup>(2)</sup></b></font></TD>
    <TD align="left"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD align="center"><HR noshade size=1></TD>
    <TD align="left"> <HR noshade size=1></TD>
    <TD align="center"><HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
    <TD align="center"><HR noshade size=1></TD>
    <TD align="left"> <HR noshade size=1></TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Period</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>High</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Low</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>High</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Low</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD> <hr align="left" width="35" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD align="left">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">(p)</FONT></TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">(p)</FONT></TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif"> ($)</FONT></TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">($)</FONT></TD>
    <TD align="left">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">Fiscal year 2006</FONT></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><font size="2">&nbsp;</font></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;First Quarter</font></TD>
    <TD width=2% align="center"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">1240.00</FONT></TD>
    <TD width=2% align="left"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">1102.00</FONT></TD>
    <TD width=2% align="left"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">22.03</FONT></TD>
    <TD width=2% align="left"><font size="2">&nbsp;</font></TD>
    <TD width=8% align="right"><FONT size=2 face="sans-serif">19.88</FONT></TD>
    <TD width=2% align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;Second Quarter</font></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1356.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1164.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">24.51</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.53</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;Third Quarter</font></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1462.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1350.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">25.99</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">24.05</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><font size="2" face="sans-serif">&nbsp;&nbsp;&nbsp;Fourth Quarter</font></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1396.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1079.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">26.10</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.32</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1396.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1181.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">26.10</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">22.55</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">June 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1225.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1101.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">23.50</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.75</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1194.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1079.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">22.46</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.32</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">August 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1155.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1063.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">22.19</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.35</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">September 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1193.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1094.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">22.70</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">20.73</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><FONT size=2 face="sans-serif">October 2006</FONT></TD>
    <TD align="center"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1263.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">1134.00</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">24.22</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">21.63</FONT></TD>
    <TD align="left"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD><hr align="left" width="100" size="1" noshade></TD>
    <TD align="center">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr align="left" valign="top">
    <td width="3%"><font size="1" face="sans-serif">(2)</font></td>
    <td><font size="1" face="sans-serif"><I>The Company further changed the ratio
      with effect from June 30, 2006 such that each ADS represented one Wolseley
      ordinary share. The market quotations shown in the table above for the fiscal
      year 2006 have been adjusted to reflect the ratio of one ordinary share
      per ADS.</I></font></td>
  </tr>
</table>
<P> <font size="2" face="sans-serif"><B>B. Plan of Distribution</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font size="2" face="sans-serif"><B>C. Markets</B></font></P>
<P> <FONT size=2 face="sans-serif">The principal trading market for the ordinary
  shares is the London Stock Exchange. Wolseley&#146;s ADSs, each representing
  one ordinary share, are listed on the NYSE under the symbol &#145;WOS&#146;.
  The ADSs are evidenced by ADRs issued by The Bank of New York, as Depositary
  under the Amended and Restated Deposit Agreement, originally dated as of February
  2, 2004, and restated as of June 30, 2006, among Wolseley, the Depositary and
  the holders from time to time of ADRs (the &#147;Deposit Agreement&#148;).</FONT></P>
<P> <font size="2" face="sans-serif"><B>D. Selling Shareholders</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">69</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page>  <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font>
<P> <font size="2" face="sans-serif"><B>E. Dilution</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font size="2" face="sans-serif"><B>F. Expenses of the Issue</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font face="sans-serif"><a name="p70"></a></font><font size="2" face="sans-serif"><B>ITEM
  10. ADDITIONAL INFORMATION</B></font></P>
<P> <font size="2" face="sans-serif"><B>A. Share Capital</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font size="2" face="sans-serif"><B>B. Memorandum and Articles of Association</B></font></P>
<P> <FONT size=2 face="sans-serif">For details on Wolseley&#146;s Memorandum and
  Articles of Association, please refer to Item 10B of the Annual Report for the
  fiscal year ended July 31, 2003 as filed with the SEC on November 21, 2003,
  which section is incorporated herein by reference.</font></P>
<P> <font size="2" face="sans-serif"><B>C. Material Contracts</B></font></P>
<P> <FONT size=2 face="sans-serif">On November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. The funds raised are being used principally to fund the Group&#146;s
  working capital and refinance existing facilities that are due to mature within
  the next two years. Of the eight tranches, six are at fixed rates with maturities
  ranging from 3 to 15 years and two tranches are floating with maturities of
  3 and 7 years. Exhibit 4.24 to this document contains the note and guarantee
  agreement.</FONT></P>
<P> <FONT size=2 face="sans-serif">On June 2, 2006 Wolseley agreed to a &#128;
  2.8 billion, five year, multicurrency revolving facility agreement with a syndicate
      of banks. Exhibit 4.34 to this document contains the loan facility and
      guarantee agreement.</font></P>
<P> <FONT size=2 face="sans-serif">On September 13, 2006, Wolseley agreed to
    a  borrowing facility of &#8364;1.5 billion with six of its relationship
    banks.  The purpose of the facility was to finance the purchase of the equity
    of the
  DT Group, which was completed on September 25, 2006. A repayment of &#8364;1.0
   billion was made on September 28, 2006, and the facility was reduced to &#8364;500
    million. This facility will mature on March 31, 2008, but may be repaid at
   any
  time prior to this date.</font></P>
<P> <FONT size=2 face="sans-serif">On July 24, 2006, Sale and Purchase Agreements
     were entered into between DT Holding 1 A/S and DT Officers A/S and Wolseley

  to acquire DT Group (formerly known as Danske Traelast), conditional only upon
     regulatory approval and copies of which are included in the exhibits to
    this
  Annual Report. The aggregate value of the transaction, representing the equity
     value of DT Group, was &#128;1,982 million, including net debt of &#8364;484
      million, (approximately $2,530</font><font face="sans-serif"><B></B><FONT size=2>
  million using the prevailing exchange rate on October 31, 2006) and was completed
   on September 25 2006.</FONT></font></P>

<P><font size="2" face="sans-serif"><b>D.</b></font> <font size="2" face="sans-serif"><b>Exchange
  Controls</b></font></P>
<P><FONT size=2 face="sans-serif">There are no UK restrictions on the import or
  export of capital including foreign exchange controls that affect the remittances
  of dividends in cash or other payments to non-resident holders of ordinary shares
  except for certain restrictions imposed from time to time by the UK government
  pursuant to legislation, such as The United Nations Act 1946 and the Emergency
  Powers Act 1964, against the government or residents of certain countries.</font></P>
<P> <FONT size=2 face="sans-serif">Except for certain restrictions that may be
  imposed from time to time by the UK government under legislation as described
  above, under English law, persons who are neither residents nor nationals of
  the UK may freely hold, vote and transfer ordinary shares in the same manner
  as UK residents or nationals.</font></P>
<P align="center"> <FONT size="2" face="sans-serif"> 70</FONT></P>
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<P> <font size="2" face="sans-serif"><B>E. Taxation</B></font></P>
<P> <FONT size=2 face="sans-serif">The following discussion summarizes the material
  US and UK tax consequences regarding the ownership and disposition of the ADSs
  and ordinary shares and is not a complete analysis or listing of all the possible
  tax consequences of such ownership and disposition. This section is based on
  the US Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), its
  legislative history, Treasury Regulations promulgated thereunder, the Convention
  Between the United States of America and the United Kingdom which entered into
  force on March 31, 2003 (the &#147;Income Tax Convention&#148;), the Convention
  Between the United States of America and the United Kingdom which entered into
  force in 1980 (the &#147;Old Income Tax Convention&#148;), and administrative
  and judicial interpretations of the Code, the Income Tax Convention and the
  Old Income Tax Convention, all as in effect as of the date of this Annual Report,
  and all of which are subject to change, possibly on a retroactive basis. Statements
  regarding UK tax laws and practices set out below are based on those UK laws
  and published practices of the UK HM Revenue and Customs as in force on the
  date of this Annual Report, which are subject to change.</font></P>
<P> <FONT size=2 face="sans-serif">This discussion only applies to US holders
  (as defined below) who hold their ADSs or ordinary shares as capital assets
  and use the US dollar as their functional currency. It does not address the
  tax treatment of US holders subject to special rules, such as banks or other
  financial institutions, dealers in securities, insurance companies, traders
  in securities that mark to market, tax-exempt entities, entities treated as
  partnerships for US federal income tax purposes or their partners, holders of
  10% or more of the voting shares of Wolseley, persons holding their ADSs or
  ordinary shares as part of a hedging, straddle, conversion or constructive sale
  transaction, persons subject to the alternative minimum tax and persons who
  are resident or ordinarily resident in the UK (or who ceased to be so resident
  on or after March 17, 1998 and thereafter became resident within five years
  of assessment). The summary also does not discuss the tax consequences under
  state, local or non-US or non-UK laws.</font></P>
<P> <FONT size=2 face="sans-serif">This discussion does not consider particular
  circumstances. It is not a substitute for tax advice. Shareholders are urged
  to consult their tax advisors about the US federal, state and local, the UK
  and other tax consequences to them in light of their particular circumstances
  of purchasing, owning and disposing of ADSs or ordinary shares, and in particular
  whether they are eligible for the benefits of the Income Tax Convention and
  the Old Income Tax Convention.</font></P>
<P> <FONT size=2 face="sans-serif">As used in this discussion, &#147;US holder&#148;
  means a beneficial owner of ordinary shares or ADSs that is (i) a US citizen
  or resident, (ii) a corporation or other entity taxable as an association created
  or organized under the laws of the US or any political subdivision thereof,
  (iii) a trust if a court within the United States is able to exercise primary
  supervision over the administration of the trust and one or more United States
  persons have the authority to control all substantial decisions of the trust,
  or (iv) an estate the income of which is subject to US federal income taxation
  regardless of its source.</font></P>
<P> <FONT size=2 face="sans-serif">On March 31, 2003, the US and the UK ratified
  the current income tax treaty (the Income Tax Convention) to replace the Old
  Income Tax Convention. The Income Tax Convention generally became effective
  with respect to withholding taxes on May 1, 2003, other US taxes on January
  1, 2004, UK income and capital gains tax on April 6, 2003 and UK corporation
  tax on April 1, 2003. Taxpayers may elect to have the Old Income Tax Convention
  apply for a twelve month period from the date on which the Income Tax Convention
  would otherwise apply. US holders should consult their tax advisors regarding
  the potential application of the Income Tax Convention and the Old Income Tax
  Convention, including the relevant effective dates of the Income Tax Convention.</font></P>
<P> <font size="2" face="sans-serif"><I>Considerations Relevant to the ADSs and
  Ordinary Shares</I></font></P>
<P> <FONT size=2 face="sans-serif">US holders of ADSs are treated as the owners
  of the underlying ordinary shares for purposes of the Income Tax Convention,
  the Old Income Tax Convention and the Estate and Gift Tax Convention (defined
  below), and for US federal income tax purposes.</FONT></P>
<P> <font size="2" face="sans-serif"><I>Taxation of Dividends</I></font></P>
<P> <FONT size=2 face="sans-serif">For US federal income tax purposes, distributions
  paid to a US holder by Wolseley are treated as dividends to the extent paid
  out of Wolseley&#146;s current or accumulated earnings and profits, as determined
  for US federal income tax purposes. Distributions by Wolseley in excess of current
  and accumulated earnings and profits, as determined for US federal income tax
  purposes, are treated as a return of capital to the extent of the US holder&#146;s
  adjusted tax basis in its ADSs or ordinary shares, as the case may be, and thereafter
  as capital gain.</font></P>
<P align="center"> <FONT size="2" face="sans-serif">71</FONT></P>
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<P> <FONT size=2 face="sans-serif">Under current UK taxation law, Wolseley is
  not required when paying a dividend on ordinary shares to withhold any tax at
  source. Under the terms of the Old Income Tax Convention, a US holder that is
  eligible for benefits thereunder is treated as having paid a notional UK withholding
  tax in an amount equal to a tax credit payment (a &#147;Related Tax Credit&#148;)
  that the holder is entitled to receive from the UK HM Revenue and Customs. At
  current tax rates, a dividend of &pound;90 entitles an eligible US holder to
  a Related Tax Credit of &pound;10 offset by a notional UK withholding tax of
  &pound;10. Because the Related Tax Credit and the notional UK withholding tax
  offset each other, the UK HM Revenue and Customs neither makes the Related Tax
  Credit payment nor collects the notional UK withholding tax. In Revenue Procedure
  2000-13, 2000-6 I.R.B. 515, the Internal Revenue Service confirmed that under
  the Old Income Tax Convention, an eligible US holder will continue to be entitled
  to claim the US dollar value of such notional UK withholding tax as a credit
  against the US holder&#146;s US federal income tax liability, subject to certain
  conditions and limitations. To qualify for the foreign tax credit, a US holder
  must make an election to receive a foreign tax credit by filing Form 8833 with
  the taxpayer&#146;s US federal income tax return for the relevant year. Pursuant
  to this election, the US holder is treated as having paid the notional UK withholding
  tax on the date of distribution. No claim need be filed with the UK HM Revenue
  and Customs. US Holders are urged to consult their tax advisors as to whether
  they are eligible for the benefits of the Old Income Tax Convention. US holders
  are required to satisfy certain holding period requirements with respect to
  an ADS or ordinary share in order to claim the U.S. foreign tax credit for the
  notional UK withholding tax.</font></P>
<P> <FONT size=2 face="sans-serif">The rules relating to foreign tax credits are
  extremely complex, and US holders should consult their tax advisors with regard
  to the availability of any foreign tax credit and application of the foreign
  tax credit rules to their particular situation.</font></P>
<P> <FONT size=2 face="sans-serif">Dividends and amounts in respect of the Related
  Tax Credit will be income to a US Holder for US federal income tax purposes
  but generally will not be eligible for the dividends received deduction allowed
  to corporate holders. Any dividends paid by Wolseley in pounds sterling are
  included in the gross income of a US holder as an amount equal to the US dollar
  value of the dividend at the spot rate of exchange on the date the dividend
  is includable in the income of the US person, regardless of whether the payment
  is in fact converted into US dollars. US holders should consult their tax advisors
  regarding the treatment of any foreign currency gain or loss on any pounds sterling
  received by the US holder that is not converted into US dollars on the day the
  pounds sterling are includable in the income of the US holder.</font></P>
<P> <FONT size=2 face="sans-serif">A US holder who is a resident of the United
  States for purposes of the Old Income Tax Convention will nonetheless not be
  entitled to the Related Tax Credit and consequently will not be entitled to
  a credit against US tax liability for the notional withholding tax thereon,
  if (a) the holding of ordinary shares or ADSs is (i) effectively connected with
  a permanent establishment situated in the United Kingdom through which the holder
  carries on business in the United Kingdom or (ii) effectively connected with
  a fixed base in the United Kingdom from which the holder performs independent
  personal services or (b) in the case of a US holder that is a corporation, the
  US holder (i) is also a resident of the United Kingdom for purposes of the Old
  Income Tax Convention or (ii) is, in certain circumstances, an investment or
  holding company at least 25% of the capital of which is held, directly or indirectly,
  by persons who are neither individual residents of the United States nor citizens
  of the United States. Furthermore, special rules may apply in respect of the
  Related Tax Credit if the US holder (a) owns at least 10% of the class of shares
  in respect of which the dividend is paid (or, in the case of a US Holder that
  is a corporation, controls, alone or with one or more associated corporations,
  at least 10% of the voting stock of Wolseley plc) or (b) is exempt from tax
  in the United States on dividends paid by Wolseley plc. In addition, if a US
  holder is a trust or estate, the Related Tax Credit will be available only to
  the extent that the income derived by such trust or estate is subject to US
  tax as the income of a resident either in its hands or in the hands of its beneficiaries.</font></P>
<P> <FONT size=2 face="sans-serif">Under the Income Tax Convention, the Related
  Tax Credit and the notional UK withholding tax discussed above are eliminated
  and it would therefore not be possible to claim a foreign tax credit in respect
  of any dividend payment made by the Company. As stated above, US holders may
  elect to have the Old Income Tax Convention apply for a twelve-month period
  from the date on which the new Income Tax Convention would otherwise apply.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">72</FONT></P>
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<P> <font size="2" face="sans-serif"><I>Taxation of Capital Gains </I></font></P>
<P> <FONT size=2 face="sans-serif">A US holder will not be liable for UK tax on
  gains realized on the disposal of ADSs or ordinary shares unless, at the time
  of disposal, that holder carries on a trade (or profession or vocation) in the
  UK through a branch or agency or permanent establishment and the ADSs or ordinary
  shares are or have been used, held or acquired for the purposes of such trade,
  branch or agency or permanent establishment. For US federal income tax purposes,
  a US resident holder of ADSs or ordinary shares generally will recognize a capital
  gain or loss on the sale or other taxable disposition of ADSs or ordinary shares
  in an amount equal to the difference between the amount realized on the sale
  or other disposition (or its US dollar equivalent, determined at the spot rate
  on the date of sale if the amount is realized in a foreign currency) and the
  US holder&#146;s adjusted tax basis in the ADSs or ordinary shares. Such gain
  or loss generally will be treated as long-term capital gain or loss if the ADSs
  or ordinary shares are held for more than one year as of the date of the sale
  or other taxable disposition. Gains or losses recognized by US holders generally
  will be considered US source income or loss for US foreign tax credit limitation
  purposes. The deductibility of capital losses is subject to certain limitations.</font></P>
<P> <font size="2" face="sans-serif"><I>Information Reporting and Backup Withholding
  </I></font></P>
<P> <FONT size=2 face="sans-serif">In general, information reporting requirements
  will apply to dividend payments (or other taxable distributions) and proceeds
  paid in respect of ADSs or ordinary shares made within the US (and, in certain
  cases, outside the US) to a non-corporate US person, and &#147;backup withholding&#148;
  will apply to such payments paid during year if the US holder or beneficial
  owner fails to provide an accurate taxpayer identification number in the manner
  required by US law and applicable regulations, if there has been notification
  from the US Internal Revenue Service of a failure by the holder or beneficial
  owner to report all interest or dividends required to be shown on its federal
  income tax returns or, in certain circumstances, if the holder or beneficial
  owner fails to comply with applicable certification requirements. Certain corporations
  and persons that are not US persons may be required to establish their exemption
  from information reporting and backup withholding by certifying their status
  on the appropriate US Internal Revenue Service forms W-8 or W-8BEN.</font></P>
<P> <FONT size=2 face="sans-serif">Amounts withheld under the backup withholding
  rules may be credited against a holder&#146;s tax liability, and a holder may
  obtain a refund of any excess amounts withheld under the backup withholding
  rules by filing the appropriate claim for refund with the US Internal Revenue
  Service.</font></P>
<P> <font size="2" face="sans-serif"><I>Inheritance Tax </I></font></P>
<P> <FONT size=2 face="sans-serif">Under the convention which entered into force
  on November 11, 1979 between the US and UK for the avoidance of double taxation
  and the prevention of fiscal evasion with respect to taxes on estates of deceased
  persons and on gifts (the &#147;Estate and Gift Tax Convention&#148;), ADSs
  or ordinary shares held by an individual who is domiciled in the US and is not
  a national of or domiciled in the UK will generally not be subject to UK inheritance
  tax on the individual&#146;s death or on a gift of the ADSs or ordinary shares
  during the individual&#146;s lifetime except in certain cases where the ADSs
  or ordinary shares are placed in trust by a settlor domiciled in the UK and
  not domiciled in the US and in the exceptional case where the ADSs or ordinary
  shares are part of the business property of a UK permanent establishment of
  the individual or pertain to a UK fixed base of the individual used for the
  performance of independent personal services. In a case where the ADSs or ordinary
  shares are subject both to UK inheritance tax and to US federal gift or estate
  tax, the Estate and Gift Tax Convention generally provides a credit for the
  amount of any tax paid in the UK against the US federal tax liability, or for
  any tax paid in the US against the UK liability, based on priority rules set
  forth in the Estate Tax and Gift Convention.</font></P>
<P> <font size="2" face="sans-serif"><I>Stamp Duty and Stamp Duty Reserve Tax
  (&#147;SDRT&#148;) </I></font></P>
<P> <FONT size=2 face="sans-serif">UK stamp duty will, subject to certain exceptions,
  be payable on any instrument transferring ordinary shares to the Custodian of
  the Depositary at the rate of 1.5% (rounded up to the nearest &pound;5) on the
  value of such ordinary shares. SDRT will be payable at the rate of 1.5% of the
  consideration under any agreement to issue or transfer ordinary shares to the
  Custodian of the Depositary. In accordance with the terms of the Deposit Agreement,
  any tax or duty payable by the Depositary or the Custodian of the Depositary
  with respect to any ADSs shall be payable by the owner or beneficial owner of
  the ADSs.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">73</FONT></P>
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<P> <FONT size=2 face="sans-serif">No UK stamp duty will be payable on any transfer
  of an ADS, provided that the ADS (and any separate instrument of transfer) is
  executed and retained at all times outside the UK. A transfer of an ADS in the
  US thus will not give rise to UK stamp duty. Any transfer of ordinary shares
  not held in the form of ADSs could result in a stamp duty liability at the rate
  of 0.5% rounded up to the nearest &pound;5. The amount of stamp duty payable
  is generally calculated on the purchase price of the ordinary shares. There
  is no charge to ad valorem stamp duty on most gifts. On a transfer from the
  Depositary or its nominee to the relevant ADS holder under which no beneficial
  interest passes, a fixed &pound;5 stamp duty should be payable.</font></P>
<P> <FONT size=2 face="sans-serif">UK SDRT at a rate of 0.5%, will be payable
  on any agreement to transfer ordinary shares or any interest therein. If an
  instrument transferring the ordinary shares is executed and stamped within six
  years of the date on which the agreement is made, any SDRT paid will be refundable
  and any SDRT not paid will cease to be due. SDRT will not be payable on any
  agreement to transfer ADSs.</font></P>
<P> <font size="2" face="sans-serif"><B>F. Dividends and Paying Agents</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font size="2" face="sans-serif"><B>G. Statement by Experts</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font size="2" face="sans-serif"><B>H. Documents on Display</B></font></P>
<P> <FONT size=2 face="sans-serif">Any statement in this annual report about any
  of Wolseley&#146;s documents is not necessarily complete. If the document is
  filed as an exhibit to this annual report, the document is deemed to modify
  the description contained in this Annual Report.</font></P>
<P> <FONT size=2 face="sans-serif">Investors must review the exhibits themselves
  for a complete description of the document. Investors may review a copy of Wolseley&#146;s
  filings with the SEC, including exhibits and schedules filed therewith, at the
  SEC&#146;s public reference facilities at the Headquarters Office, 450 Fifth
  Street, N.W., Washington, D.C. 20549 and at the regional offices of the SEC
  located at the Woolworth Building, 233 Broadway, 16th Floor, New York, New York,
  10279 and at the Northwestern Atrium Center, 1751W. Jackson Boulevard, Suite
  900, Chicago, Illinois, 60604. Investors may also obtain copies of such materials
  from the Public Reference Section of the SEC, at the Headquarters Office, 450
  Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Investors may
  call the SEC at 1-800-SEC-0330 for further information on the public reference
  rooms.</font></P>
<P> <FONT size=2 face="sans-serif">Investors may read and copy any reports, statements
  or other information that Wolseley files with the SEC at the addresses indicated
  above. These SEC filings are also available to the public from commercial document
  retrieval services and on the SEC&#146;s website at www.sec.gov.</font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is required to file reports and other
  information with the SEC under the Securities Exchange Act of 1934. Reports
  and other information filed by Wolseley with the SEC may be inspected and copied
  at the SEC&#146;s public reference facilities described above. As a foreign
  private issuer, Wolseley is exempt from the rules under the Exchange Act prescribing
  the furnishing and content of proxy statements, and Wolseley&#146;s officers,
  directors and principal shareholders are exempt from the reporting and short-swing
  profit recovery provisions contained in Section 16 of the Exchange Act. Under
  the Exchange Act, as a foreign private issuer, Wolseley is not required to publish
  financial statements as frequently or as promptly as US companies.</font></P>
<P> <font size="2" face="sans-serif"><B>I. Subsidiary Information</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">74</FONT></P>
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</font>
<P> <font face="sans-serif"><a name="p75"></a></font><font size="2" face="sans-serif"><B>ITEM
  11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B></font></P>
<P> <font size="2" face="sans-serif"><I>Treasury Risk Management</I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley is exposed to market risks arising
  from its international operations. The Group has well defined and consistently
  applied policies for the management of foreign exchange and interest rate exposures.
  There has been no change since July 31, 2006 in the major financial risks faced
  by the Group.</font></P>
<P> <FONT size=2 face="sans-serif">The main risks arising from the Group&#146;s
     financial instruments are interest rate risk, liquidity risk and foreign
    currency
  risk. The treasury committee of the Board reviews and agrees policies for managing
     each of these risks, and they are summarized below. These policies are regularly

  reviewed. The Group&#146;s financial instruments, other than derivatives, comprise
   borrowings, cash and liquid resources and various items, such as trade receivables

  and trade payables that arise directly from its operations. The Group also
  enters  into derivative transactions (principally interest rate swaps and forward
  foreign
  currency contracts). The purpose of such transactions is to hedge certain interest
   rate and currency risks arising from the Group&#146;s operations and its sources
    of finance. Details of financial instruments are shown in Note</font><font face="sans-serif"><B><FONT size=2> </FONT></B><FONT size=2>20 of
  the Consolidated Financial Statements.</FONT></FONT></P>
<P> <FONT size=2 face="sans-serif">Derivatives are also used to a limited extent
  to hedge movements in the price paid for lumber. These options and futures hedging
  contracts mature within one year, and all are with organized exchanges. The
  Group&#146;s policy is to control credit risk by only entering into financial
  instruments with authorized counterparties after taking account of their credit
  rating.</font></P>
<P> <FONT size=2 face="sans-serif">It is, and has been throughout the period under
  review, the Group&#146;s policy that no trading in financial instruments or
  speculative transactions be undertaken.</font></P>
<P> <font size="2" face="sans-serif"><I>Interest Rate Risk </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley finances its operations and acquisitions
  through a mixture of retained profits and bank and other borrowings. Wolseley
  borrows in the desired currencies principally at floating rates of interest
  and then uses interest rate swaps to generate the desired interest rate profile
  thereby managing the Group&#146;s exposure to interest rate fluctuations. At
  July 31, 2006, approximately &pound;1,023 million of Wolseley&#146;s net borrowings
  were at fixed rates for one year or more after taking account of swaps. Wolseley
  reviews deposits and borrowings by currency at treasury committee and Board
  meetings. The treasury committee gives prior approval to any variations from
  floating rate arrangements. On the basis of Wolseley&#146;s analysis as of July
  31, 2006 it is estimated that the maximum effect of a rise of one percentage
  point in the principal interest rates on Wolseley&#146;s outstanding indebtedness
  would result in an increase in the interest charge of approximately &pound;9
  million.</FONT></P>
<P> <font size="2" face="sans-serif"><I>Liquidity Risk</I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley seeks a balance between certainty
  of funding and a flexible, cost-effective borrowings structure. Wolseley&#146;s
  policy is to ensure that, as a minimum, all projected net borrowing needs are
  covered by committed facilities arranged and provided by the corporate office,
  supplemented where appropriate by local facilities.</font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s principal sources of funds
  are committed bank debt and borrowings under a US private placement.</FONT></P>
<P> <FONT size=2 face="sans-serif">On November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. The funds raised were used principally to fund the Group&#146;s working
  capital and refinance existing facilities. Of the eight tranches, six are at fixed rates with maturities
  ranging from 3 to 15 years and two tranches are floating with maturities of
  3 and 7 years. Exhibit 4.24 to this document contains the note and guarantee
  agreement.</font></P>
<P> <FONT size=2 face="sans-serif">In June 2006, the Group refinanced the great
     majority of its bank debt with a bank syndication which raised &#8364;2,800
  million with a maturity of just over 5 years. Exhibit 4.34
  to this document contains the facility agreement.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">75</FONT></P>
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<P> <FONT size=2 face="sans-serif">The year-end maturity profile of Wolseley&#146;s
  centrally managed facilities at July 31, 2006 was as follows:</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Facility</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Maturity Date</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>amount &pound;m</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><hr align="left" width="65" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Less than 1 year</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">200</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">1-2 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">34</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">2-3 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">174</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">3-4 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">343</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">4-5 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">111</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Greater than 5 years</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,282</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif"><B>Total</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">3,144</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">As at the year-end, undrawn committed facilities
  are as follows:</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD>&nbsp;</TD>
    <TD align="right"><font size="1" face="sans-serif"><B>&pound;m</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Less than 1 year</FONT></TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">200</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">1-2 years</FONT></TD>
    <TD align="right"><font face="sans-serif">&#8212;</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">Over 2 years</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">580</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">On September 25, 2006, Wolseley completed the
  acquisition of DT Group, for cash consideration of &pound;1,023 million. The
  indebtedness of DT Group of approximately &pound;330 million at that time was
  also assumed. To provide committed business facilities in respect of the funding
  of this acquisition, Wolseley entered into, on September 13, 2006, an 18 month
  &#8364;1,500 million multicurrency revolving facility agreement with a syndicate
  of six of its relationship banks. A repayment of &#8364;1.0 billion was made on September 28, 2006 and the facility was reduced to &#8364;500 million. Also, on September 25, 2006, to reduce the
  Group&#146;s total indebtedness as a result of the DT Group acquisition and
  that arising from the &pound;914 million of acquisitions in fiscal 2006 and
  to provide appropriate headroom for further investment in the business, the
  Group undertook a placing of 10% of its issued ordinary share capital, which
  raised &pound;655 million before fees.</font></P>
<P> <font size="2" face="sans-serif"><I>Foreign Currency Risk </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley has significant overseas businesses
  whose revenues are mainly denominated in the currencies of the countries in
  which the operations are located. Approximately 59.1% of the Group&#146;s revenue
  during fiscal year 2006 were in US dollars. Wolseley does not have significant
  transactional foreign currency cash flow exposure. However, those that do arise
  are generally hedged with either forward contracts or currency options. Wolseley
  does not normally hedge profit translation exposure since such hedges have only
  temporary effect. Most of the foreign currency earnings generated by Wolseley&#146;s
  overseas operations are reinvested in the business to fund growth in those territories.
  Wolseley&#146;s policy is to maintain the majority of its debt in the currencies
  of its operating companies as this hedges both the net assets and cash flows
  of the Group.</font></P>
<P> <FONT size=2 face="sans-serif">Details of average exchange rates used in the
  translation of overseas earnings, and of year end exchange rates used in the
  translation of overseas balance sheets, for the principal currencies used by
  the Group are as follows: </font></P>
<table border="0" cellspacing=0 cellpadding=0 style=' border-collapse:collapse;' width="100%">
  <tr>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif"><b><font style='font-size:8 pt'>2006</font></b></font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:center;margin-top:2pt;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif"><b><font style='font-size:8 pt'>2005</font></b></font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'>
      <hr noshade width="100%" color="Gray" size="1">
    </td>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'>
      <hr noshade width="100%" color="Gray" size="1">
    </td>
    <td valign=top >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:left;margin-bottom:0pt;'><font size="1" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td  valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">US
        Dollar translation rate:</font></p>
    </td>
    <td valign=bottom width="2%" >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom width="9%" >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom width="2%" >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom width="9%" >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom width="2%" >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Income
        statement</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.7885</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.8514</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Balance
        Sheet</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.8673</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.7564</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Canadian
        Dollar translation rate:</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Income
        statement</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">2.0595</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">2.2997</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Balance
        sheet</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">2.1128</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">2.1464</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Euro
        translation rate:</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr>
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Income
        statement</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.4577</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.4587</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td valign=bottom >
      <p style=' margin-left:8.65pt;text-indent:-8.65pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">Balance
        sheet</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.4628</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0pt;text-indent:0pt;text-align:right;margin-top:2pt;margin-bottom:0pt;'><font style="font-size:10 pt" size="2" face="Arial, Helvetica, sans-serif">1.4479</font></p>
    </td>
    <td valign=bottom >
      <p style=' margin-left:0in;text-indent:0pt;text-align:left;margin-top:2pt;margin-bottom:0pt;'><font size="2" face="Arial, Helvetica, sans-serif">&nbsp;</font></p>
    </td>
  </tr>
</table>
<P><FONT size=2 face="sans-serif">The net effect of currency translation during
  fiscal year 2006 was to increase revenue by &pound;274 million (2.4%) and to
  increase trading profit by &pound;18 million (2.5%).</font></P>
<P align="center"> <FONT face="sans-serif" size="2">76</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font>
<P> <FONT size=2 face="sans-serif">These currency effects reflect a movement during
  the 2006 fiscal year of the average pound sterling exchange rate against each
  of the major currencies with which the Group is involved as follows:</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="right">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>(Strengthening)/</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Weakening</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR align="right">
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>of sterling</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">US Dollar</FONT></TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">3.5%</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">Euro</FONT></TD>
    <TD align="right"><FONT size=2 face="sans-serif">0.1%</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <td><font size=2 face="sans-serif">Canadian Dollar</font></td>
    <td align="right"><font size="2" face="sans-serif">11.7%</font></td>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">Similarly, it is estimated that a strengthening
  of sterling by 10% against all the currencies in which Wolseley does business
  would have reduced operating profit before amortization of acquired intangibles
  for fiscal 2006 by approximately &pound;75 million (8.5%) due to currency translation.</font></P>
<P> <font size="2" face="sans-serif"><I>Commodity Risk </I></font></P>
<P> <FONT size=2 face="sans-serif">Wolseley&#146;s operating performance is affected
  by price fluctuations in steel, nickel alloy, copper, aluminum, plastic, lumber
  and other commodities. Wolseley seeks to minimize the effects of changing prices
  through economies of purchasing and inventory management resulting in cost reductions
  and productivity improvements as well as price increases to maintain reasonable
  profit margins. With the exception of lumber futures held to hedge future sales
  commitments, no trading instruments are used in respect of these commodities.
  At July 31, 2006, the Group held no lumber futures contracts.</font></P>
<P> <FONT size=2 face="sans-serif">As discussed above, Wolseley&#146;s results
  of operations were both favorably and unfavorably affected by increases and
  decreases in the pricing of commodity-based products. Such commodity price fluctuations
  have from time to time have had a significant effect on Wolseley&#146;s financial
  performance and could continue to do so in the future.</font></P>
<P> <font face="sans-serif"><a name="p77"></a></font><font size="2" face="sans-serif"><B>ITEM
  12. DESCRIPTION OF SECURITIES OTHER THAN ORDINARY SHARES</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">77</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<a href="#contents">Back to Contents</a>
</font>
<P align="center"> <font face="sans-serif"><a name="p78"></a></font><font size="2" face="sans-serif"><B>PART
  II</B></font></P>
<P> <font face="sans-serif"><a name="p78a"></a></font><font size="2" face="sans-serif"><B>ITEM
  13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font face="sans-serif"><a name="p78b"></a></font><font size="2" face="sans-serif"><B>ITEM
  14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font face="sans-serif"><a name="p78c"></a></font><font size="2" face="sans-serif"><B>ITEM
  15. CONTROLS AND PROCEDURES</B></font></P>
<P> <FONT size=2 face="sans-serif">Details of the internal controls and procedures
  in place are set out at &#147;Item 6C &#150; Directors, Senior Management and
  Employees &#150; Board Practices&#148;, which also sets out the conclusions
  of Wolseley&#146;s Chief Executive Officer and Group Finance Director about
  the effectiveness of the Group&#146;s disclosure controls and procedures and
  internal controls over financial reporting based on their evaluation as of the
  end of the period covered in this annual report. There were no significant changes
  to Wolseley&#146;s disclosure controls and procedures or in other factors that
  could significantly affect those controls subsequent to the date of their evaluation
  was completed.</font></P>
<P> <font face="sans-serif"><a name="p78d"></a></font><font size="2" face="sans-serif"><B>ITEM
  16A. AUDIT COMMITTEE FINANCIAL EXPERT</B></font></P>
<P> <FONT size=2 face="sans-serif">Details of the audit committee and of Mr. Stein,
  the Audit Committee Financial Expert, are set out at &#147;Item 6C &#150;Directors,
  Senior Management and Employees &#150; Board Practices&#148;.</font></P>
<P> <font face="sans-serif"><a name="p78e"></a></font><font size="2" face="sans-serif"><B>ITEM
  16B. CODE OF ETHICS</B></font></P>
<P> <FONT size=2 face="sans-serif">Details of the matters related to the Group
     wide code of ethics and the additions thereto approved by the audit committee

  to create a confidential and anonymous process for dealing with submissions
     by employees and others of any concerns or complaints received by the Group

  regarding, inter alia, accounts, internal accounting or auditing matters, are
     set out at &#147;Item 6C &#150; Directors, Senior Management and Employees &#150;
  Board Practices&#148;. Wolseley will provide to any person without charge upon
   request a copy of the Code of Ethics and additional disclosures policy. Requests

  should be made to the Group Company Secretary and Counsel at the address set
   out on page 1 of this annual report or by facsimile to 011 44 118 929 8701
  or
  by e-mail to mark.white@wolseley.com.</font></P>
<P> <FONT size=2 face="sans-serif">No amendment to or waiver from the Code of
  Ethics has been made since its introduction to the Chief Executive Officer,
  Group Financial Director, principal accounting officer or controller or persons
  performing similar functions.</font></P>
<P> <font face="sans-serif"><a name="p78f"></a></font><font size="2" face="sans-serif"><B>ITEM
  16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</B></font></P>
<P> <FONT size=2 face="sans-serif">Details of the aggregate fees billed for each
     of the last two fiscal years for professional services rendered by the principal

  accountant, PricewaterhouseCoopers LLP (and its predecessor firm PricewaterhouseCoopers),
     for the audit of the Group&#146;s annual financial statements are set out
     at
  &#147;Item 18 &#150; Financial Statements&#148; and Note 3 Amounts Charged
  in  arriving at operating profit of the Consolidated Financial Statements.
  Details
  are also disclosed in such note of audit related fees (which comprise &quot;Other
  assurance services&quot; and &quot;Due diligence reviews&quot;), tax fees and all other fees
  for such fiscal years together with a description of
  the
  nature
  of the

  services comprising such fees.</font></P>
<P> <FONT size=2 face="sans-serif">The audit committee&#146;s pre-approval policy
  and procedure is incorporated herein by reference to Exhibit 11.3 to the Annual
  Report for the fiscal year 2003, filed with the SEC on November 21, 2003.</font></P>
<P> <font face="sans-serif"><a name="p78g"></a></font><font size="2" face="sans-serif"><B>ITEM
  16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P align="center"> <FONT face="sans-serif" size="2">78</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P>
</font></font>
<P> <font face="sans-serif"><a name="p79"></a></font><font size="2" face="sans-serif"><B>ITEM
  16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</B></font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Total Number</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Maximum</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>of Shares</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Number of</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Purchased as</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Shares that</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Part of</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>May Yet be</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Publicly</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Purchased</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Total Number</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Announced</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Under the</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>of Shares</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Average Price</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Plans or</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Plans or</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Period</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Purchased</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Paid per Share</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Programs</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
    <TD align="right"><font size="1" face="sans-serif"><B>Programs</B></font></TD>
    <TD align="right"><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><hr align="left" width="35" size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><hr size="1" noshade></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">August 1, 2004 &#150; August 31, 2004</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align="right">&nbsp;</TD>
    <TD width=10% align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">September 1, 2004 &#150; September 30,
      2004</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">October 1, 2004 &#150; October 31, 2004</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">November 1, 2004 &#150; November 30, 2004</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">2,000,000</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP> (1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;9.25</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP> (1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">December 1, 2004 &#150; December 31, 2004</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">January 1, 2005 &#150; January 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">February 1, 2005 &#150; February 28, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">March 1, 2005 &#150; March 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">April 1, 2005 &#150; April 30, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">May 1, 2005 &#150; May 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">June 1, 2005 &#150; June 30, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">July 1, 2005 &#150; July 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">August 1, 2005 &#150; August 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">September 1, 2005 &#150; September 30,
      2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">October 1, 2005 &#150; October 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">November 1, 2005 &#150; November 30, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">250,000</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;11.91</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">December 1, 2005 &#150; December 31, 2005</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">200,000</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;12.34</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">January 1, 2006 &#150; January 31, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">400,000</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;12.90</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">February 1, 2006 &#150; February 28, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">March 1, 2006 &#150; March 31, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">200,000</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;14.50</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">April 1, 2006 &#150; April 30, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">961,478</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;13.82</FONT></TD>
    <TD><font size="2" face="sans-serif"><SUP>(1)</SUP></font></TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">May 1, 2006 &#150; May 31, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><FONT size=2 face="sans-serif">June 1, 2006 &#150; June 30, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">July 1, 2006 &#150; July 31, 2006</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><hr size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD><font size="2" face="sans-serif"><B>Total</B></font></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">4,011,478</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&pound;12.474</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><hr align="left" width="100" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
  <TR>
    <TD width="3%" valign="top"><font size="1" face="sans-serif"><I>(1)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>The ordinary shares noted
      in the table above were purchased by the trustees of Wolseley&#146;s employees
      benefit trusts between November 2004 and April 2006 in anticipation of settlement
      of awards made under diverse employee incentive arrangements as referred
      to under &#147;Item 6 &#150;Directors, Senior Management and Employees &#150;
      Compensation&#148;.</I></font></TD>
  </TR>
  <TR>
    <TD valign="top"><font size="1" face="sans-serif"><I>(2)</I></font></TD>
    <TD valign="top"><font size="1" face="sans-serif"><I>A further 588,522 ordinary
      shares were purchased by the trustee of Wolseley&#146;s employees benefit
      trust on September 25, 2006 at a price of &pound;11.00 per share in anticipation
      of settlement of awards made under diverse employee incentive arrangements
      as referred to under &#147;Item 6 &#150;Directors, Senior Management and
      Employees &#150; Compensation&#148;.</I></font></TD>
  </TR>
</TABLE>
<P align="center"> <FONT face="sans-serif" size="2">79</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page>  <font size="2" face="sans-serif">
<a href="#contents">Back to Contents</a>
</font>
<P align="center"> <font face="sans-serif"><a name="p80"></a></font><font size="2" face="sans-serif"><B>PART
  III</B></font></P>
<P> <font face="sans-serif"><a name="p80a"></a></font><font size="2" face="sans-serif"><B>ITEM
  17. FINANCIAL STATEMENTS</B></font></P>
<P> <FONT size=2 face="sans-serif">Not applicable.</font></P>
<P> <font face="sans-serif"><a name="p80b"></a></font><font size="2" face="sans-serif"><B>ITEM
  18. FINANCIAL STATEMENTS</B></font></P>
<P> <FONT size=2 face="sans-serif">The Consolidated Financial Statements and notes
  thereto as required by Item 18 are attached hereto and found immediately after
  the text of this annual report.</font></P>
<P> <b><font face="sans-serif"><a name="p80c"></a></font><FONT size=2 face="sans-serif">ITEM
  19. EXHIBITS</font></b></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1" face="sans-serif"><B>Exhibit</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif"><B>No.</B></font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1" face="sans-serif"><B>Description</B></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width=5%><FONT size=2 face="sans-serif">1.1</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Memorandum and Articles of Association
      of Wolseley plc.*</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">2.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Form of Deposit Agreement between
      Wolseley plc and The Bank of New York, as Depositary.*</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated September
      25, 2002 between Stephen P. Webster and Wolseley plc.**</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Agreement dated April 30, 2003
      between Saprodis S.A.S. (1), Cofiger S.A.S. (2), Pinault- Printemps</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Redoute S.A.(3) and Wolseley
      plc (4) for the acquisition of Pinault Bois et Mat&eacute;riaux S.A.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated June
      27, 2003 between Fenton Norton Hord and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated July
      9, 2003 between Charles Augustus Banks and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated July
      18, 2003 between Claude A. Swanson Hornsby III and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated July
      21, 2003 between G&eacute;rard Legtmann and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated June
      6, 2003 between Adrian Barden and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated September
      2, 2002 between John Whybrow and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated October
      15, 2002 between Robert Walker and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated November
      12, 2002 between John Allan and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated October
      18, 2002 between James Murray and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated June
      16, 2003 between Gareth Davis and Wolseley plc.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Rules of the Wolseley plc 2002
      Long Term Incentive Scheme.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Deed of Variation to Service
      Agreement dated July 29, 2003, between Wolseley plc and Charles A. Banks.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.15</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Deed of Variation to Service
      Agreement dated July 30, 2003, between Wolseley plc and Stephen P. Webster.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Deed of Variation to Service
      Agreement dated August 11, 2003, between Wolseley plc and Fenton N. Hord.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Deed of Variation to Service
      Agreement dated September 12, 2003, between Wolseley plc and G&eacute;rard
      Legtmann.***</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.18</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated October
      20, 2003 between Jacques R&eacute;gis-Descours and Wolseley Centers France.****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Rules of the Wolseley Share Option
      Plan 2003.****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated October
      17, 2003 between Nigel Stein and Wolseley plc.****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.21</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Engagement Letter dated June
      25, 2004 between Andrew J. Duff and Wolseley plc.****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Service Agreement dated March
      18, 2005 between Robert H. Marchbank and Wolseley plc.*****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.23</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Rules of the Wolseley plc 2002
      Long Term Incentive Scheme (as applying to Awards made after November 18,
      2004).*****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=2 face="sans-serif">4.24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Note and Guarantee Agreement
      dated November 16, 2005 by Wolseley Capital Inc and Wolseley plc*****</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-25.htm"><FONT size=2 face="sans-serif">4.25</FONT></a></TD>
    <TD><a href="b84006xex4-25.htm"></a></TD>
    <TD><a href="b84006xex4-25.htm"><FONT size=2 face="sans-serif">Service Agreement dated February
      27, 2006 between Frank W. Roach and Wolseley plc.******</FONT></a></TD>
    <TD><a href="b84006xex4-25.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-26.htm"><FONT size=2 face="sans-serif">4.26</FONT></a></TD>
    <TD><a href="b84006xex4-26.htm"></a></TD>
    <TD><a href="b84006xex4-26.htm"><FONT size=2 face="sans-serif">Deed of Variation to Service
      Agreement dated August 6, 2006, between Wolseley plc and Stephen P. Webster.******</FONT></a></TD>
    <TD><a href="b84006xex4-26.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-27.htm"><FONT size=2 face="sans-serif">4.27</FONT></a></TD>
    <TD><a href="b84006xex4-27.htm"></a></TD>
    <TD><a href="b84006xex4-27.htm"><FONT size=2 face="sans-serif">Rules of the Wolseley Share Option
      Plan 2003, as amended.******</FONT></a></TD>
    <TD><a href="b84006xex4-27.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-28.htm"><FONT size=2 face="sans-serif">4.28</FONT></a></TD>
    <TD><a href="b84006xex4-28.htm"></a></TD>
    <TD><a href="b84006xex4-28.htm"><FONT size=2 face="sans-serif">Rules of the Wolseley plc 2002
      Long Term Incentive Scheme (as applying to Awards made after November 18,
      2004) (as amended).******</FONT></a></TD>
    <TD><a href="b84006xex4-28.htm"></a></TD>
  </TR>
  <TR>
    <TD valign="top"><a href="b84006xex4-29.htm"><font size=2 face="sans-serif">4.29</font></a></TD>
    <TD><a href="b84006xex4-29.htm"></a></TD>
    <TD><a href="b84006xex4-29.htm"><font size=2 face="sans-serif">Agreement dated July 22, 2006 between the sellers (as defined in the Agreement) and Wolseley plc for the acquisition of DT Holdings 1 A/S and the Amendment
      letter dated<br>
      September 21, 2006. ******</font></a></TD>
    <TD><a href="b84006xex4-29.htm"></a></TD>
  </TR>
  <TR>
    <TD valign="top"><a href="b84006xex4-30.htm"><font size=2 face="sans-serif">4.30</font></a></TD>
    <TD><a href="b84006xex4-30.htm"></a></TD>
    <TD><a href="b84006xex4-30.htm"><font size=2 face="sans-serif">Agreement dated July 22, 2006 between the sellers (as defined in the Agreement) and Wolseley plc for the acquisition of DT Officers A/S and the Amendment
      letter dated<br>
      September 21, 2006.******</font></a></TD>
    <TD><a href="b84006xex4-30.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-31.htm"><font size=2 face="sans-serif">4.31</font></a></TD>
    <TD><a href="b84006xex4-31.htm"></a></TD>
    <TD><a href="b84006xex4-31.htm"><font size=2 face="sans-serif">Rules of the Wolseley Restricted Share
    Plan 2006. ******</font></a></TD>
    <TD><a href="b84006xex4-31.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-32.htm"><font size=2 face="sans-serif">4.32</font></a></TD>
    <TD><a href="b84006xex4-32.htm"></a></TD>
    <TD><a href="b84006xex4-32.htm"><font size=2 face="sans-serif">Rules of the Wolseley Employee Share Purchase
    Plan 2001 as amended. *****</font></a></TD>
    <TD><a href="b84006xex4-32.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-33.htm"><font size=2 face="sans-serif">4.33</font></a></TD>
    <TD><a href="b84006xex4-33.htm"></a></TD>
    <TD><a href="b84006xex4-33.htm"><font size=2 face="sans-serif">&#128; 1,500,000,000
          multicurrency revolving facility agreement dated September 13, 2006
      ******</font></a></TD>
    <TD><a href="b84006xex4-33.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex4-34.htm"><font size=2 face="sans-serif">4.34</font></a></TD>
    <TD><a href="b84006xex4-34.htm"></a></TD>
    <TD><a href="b84006xex4-34.htm"><font size=2 face="sans-serif">&#128; 2,800,000,000
        multicurrency revolving facility agreement dated June 2, 2006 ******</font></a></TD>
    <TD><a href="b84006xex4-34.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex8-1.htm"><font size=2 face="sans-serif">8.1</font></a></TD>
    <TD><a href="b84006xex8-1.htm"></a></TD>
    <TD><a href="b84006xex8-1.htm"><font size=2 face="sans-serif">List of Subsidiaries******</font></a></TD>
    <TD><a href="b84006xex8-1.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex8-2.htm"><font size=2 face="sans-serif">8.2</font></a></TD>
    <TD><a href="b84006xex8-2.htm"></a></TD>
    <TD><a href="b84006xex8-2.htm"><font size=2 face="sans-serif">Principal Subsidiary Trade Names ******</font></a></TD>
    <TD><a href="b84006xex8-2.htm"></a></TD>
  </TR>
  <TR>
    <TD><font size=2 face="sans-serif">10.1</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">PricewaterhouseCoopers LLP consent, dated
        November 29</font><font face="sans-serif"><font size=2>,
    2006.</font></font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=2 face="sans-serif">11.1</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">Group Code of Ethics***</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=2 face="sans-serif">11.2</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">Group Whistleblowing Policy***</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=2 face="sans-serif">11.3</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="sans-serif">Pre-approval policy and procedures for
    the provision of non-audit services by the Auditors.***</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><a href="b84006xex12-1.htm"><font size=2 face="sans-serif">12.1</font></a></TD>
    <TD><a href="b84006xex12-1.htm"></a></TD>
    <TD><a href="b84006xex12-1.htm"><font size=2 face="sans-serif">Certification by Claude A. S. Hornsby******</font></a></TD>
    <TD><a href="b84006xex12-1.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex12-2.htm"><font size=2 face="sans-serif">12.2</font></a></TD>
    <TD><a href="b84006xex12-2.htm"></a></TD>
    <TD><a href="b84006xex12-2.htm"><font size=2 face="sans-serif">Certification by Stephen P. Webster******</font></a></TD>
    <TD><a href="b84006xex12-2.htm"></a></TD>
  </TR>
  <TR>
    <TD><a href="b84006xex13-1.htm"><font size=2 face="sans-serif">13.1</font></a></TD>
    <TD><a href="b84006xex13-1.htm"></a></TD>
    <TD><a href="b84006xex13-1.htm"><font size=2 face="sans-serif">Certification by Group Chief Executive
    and Group Finance Director ******</font></a></TD>
    <TD><a href="b84006xex13-1.htm"></a></TD>
  </TR>
  <TR>
    <TD colspan="3"><hr align="left" width="100" size="1" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><FONT size=1 face="sans-serif">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><font size=1 face="sans-serif">incorporated by reference to Wolseley&#146;s
    Registration Statement on Form 20-F (No. 1-15186).</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=1 face="sans-serif">**</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=1 face="sans-serif">incorporated by reference to Wolseley&#146;s
    Annual Report on Form 20-F for fiscal year 2002 (No. 1-15186).</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=1 face="sans-serif">***</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=1 face="sans-serif">incorporated by reference to Wolseley&#146;s
    Annual Report on Form 20-F for fiscal year 2003 (No. 1-15186).</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=1 face="sans-serif">****</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=1 face="sans-serif">incorporated by reference to Wolseley&#146;s
    Annual Report on Form 20-F for fiscal year 2004 (No. 1-15186).</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=1 face="sans-serif">*****</font></TD>
    <TD>&nbsp;</TD>
    <TD><font size=1 face="sans-serif">incorporated by reference to Wolseley&#146;s
    Annual Report on Form 20-F for fiscal year 2005 (No. 1-15186).</font></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size=1 face="sans-serif">******</font></TD>
    <TD>&nbsp;</TD>
    <TD> <font size=1 face="sans-serif"> filed with the Securities and Exchange
        Commission, as exhibits to this Form 20-F but not reproduced in the printed
    version of the Annual Report.</font></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"><font size="2" face="sans-serif">80</font></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page> </font> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P>
</font></font>
<P align="center"> <font face="sans-serif"><a name="p81"></a></font><font size="2" face="sans-serif"><B>SIGNATURE</B></font></P>
<P> <FONT size=2 face="sans-serif">The registrant hereby certifies that it meets
  all of the requirements for filing on Form 20-F and that it has duly caused
  and authorized the undersigned to sign this Annual Report on its behalf.</font></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=33%> <font size="2" face="sans-serif"><B>WOLSELEY plc</B></font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">By:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">/s/ M. J. White</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><hr align="left" width="175" size="1" noshade></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Mark J. White</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2 face="sans-serif">Group Company Secretary and Counsel</FONT></TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">Date: November 30, 2006</FONT></P>
<P align="center"> <FONT face="sans-serif" size="2">81</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="p82"></a> <font size="2" face="sans-serif">
<p><a href="#contents">Back to Contents</a></P></font></font>
<P align="center">&nbsp;</P>
<P align="center"><FONT size=2 face="sans-serif">THIS PAGE IS INTENTIONALLY LEFT
    BLANK</FONT></P>
<P align="center">&nbsp;</P>
<P align="center"> <FONT face="sans-serif" size="2">82</FONT></P>
<hr noshade align="center" width="100%" size="2">





<div style="page-break-before:always"></div><page><a name="pf1"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>

<P align="center"><font size="2" face="sans-serif">WOLSELEY PLC<br>
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</font></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf2">Report of independent registered public accounting firm</a></font></td>
    <td width="15%" align="right"><font size="2" face="sans-serif"><a href="#pf2">F-2</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf3">Group income statement for the year
        ended July 31, 2006</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf3">F-3</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf3a">Group statement of recognized income
        and expense for the year ended July 31, 2006</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf3a">F-3</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf4">Group balance sheet as
          of July 31, 2006</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf4">F-4</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf5">Group cash flow statement for the year
        ended July 31, 2006</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf5">F-5</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf6">Group accounting policies</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf6">F-6</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf13">Notes to the consolidated financial
        statements</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf13">F-13</a></font></td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><a href="#pf72">Acquisitions completed during the year</a></font></td>
    <td align="right"><font size="2" face="sans-serif"><a href="#pf72">F-72</a></font></td>
  </tr>
</table>
<P align="center">&nbsp;</P>
<P align="center"><FONT size=2 face="sans-serif">F-1</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font size="2" face="sans-serif"><page><a name="pf2"></a></font><font face="sans-serif"><font face="sans-serif"><p><font size="2"><a href="#fcontents">Back to Contents</a></font></p>
</font></font>
<P align="left"><font size="2" face="sans-serif"><b>Report of Independent Registered Public Accounting Firm <br>
To the Board of Directors and Shareholders of Wolseley plc </b></font></P>
<p><font size="2" face="sans-serif">We have completed an integrated audit of Wolseley plc&#8217;s
    July 31, 2006 consolidated financial statements and of its internal control
    over financial
  reporting as of July 31, 2006 and an audit of its July 31, 2005 consolidated
  financial statements in accordance with the standards of the Public Company
  Accounting Oversight Board (United States). Our opinions, based on our audits,
  are presented below. </font></p>
<p><font size="2" face="sans-serif"><b>Consolidated financial statements </b></font></p>
<p><font size="2" face="sans-serif">In
      our opinion, the accompanying group income statements and the related group
      balance sheets, group statements of cash flows, group statements of recognized
      income and expense present fairly, in all material respects, the financial
      position of Wolseley plc and its subsidiaries as of July 31, 2006 and 2005,
      and the results of their operations and their cash flows for each of the
      two years in the period ended July 31, 2006, in conformity with International
      Financial Reporting Standards (IFRSs) as adopted by the European Union.
    These financial statements are the responsibility of the Company&#8217;s
    management. Our responsibility is to express an opinion on these financial
    statements
      based on our audits. We conducted our audits of these statements in accordance
      with the standards of the Public Company Accounting Oversight Board (United
      States). Those standards require that we plan and perform the audit to
    obtain reasonable assurance about whether the financial statements are free
    of material
      misstatement. An audit of financial statements includes examining, on a
    test basis, evidence supporting the amounts and disclosures in the financial
    statements,
      assessing the accounting principles used and significant estimates made
    by management, and evaluating the overall financial statement presentation.
    We believe that our audits provide a reasonable basis for our opinion.</font></p>
<p><font size="2" face="sans-serif"> IFRSs as adopted by the European Union vary
    in certain significant respects from accounting principles generally accepted
    in the United States of America.
      Information relating to the nature and effect of such differences is presented
      in Note 44 to the consolidated financial statements.</font></p>
<p><font size="2" face="sans-serif"><b>Internal control over financial reporting </b></font></p>
<p><font size="2" face="sans-serif">Also, in our opinion, management&#8217;s assessment, included in the accompanying &#8220;Managements&#8217; Evaluation
  of the Effectiveness of Internal Control&#8221; as set out in Item 6C - Board Practices - Control Processes-paragraphs 4-6, that the Company maintained effective internal control over financial
  reporting as of July 31, 2006 based on criteria established in Internal Control
  - Integrated Framework issued by the Committee of Sponsoring Organizations
  of the Treadway Commission (COSO), is fairly stated, in all material respects,
  based on those criteria. Furthermore, in our opinion, the Company maintained,
  in all material respects, effective internal control over financial reporting
  as of July 31, 2006, based on criteria established in Internal Control - Integrated
  Framework issued by the COSO. The Company&#8217;s management is responsible
  for maintaining effective internal control over financial reporting and for
  its assessment of the effectiveness of internal control over financial reporting.
  Our responsibility is to express opinions on management&#8217;s assessment
  and on the effectiveness of the Company&#8217;s internal control over financial
  reporting based on our audit.</font></p>
<p><font size="2" face="sans-serif">We conducted our audit of internal control over financial reporting
    in accordance with the standards of the Public Company Accounting Oversight
    Board (United
  States). Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether effective internal control over financial
  reporting was maintained in all material respects. An audit of internal control
  over financial reporting includes obtaining an understanding of internal control
  over financial reporting, evaluating management&#8217;s assessment, testing
  and evaluating the design and operating effectiveness of internal control,
  and performing such other procedures as we consider necessary in the circumstances.
  We believe that our audit provides a reasonable basis for our opinions. </font></p>
<p><font size="2" face="sans-serif">A company&#8217;s internal control over financial reporting is a process designed
  to provide reasonable assurance regarding the reliability of financial reporting
  and the preparation of financial statements for external purposes in accordance
  with the applicable accounting standards. A company&#8217;s internal control
  over financial reporting includes those policies and procedures that (i) pertain
  to the maintenance of records that, in reasonable detail, accurately and fairly
  reflect the transactions and dispositions of the assets of the company; (ii)
  provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with the applicable
  accounting standards, and that receipts and expenditures of the company are
  being made only in accordance with authorizations of management and directors
  of the company; and (iii) provide reasonable assurance regarding prevention
  or timely detection of unauthorized acquisition, use, or disposition of the
  company&#8217;s assets that could have a material effect on the financial statements. </font></p>
<p><font size="2" face="sans-serif">Because of its inherent limitations, internal control over financial reporting
  may not prevent or detect misstatements. Also, projections of any evaluation
  of effectiveness to future periods are subject to the risk that controls may
  become inadequate because of changes in conditions, or that the degree of compliance
  with the policies or procedures may deteriorate. </font></p>
<p><font size="2" face="sans-serif"><br>
  PricewaterhouseCoopers LLP <br>
  London<br>
  United Kingdom<br>
November 29, 2006</font><font size="2" face="sans-serif"><b>  </b></font></p>
<P align="center"> <FONT size=2 face="sans-serif">F-2</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf3"></a><p><a href="#fcontents"><font size="2" face="sans-serif">Back to Contents</font></a></p>

<p><FONT size=6 face="sans-serif">Group income statement</FONT><br>
  <FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <I><FONT size=2 face="sans-serif">Continuing operations</FONT></I></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Revenue</FONT></B>&nbsp;
    </TD>
    <TD width=5% align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <B><FONT size=2 face="sans-serif">14,158</FONT></B>
    </TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">11,256</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cost of sales</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10,222</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8,174</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Gross profit</FONT></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">3,936</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,082</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Distribution costs</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2,413</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,930</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#cccccc">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: amortization
      of acquired intangibles</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(48</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#cccccc">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: other</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(665</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(468</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: total</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(713</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(474</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Other income</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Operating profit</FONT></B>&nbsp;
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2, 3</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">834</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">702</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Finance revenue</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">49</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">27</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Finance costs</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(114</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(64</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Profit before tax</FONT></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">769</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">665</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Tax expense</FONT></B>&nbsp;
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">(232</FONT></B> </TD>
    <TD align=left> <B><FONT size=2 face="sans-serif">)</FONT></B>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(186</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Profit for the year attributable
      to equity shareholders</FONT></B>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">537</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">479</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Earnings per share</FONT></B>&nbsp;
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT> </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Basic earnings per share</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">90.77</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">p</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">81.61</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">p</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Diluted earnings per share</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">90.02</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">p</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">80.75</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">p</FONT> </TD>
  </TR>
</TABLE>
<p><FONT size=6 face="sans-serif"><a name="pf3a"></a>Group statement of recognized income and expense
  </FONT><br><FONT size=2 face="sans-serif">Year ended July 31, 2006 </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the financial year</FONT>
    </TD>
    <TD width=5% align=left>&nbsp; </TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">537</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">479</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Net exchange adjustments offset
      in reserves</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(124</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">57</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cash flow hedges</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">&#150; fair value gains and losses</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#150; reclassified and reported
      in net profit for the year</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial gain/(loss) on retirement
      benefits</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Change in fair value of available-for-sale
      investments</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(7</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Tax (charge)/credit not recognized
      in the income statement</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net (losses)/gains not recognized
      in the income statement</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(124</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">76</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Total recognized income for
      the year attributable to shareholders</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">413</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">555</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">The accompanying notes are an integral part
  of these consolidated financial statements. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-3</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf4"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Group balance sheet<br>
  </FONT><FONT size=2 face="sans-serif">As at July 31, 2006 </FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Assets</FONT></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current assets</FONT></I></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Intangible
      assets: goodwill</FONT> </TD>
    <TD width=5% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">11</FONT>
    </TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,173</FONT>
    </TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">815</FONT>
    </TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: other</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">12</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">333</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">133</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Property,
      plant and equipment</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">13</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,144</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">883</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax assets</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">15</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">16</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">55</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Trade and
      other receivables</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">17</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">36</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">37</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: available-for-sale
      investments</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">21</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,723</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,929</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current assets</FONT></I></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Inventories</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">16</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,954</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,706</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,650</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,198</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Current tax
      receivable</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: trading investments</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Derivative
      financial assets</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">20</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">10</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial receivables: construction
      loans (secured)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">21</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">313</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">262</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Cash and
      cash equivalents</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">22</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">416</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">381</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5,348</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4,562</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Assets held
      for sale</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">18</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">8</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Total
      assets</FONT></B>&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">8,078</FONT></B>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">6,499</FONT></B>&nbsp;
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Liabilities</FONT></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current liabilities</FONT></I></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Trade and
      other payables</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">23</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,294</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,943</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Current tax payable</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">91</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">70</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Borrowings:
      construction loans (unsecured)</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">21</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">313</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">262</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">192</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">439</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Obligations
      under finance leases</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">25</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">18</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial liabilities</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">20</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">29</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Provisions</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">26</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">29</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">22</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">27</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">29</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,995</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,771</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current liabilities</FONT></I></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Trade and
      other payables</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">23</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">25</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">18</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,084</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,045</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Obligations
      under finance leases</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">25</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">57</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">58</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax liabilities</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">15</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">88</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">62</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Provisions</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">26</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">77</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">63</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">27</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">160</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">181</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,491</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1,427</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Total
      liabilities</FONT></B>&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">5,486</FONT></B>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">4,198</FONT></B>&nbsp;
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Net assets</FONT></B>&nbsp;
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">2,592</FONT></B>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">2,301</FONT></B>&nbsp;
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Shareholders&#146; equity</FONT></B>&nbsp;
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Called up
      share capital</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">28</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">149</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">148</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Share premium account</FONT>
    </TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">288</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">241</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Foreign currency
      translation reserve</FONT> </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">30</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(49</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">82</FONT>
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retained earnings</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,204</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,830</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Equity
      shareholders&#146; funds</FONT></B>&nbsp; </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">2,592</FONT></B>
    </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">2,301</FONT></B>&nbsp;
    </TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">The accompanying notes are an integral part
  of these consolidated financial statements. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-4</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf5"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Group cash flow statement <br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006 </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from operating
      activities</FONT></B>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash generated from operations</FONT>
    </TD>
    <TD width=5% align=right> <FONT size=2 face="sans-serif">34</FONT> </TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">850</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">765</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Interest received</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">45</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Interest paid</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(102</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(57</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Tax paid</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(206</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(151</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash generated from
      operating activities</FONT></I></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">587</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">583</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from investing
      activities</FONT></B>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Acquisition of businesses (net
      of cash acquired)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">32</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(822</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(406</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Disposals of businesses (net
      of cash disposed of)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Purchases of property, plant
      and equipment</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(326</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(218</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from sale of property,
      plant and equipment</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">52</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">74</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Purchases of intangible assets</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(20</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(21</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Purchases of investments</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(23</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from disposal of investments</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash used in investing
      activities</FONT></I></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">(1,137</FONT></I> </TD>
    <TD align=left> <I><FONT size=2 face="sans-serif">)</FONT></I></TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">(565</FONT></I> </TD>
    <TD align=left> <I><FONT size=2 face="sans-serif">)</FONT></I></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from financing
      activities</FONT></B>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from the issue of
      shares to shareholders</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Purchases of shares by Employee
      Benefit Trusts</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(27</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from new borrowings</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,486</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">410</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Repayments of borrowings and
      derivatives</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,405</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(234</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Finance lease capital payments</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(17</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Dividends paid to shareholders</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(162</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(145</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash generated from
      financing activities</FONT></I></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">906</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">40</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net cash generated</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">356</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Effects of exchange rate changes</FONT>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(26</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net increase/(decrease) in
      cash, cash equivalents and bank overdrafts</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">348</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">32</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cash, cash equivalents and
      bank overdrafts at the beginning of the year.</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(88</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash, cash equivalents and
      bank overdrafts at the end of the year</FONT> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">292</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The accompanying notes are an integral part of these consolidated financial statements. </FONT></P>
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<P>
<FONT size=6 face="sans-serif">Group accounting policies<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT>
</P>
<P>
<FONT size=2 face="sans-serif">The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (&#147;IFRS&#148;) as adopted by the European Union, including interpretations issued by the
International Accounting Standards Board (&#147;IASB&#148;) and its committees, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The disclosures required by IFRS 1, &#147;First-Time Adoption of
International Financial Reporting Standards&#148; concerning the transition from UK GAAP to IFRS are given in note 45. The date of transition to IFRS is August 1, 2004. </FONT></P>
<P>
<FONT size=2 face="sans-serif">A summary of the principal accounting policies applied by the Group in the preparation of the consolidated financial statements is set out below.</FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Basis of accounting<br>
</FONT></B><FONT size=2 face="sans-serif">The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of available for sale investments and financial assets and liabilities held for trading.
</FONT></P>
<P>
<B><FONT size=2 face="sans-serif">First time adoption of International Financial
Reporting Standards<br>
</FONT></B><FONT size=2 face="sans-serif">IFRS 1, &#147;First-time Adoption of International Financial Reporting Standards&#148; sets
out the procedures that the Group must follow when it adopts IFRS for the first
time as the basis for preparing its consolidated financial statements. The Group
is required to establish its IFRS accounting policies as at July 31, 2006 and,
in general, apply these retrospectively to determine the IFRS opening balance
sheet at its date of transition, August 1,
2004. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Certain optional exemptions to this general principle are available under IFRS 1, and the significant first-time adoption choices made by the Group are as follows: </FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%" valign="top"><font size="2" face="sans-serif">&#8226;</font></td>
    <td><font size=2 face="sans-serif">The Group has elected not to apply IFRS
      3 retrospectively to business combinations that took place before August</font>
      <font size=2 face="sans-serif">1, 2004. As a result, in the IFRS opening
      balance sheet, goodwill arising from past business combinations of &#163;666</font>
      <font size=2 face="sans-serif">million remains as stated under UK GAAP at
      that date.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="sans-serif">&#8226;</font></td>
    <td> <font size=2 face="sans-serif">The Group has elected to recognize all
      cumulative actuarial gains and losses in relation to post employment</font>
      <font size=2 face="sans-serif">defined benefit schemes at the date of transition.
      In addition, the Group has elected to recognize actuarial gains</font> <font size=2 face="sans-serif">and
      losses in full in the period in which they occur in a statement of recognized
      income and expense.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="sans-serif">&#8226;</font></td>
    <td><font size=2 face="sans-serif">The Group has elected to apply IFRS 2,
      &#147;Share Based Payment&#148; only to equity-settled awards that had not
      vested</font> <font size=2 face="sans-serif">as at August 1, 2004 and were
      granted on or after 7 November 2002 and cash-settled awards that had not
      vested</font> <font size=2 face="sans-serif">as at August 1, 2004.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp; </td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="sans-serif">&#8226;</font></td>
    <td><font size=2 face="sans-serif">The Group has elected to reset the foreign
      currency translation reserve to zero at August 1, 2004. Going forward,</font>
      <font size=2 face="sans-serif">IFRS requires amounts taken to reserves on
      the retranslation of foreign subsidiaries to be recorded in a separate</font>
      <font size=2 face="sans-serif">foreign currency translation reserve and
      be included in the future calculation of profit or loss on sale of the</font>
      <font size=2
face="sans-serif">subsidiary.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td>&nbsp; </td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="sans-serif">&#8226;</font></td>
    <td> <font size=2 face="sans-serif">The Group has elected to implement IAS
      39, &#147;Financial Instruments: Recognition and Measurement" and IAS 32,</font>
      <font size=2 face="sans-serif">&#147;Financial Instruments: Disclosure and
      Presentation&#148; at its date of transition, August 1, 2004, and apply
      hedge</font> <font size=2 face="sans-serif">accounting where the requirements
      of IAS 39 are met.</font></td>
  </tr>
</table>
<P><B><FONT size=2 face="sans-serif"><br>
  Consolidation<br>
</FONT></B><FONT size=2 face="sans-serif">The consolidated financial information
    includes the results of the parent Company and its subsidiary undertakings drawn
  up to July 31, 2006. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The trading results of businesses acquired, sold or discontinued during the year are included in profit on ordinary activities from the date of effective acquisition or up to the date of sale or discontinuance.
</FONT></P>
<P>
<FONT size=2 face="sans-serif">Intra-group transactions and balances and any unrealized gains and losses arising from intra-group transactions are eliminated on consolidation.</FONT></P>
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<P> <FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT>
</P>
<P> <B><FONT size=2 face="sans-serif">Foreign currencies <br>
  </FONT></B><FONT size=2 face="sans-serif">Items included in the financial statements
  of each of the Group&#146;s subsidiary undertakings are measured using the currency
  of the primary economic environment in which the subsidiary undertaking operates
  (the &#147;functional currency&#148;). The consolidated financial statements
  are presented in sterling, which is the presentational currency of the Group
  and the functional currency of the parent Company. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The trading results of overseas subsidiary undertakings are translated into sterling using average rates of exchange ruling during the relevant financial period. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The balance sheets of overseas subsidiary undertakings are translated into sterling at the rates of exchange ruling at the period end. Exchange differences arising between the translation into sterling of the net
assets of these subsidiary undertakings at rates ruling at the beginning and end of the year are recognized in the currency translation reserve as are exchange differences on foreign currency borrowings to the extent that they are used to finance or
provide a hedge against foreign currency net assets. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Changes in the fair value and the final settlement value of derivative financial instruments, entered into to hedge foreign currency net assets and that satisfy the hedging conditions of IAS 39, are recognized in the
currency translation reserve (see the separate accounting policy on derivative financial instruments). </FONT></P>
<P>
<FONT size=2 face="sans-serif">In the event that an overseas subsidiary undertaking is sold, the gain or loss on disposal recognized in the income statement is determined after taking into account the cumulative currency translation differences that
are attributable to the subsidiary undertaking concerned. As permitted by IFRS 1, the Group has elected to deem the cumulative currency translation differences of the Group to be &#163;nil as at August 1, 2004. As a result the gain or loss on
disposal of an overseas subsidiary undertaking does not include currency translation differences arising before August 1, 2004. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Foreign currency transactions entered into during the year are translated into sterling at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet date. All currency translation differences are taken to the income statement with the exception of differences on foreign currency borrowings to the extent that they are
used to finance or provide a hedge against foreign currency net assets as detailed above.</FONT></P>
<P> <B><FONT size=2 face="sans-serif">Revenue <br>
  </FONT></B><FONT size=2 face="sans-serif">Revenue is the amount receivable for
  the provision of goods and services falling within the Group's ordinary activities,
  excluding intra-group sales, estimated and actual sales returns, trade and early
  settlement discounts, value added tax and similar sales taxes. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Revenue from the provision of goods is recognized when the risks and rewards of ownership of goods have been transferred to the customer. The risks and rewards of ownership of goods are deemed to have been transferred
when the goods are shipped to, or are picked up by, the customer. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Revenue from services, other than those that arise from construction service contracts (see below), are recognized when the service provided to the customer has been completed. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Revenue in respect of construction service contracts, where the Group is providing framing lumber installation services to residential property companies, is recognized using the percentage of completion method, with
the percentage complete being determined by comparing the percentage of costs incurred to date with the estimated total costs of the contract. Losses on these contracts, if any, are recognized in the period when such losses become probable and can
be reasonably estimated. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Revenue from the provision of goods and all services is only recognized when the amounts to be recognized are fixed or determinable and collectibility is reasonably assured. </FONT></P>
<p><B><FONT size=2 face="sans-serif">Vendor rebates<br>
</FONT></B><B><FONT size=2 face="sans-serif"><br>
  </FONT></B><FONT size=2 face="sans-serif">The Group enters into arrangements with
    certain vendors providing for inventory purchase rebates. These purchase rebates
    are accrued as earned and are recorded initially as a reduction in inventory with
    a subsequent reduction in cost of sales when the related product is sold.</FONT></p>
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<P> <FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT>
</P>
<P> <B><FONT size=2 face="sans-serif">Business combinations<br>
  </FONT></B><FONT size=2 face="sans-serif">The Group has applied the purchase
  method in its accounting for the acquisition of subsidiaries. </FONT></P>
<P>
<FONT size=2 face="sans-serif">As permitted by IFRS 1, the Group has elected not to apply IFRS 3 &#147;Business Combinations&#148; to acquisitions of subsidiaries that were recognized before August 1, 2004 and as a result the carrying amount of
goodwill recognized as an asset under UK GAAP has been brought forward unadjusted as the cost of goodwill recognized under IFRS as at August 1, 2004. IFRS 3 has been applied with effect from August 1, 2004 and goodwill amortization ceased from that
date. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The excess of the cost of acquisition over the fair value of the Group&#146;s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
Group&#146;s share of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. </FONT></P>
<B><FONT size=2 face="sans-serif">Intangible assets</FONT></B>
<P> <I><FONT size=2 face="sans-serif">Goodwill <br>
  </FONT></I><FONT size=2 face="sans-serif">Goodwill represents the excess of
  the cost of an acquisition over the fair value of the Group&#146;s share of
  the net identifiable assets of the acquired subsidiary undertaking at the date
  of acquisition. Goodwill on acquisitions of subsidiary undertakings is included
  in intangible assets.</FONT></P>
<P>
<FONT size=2 face="sans-serif">Goodwill is not amortized but is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the lowest level within the Group at which the associated goodwill is monitored for
management purposes and each is not larger than the primary or secondary reporting segments determined in accordance with IAS 14 &#147;Segmental Reporting&#148;. </FONT></P>
<P> <I><FONT size=2 face="sans-serif">Other intangible assets <br>
  </FONT></I><FONT size=2 face="sans-serif">An intangible asset, which is an identifiable
  non-monetary asset without physical substance, is recognized to the extent that
  it is probable that the expected future economic benefits attributable to the
  asset will flow to the Group and that its cost can be measured reliably. The
  asset is deemed to be identifiable when it is separable or when it arises from
  contractual or other legal rights. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Intangible assets, primarily brands, trade names and customer relationships, acquired as part of a business combination are capitalized separately from goodwill and are carried at cost less accumulated amortization and
accumulated impairment losses. Amortization is calculated using the reducing balance method for customer relationships and the straight-line method for other intangible assets. The cost of the intangible assets is amortized over their estimated
useful lives, which can range from less than a year to 25 years, depending on the nature of the intangible asset. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset and is carried at cost less accumulated amortization and accumulated impairment losses.
Costs include software licences, consulting costs attributable to the development, design and implementation of the computer software and internal costs directly attributable to the development, design and implementation of the computer software.
Costs in respect of training and data conversion are expensed as incurred. Amortization is calculated using the straight-line method so as to charge the cost of the computer software to the income statement over its estimated useful life (3-5
years). </FONT></P>
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<P> <FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<P> <B><FONT size=2 face="sans-serif">Property, plant and equipment (&#147;PPE&#148;)<br>
  </FONT></B><FONT size=2 face="sans-serif">PPE is carried at cost less accumulated
  depreciation and accumulated impairment losses, except for land and assets in
  the course of construction, which are not depreciated and are carried at cost
  less accumulated impairment losses. Cost includes expenditure that is directly
  attributable to the acquisition of the items. In addition, subsequent costs
  are included in the asset&#146;s carrying amount or recognized as a separate
  asset, as appropriate, only when it is probable that future economic benefits
  associated with the item will flow to the Group and the cost of the item can
  be measured reliably. All other repairs and maintenance costs are charged to
  the income statement during the financial period in which they are incurred.
</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD colspan="2"> <font size=2 face="sans-serif">Depreciation on assets is
        calculated using the straight-line method to allocate the cost of each
    asset to its residual value over its estimated useful life, as follows:</font></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Freehold buildings and long leaseholds</FONT></TD>
    <TD width="50%"> <FONT size=2 face="sans-serif">35-50 years</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Short leaseholds</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">over the period of the lease</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Plant and machinery</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">7-10 years</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Fixtures and fittings</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">5-7 years</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Computers</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">3-5 years</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Motor vehicles</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">4 years</FONT></TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The residual values and useful lives of PPE are reviewed and adjusted if appropriate at each balance sheet date. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Borrowing costs attributable to assets under construction are charged to the income statement in the period in which they are incurred. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Leased assets <br>
  </FONT></B><FONT size=2 face="sans-serif">Assets held under finance leases,
  which are leases where substantially all the risks and rewards of ownership
  of the asset have transferred to the Group, are capitalized in the balance sheet
  and depreciated over the shorter of the lease term or their useful lives. The
  asset is recorded at the lower of its fair value and the present value of the
  minimum lease payments at the inception of the lease. The capital elements of
  future obligations under finance leases are included in liabilities in the balance
  sheet and analysed between current and non-current amounts. The interest elements
  of future obligations under finance leases are charged to the income statement
  over the periods of the leases and represent a constant proportion of the balance
  of capital repayments outstanding in accordance with the effective interest
  rate method. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. The cost of operating leases (net of any incentives received from the lessor) is charged to the
income statement on a straight line basis over the periods of the leases. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Assets held for sale <br>
  </FONT></B><FONT size=2 face="sans-serif">Assets are classified as held for
  sale if their carrying amount will be recovered by sale rather than by continuing
  use in the business. For this to be the case, the asset must be available for
  immediate sale in its present condition, management must be committed to and
  have initiated a plan to sell the asset which, when initiated, was expected
  to result in a completed sale within 12 months. Assets that are classified as
  held for sale are not depreciated and are measured at the lower of their carrying
  amount and fair value less costs to sell.</FONT></P>
<P> <B><FONT size=2 face="sans-serif">Impairment of assets <br>
  </FONT></B><FONT size=2 face="sans-serif">Assets that have an indefinite useful
  life, such as goodwill, are not subject to amortization and are tested annually
  for impairment and whenever events or changes in circumstance indicate that
  the carrying amount may not be recoverable. Assets that are subject to amortization
  are tested for impairment whenever events or changes in circumstance indicate
  that the carrying amount may not be recoverable. An impairment loss is recognized
  for the amount by which the asset&#146;s carrying amount exceeds its recoverable
  amount. The recoverable amount is the higher of an asset&#146;s fair value less
  costs to sell and value in use. For the purposes of assessing impairment, assets
  are grouped at the lowest levels for which there are separately identifiable
  cash flows. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Inventories <br>
  </FONT></B><FONT size=2 face="sans-serif">Inventories are stated at the lower
  of cost and net realizable value. Cost is determined using the first-in, first-out
  (FIFO) method or the average cost method as appropriate to the nature of the
  transactions in those items of inventory. The cost of goods purchased for resale
  includes import and custom duties, transport and handling costs, freight and
  packing costs and other attributable costs less trade discounts, rebates and
  other subsidies. It excludes borrowing costs. Net realizable value is the estimated
  selling price in the ordinary course of business, less applicable variable selling
  expenses. </FONT></P>
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<P> <FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<P> <B><FONT size=2 face="sans-serif">Taxation <br>
  </FONT></B><FONT size=2 face="sans-serif">Current tax represents the expected
  tax payable (or recoverable) on the taxable income for the year using tax rates
  enacted or substantively enacted at the balance sheet date and taking into account
  any adjustments arising from prior years. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss.</font></p>
<p><FONT size=2 face="sans-serif">Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax
assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.</FONT></P>
<p><FONT size=2 face="sans-serif">Deferred tax is provided on temporary differences arising on investments in subsidiaries
except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Derivative financial instruments <br>
  </FONT></B><FONT size=2 face="sans-serif">Derivative financial instruments,
  in particular, interest rate swaps and currency swaps, are used to manage the
  financial risks arising from the business activities of the Group and the financing
  of those activities. There is no trading activity in derivative financial instruments.
  </FONT></P>
<P>
<FONT size=2 face="sans-serif">At the inception of a hedging transaction entailing the use of derivative financial instruments, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management
objective and the strategy underlying the proposed transaction. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedge in offsetting
movements in the fair values or cash flows of the hedged items.</FONT></P>
<p><FONT size=2 face="sans-serif">Derivative financial instruments are recognized as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfil
the criteria for hedge accounting contained in IAS 39, changes in their fair values are recognized in the income statement.</font></p>
<p><FONT size=2 face="sans-serif">When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or
net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the
resulting gain or loss is recognized in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. Where the hedging relationship is classified as a cash flow
hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognized directly in equity rather than in the income statement. When the hedged item is
recognized in the financial statements, the accumulated gains and losses recognized in equity are either recycled to the income statement or, if the hedged item results in a non-financial asset, are recognized as adjustments to its initial carrying
amount.</FONT></P>
<P> <B><FONT size=2 face="sans-serif">Pensions and other post retirement benefits
  <br>
  </FONT></B><FONT size=2 face="sans-serif">Contributions to defined contribution
  pension plans and other post retirement benefits are charged to the income statement
  as incurred. </FONT></P>
<P>
<FONT size=2 face="sans-serif">For defined benefit pension plans and other retirement benefits, the cost is calculated annually using the projected unit credit method and is recognized over the average expected remaining service lives of
participating employees, in accordance with the recommendations of independent qualified actuaries. The current service cost of defined benefit plans is recorded within operating profit. The total expected return from pension scheme assets less the
total interest on pension scheme liabilities is recorded within finance revenue if a gain and finance costs if an expense. Past service costs resulting from enhanced benefits are recorded within operating profit and recognized on a straight-line
basis over the vesting period, or immediately if the benefits have vested. Actuarial gains and losses, which represent differences between the expected and actual returns on the plan assets and the effect of changes in actuarial assumptions, are
recognized in full in the statement of recognized income and expense in the period in which they occur. The defined benefit liability or asset recognized in the balance sheet comprises the net total for each plan of the present value of the benefit
obligation at the balance sheet date, less any past service costs not yet recognized, less the fair value of the plan assets, if any, at the balance sheet date. Where a plan is in surplus, the asset recognized is limited to the amount of any
unrecognized past service costs and the present value of any amount which the Group expects to recover by way of refunds or a reduction in future contributions.</FONT></P>
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<P> <FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<P> <B><FONT size=2 face="sans-serif">Trade receivables <br>
  </FONT></B><FONT size=2 face="sans-serif">Trade receivables are recognized initially
  at fair value and measured subsequently at amortized cost using the effective
  interest method, less provision for impairment. A provision for impairment of
  trade receivables is established when there is objective evidence that the Group
  will not be able to collect all amounts due according to the original terms
  of the receivables. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Cash and cash equivalents <br>
  </FONT></B><FONT size=2 face="sans-serif">Cash and cash equivalents includes
  cash in hand, deposits held at call with banks, other short-term highly liquid
  investments with original maturities of three months or less, and bank overdrafts.
  Bank overdrafts are shown within borrowings in current liabilities on the balance
  sheet to the extent that there is no right of offset and practice of net settlement
  with cash balances.</FONT></P>
<P> <B><FONT size=2 face="sans-serif">Share capital <br>
  </FONT></B><FONT size=2 face="sans-serif">The Company only has one class of
  shares, ordinary shares, which are classified as equity. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Where any Group company purchases the Company&#146;s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity
attributable to the Company&#146;s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction
costs and the related tax effects, is included in equity attributable to the Company&#146;s equity holders. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Borrowings <br>
  </FONT></B><FONT size=2 face="sans-serif">Borrowings are recognized initially
  at cost being the fair value of the consideration received net of transaction
  costs incurred.</FONT></P>
<P>
<FONT size=2 face="sans-serif">Borrowings are subsequently stated at amortized cost with any difference between the proceeds (net of transaction costs) and the redemption value being recognized in the income statement over the period of the
borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Investments <br>
  </FONT></B><FONT size=2 face="sans-serif">The Group classifies its investments
  in the following categories: financial assets at fair value through profit or
  loss; loans and receivables; held-to-maturity investments; and available-for-sale
  financial assets. The classification depends on the purpose for which the investments
  were acquired. Management determines the classification of its investments at
  initial recognition and re-evaluates this designation at every reporting date.
  </FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><i><font size=2 face="sans-serif">(a)</font></i></td>
    <td><i><font size=2 face="sans-serif">Financial assets at fair value through
      profit or loss </font></i></td>
  </tr>
  <tr>
    <td colspan="2"> <font size=2 face="sans-serif">This category comprises financial
      assets held for trading which have been acquired principally for the purpose
      of selling in the short-term. Derivatives also fall within this category
      unless they are designated as hedges and the hedge is effective for accounting
      purposes. Assets in this category are classified as current. </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><i><font size=2 face="sans-serif">(b)</font></i></td>
    <td> <i><font size=2 face="sans-serif">Loans and receivables </font></i></td>
  </tr>
  <tr>
    <td colspan="2"> <FONT size=2 face="sans-serif">Loans and receivables are
      non-derivative financial assets with fixed or determinable payments that
      are not quoted in an active market and with no intention of trading. They
      are included in current assets, except for maturities greater than 12 months
      after the balance sheet date, which are classified as non-current assets.
      Loans and receivables are included in trade and other receivables in the
      balance sheet.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><i><font size=2 face="sans-serif">(c)</font></i></td>
    <td> <i><font size=2 face="sans-serif">Held-to-maturity investments </font></i></td>
  </tr>
  <tr>
    <td colspan="2"> <FONT size=2 face="sans-serif">Held-to-maturity investments
      are non-derivative financial assets with fixed or determinable payments
      and fixed maturities that the Group&#146;s management has the positive intention
      and ability to hold to maturity. They are included in non-current assets
      unless the investment is due to mature within 12 months of the balance sheet
      date.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><I><FONT size=2 face="sans-serif">(d)</FONT></I></td>
    <td> <I><FONT size=2 face="sans-serif">Available-for-sale financial assets
      </FONT></I></td>
  </tr>
  <tr>
    <td colspan="2"> <FONT size=2 face="sans-serif">Available-for-sale financial
      assets are non-derivative financial assets that are either designated in
      this category or not classified in any of the other categories. They are
      included in non-current assets unless management intends to dispose of the
      investment within 12 months of the balance sheet date.</FONT></td>
  </tr>
</table>
<P align="center"><FONT size=2 face="sans-serif">F-11</FONT></P>
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<div style="page-break-before:always"></div><page><a name="pf12"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Group accounting policies<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<P>
<B><FONT size=2 face="sans-serif">Investments (continued) <br>
</FONT></B><FONT size=2 face="sans-serif">Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognized when the rights to receive cash flows
from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are subsequently carried at
amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of the &#147;Financial assets at fair value through profit or loss&#148; category are included in the income
statement in the period in which they arise. Unrealized gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognized in equity. When securities classified as available-for-sale
are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Provisions <br>
</FONT></B><FONT size=2 face="sans-serif">Provisions
for environmental restoration, restructuring costs and legal claims are recognized
when the Group has a present legal or constructive obligation as a result of
past events, it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated.
Such provisions are measured at the present value of management&#146;s best estimate
of the expenditure required to settle the present obligation at the balance sheet
date. The discount rate used to determine the present value reflects current
market assessments of the time value of money. Provisions are not recognized
for future operating losses. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Provisions for insurance represent an estimate, based on historical experience, of the ultimate cost of settling outstanding claims and claims incurred but not reported at the balance sheet. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Share-based payments <br>
</FONT></B><FONT size=2 face="sans-serif">Share-based
incentives are provided to employees under the Group&#146;s executive share option,
long-term incentive and share purchase schemes. The Group recognizes a compensation
cost in respect of these schemes that is based on the fair value of the awards,
measured using Black-Scholes, Binomial and Monte Carlo valuation methodologies.
For equity-settled schemes, the fair value is determined at the date of grant
and is not subsequently re-measured unless the
conditions on which the award was granted are modified. For cash-settled schemes,
the fair value is determined at the date of grant and is re-measured at each
balance sheet date until the liability is settled. Generally, the compensation
cost is recognized on a straight-line basis over the vesting period. Adjustments
are made to reflect expected and actual forfeitures during the vesting period
due to the failure to satisfy service conditions or non-market performance conditions.</FONT></P>
<P>
<FONT size=2 face="sans-serif">As permitted by IFRS 1, the Group has applied IFRS 2 &#147;Share-based Payment&#148; retrospectively only to equity-settled awards that had not vested as at August 1, 2004 and were granted on or after 7 November 2002
and cash-settled awards that had not vested as at August 1, 2004. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Dividends payable<br>
  </FONT></B><FONT size=2 face="sans-serif">Dividends on ordinary shares are recognized
  in the Group&#146;s financial statements in the period in which the dividends
  are approved by the shareholders of the Company (generally in the case of the
  final dividend) or paid (in the case of interim dividends).</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-12</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf13"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">1.</font></b></td>
    <td><b><font size=2 face="sans-serif"> Critical accounting estimates</font></b></TD>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions in certain circumstances that affect reported amounts. The most sensitive estimates affecting the
financial statements are in the areas of assessing the recoverability of receivables, the net realizable value of inventory, the impairment of goodwill and long-lived intangible assets, the reserves in respect of self-insured insurance, the
consideration received from vendors and pensions and other post-retirement benefits. </FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Allowance for doubtful accounts<br>
</FONT></I><FONT size=2 face="sans-serif">Provision is made against accounts that in the estimation of management may be impaired. Within each of the businesses assessment is made locally of the recoverability of accounts receivable based on a range of factors
including the age of the receivable and the creditworthiness of the customer. The provision is assessed monthly with a detailed formal review of balances and security being conducted at the full year and half year. Determining the recoverability of
an account involves estimation as to the likely financial condition of the customer and their ability to subsequently make payment. If the Group is cautious as to the financial condition of the customer the Group may provide for accounts that are
subsequently recovered. Similarly if the Group is optimistic as to the financial condition of the customer the Group may not provide for an account that is subsequently determined to be irrecoverable. Furthermore, while the Group has a large
geographically dispersed customer base, a slowdown in the markets in which the Group operates may result in higher than expected uncollectable amounts and therefore higher (or lower) than anticipated charges for irrecoverable receivables. In recent
years the Group has not experienced significant variation in the amount charged to the income statement in respect of doubtful accounts, when compared to sales. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group held a provision for impairment of receivables at July 31, 2006 amounting to &#163;41 million (2005: &#163;32 million). </FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Inventories<br>
</FONT></I><FONT size=2 face="sans-serif">For financial reporting purposes the Group evaluates its inventory to ensure it is carried at the lower of cost or net realizable value. Provision is made against slow moving, obsolete and damaged inventories. Damaged
inventories are identified and written down through the inventory counting procedures conducted within each business. Provision for slow moving and obsolete inventories is assessed by each business as part of their ongoing financial
reporting. Obsolescence is assessed based
on comparison of the level of inventory holding to the projected likely future
sales. Future sales are assessed based on historical experience and adjusted
where the manufacturer has indicated that it will no longer continue to manufacture
the particular item. To the extent that future events impact the saleability
of inventory these provisions could vary significantly. For example, changes
in specifications or regulations may
render inventory, previously considered to have a realizable value in excess
of cost, obsolete and requiring such inventory to be fully written off. The Group
held allowances in respect of inventory balances at July 31, 2006 amounting to &#163;134
million (2005: &#163;99 million).</FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Impairment of long-lived assets<br>
</FONT></I><FONT size=2 face="sans-serif">Wolseley periodically evaluates the net realizable value of long-lived assets, including goodwill, other intangible assets and tangible fixed assets, relying on a number of factors, including operating results,
business plans and projected future cash flows. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually for impairment and whenever events or changes in circumstance indicate that the carrying amount may
not be recoverable. Assets that are subject to amortization are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the
asset&#146;s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset&#146;s fair value less costs to sell and value in use. The fair value is in most cases based on the discounted present value of the future
cash flows expected to arise from the cash generating unit to which the goodwill relates, or from the individual asset or asset group. Estimates are used in deriving these cash flows and the discount rate. </FONT></P>
<P> <FONT size=2 face="sans-serif">The complexity of the estimation process and
  issues related to the assumptions, risks and uncertainties inherent with the
  application of the intangible and tangible fixed asset accounting policies affect
  the amounts reported in the financial statements. In particular, if different
  estimates of the projected future cash flows or a different selection of an
  appropriate discount rate were made, these changes could materially alter the
  projected value of the cash flows of the asset, and as a consequence materially
  different amounts would be reported in the financial statements. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-13</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf14"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Self-insured insurance<br>
</FONT></I><FONT size=2 face="sans-serif">The
Group operates a captive insurance company, Wolseley Insurance Limited, which
is registered and operational in the Isle of Man. This company provides reinsurance
exclusively to certain companies within the Group, principally to cover US casualty
and property damage risks. Provision is made based on actuarial assessment of
the liabilities arising from the insurance coverage provided. The actuarial assessment
of the reserve for future claims necessarily
includes estimates as to the likely trend of future claims costs and the estimates
as to the emergence of further claims subsequent to the year end. An actuarial
review of claims is performed annually. To the extent that actual claims differ
from those projected the provisions could vary significantly. At July 31, 2006,
the provision for claims arising from this insurance was &#163;47 million (2005: &#163;35
million).</FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Consideration received from vendors<br>
</FONT></I><FONT size=2 face="sans-serif">The Group enters into agreements with many of its vendors providing for inventory purchase rebates primarily upon achievement of specified volume purchasing levels with many of these agreements applying to sales in a
calendar year. For certain agreements the rebate rises as a proportion of purchases as higher quantities or values of purchases are made. The Group accrues the receipt of vendor rebates as part of its cost of sales for products sold, taking into
consideration cumulative purchases of inventory to date and projected purchases through to the end of the qualifying period. Rebates are accrued for each reporting period with an extensive reassessment of the rebates earned being performed at the
end of the financial year and halfway through the financial year. The Group has agreements with numerous and geographically dispersed suppliers, but a slowdown in the markets in which the Group operates, or a significant change in the profile of
products purchased, may result in purchases for the remainder of the year differing significantly from those projected. Consequently the rebate actually received may vary from that accrued in the financial statements. </FONT></P>
<P>
<I><FONT size=2 face="sans-serif">Pensions and other post retirement benefits<br>
</FONT></I><FONT size=2 face="sans-serif">The Group operates defined benefit pension schemes in the United Kingdom and in a number of overseas locations, that are accounted for using methods that rely on actuarial assumptions to estimate costs and liabilities
for inclusion in the financial statements.  These actuarial assumptions include discount rates, assumed rates of return, salary increases, employee turnover rates and mortality rates. </FONT></P>
<P>
<FONT size=2 face="sans-serif">While management believes that the actuarial assumptions are appropriate, any significant changes to those used would affect the balance sheet and income statement. The Group considers that the most significant
assumptions are the discount rate and the expected return on plan assets. The Group has estimated the sensitivity of the financial statements to changes in these assumptions as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan=3 align=center> <FONT size=1 face="sans-serif">Impact on balance
      sheet</FONT></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <font size=1 face="sans-serif">Impact on income
      statement</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left><hr size="1"></TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left><hr size="1"></TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Effect of a change in discount
      rate</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1"></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Increase of 0.5%</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">55</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Decrease of 0.5%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(64</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(40</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Effect of a change in expected
      return on assets</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Increase of 0.5%</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Decrease of 0.5%</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-14</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf15"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">2.</font></b></td>
    <td><b><font size=2 face="sans-serif">Segmental analysis </font></b></td>
  </tr>
</table>
<P><FONT size=2 face="sans-serif">The Group has a single business segment, the distribution and supply of construction materials and services. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s geographical segments are Europe, consisting of UK and Ireland, France and Central Europe, and North America. The Group has determined that its geographical segments are its primary segments for IFRS
reporting purposes. The revenue, operating profit and trading profit of the Group&#146;s geographical segments are detailed in the following three tables. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Revenue</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">2,690</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">2,351</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,725</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,644</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Central Europe</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">735</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">642</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Europe</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5,150</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4,637</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">North America</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">9,008</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6,619</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Group</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11,256</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Operating profit</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font>        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font>        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">188</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">181</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">France</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">90</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">97</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">European central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Europe</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">301</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">304</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">North America</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">570</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">423</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Group central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(37</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(25</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Group</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">834</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">702</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Trading profit (note 9)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">201</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">183</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">France</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">91</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">98</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">31</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">European central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Europe</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">316</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">307</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">North America</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">603</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">426</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Group central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(37</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(25</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Group</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">882</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">708</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center"> <FONT size=2 face="sans-serif">F-15</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf16"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<P>
<FONT size=2 face="sans-serif">Other segmental information: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size=1 face="sans-serif">UK and Ireland</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">France</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">North America</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Group Centre</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">For the year ended July 31, 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Depreciation of property, plant and equipment </FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size=2 face="sans-serif">33</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">22</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">72</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">134</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amortization of non-acquired intangibles</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">13</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">33</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">48</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">46</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">23</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">106</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">188</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to property, plant and equipment</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">93</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">33</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">217</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">365</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to non-acquired intangible assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">21</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">93</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">33</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">220</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">390</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to goodwill</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">192</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">165</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">387</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to acquired intangible assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">83</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">162</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">251</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Segment assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,812</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,063</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">414</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4,247</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">74</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7,610</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
        </TD>
    <TD></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan=8 align=left>
<FONT size=2 face="sans-serif">Reconciliation to total assets as reported in the Group Balance Sheet:</FONT></TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">16</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Financial assets &#150; current and non-current</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Current tax receivable</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">416</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total assets as reported in the Group Balance Sheet</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8,078</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Segment liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">668</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">532</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">136</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,489</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">102</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,927</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
        </TD>
    <TD></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan=8 align=left>
<FONT size=2 face="sans-serif">Reconciliation to total liabilities as reported in the Group Balance Sheet:</FONT></TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Current tax payable</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">91</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,276</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">75</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">29</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">88</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total liabilities as reported in the Group Balance Sheet</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5,486</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"><font size="1" face="sans-serif">F-16</font></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf17"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT><BR>
</P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size=1 face="sans-serif">UK and Ireland</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">France</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">North America</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Group Centre</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">For the year ended July 31, 2005</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Depreciation of property, plant and equipment </FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right><font size=2 face="sans-serif">35</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=7% align=right>
<FONT size=2 face="sans-serif">23</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">49</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=7% align=right>
<FONT size=2 face="sans-serif">114</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amortization of non-acquired intangibles</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">38</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">53</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">123</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to property, plant and equipment</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">54</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">37</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">134</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">238</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to non-acquired intangible assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">21</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">54</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">37</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">136</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">20</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">259</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to goodwill</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">34</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">78</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">121</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions to acquired intangible assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">83</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">108</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Segment assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,226</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">986</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">342</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3,470</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6,042</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
        </TD>
    <TD align="right"></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan=8 align=left>
<FONT size=2 face="sans-serif">Reconciliation to total assets as reported in the Group Balance Sheet:</FONT></TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">55</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Financial assets &#150; current and non-current</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Current tax receivable</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial assets</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">381</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=4 align=left>
<FONT size=2 face="sans-serif">Total assets as reported in the Group Balance Sheet</FONT></TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6,499</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right"><HR noshade size=1></TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Segment liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">631</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">491</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">124</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,241</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,506</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
      <HR noshade size=2>
        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
        </TD>
    <TD align="right"></TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan=8 align=left>
<FONT size=2 face="sans-serif">Reconciliation to total liabilities as reported in the Group Balance Sheet:</FONT></TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Current tax payable</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">70</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,484</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=1>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total liabilities as reported in the Group Balance Sheet</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4,198</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">&nbsp;        </TD>
        <TD align="right">&nbsp;</TD>
        <TD align="right">
<HR noshade size=2>
        </TD>
    <TD align="right">&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Revenue, trading profit and operating profit for North America can be further analyzed by operating segment as follows:</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-17</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf18"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P align="left">
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width=100% border=0 cellpadding=0 cellspacing=0>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">2006</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">2005</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=1 face="sans-serif">Revenue</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"><hr noshade size=1>
    </td>
    <td width="2%" align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">US Plumbing and Heating</font></td>
    <td width=2% align=right bgcolor="#eeeeee">&nbsp;</td>
    <td width=8% align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">5,396</font> </td>
    <td width=2% align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td width=8% align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">3,858</font> </td>
    <td width=2% valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=2 face="sans-serif">US Building Materials</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">2,966</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">2,249</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">Canada</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">646</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">512</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom"><hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top" bgcolor="#eeeeee">
    <td valign="bottom"> <font size=2 face="sans-serif">North America</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">9,008</font>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">6,619</font>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=2>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=2>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=1 face="sans-serif">Operating profit</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"><hr noshade size=1>
    </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">US Plumbing and Heating</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">369</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">258</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=2 face="sans-serif">US Building Materials</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">168</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">130</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">Canada</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">44</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">36</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=2 face="sans-serif">North American central costs</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">(11</font> </td>
    <td align="left" valign="bottom"> <font size=2 face="sans-serif">)</font></td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">(1</font> </td>
    <td valign="bottom"> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">North America</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">570</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">423</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=2>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=2>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=1 face="sans-serif">Trading profit (note 9)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"><hr noshade size=1>
</td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp;    </td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">US Plumbing and Heating</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">378</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">260</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=2 face="sans-serif">US Building Materials</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">192</font> </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">131</font> </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">Canada</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">44</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">36</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom"> <font size=2 face="sans-serif">North American central costs</font></td>
    <td align=right>&nbsp;</td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">(11</font> </td>
    <td align="left" valign="bottom"> <font size=2 face="sans-serif">)</font></td>
    <td align=right valign="bottom"> <font size=2 face="sans-serif">(1</font> </td>
    <td valign="bottom"> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom">&nbsp; </td>
    <td align="right">&nbsp;</td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom">
      <hr noshade size=1>
    </td>
    <td valign="bottom">&nbsp; </td>
  </tr>
  <tr align="left" valign="top">
    <td valign="bottom" bgcolor="#eeeeee"><font size=2 face="sans-serif">North America</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">603</font> </td>
    <td align="left" valign="bottom" bgcolor="#eeeeee">&nbsp; </td>
    <td align=right valign="bottom" bgcolor="#eeeeee"> <font size=2 face="sans-serif">426</font> </td>
    <td valign="bottom" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="top">&nbsp;</td>
    <td align="right" valign="bottom"><hr noshade size=2></td>
    <td align="left" valign="bottom">&nbsp; </td>
    <td align="right" valign="bottom"><hr noshade size=2></td>
  </tr>
</table>
<P align="left"><FONT size=2 face="sans-serif">  </FONT><FONT size=2 face="sans-serif">The
    change in revenue and trading profit between the years ended July 31, 2005
    and 2006 can be analyzed into the effects of changes
of exchange rates, the effects of acquisitions made during the financial year,
and the
effect of taking in a full year&#146;s revenue and trading profit of businesses
acquired
part way through the previous year, with the remainder being organic change. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=1 face="sans-serif">New</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Increment</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=1 face="sans-serif">acquisitions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">on 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Organic</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Organic</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Exchange</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">acquisitions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">change</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">change</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Analysis of movement in revenue</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">%</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp; </TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,351</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">277</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">14</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">48</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2.1</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,690</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,644</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">27</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,725</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Central
        Europe</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">642</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">47</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.4</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">735</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp; </TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Europe</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4,637</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">332</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">50</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">131</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2.8</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5,150</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp; </TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">US Plumbing
        and Heating</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3,858</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">135</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">264</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">168</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">971</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">24.3</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5,396</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">US Building Materials</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,249</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">79</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">262</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">280</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">96</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,966</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Canada</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">512</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">60</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">61</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">10.7</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">646</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp; </TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">North America</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6,619</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">274</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">530</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">457</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,128</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">16.4</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">9,008</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp; </TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Group</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11,256</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">274</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">862</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">507</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,259</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">10.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14,158</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp; </TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">New</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Increment</FONT></TD>
        <TD align=left></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">acquisitions</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">on 2005</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Organic</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Organic</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Exchange</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">acquisitions</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">change</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">change</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2006</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Analysis of change in trading profit (note 9)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">%</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">183</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1.1</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">201</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">France</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">98</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(9</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(9.2</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">91</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">30</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2.1</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">31</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">European central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Europe</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">307</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">22</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(15</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(4.9</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">316</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US Plumbing and Heating</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">260</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">81</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30.0</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">378</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">US Building Materials</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">131</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">20</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">27</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">9</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">6.0</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">192</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Canada</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">36</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10.0</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">44</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">North American central costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(10</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(11</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">North America</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">426</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">38</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">38</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">83</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">18.6</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">603</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Group central costs</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(25</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(12</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left bgcolor="#eeeeee">

        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(37</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Group</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">708</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">60</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">40</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">56</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">7.8</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">882</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=2>
  </TD>
  <TD>&nbsp; </TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp; </TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp; </TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-18</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf19"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements </FONT><br>
<FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR align="left" valign="top">
    <TD><b><font size=2 face="sans-serif">3.</font></b>&nbsp; </TD>
    <TD><b><font size=2 face="sans-serif">Amounts charged in arriving at operating
          profit</font></b></TD>
  </TR>
  <TR align="left" valign="top">
    <TD width="3%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right valign="bottom">
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right valign="bottom">
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Depreciation of property, plant and equipment</FONT></TD>
        <TD width=8% align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">134</FONT>
        </TD>
        <TD width=2% align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD width=8% align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">114</FONT>
        </TD>
        <TD width=2% align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amortization of non-acquired intangible assets</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">6</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(Profit) on disposal of property, plant and equipment and assets available for sale</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(16</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(11</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Staff costs (note 10)</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">1,943</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">1,526</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Amortization of acquired intangible assets</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">48</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">6</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Operating lease rentals: land and buildings</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">168</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">125</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Operating lease rentals: plant and machinery</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">20</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">12</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amounts included in costs of goods sold with respect to inventory</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">10,007</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">8,182</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Amounts charged to write inventory down to net realizable value</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">32</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">11</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade receivables impairment</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">5</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">(14</FONT>
        </TD>
        <TD align=left valign="bottom">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amounts payable to the auditors:</FONT></TD>
        <TD align=left valign="bottom">

        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=left valign="bottom">

        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Audit fees</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">5.1</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">3.5</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other assurance services</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">0.3</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">0.3</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Taxation</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">4.0</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2.8</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Due diligence reviews</FONT></TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">0.2</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
        <TD align=right valign="bottom">
<FONT size=2 face="sans-serif">0.4</FONT>
        </TD>
        <TD align=left valign="bottom">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Other services</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">0.2</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=1>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Total fees payable to the auditors</FONT></TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">9.6</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right valign="bottom" bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">7.2</FONT>
        </TD>
        <TD align=left valign="bottom" bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=2>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
        <TD valign="bottom">
<HR noshade size=2>
        </TD>
        <TD valign="bottom">&nbsp;      </TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The increase in audit fees mainly reflects the audit cost associated with Section 404 of the US Sarbanes-Oxley Act. </FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">4. </font></b></td>
    <td><b><font size=2 face="sans-serif">Finance revenue</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Interest receivable</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">49</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">27</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P><FONT size=2 face="sans-serif">Net interest receivable on construction
    loans included in finance revenue and finance costs amounted to &#163;12 million (2005: &#163;9
million).</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><B><FONT size=2 face="sans-serif">5.</FONT></B></td>
    <td><B><FONT size=2 face="sans-serif">Finance costs</FONT></B></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Interest payable</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
 &nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">&#150; Bank loans and overdrafts</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">110</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">55</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
 &nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">&#150; Finance lease charges</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Net pension finance cost</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">7</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation losses/(gains) on financial instruments</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
 &nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">&#150; Derivatives held at fair value through profit and loss</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">27</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
 &nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">&#150; Loans in a fair value hedging relationship</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(26</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
 &nbsp;<FONT size=2 face="sans-serif">&nbsp;&nbsp;&#150; Recycled from equity</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Total finance costs</FONT></TD>
        <TD align=right> <FONT size=2 face="sans-serif">114</FONT> </TD>
        <TD align=left>&nbsp; </TD>
        <TD align=right> <FONT size=2 face="sans-serif">64</FONT> </TD>
        <TD align=left>&nbsp; </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD><HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-19</FONT></P>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div><page><a name="pf20"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements </FONT><br>
<FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><B><FONT size=2 face="sans-serif">6.</FONT></B></td>
    <td><B><FONT size=2 face="sans-serif">Taxation</FONT></B></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">The tax charge for the year comprises:</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Current year tax charge</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">230</FONT>
        </TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">150</FONT>
        </TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Adjustments to tax charge in respect of prior years</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(8</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total current tax charge</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">223</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">142</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax charge: origination and reversal of temporary differences</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">44</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total tax charge</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">232</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">186</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
  <TD>&nbsp; </TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=2>
  </TD>
  <TD>&nbsp; </TD>
  <TD>
    <HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Tax on items charged to equity:</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><b>
    <FONT size=1 face="sans-serif">&#163;m</FONT>
        </b></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Current tax (charge)/credit on exchange movements offset in reserves</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(7</FONT>
        </TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">25</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax (charge)/credit on changes in the fair value of cash flow hedges</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Deferred tax (charge)/credit on actuarial loss on retirement benefits</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax credit/(charge) on available for sale investments</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Deferred tax (charge)/credit on share based payments</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT>
        </TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Total tax on items charged
      to equity</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
        <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right> <FONT size=2 face="sans-serif">34</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2></TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;      </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Tax reconciliation:</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">%</FONT></B>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">%</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Statutory UK corporation tax rate</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">30</FONT>
        </TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">30</FONT>
        </TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Prior year amounts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Non deductible and non-taxable items</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(6</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT>
        </TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Higher average tax rates in overseas companies</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Effective current tax rate on profit on ordinary activities before tax (and the amortization of intangibles)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">28</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">28</FONT>
        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD><hr noshade size=2></TD>
  <TD>&nbsp;</TD>
  <TD><hr noshade size=2></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>&nbsp;
        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">The tax expense can be analyzed as follows:</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>&nbsp;
        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">UK</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">38</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Overseas</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">205</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Current tax</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">223</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">142</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">UK</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Overseas</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">37</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-20</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf21"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">7.</font></b></td>
    <td><b><font size=2 face="sans-serif">Dividends</font></b></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Final paid for the year ended July 31, 2005 of 17.6 pence per share (year ended July 31, 2004: 16.0 pence)</FONT></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">104</FONT></TD>
        <TD width=2% align=right><font size="2">&nbsp;</font></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">94</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Interim paid for the year ended July 31, 2006 of 9.85 pence per share (year ended July 31, 2005: 8.8 pence)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">58</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">51</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Total 27.45 pence per share (2005: 24.8 pence)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">162</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">145</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Proposed final for the year ended July 31, 2006 of 19.55 pence per share (year ended July 31, 2005: 17.6 pence)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">128</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">104</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">The final dividend will be authorized by the
  shareholders at the Annual General Meeting and is not included as a liability
  in these financial statements. The final dividend is based on an anticipated
  657 million shares in issue on October 6, 2006, an increase of 59 million shares
  on the shares in issue as at July 31, 2006 due to the placing on September 25,
  2006.</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">8.</font></b></td>
    <td><b><font size=2 face="sans-serif">Earnings per share</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">Basic earnings per share of 90.77 pence (2005: 81.61 pence) is calculated on the profit for the year attributable to equity shareholders of &#163;537 million (2005: &#163;479 million) on a weighted average number of
ordinary shares in issue during the year of 592 million (2005: 587 million).</FONT></P>
<P>
<FONT size=2 face="sans-serif">The impact of all potentially dilutive share options
on earnings per share would be to increase the weighted average number of shares
in issue to 597 million (2005: 593 million) and to reduce basic earnings per
share

to 90.02 pence (2005: 80.75 pence).</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">9.</font></b></td>
    <td><b><font size=2 face="sans-serif">Trading profit </font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">Trading profit is defined as operating profit before the amortization of acquired intangibles and is a non-GAAP measure. The current businesses within the Group have arisen through internal organic growth and through
acquisition. Operating profit includes only the amortization of acquired intangibles arising on those businesses that have been acquired subsequent to July 31, 2004 and as such does not reflect equally the performance of businesses acquired prior to
July 31, 2004 (where no amortization of acquired intangibles was recognized), businesses that have developed organically (where no intangibles are attributed) and those businesses more recently acquired (where amortization of acquired intangibles is
charged). The Group believes that trading profit provides valuable additional information for users of the financial statements in assessing the Group&#146;s performance since it provides information on the performance of the business that local
managers are more directly able to influence and on a basis consistent across the Group.</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp; </font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Operating profit</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">834</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">702</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Add back: amortization
        of acquired intangibles</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">48</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trading profit</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">882</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">708</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit before tax</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">769</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">665</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Add back: amortization
        of acquired intangibles</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">48</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit before tax
        and the amortization of acquired intangibles</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">817</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">671</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center">
<FONT size=2 face="sans-serif">F-21</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf22"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">10.</font></b></td>
    <td>
      <p><b><font size=2 face="sans-serif">Employee information and Directors&#146;
        remuneration</font></b></p></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Employee benefit costs:</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Wages and salaries</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">1,630</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">1,257</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Social security costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">249</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">210</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Pension costs &#150; Defined contribution schemes</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">28</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Pension costs &#150; Defined benefit schemes (note 27)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Share options granted to directors and employees</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">22</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">23</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total employee benefit costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,943</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,526</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Details of Directors&#146; remuneration and share
options are set out in Item 6 &#8211; Directors, Senior Management and Employees &#8211; Paragraph
B, Compensation</FONT><FONT size=2 face="sans-serif">.
The aggregate
emoluments for all key management are set out in note 36. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Average weekly number of employees:</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><hr size="1" noshade></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">13,869</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">12,688</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">France</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9,631</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9,196</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Central Europe</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,983</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,767</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Europe</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26,483</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">24,651</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">North America</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">38,740</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">29,017</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Group</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">65,223</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">53,668</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The average weekly number of Group and Europe head office employees is included in UK and Ireland in the above table. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-22</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf23"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P align="left"> <FONT size=6 face="sans-serif">Notes to the consolidated financial
  statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">11.</font></b></td>
    <td><b><font size=2 face="sans-serif">Intangible assets: goodwill</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Cost and net book value</FONT></B></TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1, 2004</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">666</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">31</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">120</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">815</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(29</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">387</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2006</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,173</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="2" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The carrying value of goodwill by segment is as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp; </font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">UK and Ireland</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">410</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">219</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">France</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">153</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">135</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Central Europe</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">61</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">50</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
    <TD><hr size="2" noshade></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Europe</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">624</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">North America</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">549</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">411</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Group</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,173</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">815</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>

<P>
<FONT size=2 face="sans-serif">All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash generating units (CGUs). These are independent sources of income
streams, and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes, which may be at country, divisional, brand or regional level. Goodwill arising on business combinations after August 1,
2004 has been allocated to the CGUs that are expected to benefit from that business combination. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.</FONT></P>
<P>
<FONT size=2 face="sans-serif">The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use cash flow projections based on five year financial forecasts approved by management. The key assumptions for
these forecasts are those regarding revenue growth, net margin and the level of working capital required to support trading, which management estimates based on past experience and expectations of future changes in the market. To prepare value in
use calculations, the cash flow forecasts are extrapolated after the five-year period at the estimated average long-term inflation rate for each market (ranging from 1% to 3%), and discounted back to present value. The key assumption is the discount
rate, which uses an estimate of the Group&#146;s weighted average cost of capital, based on the three-month historic volatility of Wolseley shares and on benchmark interest rates, adjusted for the risk attributable to individual CGUs. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Impairment tests were performed for all CGUs during the year ended July 31, 2006. No impairments were identified. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-23</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf24"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">12.</font></b></td>
    <td><b><font size=2 face="sans-serif">Intangible assets: other</font></b></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Trade names</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Customer</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Software costs</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">and brands </FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><FONT size=1 face="sans-serif">relationships</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">
<FONT face="sans-serif">Other</FONT>&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">
<FONT face="sans-serif">&#163;m</FONT>&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Cost</FONT></B></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1, 2005</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">40</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">87</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">148</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(13</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">220</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">276</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2006</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">53</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">39</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">295</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">399</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Accumulated amortization</FONT></B></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">40</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">54</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2006</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">42</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">66</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount at July 31, 2006</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">39</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">34</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">253</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">333</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Trade names</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Customer</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Software costs</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right> <FONT size=1 face="sans-serif">and brands </FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><FONT size=1 face="sans-serif">relationships</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Other</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Cost</FONT></B></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1, 2004</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">21</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">87</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">129</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">40</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">87</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">148</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Accumulated amortization</FONT></B></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1, 2004</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD><font size="1">&nbsp;</font></TD>
  <TD><HR noshade size=1>
  </TD>
  <TD><font size="1">&nbsp;</font></TD>
  <TD><HR noshade size=1>
  </TD>
  <TD><font size="1">&nbsp;</font></TD>
  <TD><HR noshade size=1>
  </TD>
  <TD><font size="1">&nbsp;</font></TD>
  <TD><HR noshade size=1>
  </TD>
  <TD><font size="1">&nbsp;</font></TD>
  <TD><HR noshade size=1>
  </TD>
  <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount at July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">31</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">83</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">133</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR size=2 noshade>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount at August 1, 2004</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">13</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Software costs are either purchases from third parties or internally generated. Other intangible assets arise on business combinations. Included in the amounts above are &#163;28 million (2005: &#163;25 million)
relating to assets under construction. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-24</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf25"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">13.</font></b></td>
    <td><b><font size=2 face="sans-serif">Property, plant and equipment</font></b></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD colspan=3 align=center>
<FONT size=1 face="sans-serif">Land and buildings</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD colspan="3" align=left><HR noshade size=1></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Operating</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Plant</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Finance</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">leasehold</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">machinery</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Freehold</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">lease</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><FONT size=1 face="sans-serif">improvements</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><FONT size=1 face="sans-serif"> equipment</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Cost</FONT></B></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of August 1, 2005</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">619</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">56</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">146</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">717</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1,538</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(17</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(29</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(57</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">New businesses</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">46</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">46</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">99</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">48</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">205</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">365</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Disposals and transfers</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(25</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(53</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(80</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Property reclassified as held for sale</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of July 31, 2006</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">720</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">64</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">188</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">886</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">1,858</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Accumulated depreciation</FONT></B></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of August 1, 2005</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">131</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">81</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">432</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">655</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(15</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(22</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
 &nbsp;<FONT size=2 face="sans-serif">&#150; owned assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">22</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">85</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">119</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
 &nbsp;<FONT size=2 face="sans-serif">&#150; leased assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals and transfers</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(6</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(44</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(52</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Property reclassified as held for sale</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">As of July 31, 2006</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">143</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">88</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">472</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">714</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Owned assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">577</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">375</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,052</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Assets under finance leases</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">53</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">39</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">92</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount as of July 31, 2006</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">577</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">53</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">414</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,144</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount as of August 1, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">488</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">45</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">65</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">285</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">883</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Cost</FONT></B></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">As of August 1, 2004</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">507</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">50</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">121</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">630</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,308</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">19</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">20</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">44</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">New businesses</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">67</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">80</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Additions</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">86</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">24</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">122</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">238</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals and transfers</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(54</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(67</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(126</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Property reclassified as held for sale</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(6</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(6</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">619</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">56</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">146</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">717</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,538</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=2 face="sans-serif">Accumulated depreciation</FONT></B></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">As of August 1, 2004</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">117</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">66</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">395</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">589</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange rate adjustment</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
 &nbsp;<FONT size=2 face="sans-serif">&#150; owned assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">16</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">72</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">103</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
 &nbsp;<FONT size=2 face="sans-serif">&#150; leased assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Disposals and transfers</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(55</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(61</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Property reclassified as held for sale</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">131</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">81</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">432</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">655</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Owned assets</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">488</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">65</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">253</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">806</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Assets under finance leases</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">45</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">32</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">77</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount as of July 31, 2005</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">488</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">45</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">65</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">285</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">883</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net book amount as of August 1, 2004</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">390</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">39</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">55</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">235</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">719</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Included in the amounts above are &#163;89 million (2005: &#163;48 million) relating to assets under construction. At July 31, 2006, &#163;92 million of property, plant and equipment had been pledged as security for
liabilities (2005: &#163;77 million).</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-25</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page>
<a name="pf26"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">14.</font></b></td>
    <td><b><font size=2 face="sans-serif">Financial assets - available for sale
      investments</font></b></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Financial assets</FONT></TD>
        <TD width="8%" align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">21</FONT></TD>
        <TD width="2%" align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width="8%" align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
    <TD width="2%" align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">These assets comprise investments in listed
  and unlisted companies, tradeable government securities and fiduciary deposits.
  They are primarily equity securities that have no fixed maturity or yield.</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">15.</font></b></td>
    <td><b><font size=2 face="sans-serif">Deferred tax assets and liabilities</font></b></td>
  </tr>
</table>
<P> <FONT size=2 face="sans-serif">The deferred tax assets and liabilities shown
in the balance sheet are analyzed as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Deferred tax</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Deferred tax assets</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">16</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">55</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(88</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(62</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(72</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Current</FONT></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(67</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(40</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Non-current</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">33</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(72</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The following are the major deferred tax liabilities and assets recognized by the Group and movements thereon during the current and prior reporting period:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD rowspan="2" align=right>
<FONT size=1 face="sans-serif">Goodwill</FONT><FONT size=1 face="sans-serif"><br>
and</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD rowspan="2" align=right>
<FONT size=1 face="sans-serif">Share</FONT><br>
<FONT size=1 face="sans-serif">based</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Retirement</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">benefit</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">intangibles</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">payment</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Properties</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">obligations</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Inventory</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Other</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR>
        <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of August 1, 2004</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">15</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(40</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">29</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(26</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">72</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">43</FONT></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge to income</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">45</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(16</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(72</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(44</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Charge to equity</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Acquisition of subsidiaries</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(13</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(9</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Currency translation adjustment</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(6</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(30</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(39</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">73</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(42</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
  <TD><HR noshade size=2>
  </TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Charge to income</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(7</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(15</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(9</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Charge to equity</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(6</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(11</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Acquisition of subsidiaries</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(45</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(51</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Currency translation adjustment</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">As of July 31, 2006</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(64</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">13</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(46</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">71</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(54</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(72</FONT></TD>
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">There are other potential deferred tax assets
in relation to tax losses totalling &#163;43 million (2005: &#163;13 million)
that have not been recognized on the basis that their future economic benefit
is uncertain.
All of these losses may be carried forward indefinitely.</FONT></P>
<P>
<FONT size=2 face="sans-serif">No deferred tax liability has been recognised in respect of a further &#163;459 million (2005: &#163;406 million) of unremitted earnings of subsidiaries because the Group is in a position to control the timing of
reversal of the associated temporary deferred tax differences and it is probable that such differences will not reverse in the foreseeable future.</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-26</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf27"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements</FONT><br>
<FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">16.</font></b></td>
    <td><b><font size=2 face="sans-serif">Inventories</font></b></td>
  </tr>
</table>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Goods purchased for resale</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,954</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,706</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">&#163;10,007 million has been charged to operating profit in relation to inventories recognized as an expense in the year (2005: &#163;8,182 million). In addition, an amount of &#163;32 million has been charged to the
income statement to write down inventories to net realizable value (2005: charge of &#163;11 million). </FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><FONT size=2 face="sans-serif">17.</FONT></b></td>
    <td><b><font size=2 face="sans-serif">Trade and other receivables</font></b></td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp; </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Current</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade receivables</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">2,309</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,964</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Less: provision for impairment</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(41</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(32</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net trade receivables</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,268</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,932</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other receivables</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">107</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">131</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Prepayments and accrued income</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">275</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">135</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,650</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,198</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Non-current</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Other receivables</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">36</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">37</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">&#163;5 million has been charged to operating profit in respect of impairment losses recognized in the year on receivables (2005: credit of &#163;14 million). Other receivables classified as non-current include an
amount of &#163;31 million (2005: &#163;32 million) which has been discounted at a rate of 5.2% (2005: 4.5%) due to the long-term nature of the receivable. The fair value of the remaining balances in trade and other receivables approximates to book
value. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Concentration of credit risk in trade receivables is limited as the Group&#146;s customer base is large and unrelated. </FONT><FONT size=2 face="sans-serif">Accordingly, management considers that there is no further credit risk provision required above the current provision for impairment.</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><FONT size=2 face="sans-serif">18.</FONT></b></td>
    <td><B><FONT size=2 face="sans-serif">Assets held for sale</FONT></B></td>
  </tr>
</table>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD height="14" align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Properties awaiting disposal</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><b><FONT size=2 face="sans-serif">19.</FONT></b></td>
    <td><B><FONT size=2 face="sans-serif">Financial assets: trading investments</FONT></B> </td>
  </tr>
</table>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">US Life Assurance policies (denominated in US dollars)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">These securities have no fixed maturity or yield. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-27</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf28"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements</FONT><br>
<FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="top">
        <TD width="3%">
<B><FONT size=2 face="sans-serif">20.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Derivative financial instruments</FONT></B></TD>
</TR></TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Current assets</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Interest rate swaps</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Currency swaps: at fair value through profit and loss</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial assets</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Current liabilities</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Interest rate swaps</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(27</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Currency swaps: net investment hedge</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(29</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(14</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<P>
<B><I><FONT size=2 face="sans-serif"> Interest rate swaps </FONT></I></B><br>
<FONT size=2 face="sans-serif">The Group uses interest rate swaps to manage its exposure to interest rate movements on its borrowings. The fair value of interest rate swaps is estimated on the basis of the market values of equivalent instruments at
the balance sheet date. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s bank borrowings generally attract variable interest rates based on 6 month LIBOR. Certain interest rate swaps are designated and effective as cash flow hedges, with the valuation gains being deferred
in equity until realized. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Hedge of interest rate cash flows</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation gains on effective hedges credited to equity</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation losses charged to income statement</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s private placement borrowings
in the USA are at fixed rates. Certain interest rate swaps are designated as
hedges of the fair values of these borrowings. The movement in fair value of
these interest rate swaps has been analyzed into a proportion that is effective
as a hedge and a proportion that is ineffective: both portions have been charged
to the income statement with the effective portion offsetting the change in fair
value of the hedged
borrowings. The ineffective portion was less than &#163;1 million.</FONT> </P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Hedge of fair value of fixed interest borrowings</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation losses charged to income statement</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(26</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Exchange</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(25</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Outstanding interest rate swap contracts at July 31, 2006 comprised fixed interest payable on notional principal of US&#36;650 million, &#128;770 million and &#163;7 million (2005: US&#36;575 million and &#128;785
million) and fixed interest receivable on notional principal of US&#36;1,079 million. The contracts expire between September 2006 and November 2020 (2005: August 2005 and August 2009), and the gains deferred in equity will reverse in the income
statement over that period. The fixed interest rates vary between 2.313% and 5.415% (2005: 2.0375% and 4.3275%) .</FONT></P>
<P>
<B><I><FONT size=2 face="sans-serif">Currency swaps </FONT></I></B><br>
<FONT size=2 face="sans-serif">The Group uses currency swaps either to obtain the optimum return on its surplus funds or to hedge cash flows in respect of committed transactions. The fair value of currency swaps has been estimated as the cost of
closing out the contracts using market prices at the balance sheet date.</FONT></P>
<P>
<FONT size=2 face="sans-serif">At the balance sheet date the Group had entered into certain short-term currency swaps amounting to assets of US&#36;3 million (2005: assets of &#128;130 million, C&#36;33 million and CHF 22 million) and liabilities of
&#163;2 million (2005: &#163;4 million, US&#36;53 million and C&#36;170 million) which were held at fair value through the income statement.</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-28</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf29"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>

<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT><BR>
</P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">At fair value through income statement</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation gains charged to income statement</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Transferred to &#145;net investment in overseas operations&#146;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">At the balance sheet date the Group had entered into certain short-term currency swaps amounting to assets of US&#36;627 million, &#128;222 million and CHF 22 million (2005: assets of &#163;287 million) and liabilities
of &#163;419 million and C&#36;169 million (2005: liabilities of US&#36;525 million) which were designated and effective as hedges of net investments in overseas operations. Valuation gains have been deferred in equity. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Hedge of net investment in overseas operations</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At August 1</FONT></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Transferred from &#145;at fair value through income statement&#146;</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Cash settlements in the period</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Valuation gains/(losses) on effective hedges credited/(charged) to equity</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">At July 31</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="3%"> <B><FONT size=2 face="sans-serif">21.</FONT></B></TD>
    <TD> <B><FONT size=2 face="sans-serif">Construction loans</FONT></B></TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
        </TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Construction loans receivable (secured)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">313</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">262</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Borrowings to finance construction loans (unsecured)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(313</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(262</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Construction loans receivable, which are secured principally against homes in the course of construction or completed homes awaiting sale, are made to customers of Stock Building Supply Inc and are all denominated in
US dollars. These loans have an average maturity of 9 months (2005: 8 months). As of July 31, 2006, the effective rate of interest thereon was 8.85% (2005: 6.98%) . </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="top">
        <TD width="3%">
<B><FONT size=2 face="sans-serif">22.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></B></TD>
</TR></TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">359</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">371</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Short-term bank deposits</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">57</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total cash and cash equivalents</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">416</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">381</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The effective interest rate as of July 31, 2006 on cash and cash equivalents was 2.1% (2005: 2.0%) . The average maturity of short-term bank deposits was 1 week (2005: 1 week). The fair values of cash and cash
equivalents approximate to book value due to their short maturities. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The currency analysis of cash and cash equivalents is as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">33</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollar</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">230</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">224</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euro</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">56</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">94</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">416</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">381</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-29</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf30"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="top">
    <TD width="3%"> <B><FONT size=2 face="sans-serif">23.</FONT></B></TD>
    <TD> <B><FONT size=2 face="sans-serif">Trade and other payables</FONT></B></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><b><font size="1" face="sans-serif"> 2006 </font></b></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Current</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><b><font size="1" face="sans-serif"> &#163;m</font></b></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Amounts falling due within one year:</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade payables</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,504</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,273</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Bills of exchange payable</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">188</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">194</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Other tax and social security</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">142</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">102</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other payables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">148</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">80</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Share based payment liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Accruals</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">305</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">280</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred income</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total trade and other payables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,294</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,943</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
        <TD colspan=6>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Non-current</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Other payables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P>
<FONT size=2 face="sans-serif">The fair value of other payables falling due after more than one year is estimated at &#163;21 million (2005: &#163;15 million), by discounting the anticipated cash flows at a money market rate of appropriate maturity.
The fair value of other amounts included in trade and other payables approximates to book value. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="top">
        <TD width="3%"><B><FONT size=2 face="sans-serif">24.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></B></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD>
</TR></TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR align="right" valign="bottom">
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>&nbsp;</TD>
        <TD><b>
<FONT size=1 face="sans-serif">2006</FONT>
        </b></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=1 face="sans-serif">Current</FONT></B></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><b>
<FONT size=1 face="sans-serif">&#163;m</FONT>
        </b></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank overdrafts</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">124</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">437</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank loans</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">68</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total bank loans and overdrafts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">192</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">439</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The fair values of current overdrafts and loans approximate to book value due to their short maturities.</FONT></P>
<P>
<FONT size=2 face="sans-serif">The currency analysis of bank loans and overdrafts is as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollar</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">65</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">265</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euro</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">116</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">122</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">52</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">192</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">439</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR align="right" valign="bottom">
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR align="right" valign="bottom">
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><b>
    <FONT size=1 face="sans-serif">2006</FONT>
        </b></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<B><FONT size=1 face="sans-serif">Non-current</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><b>
<FONT size=1 face="sans-serif">&#163;m</FONT></b></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank loans</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,465</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1,043</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other loans</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Senior unsecured notes</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">617</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US Industrial Revenue Bonds</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total bank loans</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,084</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,045</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<p> <FONT size=2 face="sans-serif">The non-current loans are repayable as follows:</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Due in one to two years</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">35</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">516</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Due in two to five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">403</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">529</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Due in over five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,646</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,084</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,045</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">At July 31, 2006, &#163;651 million of loans carried
a fixed interest rate (2005: &#163;34 million). The weighted average interest
rate paid on fixed interest borrowings is 5.0% (2005: 6.2%). Interest receipts
and  payments on the floating rate assets and liabilities are determined by reference
to short-term benchmark rates applicable to the relevant currency or market,
such as LIBOR. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-30</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf31"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT><BR>
</P>
<P>
<FONT size=2 face="sans-serif">The fair value of fixed interest rate loans payable after one year is &#163;621 million, compared to their book value of &#163;626 million (2005: no material difference). The floating rate loans payable after one year
generally attract variable interest rates based on 6 month LIBOR. Thus the fair value of these instruments approximates to their book value. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s undrawn committed facilities
amount to &#163;780
million. Further details of these centrally managed facilities and the financial
risk management activities of the Group are set out in Item 5 &#8211; Operating
and Financial Review and Prospects &#8211; Paragraph B, Liquidity and Capital
Resources. </FONT></P>
<p> <FONT size=2 face="sans-serif">The currency analysis of non-current loans
is as follows:</FONT> </p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">136</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollar</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,246</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">455</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euro</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">645</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">558</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other currencies</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">57</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">31</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2,084</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,045</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s financial assets and liabilities are exposed to both fair value interest rate risk (fixed rate borrowings) and cash flow interest rate risk (floating rate borrowings). The interest rate profile of the
financial assets and liabilities that comprised the Group&#146;s net debt at July 31, 2006 and July 31, 2005, after including the effect of interest rate swaps, are set out in the following tables.</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Assets at July 31, 2006</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR align="right" valign="bottom">
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">average fixed</FONT></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">average time for</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR align="right" valign="bottom">
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">interest rate</FONT></TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<FONT size=1 face="sans-serif">which rate is fixed</FONT></TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Floating</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Fixed</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">swaps</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">%</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Years</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="10%" align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="10%" align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="10%" align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="10%" align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="11%" align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="11%" align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width="2%" align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollars</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">550</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">550</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euros</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">63</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">63</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other currencies</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">743</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">743</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Liabilities at July 31, 2006</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">average fixed</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">average time for</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">interest rate</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">which rate is fixed</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Floating</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Fixed</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">swaps</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">%</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Years</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(135</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(419</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(559</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=11% align=right>
<FONT size=2 face="sans-serif">9.5</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=11% align=right>
<FONT size=2 face="sans-serif">10.0</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollars</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,255</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(423</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">336</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,342</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5.0</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euros</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(235</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(563</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">152</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(646</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3.0</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2.0</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other currencies</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(43</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(32</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(71</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(146</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5.6</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4.4</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,668</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,023</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2,693</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Assets at
        July 31, 2005</FONT></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average
        fixed</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average
        time for</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Currency</FONT></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">interest
        rate</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">which rate
        is fixed</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Currency</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Floating</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Fixed</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">swaps</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">%</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Years</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Sterling</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=11% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=11% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">US dollars</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">491</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">491</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Euros</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">100</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">100</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Other currencies</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Total</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">654</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">654</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Liabilities at July 31, 2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">average fixed</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">average time for</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">interest rate</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">which rate is fixed</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Currency</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Floating</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Fixed</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">swaps</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Total</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">%</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Years</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1></TD>
  <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">282</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">277</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=11% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=11% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollars</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(725</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(274</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(329</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,328</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4.2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1.5</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euros</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(250</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(463</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">90</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(623</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3.0</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2.6</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other currencies</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(53</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(38</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(54</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(145</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">6.0</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1.4</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,028</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(780</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(11</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(1,819</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P align="center"> <FONT size=2 face="sans-serif">F-31</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf32"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<P><B><I><FONT size=2 face="sans-serif">Hedge of net investment in overseas operations</FONT></I></B>
</P>
<P>
<FONT size=2 face="sans-serif">The Group has financial instruments denominated in foreign currencies which have been designated as hedges of the net investment in its subsidiaries in North America and Europe. The value of these financial instruments
at the balance sheet date was: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollar</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">926</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">922</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Euro</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">611</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">573</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Other currencies</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">112</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">106</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,649</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,601</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P>
<FONT size=2 face="sans-serif">The gain on translation of the borrowings into sterling of &#163;58 million (2005: loss of &#163;36 million) has been taken to the translation reserve. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
        <TD width="3%" valign=top>
<B><FONT size=2 face="sans-serif">25.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Obligations under finance leases</FONT></B></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Gross</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Gross</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Net</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Net</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Due within one year</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">24</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">6</FONT></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Due in one to five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">50</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">30</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">37</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">23</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Due in over five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">28</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">42</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">20</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">102</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">78</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">75</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Less: future finance charges</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(27</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(16</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Present value of finance lease obligations</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">75</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD></TD>
        <TD></TD>
        <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Current</FONT></TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Non current</FONT></TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">57</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total obligations under finance leases</FONT></TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">75</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<P>
<FONT size=2 face="sans-serif">It is the Group&#146;s policy to lease certain
of its property, plant and equipment under finance leases. The average lease
term is 7 years (2005: 7 years). For the year ended July 31, 2006, the average
effective  borrowing rate was 4.7% (2005: 4.9%). Finance lease obligations included
above are secured against the assets concerned. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The currency analysis of the present value of finance lease obligations is as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Net</FONT></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Net</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Sterling</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">US dollar</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">16</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Euro</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">37</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">34</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Other</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">75</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-32</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf33"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements</FONT><br>
  <FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><B><FONT size=2 face="sans-serif">26.</FONT></B></td>
    <td><B><FONT size=2 face="sans-serif">Provisions</FONT></B></td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Environmental </FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><FONT size=1 face="sans-serif">Wolseley</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Other</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">and legal</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Insurance</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">provisions</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">At August 1, 2004</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">20</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">83</FONT></TD>
    <TD width=2%>&nbsp; </TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Utilized in the year</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Transfers</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">New businesses</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Exchange difference</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">At July 31, 2005</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">85</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Utilized in the year</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Charge for the year</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">23</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Transfers</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">New businesses</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Exchange differences</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">At July 31, 2006</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">47</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">106</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">Provisions have been analyzed between current and non current as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Environmental</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Wolseley</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Other</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">and legal</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Insurance</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">provisions</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">At July 31, 2006</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Current</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">29</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Non current</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">77</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total provisions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">47</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">106</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Environmental</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Wolseley</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Other</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">and legal</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Insurance</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">provisions</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">At July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Current</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">11</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">22</FONT></TD>
    <TD width=2%>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Non current</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">63</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total provisions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">85</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Wolseley Insurance provisions represent an estimate, based on historical experience, of the ultimate cost of settling outstanding and potential claims on certain risks retained by the Group (principally US casualty and
global property damage).</FONT></P>
<P>
<FONT size=2 face="sans-serif">Environmental and legal liabilities include known
and potential legal claims and environmental liabilities arising from past events
where it is probable that a payment will be made and the amount of such payment
can be
reasonably estimated. Included in this provision is an amount of &#163;31 million
(2005: &#163;32 million) related to asbestos litigation involving certain Group
companies. This liability is fully covered by insurance, and accordingly an equivalent

insurance receivable has been recorded in &#145;Trade and other receivables&#146; (note
17). The liability has been actuarially determined as at July 31, 2006 based
on advice from independent professional advisors. The provision and the related
 receivable have been stated on a discounted basis using a long-term discount
rate of 5.2% (2005: 4.5%). The level of insurance cover available significantly
exceeds the expected level of future claims, and no profit or cash flow impact
is therefore
expected to arise in the foreseeable future. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-33</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf34"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  <FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><B><FONT size=2 face="sans-serif">27.</FONT></B></td>
    <td><B><FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></B></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><B><FONT size=2 face="sans-serif">(i)</FONT></B></td>
    <td><B><FONT size=2 face="sans-serif">Description of plans</FONT></B></td>
  </tr>
</table>
<P><B><FONT size=2 face="sans-serif">United Kingdom<br>
  </FONT></B><FONT size=2 face="sans-serif">The principal plan operated for UK
  employees is the Wolseley Group Retirement Benefits Plan which provides benefits
  based on final pensionable salaries. The assets are held in separate trustee
  administered funds. The plan&#146;s retirement benefits are funded by a contribution
  from employees with the balance being paid by Group companies. The contribution
  rates paid by employees at July 31, 2006 are either 5% or 6% of earnings depending
  on the level of benefits that were accruing at that date. The Group and employee
  contribution rates are calculated on the Projected Unit Method and agreed with
  an independent consulting actuary. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Outside the United Kingdom</FONT></B><br>
  <I><FONT size=2 face="sans-serif">North America </FONT></I><br>
  <FONT size=2 face="sans-serif">The principal plans operated for US employees
  are defined contribution schemes, which are established in accordance with US
  401K rules. Companies contribute to both employee compensation deferral and
  profit sharing plans. Contributions are charged to the income statement in the period in which they fall due. In the year to July 31, 2006 the cost of defined contribution plans charged to the income statement was &#163;23 million (2005:
&#163;18 million). </FONT></P>
<P>
<FONT size=2 face="sans-serif">In addition, the Group operates three defined benefit schemes in the United States. In Canada a defined benefit scheme and a defined contribution scheme are operated. Two of the US plans and the Canadian plan are
funded; two plans are closed to new entrants. The majority of assets are held in trustee administered funds independent of the assets of the companies. The closed plans now provide a minimum pension guarantee in conjunction with a defined
contribution plan. The remaining plans provide benefits based on final pensionable salaries. The contribution rate is calculated on the Projected Unit (credit) Method as agreed with independent consulting actuaries. </FONT></P>
<P> <I><FONT size=2 face="sans-serif">Europe </FONT></I><br>
  <FONT size=2 face="sans-serif">Both defined contribution and defined benefit
  schemes are operated. Liabilities arising under defined benefit schemes are
  calculated in accordance with actuarial advice. Contributions to defined contribution
  schemes are accounted for in the period in which they fall due. The cost of
  defined contribution schemes charged to the income statement was &#163;5 million
  (2005: &#163;1 million). </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Post retirement health care </FONT></B><br>
  <FONT size=2 face="sans-serif">There are no material obligations to provide
  post retirement health care benefits. </FONT></P>
<P><FONT size=2 face="sans-serif">The Group expects to contribute &#163;23 million to the UK defined benefit scheme and &#163;15 million to the non-UK schemes in the year ending July 31, 2007.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="3%"> <B><FONT size=2 face="sans-serif">(ii)</FONT></B></TD>
    <TD> <B><FONT size=2 face="sans-serif">Financial impact of plans</FONT></B>
    </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">As disclosed in the balance sheet</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Current liability</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">(29</FONT></TD>
    <TD width=2%> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">(17</FONT></TD>
    <TD width=2%> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Non-current liability</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(160</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(181</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total liability</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(189</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(198</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">Analysis of balance sheet liability</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Fair value of plan assets:</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">UK</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">501</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> </TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> </TD>
    <TD width=2%>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">Non-UK</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">112</FONT></TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">105</FONT></TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp; </TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">613</FONT></TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">509</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Present value of defined benefit obligation:</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">UK</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(619</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(527</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="sans-serif">Non-UK</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(182</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(180</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD>&nbsp; </TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(801</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(707</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Net deficit</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(188</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(198</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Unrecognized past service cost</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp; </TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Unrecognized surplus</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Net liability recognized in balance sheet</FONT></TD>
    <TD></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(189</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> </TD>
    <TD>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(198</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <TD align="right"> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <TD align="right"> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-34</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf35"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD width=2% align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD width=2%><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">Analysis of total expense recognized in
      income statement</FONT></TD>
    <TD width=2% align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD width=2%><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD width="2%" align="right"><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD width="2%"><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Current service cost</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD width=2%>&nbsp; </TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Past service cost</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Curtailment</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD width=2%> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Settlement</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT></TD>
    <TD width=2%> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="2%" align="right">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Charged to administrative expenses</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="2%" align="right">&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Interest on pension liabilities</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Expected return on scheme assets</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(35</FONT></TD>
    <TD width=2%> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(28</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="2%" align="right">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Charged to finance costs</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="2%" align="right">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total expense recognized in income statement</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">15</FONT></TD>
    <TD width=2%>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="2%" align="right">&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD width="2%">&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
    <td>&nbsp;</td>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width=100% border=0 cellpadding=0 cellspacing=0>
  <tr>
    <td><font size="1">&nbsp;</font> </td>
    <td align=right><font size="1">&nbsp;</font></td>
    <td align=right> <font size=1 face="sans-serif">2006</font></td>
    <td><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">2005</font></td>
    <td><font size="1">&nbsp;</font> </td>
  </tr>
  <tr>
    <td> <font size=1 face="sans-serif">Analysis of amount recognized in the statement
      of recognized income and expense</font></td>
    <td align=right><font size="1">&nbsp;</font></td>
    <td align=right> <font size=1 face="sans-serif">&#163;m</font></td>
    <td><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">&#163;m</font></td>
    <td><font size="1">&nbsp;</font> </td>
  </tr>
  <tr>
    <td><hr noshade size=1></td>
    <td align="right"><font size="1">&nbsp;</font></td>
    <TD><HR noshade size=1></TD>
    <td><font size="1">&nbsp;</font></td>
    <TD><HR noshade size=1></TD>
    <td><font size="1">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td> <font size=2 face="sans-serif">Actuarial gain/(loss)</font></td>
    <td width=2% align=right>&nbsp;</td>
    <td width=8% align=right> <font size=2 face="sans-serif">8</font></td>
    <td width=2%>&nbsp; </td>
    <td width=8% align=right> <font size=2 face="sans-serif">(4</font></td>
    <td width=2%> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td> <font size=2 face="sans-serif">Unrecognized past service cost</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">1</font></td>
    <td>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td>&nbsp; </td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td> <font size=2 face="sans-serif">Unrecognized surplus</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(2</font></td>
    <td> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td>&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">7</font></td>
    <td>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(4</font></td>
    <td> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td> <font size=2 face="sans-serif">Deferred tax thereon</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(2</font></td>
    <td> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">2</font></td>
    <td>&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=1></TD>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td> <font size=2 face="sans-serif">Total amount recognized in the statement
      of recognized income and expense</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">5</font></td>
    <td>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(2</font></td>
    <td> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
    <TD><HR noshade size=2></TD>
    <td>&nbsp;</td>
  </tr>
</table>
<P> <FONT size=2 face="sans-serif">The cumulative amount of actuarial gains recognized
  in the statement of recognized income and expense was a gain of &#163;3 million
  (2005: loss of &#163;4 million). </FONT></P>
<P><FONT size=2 face="sans-serif">The assets in the UK schemes and the expected
  rates of return were:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">2006</FONT><font size="1">&nbsp;</font>
    </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">UK</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align=right><HR noshade size=1></TD>
    <TD><HR noshade size=1></TD>
    <TD align=right><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD align=right><HR noshade size=1></TD>
    <TD><HR noshade size=1></TD>
    <TD align=right><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Long-term</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Long-term</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">rate of</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">rate of</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">return</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Value at</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">return</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Value at</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">expected at</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">expected at</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Equities</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">7.4</FONT></TD>
    <TD width="2%"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">344</FONT></TD>
    <TD width="2%"><font size="2">&nbsp;</font></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">7.3</FONT></TD>
    <TD width="2%"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">354</FONT></TD>
    <TD width="2%"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Bonds</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.2</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">154</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.1</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">49</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Other</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.0</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.0</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total market value of assets</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.5</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">501</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.9</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P><FONT size=2 face="sans-serif">The assets in the non-UK schemes and the expected rates of return were: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD colspan="3" align=center><FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center><FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD align=center><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD colspan="3" align=center><FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center><FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD align=right><HR noshade size=1></TD>
    <TD><HR noshade size=1></TD>
    <TD align=right><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD align=right><HR noshade size=1></TD>
    <TD><HR noshade size=1></TD>
    <TD align=right><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Long-term</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Long-term</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">rate of</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">rate of</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">return</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Value at</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">return</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Value at</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">expected at</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">expected at</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31,</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Equities</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">8.0</FONT></TD>
    <TD width="2%"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">59</FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">7.2</FONT></TD>
    <TD width="2%"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">55</FONT></TD>
    <TD width="2%">&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Bonds</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.1</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.8</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">38</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Property</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.3</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD> <FONT size=2 face="sans-serif">Other</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.0</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.0</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR bgcolor="#eeeeee">
    <TD> <FONT size=2 face="sans-serif">Total market value of assets</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.6</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.2</FONT></TD>
    <TD> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">105</FONT></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-35</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf36"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">UK</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">Non-UK</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">Total</FONT></b></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right> <b><FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Fair value of plan assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">&#163;m</FONT></b></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">At August 1</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">105</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">509</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">323</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">73</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">396</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Expected return on plan assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial gain</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">46</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">50</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Employer&#146;s contributions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">20</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">27</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Participants&#146; contributions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Acquisition</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Transfers</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Benefits paid</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(16</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(22</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(20</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Currency translation</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">At July 31</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">501</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">112</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">613</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">105</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">509</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Actual return on plan assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">64</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">71</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">68</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">78</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The expected long-term rates of return for equities have been determined by reference to government bond rates (minimum risk rates) in the countries in which the plans are based. To reflect the additional risks
associated with equities, expected long-term rates of return on equities include a risk premium. These risk premiums are long-term assumptions and were set after taking actuarial advice and considering the assumptions used by listed companies. The
expected long-term rates of return for other assets are determined in a similar way, i.e., by using an appropriate risk premium relative to government bonds in the relevant country. For the UK scheme a premium of 3.0% per year as at July 31, 2006
(2005: 3.0%) was applied to the expected return from government bonds. For the principal overseas schemes in USA, Canada and Switzerland a similar approach was adopted with returns set by reference to long-term bond rates after taking actuarial
advice. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group&#146;s investment strategy for its funded post employment plans is decided locally by the Group and, if relevant, the trustees of the plan, and takes account of the relevant statutory requirements. The
Group&#146;s objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities. </FONT></P>
<P>
<FONT size=2 face="sans-serif">This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return. Most investment strategies have significant
allocations to equities, with the intention being that this will result in the ongoing cost to the group of the post employment plans being lower over the long term and be within acceptable boundaries of risk. </FONT></P>
<P>
<FONT size=2 face="sans-serif">For the UK scheme the policy is to invest approximately 75% of the assets in equities, and 25% in other asset classes, principally bonds. The investment strategy is subject to regular review by the scheme trustees in
consultation with the Group. For the overseas schemes the investment strategy involves the investment in defined levels of predominantly equities with the remainder of the assets being invested in cash and bonds. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">UK</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">Non-UK</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">Total</FONT></b></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><b><font size="1">&nbsp;</font></b></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">2006</FONT></b></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Present value of defined benefit
      obligation</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif"><b>&#163;m</b></FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">At August 1</FONT></TD>
    <TD width="2%" align=left>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">527</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">180</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">707</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">460</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">131</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">591</FONT></TD>
    <TD width=2% align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Current service cost</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Past service cost</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Curtailment and settlement</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Interest cost</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Participants&#146; contributions</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Acquisitions</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Benefits paid</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(16</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(22</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(22</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Transfers</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial (gain)/loss</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">32</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">54</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Currency translation</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">At July 31</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">619</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">182</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">801</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">527</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">180</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">707</FONT></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="2">&nbsp;</font></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD><HR noshade size=2></TD>
    <TD><font size="2">&nbsp;</font></TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-36</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<page>  <a name="pf37"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Analysis of present value of
      defined benefit obligation</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Amounts arising from wholly
      unfunded plans</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">57</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Amounts arising from plans
      that are wholly or partly funded</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">744</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">663</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">801</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">707</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="3%" valign=top> <B><FONT size=2 face="sans-serif">(iii)</FONT></B></TD>
    <TD> <B><FONT size=2 face="sans-serif">Valuation assumptions</FONT></B></TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The financial assumptions used to estimate defined benefit obligations are:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <font size="1" face="sans-serif"> 2005 </font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=right><HR noshade size=1></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=right><HR noshade size=1></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Discount rate</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">5.1</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">5.1</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">5.0</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">5.1</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Inflation rate</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1.4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1.4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Increase to deferred benefits
      during deferment</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.0</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Increases to pensions in payment</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.0</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1.5</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.7</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">0.8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Salary increases</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.3</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.5</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The life expectancy assumptions used to estimate defined benefit obligations at July 31, 2006 are: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <font size=1 face="sans-serif">2006</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan="3" align=center> <hr noshade size=1></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Current pensioners (at age
      65) &#150; male</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">19.0</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">18.3</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Current pensioners (at age
      65) &#150; female</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">21.9</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">20.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Future pensioners (at age 65)
      &#150; male</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">19.8</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Future pensioners (at age 65)
      &#150; female</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">22.8</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">20.4</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">UK</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Non-UK</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Non-UK</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">History of experience gains
      and losses</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Fair value of plan assets</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">501</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">112</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">105</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Present value of defined benefit
      obligation</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(619</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(182</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(527</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(180</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Deficit in the plan</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(118</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(70</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(123</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(75</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=10>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Experience adjustments to scheme
      assets</FONT></TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="sans-serif">Amount</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">46</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="sans-serif">Percentage
      of scheme assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Experience adjustments on scheme
      liabilities</FONT></TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="sans-serif">Amount</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="sans-serif">Percentage
      of the present value of scheme liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-37</FONT></P>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<page><a name="pf38"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a> </p>
<p><font size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </font><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT> </p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width=3% align=left> <B><FONT size=2 face="sans-serif">28.</FONT></B></TD>
    <TD align=left><b><font size=2 face="sans-serif">Share capital</font></b>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center> <FONT size=1 face="sans-serif">Authorized</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD colspan=3 align=center> <font size=1 face="sans-serif">Allotted and issued</font></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=right><HR noshade size=1></TD>
    <TD align=right>&nbsp;</TD>
    <TD colspan="3" align=right>
      <HR noshade size=1></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Number of ordinary 25 pence
      shares (million)</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">800</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">800</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">598</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">592</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Nominal value of ordinary 25
      pence shares (&#163; million)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">200</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">200</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">149</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">148</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">All the allotted and issued shares are fully paid or credited as fully paid. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Allotment of shares <br>
  </FONT></B><FONT size=2 face="sans-serif">From August 1, 2005 to July 31, 2006,
  new ordinary shares of 25 pence each in the Company have been issued as follows:
  </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">Proceeds to the Group</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Allottees</FONT></TD>
    <TD align=center><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Number of shares</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Price per share (p)</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Purpose of issue</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Various</FONT></TD>
    <TD width=2% align=center bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,318,435</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=13% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">251.00
      &#150; 935.85</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=13% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=46% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Exercise
      of savings related share options</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Various</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,235,350</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">349.75 &#150; 543.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Exercise of executive share
      options/stock appreciation rights</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=center bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5,553,785</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P> <B><FONT size=2 face="sans-serif">Limits on grant of options <br>
  </FONT></B><FONT size=2 face="sans-serif">The maximum number of shares over
  which options may be granted (but excluding any which lapse) under all share
  option schemes and the stock appreciation plan in any ten year period is 10%
  of the issued share capital from time to time. The number of shares over which
  options may be granted under all such schemes as at July 31, 2006 was 59,769,622
  (2005: 59,214,243) of which 20,632,264 (2005: 15,510,090) have already been
  issued pursuant to options exercised in the ten year period ended on July 31,
  2006. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The maximum number of shares over which options may be granted (but excluding any which lapse) under the rules of the executive share option schemes in any ten year period is 5% of the issued share capital from time to
time. The number of shares over which options may be granted as at July 31, 2006 was 29,884,811 (2005: 29,607,122) of which 6,181,529 (2005: 4,886,655) have already been issued pursuant to options exercised on or before July 31, 2006. </FONT></P>
<P> <B><FONT size=2 face="sans-serif">Executive Benefit Trusts <br>
  </FONT></B><FONT size=2 face="sans-serif">Three Employee Benefit Trusts have
  been established in connection with the Wolseley Share Option Plan 2003 and
  the Wolseley plc 2002 Long Term Incentive Scheme. During the year one of these
  trusts purchased 2,011,478 ordinary shares of the Company, with a nominal value
  of &#163;1 million, for a cash consideration of &#163;27 million. The market
  value of the 4,011,478 shares held by the employee benefit trusts at July 31,
  2006, which have a nominal value of &#163;1 million, was &#163;46 million (2005:
  &#163;24 million), and none of them had been allocated to employees or Directors
  at that date. Dividends due on shares held by the Employee Benefit Trusts are
  waived in accordance with the provisions of the trust deeds.</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-38</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf39"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">29.</font></b></td>
    <td><b><font size=2 face="sans-serif">Share-based payments</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">The Group operates six share option plans: the 1984 Executive Share Option Scheme, the 1989 Executive Share Option Scheme and the Wolseley Share Option Plan 2003 (collectively, the &#147;Executive Option
Schemes&#148;); the Wolseley Employees Savings Related Share Option Scheme 1981 and Wolseley Irish Sharesave Scheme 2000 (collectively, the &#147;Employees Savings Option Schemes&#148;); and the Wolseley Employee Share Purchase Plan 2001 (the
&#147;ESPP&#148;). The Wolseley Employees International Stock Appreciation Plan (the &#147;SAP&#148;) expired during the year ended July 31, 2006. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Awards granted under the Executive Option Schemes are subject to a condition such that they may not be exercised unless the growth in earnings per share over a period of three consecutive financial years exceeds growth
in the UK Retail Price Index over the same period by at least 9% and consequently vest over a period of three years. Awards granted under the Employee Savings Option Schemes vest over periods ranging from three to seven years. Awards granted under
the Employee Share Purchase Plan vest over a one-year period. Awards granted under the SAP vested over a period of five years. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group also operates a Long Term Incentive Scheme (&#147;LTIS&#148;) for senior executives. Under this Scheme, executives will be awarded a variable number of shares depending on the level of total shareholder
return over the next three years relative to that of a number of comparator companies. The vesting period is three years. The maximum award under the scheme is determined at grant date and then adjusted at vesting date in accordance with the market
performance condition. </FONT></P>
<P><FONT size=2 face="sans-serif"><b>Share options outstanding during the year</b>&nbsp;
  </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD colspan="7" align=center> <FONT size=1 face="sans-serif">Year ended July
      31</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD colspan=7 align=right><hr size="1" noshade>
    </TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2006</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">exercise</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">exercise</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Shares</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">price</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Shares</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">price</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">000</FONT></TD>
    <TD align=left> <FONT size=1 face="sans-serif">&#146;s</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">000</FONT></TD>
    <TD align=left> <FONT size=1 face="sans-serif">&#146;s</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Executive Option Schemes</FONT></B> </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Outstanding as at August 1</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">11,809</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">7.22</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">11,061</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">5.64</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Granted</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4,588</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">11.87</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4,131</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9.51</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Exercised</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,358</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.09</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2,819</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.37</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Surrendered or expired</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(457</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.89</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(564</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">7.07</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Outstanding as at July 31</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">14,582</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.83</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11,809</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7.22</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Exercisable as at July 31</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,172</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.10</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,831</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.42</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Weighted average fair value
      of options granted during the year</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.97</FONT></TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.06</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Employees Savings Option
      Schemes, ESPP and SAP</FONT></B> </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Outstanding as at August 1</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8,129</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.38</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">10,708</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.83</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Granted</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,521</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">12.01</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,434</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9.26</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Exercised</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2,725</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.80</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4,215</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.85</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Surrendered or expired</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3,247</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.75</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,798</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.24</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Outstanding as at July 31</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,678</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.53</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">8,129</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.38</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Exercisable as at July 31</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">88</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.44</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">72</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.12</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right><hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Weighted average fair value
      of options granted during the year</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.83</FONT></TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.70</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">The weighted average share price at the date
  of exercise for share options exercised during the period was &#163;12.67 (2005:
  &#163;10.16) . The total intrinsic value of options exercised during the period
  was &#163;22 million (2005: &#163;29 million). The aggregate intrinsic value
  of options outstanding and exercisable at July 31, 2006 was &#163;48 million
  and &#163;21 million </FONT><FONT size=2 face="sans-serif">respectively (2005:
  &#163;99 million and &#163;14 million).</FONT>
</P>
<P align="center"> <FONT size=2 face="sans-serif">F-39</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf40"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<P>
  <b><font size=2 face="sans-serif">Maximum number of shares that can be issued
  under the Long Term Incentive Scheme</font></b>&nbsp; </P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan="7" align=center>
      <FONT size=1 face="sans-serif">Year ended July 31</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan="7" align=left>
      <hr size="1" noshade>
        </TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</FONT></TD>
  <TD align=right><hr size="1" noshade>
  </TD>
  <TD align=left><font size="1">&nbsp;</FONT></TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right><font size="1">&nbsp;</FONT></TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=left><font size="1">&nbsp;</FONT></TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Share</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Share</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">price at</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">price at</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">award</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">award</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Shares</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">date</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Shares</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">date</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1"><font size="1">&nbsp;</font></font></TD>
        <TD align=right><FONT size=1 face="sans-serif">000&#146;s</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font> </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right><FONT size=1 face="sans-serif">000&#146;s</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font> </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp; </TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Outstanding as at August 1</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">604</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">9.27</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=left>&nbsp;

        </TD>
    <TD width=2% align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Granted</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">730</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">11.29</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">628</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9.27</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Surrendered or expired</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(12</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9.25</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(24</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9.25</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Outstanding as at July 31</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,322</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10.39</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">604</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9.27</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp; </TD>
  <TD align=right><hr size="1" noshade>
  </TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Exercisable as at July 31</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp; </TD>
  <TD align=right><hr size="1" noshade>
  </TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=left>&nbsp; </TD>
  <TD align=right>
    <hr size="1" noshade>
  </TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Weighted average fair value of shares awarded</FONT></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3.99</FONT></TD>
        <TD align=left></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4.85</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P>
<B><FONT size=2 face="sans-serif">Details of options exercisable <br>
  </FONT></B><FONT size=2 face="sans-serif">Options outstanding and exercisable
  at July 31, 2006 under the Executive Option Schemes, the Employees Saving Option
  Schemes and ESPP can be analyzed as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD colspan=3 align=center> <FONT size=1 face="sans-serif">Options Outstanding</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD colspan=6 align=center> <font size=1 face="sans-serif">Options Exercisable</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD colspan="3" align=left> <hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD colspan="5" align=left><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Weighted</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">remaining</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">remaining</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">average</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">contractual</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">exercise</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">contractual</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">exercise</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Shares</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">life</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">price</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Shares</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">life</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">price</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Range of exercise prices</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">000&#146;s</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Years</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">000&#146;s</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Years</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#163;2.51</FONT>
      <font size=2 face="sans-serif">&#150; &#163;3.50</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">404</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2.5</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3.15</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">211</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3.8</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3.48</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#163;3.51</FONT> <font size=2 face="sans-serif">&#150;
      &#163;4.50</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">668</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.0</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4.07</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">198</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3.96</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#163;4.51</FONT>
      <font size=2 face="sans-serif">&#150; &#163;5.50</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,740</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.7</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.14</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,740</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.7</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.14</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#163;5.51</FONT> <FONT size=2 face="sans-serif">&#150;
      &#163;6.50</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">228</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.62</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5.63</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#163;6.51</FONT>
      <FONT size=2 face="sans-serif">&#150; &#163;7.50</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3,774</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">6.3</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.29</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">57</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">6.8</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.37</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#163;7.51</FONT> <FONT size=2 face="sans-serif">&#150;
      &#163;8.50</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">24</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.42</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#163;8.51</FONT>
      <FONT size=2 face="sans-serif">&#150; &#163;9.50</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4,376</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.4</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9.40</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">52</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.8</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9.44</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#163;10.51</FONT> <FONT size=2 face="sans-serif">&#150;
      &#163;11.50</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">50</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8.6</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#163;11.51</FONT>
      <FONT size=2 face="sans-serif">&#150; &#163;12.50</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5,883</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.3</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">11.90</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7.7</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">11.64</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">&#163;12.51</FONT> <FONT size=2 face="sans-serif">&#150;
      &#163;13.50</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">111</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9.5</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">12.81</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="1" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> </TD>
    <TD align=left bgcolor="#eeeeee"></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">18,258</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">6.5</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">8.77</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3,265</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.4</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.08</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> </TD>
    <TD align=left></TD>
    <TD align=right> <hr size="2" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="2" noshade></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <hr size="2" noshade></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The fair value at the date of grant of options awarded during the year has been estimated by the binomial methodology for all schemes except the LTIS, for which a Monte Carlo simulation was used.</FONT></P>
<P><FONT size=2 face="sans-serif">The principal assumptions required by these
  methodologies were: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan=3 align=center>
<FONT size=1 face="sans-serif">Long Term Incentive</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD colspan=3 align=center>
<FONT size=1 face="sans-serif">Executive Share Options</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan=3 align=center>
<FONT size=1 face="sans-serif">Employee Share Options</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan=3 align=center>
<FONT size=1 face="sans-serif">Schemes</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD colspan=3 align=center>
    <hr size="1" noshade></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan=3 align=center>
    <hr size="1" noshade></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD colspan=3 align=center>
    <hr size="1" noshade></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2006</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
      <hr size="1" noshade></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Risk free interest rate</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.45</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.72</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.52</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.60</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.40</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">4.70</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Expected annual increase in dividends*</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Expected dividend yield*</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2.75</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2.29</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Expected volatility</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">39.00</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">40.10</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">31.06</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">40.00</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">20.58</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">27.74</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Expected life</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5.7 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5.7 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1-7 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1-7 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3 years</FONT></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2" align="left" valign="top"><hr align="left" width="150" size="1" noshade></TD>
  </tr>
  <tr>
    <td width="3%" align="left" valign="top"><font size=2 face="sans-serif">*</FONT></TD>
    <td align="left" valign="top"><font size=1 face="sans-serif"> The initial
      assumption was for 2006 interim and final dividends of 9.68 pence and 19.36
      pence respectively (2005: 8.73 pence and 17.45 pence respectively) </FONT></TD>
  </tr>
</table>
<P><font size=2 face="sans-serif">Expected volatility has been estimated on the
    basis of historic volatility over the expected term. Expected life has been
estimated on the basis of historical data on the exercise pattern. </font></P>

<P align="center"> <FONT size=2 face="sans-serif">F-40</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf41"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">30.</font></b></td>
    <td><b><font size=2 face="sans-serif">Shareholders&#146; funds and statement
      of changes in shareholders&#146; equity</font></b></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD colspan="5" align=center> <FONT size=1 face="sans-serif">Retained Earnings</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD colspan="5"> <hr size="1" noshade> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size=1 face="sans-serif">Share</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size=1 face="sans-serif">Share</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size=1 face="sans-serif">Translation</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><font size=1 face="sans-serif">Hedging</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><font size="1" face="sans-serif">Own</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><font size=1 face="sans-serif">Profit and Loss</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Capital</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Premium</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Reserve</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Reserve</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Shares</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Account</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Total</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">For the year ended July 31,
      2006</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=16>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Profit for
      the year attributable to equity shareholders</div></FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">537</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=8% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">537</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Exchange loss on translation
      of overseas operations</div></FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(182</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(182</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2"> <font size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Exchange
      gain on translation of borrowings designated as
      hedges of overseas operations</div></FONT> </FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="2"> <font size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Valuation gain
      on interest rate swaps (less amounts reclassified
      and reported in net income)</div></FONT> </FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Valuation
      gain on currency swaps</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial gain on retirement
      benefits</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Change in
      fair value of available for-sale-investments</div></FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Tax on gains/(losses) not recognized
      in the income statement</div></FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Total recognized
      income and expense</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(131</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">535</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">413</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">New share capital subscribed</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Premium on
      share options issued through share
      symmetry arrangements</div></FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(17</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif"><div style="margin-left:3%; text-indent:-3%">Purchase of own shares by Employee Benefit Trust</div></FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(27</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(27</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Credit to
      equity for share-based payments</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">36</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Dividends</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(162</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(162</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Net additions
      to shareholders&#146; funds</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">47</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(131</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(27</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">392</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">291</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Opening shareholders&#146;
      funds</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">148</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">241</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">82</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,857</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,301</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Closing shareholders&#146;
      funds</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">149</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">288</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(49</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(46</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,249</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,592</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr size="1" noshade> </TD>
    <TD>&nbsp; </TD>
  </TR>
</TABLE>
<p>&nbsp;</p>
<table width=100% border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="5" align=center> <font size=1 face="sans-serif">Retained earnings</font></td>
    <td align=left>&nbsp;</td>
    <td align=left></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td> </td>
    <td></td>
    <td> </td>
    <td></td>
    <td> </td>
    <td>&nbsp;</td>
    <td>&nbsp;    </td>
    <td>&nbsp;</td>
    <td colspan="5"><hr noshade size=1></td>
    <td>&nbsp; </td>
    <td> </td>
    <td> </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Share</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Share</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Translation</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Hedging</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Own</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Profit and loss</font></td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Capital</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Premium</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Reserve</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Reserve</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Shares</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">Account</font></td>
    <td align=left>&nbsp;</td>
    <td align=right> <font size=1 face="sans-serif">Total</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=1 face="sans-serif">For the year ended July 31,
        2005</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=1 face="sans-serif">&#163;m</font></td>
    <td align=left>&nbsp;</td>
    <td align=right> <font size=1 face="sans-serif">&#163;m</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td><hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=16>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Profit for
        the year attributable to equity shareholders</font></td>
    <td width=2% align=right bgcolor="#eeeeee">&nbsp;</td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td width=2% align=right bgcolor="#eeeeee">&nbsp;</td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td width=2% align=right bgcolor="#eeeeee">&nbsp;</td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td width=2% align=left bgcolor="#eeeeee">&nbsp; </td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td width=2% align=left bgcolor="#eeeeee">&nbsp; </td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td width=2% align=left bgcolor="#eeeeee">&nbsp; </td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">479</font></td>
    <td width=2% align=left bgcolor="#eeeeee">&nbsp; </td>
    <td width=8% align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">479</font></td>
    <td width=2% align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Exchange gain on translation
        of overseas operations</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">93</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">93</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif"> Exchange
        loss on translation of borrowings designated as hedges of overseas operations</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(36</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(36</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Valuation gain on interest
        rate swaps</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">1</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">1</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Valuation
        loss on currency swaps</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(12</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(12</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Actuarial loss on retirement
        benefits</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(4</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(4</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Tax on gains/(losses)
        not recognized in the income statement</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">25</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">3</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">6</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">34</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Total recognized
        income and expense</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">82</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(8</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">481</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">555</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">New share capital subscribed</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">31</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">33</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> &nbsp;<font size=2 face="sans-serif">Premium
        on share options issued through</font> <font size=2 face="sans-serif">share
        symmetry arrangements</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">10</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(10</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Purchase of own shares by
        Employee</font> <font size=2 face="sans-serif">Benefit Trust</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(19</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(19</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Credit to
        equity for share-based payments</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">23</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">23</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Dividends</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(145</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(145</font></td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Net additions
        to shareholders&#146; funds</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">2</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">41</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">82</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(8</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(19</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">349</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">447</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Opening shareholders&#146; funds</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">146</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">200</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">1,508</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">1,854</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">Closing
        shareholders&#146; funds</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">148</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">241</font></td>
    <td align=right bgcolor="#eeeeee">&nbsp;</td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">82</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(8</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">(19</font></td>
    <td align=left bgcolor="#eeeeee"> <font size=2 face="sans-serif">)</font></td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">1,857</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
    <td align=right bgcolor="#eeeeee"> <font size=2 face="sans-serif">2,301</font></td>
    <td align=left bgcolor="#eeeeee">&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp; </td>
  </tr>
</table>
<P align="center"> <FONT size=2 face="sans-serif">F-41</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf42"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">31.</font></b></td>
    <td><b><font size=2 face="sans-serif">Acquisitions</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">A list of businesses acquired during the year,
and the month of acquisition, is set out on page F-72. All these businesses are
engaged in the  distribution of building materials. In all these acquisitions,
the Group acquired 100% of the issued share capital, and has accounted for the
transaction by the purchase method of accounting. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Fair</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Provisional</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Book values</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">value</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">fair values</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">acquired</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">alignments</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">acquired</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=1 face="sans-serif">All acquisitions</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD colspan=2 align=left><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Intangible fixed assets</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD width=3% align=center> <FONT size=2 face="sans-serif">&#150;</FONT></TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">Customer relationships</FONT></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee">
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">220</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">220</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=center> <FONT size=2 face="sans-serif">&#150;</FONT></TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">Trade names and brands</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">26</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">26</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=center> <FONT size=2 face="sans-serif">&#150;</FONT></TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">Other</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">13</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(8</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">5</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">68</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">31</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">99</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Inventories</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">155</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(7</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">148</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Receivables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">310</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(3</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">307</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Cash, cash equivalents and bank overdrafts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">5</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">5</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Borrowings</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(76</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(76</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Payables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(205</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(6</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(211</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Deferred tax</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(1</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(50</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(51</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(11</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(11</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Provisions</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(2</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(3</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(5</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD colspan="2" align=left><font size="2">&nbsp;</font></TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2" align=left>
      <FONT size=2 face="sans-serif">Total</FONT>       </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">267</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">189</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">456</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Goodwill arising</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">387</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD colspan=2 align=left><font size="2">&nbsp;</font></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Consideration</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">843</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD colspan=2 align=left><font size="2">&nbsp;</font></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Satisfied by:</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2" align=left>
      <FONT size=2 face="sans-serif">Cash</FONT>        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">799</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Deferred consideration</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">35</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Contingent consideration</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">2</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Directly attributable costs</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">7</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD colspan=2 align=left><font size="2">&nbsp;</font></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan=2 align=left>
      <FONT size=2 face="sans-serif">Total consideration</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">843</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD colspan=2 align=left><font size="2">&nbsp;</font></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">The fair value adjustments shown above for the year ended July 31, 2006 are provisional figures, being the best estimates currently available. Further adjustments to goodwill may be necessary when additional
information is available concerning some of the judgmental areas.</FONT></P>
<P>
<FONT size=2 face="sans-serif">The goodwill arising on these acquisitions is
attributable to the anticipated profitability of the new markets and product
ranges to which the Group has gained access, and to additional profitability
and operating
efficiencies in respect of existing markets.</FONT></P>
<P>
<FONT size=2 face="sans-serif">The acquisitions contributed &#163;862 million
to revenue, &#163;60 million to trading profit and &#163;33 million to the Group&#146;s
operating profit for the period between the date of acquisition and the balance

sheet date.</FONT></P>
<P>
<FONT size=2 face="sans-serif">If each acquisition had been completed on the first day of the financial year, Group revenue would have been &#163;14,940 million and Group trading profit would have been &#163;934 million.</FONT></P>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">32.</font></b></td>
    <td><b><font size=2 face="sans-serif">Analysis of the net outflow of cash
    in respect of the purchase of businesses</font></b>&nbsp; </td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><b> <FONT size=1 face="sans-serif">&#163;m</FONT> </b></TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Purchase consideration (note 31)</FONT></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">843</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">423</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Deferred and contingent consideration (net of payments in the year)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(16</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(25</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Cash consideration</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">827</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">398</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Cash, cash equivalents and bank overdrafts acquired</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(5</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">8</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Net cash outflow in respect of the purchase of businesses</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">822</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">406</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-42</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf43"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">33.</font></b></td>
    <td><b><font size=2 face="sans-serif">Disposals</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">The Group made no disposals of operations in the year ended July 31, 2006. &#163;2 million of deferred consideration was received in the year in respect of a disposal in the year ended July 31, 2005. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="top">
    <TD width="3%"> <B><FONT size=2 face="sans-serif">34.</FONT></B></TD>
        <TD> <B><FONT size=2 face="sans-serif">Reconciliation of operating profit
      to net cash inflow from operating activities</FONT></B></TD>
</TR></TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
<B><FONT size=1 face="sans-serif">2006</FONT></B>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT>
        </TD>
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">537</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">479</FONT>
        </TD>
        <TD width=2% align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Net finance costs</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">65</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">37</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Tax expense</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">232</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">186</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Depreciation of property, plant and equipment</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">134</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">114</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Amortization of non-acquired intangibles</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">6</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">3</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Profit on disposal of property, plant and equipment</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(16</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(11</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">48</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">6</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Increase in inventories</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(171</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(56</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Increase in trade and other receivables</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(243</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">(180</FONT>
        </TD>
        <TD align=left>
      <FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Increase in trade and other payables</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">217</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">168</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Increase in provisions and other liabilities</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">19</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Share based payments and other non-cash items</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">22</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">19</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Cash generated from operations</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">850</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">765</FONT>
        </TD>
        <TD align=left><font size="2">&nbsp;</font>

        </TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">35.</font></b></td>
    <td><b><font size=2 face="sans-serif">Reconciliation of opening to closing
    net debt</font></b></td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">New</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">finance</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Fair value</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Exchange</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <font size=1 face="sans-serif">At August 1</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">Cash flows</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">Acquisitions</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size=1 face="sans-serif">leases</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif"> adjustments</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">movement</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">At July 31</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">For the year ended July 31,
      2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Cash and
      cash equivalents</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">381</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">52</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">(17</FONT> </TD>
    <TD width=2% align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">416</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank overdrafts</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(437</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">304</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(124</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">356</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">292</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: trading investments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial instruments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,047</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,085</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(74</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">28</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2,152</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(62</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(30</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(75</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,171</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(708</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(76</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(30</FONT>
    </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">13</FONT>
    </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,950</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
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    <TD align=right><hr size="1" noshade></TD>
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    <TD align=right><hr size="1" noshade></TD>
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    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">New</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">finance</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Fair value</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Exchange</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">At August 1</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">Cash flows</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">Acquisitions</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size=1 face="sans-serif">leases</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif"> adjustments</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">movement</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size=1 face="sans-serif">At July 31</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">For the year ended July 31,
      2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">291</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">66</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">24</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">381</FONT> </TD>
    <TD width=2% align=left><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank overdrafts</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(379</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(50</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(437</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
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    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
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  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(88</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
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    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(26</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
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    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=left><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: trading investments</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial instruments</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(835</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(176</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(35</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,047</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(52</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(62</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
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  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2">&nbsp;</font> </TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(970</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(114</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(63</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1,171</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><hr size="1" noshade>
    </TD>
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    </TD>
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  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-43</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf44"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P>
<FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
        <TD width="3%">
<B><FONT size=2 face="sans-serif">36.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Related party transactions</FONT></B></TD>
</TR></TABLE>
<P>
<FONT size=2 face="sans-serif">There are no related party transactions requiring
disclosure under IAS 24, Related Party Disclosures other than the compensation
of key management personnel which is set out in the following table.</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">
<B><FONT face="sans-serif">2006</FONT></B>&nbsp;
        </font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Key management personal compensation (including directors)</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">
<B><FONT face="sans-serif">&#163;m</FONT></B>&nbsp;
        </font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
      <FONT size=2 face="sans-serif">Salaries, bonuses and other short-term employee benefits</FONT></TD>
        <TD width=2% align=right><font size="2">&nbsp;</font></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">9</FONT></TD>
        <TD width=2% align=right><font size="2">&nbsp;</font></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Termination and post employment benefits</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Share-based payments</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">4</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="2">&nbsp;</font>        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Total compensation</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="2">&nbsp;</font>        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
      <HR noshade size=2>
        </TD>
    <TD><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">More detailed disclosures on the remuneration
of the Directors are provided in Item 6 &#8211; Directors, Senior Management
and Employees &#8211; Paragraph B, Compensation.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
        <TD width="3%">
<B><FONT size=2 face="sans-serif">37.</FONT></B></TD>
        <TD>
<B><FONT size=2 face="sans-serif">Capital commitments</FONT></B></TD>
</TR></TABLE>
<P>
<FONT size=2 face="sans-serif">Authorised capital expenditure which was contracted for but not provided in these accounts was as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><font size="1">
<B><FONT face="sans-serif">2006</FONT></B>&nbsp;
        </font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><b><font size="1"> <FONT face="sans-serif">&#163;m</FONT>&nbsp;
      </font></b></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font>        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">77</FONT></TD>
        <TD width=2% align=right><font size="2">&nbsp;</font></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">96</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Intangible assets: software</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">14</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="2">&nbsp;</font>        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Total capital commitments</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">91</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">96</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="2">&nbsp;</font>        </TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
      <HR noshade size=2>
        </TD>
    <TD><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">38.</font></b></td>
    <td><b><font size=2 face="sans-serif">Operating lease commitments</font></b></td>
  </tr>
</table>
<p><font size=2 face="sans-serif">Future minimum lease payments under non-cancellable
operating leases for the following periods are:</font></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><font size="1">
<B><FONT face="sans-serif">2006</FONT></B>&nbsp;
        </font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><b><font size="1"> <FONT face="sans-serif">&#163;m</FONT>&nbsp; </font></b></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1">&nbsp;</font>        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Within one year</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">199</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">153</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Later than one year and less than five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">533</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">402</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">After five years</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">372</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">323</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Total operating lease commitments</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1,104</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">878</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Operating lease payments represent rental payable by the Group for certain of its properties. Some of these operating lease arrangements have renewal options and rental escalation clauses, though the effect of these is
not material. No arrangements have been entered into for contingent rental payments.</FONT></P>
<P>
<FONT size=2 face="sans-serif">The total minimum sublease payments expected to be received under non-cancellable subleases at July 31, 2006 is &#163;8 million (2005: &#163;5 million). </FONT></P>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">39.</font></b></td>
    <td><b><font size=2 face="sans-serif">Contingent liabilities</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">The Group has the following quantifiable contingent liabilities which arose in the ordinary course of business and which have not been provided in these accounts since no actual liability is expected to arise:
</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><font size="1">
<B><FONT face="sans-serif">2006</FONT></B>&nbsp;
        </font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font>

        </TD>
        <TD align=right><b><font size="1"> <FONT face="sans-serif">&#163;m</FONT>&nbsp; </font></b></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
      <FONT size=2 face="sans-serif">Sundry guarantees, performance bonds and indemnities</FONT></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">114</FONT></TD>
        <TD width=2% align=right><font size="2">&nbsp;</font></TD>
        <TD width=8% align=right>
      <FONT size=2 face="sans-serif">78</FONT></TD>
    <TD width=2% align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=2 face="sans-serif">Obligations under forward foreign exchange contracts</FONT></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">497</FONT></TD>
        <TD align=right><font size="2">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=2 face="sans-serif">413</FONT></TD>
    <TD align=right><font size="2">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="2">&nbsp;</font>        </TD>
        <TD>
      <HR noshade size=2>
        </TD>
        <TD><font size="2">&nbsp;</font></TD>
        <TD>
      <HR noshade size=2>
        </TD>
    <TD><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">An amount of &#163;499 million (2005: &#163;402 million) is expected to be received from counterparties in respect of the obligations under forward foreign exchange contracts detailed above.</FONT></P>
<P>
<FONT size=2 face="sans-serif">As of July 31, 2006, cash deposits of Wolseley Insurance Limited amounting to &#163;52 million (2005: &#163;41 million) were charged in favor of LloydsTSB Bank plc to secure letters of credit provided by that bank.
</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-44</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf45"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">40.</font></b></td>
    <td><b><font size=2 face="sans-serif">Post balance sheet events</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">The Group has made the following acquisitions between August 1 and September 24, 2006:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Estimated</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Estimated</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Estimated</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=center><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Percentage</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">cost</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">net assets</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">goodwill</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Name</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Date of acquisition</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">acquired</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Water Works Suppliers Corporation</FONT></TD>
        <TD width="2%" align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width="14%" align=right>
<FONT size=2 face="sans-serif">August 2006</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="6%" align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD width="2%" align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width="6%" align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="6%" align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
        <TD width="2%" align=right>&nbsp;</TD>
        <TD width="6%" align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width="2%" align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Palermo Supply Co., Inc.</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">August 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">21</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Lunts Heath Limited</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">August 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Sigmatec SAS</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">August 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">United Automatic Heating Supply Ltd.</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">September 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Morris Insulation Limited, et al</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">September 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">18</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">Both the cost of acquisition and the fair values of assets and liabilities acquired are estimates, based on information available to the Group at the date of approval of these financial statements. Further adjustments
will be necessary when additional information is available.</FONT></P>
<P> <FONT size=2 face="sans-serif">The Group has made the following acquisitions
between September 25 and October 31, 2006:</FONT> </P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp; </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Estimated</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=center><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Percentage</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">cost</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
      <FONT size=1 face="sans-serif">Name</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">Date of acquisition</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">acquired</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
      <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><hr size="1" noshade></TD>
  <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">DT Group A/S</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=14% align=right>
<FONT size=2 face="sans-serif">September 2006</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD width=8% align=right>
<FONT size=2 face="sans-serif">1,353</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Castle Group</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">69</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Northern Water Works Supply, Inc</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Murdock EDC Ltd &amp; Murdock Haworth Ltd</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Helatukku Finland Oy</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Gulf Refrigeration Supply Inc.</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Kandall Fabricating &amp; Supply Corporation</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">12</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Lee Window &amp; Door Company</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Perfection Truss Company, Inc</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Woodcote-stavebni materialy a.s.</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">October 2006</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">100</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">%</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">The fair value of assets and liabilities acquired,
  and hence the amount of goodwill arising, cannot yet be estimated. Further details
  of the acquisition of DT Group and a vendor placing of approximately 59 million
  ordinary shares are provided in Item 5 &#150; Operating and Financial Review
  and Prospects &#150; Liquidity and Capital Resources &#150; Capital Resources.
  </FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">41.</font></b></td>
    <td><b><font size=2 face="sans-serif">Parent company</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">Wolseley plc is a limited liability company incorporated in England and Wales and domiciled in the United Kingdom. It operates as the ultimate parent company of the Wolseley Group. Its registered office is Parkview
1220, Arlington Business Park, Theale, Reading RG7 4GA, United Kingdom. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-45</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf46"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>


<P> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
  </FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">42.</font></b></td>
    <td><b><font size=2 face="sans-serif">Accounting standards, interpretations
      and amendments to published standards not yet effective</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group&#146;s accounting periods beginning on or after August 1, 2006 or later periods, but
which the Group has not early adopted. The new standards which are expected to be relevant to the Group&#146;s operations are as follows: </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Amendment to IAS 39 and IFRS 4 &#147;Financial Guarantee Contracts&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">This amendment requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be initially recognized at their fair value and subsequently measured at the higher
of: (a) the unamortized balance of the related fees received and determined; and (b) the expenditure required to settle the commitment at the balance sheet date. Management is currently assessing the impact of this amendment on the Group&#146;s
financial statements. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Amendment to IAS 39 &#147;Cash Flow Hedge Accounting of Forecast Intragroup Transactions&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">This amendment allows the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a hedged item in the consolidated financial statements, provided that: (a) the transaction is
denominated in a currency other than the functional currency of the entity entering into that transaction; and (b) the foreign currency risk will affect consolidated profit or loss. Management does not expect adoption of this amendment to have a
significant impact on the Group&#146;s financial statements. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Amendment to IAS 39 &#147;The Fair Value Option&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">This amendment changes the definition of the financial instruments classified at fair value through the income statement and restricts the ability to designate financial instruments as part of this category. Management
does not expect adoption of this amendment to have a significant impact on the Group&#146;s financial statements. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">IFRS 7 &#147;Financial Instruments: Disclosures&#148; (effective from August 1, 2007) and amendment to IAS 1 &#147;Presentation of Financial Statements &#150; Capital Disclosures&#148; (effective from August 1,
2007) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">IFRS 7 introduces new disclosures of qualitative and quantitative information about exposure to risks arising from financial instruments including specified minimum disclosures about credit risk, liquidity risk and
market risk, including sensitivity analysis to market risk. The amendment to IAS 1 introduces disclosures about the level of an entity&#146;s capital and how it manages capital. Management is currently assessing the impact of IFRS 7 and the
amendment to IAS 1 on the Group&#146;s financial statements.</FONT></P>
<P>
<B><FONT size=2 face="sans-serif">IFRIC 7 &#147;Applying the restatement approach under IAS 29&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">IFRIC 7 deals with the accounting when an entity identifies the existence of hyperinflation in the economy of its functional currency and how deferred tax items in the opening balance sheet should be restated. The
Group has no operations in hyperinflationary economies. The Group has assessed the impact of the interpretation and concluded it is not likely to have a significant impact on the Group&#146;s financial statements. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">IFRIC 8 &#147;Scope of IFRS 2&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">IFRIC 8 clarifies that transactions within the scope of IFRS 2 &#145;Share Based Payment&#146; include those in which the entity cannot specifically identify some or all of the goods and services received. The Group
has assessed the impact of this interpretation and has concluded it is not likely to have a significant impact on the Group&#146;s financial statements.</FONT></P>
<P>
<B><FONT size=2 face="sans-serif">IFRIC 9 &#147;Reassessment of embedded derivatives&#148; (effective from August 1, 2006) </FONT></B></P>
<P>
<FONT size=2 face="sans-serif">IFRIC 9 clarifies that an entity should assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract.
Subsequent reassessment is prohibited unless there is a change in the contract terms, in which case it is required. The Group has assessed the impact of this interpretation and has concluded it is not likely to have a significant impact on the
Group&#146;s financial statements. </FONT></P>
<P><B><FONT size=2 face="sans-serif">IFRIC 10 &#147;Interim financial reporting
      and impairment&#148; (effective
from August 1, 2007) </FONT></B></P>
<P> <FONT size=2 face="sans-serif">IFRIC 10 clarifies that any impairment losses
    on goodwill and certain financial assets recognised in an interim financial
    statement must not be reversed in subsequent interim or annual financial
    statements.  The Group
    has assessed the impact of this interpretation and has concluded it is not
    likely to have a significant impact on the Group&#146;s financial statements. </FONT></P>
<P>&nbsp;</P>
<P align="center"> <FONT size=2 face="sans-serif">F-46</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf47"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%" valign="top"><b><font size=2 face="sans-serif">43.</font></b></td>
    <td><b><font size=2 face="sans-serif">Reconciliation of net assets and profit
      under UK GAAP to IFRS</font></b></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">This is the first year that the Group has presented its financial statements under IFRS. In the year ended July 31, 2005, Wolseley plc reported under UK GAAP. </FONT></P>
<P>
<FONT size=2 face="sans-serif">IFRS 1, &#147;First-time Adoption of International
Financial Reporting Standards&#148; sets out the procedures that the Group must
follow when it adopts IFRS for the first time as the basis for preparing its
 consolidated financial statements. The Group is required to establish its IFRS
accounting policies as at July 31, 2006 and, in general, apply these retrospectively
to determine the IFRS opening balance sheet at its date of transition, August
1,
2004.</FONT></P>
<P><FONT size=2 face="sans-serif">Certain optional exemptions to this general
    principle are available under IFRS 1 and the significant first-time adoption
    choices made by the Group are
  as follows: </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Business combinations before August 1, 2004
(IFRS 3, &#147;Business Combinations&#148;)<br>
</FONT></B><FONT size=2 face="sans-serif">The
Group has elected not to apply IFRS 3 retrospectively to business combinations
that took place before August 1, 2004. As a result, in the IFRS opening balance
sheet, goodwill arising from past business combinations
(&#163;665.9 million) remains as stated under UK GAAP at that date. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Employee Benefits &#150; actuarial gains and losses (IAS 19, &#147;Employee Benefits&#148;)<br>
</FONT></B><FONT size=2 face="sans-serif">The Group has elected to recognize all cumulative actuarial gains and losses in relation to employee benefit schemes at the date of transition. In addition, the Group has elected to recognize actuarial gains and losses
in full in the period in which they occur in a statement of recognized income and expense. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Share-based Payments (IFRS 2, &#147;Share-based
Payment&#148;)<br>
</FONT></B><FONT size=2 face="sans-serif">The Group has elected to apply IFRS 2 only to equity-settled awards that had not vested as at August 1, 2004 and were gra</FONT><FONT size=2 face="sans-serif">nted on or after 7 November 2002 and cash-settled awards
that had not vested as at August 1, 2004. </FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Foreign Currency Translation Reserve (IAS 21, &#147;The
Effects of Changes in Foreign Exchange Rates&#148;)<br>
</FONT></B><FONT size=2 face="sans-serif">The Group has elected to reset the foreign currency translation reserve to zero at August 1, 2004. Going forward, IFRS requires amounts taken to reserves on the retranslation of foreign subsidiaries to be recorded in a
separate foreign currency translation reserve and be included in the future calculation of profit or loss on sale of the subsidiary.</FONT></P>
<P>
<B><FONT size=2 face="sans-serif">Financial Instruments (IAS 39, &#147;Financial
Instruments: Recognition and Measurement&#148; and IAS 32, &#147;Financial Instruments:
Disclosure and Presentation&#148;)<br>
</FONT></B><FONT size=2 face="sans-serif">The Group has elected to implement IAS 32 and IAS 39 at its date of transition, August 1, 2004, and apply hedge accounting where the requirements of IAS 39 are met. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group is also required to provide reconciliations of equity at the transition date, equity at July 31, 2005, and profit for the year ended July 31, 2005 under UK GAAP and IFRS, and to provide explanations of the
effect of the transition on its financial position, financial performance and cash flows. These are presented in the following tables. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-47</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf48"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p> <FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><b><font size=2 face="sans-serif">Restatement of profit and loss account </font></b></p>
<table width=100% border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td align=left><font size="1">&nbsp; </font> </td>
    <td align=left><font size="1">&nbsp;</font></td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=left><font size="1">&nbsp;</font></td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">Effect of</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=left><font size="1">&nbsp;</font></td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right><font size="1">&nbsp;</font></td>
    <td align=right> <font size=1 face="sans-serif">UK GAAP</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">transition</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">IFRS</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=1 face="sans-serif">Year ended July 31, 2005</font></td>
    <td align=right><font size="1">&nbsp;</font></td>
    <td align=right> <font size=1 face="sans-serif">Notes</font></td>
    <td align=right><font size="1">&nbsp;</font></td>
    <td align=right> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right> <b><font size=1 face="sans-serif">&#163;m</font></b> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
    <td align=right> <font size=1 face="sans-serif">&#163;m</font> </td>
    <td align=left><font size="1">&nbsp;</font> </td>
  </tr>
  <tr>
    <td> <hr align="left" size=1 noshade> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <font size=2 face="sans-serif">Revenue</font></td>
    <td width=2% align=right>&nbsp;</td>
    <td width=10% align=right> <font size=2 face="sans-serif">(ix)</font></td>
    <td width=2% align=right>&nbsp;</td>
    <td width=8% align=right> <font size=2 face="sans-serif">11,257</font> </td>
    <td width=2% align=left>&nbsp; </td>
    <td width=8% align=right> <font size=2 face="sans-serif">(1</font> </td>
    <td width=2% align=left> <font size=2 face="sans-serif">)</font></td>
    <td width=8% align=right> <font size=2 face="sans-serif">11,256</font> </td>
    <td width=2% align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Cost of sales</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(ix)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(8,175</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">1</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(8,174</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <b><font size=2 face="sans-serif">Gross profit</FONT></B></TD>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <b><font size=2 face="sans-serif">3,082</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">&#151;</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">3,082</font></b> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=10>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Distribution costs</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(1,930</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(1,930</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#cccccc">
    <td align=left> <font size=2 face="sans-serif">Administrative expenses: amortization
      of acquired intangibles</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(i)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(43</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">37</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(6</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#cccccc">
    <td align=left> <font size=2 face="sans-serif">Administrative expenses: other</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(i)-(v), (viii), (ix)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(455</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(13</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(468</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <font size=2 face="sans-serif">Administrative expenses: total</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(498</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">24</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(474</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Other operating income</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">24</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">24</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <b><font size=2 face="sans-serif">Operating profit</FONT></B></TD>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <b><font size=2 face="sans-serif">678</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">24</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">702</font></b> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Finance revenue</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">27</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">&#151;</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">27</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <font size=2 face="sans-serif">Finance costs</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(ii), (iii), (v), (ix)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(57</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(7</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">(64</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <b><font size=2 face="sans-serif">Profit before tax</FONT></B></TD>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <b><font size=2 face="sans-serif">648</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">17</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">665</font></b> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2 face="sans-serif">Tax expense</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(vii)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2 face="sans-serif">(187</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
    <td align=right> <font size=2 face="sans-serif">1</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2 face="sans-serif">(186</font> </td>
    <td align=left> <font size=2 face="sans-serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp; </td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td align=left> <b><font size=2 face="sans-serif">Profit for the period</FONT></B></TD>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <b><font size=2 face="sans-serif">461</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">18</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=right> <b><font size=2 face="sans-serif">479</font></b> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp; </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp; </td>
  </tr>
</table>
<P> <b><font size=2 face="sans-serif">Restatement of reconciliation of shareholders&#146;
  funds</font></b></P>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp; </font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">Effect of</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK GAAP</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">transition</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">IFRS</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Year ended July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the financial year</FONT></TD>
    <TD width="2%" align=left>&nbsp;</TD>
    <TD width="8%" align=left>&nbsp; </TD>
    <TD width="2%" align=right>&nbsp;</TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">461</FONT> </TD>
    <TD width="2%" align=left>&nbsp; </TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">18</FONT> </TD>
    <TD width="2%" align=left>&nbsp; </TD>
    <TD width="8%" align=right> <FONT size=2 face="sans-serif">479</FONT> </TD>
    <TD width="2%" align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Net exchange adjustments offset
      in reserves</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(viii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">60</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">57</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#FFFFFF">
    <TD align=left> <FONT size=2 face="sans-serif">Cash flow hedges</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">&#150; net fair value gains</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#FFFFFF">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial loss on retirement
      benefits</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Tax credit recognized directly
      in equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">25</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net gains not recognized in
      the income statement</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">85</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">76</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Total recognized income for
      the year attributable to shareholders</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">546</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">555</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">New share capital subscribed</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Purchase of own shares</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Credit to equity for share-based
      payments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iv)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">23</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">23</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Dividends</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vi)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(155</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">10</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(145</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net additions to shareholders&#146;
      funds</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">405</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">42</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">447</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Opening shareholders&#146;
      funds</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,902</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(48</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,854</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Closing shareholders&#146;
      funds</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,307</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,301</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-48</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf49"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><b><font size=2 face="sans-serif">Restatement of balance sheet </font></b></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp; </font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Effect of</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK GAAP</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">transition</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">IFRS</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right><b> <FONT size=1 face="sans-serif">&#163;m</FONT> </b></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current assets</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: goodwill</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(i)</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">866</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">(51</FONT> </TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">815</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: other</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">133</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">133</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i), (ii), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">916</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(33</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">883</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax asset</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">29</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">55</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: available
      for sale investments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,849</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">80</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,929</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current assets</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Inventories</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,705</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,706</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iii), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,213</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,205</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: trading investments</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Financial receivables: construction
      loans (secured)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">264</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">262</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">381</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">381</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4,568</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">4,562</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Assets held for sale</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Total assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">6,417</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">82</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">6,499</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Liabilities</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current liabilities</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)-(iv), (vi), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,029</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(86</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,943</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Current tax payable</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">70</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">70</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Borrowings: construction loans
      (unsecured)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">264</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">262</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">437</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">439</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,843</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(72</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,771</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current liabilities</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,045</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,045</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">14</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">71</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">62</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">57</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">63</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">32</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">149</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">181</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,267</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">160</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,427</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Total liabilities</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">4,110</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">88</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">4,198</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Net assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">2,307</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">(6</FONT></B> </TD>
    <TD align=left> <B><FONT size=2 face="sans-serif">)</FONT></B></TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">2,301</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Shareholders&#146; equity</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Called up share capital</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">148</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">148</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Share premium account</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">241</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">241</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign currency translation
      reserve</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">82</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">82</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retained earnings</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,918</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(88</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,830</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Shareholders&#146; funds</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">2,307</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">(6</FONT></B> </TD>
    <TD align=left> <B><FONT size=2 face="sans-serif">)</FONT></B></TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">2,301</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>

<P align="center"> <FONT size=2 face="sans-serif">F-49</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf50"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p> <b><font size=2 face="sans-serif">Restatement of balance sheet </font></b></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp; </font> </TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">UK GAAP</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Effect of</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">IFRS</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">As of August 1, 2004</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Notes</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">transition</FONT> </TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current assets</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: goodwill</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=left>&nbsp; </TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">666</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=8% align=right> <FONT size=2 face="sans-serif">666</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: other</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i), (ii), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">716</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">719</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">25</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">59</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">34</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: available
      for sale investments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,452</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">41</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,493</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current assets</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Inventories</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,502</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,502</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,897</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,892</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Financial assets: trading investments</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Financial receivables: construction
      loans (secured)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">188</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">185</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash and cash equivalents</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">291</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">291</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,884</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3,876</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Assets held for sale</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;  </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Total assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">5,336</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">40</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">5,376</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Liabilities</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Current liabilities</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)-(vi), (ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,701</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(77</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,624</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Current tax payable</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">152</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">152</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Borrowings: construction loans
      (unsecured)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">188</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">185</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">379</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">382</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,477</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(73</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2,404</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><I><FONT size=2 face="sans-serif">Non-current liabilities</FONT></I></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Bank loans</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">832</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">832</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">22</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(15</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">16</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ii), (iii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">51</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">57</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">21</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">148</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">169</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">957</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">161</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,118</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Total liabilities</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">3,434</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">88</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">3,522</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Net assets</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">1,902</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">(48</FONT></B> </TD>
    <TD align=left> <B><FONT size=2 face="sans-serif">)</FONT></B></TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">1,854</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Shareholders&#146; equity</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Called up share capital</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">146</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">146</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Share premium account</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">200</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">200</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign currency translation
      reserve</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retained earnings</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,556</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(48</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,508</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <B><FONT size=2 face="sans-serif">Shareholders&#146; funds</FONT></B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">1,902</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">(48</FONT></B> </TD>
    <TD align=left> <B><FONT size=2 face="sans-serif">)</FONT></B></TD>
    <TD align=right> <B><FONT size=2 face="sans-serif">1,854</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp; </TD>
    <TD> <hr noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-50</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf51"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><B><FONT size=2 face="sans-serif">Restatement of cash flow statement </FONT></B></p>


<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">Effect of</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">UK GAAP</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">transition</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">IFRS</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"> <FONT size=1 face="sans-serif">Year ended
      July 31, 2005</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
    </TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD align="left" valign="bottom"><HR noshade size=1></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from operating
      activities</FONT></B>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash generated from operations</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">764</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">765</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Interest received</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Interest paid</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(57</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Tax paid</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(151</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(151</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash generated from
      operating activities</FONT></I>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">583</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">&#151;</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">583</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from investing
      activities</FONT></B>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Acquisition of businesses (net
      of cash acquired)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(406</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(406</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Disposals of businesses (net
      of cash disposed of)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Purchases of property, plant
      and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(239</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">21</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(218</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from sale of property,
      plant and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">74</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">74</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Purchase of intangible assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(21</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(21</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from disposal of current
      asset investments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash used in investing
      activities</FONT></I>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">(565</FONT></I> </TD>
    <TD align=left> <I><FONT size=2 face="sans-serif">)</FONT></I>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">&#151;</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">(565</FONT></I> </TD>
    <TD align=left> <I><FONT size=2 face="sans-serif">)</FONT></I>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Cash flows from financing
      activities</FONT></B>&nbsp; </TD>
    <TD align=left></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from the issue of
      shares to shareholders</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Purchase of shares by Employee
      Benefit Trusts</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Proceeds from new borrowings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">410</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">410</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Repayment of borrowings and
      derivatives</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(234</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(234</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Finance lease capital payments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Dividends paid to shareholders</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(145</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(145</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <I><FONT size=2 face="sans-serif">Net cash generated from
      financing activities</FONT></I>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">40</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">&#151;</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <I><FONT size=2 face="sans-serif">40</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net increase in cash, cash
      equivalents and overdrafts</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Effects of exchange rate changes</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(26</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(26</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash, cash equivalents and
      overdrafts at the beginning of the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(88</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(88</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Cash, cash equivalents and
      overdrafts at the end of the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">Effect of</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">UK GAAP</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">transition</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">IFRS</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Year ended July 31, 2005</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B>
    </TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">461</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">479</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Tax expense</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">187</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">186</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Depreciation of property, plant
      and equipment and amortization of non-acquired intangibles</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">114</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">117</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Profit on disposal of property,
      plant and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Amortization of acquired intangibles</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">43</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(37</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Net finance costs</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">30</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Increase in inventories</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(55</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(56</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Decrease in trade and other
      receivables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(181</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(180</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Decrease in trade and other
      payables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">169</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">168</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Decrease in provisions and
      other liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Share-based payments and other
      non-cash items</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net cash flow from operating
      activities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">764</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">765</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-51</FONT></P>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf52"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(i)</font></b></td>
    <td><b><font size=2 face="sans-serif">Intangible assets</font></b></td>
  </tr>
</table>
<P> <B><FONT size=2 face="sans-serif">Arising on business combinations<br>
  </FONT></B><FONT size=2 face="sans-serif">Under UK GAAP, goodwill was amortized
  over its useful economic life, tested for impairment and provided against as
  necessary. Under IFRS, goodwill is no longer amortized but must be tested for
  impairment as at August 1, 2004 (the transition date) and at least annually
  thereafter. Goodwill amortization charged under UK GAAP during the year ended
  July 31, 2005 has been credited back to the income statement under IFRS.</FONT></P>
<P><FONT size=2 face="sans-serif">In addition IFRS requires identifiable intangible
  assets to be recognized separately on the balance sheet and consequently certain
  intangible assets, such as contractual customer relationships and trade names,
  which were previously recorded as part of goodwill under UK GAAP, have been
  separately recognized as intangible assets under IFRS and amortized over their
  expected useful lives.</FONT></P>
<P> <B><FONT size=2 face="sans-serif">Software<br>
  </FONT></B><FONT size=2 face="sans-serif">Under UK GAAP, software was included
  in plant and equipment, and the allocation of its cost over its estimated useful
  life was charged as depreciation. Under IFRS, only software which is necessary
  to operate hardware is included in plant and equipment. Other expenditure on
  software is included in intangible assets, and the allocation of its cost over
  its estimated useful life is charged as amortization. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in income
      statement headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: amortization
      of acquired intangibles</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">37</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">As of July 31, 2004</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in balance
      sheet headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: goodwill</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(51</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Intangible assets: other</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">133</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(31</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">51</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(ii)</font></b></td>
    <td><b><font size=2 face="sans-serif">Leases</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"><font size=2 face="sans-serif">IAS 17, &#147;Leases&#148;
      requires that the land and buildings elements of property leases are considered
      separately for the purposes of determining whether the lease is a finance
      or operating lease. The majority of the Group's leased buildings are on
      short-term leases and, consistent with UK GAAP, are classified as operating
      leases under IFRS. There are, however, a small number of leases where the
      building element of the lease has been reclassified as a finance lease based
      on the criteria set out in IAS 17.</FONT></TD>
  </tr>
</table>
<P><B><FONT size=2 face="sans-serif"> </FONT></B><FONT size=2 face="sans-serif">Under
  UK GAAP, committed rental increases, which could be considered in the same way
  as inflationary increases and increases due to market comparables, were generally
  recognized as they arose, and property lease incentives were generally recognized
  over the period to the first market rent review. Under IFRS, committed rental
  increases and lease incentives are required to be spread over the entire lease
  term. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in income
      statement headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Finance costs</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2005</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2004</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"> <FONT size=1 face="sans-serif">Increase/(decrease)
      in balance sheet headings</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD align="left" valign="bottom"><HR noshade size=1></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">11</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">24</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables (included
      in current liabilities)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases:
      due in less than one year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Obligations under finance leases:
      due in more than one year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(14</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(22</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions (included in non-current
      liabilities)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-52</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf53"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(iii)</font></b></td>
    <td><b><font size=2 face="sans-serif">Post-employment benefits</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"> <p><font size=2 face="sans-serif">Under UK GAAP, the Group
        accounted for post-employment benefits under SSAP 24, &#147;Accounting
        for pension costs&#148;, whereby the cost of providing defined benefit
        pensions and post-retirement healthcare benefits was charged against operating
        profit on a systematic basis with surpluses and deficits arising recognized
        over the expected average remaining service lives of participating employees.
        The Group has adopted the amendment to IAS 19, &#147;Employee Benefits&#148;
        which allows actuarial gains and losses to be charged to equity and, as
        a result, the net deficit on the Group&#146;s defined benefit pension
        schemes is carried in full in the Group&#146;s IFRS balance sheet. </font></p></td>
  </tr>
  <tr valign="top">
    <td colspan="2">&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in income
      statement headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Finance costs</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in statement
      of recognized income and expense headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial loss on retirement
      benefits</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net gains not recognized in
      the income statement</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2005</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2004</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"> <FONT size=1 face="sans-serif">Increase/(decrease)
      in balance sheet headings</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD align="left" valign="bottom"><HR noshade size=1></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Provisions (included in non-current
      liabilities)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Retirement benefit obligations
      (included in non-current liabilities)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(149</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(148</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(152</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(148</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(iv)</font></b></td>
    <td><b><font size=2 face="sans-serif">Share-based payments</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"><font size=2 face="sans-serif">Under UK GAAP, the cost of
      awards made under the Group&#146;s employee share schemes was based on the
      intrinsic value of the awards, with the exception of Save As You Earn schemes
      for which no cost was recognized. Under IFRS 2, &#147;Share-based Payment&#148;,
      the cost of employee share schemes, including Save As You Earn schemes,
      is based on the fair value of the awards, which must be assessed using an
      option-pricing model. The Group has principally used a binomial model for
      this purpose.</FONT></TD>
  </tr>
</table>
<P><FONT size=2 face="sans-serif">Generally, for an equity-settled award, the
  fair value of the award at the grant date is expensed on a straight-line basis
  over the vesting period, with adjustments being made to reflect expected and
  actual forfeitures during the vesting period due to failure to satisfy service
  conditions or achieve non-market performance conditions, such as EPS growth
  targets. For a cash-settled award, the fair value of the award at each balance
  sheet date is used to calculate the probable liability of the Group; changes
  in this liability from the opening to closing balance sheet are charged or credited
  to the income statement. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in income
      statement headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(21</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(21</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in statement
      of changes in shareholders&#146; equity headings</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Credit to equity for share-based
      payments</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">23</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Net additions to shareholders&#146;
      funds</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">23</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2005</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">As of July
      31, 2004</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left valign="bottom"> <FONT size=1 face="sans-serif">Increase/(decrease)
      in balance sheet headings</FONT></TD>
    <TD align=right valign="bottom">&nbsp;</TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align=right valign="bottom"> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD align="left" valign="bottom"><HR noshade size=1></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"> <HR noshade size=1> </TD>
    <TD align="right" valign="bottom"><font size="1">&nbsp;</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">(14</FONT></TD>
    <TD width=2% align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(14</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-53</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf54"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(v)</font></b></td>
    <td><b><font size=2 face="sans-serif">Derivatives and hedge accounting</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"><font size=2 face="sans-serif">The Group uses derivative contracts
      to manage its economic exposure to movements in interest rates and currency
      exchange rates. Under UK GAAP, such derivative contracts were not recognized
      as assets and liabilities on the balance sheet and gains or losses arising
      on them were not recognized until the hedged item had itself been recognized
      in the financial statements.</font></td>
  </tr>
</table>
<p> <FONT size=2 face="sans-serif">Under IFRS, all derivative financial instruments
    are accounted for at fair market value whilst other financial instruments
    are accounted for either at amortized cost or at fair value depending on
    their classification. Subject to stringent criteria, derivative financial
    instruments, financial assets and financial liabilities may be designated
    as forming hedge relationships as a result of which fair value changes are
    offset in the income statement or charged/credited to equity depending on
    the nature of the hedge relationship. Hedge accounting has been applied to
    the Group&#146;s interest rate swaps (which are hedging floating rate debt)
    and foreign currency financial instruments (which are hedging the net assets
of the Group&#146;s foreign operations).</FONT></p>
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<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in income statement headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</FONT></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</FONT></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</FONT></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Finance costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
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  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in statement of recognized income and expense headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Cash flow hedges: net fair value losses</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">(11</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Net gains not recognized in the income statement</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(11</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
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  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">As of July 31, 2004</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in balance
      sheet headings</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
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    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial assets</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Derivative financial liabilities</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(14</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Equity</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(11</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><hr noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(vi)</font></b></td>
    <td><b><font size=2 face="sans-serif">Post balance sheet events</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"><p><font size=2 face="sans-serif">Under UK GAAP, dividends
        were recognized in the period to which they related. IAS 10, &#147;Events
        after the Balance Sheet Date&#148; requires that dividends declared or
        approved after the balance sheet date should not be recognized as a liability
        at that balance sheet date as the liability does not represent a present
        obligation as defined by IAS 37, &#147;Provisions, Contingent Liabilities
        and Contingent Assets&#148;.</font></p></td>
  </tr>
  <tr valign="top">
    <td colspan="2">&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2004</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in balance sheet headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">94</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Equity</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">104</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">94</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in statement of changes in shareholders&#146; equity headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Dividends</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net additions to shareholders&#146; funds</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">10</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">(vii)</font></b></td>
    <td><b><font size=2 face="sans-serif">Taxation</font></b></td>
  </tr>
  <tr valign="top">
    <td colspan="2"><font size=2 face="sans-serif">Under UK GAAP, deferred tax
      was provided on timing differences between the accounting and taxable profit
      (an income statement approach). Under IFRS, deferred tax is provided on
      temporary differences between the book carrying value and tax base of assets
      and liabilities (a balance sheet approach). As a result, the Group's IFRS
      balance sheet includes an additional deferred tax liability in respect of
      fair value property revaluations on acquisitions and property roll-over
      gains. </font></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">In addition, deferred tax has been recognized on the adjustments between UK GAAP and IFRS with the majority of the net deferred tax asset relating to the adjustments for share options and post-employment benefits
(reflecting the substantially increased defined benefit liability under IFRS).</FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-54</FONT></P>

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<div style="page-break-before:always"></div><page><a name="pf55"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=1 face="sans-serif">Increase/(decrease) in income
        statement headings</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><HR noshade size=1>
    </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Income tax expense</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2>
    </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2004</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in balance sheet headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax assets</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">29</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">25</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Deferred tax liabilities</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">15</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Equity</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">38</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">40</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in statement of recognized income and expense headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Tax credit recognized directly in equity</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net gains not recognized in the income statement</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">(viii)</font></b></td>
    <td><b><font size=2 face="sans-serif"> Foreign exchange gains and losses</font></b></td>
  </tr>
  <tr>
    <td colspan="2"><font size=2 face="sans-serif">A small number of the Group&#146;s
      subsidiary companies have changed their functional currency in order to
      comply with the more stringent functional currency requirements of IAS 21,
      &#147;The Effects of Changes in Foreign Exchange Rates&#148; which requires
      companies that are acting on behalf of the parent company to have the same
      functional currency as the parent company. As a result, some foreign exchange
      differences arising in these companies have been recorded in the Group&#146;s
      income statement under IFRS rather than in equity, as required under UK
      GAAP.</font></td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in income statement headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in statement of recognized income and expense headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Net exchange adjustments offset in reserves</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Net gains not recognized in the income statement</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR align="left" valign="top">
  <TD> <B><FONT size=2 face="sans-serif">(ix)</FONT></B></TD>
  <TD colspan="2"> <B><FONT size=2 face="sans-serif">Other adjustments</FONT></B> </TD>
  </TR>
<TR align="left" valign="top">
<TD>&nbsp;</TD> <TD>&#8226;</TD>
        <TD>
<FONT size=2 face="sans-serif">The Group holds invoiced products on its premises for later collection by customers: under UK GAAP such products are generally treated as sold, while under IFRS they are held in inventory.</FONT></TD>
</TR><TR align="left" valign="top">
<TD width="3%">&nbsp;</TD>      <TD width="3%">&#8226;</TD>
        <TD>
<FONT size=2 face="sans-serif">Available-for-sale financial assets are stated at historical cost under UK GAAP, but at fair value under IFRS.</FONT></TD>
</TR><TR align="left" valign="top">
<TD>&nbsp;</TD> <TD>&#8226;</TD>
        <TD>
<FONT size=2 face="sans-serif">Assets held for sale are shown in a single balance sheet caption under IFRS, but under UK GAAP are included in property, plant and equipment, trade and other receivables or, where they arise out of foreclosed loans, in
construction loans receivable.</FONT></TD>
</TR><TR align="left" valign="top">
<TD>&nbsp;</TD> <TD>&#8226;</TD>
        <TD>
<FONT size=2 face="sans-serif">Under IFRS, holiday pay is accrued over the period when employees render the service that increases their entitlement to paid leave. Under UK GAAP, there is no requirement to adjust salary costs to reflect the timing
when such benefits are taken.</FONT></TD>
</TR></TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-55</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf56"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">Year ended</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">July 31, 2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in income statement headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left bgcolor="#eeeeee">
<FONT size=2 face="sans-serif">Revenue</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(1</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Cost of sales</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Administrative expenses: other</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Finance costs</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Profit for the year</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2005</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">As of July 31, 2004</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=1 face="sans-serif">Increase/(decrease) in balance sheet headings</FONT></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right>
<FONT size=1 face="sans-serif">&#163;m</FONT></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD>
        <TD><HR noshade size=1></TD>
        <TD><font size="1">&nbsp;</font></TD></TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Property, plant and equipment</FONT></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(13</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD width=10% align=right>
<FONT size=2 face="sans-serif">(9</FONT></TD>
        <TD width=2% align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Financial assets: available-for-sale investments (included in non-current assets)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Inventories</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">1</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade and other receivables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Construction loans receivable (secured)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Assets held for sale</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">8</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">7</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Trade and other payables</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(5</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(4</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Borrowings: construction loans (unsecured)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">2</FONT></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">3</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Bank loans and overdrafts</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(3</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD align=left>
<FONT size=2 face="sans-serif">Provisions (included in non current liabilities)</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(2</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">&#151;</FONT></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left>
<FONT size=2 face="sans-serif">Equity</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(16</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
        <TD align=right>
<FONT size=2 face="sans-serif">(14</FONT></TD>
        <TD align=left>
<FONT size=2 face="sans-serif">)</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
        <TD><HR noshade size=2></TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-56</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<page>  <a name="pf57"></a>
<p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size=2 face="sans-serif">44. </font></b></td>
    <td><b><font size=2 face="sans-serif">Summary of significant differences between
      International Financial Reporting Standards and accounting principles generally
      accepted in the United States</font></b></td>
  </tr>
</table>
<P><FONT size=2 face="sans-serif">The Consolidated Financial Statements have been
  prepared in accordance with International Financial Reporting Standards as adopted
  by the European Union (&#147;IFRS&#148;), which differ in certain significant
  respects from generally accepted accounting principles in the United States
  (&#147;US GAAP&#148;). Such differences involve methods for measuring the amounts
  shown in the financial statements, as well as additional disclosures required
  by US GAAP.</FONT></P>
<P>
<FONT size=2 face="sans-serif">There are no significant differences between IFRS as adopted for use in the EU and full IFRS as published by the International Accounting Standards Board (&#147;IASB&#148;), as applied to the Group. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The following is a summary of the material adjustments to consolidated profit for the financial year and consolidated shareholders&#146; funds that would have been required in applying the significant differences between
IFRS and US GAAP. </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan=4 align=center> <B><FONT size=1 face="sans-serif">Year ended July
      31,</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan=4> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2005</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <font size="1" face="sans-serif"><b>Reconciliation of consolidated
      profit for the financial year</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size="1" face="sans-serif"><B>Note</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Profit
      for the financial year under IFRS</FONT></B></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=5% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">537</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">479</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">US GAAP adjustments:</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Amortization of intangible
      assets</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(8</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Pensions</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(iv)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(13</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(15</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred taxation</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Share based
      payments</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(vi)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(5</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(19</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Other adjustments</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(viii)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(7</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Taxation effect of US GAAP
      adjustments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">16</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Profit for
      the year before cumulative effect of accounting change</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">526</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">444</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cumulative effect of change
      in accounting principle</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vi)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(18</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Tax effect of change in accounting
      principle</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Profit
      for the financial year under US GAAP</FONT></B></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">510</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">444</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B><FONT size=2 face="sans-serif">Presentation of earnings
      per share under US GAAP</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(ix)</FONT></TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Basic earnings
      per share before cumulative effect of accounting change</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">88.91</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">75.61</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cumulative effect of accounting
      change, net of tax</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2.70</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)p</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Basic earnings
      per share</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">86.21</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">75.61</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Diluted earnings
      per share before cumulative effect of accounting change</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">88.10</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">74.94</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Cumulative effect of accounting
      change, net of tax</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2.68</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)p</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Diluted earnings
      per share</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">85.42</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">74.94</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">p</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Weighted
      average shares outstanding (millions)</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">592</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">587</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Dilutive effect of stock options
      (millions)</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Weighted
      average shares outstanding assuming dilution (millions)</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">597</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">592</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-57</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf58"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD colspan=4 align=center> <B><FONT size=1 face="sans-serif">Year ended July
      31,</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD colspan=4> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2006</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">2005</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <font size="1" face="sans-serif"><B>Reconciliation of consolidated
      shareholders&#146; funds</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size="1" face="sans-serif"><B>Note</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1></TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Shareholders&#146;
      funds under IFRS</FONT></B></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=5% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,592</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,301</FONT></TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">US GAAP adjustments:</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Goodwill</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(i)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">170</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">174</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Intangible
      assets</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(ii)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">82</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">94</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Contingent consideration</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(iii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">31</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Pensions</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(iv)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">96</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">88</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Deferred taxation</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">13</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Share based
      payments</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(vi)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(23</FONT></TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">12</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Leases</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(vii)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(15</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Other adjustments</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(viii)</FONT></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Taxation effect of US GAAP
      adjustments</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(v)</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(73</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(99</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Total US
      GAAP adjustments</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">277</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">312</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <B><FONT size=2 face="sans-serif">Shareholders&#146;
      funds under US GAAP</FONT></B></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,869</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2,613</FONT></TD>
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P>
<FONT size=2 face="sans-serif">A summary of the principal differences between IFRS and US GAAP, and additional disclosures under US GAAP applicable to the Group, are set out below:</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><b><font size=2 face="sans-serif">(i)</font></b></td>
    <td><b><font size=2 face="sans-serif">Goodwill</font></b></td>
  </tr>
  <tr>
    <td colspan="2"><font size=2 face="sans-serif">On transition to IFRS, the amount of goodwill
        at August 1, 2004 is the previous carrying amount under UK GAAP. Under
    IFRS goodwill is no longer amortized but tested annually for impairment. </font></td>
  </tr>
</table>
<P>
<FONT size=2 face="sans-serif">Prior to August 1, 1998, purchased goodwill was written off to reserves in the year of acquisition as permitted under UK GAAP. Since August 1, 1998, all acquired goodwill has been capitalized and amortized over a period not
exceeding 20 years. If a subsidiary or a business is subsequently sold or closed, previously written off goodwill which was the result of the initial acquisition is taken into account in determining the profit or loss on sale or closure. </FONT></P>
<P>
<FONT size=2 face="sans-serif">Under US GAAP prior to August 1, 2002, goodwill arising on acquisitions prior to July 1, 2001 was capitalized and amortized over its estimated useful life, not exceeding 40 years. Following implementation of SFAS 142,
&#147;Goodwill and Other Intangible Assets,&#148; goodwill is no longer amortized, but is reviewed at least annually for impairment. </FONT></P>
<P>
<FONT size=2 face="sans-serif">The Group completed the required impairment tests under both IFRS and US GAAP during 2006, which indicated that no impairment charge was required under either set of accounting principles. </FONT></P>
<P>
<FONT size=2 face="sans-serif">A roll-forward of goodwill in total and by reportable segment accounted for under US GAAP for 2006 and 2005 is as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">North</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Europe</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">America</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Total</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at August 1, 2004</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">426</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">429</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">855</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">87</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">131</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Disposals</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2005</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">489</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">500</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">989</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">229</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">160</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">389</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(31</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(35</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2006</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">714</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">629</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1,343</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-58</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf59"></a><p><a href="#fcontents"><font size="2">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Central</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">UK and Ireland</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">France</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Europe</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Europe</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at August 1, 2004</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">202</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">164</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">60</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">426</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">35</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">44</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Disposals</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2005</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">240</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">182</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">67</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">489</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">199</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">19</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">11</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">229</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(4</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2006</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">438</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">199</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">77</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">714</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">US Plumbing</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">US Building</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">North</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">and Heating</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">Materials</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size="1" face="sans-serif"><B>Canada</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">America</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</b></font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
    <TD align=right> <B><FONT size=1 face="sans-serif">&#163;m</FONT></B></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at August 1, 2004</FONT></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">188</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">179</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">62</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">429</FONT></TD>
    <TD width=2% align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">26</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">58</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">87</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Disposals</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(1</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(3</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(12</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2005</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">200</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">227</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">73</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">500</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Additions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">56</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">99</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">160</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Foreign exchange movements</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(15</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(17</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">(31</FONT></TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1></TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">Balance at July 31, 2006</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">241</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">309</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">79</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">629</FONT></TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2></TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-59</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf60"></a><font size="2" face="sans-serif">
<p><a href="#fcontents">Back to Contents</a></p>
</font></font>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="sans-serif"><b>(ii)</b></font></td>
    <td><font size="2" face="sans-serif"><B>Intangible assets from business combinations</B></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font size=2 face="sans-serif">Under IFRS, the accounting for business combinations
        prior to transition to IFRS has not been revisited. Therefore intangible
        assets arising in respect of acquisitions prior to the transition date
        of August 1, 2004, previously recognized under US GAAP, have not been
    recognized under IFRS and remain within goodwill. </font> </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font size="2" face="sans-serif"> The intangible assets arising
        on business combinations under US GAAP for 2006 and 2005 can be analyzed
    as follows:</font></td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Gross carrying</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Accumulated</FONT></b></font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>amount</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>amortization</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Net book value</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>&#163;m</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>&#163;m</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>&#163;m</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Customer relationships</font></TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    378</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    58</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    320</font></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Trademarks</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    54</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    11</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    43</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Licensing agreements</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    11</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    4</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    7</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Other</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    34</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    28</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    6</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    As of July 31, 2006</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"><b>477</b></font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"><b>101</b></font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"><b>376</b></font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp;</TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> Customer
      relationships</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 172</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 16</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 156</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif"> Trademarks</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 30</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 6</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 24</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> Licensing
      agreements</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 11</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 3</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 8</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif"> Other</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 31</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 24</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 7</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> As of July
      31, 2005</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 244</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 49</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 195</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
  <TD> </TD>
  <TD>
    <HR noshade size=1>
  </TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1>
  </TD>
  <TD>&nbsp;</TD>
  <TD>
    <HR noshade size=1>
  </TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<P><font size="2" face="sans-serif">
Intangible assets arising on business combinations are being amortized over their
useful lives, which range from one to 25 years. </font></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <b>&#163;m</b></font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Actual aggregate amortization expense</font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> &#150;
      For the year ending July 31, 2005</font></TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
      13</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
  </TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
    July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    56</font></TD>
        <TD align=right>&nbsp;</TD>
</TR>
  <TR valign="bottom">
    <TD align=left><font size="2" face="sans-serif">
    Estimated aggregate amortization expense</font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
      July 31, 2007</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 67</font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
      July 31, 2008</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 58</font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
      July 31, 2009</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 50</font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
      July 31, 2010</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 42</font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif"> &#150; For the year ending
      July 31, 2011</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 35</font></TD>
        <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<p><font size="2" face="sans-serif"> <B>Weighted average period of amortization</B>
  </font> </p>
<P><FONT size=2 face="sans-serif">The weighted average periods of amortization of intangible assets acquired in the fiscal years ended July 31, 2006 and 2005 are as follows:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
    <TD colspan=3 align=right><font size="1" face="sans-serif"><b>Year ended
    July 31, 2006</b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Weighted</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>average</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>amortization</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><FONT size=1 face="sans-serif">&nbsp;</FONT></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Amount</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>period</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><FONT size=1 face="sans-serif"><b>Class</b></FONT> </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>&#163;m</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Years</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Customer relationships</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    220</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    11.8</font></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Trademarks</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    26</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    7.1</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Other</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    5</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    2.7</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 251</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 11.1</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<font face="sans-serif">
<P align="center"> <FONT size=2>F-60</FONT></P>
</font>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf61"></a><font size="2" face="sans-serif">
<p><a href="#fcontents">Back to Contents</a></p>
</font></font>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
    <TD colspan=3 align=right><font face="sans-serif"><b> <font size=1>Year ended July 31, 2005</font></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Weighted</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>average</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>amortization</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font face="sans-serif"><b> </b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Amount</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>period</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif"><b>Class</b></font> </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>&#163;m</FONT></b></font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif"><b>
    <FONT size=1>Years</FONT></b></font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Customer relationships</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    87</font></TD>
        <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    10.3</font></TD>
    <TD width=2% align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Trademarks</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    14</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    9.4</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Other</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    7</font></TD>
        <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    4.1</font></TD>
    <TD align=right bgcolor="#eeeeee">&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp; </TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 108</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif"> 11.1</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="sans-serif"><b>(iii) </b></font></td>
    <td><font size="2" face="sans-serif"><b>Contingent purchase consideration</b></font></td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><P><font size="2" face="sans-serif"> Under IFRS, contingent
        purchase consideration is recorded as part of the purchase cost at the
        date of acquisition if it is reliably measurable and probable. Under US
        GAAP, this cost is not recognized until the contingency is resolved and
        the amount determinable. </font></P></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="sans-serif"><b>(iv)</b></font></td>
    <td><font size="2" face="sans-serif"><b>Pensions</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><FONT size=2 face="sans-serif">Under IFRS, pension costs are
      accounted for in accordance with IAS 19 (revised 2004). Under US GAAP, pension
      costs comprise the estimated cost of benefits accruing in the period as
      determined in accordance with SFAS 87, &#147;Employers&#146; Accounting
      for Pensions&#148;, and SFAS 88, &#147;Employers&#146; Accounting for Settlements
      and Curtailments of Defined Benefit Plans and for Termination Benefits.&#148;
      </FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><FONT size=2 face="sans-serif">Under IFRS, actuarial gains
      and losses, which represent differences between the expected and actual
      returns on the plan assets and the effect of changes in actuarial assumptions,
      are recognized in full in the statement of recognized income and expense
      in the period in which they occur. The defined benefit liability or asset
      recognized in the balance sheet comprises the net total for each plan of
      the present value of the benefit obligation at the balance sheet date, less
      any past service costs not yet recognized, less the fair value of the plan
      assets, if any, at the balance sheet date. Where a plan is in surplus, the
      asset recognized is limited to the amount of any unrecognized past service
      costs and the present value of any amount which the Group expects to recover
      by way of refunds or a reduction in future contributions.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><FONT size=2 face="sans-serif">Under US GAAP, the annual pension
      cost comprises the estimated cost of benefits accruing in the period as
      determined in accordance with SFAS 87, &#147;Employers&#146; Accounting
      for Pensions.&#148; SFAS 87 requires the use of the projected unit credit
      actuarial method for determining defined benefit pension costs and provides
      for the deferral of actuarial gains and losses (in excess of a specified
      corridor) that result from changes in assumptions or actual experience.</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><FONT size=2 face="sans-serif">SFAS 132, &#147;Employers&#146;
      Disclosure about Pensions and Other Post-Retirement Benefits&#148;, requires
      disclosure of the components of net periodic pension cost and the funded
      status of the pension plans.</FONT></td>
  </tr>
</table>
<P><font size="2" face="sans-serif">
The components of net periodic pension cost for all Group-sponsored defined benefit
plans are as follows:</font></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD colspan="7" align=left>
      <div align="center"><font size="1" face="sans-serif"><B>Year ended July
            31,</B>
    </font></div></TD>
    <TD align=left></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=right><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD colspan=3 align=left>
      <div align="center"><font face="sans-serif">&nbsp;<B><FONT size=1>UK Plans</FONT></B>
    </font></div></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD colspan="3" align=right>
      <div align="center"><font size="1" face="sans-serif"><B>Non-UK Plans</B>
    </font></div></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD><HR noshade size=1>
        </TD>
        <TD><HR noshade size=1></TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2006</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2005</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2006</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2005</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Service cost</font></TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    15
        </font></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    12
        </font></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    5
        </font></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    5
        </font></TD>
        <TD width=2% align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Interest cost</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    27
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    26
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    9
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    8
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Expected return on plan assets</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (29
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (22
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (7
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (6
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    New entrants&#146; prior service cost</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    1
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Amortization of unrecognized net loss</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    12
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    12
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    1
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    1
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Curtailments and settlements</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    (6
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    1
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Net periodic pension cost</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    25
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    28
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    2
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    10
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
</TABLE>
<font face="sans-serif">
<P align="center"> <FONT size=2>F-61</FONT></P>
</font>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf62"></a>
<p><font size="2" face="sans-serif"><a href="#fcontents">Back to Contents</a></font></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<P><font size="2" face="sans-serif">
  The following table sets out the benefit obligation and plan assets of the
UK pension plans in accordance with US GAAP:</font></P>
</font>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD colspan=3 align=center><font size="1" face="sans-serif">
    <B>UK Plans as of July 31,</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD><HR noshade size=1>
        </TD>
        <TD><HR noshade size=1></TD>
        <TD><HR noshade size=1></TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2006</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2005</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    <b>Change in benefit obligation:</b></font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Benefit obligation at beginning of year</font></TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    527
        </font></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD width=8% align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    460
        </font></TD>
        <TD width=2% align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Service cost</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    15
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    12
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Interest cost</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    27
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    26
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Plan participants&#146; contribution</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    8
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    6
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Acquisition</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    28
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Actuarial loss/(gain)</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    30
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    35
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Benefits paid</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    (16
        </font></TD>
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    (12
        </font></TD>
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    )</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> Benefit
      obligation at end of year</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 619 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 527 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp; </TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font face="sans-serif"><b>
    <FONT size=2>Change in plan assets:</FONT></b></font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Fair value of plan assets at beginning of year</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    409
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    326
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Actual return on plan assets</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    59
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    69
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Employer contribution</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    24
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    20
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Plan participants&#146; contribution</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    8
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    6
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Acquisition</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    17
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    &#151;</font>
        </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Benefits paid</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (16
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (12
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif">
    Fair value of plan assets at end of year</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    501
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif">
    409
        </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp; </TD>
        <TD>
      <HR noshade size=1>
    </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR>
        <TD>&nbsp;

        </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif"> Funded status</font></TD>
        <TD align=right><font size="2" face="sans-serif"> (118 </font></TD>
        <TD align=left><font size="2" face="sans-serif"> )</font></TD>
        <TD align=right><font size="2" face="sans-serif"> (118 </font></TD>
        <TD align=left><font size="2" face="sans-serif"> )</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif"> Unrecognized net actuarial
      loss</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 142 </font></TD>
        <TD align=left>&nbsp; </TD>
        <TD align=right><font size="2" face="sans-serif"> 154 </font></TD>
        <TD align=left>&nbsp; </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif">Prepaid pension cost</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 24 </font></TD>
        <TD align=left>&nbsp; </TD>
        <TD align=right><font size="2" face="sans-serif"> 36 </font></TD>
        <TD align=left>&nbsp; </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    <b>Net amount recognized</b></font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Amounts recognized in the balance sheet:</font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> Prepaid
      pension cost</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 36 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 36 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Accrued pension cost</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (66
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (84
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> Accumulated
      other comprehensive loss</font></TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 54 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 84 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;      </TD>
</TR>

  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left><font size="2" face="sans-serif"> Net amount recognized</font></TD>
        <TD align=right><font size="2" face="sans-serif"> 24 </font></TD>
        <TD align=left>&nbsp; </TD>
        <TD align=right><font size="2" face="sans-serif"> 36 </font></TD>
        <TD align=left>&nbsp; </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;      </TD>
</TR>
<TR valign="bottom">
        <TD align=left><b><font size="2" face="sans-serif">
    Estimated future benefit payments</font></b></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31,</font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> 2007</font></TD>
        <TD align=left bgcolor="#eeeeee"> </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 13 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2008</font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    13
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> 2009</font></TD>
        <TD align=left bgcolor="#eeeeee"> </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 13 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2010</font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    14
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"><font size="2" face="sans-serif"> 2011</font></TD>
        <TD align=left bgcolor="#eeeeee"> </TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
        <TD align=right bgcolor="#eeeeee"><font size="2" face="sans-serif"> 15 </font></TD>
        <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Years from August 1, 2011 to July 31, 2016</font></TD>
        <TD align=left>

        </TD>
        <TD align=left>&nbsp;

        </TD>
        <TD align=right><font size="2" face="sans-serif">
    82
        </font></TD>
        <TD align=left>&nbsp;

        </TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
        </TD>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
</TR>
</TABLE>
<font face="sans-serif">
<P><font size="2" face="sans-serif">
  The Group expects to contribute &#163;23 million to the UK pension plans
in the year ending July 31, 2007. </font></P>
<P align="center"><font size="2" face="sans-serif"> F-62</font></P>
</font>
<hr noshade align="center" width="100%" size="2">


<div style="page-break-before:always"></div>
<page><a name="pf63"></a>
<p><font size="2" face="sans-serif"><a href="#fcontents">Back to Contents</a></font></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<P> <FONT size=2 face="sans-serif">The following table sets out the benefit obligation
  and plan assets of the non-UK pension plans in accordance with US GAAP:</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan=3 align=center> <font size="1" face="sans-serif"><B>Non-UK Plans
      as of July 31,</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan=3> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2006</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2005</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <font size="2" face="sans-serif"><B>Change in benefit obligation:</B></font></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Benefit obligation at beginning
      of year</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">181</FONT> </TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">127</FONT> </TD>
    <TD width=2% align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Change due to remeasurement</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Amendments</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Service cost</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Interest cost</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">8</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Settlements and curtailments</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Member contributions</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Actuarial (gain)/loss</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT> </TD>
    <TD align=left><FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">18</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Acquisition and reclassification</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">19</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="Arial, Helvetica, sans-serif">Benefits paid</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(10</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Exchange rate fluctuation</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(4</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Benefit obligation at end of
      year</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">182</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">181</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <font size="2" face="sans-serif"><B>Change in plan assets:</B></font></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Fair value of plan assets at
      beginning of year</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">105</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">73</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Actual return on plan assets</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">7</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">10</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Employer contribution</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">10</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Member contributions</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Acquisition</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">16</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Transfers</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Benefits paid</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(6</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(10</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Exchange rate fluctuation</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Fair value of plan assets at
      end of year</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">112</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">105</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Funded status</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(70</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(76</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Business combinations</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Unrecognized net actuarial loss</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">13</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">19</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Unrecognized prior service cost</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <font size="2" face="sans-serif"><B>Accrued
    pension cost</B></font></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(54</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(54</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Amounts recognized in the balance
      sheet consist of:</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Prepaid pension cost</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Accrued pension cost</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(67</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(70</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Intangible asset</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left bgcolor="#eeeeee">&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Accumulated other comprehensive
      loss</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">12</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Net amount recognized</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(54</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">(54</FONT> </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-63</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf64"></a> <font size="2" face="sans-serif">
<p><a href="#fcontents">Back to Contents</a></p>
</font></font>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left> <font size="2" face="sans-serif"><B>Estimated future benefit
      payments</B></font></TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B></font></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Year ended July 31,</FONT></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">2007</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">17</FONT></TD>
    <TD width=2% align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">2008</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">2009</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">2010</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">8</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left> <FONT size=2 face="sans-serif">2011</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2 face="sans-serif">Years from August 1, 2011 to
      July 31, 2016</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">53</FONT></TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>
    <TD> </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>
<P> <FONT size=2 face="sans-serif">The Group expects to contribute &#163;15 million
  to the non-UK pension plans in the year ending July 31, 2007. </FONT></P>
<P> <FONT size=2 face="sans-serif">The accumulated benefit obligation for all defined
  benefit plans was &#163;691 million (2005: &#163;579 million). The projected
  benefit obligation, accumulated benefit obligation and fair value of plan assets
  for the plans with accumulated benefit obligations in excess of plan assets
  were &#163;758 million, &#163;653 million and &#163;569 million, respectively,
  as of July 31, 2006 (2005: &#163;667 million, &#163;579 million and &#163;474
  million). </FONT></P>
<P> <FONT size=2 face="sans-serif">The amount included within other comprehensive
  income for the year ended July 31, 2006 arising from a change in the additional
  minimum liability recognized is a credit of &#163;31 million (2005: &#163;17
  million). </FONT></P>
<P> <FONT size=2 face="sans-serif">Assumptions used to determine the pension cost
  for the defined benefit plans under US GAAP were as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan="7" align=center> <font size="1" face="sans-serif"><B>Year ended
      July 31,</B> </font> </TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan="7"> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan="3" align=center> <font size="1" face="sans-serif"><B>UK Plan</B>
      </font> </TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan="3" align=center> <font size="1" face="sans-serif"><B>Non-UK
      Plans</B> </font> </TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD colspan="3"> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD colspan="3"> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2006</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2005</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2006</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2005</B> </font></TD>
    <TD align=left><font size="1" face="sans-serif">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Discount rate</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.1</FONT>
    </TD>
    <TD width=2% align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.0</FONT>
    </TD>
    <TD width=2% align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.1</FONT>
    </TD>
    <TD width=2% align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD width=10% align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">5.1</FONT>
    </TD>
    <TD width=2% align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <FONT size=2 face="sans-serif">Expected return on plan assets</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.5</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.9</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.6</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">6.2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left bgcolor="#eeeeee">&nbsp;</TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">Rate of compensation
      increase</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">4.6</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">*3.3</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2.4</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
    <TD align=right bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">2.5</FONT>
    </TD>
    <TD align=left bgcolor="#eeeeee"> <FONT size=2 face="sans-serif">%</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font></TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><hr align="left" width="150" size="1" noshade></td>
  </tr>
  <tr>
    <td> <font size="1" face="sans-serif"><i>* In addition, a promotional salary
          scale was added to the salary increase assumption as of July 31, 2005.
      This was equivalent to an overall increase of 1.5% per annum.</i></font></td>
  </tr>
</table>
<P><font size="2" face="sans-serif">The assumed discount rates were determined by
  benchmarking from published long-term bond indices at a maturity appropriate
  to the anticipated timing and amount of expected benefit payments. </font></P>
<P> <FONT size=2 face="sans-serif">The Group also sponsors defined contribution
  pension plans covering employees. Contributions are recognized as paid and amounted
  to approximately &#163;28 million and &#163;19 million during the years ended
  July 31, 2006 and 2005, respectively. </FONT></P>
<p><font size="2" face="sans-serif"><B>(v) Deferred taxation</B></font>
  <br>
  <FONT size=2 face="sans-serif">Under IFRS and US GAAP, deferred tax is provided
  in full, using the liability method, on temporary differences arising between
  the tax bases of assets and liabilities and their carrying amounts in the consolidated
  financial statements. There is a difference in the definition of tax basis between
  IFRS and US GAAP, which gives rise to an additional deferred tax liability under
  IFRS. Under IFRS, deferred tax is not accounted for if it arises from initial
  recognition of an asset or liability in a transaction, other than a business
  combination, that at the time of the transaction affects neither accounting
nor taxable profit or loss. </FONT></p>
<P> <FONT size=2 face="sans-serif">Under US GAAP, a valuation allowance is established
  against deferred tax assets when it is more likely than not that some portion
  or all of these will not be realized. Under IFRS it is recognized net. </FONT></P>
<P align="center"> <FONT size=2 face="sans-serif">F-64</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf65"></a> <font size="2" face="sans-serif">
<p><a href="#fcontents">Back to Contents</a></p>
</font></font>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<P> <FONT size=2 face="sans-serif">Under IFRS the deferred tax asset in relation
     to share based payments is based upon the intrinsic value of the share option

  and is adjusted at every year end to reflect changes in the share price valuation,
     as well as pre-vesting forfeitures, change in tax rate, relocation of employees,

  or changes in tax legislation. If the cumulative estimated tax deduction &#150; either
   during vesting or on exercise &#150; exceeds the &#147;book expense&#148; tax
    deduction, the difference is credited to equity.</FONT></P>
<P><FONT size=2 face="sans-serif"> Under US GAAP this asset is based upon the fair
  value expensed under SFAS 123R and only adjusted for pre-vesting forfeitures,
  change in tax rate, relocation of employees, or changes in tax legislation.
  If the final tax deduction exceeds book expense (&#147;windfall&#148;), the
  difference is credited to additional paid-in capital. If the final tax deduction
  is less than book expense (&#147;shortfall&#148;), the difference is included
  in additional paid-in capital to the extent there have been previous windfalls
  credited; otherwise the difference is recorded in the income statement. </FONT></P>
<P><FONT size=2 face="sans-serif">The tax effects of temporary differences that
  give rise to significant deferred tax assets and liabilities under US GAAP are
  as follows: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2006</B> </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2005</B> </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</font></TD>
    <TD> <HR noshade size=1> </TD>
    <TD><font size="1">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Deferred tax assets:</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD width="3%" align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Accounts receivable</font></TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
    <TD width=10% align=right> <FONT size=2 face="sans-serif">12</FONT> </TD>
    <TD width=2% align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Inventory</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">23</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Property, plant and equipment</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">4</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Intangible assets</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Pensions</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">40</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">38</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Loss carryforwards</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">51</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">33</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Stock options</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">9</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">5</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Derivatives</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Purchase incentive volume
      rebates</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Leases</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">1</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Bank loans and overdrafts</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Trade and other payables</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">21</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">6</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Other</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">3</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Total deferred tax
      assets</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">135</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">134</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Deferred tax liabilities:</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Accounts receivable</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(13</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Inventory</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(9</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(64</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Property, plant and equipment</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(42</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(32</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Goodwill and intangible
      assets</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(100</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(86</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Purchase volume incentive
      rebates</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(51</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(21</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Derivatives</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Capitalized interest</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">&#151;</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <font size="2" face="sans-serif">Other</font></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(5</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(2</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Total deferred tax
      liabilities</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(224</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(205</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(89</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(71</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Valuation allowance</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(43</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(27</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Net deferred tax
      liability</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(132</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(98</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Deferred taxes are
      classified as follows:</FONT></TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2006</B> </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>2005</B> </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><font size="1">&nbsp;</font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
    <TD align=right> <font size="1" face="sans-serif"><B>&#163;m</B>
      </font></TD>
    <TD align=left><font size="1">&nbsp;</font> </TD>
  </TR>
  <TR>
    <TD><font size="1">&nbsp;</font></TD>
    <TD><font size="1">&nbsp;</font> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Current</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(68</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(41</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left> <FONT size=2 face="sans-serif">Non-current</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(64</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(57</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=1> </TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#eeeeee">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <FONT size=2 face="sans-serif">(132</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
    <TD align=right> <FONT size=2 face="sans-serif">(98</FONT> </TD>
    <TD align=left> <FONT size=2 face="sans-serif">)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD> </TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade size=2> </TD>
    <TD>&nbsp;</TD>
  </TR>
</TABLE>

<P align="center"><FONT size=2 face="sans-serif">F-65</FONT></P>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<font face="sanserif"><page><a name="pf66"></a>
<p><font size="2" face="sans-serif"><a href="#fcontents">Back to Contents</a></font></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<P>
  <FONT size=2 face="sans-serif">Recognized deferred tax assets are based
  upon the expected future utilization of tax loss carry forwards and the reversal
  of other temporary differences. The tax loss carry forwards do not expire,
  and there are no current restrictions on their utilization. For financial reporting
  purposes, the Group has recognized a valuation allowance for those benefits
  for which realization does not meet the &#147;more likely than not&#148; criterion.
  The valuation allowance has increased by &#163;16 million in the year ended
  July 31, 2006, because of an increase in the level of capital losses and overseas
tax credits the</FONT> <font size="2" face="sanserif"><font face="sans-serif">realization of which is uncertain. No provision has been made in respect of
    unremitted foreign earnings because they are intended to be permanently reinvested,
and accordingly no tax has been calculated on these amounts.. </font></font></P>
</font><font face="sanserif">
<p><font size="2" face="sans-serif"> Profit before tax on an IFRS basis can be
    analyzed
as follows:</font></p>
</font>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>2006</B>&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>2005</B>&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>&#163;m</B>&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>&#163;m</B>&nbsp;</font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    United Kingdom</font></TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    181</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    241</font></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Overseas</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    588</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    424</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Total profit before tax</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    769</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    665</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr>
    <td width="3%"><font size="2" face="sans-serif"><b>(vi)</b></font></td>
    <td><font size="2" face="sans-serif"><b>Share based payments</b></font></td>
  </tr>
</table>

<P><font size="2" face="sans-serif"> Under the transition provisions of IFRS,
    the Group has elected to apply IFRS2 &#147;Share-based
  Payment&#148; retrospectively only to equity-settled awards that had not vested
  as at August 1, 2004 and were granted on or after November 7, 2002 and cash-settled
  awards that had not vested as at August 1, 2004. Under US GAAP, the Group adopted
  SFAS 123 (Revised), &#147;Share Based Payments&#148; with effect from August
  1, 2005 using a modified prospective transition method, and the Group&#146;s
  prior periods have not been restated to reflect, and do not include the impact
  of, SFAS 123 (R). Under SFAS 123 (R), share based compensation expense is recognized
  during the period based on the portion of share based payments awards that
  is ultimately expected to vest during
the period. </font></P>
<P><font size="2" face="sans-serif">
  The Group operates a number of plans which are defined within note 29. The
  Executive Option Schemes are subject to a condition such that they may not
  be exercised unless the growth in earnings per share over a period of three
  consecutive fiscal years exceeds growth in the UK Retail Price Index over the
  same period by at least 9% (for options granted in and after December 1997).
Under IFRS such options are treated as equity-settled.</font></P>
<P><font size="2" face="sans-serif"> For the fiscal year ended July 31, 2005,
    the Group was accounting for the Executive Option Schemes under SFAS 123, &#147;Accounting for Stock Based Compensation.&#148; The
  condition described above was regarded as a performance condition, and such
  options were also treated as equity-settled. On application of SFAS 123 (R),
  the condition is not regarded as a performance condition, as the performance
  target is set by reference to an index, rather than being fixed at the date
  of award. As the condition is not a service or market condition either, the
  options are accounted for as liabilities under US GAAP, and revalued at every
reporting date until the option has vested. </font></P>
<P><font size="2" face="sans-serif"> Under SFAS 123, the cumulative cost recorded
    up to July 31, 2005 in respect of executive options was &#163;11 million. Under SFAS 123 (R), &#163;18 million
  has been charged in the year ended July 31, 2006 in respect of the cumulative
  effect of a change in accounting principle. Under SFAS 123 (R), the charge
  in the year ended July 31, 2006 in respect of executive options is &#163;12
million. </font></P>
<P><font size="2" face="sans-serif"><B>Additional disclosures</B> </font></P>
<P><font size="2" face="sanserif"> <font face="sans-serif">The total expense
      in respect of share based payments in the year ended July 31, 2006 was &#163;41 million (2005: &#163;27
    million), the tax benefit of which was &#163;2 million (2005: charge of &#163;3
    million). The effect of the transition to SFAS 123 (R) has been to reduce
    income from continuing operations and income before taxes by &#163;20 million,
    to reduce net income by &#163;19 million, to reduce basic earnings per share
    by 3.17p, of which 2.70p relates to the cumulative effect of the change in
    accounting principle, and to reduce diluted earnings per share by 3.14p,
    of which 2.68p relates to the cumulative effect of the change in accounting
    principle. There is no impact on cash flows. </font></font></P>
<P><font size="2" face="sans-serif"> As at July 31, 2006, the compensation cost
    related to non-vested equity-accounted awards expected to be recognized in
    future periods was &#163;9 million, and the weighted average period over
    which this cost was expected to be recognized was 1.6 years. </font></P>
<P><font size="2" face="sans-serif"> During the year ended July 31, 2006, cash
    proceeds of &#163;31 million (2005: &#163;33 million) were received from
    the exercise of share options, of which the tax benefit recognized through
    equity  was &#163;4
    million (2005: &#163;4 million). Cash of &#163;17 million (2005: &#163;10
    million) was used to settle share based liabilities. </font></P>
<P><font size="2" face="sans-serif"> All options exercised during the year ended
    July 31, 2006 were satisfied by the issue of new shares. </font></P>
<P align="center"><font size="2" face="sans-serif"> F-66</font></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf67"></a>
</font><font face="sanserif"><p><font size="2" face="sans-serif"><a href="#fcontents">Back to Contents</a></font></p>
</font>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p>&nbsp;</p>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="sans-serif"><B>(vii)</B></font></td>
    <td><font size="2" face="sans-serif"><B>Sale and leaseback accounting</B></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="sans-serif"> <font size=2>Under IFRS, in a sale and leaseback transaction
        where the leaseback is recognized as an operating lease, and the sale
        price equals fair value, the profit or loss on the sale should be recognized
        immediately. Under US GAAP, in general, the gains or losses on disposal
        of the properties are deferred and amortized over the term of the operating
    lease. </font></font></td>
  </tr>
</table>


<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr>
    <td width="3%"><font face="sans-serif"><B><FONT size=2>(viii)</FONT></B></font></td>
    <td><font face="sans-serif"><B><FONT size=2>Other adjustments</FONT></B></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="sans-serif">
      <b><font size=2>Restructuring costs</font></b></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="sans-serif"> <font size=2>Under IFRS, a provision for restructuring costs
        is recognized only when a present obligation (legal or constructive)
        exists as a result of a past event; it is probable that a transfer of
        economic benefits will be required to settle the obligation; and a reliable
    estimate can be made of the amount of the obligation. </font></font></td>
  </tr>
</table>


<P><font face="sans-serif">
  <FONT size=2>Under US GAAP, for restructuring plans initiated after January
      1, 2003, a liability for a cost associated with an exit or disposal activity
      can only be recognized when the liability is incurred. An entity&#146;s
      commitment to a plan, by itself, does not create a present obligation to
      others that
      meets the definition of a liability. The timing of recognition and related
      measurement
      of a liability for one-time termination benefits in relation to employees
      who are to be
      involuntarily terminated depends on whether the employees are required
      to render service until they are terminated in order to receive the termination
      benefits
      and, if so, whether employees will be retained to render service beyond
      the
minimum retention period. </FONT></font></P>
<p><font face="sans-serif"><B><FONT size=2>Capitalized interest</FONT></B><br>
    <FONT size=2>Under IFRS, the Group has chosen not to capitalize interest on
  specific or general borrowings to finance the construction of certain property,
  plant and equipment. Under US GAAP, this interest is capitalized. The amount
  of interest capitalized is based on a weighted average method considering the
  general borrowings outstanding during the period. </FONT></font> </p>
<P><font face="sans-serif">
<B><FONT size=2>Employers&#146; payroll taxes in respect of share based payments</FONT></B><br>
<FONT size=2>Under
IFRS, employers&#146; social security liability arising from share-based payment transactions is recognized over the same period or periods as the share-based payment charge.  Under US GAAP, employers&#146; payroll
      taxes due on the exercise of share options are recognized as an expense when the liability arises, which is generally at the option&#146;s
exercise date. </FONT></font></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font face="sans-serif"><B><FONT size=2>(ix)</FONT></B></font></td>
    <td><font face="sans-serif"><B><FONT size=2>Presentation of earnings per share</FONT></B></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="sans-serif"> <font size=2>Basic net income per share is computed by dividing
        net income by the weighted average number of ordinary shares outstanding.
        Diluted net income per share is computed by dividing net income by the
        weighted average number of ordinary shares and potentially dilutive ordinary
        shares, which includes the dilutive effect of stock options. Dilutive
        potential ordinary shares for all periods presented are computed utilizing
    the treasury stock method.</font></font></td>
  </tr>
</table>


<P align="center"><font face="sans-serif"> <FONT size=2>F-67</FONT></font></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div>
<font face="sans-serif"><page><a name="pf68"></a>
</font><font face="sanserif"><p><font size="2" face="sans-serif"><a href="#fcontents">Back to Contents</a></font></p>
</font>

<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2" face="sans-serif"><b>(x)</b></font></td>
    <td><font size="2" face="sans-serif"><b>Other disclosures required by US GAAP</b></font></td>
  </tr>
</table>
<P><font size="2" face="sans-serif">
<B>Segmental Analysis</B></font><font face="sans-serif"><br>
<font size="2">Under IFRS, the Group discloses North America
as a single geographical segment. Under US GAAP, US Plumbing and Heating, US
Building Materials and Canada are distinct reportable segments.</font></font></P>
<P><font size="2" face="sans-serif"> Additional analysis of segment assets and
    liabilities and additions to and the depreciation of property, plant and
    equipment and intangible assets under IFRS for the years ended July 31, 2006
    and 2005 is as follows:</font></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>US Plumbing</B></font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>US Building</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>North</B></font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>and Heating</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>Canada</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>Materials</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>America</B></font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B></font></TD>
        <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B></font></TD>
    <TD align=right><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Segment assets</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    2,335</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    301</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    1,611</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=10% align=right><font size="2" face="sans-serif">
    4,247</font></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    1,906</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    265</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1,299</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    3,470</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Segment liabilities</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    765</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    93</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    631</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1,489</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    614</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    108</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    519</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1,241</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Depreciation of property, plant and equipment</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    43</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    3</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    26</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    72</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    30</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    2</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    17</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    49</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Amortization of non-acquired intangibles</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Amortization of acquired intangibles</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    9</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    24</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    33</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    2</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    3</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Additions to goodwill</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    56</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    5</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    104</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    165</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    22</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    2</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    54</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    78</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Additions to acquired intangible assets</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    51</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    5</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    106</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    162</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    16</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    66</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    83</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Additions to non-acquired intangible assets</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    3</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    3</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    2</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    &#151;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    2</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Additions to property, plant and equipment</font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2006</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    149</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    5</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    63</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    217</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Year ended July 31, 2005</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    100</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    5</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    29</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    134</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<P align="center"> <FONT size=2 face="sans-serif">F-68</FONT></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf69"></a><p><a href="#fcontents"><font size="2" face="sans-serif">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><B><FONT size=2 face="sans-serif">Pro forma information (unaudited)<br>
  </FONT></B><FONT size=2 face="sans-serif">The following unaudited pro forma
  information presents the results of operations of the Group under IFRS as if
  the fiscal 2006 and 2005 acquisitions had occurred on August 1, 2004.</FONT></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD colspan="3" align=center><font size="1" face="sans-serif"><B>Year ended July 31,</B></font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
  <TD align=right><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=right><HR noshade size=1></TD>
  <TD align=left><font size="1" face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2006</B>
        </font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2005</B>
        </font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>(unaudited)</B>
        </font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>(unaudited)</B>
        </font></TD>
        <TD align=left><font size="1" face="sans-serif">&nbsp;</font><font face="sans-serif">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Sales (&#163;m)</font></TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    14,940
        </font></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    13,148
        </font></TD>
        <TD width=2% align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Net profit (&#163;m)</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    575
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    548
        </font></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Basic earnings per share</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    97.07
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    p</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    93.28
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    p</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Diluted earnings per share</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    96.09
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    p</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    92.53
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    p</font></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>

<P><font size="2" face="sans-serif">
The unaudited pro forma information has been prepared for comparative purposes
only and excludes certain adjustments, such as amortization expense and interest
expense related to the acquisitions. The pro forma results do not necessarily
represent the results of operations that would have occurred if the acquisitions
had been effective at the beginning of fiscal 2005, nor are they necessarily
indicative of future results. </font></P>
<P><font size="2" face="sans-serif">
During 2006 goodwill arising on acquisitions was &#163;387 million. Of that total
amount, &#163;97
million is expected to be deductible for tax purposes. </font></P>
<p><font face="sans-serif"><B><FONT size=2>Operating profit</FONT></B><br>
  <FONT size=2>The following table reconciles operating profit under IFRS to US GAAP:</FONT>
</font></p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD colspan="3" align=center><font size="1" face="sans-serif"> <B>Year ended July 31,</B> </font></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left><font size="1">&nbsp;</font></TD>
  <TD align=right><HR noshade size=1></TD>
  <TD align=left><HR noshade size=1></TD>
  <TD align=right><HR noshade size=1></TD>
  <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2006</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>2005</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Operating profit under IFRS</font></TD>
        <TD width="8%" align=right><font size="2" face="sans-serif">
    834
        </font></TD>
        <TD width="2%" align=left>&nbsp;</TD>
        <TD width="8%" align=right><font size="2" face="sans-serif">
    702
        </font></TD>
        <TD width="2%" align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    US GAAP adjustments, excluding capitalized interest and taxes</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (51
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    (63
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Operating profit under US GAAP</font></TD>
        <TD align=right><font size="2" face="sans-serif">
    783
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    639
        </font></TD>
        <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
</TR>
</TABLE>
<p><font face="sans-serif"><B><FONT size=2>Provisions</FONT></B><br>
      <FONT size=2>Under US GAAP, provisions arising
  in respect of an acquired business can be discounted, but subsequent adjustments
  to the provision should be recorded
    gross, although they relate to changes in the estimated cost of settling
      liabilities incurred prior to acquisition. Provisions for liabilities arising
      in respect
    of continuing businesses should be recorded gross. Accordingly, the provision
    for asbestos litigation as reported under US GAAP would be &#163;51 million (2005:
&#163;52 million), of which &#163;43 million (2005: &#163;44 million) is an undiscounted
  amount with the balance representing a discounted amount. This liability is
fully covered by insurance, and accordingly an equivalent insurance receivable
would
be recorded.</FONT></font></p>
<p><font face="sans-serif"><B><FONT size=2>Taxation</FONT></B><br>
</font>
  <FONT size=2 face="sans-serif">The taxation effects of US GAAP adjustments, including the taxation
  effect of the change in accounting principle, comprised &#163;22 million credited to net income and &#163;1
million charged to other comprehensive income in the year ended July 31, 2006. </FONT></p>

<P align="center"><font size="2" face="sans-serif">F-69</font></P>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf70"></a><p><a href="#fcontents"><font size="2" face="sans-serif">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><font face="sans-serif"><B><FONT size=2>Debt</FONT></B><br>
      <FONT size=2>US GAAP requires disclosure of the
  maturity of long-term debt in each of the five years following the end of the
  financial year. The following
  is a summary of the Group&#146;s debt maturity as of July 31, 2006:</FONT></font>
</p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font face="sans-serif">
<B><FONT size=1>Due in the year ending July 31:</FONT></B>&nbsp;</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font face="sans-serif">
<B><FONT size=1>&#163;m</FONT></B>&nbsp;</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD><HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2007</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    68</font></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2008</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    35</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2009</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    175</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2010</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    108</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2011</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    120</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Thereafter</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1,646</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Total</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    2,152</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<font face="sans-serif"><P>
  <FONT size=2>The Group has given certain covenants to lenders in connection
  with credit facilities totaling &#163;2,944 million. They relate mainly to
  maintaining a level of tangible net worth, total borrowings, interest cover and net debt to earnings before interest, taxes, depreciation and amortization.
The Group was in compliance with all such covenants as of July 31, 2006. </FONT></P>
</font>
<p><font face="sans-serif"><B><FONT size=2>Capital and operating lease commitments</FONT></B><br>
      <FONT size=2>The Group leases property, buildings and plant, machinery and equipment under capital and operating lease agreements, which are subject to various renewal options and escalation clauses. The following is a summary as of
  July 31, 2006 of the future minimum lease payments under these agreements: </FONT></font>
</p>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>Capital</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>Operating</B>&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>leases</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>leases</B>&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="1" face="sans-serif">
<B>Year ending July 31:</B>&nbsp;</font></TD>
        <TD align=right><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
    <B>&#163;m</B>
        </font></TD>
        <TD align=left><font size="1">&nbsp;</font></TD>
        <TD align=right><font size="1" face="sans-serif">
<B>&#163;m</B>&nbsp;</font></TD>
    <TD align=right><font size="1">&nbsp;</font></TD>
</TR>
<TR>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2007</font></TD>
        <TD width=2% align=right>&nbsp;</TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    24
        </font></TD>
        <TD width=2% align=left>&nbsp;</TD>
        <TD width=8% align=right><font size="2" face="sans-serif">
    199</font></TD>
    <TD width=2% align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2008</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    19
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    173</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2009</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    13
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    146</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    2010</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    10
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    119</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    2011</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    8
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    95</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left><font size="2" face="sans-serif">
    Thereafter</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    28
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    372</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Total minimum lease payments</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    102
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    1,104</font></TD>
    <TD align=right>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD></TD>
        <TD>
        </TD>
        <TD>
        </TD>
        <TD>
<HR noshade size=1>
        </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Less interest element</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    (27
        </font></TD>
        <TD align=left><font size="2" face="sans-serif">
    )</font></TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=1>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
        </TD>
    <TD></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD align=left><font size="2" face="sans-serif">
    Present value of net minimum lease payments</font></TD>
        <TD align=right>&nbsp;</TD>
        <TD align=right><font size="2" face="sans-serif">
    75
        </font></TD>
        <TD align=left>&nbsp;</TD>
        <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
</TR>
<TR>
        <TD>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
<HR noshade size=2>
        </TD>
        <TD>&nbsp;</TD>
        <TD>
        </TD>
    <TD></TD>
</TR>
</TABLE>
<p><font face="sans-serif">
  <B><FONT size=2>Consolidated statement of cash flows</FONT></B><br>
  <FONT size=2>Under
  both IFRS and US GAAP, cash flows are classified under operating activities,
  investing activities and financing activities. Under IFRS, cash
    and cash equivalents includes cash in hand, deposits held at call with banks,
    other short-term highly liquid investments with original maturities of three
    months or less and bank overdrafts. Under US GAAP, cash and cash equivalents
    does not include bank overdrafts. Therefore, under US GAAP, the net increase
    in cash and
    cash equivalents would have been reduced by &#163;313 million (2005: increased by &#163;58
  million).</FONT></font></p>

<P align="center"><font size="2" face="sans-serif">F-70</font></P>
<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf71"></a><p><a href="#fcontents"><font size="2" face="sans-serif">Back to Contents</font></a></p>
<p><FONT size=6 face="sans-serif">Notes to the consolidated financial statements<br>
</FONT><FONT size=2 face="sans-serif">Year ended July 31, 2006</FONT></p>
<p><font size="2" face="sans-serif"><B>New Accounting Developments under US GAAP</B></font></p>
<font face="sans-serif">
<P>
  <FONT size=2>In February 2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS No. 155 &#147;Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140&#148;.
For periods beginning after 15 September 2006, this statement</FONT></P>
</font>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</TD>
    <td width="3%"><font face="sans-serif">&#8226;</font></td>
    <td><font face="sans-serif">
    <FONT size=2>Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative</FONT> <FONT size=2>that otherwise would require bifurcation</FONT></font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td><font face="sans-serif">&#8226;</font></td>
    <td><font size="2" face="sans-serif">
    Clarifies which interest-only strips and principal-only strips are not subject
    to the requirements of FAS 133</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td><font face="sans-serif">&#8226;</font></td>
    <td><font face="sans-serif">
    <FONT size=2>Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are</FONT> <FONT size=2>freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring</FONT> <FONT size=2>bifurcation</FONT></font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td><font face="sans-serif">&#8226;</font></td>
    <td><font size="2" face="sans-serif">
    Clarifies that concentrations of credit risk in the form of subordination
    are not embedded derivatives</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
    <td>&nbsp;</TD>
  </tr>
  <tr valign="top">
    <td>&nbsp;</TD>
    <td><font face="sans-serif">&#8226;</font></td>
    <td><font face="sans-serif">
    <FONT size=2>Amends FAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative</FONT> <FONT size=2>financial instrument that pertains to a beneficial interest other than another
derivative financial instrument</FONT></font></td>
  </tr>
</table>
<P><font size="2" face="sans-serif">
The adoption of SFAS No. 155 is not expected to have a material effect on the
results or net assets of the Group.</font></P>
<P><font size="2" face="sans-serif">In March 2006, the FASB issued SFAS No. 156 &#147;Accounting
    for Servicing of Financial Assets, an amendment
of FASB Statement No. 140&#148;, which amends FASB Statement No. 140 &#147;Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities&#148;,
with respect to the accounting for separately recognized servicing assets and
servicing liabilities. The adoption of SFAS No. 156 is not expected to have a
material effect on the results or net assets of the Group.</font></P>
<P><font size="2" face="sans-serif">In June 2006, the FASB issued FASB Interpretation
    No. 48, &#147;Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109&#148;. For periods beginning after 15 December
    2006, this interpretation prescribes a recognition threshold and measurement
    attribute for the financial statement recognition and measurement of a tax
    position taken or expected to be taken in a tax return. This interpretation
    also provides guidance on derecognition, classification, interest and penalties,
    accounting in interim periods, disclosure, and transition. It is not yet
    possible to estimate the effect on the results or net assets of the Group
    of the adoption of FIN 48.</font></P>
<P><font size="2" face="sans-serif">In September 2006, the FASB issued SFAS No.
    157 &#147;Fair Value Measurements&#148;. For periods beginning after November
    15, 2007 this Statement defines fair value, establishes a framework for measuring
    fair value where that measurement attribute is permitted or required by other
    accounting pronouncements, and expands disclosures about fair value measurements,
    but does not require any new fair value measurements. It is not yet possible
    to estimate the effect on the results or net assets of the Group of the adoption
    of SFAS No. 157. </font></P>
<P><font size="2" face="sans-serif">
In September 2006, the FASB issued SFAS No 158 &#147;Employers&#146; Accounting
for Defined Benefit Pension and Other Postretirement Plans &#150; an amendment
of FASB Statements No. 87, 88, 106, and 132(R).&#148; As of the end of any fiscal
period ending on or after December 15, 2006, this Statement requires an employer
to recognize the overfunded or underfunded status of a defined benefit postretirement
plan as an asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income. Had SFAS No. 158 applied to the Group as of July 31, 2006,
the impact would have been to increase the liability in respect of underfunded
defined benefit postretirement plans by &#163;95 million, and to increase the
deferred tax asset by &#163;29 million. The consequent reduction in the Group&#146;s
net assets of &#163;66 million would have been charged to other comprehensive
income. </font></P>
<P><font size="2" face="sans-serif">
In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108 &#147;Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements.&#148; With immediate effect, this Bulletin requires that, in order
to assess whether a misstatement is sufficiently material to require adjustment,
a registrant should consider the amount of misstatement of both the current year
income statement and of the closing balance sheet, and assess whether either
approach results in a material misstatement. The adoption of SAB No. 108 is not
expected to have a material effect on the results or net assets of the Group. </font></P>
<P align="center"><font size="2" face="sans-serif"> F-71</font></P>

<hr noshade align="center" width="100%" size="2">

<div style="page-break-before:always"></div><page><a name="pf72"></a><p><a href="#fcontents"><font size="2" face="sans-serif">Back to Contents</font></a></p>
<P>
<FONT size=6 face="sans-serif">Acquisitions completed during the year</FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><font size="1">&nbsp;</font> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Country of</FONT></TD>
  </TR>
  <TR>
    <TD> <FONT size=1 face="sans-serif">Name</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">Date</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=1 face="sans-serif">incorporation</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size=1></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Sudbury Valve Fitting &amp;
      Control Ltd.</FONT></TD>
    <TD width="2%" align=right>&nbsp;</TD>
    <TD width="25%" align=right> <FONT size=2 face="sans-serif">August 2005</FONT></TD>
    <TD width="2%" align=right>&nbsp;</TD>
    <TD width="15%" align=right> <FONT size=2 face="sans-serif">Canada</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Park Supply</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">August 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">S &amp; S Fabrication &amp;
      Supply Co.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">August 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">HGH Plumbing Supplies Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">September 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Contractors Field Products,
      Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">September 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Economy Heating &amp; Plumbing
      Supply Co., Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">September 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Endries Incorporated &amp;
      Endries International Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">September 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Centratec N.V.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">October 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Belgium</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Encon Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">October 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">William Wilson Holdings Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">October 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Cammillia Valley Supply</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">October 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Seigles, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">October 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">John H. Frischkorn Jr., Incorporate</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">November2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Canyon Drive Lumber, LP</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">November 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">LAB Distributing, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">November 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Mobile Supply Company, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">November 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS MCSO</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">December 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">South Tahoe Plumbing Supply</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">December 2005</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS Charpentes Calonge</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">January 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS Bigmat Boismat</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">January 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Friosol AG</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">January 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Switzerland</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Colgan Distributors, Inc. and
      Colgan Cabinets, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">January 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Can-Con Industries Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">February 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Canada</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SA Alain Carrelages</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">February 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Universal Supply Company, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">February 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Central Georgia Plumbing Supply
      Co., Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">February 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS Centrale Reolaise des Bois</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS A+ </FONT><I><FONT size=2 face="sans-serif">(Centrale
      des Materiaux)</FONT></I>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Hermann Frei</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Switzerland</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Nevill Long Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">K &amp; A Lumber Company, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Indiana Plumbing Supply Oc.,
      Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Alamo Pipe and Supply Company</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">March 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SAS DAFI</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">K &amp; R Building Supplies
      Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">AC Electrical Holdings Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">MDJ Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Pipe Products, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Davis Homes LLC - Wholesale
      Division</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Davies Water Equipment Co.
      Of Wisconsin, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">April 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SA Borgetto Materiaux</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Ivybridge Building Supplies
      Limited</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Brandon Hire plc</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">UK</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Efficient Enterprises Inc.
      Group</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Central Lighting, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Central Supply Company, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Supply North Central Group,
      Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">May 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Davidson Electric Wholesale
      Supply, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">June 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Coleman Floor Company, Inc.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">June 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Marmon Keystone Anbuma N.V.</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">Belgium</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Larivi&egrave;re</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">SARL Depont Materiaux</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">France</FONT></TD>
  </TR>
  <TR>
    <TD align=left> <FONT size=2 face="sans-serif">Martin Architectural Products,
      LLC</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">July 2006</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> <FONT size=2 face="sans-serif">USA</FONT></TD>
  </TR>
</TABLE>
<P align="center"><FONT size=2 face="sans-serif">F-72</FONT></P>
<hr noshade align="center" width="100%" size="2">
</font></body>
</html>
[{"type": "20-F", "sequence": "1", "filename": "b84006x-20f.htm", "secsgml_size_bytes": 2015536}]
{"company-data": {"conformed-name": "WOLSELEY PLC", "cik": "0001139313", "assigned-sic": "5200", "irs-number": "000000000", "state-of-incorporation": "X0"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-15186", "film-number": "061247314"}, "business-address": {"street1": "PARKVIEW 1220 ARLINGTON BUSINESS PARK", "street2": "TEAL READING", "city": "UNITED KINGDOM", "state": "X0", "zip": "R67 4FA", "phone": "441189298700"}, "mail-address": {"street1": "PARKWVIEW 1220 ARLINGTON BUSINESS PARK", "street2": "THEALE READING", "city": "UNITED KINGDOM", "state": "X0", "zip": "R67 4FA"}}
Prepared and filed by St Ives Financial
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
  THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY
  31, 2006
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
Commission File Number
  1-15186
WOLSELEY plc
(Exact Name of Registrant as Specified in its Charter)
England and Wales
(Jurisdiction of Incorporation or Organization)
Parkview 1220
Arlington Business Park
Theale, Reading, Berkshire, RG7 4GA, United Kingdom
(Address of Principal Executive Offices)
Securities Registered or
  to be Registered Pursuant to Section 12(b) of the Act:
Title
        of each class
Name of
      each exchange
American
        Depositary Shares, evidenced by
American Depositary Receipts, each
representing one (1) Ordinary Share
New York Stock
      Exchange
Ordinary
        Shares of 25p each*
New York Stock Exchange
•          *
•
Listed, not for trading,
        but only in connection with the registration of American Depositary Shares,
        pursuant to the requirements of the Securities and Exchange Commission.
Securities Registered or
  to be Registered Pursuant to Section 12(g) of the Act:
None
Securities for Which There
  is a Reporting Obligation Pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares
  of each of the issuer's classes of capital or common stock as of July 31,
  2006.
Ordinary Shares of 25p each               597,696,216*
•          *
•
Includes
        American Depositary Shares representing Ordinary Shares.
Indicate by checkmark whether the registrant
  (1) has filed all reports required to be filed by Section 13 or 15(d) of the
  Securities Exchange Act of 1934 during the preceding 12 months (or for such
  shorter period that the registrant was required to file such reports), and (2)
  has been subject to such filing requirements for the past 90 days.
YES
NO
Indicate by check mark whether the registrant
  is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large
  Accelerated filer
Accelerated
  filer
Non-accelerated
  filer
Indicate by check mark which financial statement
  item the registrant has elected to follow.
ITEM
  17
ITEM
  18
If this is an annual report, indicate by
  check mark whether the registrant is a shell company (as defined in Rule 12b-2
  of the Exchange Act)
YES
NO
TABLE OF CONTENTS
Page
GENERAL
3
CAUTIONARY STATEMENT
      REGARDING FORWARD LOOKING STATEMENTS
3
PART I
4
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR
      MANAGEMENT AND ADVISERS
4
ITEM 2.
OFFER STATISTICS AND EXPECTED
      TIMETABLE
4
ITEM 3.
KEY INFORMATION
4
ITEM 4.
INFORMATION ON THE GROUP
14
ITEM 4A.
UNRESOLVED STAFF COMMENTS
24
ITEM 5.
OPERATING AND FINANCIAL
      REVIEW AND PROSPECTS
24
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT
      AND EMPLOYEES
40
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED
      PARTY TRANSACTIONS
67
ITEM 8.
FINANCIAL INFORMATION
67
ITEM 9.
THE OFFER AND LISTING
68
ITEM 10.
ADDITIONAL INFORMATION
70
ITEM 11.
QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
75
ITEM 12.
DESCRIPTION OF SECURITIES
      OTHER THAN ORDINARY SHARES
77
PART II
78
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES
      AND DELINQUENCIES
78
ITEM 14.
MATERIAL MODIFICATIONS
      TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
78
ITEM 15.
CONTROLS AND PROCEDURES
78
ITEM 16A.
AUDIT COMMITTEE FINANCIAL
      EXPERT
78
ITEM 16B.
CODE OF ETHICS
78
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES
      AND SERVICES
78
ITEM 16D.
EXEMPTIONS FROM THE LISTING
      STANDARDS FOR AUDIT COMMITTEES
78
ITEM 16E.
PURCHASES OF EQUITY SECURITIES
      BY THE ISSUER AND AFFILIATED PURCHASERS
79
PART III
80
ITEM 17.
FINANCIAL STATEMENTS
80
ITEM 18.
FINANCIAL STATEMENTS
80
ITEM 19.
EXHIBITS
80
SIGNATURE
81
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GENERAL
As used in this Annual Report, "Company"
  refers to Wolseley plc, and "Wolseley" or the "Group" refers
  collectively to Wolseley plc and its consolidated subsidiaries.
The consolidated financial statements of Wolseley
  appearing in this Annual Report (the "Consolidated Financial Statements")
  are presented in pounds sterling and are prepared in accordance with International
  Financial Reporting Standards  as adopted by the European
  Union ("EU") ("IFRS"). There are no material differences between IFRS as adopted
  by the EU and complied with in the preparation of these accounts and IFRS as
  published by the IASB, for the Group. The 2006 financial statements are the
  Group's first consolidated financial statements prepared under IFRS, with
  a transition date of August 1, 2005. Consequently, the comparative figures for
  fiscal year 2004 and the Group's balance sheet as at August 1, 2005 have
  been restated to comply with IFRS. IFRS differs in certain respects from accounting
  principles generally accepted in the United States ("US") ("US
  GAAP"). The significant differences between IFRS and US GAAP relevant to
  Wolseley are identified beginning on page
F-57
of the Consolidated Financial Statements.
This Annual Report contains amounts in British
  pounds sterling ("£") or pence ("p") (1p is equivalent
  to 1/ 100 of £1). For information on exchange rates between British pounds
  sterling and US dollars ("US dollars" or "$") or cents ("¢"),
  see "Item 3 – Key Information – British Pounds Sterling Exchange
  Rate Information".
CAUTIONARY
  STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Annual Report contains forward looking
  statements. The Company desires to take advantage of the safe harbor provisions
  of the US Private Securities Litigation Reform Act of 1995 and is including
  this statement for the express purpose of availing itself of the protections
  of the safe harbor with respect to all forward looking statements. Several important
  factors, in addition to the specific factors discussed in connection with such
  forward looking statements individually, could affect Wolseley's future
  results and could cause those results to differ materially from those expressed
  in the forward-looking statements contained in this Annual Report. These forward
  looking statements may generally, but not always, be identified by the use of
  words such as "will", "expects", "is expected to",
  "should", "may", "is likely to", "intends",
  "believes" or similar expressions. Statements, other than statements
  of historical fact, included in this Annual Report including, without limitation,
  the statements under "Key Information", "Information on the Group",
  "Operating and Financial Review and Prospects" and "Quantitative
  and Qualitative Disclosures about Market Risk" are, or may be deemed to
  be, forward-looking statements within the meaning of Section 21E of the US Securities
  Exchange Act of 1934, as amended (the "Exchange Act"). By their nature,
  forward looking statements involve risk and uncertainty because they relate
  to events and depend on circumstances that will o ccur in the future and are
  outside Wolseley's control.
Important factors that could cause actual results
  to differ materially from those discussed in such forward looking statements
  include, but are not limited to, changes in economic conditions, including in
  particular the general strength or weakness of the plumbing and heating and
  building materials industries in North America and Europe, in both the private
  (residential and commercial) and public sectors; risks related to Wolseley's
  growth strategy; fluctuations in product pricing; Wolseley's ability to
  manage its growth; actions of competitors; risks related to Wolseley's
  international operations; risks related to litigation in the jurisdictions in
  which Wolseley operates; Wolseley's ability to identify and successfully
  integrate acquisitions and realize synergies from acquired companies; Wolseley's
  ability to finance acquisitions; changes in government regulations in countries
  in which Wolseley has operations; Wolseley's ability to retain and attract
  personnel; continued development of e-business distribution alternatives; changes
  in exchange rates and other factors discussed elsewhere in this Annual Report,
  in particular under "Item 3 – Key Information – Risk Factors
  Relating to Wolseley's Industry and Business" (all such factors, and
  cautionary statements with respect thereto, collectively, "Cautionary Statements").
  All subsequent written and oral forward-looking statements attributable to Wolseley
  or persons acting on behalf of Wolseley are expressly qualified in their entirety
  by such Cautionary Statements. In addition to factors set forth elsewhere in
  this Annual Report, the factors set forth above are important factors, although
  not exhaustive, that may cause actual results and developments to differ materially
  from those expressed or implied by these forward looking statements.
The Company wishes to caution each reader of
  this Annual Report to consider carefully these factors as well as the specific
  factors that may be discussed with each forward-looking statement in this Annual
  Report or disclosed in the Company's filings with the US Securities and
  Exchange Commission (the "SEC") as such factors, in some cases, could
  affect Wolseley's ability to implement its business strategy and cause
  actual results to differ materially from those contemplated by the statements
  expressed herein.
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PART
  I
ITEM
  1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM
  2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM
  3. KEY INFORMATION
A. Selected Financial Data
For the year ended July 31, 2006, the Group
  is required to prepare its audited annual consolidated financial statements
  in accordance with IFRS, as adopted by the EU and those parts of the UK Companies
  Act 1985 applicable to companies reporting under IFRS.
Previously the Group prepared its audited annual
  financial statements under UK generally accepted accounting principles (UK GAAP).
  The financial statements for the 2005 financial year have therefore been restated
  as part of the first-time adoption of IFRS. As allowed by the SEC rules in relation
  to first-time adoption of IFRS, only two years of comparative IFRS financial
  statements are presented in this Annual Report. The policies set out on pages
  F-6 to F-12 of this Annual Report have been applied consistently to the 2006
  and 2005 financial years. The selected financial data on page 5 of this Annual
  Report are shown in accordance with IFRS for 2006 and 2005. IFRS differs in
  certain respects from accounting principles generally accepted in the United
  States. The material differences between IFRS and US GAAP relevant to the Group
  are explained on pages F-57 to F-71 of this report.
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Year Ended July 31,
2006
2005
£m
£m
(Amounts in millions,
except per share amounts)
Amounts in accordance with IFRS
Consolidated
    Income Statement
Revenue
14,158
11,256
Operating profit
834
702
Profit on ordinary activities before finance
      expense
834
702
Net finance expense
(65
)
(37
)
Profit on ordinary activities before
      tax
769
665
Taxation
(232
)
(186
)
Profit on ordinary activities after
      tax
537
479
Basic earnings per share
90.77
p
81.61
p
Diluted earnings per share
90.02
p
80.75
p
Dividends declared, net per share
29.40
p
26.40
p
Other Data
Amortization of acquired intangibles
(48
)
(6
)
Consolidated Balance Sheet Data
Total assets (fixed assets plus current assets)
8,078
6,499
Net assets
2,592
2,301
Share capital
149
148
Number of shares in issue at period end
598
592
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2006
2005
2004
2003
2002
£m
£m
£m
£m
£m
Amounts in accordance with US GAAP
(1)
      (2)
Revenue
14,158
11,258
10,128
8,221
7,968
Operating profit
783
639
577
452
401
Net income
510
444
404
311
244
Basic earnings per share
86.21p
75.61p
69.33p
53.64p
42.26p
Diluted earnings per share
85.42p
74.94p
68.53p
53.21p
41.84p
Total assets
8,357
6,760
5,645
5,141
4,101
Shareholders' funds
2,869
2,613
2,200
2,047
1,852
Declared dividends per share
29.40p
26.40p
23.80p
21.20p
18.90p
Share capital
149
148
146
145
144
Shares in issue at period end (millions)
598
592
585
581
578
(1)
See Note 44
of the
      Consolidated Financial Statements for a description of significant differences
      between IFRS and US GAAP
relevant to the Group.
(2)
Following the adoption of
         the new US accounting standards for business combinations and goodwill,

      goodwill on acquisitions completed since July 1, 2001 has not been amortized
         under US GAAP. Goodwill amortization included in the determination of
        net
      income under US GAAP in the years ended July 31, 2002 and 2001 was £46.0
       million and £3.3 million, respectively. From August 1, 2002, goodwill
        has ceased to be amortized under US GAAP.
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British Pounds Sterling Exchange Rate Information
The following tables set forth, for the months
  indicated, the high and low exchange rates and for the years indicated the average
  exchange rate between British pounds sterling and US dollars based on the noon
  buying rate in New York City for cable transfers in foreign currencies as certified
  for customs purposes by the Federal Reserve Bank of New York (the "Noon
  Buying Rate") on the date of the information so translated (expressed in
  US dollars per pound sterling). These rates are provided solely for the reader's
  convenience and are not necessarily the exchange rates (if any) used by the
  Company in the preparation of the Consolidated Financial Statements included
  elsewhere in this Annual Report.
US Dollars per British
Pounds Sterling
Exchange Rate
Month
High
Low
February 2006
1.7807
1.7343
March 2006
1.7567
1.7256
April 2006
1.8220
1.7389
May 2006
1.8911
1.8286
June 2006
1.8817
1.8108
July 2006
1.8685
1.8203
August 2006
1.9102
1.8711
September 2006
1.9050
1.8630
October 2006
1.9084
1.8548
US Dollars per British Pounds
Sterling Average of the Noon
Buying Rate on the Last
      Business
Company fiscal year ended
      July 31,
Day of Each Full Month
2002
1.4594
2003
1.5915
2004
1.7590
2005
1.8547
2006
1.7899
On October 31, 2006, the most recent practicable
  date for this Annual Report, the Noon Buying Rate was $1.9084 = £1.00
  (consequently, $1.00 = £0.52 at this rate).
Fluctuations in the exchange rate between British
  pounds sterling and US dollars will affect the US dollar equivalent of the British
  pounds sterling denominated prices of the Company's ordinary shares and,
  as a result, will affect the market prices of the Company's American Depositary
  Shares ("ADSs") in the US.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors Relating to Wolseley's
  Industry and Business
You should carefully consider the risk factors
  discussed below, as well as all other information included in this Annual Report.
  Wolseley's business, financial condition and results of operations could
  be materially adversely affected by any or all of these risks.
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Wolseley is subject to inherent risks
  of the commercial and residential construction and building materials industries.
Many of Wolseley's products are distributed
  to professional contractors in connection with commercial, industrial and residential
  construction projects. The level of activity in residential construction markets
  depends on many factors Wolseley cannot control. These include general economic
  conditions, mortgage and other interest rates, the extent of unsold new housing
  inventory, inflation, unemployment, demographic trends, gross domestic product
  growth, the price of oil and other commodities notably lumber, and consumer
  confidence in each of the countries and markets in which Wolseley operates.
  Historically, both new housing starts and residential remodeling decrease in
  slow economic periods. The level of activity in the commercial and industrial
  construction market depends largely on vacancy rates, commercial investment
  and general economic conditions. Because residential and commercial and industrial
  construction markets are sensitive to changes in the economy, downturns (or
  lack of substantial improvement) in the economy in any of Wolseley's geographic
  markets could adversely affect Wolseley's business, financial condition
  and results of operations. The US building materials business is particularly
  dependent upon the new residential housing market, which may be adversely affected
  by significant rises in interest rates and unemployment and by the extent of
  unsold new housing inventory. Such factors could also have an adverse impact
  on loss ratios in Wolseley's construction loan lending program. The new
  residential housing market in the US, which in fiscal year 2006 accounted for
  approximately 30% of Wolseley's revenue and on which the US building materials
  business is particularly dependent, has seen a substantial recent decline in
  activity with housing starts reported on an annualized basis by the US Census
  bureau falling by 21.8% to 1.772 million in September 2006 from 2.265 million
  in January 2006. To the extent recovery from these soft market conditions does
  not materialize or otherwise takes place over an extended period of time, Wolseley's
  business, financial condition and results of operations may be adversely affected.
  In addition, the commercial and residential construction and building materials
  industries may be affected by weather conditions. Because of these factors,
  there may be fluctuations in Wolseley's operating results, and the results
  for any period may not be indicative of results for any future period.
There are risks related to Wolseley's
  operating and growth strategies.
A key element of Wolseley's strategy is
  to increase the profitability and revenues of its existing businesses as well
  as that of the businesses it acquires. Although Wolseley has been implementing
  this strategy over the past several years, it cannot provide assurances that
  it will continue to be able to do so successfully. There are risks related to
  Wolseley's ability to grow its businesses organically, such as those set
  forth below, and it may not be possible for Wolseley to complete the number
  of acquisitions at the same rate that it has done so in the past. Another key
  component of Wolseley's strategy is to operate its businesses on a basis
  where local management is responsible for day-to-day operations, profitability
  and the organic growth of the individual businesses. Local management is overseen
  by European and North American continental management teams. As a result, Wolseley's
  overall profitability could be adversely affected if it is unable to maintain
  the efficiencies of operating in this manner.
Wolseley's ability to generate organic
  growth will be affected by various factors, including its ability to:
–
increase sales to existing customers;
–
introduce new products or lines of business;
–
attract new customers;
–
acquire or develop new brands or outlets;
–
improve operating efficiency;
–
reduce operating and overhead expenses;
–
increase net margins; and
–
hire and retain employees.
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Many of the factors affecting Wolseley's
  ability to generate organic growth may be beyond its control. Wolseley cannot
  be sure that its strategies will be successful or that it will be able to generate
  enough cash flow from operations to fund its operations and support these strategies.
  This could materially and adversely affect its business, financial condition
  and results of operations.
Fluctuating product prices and unexpected
  product shortages may impair Wolseley's operating results.
The market price and availability of lumber,
     gypsum, steel, aluminum, copper, nickel alloys, plastic and other products
    (or
  commodities used in such products) distributed by Wolseley can fluctuate quickly
     and significantly. These fluctuations may adversely affect Wolseley's
     results  of operations. For example, the monthly average price for framing
     lumber, a
  significant product for Wolseley's US Building Materials business, at
  September  2006 was $292 per thousand board feet, compared to $396 for September
  2005,
  a decline of 26.3%. Lower lumber prices have the effect of reducing sales and
   profitability in the period affected. For additional information on the effect

  of lumber prices, see "Item 4 – Information on the Group – Business
   Overview – Raw Materials and Commodities". In another example Ferguson
   Enterprises, Inc., the US part of the North American Plumbing and Heating
   business, saw significant price inflation in copper during the second half
   of the 2006 fiscal year. Although in recent years, Wolseley has generally
   been

  able to pass raw material price increases on to its customers, there can be
    no assurance that it will be able to do so in the future, and even if Wolseley

  is ultimately able to pass on such price increases, delays in doing so may
   adversely  affect results of operations in those periods.
Wolseley distributes plumbing and heating materials
  and building supplies, including lumber, from a wide variety of manufacturers
  and suppliers. No one supplier or manufacturer accounted for more than 5% of
  the Group's total material and supply purchases during the 2006 fiscal
  year. Nevertheless, Wolseley may still experience shortages as a result of unexpected
  demand or production difficulties. If Wolseley is unable to obtain sufficient
  products from manufacturers and suppliers, there could be a short-term material
  adverse effect on the Group's business.
Wolseley's business growth could
  outpace the capability of its management and systems.
Wolseley expects to grow both organically and
  through acquisitions. Wolseley expects to expend significant time and effort
  in evaluating, completing and integrating acquisitions, opening new facilities
  and pursuing organic growth opportunities. Further expenditure was incurred
  during the 2006 fiscal year in the Group's infrastructure, logistics, systems
  and human resources. However, Wolseley cannot be certain that its existing systems,
  including supply chain and logistics, will be adequate to support its expanding
  operations and acquisitions without the need to spend additional resources to
  extend capacity and upgrade as necessary. Significant future growth also will
  impose substantial additional responsibilities on Wolseley's senior management
  and executive officers. Wolseley's success and ability to undertake new
  and concurrent business change initiatives will therefore depend on recruiting
  new, and retaining existing, senior level managers and officers and the successful
  implementation of infrastructure, logistics and system changes. To the extent
  Wolseley cannot accomplish these matters, its business, financial condition
  and results of operations could be materially and adversely affected.
Wolseley may lose business to competitors
  and otherwise be unable to compete favorably in its industries.
The plumbing and heating and building materials
  industries in most of the countries in which Wolseley operates are fragmented.
  The principal competitive factors are availability of materials and supplies,
  pricing of products, customer service, availability of credit, technical product
  knowledge with respect to application and usage, and advisory and other service
  capabilities. Wolseley's competition varies by product line, type of customer
  and geographic market. Wolseley competes with many local, regional, and, in
  several markets and product categories, other national distributors including
  specialist subsidiaries of large home center chains such as The Home Depot and
  product manufacturers. Wolseley, to a more limited extent, also competes with
  the large home center chains, such as The Home Depot and Lowe's in the
  US and B&Q in the UK, for business from professional contractors. Wolseley
  cannot be sure that competition from such large home center chains or consolidation
  in an otherwise fragmented market will not, in the future, include greater competition
  for the business of professional contractors. Several of the companies that
  compete with Wolseley may have substantially greater financial and other resources.
  No assurance can be given that Wolseley will be able to respond effectively
  to such competitive pressures. Increased competition by existing and future
  competitors could result in reductions in sales, prices, volumes and gross margins
  that could materially adversely affect Wolseley's business, financial condition
  and results of operations. Furthermore, Wolseley's success will depend,
  in part, on its ability to gain market share from competitors.
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Wolseley is subject to risks related to
  its international operations.
Wolseley has its principal operations in the
  US, Canada and Europe and plans to continue to expand in each area. Accordingly,
  Wolseley is subject to specific risks of conducting business in these geographic
  regions. For example:
–
At July 31, 2006, Wolseley had operations
        in 19 countries, and the Group currently operates in 27 countries following
        the acquisition of DT Group on September 25, 2006 and Woodcote - stavebni
    materialy a.s. on October 31, 2006;
–
Wolseley may have difficulty managing
        and administering an internationally dispersed business. In particular,
        the management of Wolseley's personnel across these countries can
        present logistical and management challenges. Additionally, international
        operations present challenges related to operating under different business
    cultures, laws and languages;
–
fluctuations in currency exchange rates may
    negatively affect Wolseley's operating results and its financial position;
–
economic, social or political instability
    in some international markets may adversely affect Wolseley's businesses
    in those regions;
–
Wolseley may have to comply with unexpected
    changes in foreign laws and regulatory requirements;
–
export controls or other regulatory restrictions
    could prevent Wolseley from sourcing and shipping its products into and from
    some markets;
–
Wolseley may not be able to protect adequately
    its trademarks and other intellectual property overseas due to uncertainty
    of laws and enforcement in a number of countries relating to the protection
    of intellectual property rights;
–
changes in tax regulation and international
    tax treaties could adversely affect the level of taxation paid by Wolseley;
    and
–
Wolseley may have difficulty sourcing on
    a multinational basis products of a sufficiently good quality and specification
    to be supplied to all Group companies.
Wolseley's success may be limited
  by its inability to identify and successfully integrate acquisitions.
Wolseley intends to continue to grow by acquiring
  additional plumbing and heating, building materials and construction materials
  distribution businesses. Competition for these acquisitions may limit the number
  of acquisitions and lead to higher acquisition prices. There can be no assurance
  that Wolseley will be able to identify, acquire or manage profitably additional
  businesses or to successfully integrate any acquired businesses into Wolseley
  without substantial costs, delays or other operational or financial problems.
  Acquisitions also involve a number of special risks, including possible lower
  margins, failure to achieve expected results, diversion of management's
  attention, failure to retain key personnel of the acquired business, the risks
  inherent in the systems of the acquired business and risks associated with unanticipated
  events or liabilities, any of which could have a material adverse effect on
  Wolseley's business, financial condition and results of operations.
Wolseley may not have access to sufficient
  funding to finance future acquisitions or organic growth.
If Wolseley cannot secure acceptable financing,
  it may be unable to pursue its acquisition and organic growth strategies successfully.
  Wolseley cannot predict the timing, size and success of its acquisitions or
  the capital it will need for those efforts. Using cash for acquisitions could
  limit Wolseley's financial flexibility and increases the likelihood that
  Wolseley will need to seek additional capital through future debt or equity
  financings. Additional debt may include financial covenants limiting Wolseley's
  operational and financial flexibility. Ordinary shares may be used as a component
  of the consideration for future acquisitions. Issuances of ordinary shares for
  acquisitions or additional equity financing may dilute the ownership interests
  of the Company's shareholders, including holders of American Depositary
  Receipts ("ADRs") evidencing the Company's ADSs. If the Company's
  ordinary shares do not maintain a sufficient market value or potential acquisition
  candidates are unwilling to accept ordinary shares, Wolseley may be required
  to use more of its cash resources to pursue its acquisition program. Wolseley
  cannot provide assurances that additional debt or equity financing will be available
  on acceptable terms.
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Wolseley may be adversely affected by
  governmental regulations.
Wolseley's operations are affected by
  various statutes, regulations and laws in the countries and markets in which
  it operates. While Wolseley is not engaged in a "regulated" industry,
  it is subject to various laws applicable to businesses generally, including
  laws affecting land usage, zoning, the environment (including laws and regulations
  affecting the supply of lumber), health and safety, transportation, labor and
  employment practices (including pensions), competition and other matters. Additionally,
  building codes may affect the products Wolseley's customers are allowed
  to use, and consequently, changes in building codes may affect the saleability
  of Wolseley products. Wolseley cannot provide assurance that it will not incur
  material costs or liabilities in connection with regulatory requirements.
Wolseley cannot predict whether future developments
  in laws and regulations concerning its businesses will affect its business,
  financial condition and results of operations in a negative manner. Similarly,
  Wolseley cannot assess whether its operating units will be successful in meeting
  future demands of regulatory agencies in a manner which will not materially
  adversely affect the business, financial condition or results of its operations.
Litigation may have an adverse impact
  on Wolseley's financial results.
The international nature of Wolseley's
  operations increases its exposure to the potential for litigation from third
  parties. In the US, the risk of litigation is generally higher than that in
  Europe in such areas as workers' compensation, general employer liability
  and environmental and asbestos litigation.
In the case of asbestos litigation, Wolseley
  employs independent professional advisors to actuarially assess the potential
  gross liability. Their work, which results in a range of high, likely and low
  estimates, necessitates the application of a number of assumptions relating
  to claims development and the cost of settling such claims over the maximum
  anticipated remaining lifetime of the potential litigants, which is approximately
  50 years. Whilst actual experience is reviewed against the assumptions each
  year and the liability is adjusted in the financial statements, there can be
  no assurance that these assumptions will prove correct over the long term.
Wolseley has insurance which significantly
  exceeds the current estimated liability relating to asbestos claims. Based on
  current estimates, no profit or cash flow impact is therefore expected to arise
  in the foreseeable future. However, there can be no assurance that these assumptions
  will prove correct. In accordance with IFRS, Wolseley has recognized as at July
  31, 2006 a discounted liability of £31 million in respect of asbestos
  litigation. The liability of £31 million represents the most likely outcome
  of a range of high, likely and low estimates determined by the independent professional
  advisors employed by Wolseley. An equal receivable amount of £31 million
  is shown in other receivables reflecting the discounted sum recoverable from
  insurers in respect of this liability.
Factors which could cause actual results to
  differ from these estimates and expectations include: (i) adverse trends in
  the ultimate number of asbestos claims filed against any of Wolseley's
  subsidiaries; (ii) increases in the cost of resolving current and future asbestos
  claims as a result of adverse trends relating to settlement costs, dismissal
  rates, legal fees and/or judgment sizes; (iii) decreases in the amount of insurance
  available to cover asbestos claims as a result of adverse changes in the interpretation
  of insurance policies or the insolvency of insurers; (iv) the emergence of new
  trends or legal theories that enlarge the scope of potential claimants; (v)
  the impact of bankruptcies of other companies whose share of liability may be
  imposed on Wolseley's subsidiaries under state or national liability laws;
  (vi) the unpredictable aspects of the litigation process; (vii) adverse changes
  in the mix of asbestos-related diseases with respect to which asbestos claims
  are made against Wolseley's subsidiaries; (viii) potential legislative
  changes; and (ix) changes in the discount rate used to determine the discounted
  liability.
The departure of key personnel could disrupt
  Wolseley's business.
Wolseley depends on the efforts of its executive
  officers, including the senior management of all its businesses, including those
  recently acquired, to run its businesses and to implement business change initiatives.
  It customarily negotiates employment agreements and agreements not to compete
  with key personnel of companies it acquires in order to maintain key customer
  relationships and manage the transition of the acquired business. The loss of
  key personnel, or the inability to hire and retain qualified replacements, could
  adversely affect Wolseley's business, financial condition and results of
  operations.
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Wolseley may be unable to attract and
  retain qualified employees.
Wolseley's ability to provide high-quality
  products and services on a timely basis requires an adequate number of qualified
  employees. Accordingly, Wolseley's ability to increase its productivity
  and profitability and support its growth strategy may be limited by its ability
  to employ, train, motivate and retain skilled personnel. Wolseley's labor
  expenses may also increase as a result of a shortage in the supply of skilled
  personnel.
Collective bargaining agreements, work
  stoppages and other labor relations matters may have an adverse
effect on Wolseley.
A small proportion of Wolseley's employees
  are covered by collective bargaining or other similar labor agreements. Historically,
  the effects of collective bargaining and other similar labor agreements on the
  Group have not been significant. Any inability by Wolseley to negotiate acceptable
  new contracts under these collective bargaining arrangements could cause strikes
  or other work stoppages, and new contracts could result in increased operating
  costs. If any such strikes or other work stoppages occur, or if other employees
  become represented by a union, Wolseley could experience a disruption of its
  operations and higher labor costs. Labor relations matters affecting Wolseley's
  suppliers of products and services could also adversely affect Wolseley's
  business from time to time.
Investors may be subject to both United
  States and United Kingdom taxes.
Investors are strongly urged to consult with
  their tax advisers concerning the consequences of investing in the Company by
  purchasing ADRs. The Company's ADRs are traded in the US, but the Company
  is organized under the laws of England and Wales. A US holder of the Company's
  ADRs will be treated as the owner of the underlying ordinary shares for the
  purposes of US and UK tax laws. Therefore, US federal, state and local tax laws
  and UK tax laws will apply to the ownership of the Company's ADRs and the
  underlying ordinary shares. Tax laws of other jurisdictions may also apply.
  For a more detailed discussion of tax issues with respect to the ADRs, see "Item
  10 – Additional Information, paragraph E – Taxation".
The price of the Company's ADRs may
  be subject to foreign exchange fluctuations.
Fluctuations in the exchange rate between the
  British pound sterling and the US dollar could have an adverse effect on the
  market price of the Company's ADRs. See "Item 3 – Key Information
  – British Pounds Sterling Exchange Rate Information" for a discussion
  of exchange rates.
Voting rights with respect to the ADRs
  are limited by the terms of the Deposit Agreement.
ADR holders may exercise voting rights with
  respect to the ordinary shares represented by ADRs only in accordance with the
  provisions of the Deposit Agreement (as defined in "Item 9 – The Offer
  and Listing, paragraph C – Markets") relating to the ADRs. There are
  no provisions under English law or under the Company's Memorandum and Articles
  of Association that limit ADR holders' ability to exercise their voting
  rights through the Depositary (as defined in "Item 9 – The Offer and
  Listing, paragraph C – Markets") with respect to the underlying ordinary
  shares. However, there are practical limitations upon the ability of ADR holders
  to exercise their voting rights due to the additional procedural steps involved
  in communicating with such holders. For example, the Company's Memorandum
  and Articles of Association require the Company to notify its shareholders at
  least 21 days in advance of any annual or other general meeting. The Company's
  ordinary shareholders will receive notice directly from the Company and will
  be able to exercise their voting rights by either attending the meeting in person
  or voting by proxy.
ADR holders, by comparison, will not receive
  notice directly from the Company. Rather, in accordance with the Deposit Agreement,
  the Company will provide the notice to the Depositary, which will in turn, as
  soon as practicable thereafter, mail to ADR holders:
–
the notice of such meeting;
–
voting instruction forms; and
–
a statement as to the manner in which instructions
    may be given by ADR holders.
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To exercise their voting rights, ADR holders
  must then instruct the Depositary how to vote their shares. Because of this
  extra procedural step involving the Depositary, the process for exercising voting
  rights will take longer for ADR holders than for holders of ordinary shares.
  ADRs for which the Depositary does not receive timely voting instructions will
  not be voted at any meeting. ADR holders are only able to exercise voting rights
  through the Depositary as described in this Annual Report.
Limitations Relating to Dividend and Other
  Distribution Rights of ADR Holders.
ADR holders are entitled to receive dividends
  and cash distributions paid by the Company in proportion to the number of ordinary
  shares their ADRs represent. The Depositary will convert cash dividends and
  other cash distributions into US dollars for distribution to ADR holders, to
  the extent such cash dividends and distributions are declared in British pounds
  sterling. Periodically, the Depositary may be unable to convert the foreign
  currency into US dollars, in which case the Deposit Agreement permits the Depositary,
  among other things, to hold on to such foreign currency it cannot convert for
  the account of ADR holders who have not been paid. Consequently, ADR holders
  may be delayed in receiving their dividend payments and other cash distributions.
  Additionally, if the exchange rate fluctuates during the time when the Depositary
  cannot convert the foreign currency, ADR holders may lose some or all of the
  value of the distribution or alternatively receive a greater US dollar amount
  than would have been received had the conversion been effected at exchange rates
  prevailing during that period.
The Company may, from time to time, distribute
  rights to its shareholders, including rights to acquire securities under the
  Deposit Agreement relating to ADRs. The Depositary will not offer rights to
  ADR holders unless both the rights and the securities to which such rights relate
  are either exempt from registration under the US Securities Act of 1933, as
  amended (the "Securities Act") or are registered under the Securities
  Act. However, the Company is under no obligation to file a registration statement
  with respect to any such rights or underlying securities or to endeavor to cause
  such a registration statement to be declared effective. Accordingly, ADR holders
  may be unable to participate in rights offerings by the Company and may experience
  dilution of their holdings as a result.
ADR holders' rights will be governed
  by English law and differ from the rights of shareholders under US
law.
Wolseley plc is a public limited company incorporated
  under the laws of England and Wales. The rights of shareholders, including holders
  who hold their shares in the form of ADRs, are, therefore, governed by English
  law and by the Company's Memorandum and Articles of Association. These
  rights differ from the typical rights of shareholders in US corporations. In
  particular, a majority of the Company's directors and executive officers
  and the experts named in this Annual Report are residents of countries other
  than the US. Further, all or a substantial portion of their assets and the Company's
  assets are located outside the US. As a result, it may not be possible for ADR
  holders to:
–
effect service of process within the US upon
    a majority of the Company's directors, executive officers and the experts
    named in this Annual Report or on the Company; or
–
enforce in the US courts or outside the US
    judgments obtained against a majority of the Company's directors, executive
    officers and the experts named in this Annual Report or the Company in the
    US courts in any action, including actions under the civil liability provisions
    of US securities laws; or
–
enforce US court judgments obtained against
    the Company or a majority of the Company's directors, executive officers
    and the experts named in this Annual Report in courts situated in jurisdictions
    outside the US in any action, including actions under the civil liability
    provisions of US securities laws.
ADR holders also may have difficulties enforcing,
  in original actions brought in courts in jurisdictions located outside the US,
  liabilities under US securities laws.
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ITEM
  4. INFORMATION ON THE GROUP
A. History and Development of the Company
The Company and its subsidiaries form an international
  group of companies, engaged primarily in the wholesale distribution and supply
  of plumbing, heating and industrial products and building materials, with operations
  in the US, Canada and Europe. The Company is organized under the laws of England
  and Wales, and its registered office is located at Parkview 1220, Arlington
  Business Park, Theale, Nr Reading, RG7 4GA, United Kingdom. Its telephone number
  is 011 44 118 929 8700. The ordinary shares of 25p each of the Company are listed
  on the London Stock Exchange, and the ADSs of the Company (each ADS representing
  one ordinary share) are listed on the New York Stock Exchange ("NYSE").
  The ratio of ADSs to ordinary shares was reduced from five ordinary shares to
  two ordinary shares on February 2, 2004 and from two ordinary shares to one
  ordinary share on June 30, 2006. The ADSs are evidenced by ADRs issued by The
  Bank of New York. The market capitalization of the Company as of October 31,
  2006 was £8,143,996,523.
The Company was incorporated on October 9,
  1889 under the name The Wolseley Sheep Shearing Machine Company Limited, and
  in its early years manufactured sheep shearing machines, automobiles, machine
  tools and agricultural equipment. The Company sold its automobile and machine
  tool businesses in the early 1900s. During World War I and World War II, the
  Company devoted its activities to support England's war effort. In the
  1950s, Wolseley began to manufacture a range of electric fencing and pedestrian
  controlled motor cultivators and in 1955 changed its name to Wolseley Engineering
  Limited. In 1958, Wolseley acquired Geo H. Hughes Limited, a wheel manufacturer,
  and became Wolseley-Hughes Limited.
During the 1960s and 1970s, Wolseley acquired
  other engineering companies, including companies involved in heating products,
  such as radiators and boilers. In 1979, the Company acquired John James Group
  of Companies Limited. Within the John James Group was a distributor of industrial
  pipe, valves and fittings, which today trades as "Pipe Center" within
  Wolseley's UK distribution business, Wolseley UK Limited ("Wolseley
  UK").
On January 4, 1982, the Company registered
  as a public limited company and on April 14, 1986, it changed its name from
  Wolseley-Hughes plc to Wolseley plc, which is the current name of the Group's
  parent company.
Throughout the past 26 years, Wolseley has
     expanded its businesses through organic growth and acquisitions in the US,
    Canada
  and Europe. During the 1980s, the Company expanded its operations into the
    US  with the acquisition of Ferguson Enterprises Inc. ("Ferguson")
    in  1982, Carolina Holdings Inc. (now known as Stock Building Supply Holdings,
    Inc.
  or "SBS") in 1986, and has made further acquisitions since that time.
   Wolseley's European expansion included the acquisition of Brossette SA
    ("Brossette") in France in 1992, followed by the acquisition of ÖAG
     Handelsbeteiligungs AG (now known as ÖAG A.G.) ("ÖAG")
     in  Austria in 1994 and the acquisitions in 1999 of Heatmerchants Limited
     ("Heatmerchants")
  in the Republic of Ireland, Manzardo SpA ("Manzardo") in Italy and
   Comptoir des Fers et Métaux SA ("CFM") in Luxembourg. In
   July  2001, Wolseley expanded into Canada with the acquisition of Westburne
   Plumbing
  & Waterworks Inc., Westburne Refrigeration & HVAC Inc. and Westburne
   Industrial Products, Inc. (together, "Wolseley Canada"). During
   2000  and 2001, Wolseley sold its remaining manufacturing businesses and focused
   its
  activities entirely on its distribution business, which consists of two distribution
    divisions: North American Distribution and European Distribution. In July
   2002
  Wolseley maintained this focus by expanding into the Netherlands with the acquisition
    of Wasco Holdings BV ("Wasco") and in July 2003 completed the purchase of
   Pinault Bois
  et Matériaux SA (now known as PB & M SA) ("PBM"), a French
   building materials distribution business. In December 2003, Wolseley entered

  into the Swiss market with the purchase of Tobler Management Holding AG (now
   known as Wolseley (Schweiz) AG), ("Tobler"), a Swiss plumbing and
    heating distribution business. In August 2004, Wolseley acquired the Irish
   building
  materials distribution group, Brooks Group Limited ("Brooks Group").
   In October 2005, Wolseley entered into the Belgian market with the purchase

  of Centratec NV, a distributor of residential and commercial heating equipment
   and pipes, valves and fittings. In November 2005 Wolseley entered the electrical

  distribution market in the UK through its acquisitions of William Wilson and
   in May 2006 the electrical distribution market in the US through its acquisition

  of Efficient Electric. In September 2006, Wolseley entered the building materials
   distribution market in the Nordic region, through the acquisition of DT Group,

  which has operations in Denmark, Finland, Sweden and Norway. The acquisition
   of DT Group has also enabled Wolseley to enter the Do It Yourself ("DIY")
    markets of Denmark and Sweden. On October 31, 2006, Wolseley completed the
   acquisition
  of Woodcote – stavebni materialy, a.s., a general builders merchant, which
   has operations in the markets of the Czech Republic, the Slovak Republic,
  Hungary,
  Poland, Romania and Croatia.
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Acquisitions and Divestitures
Acquisitions
A significant aspect of Wolseley's business
  strategy is growth through acquisitions. These acquisitions enable Wolseley
  to improve its service to customers through an expansion of its branch network
  and product offerings. During the fiscal year ended July 31, 2006, Wolseley
  completed a total of 53 acquisitions for an aggregate purchase price including
  debt acquired equal to approximately £914 million. Wolseley's North
  American Distribution segment acquired a total of 31 companies for approximately
  £497 million, whose last 12 months sales were £904 million. Wolseley's
  European Distribution segment acquired 22 companies for approximately £417
  million, whose last 12 months sales were £514 million.
Between August 1, 2006 and October 31, 2006,
  Wolseley completed a total of 16 acquisitions for a total consideration of approximately
  £1,570 million, including £1,353 million in respect of the acquisition
  of DT Group.
During the three fiscal years ended July 31,
  2006, Wolseley acquired a total of 94 companies for an aggregate consideration
  of £1,469 million. Specifically, Wolseley's North American Distribution
  segment acquired 58 businesses for £820 million, and its European Distribution
  segment acquired 36 businesses for £649 million.
Divestitures
During the two fiscal years ended July 31,
  2006, Wolseley did not make any material divestitures of operations and has
  not made any material divestitures since July 31, 2006.
B. Business Overview
The Company is a holding company that operates
  with strong experienced management teams leading each principal operating subsidiary.
  Wolseley's principal operating businesses are organized into two divisions:
  North American Distribution and European Distribution. During the fiscal year
  ended July 31, 2006, these two divisions accounted for all of Wolseley's
  sales. A North American management team oversees operations in North America
  and a European management team oversees the operations in Europe. Within the
  European division there were three geographical segments in the fiscal year
  ended July 31, 2006: UK and Ireland, France and Central Europe. DT Group acquired
  on September 25, 2006, forms a further Nordic region segment. The North American
  division comprises 3 businesses: US Plumbing and Heating ("Ferguson"),
  US Building Materials ("SBS" or "Stock") and Wolseley Canada.
  Up until 2001, Wolseley had several manufacturing and other subsidiaries which
  were then sold. With the divestiture of these manufacturing subsidiaries, Wolseley
  is now focused almost entirely on the distribution and supply of construction
  materials.
According to the May 2006 edition of
Supply
  House Times
(1)
, a recognized
  US trade publication, Wolseley is the market leading
(2)
distributor
  of plumbing and heating products to professional contractors in the US.
Wolseley also believes that it has market
    leading  positions in the plumbing and heating business in the UK and Austria,
    based
  on its knowledge and experience in the plumbing and heating business in these
     countries. Additionally, according to the May 2006 edition of
Supply
      House Times
, Wolseley is the leading distributor
      of  industrial pipes, valves and fittings in the US. Wolseley also believes
      that
  it has a market leading position in this activity in the UK based on its knowledge
       and experience of the industrial pipes, valves and fittings distribution
      market
  in the UK. For the fiscal year ended July 31, 2006, Wolseley's plumbing
  and heating activities accounted for approximately 61% of Wolseley's revenue
   (sales). Wolseley's plumbing and heating activities include the distribution
    and supply of residential and commercial and industrial plumbing supplies,
   including
  pipes, valves and fittings, heating, ventilation and air conditioning products,
    industrial supplies and specialized plumbing products for utilities, mechanical

  contractors, irrigation, fire suppression and industrial and commercial users.
(1)
Wolseley has neither funded nor is it otherwise
      affiliated with any trade publication ranking or report which is cited in
      this Annual Report  as support for Wolseley's competitive market
      position.
(2)
The references throughout this document
      to market leading positions are based on such positions measured against
      total sales.
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According to the May 2006 edition of
Pro
  Sales
, a recognized US trade publication, Stock Building
  Supply, is the leading distributor of lumber products and building materials
  to professional contractors in the US. Wolseley also believes that it is a leading
  distributor of building materials in the UK, based on its knowledge and experience
  of the building materials market in the UK. Wolseley believes, based on its
  knowledge and experience in the French building materials distribution market,
  that PBM, its French building materials distribution business, is the number
  two distributor of heavyside building materials in France. Based on its knowledge
  and experience in the Irish market, Wolseley believes that the Brooks Group,
  its Irish building materials distribution business, acquired in August 2004,
  is the number one distributor of timber products and the number three distributor
  of building materials in Ireland. For the fiscal year ended July 31, 2006, Wolseley's
  building materials activities in the US, UK, Ireland and France accounted for
  approximately 34% of Wolseley's revenue. Wolseley's building materials
  activities include the distribution and supply of lumber, panels millwork, various
  lumber speciality products, including roofing, floor and roof trusses, wall
  panels, stairs, doors, windows, kitchen cabinets and various services to the
  professional contractor. Other significant Wolseley product lines are bricks,
  sand, cement, roof tiles, paving and drainage products, tool rentals, insulation
  and electrical supplies.
Strategy
Wolseley is committed to providing long-term
  value for its shareholders by pursuing a strategy of growing both organically,
  including new branch openings, and through acquisitions and competing internationally
  in the construction materials distribution market. Through the operations of
  the continental management teams the Group drives organic growth and profitability
  of the operations within its businesses. Central, groupwide functions in respect
  of supply chain, sourcing, acquisitions and business improvement operate to
  develop competitive advantage that can be leveraged across the group.
Continental and operational activities
  to drive business performance
At a continental level and local business level,
  Wolseley continues to pursue several activities designed to accelerate organic
  growth and drive improved business performance. These activities include:
New Branches.
Wolseley has continued to invest in branch openings, enabling its businesses
  to further enhance their market leading positions, and has expanded its branch
  network into existing and new markets. During the last fiscal year, Wolseley
  added, net of closures, 279 new locations.
Broadening of Product Lines.
Wolseley seeks to broaden the product lines offered by its businesses in order
  to improve the overall product mix available to its customers. Management continually
  seeks opportunities to enhance Wolseley's product offerings through the
  establishment of relationships with additional suppliers and customers and the
  acquisition of companies and businesses offering complementary product lines.
  During the 2006 fiscal year the acquisitions of William Wilson and AC Electrical
  in the UK allowed Wolseley UK to expand into the complementary market of electrical
  distribution.
People and Leadership Development.
High quality training of employees is a key feature of Wolseley's service
  capability and growth strategy. Employees participate in Wolseley's own
  modular system of training at specialized in-house facilities and in co-operative
  programs with universities and other institutes of higher education. The Ferguson
  "legacy of leadership" program in the US is one of many training initiatives
  throughout the Group. This program focuses on preparing the next level of Ferguson
  leaders. The first graduates from this program have already successfully filled
  senior roles within Ferguson's management. Wolseley's management education
  and development programs are regarded as of primary importance to ensure that
  it has the right caliber of resources to keep pace with the development of its
  businesses. Wolseley has established an annual international executive management
  program in conjunction with the Darden School of Management, located at the
  University of Virginia, and subsequently complemented this with a management
  development program with IMD, a leading European business school based in Switzerland.
  A European graduate recruitment program was successfully launched during the
  2004 fiscal year, and a further 32 graduates were recruited during fiscal 2006.
  Across the Group 1,400 graduates were recruited in fiscal 2006.
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Supply Chain
Wolseley believes that its supply chain can
  be developed to provide competitive advantage, both by giving suppliers their
  most efficient route to market and by being able to offer customers the broadest
  product offering with the best fill rates. Wolseley believes that a key differentiator
  of its supply chain to that of its competitors is its distribution center network,
  particularly in the plumbing and heating businesses. Both the plumbing and heating
  businesses of the North American Distribution segment and the plumbing and heating
  business of the European Distribution segment continue to open DCs to improve
  customer service and generate operating efficiencies. Wolseley opened a new
  pipeyard in Stockton, California in September 2005, and development is being
  undertaken of DCs in Florida and Northern California. Volumes through the Ferguson
  distribution center network during the 2006 fiscal year increased by 34% over
  the previous year, and more than 50% of branch sales now go through the network.
  In Canada, the second of three regional distribution centers for larger inventory
  items was opened in Quebec in October 2005, with the third planned to open near
  Toronto in December 2006. In the UK, the new national distribution center at
  Leamington Spa was completed and started operation in August 2006, while the
  work has now started on a new regional distribution center in the North West
  of England. In Italy a new DC is under construction in Bologna and is expected
  to come on stream before the end of calendar 2006.
Sourcing
Wolseley believes that by using its international
  size it can further enhance its performance from sales of its suppliers'
  proprietary brands and expand the performance from Wolseley's own brands.
  Through a groupwide focus on the sourcing of products for sale Wolseley believes
  it can drive further improvements in its margins while enhancing its sales performance
  by supplying its customers with a wider range of competitively priced products.
Business improvement
Wolseley believes that it can achieve further
  improvements in performance through the integration of activities and collaboration
  to share formats. Wolseley believes that information technology to support organization-wide
  decision making is critical to achieving its business improvement, sales growth
  and profit objectives.
Integration and Leveraging Activities.
An important element of Wolseley's growth strategy is the integration of
  facets of Wolseley operations to obtain cost savings, synergies and accelerate
  growth opportunities.
International Collaboration.
Collaboration across the Group should help shorten development time cycles as
  each of the businesses continues to focus on its unique marketplace and offer
  customers the service and responsiveness they require in a changing business
  environment. During the 2006 fiscal year 64 further XpressNet locations, which
  are based on the Wolseley UK Plumb Center Express model, were opened by Ferguson
  in the USA, bringing the total to 124 locations. The Wolseley UK Hire Center
  model is being rolled out to PBM in France and
ÖAG
  in Austria, with further progress expected in the coming year.
Information Technology.
Wolseley continues to pursue the development of enhanced IT systems, and has
  continued to invest in developing a common IT platform. Wolseley expects that
  this initiative will bring about a greater cohesion across its operating units
  through leveraging of its international purchasing, international sourcing and
  supply chain efficiencies. The platform will further enable the sharing of best
  practices and ideas between Wolseley's businesses for the benefit of the
  Group as a whole.
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Acquisitions
A significant aspect of Wolseley's business
  strategy is growth through acquisitions. Over the past several years, Wolseley's
  acquisition strategy has resulted in the expansion of its operations across
  the US, within Europe and into Canada. Going forward, Wolseley intends to continue
  to expand through acquisitions in order to achieve its growth objectives and
  strengthen its international distribution network. In evaluating future acquisition
  candidates, Wolseley will target companies that are expected to bring benefits
  through additional expansion of its branch network and increased market share
  or through the addition of new products or customers. Such acquisition candidates
  must generally offer the prospect of sustainable growth in an existing or complementary
  market, or provide Wolseley with a platform for expansion into new areas. After
  acquiring a new company, Wolseley concentrates on expanding the customer base
  and product lines at each location and improving its operational efficiency
  through purchasing economies, inventory management and administrative savings.
Wolseley has invested significantly in recent
  years to extend its geographic and product spread, improve operational efficiency
  and provide a platform for future growth. Wolseley has spent approximately £1,469
  million on acquisitions over the last three fiscal years, including £914
  million in the 2006 fiscal year. For a more detailed discussion of acquisitions,
  see "Item 4 – Information on the Group, paragraph A – History
  and Development of the Company – Acquisitions and Divestitures".
North American Distribution
Wolseley's North American Distribution
  segment is comprised of the businesses of Ferguson and Wolseley Canada, both
  of which supply plumbing, waterworks and heating products, including industrial
  pipes, valves and fittings, to markets in North America, together with the business
  of SBS, which supplies lumber and building materials to markets in the US.
Ferguson
Ferguson is a wholesale distributor of plumbing,
  heating, waterworks and piping products to professional contractors and the
  industrial market. Ferguson customers include plumbing, mechanical and utility
  contractors and air conditioning dealers, plants, utilities, irrigation and
  fire suppression equipment installers. Ferguson is headquartered in Newport
  News, Virginia and operates in 50 states, Washington DC, Puerto Rico, Trinidad
  & Tobago and Mexico. The May 2006 edition of
Supply
  House Times
ranks Ferguson as the largest distributor
  in the US of both plumbing supplies, and pipes, valves and fittings and the
  third largest distributor for heating and cooling systems. Ferguson also provides
  integrated purchasing services for third party customers.
Based on Wolseley's knowledge and experience
  in the US plumbing and heating market, Wolseley believes that Ferguson is the
  leading "coast to coast" brand name in the US supplying plumbing and
  heating products to professional contractors. Its sales have grown at a compound
  growth rate of 17.6% per annum over the last five years. Ferguson had 22,030
  employees and operated from 1,237 branches and 9 distribution centers as of
  July 31, 2006. Ferguson's distribution center network provides significant
  competitive advantages through:
•
enabling it to stock a wider product range,
      which is easily accessible to the branch network;
•
improving customer service in reducing
      delivery times and improving fill rates;
•
increasing purchasing leverage with suppliers
      through bulk orders and deliveries;
•
reducing costs in the supply chain;
•
facilitating the integration of acquisitions
      and the opening of new branches; and
•
improved inventory control.
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Wolseley Canada
In July 2001, the Company acquired the Westburne
  Group for £255 million, thereby expanding its plumbing and heating operations
  into Canada, as Wolseley Canada. Wolseley Canada distributes plumbing, heating
  and piping products, including heating, ventilation and air conditioning ("HVAC"),
  waterworks, refrigeration and fire protection products as well as industrial
  plumbing supplies. Wolseley Canada customers include professional contractors,
  utilities and machine shop operators. Wolseley Canada, which comprises the operations
  of Wolseley Canada, Inc. and Wolseley Industrial Products Group, Inc., conducts
  business solely in Canada. Wolseley Canada, headquartered in Toronto, operates
  locations across Canada, including Calgary, Montreal, Ottawa and Vancouver,
  Winnipeg and Edmonton. Wolseley continues to expand Wolseley Canada through
  a combination of acquisitions, new branch openings and product diversification.
  Westburne Supply, Inc. was the US component of the Westburne Group. Wolseley
  has integrated the Westburne Supply Inc. business into its existing US plumbing
  and heating operations. Wolseley believes it is the second largest distributor
  of plumbing and heating products in Canada.
As of July 31, 2006, Wolseley Canada had 2,815
  employees based in Canada and operated from 246 branches.
Stock Building Supply
SBS supplies lumber and building materials,
  including value added pre-assembled components such as roof and floor trusses,
  wall panels, floor systems, doors, windows and staircases to house builders
  and professional contractors. In addition, SBS supplies installation services
  to major house builders together with the provision of secured loans to builders.
  According to the May 2006 edition of
Pro
  Sales
, SBS is the leading supplier of residential construction
  materials in the US. SBS is headquartered in Raleigh, North Carolina and, through
  wholly-owned subsidiaries, operates in 33 states. Through more recent acquisitions
  in California, Utah, Texas and Nevada, SBS has significantly increased its presence
  in the Western and Southwestern regions, and these acquisitions have given SBS
  a "coast to coast" presence with 314 branches nationwide, including
  a number with millwork plants and roof truss manufacturing facilities, and 10
  distribution facilities, as of July 31, 2006. SBS's compound growth rate
  of sales in the last five years has been 15.7% per annum. Approximately 42%
  of its current product range relates to framing lumber and panels, and approximately
  84% of the current business relates to new residential housing based on sales
  in fiscal 2006. SBS had 18,305 employees as of July 31, 2006.
An important part of SBS's strategy is
  to expand its geographic presence, its product range, market sectors, and its
  value added capability in terms of roof truss and panel plant assembly capability
  together with its ability to provide installation services to major home builders.
  As part of this strategy, SBS has acquired 24 businesses over the last five
  years for an aggregate consideration of approximately £559 million.
In addition to distributing lumber products,
  SBS provides construction loans to builders, secured principally against homes
  in the course of construction or completed homes awaiting sale. Construction
  loan receivables as of July 31, 2006 amounted to £313 million compared
  to £262 million at the previous year end. Net interest receivable on construction
  loan lending amounted to £12 million as of July 31, 2006 compared to £9
  million in the prior year. SBS expects to continue to adopt a cautious approach
  with the loan portfolio, which turned in fiscal 2006 at the rate of 1.41 times
  compared to 1.53 times in the prior year.
European Distribution
Wolseley believes it is one of the largest
  specialist distributors of plumbing and heating products to the professional
  contractor and specialist installer in Europe. Wolseley's European strategy
  is to extend the branch network in existing territories through a combination
  of branch openings, acquisitions, a proactive cross-border transfer of know-how
  and product diversification. Wolseley also intends to enter new territories
  in Europe as opportunities arise. The principal driver of the European businesses
  is the repairs, maintenance and installation ("RMI") market. Approximately
  28% of the sales of the European Distribution division in the year ended July
  31, 2006 related to new residential housing. The European Distribution division
  was comprised of three segments; UK and Ireland, France and Central Europe
  in
  fiscal 2006. DT Group, acquired
  on September 25, 2006, will form a further, Nordic region, segment within the
  European Distribution division.
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Wolseley had 29,441 employees in Europe as
  of July 31, 2006. (See "Item 6 – Directors, Senior Management and
  Employees, paragraph D – Employees" for a more detailed discussion
  of Wolseley employees.)
United Kingdom
Wolseley's UK business is headquartered
  in Leamington Spa, Warwickshire and is organized into brand driven units, which
  focus on specialized customer groups. These organizations are as follows:
Plumb Center is in the opinion of management
  the country's largest distributor of plumbing and bathroom products through
  branches across the UK. Its principal markets are both new housing and RMI as
  well as light commercial construction.
Build Center is a national network supplying
  a wide range of building materials and equipment, including timber, glass, bulk
  materials and ironmongery.
Drain Center provides pressurized and non-pressurized
  drainage solutions for the commercial and domestic sectors, and incorporates
  the operations of Capper Plastics.
Hire Center offers a full range of tools for
  commercial and domestic hire, including access and site equipment, power tools,
  carpet cleaning equipment and pumps. Brandon Hire, acquired in May 2006, further
  expanded Wolseley's presence in this market. Wolseley is now re-branding
  all Hire Center branches as Brandon Hire.
Pipe Center, in the opinion of management,
  has a market leading position in the supply of pipes, valves and fittings to
  the commercial and industrial sectors.
Climate Center is, in the opinion of Wolseley
  management, the UK's largest wholesaler and distributor of commercial refrigeration
  and air conditioning products to professional installation, service and maintenance
  contractors.
Parts Center is, in the opinion of Wolseley
  management, the UK's largest specialist supplier of spare parts to trade
  customers.
Electric Center, created in the 2006 fiscal
  year through the acquisition of William Wilson in October 2005 and AC Electrical
  in April 2006, is in the opinion of management the fifth largest distributor
  of electrical products in the UK.
Wolseley UK also includes: Broughton Crangrove
  and Galley Matrix, distributors of bathroom, kitchen and heating products to
  "do-it-yourself" centers, boutiques and independent merchants; Unifix,
  which sells fixings, fasteners, power tools and accessories to the building
  trade; Encon Insulation, a distributor of insulation and related products, and
  Bathstore, which supplies bathroom fittings through its showrooms to retail
  customers. As of July 31, 2006, there were 1,778 Wolseley UK branches in the
  UK, serviced by 9 distribution centers.
Republic of Ireland
Heatmerchants, in the Republic of Ireland,
  was acquired by Wolseley in fiscal year 1999 and had 61 branches and one DC
  as of July 31, 2006. Brooks Group in the Republic of Ireland and Northern Ireland
  was acquired by Wolseley in August 2004 and had 19 branches as of July 31, 2006.
  Wolseley UK's management in the UK is responsible for both the Heatmerchants
  and Brooks businesses, which include the distribution of plumbing and heating
  products as well as tiles and building materials.
France
Wolseley's French plumbing and heating
  distribution business, Brossette, is based in Lyon. According to the June 2006
  edition of
Négoce
,
  a French trade publication, Brossette is the second largest distributor of plumbing
  and heating equipment in France with national coverage. Brossette also distributes
  underground drainage products and pipes, valves and fittings to professional
  contractors and public authorities. It was acquired by Wolseley in 1992 and
  has grown from 199 branches at that date to 438 branches and 6 regional distribution
  centers as of July 31, 2006.
Wolseley's French building materials distribution
  business, PBM, is based in Paris. Wolseley believes, based on its knowledge
  and experience in the French building materials distribution market, that, based
  on sales, PBM is the number two integrated distributor of heavyside building
  materials in France. As of July 31, 2006, it had 347 branches and 9 regional
  distribution centers.
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As of May 2006, Wolseley moved to manage its
  businesses in France through a central French management team.
Central Europe
Wolseley's Central European segment comprises
  the Group's businesses in Italy, Switzerland, Luxembourg, Netherlands,
  Belgium, Austria, Hungary and the Czech Republic and Electro Oil in Denmark
  and following the acquisition of Woodcote-stavebni materialy, a.s. ("Woodcote")
  on October 31, 2006 businesses in the Slovak Republic, Poland, Romania and Croatia.
  A central management team based in Switzerland oversees the operations of these
  businesses.
Wolseley's Austrian business, ÖAG,
  which trades principally as ÖAG Haustechnik, Kontinentale and FAP, is based
  in Vienna and was acquired by Wolseley in 1994. It operated from 64 branches
  as of July 31, 2006 and has 7 distribution centers in Austria. Wolseley believes
  ÖAG is the leading distributor of plumbing and heating products to professional
  contractors in Austria, based on Wolseley's knowledge and experience in
  the Austrian plumbing and heating market. Wolseley's subsidiary, Wolseley
  Czech Republic spol. S.r.o., has 24 branches in the Czech Republic, and Mart
  kft has 31 branches in Hungary, plus a distribution center in both countries.
In Italy, Manzardo SpA ("Manzardo")
     was acquired by Wolseley in the fiscal year 1999 and is based in Bolzano.
    Manzardo
  significantly expanded its business during the fiscal years 2003 to 2006. In
     January 2005, Wolseley acquired Iser Zauli SpA, which operated 15 branches
    in
  the Romagna and Marche regions south of Venice. This acquisition has made Wolseley's
   operations in Italy, based on the opinion and knowledge of management, one
  of
  the largest companies in the Italian sanitary and heating market. As of July
   31, 2006, Manzardo operates from 42 branches and has 520 employees.
Comptoir des Fers et Métaux ("CFM"),
  Wolseley's Luxembourg business, operates from two locations in Luxembourg.
  Wolseley believes CFM is the market leading plumbing and heating distributor
  in Luxembourg based on Wolseley's knowledge and experience in the Luxembourg
  plumbing and heating market. CFM was acquired by Wolseley in fiscal year 2000.
Electro-Oil International AS operates from
  three locations in Denmark. It is primarily involved in the distribution of
  spares for oil burners, boilers and gas systems.
Wasco Holding BV ("Wasco"), based
  in the Netherlands, was acquired in July 2002 and operates from 15 branches
  throughout the Netherlands. The majority of Wasco's revenue comes from
  the sale of boilers and radiators, but Wasco has, in recent years, expanded
  its product range and developed its offering to the RMI market.
Wolseley (Schweiz) AG, which continues to trade
  as Tobler ("Tobler"), based in Switzerland, was acquired in December
  2003 and operates from 28 branches throughout Switzerland. Wolseley believes
  Tobler is the leading wholesaler for heating and "behind the wall"
  sanitation products and is also one of the leading providers of technical maintenance
  services in Switzerland based on Wolseley's knowledge and experience in
  the Swiss plumbing and heating market.
Centratec N.V. was acquired in October 2005
  and operates from 9 locations in the central and eastern regions of Belgium.
  In July 2006 it expanded its operations through the acquisition of Marmon Keystone
  Anbuma, a distributor of carbon and stainless steel pipe with 3 branches in
  Belgium.
Woodcote – stavebni materialy, a.s. was
     acquired on October 31, 2006 and operates from 37 outlets in the Czech Republic,

  the Slovak Republic, Hungary, Poland, Romania and Croatia. Woodcote is a general
     builder's merchant and also imports and distributes doors, ceilings,
     flooring,  batons, insulation and dry lining to primarily professional
     contractors.
Nordic Region
DT Group was acquired on September 25, 2006
  and operates from 247 locations in Denmark, Sweden, Norway and Finland. It operates
  building materials distribution businesses in all four countries and has DIY
  retail stores in Denmark and Sweden.
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Revenues
The table below indicates sales generated by
  Wolseley's North American Distribution and European Distribution segments
  in each of the last two fiscal years.
Fiscal Year Ended
      July 31,
2006
2005
Segment
£m
£m
US Plumbing & Heating
5,396
3,858
US Building Materials
2,966
2,249
Canada
646
512
North American Distribution Segment
9,008
6,619
UK & Ireland
2,690
2,351
France
1,725
1,644
Central Europe
735
642
European Distribution
5,150
4,637
Total
14,158
11,256
Divestitures
During fiscal year 2006, Wolseley did not make
  any material divestitures of operations.
Governmental Regulation
Wolseley's operations are affected by
  various statutes, regulations and laws in the countries and markets in which
  it operates. While Wolseley is not engaged in a 'regulated' industry,
  it is subject to various laws applicable to businesses generally, including
  laws affecting land usage, zoning, the environment (including laws and regulations
  affecting the supply of lumber), health and safety, transportation, labor and
  employment practices (including pensions), competition and other matters. These
  laws are administered by various regulatory bodies in the countries in which
  Wolseley operates. In the US, among other regulatory bodies, Wolseley is subject
  to the jurisdiction of the Environmental Protection Agency, the Occupational
  Safety and Health Administration and the Federal Trade Commission on a federal
  level and various local land use commissions and labor and employment commissions
  on a state and local level. In Canada, Wolseley is subject to many federal and
  various provincial regulations including but not limited to employment standards,
  health and safety, human rights, competition and foreign investment. Additionally,
  differing municipal building codes across Canada may also affect the building
  related products sold by Wolseley Canada. In Europe, Wolseley is subject to
  the jurisdiction of the relevant regulatory bodies of the European countries
  in which it operates, including these countries' respective commissions
  or departments of health and safety, data protection, competition and environmental
  protection, as well as equivalent respective governing bodies of the European
  Union.
None of the governmental regulations to which
  the Group is subject has had a material adverse effect on Wolseley's financial
  condition, and Wolseley is not aware of any existing matters it presently expects
  to have a material adverse effect.
Patents and Trademarks
Wolseley's operating units have various
  US and foreign patents, registered trademarks, trade names and applications
  for, or licenses in respect of, the same that relate to various businesses.
  While its business is not significantly dependent upon any patents or trademarks,
  Wolseley believes that the important patents, trademarks and trade names of
  its operating subsidiaries and divisions are adequately protected and that the
  expiration of patents and patent licenses will not have a material adverse effect
  upon Wolseley's business, financial condition or results of operations.
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Legal Proceedings
Wolseley is involved in various legal proceedings
  incidental to the nature of its business and maintains various insurance coverages
  to reduce financial risk associated with claims related to these proceedings.
  Although it is not possible to predict the outcome of these proceedings, or
  any claim against Wolseley related thereto, in the opinion of management, uninsured
  losses, if any, resulting from the ultimate resolution of these matters will
  not have a material effect on Wolseley's business, financial position and
  results of operations.
Provisions for liabilities and charges in the
  balance sheet include the estimated liability for asbestos claims on a discounted
  basis. This liability has been determined actuarially as at July 31, 2006 by
  independent professional actuarial advisors. The estimated liability relating
  to asbestos related claims is fully covered by insurance, and accordingly an
  equivalent insurance receivable has been included in non-current assets –
  other receivables. The level of insurance coverage available significantly exceeds
  the estimated liability, and no profit or cash flow impact is therefore expected
  to arise in the foreseeable future. There were 246 (2005: 235) claims outstanding
  at the July 31, 2006 fiscal year end.
Raw Materials and Commodities
With the exception of lumber and certain commodities
  such as copper, steel and plastics, the financial performance of the Group is
  not significantly influenced by the supply and cost of commodity products. Wolseley's
  products such as industrial pipes, valves and fittings, plumbing supplies and
  heating and ventilation equipment are generally pre-assembled and do not require
  Wolseley to engage in bulk purchases of raw materials and other commodities.
  Wolseley is not dependent on contracts with suppliers for pre-assembled products
  such as industrial pipes, valves, fittings, plumbing supplies and heating and
  ventilation equipment that are material to its business and profitability. However,
  Wolseley's building materials business in the US (and, to a lesser extent,
  the businesses in the UK, Ireland and France) is significantly dependent on
  lumber products. Wolseley purchases its lumber supplies from a number of major
  producers both within the US and Canada and in Europe and is not dependent on
  any material supply contracts. Any restriction in supply from any one supplier
  is unlikely to have a significant impact on the total lumber supply available
  to Wolseley.
Wolseley's building materials business
     can be adversely affected by the fluctuation of lumber prices. For example,

  the average price for framing lumber, a significant product for Wolseley's
  US Building Materials Distribution business, over the five fiscal years from
  2002 to 2006 has ranged between $400 and $287 per thousand board feet, with
  the average for the year ended July 31, 2006, being $362 per thousand board
  feet. Lower lumber prices had the effect of reducing sales and profitability
  of that business during the 2006 fiscal year. In the last three years there
  has been significant fluctuation in the price of many raw materials, notably
  in
  North America. Ferguson, for example, saw price inflation in commodity products,
  particularly copper during the 2006 fiscal year which accounted for some $35
  million of unusually large profits in the second half of the year, in addition
  to unusually large gains of around $8 million in the first half. There can
  be
  no assurance that continued volatility of lumber prices and other commodities
  and sustained periods of low lumber prices or commodities will not materially
  adversely affect the financial performance of Wolseley. See "Item 5 –
  Operating and Financial Review and Prospects – Year Ended July 31, 2006
   compared to Year Ended July 31, 2005 – US Building Materials Distribution"
  for additional information on the effect of lumber prices and other raw material
   prices.
Seasonality
The businesses of the Group, particularly its
  heating and building materials business, are, to a degree, seasonal. Since many
  of Wolseley's products are intended for exterior use, sales by the Group
  tend to be lower during periods of inclement weather; this is particularly true
  with respect to Wolseley's Northern US, Canadian and Northern European
  operations. Accordingly, weather conditions occurring during the second and
  third quarters (November – April) of the Group's fiscal year may result
  in the generation of lower sales revenues during those periods than in other
  periods of the Group's fiscal year. These seasonal fluctuations are likely
  to continue in the future. Management closely monitors operating expenses and
  inventory levels during seasonally affected periods and, to the extent possible,
  controls variable operating costs to minimize seasonal effects on profitability.
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C. Organizational Structure
Wolseley plc is a holding company that operates
  with strong, experienced management teams leading each principal operating subsidiary.
  Wolseley's principal operating businesses are organized into two divisions:
  North American Distribution and European Distribution, with a management team
  based in each territory. During fiscal 2006 the European Distribution division
  had three geographical segments: UK and Ireland, France and Central Europe.
  Following the acquisition of DT Group on September 25, 2006 the division added
  a further, Nordic Region, geographical segment. The North American division
  comprises 3 businesses, US Plumbing and Heating ("Ferguson"), US Building
  Materials ("SBS") and the Canadian business. The table below sets
  forth Wolseley's principal operating subsidiaries, including for each such
  subsidiary the applicable segment and country of operation. Each of the following
  subsidiaries is wholly owned, either directly or indirectly, by Wolseley plc.
Segment
Principal Operating Companies
Country of Operation
North American
Distribution
Ferguson Enterprises Inc.
US
Wolseley Canada, Inc.
Canada
Stock Building Supply Holdings, Inc.
US
European Distribution
UK & Ireland
Wolseley UK Limited
UK
Heatmerchants Limited
Republic of Ireland
Brooks Group Limited
Republic of Ireland
France
Brossette SA
France
PB & M SA
France
Central Europe
OAG AG
Austria
Mart Kft
Hungary
Manzardo SpA
Italy
Comptoir des Fers et Métaux SA
Luxembourg
Wasco Holding B.V.
The Netherlands
Wolseley (Schweiz) AG
Switzerland
Wasco - Centratec N.V.
Belgium
Wolseley Czech Republic spol. s r.o.
Czech Republic
Woodcote – stavebni materialy, a.s.
Czech Republic
Electro-Oil International A/S
Denmark
Nordic Region
DT Group A/S (from September 25, 2006)
Denmark
D. Property, Plant and Equipment
As of July 31, 2006, Wolseley operated from
     4,720 outlets, including 4,658 branches and 62 regional and national distribution

  centers and facilities. In North America, including the US and Canada, Wolseley
     operated from 1,816 outlets, including 1,797 branches and 19 distribution
    centers
  and facilities. In Europe, Wolseley operated from 2,904 outlets, including
    2,861  branches and 43 distribution centers and facilities. The majority
    of these properties
  are leased, and none is considered to have a value that is significant in relation
     to Wolseley's assets as a whole. Wolseley owns approximately 650 of
     its  properties, and none of its owned properties is subject to any material
     encumbrances.
ITEM
  4A. UNRESOLVED STAFF COMMENTS
None.
ITEM
  5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion is based on Wolseley's
  Consolidated Financial Statements included in Item 18 of this Annual Report.
  These financial statements have been prepared in accordance with IFRS, which
  differs in certain significant respects from US GAAP. Reconciliations and discussions
  of the significant differences between IFRS and US GAAP are set forth in Note
  44 to the Consolidated Financial Statements. In addition, various terms used
  in financial statements prepared in accordance with IFRS (such as Wolseley's)
  differ from terms commonly used in US financial statements. For example, operating
  profit is the equivalent of net income before interest and taxes.
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During the periods presented, the operations
     of Wolseley were conducted principally in the US, Canada and Europe. For
    purposes
  of the Company's Consolidated Financial Statements, the results of its
  US, Canadian and other overseas subsidiaries were translated at the average
  exchange rate for the period in respect of the income statement and the relevant
  period end rate in respect of the balance sheet (see Item 11. Quantitative
  and Qualitative Disclosures About Market Risk – Foreign Currency Risk).
  Consequently, Wolseley's
  reported results were affected  by fluctuations in the rates of exchange between
  the British pound sterling
  and the other currencies in which it received revenues and incurred expenses,
   principally the US dollar, the Euro and the Canadian dollar.
The residential and commercial and industrial
  construction markets in which Wolseley operates are sensitive to changes in
  the economy, and as a result, downturns (or lack of substantial improvement)
  in the economy in any of Wolseley's geographic markets could adversely
  affect Wolseley's business, financial condition and results of operations.
  The US economy showed significant momentum during fiscal years 2005 and 2006
  but from the third quarter of calendar 2006 has shown a substantial slowdown
  in the market for new residential housing. The markets in Continental Europe
  (excluding the UK and Ireland), which accounted for approximately 17% of Wolseley's
  sales in the fiscal year ended July 31, 2006, showed limited improvement during
  the fiscal year 2006, having been soft during the fiscal year 2005. To the extent
  recovery from these soft market conditions does not materialize or otherwise
  takes place over an extended period of time, Wolseley's business, financial
  condition and results of operations may be adversely affected.
A. Operating Results
Revenue
Year Ended July 31
2006
2005
£m
£m
US Plumbing & Heating
5,396
3,858
US Building Materials
2,966
2,249
Canada
646
512
North American Distribution
9,008
6,619
UK & Ireland
2,690
2,351
France
1,725
1,644
Central Europe
735
642
European Distribution
5,150
4,637
TOTAL
14,158
11,256
Operating Profit
Year Ended July
      31,
2006
2005
£m
£m
US Plumbing & Heating
378
260
US Building Materials
192
131
Canada
44
36
North American Central Costs
(11
)
(1
)
North American Distribution
603
426
UK & Ireland
201
183
France
91
98
Central Europe
31
30
European Central Costs
(7
)
(4
)
European Distribution
316
307
Group Central Costs
(37
)
(25
)
Trading Profit
882
708
Amortization of acquired intangibles
(48
)
(6
)
Operating profit
834
702
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Following its adoption of IFRS, Wolseley determined
  that its primary segments for reporting in accordance with IFRS were on a geographical
  basis and in fiscal 2005 and 2006 comprised UK and Ireland, France, Central
  Europe and North America. Under US GAAP Wolseley considers that its North American
  segment would be reported as three further segments: US Plumbing and Heating,
  US Building Materials, and Canada, as these further segments reflect the manner
  in which the principal decision makers of the Group receive information. Management
  considers that this further segmental information required under US GAAP but
  not in accordance with IFRS provides valuable additional information to users
  of the financial statements as it reflects the performance of the business on
  a basis consistent with that used by managers in discussing and directing the
  business.
Trading profit, being defined as operating
  profit before amortization of acquired intangibles, is a measure set out in
  Note 9 to the accounts on page F-
21
  and is a non GAAP measure. The performances of Wolseley's segments and
  businesses are discussed using this measure.
This measure, trading profit, closely reflects
  the way in which operating targets are defined and performance is monitored
  by the Group's management. The current businesses within Wolseley have
  arisen through internal organic growth and through acquisition. Operating profit
  includes the amortization of acquired intangibles arising from those businesses
  that have been acquired subsequent to July 31, 2004 and as such does not reflect
  equally the performance of businesses acquired prior to August 1, 2004 (where
  no amortization of acquired intangibles was recognized), businesses that have
  developed organically (where no acquired intangibles are attributed), and those
  businesses more recently acquired. Wolseley believes that trading profit provides
  valuable additional information for users of the financial statements in assessing
  the Group's performance since it provides information on the performance
  of the business that local managers are most directly able to influence and
  on a basis consistent across businesses. Wolseley uses trading profit for planning,
  budgeting and reporting purposes and for its internal assessment of management
  performance. Trading margin is trading profit expressed as a percentage of revenue.
Also in discussing the performance of the businesses
  certain information is presented on a constant currency basis. This removes
  the translation effect of foreign exchange movements and enables an understanding
  of the underlying performance of the business that is most closely influenced
  by the actions of each business' management. The risk of foreign exchange
  movements on the translation of overseas earnings is managed centrally and is
  not a factor over which managers have any control. In discussing performance
  Wolseley also considers "organic" performance. The change in organic
  performance is the total increase or decrease in the year adjusted for the impact
  of foreign exchange, new acquisitions (and, where applicable, divestitures)
  in the year and the incremental impact of acquisitions (and divestitures) in
  the prior year.
Whilst these measures are important in the
  management of the business, they should not be viewed as replacements for, but
  rather as complementary to, the comparable GAAP measures such as revenue and
  reported (rather than organic) movements in individual income statement captions.
  These GAAP measures reflect all the factors which affect the business, and the
  discussion by segment and business should be read in the context of the discussion
  of the overall Group performance.
Year Ended July 31, 2006 Compared To Year
  Ended July 31, 2005
Revenue
Revenue increased by 25.8% in fiscal year
  2006 from £11,256 million to £14,158 million. The impact of currency
  translation on the Group's reported sterling results for the year compared
  to the previous year was to increase sales by £274 million (2.4%) principally
  as a result of the depreciation of sterling pounds in relation to the US dollar.
  Excluding the effects of foreign currency translation, revenues increased by
  22.8%. Revenues increased by £862 million due to acquisitions made in
  the fiscal year 2006 and £507 million due to acquisitions made in the
  fiscal year 2005. Excluding the effect of these acquisitions and currency translation,
  revenues grew by £1,259 million, with the North American Distribution
  segment responsible for 90% of this growth and the European Distribution division
  responsible for the remaining 10%.
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Operating profit
Operating profit increased by 18.8% from £702
  million to £834 million. This was driven by an increase in trading profit
  of £174 million (24.7%) offset in part by an increase in amortization
  of acquired intangibles of £42 million. Amortization of acquired intangibles
  increased due to further acquisitions being made in fiscal 2006. Excluding the
  effects of foreign currency translation, Group operating profit for fiscal 2006
  increased by 15.9%. The effect of US dollar appreciation has been to increase
  translated US trading profits by £14 million (1.9% of 2005 trading profit)
  compared to fiscal 2005. US dollar denominated profits account for around 63.4%
  of the Group's trading profit in fiscal 2006. There has been little movement
  in the Euro translation rate, with Euro denominated profits accounting for around
  15.2% of Group trading profit in fiscal 2006.
Finance revenue and Finance costs
Net finance costs of £65 million in
    fiscal  year 2006 (2005: £37 million) reflects an increase in Group
    debt as a  result of acquisitions and an increase in interest rates, together
    with a reduction
  in pension funding costs and interest received on the refund of French wood
     tax.
Tax Expense
The effective tax rate, being tax payable on
  profit before tax and amortization of acquired intangibles, increased marginally
  from 27.7% to 28.4%.
North American Distribution
The North American Distribution segment performed
  strongly with significant rises in revenue and profits and its highest ever
  trading margin, which increased from 6.4% to 6.7%.
Reported revenue of the segment was up 36.1%
  from £6,619 million to £9,008 million, reflecting organic growth
  of 16.4% (including gains from price fluctuations in commodities), acquisitions
  and the beneficial impact of currency translation. Trading profit, in sterling,
  increased by 41.5% from £426 million to £603 million, after an increase
  of £10 million in North American central costs reflecting the creation
  of the new North American management structure with effect from August 1, 2005.
Currency translation increased segmental revenue
  by £274 million (4.1%) and trading profit by £18 million (4.2%).
  There was a net increase of 363 branches in North America to 1,797 (2005: 1,434).
Amortization of acquired intangibles applicable
  to this segment was £33 million in fiscal 2006.
US Plumbing and Heating
Ferguson produced another outstanding performance,
  generating strong organic growth from its focus on selected markets, new branch
  openings and driving further commercial advantage from its DC network. These
  factors contributed to, in the opinion of management, a significant market outperformance
  in the year.
Local currency revenue in the US plumbing
    and  heating operations rose by 35.1% to $9,651 million (£5,396 million)
    from  $7,144 million (£3,859 million), with trading profit up by 40.4%
    to $676  million (£378 million) from $481 million (£260 million).
    Organic  revenue growth was 24.3%. The second half gross margin benefited
    from further
  increases in commodity prices, mainly copper, towards the latter part of the
     financial year. Ferguson's scale and distribution capability allowed
     it  to take advantage of price movements in a rising commodity market to
     secure
  additional unusually large profits amounting to around $35 million in the second
      half in addition to the unusually large gains of around $8 million in the
     first
  half. Taking into account the unusually large commodity gains, the trading
     margin  increased from 6.7% to 7.0%. The underlying trading margin was approximately

  20 basis points higher, year on year, increasing from 6.5% to 6.7%, despite
      significant expenditure to develop the business for future profitable growth.
Volumes through the DC network grew by 34%
  compared to the prior fiscal year, and Ferguson believes more than 50% of branch
  sales as of July 31, 2006 went through the network. Further investment was made
  in the DCs with an additional 700,000 square feet of capacity added through
  the expansion of four existing facilities. Wolseley Board approval has recently
  been given for new DCs in both Florida and northern California, both of which
  are scheduled to become operational within twelve months.
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In the markets in which Ferguson operates,
  the commercial and industrial sectors continued to improve, and although new
  housing slowed towards the end of the fiscal year, other housing related activity
  remained strong, with the positive economic environment benefiting the RMI sector.
  RMI is becoming an increasingly important element of overall construction spending
  in the US. To address this opportunity, Ferguson opened a further 64 XpressNet
  branches and 30 new showrooms during the fiscal year. More than 60 new specialist
  branches for heating, ventilation, and air-conditioning (HVAC) or waterworks
  were also opened, and this expansion is expected to lead to additional growth
  opportunities.
As well as new branch openings, investment
  in people and IT continued during the fiscal year. More than 4,300 people joined
  the business, and the new warehouse management system is being introduced into
  the large branches. This system should lead to enhanced customer service as
  a result of faster and more accurate product picking and more efficient inventory
  management.
Ferguson's total branch numbers increased
  by 296 during the fiscal year to 1,237 locations (2005: 941 branches).
US Building Materials
The strong performance of SBS in fiscal 2006
  benefited from improved market focus which was brought about by the recent business
  restructuring and from acquisitions. Reported figures also benefited from currency
  translation.
In local currency, SBS's revenue for fiscal
  2006 was up 27.4% to $5,305 million (£2,966 million) from $4,164 million
  (£2,249 million), with trading profit up by 40.6% from $244 million (£131
  million) to $343 million (£191 million). Organic revenue growth was 4.1%,
  reflecting some commodity price deflation in lumber and structural panels. These
  commodity price movements had the effect of decreasing SBS's local currency
  revenue by $167 million (4.0%) in the fiscal year compared to the prior fiscal
  year, with the greater impact being in the second half. Acquisitions contributed
  $970 million (23.3%) to revenue growth.
SBS's trading margin increased significantly
  from 5.9% to 6.5% primarily as a result of a more favorable sales mix arising
  from increased management focus on value added products and installed services,
  both of which represent significant growth opportunities.
For the majority of the fiscal year, new residential
  housing starts were around record levels at between 1.9 and 2.0 million starts,
  although there were significant regional variations. The markets in Georgia,
  Utah, Texas and the Carolinas have been the strongest throughout the fiscal
  year whereas the weakest markets have been in the upper midwest and the north
  east. As expected, housing starts declined in the final quarter of the fiscal
  year as a result of rising interest rates, increased inventory of unsold houses
  and a reversal in the trend of house price inflation. Housing starts ended the
  fiscal year at an annualized rate of just below 1.8 million per annum, with
  the previously buoyant markets such as Washington DC, Florida and Las Vegas
  showing significant fourth quarter year on year declines. Management action
  has already been taken to reduce headcount and indirect costs and to shift emphasis
  to the more resilient housing markets and to increase penetration of the RMI
  and industrial and commercial markets. Initiatives are also being taken to expand
  the product range throughout the branch network, which should help SBS to continue
  to outperform competitors in these softening market conditions.
Value-added sales in the 2006 fiscal year were
  up 31%, construction service and installed business sales were up more than
  140% and sales to commercial and RMI contractors increased by 47% and 20%, respectively.
  As well as achieving these increases through its existing branch network and
  acquisitions, SBS opened 19 new greenfield branches, and these initiatives further
  complement SBS's installed service expertise.
SBS's branch numbers increased by 59 during
  the fiscal year to 314 locations (2005: 255 branches), and it now operates in
  33 states.
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Wolseley Canada
In Canada, the construction and housing markets
  remained mostly strong in fiscal 2006, while the buoyant energy sector in Western
  Canada helped sales in the industrial and commercial sector.
Reported revenue for the division increased
  by £134 million (26.8%) to £646 million with the Canadian dollar-sterling
  exchange rate for the year strengthening from C$2.2997 to C$2.0595 (11.7%).
  Local currency revenue increased by 13.0% to C$1,330 million (£646 million)
  from C$1,177 million (£512 million). Of this increase, 10.7% was organic,
  which management believes to be ahead of the market generally. Gross margin
  improved and local currency trading profit rose by 12.4%, in line with revenue,
  resulting in an unchanged trading margin of 6.9%.
Work continued to consolidate back offices,
  recruit additional people to fill management and trainee positions and improve
  logistics. The second of three regional distribution centers for larger inventory
  items was opened in Quebec in October 2005, with the third scheduled to open
  near Toronto in December 2006. These regional distribution centers should lead
  to lower inventory levels and enable the branch network to be utilized more
  effectively.
Wolseley Canada's total branch numbers
  increased from 238 to 246 locations.
European Distribution
The European Distribution division produced
  36.4% (2005: 41.2%) of the Group's revenues and 35.8% (2005: 43.5%) of
  the Group's trading profit in fiscal 2006.
Construction markets in Europe showed very
  little growth during the fiscal year. Nonetheless, with the exception of the
  Czech Republic, which had marginally lower revenue, all the continental European
  operations increased revenue, and most achieved profit improvements. The results
  benefited from the effect of acquisitions but were adversely affected by the
  fall in Brossette's profits due to its restructuring and lower profitability
  in Austria.
Reported revenue for this division increased
  by 11.1% from £4,637 million to £5,150 million, of which 2.8% was
  from organic growth. Acquisitions accounted for £382 million (8.2%) of
  revenue growth. Trading profit, after European central costs, increased 2.9%
  from £307 million to £316 million. European central costs rose by
  £3 million to £7 million due to the planned expansion of the European
  infrastructure to drive future growth and margin improvement.
The overall European distribution division
  trading margin, after European central costs, fell from 6.6% to 6.1% of revenue,
  primarily due to the lower trading margins in Brossette, Austria and the UK
  and the effect of acquisitions. Margin improvements were achieved in PBM (France),
  Manzardo (Italy), Cesaro (Czech Republic), Electro Oil (Denmark) and Wasco (Netherlands).
During the fiscal year, a further net 375 branches
  were added to the European distribution network, giving a total of 2,861 locations
  (2005 : 2,486).
UK and Ireland
Wolseley UK's performance in fiscal 2006
  held up well against a UK building materials market which is estimated to be
  around 4-5% down as compared to the prior period. Whilst the fundamentals of
  the UK economy remained positive, with relatively low interest rates and low
  unemployment, RMI spending slowed in the first half of the fiscal year reflecting
  weaker consumer confidence, but sales trends started to show a gradual improvement
  in the final quarter. Government spending remained a relative bright spot, although
  there have been noticeable delays on planned social housing expenditure.
Against this more challenging background, Wolseley
  UK, which includes operations in Ireland, recorded a 14.4% increase in revenue
  to £2,690 million (2005: £2,351 million). Organic growth of 2.1%
  is believed by management to have outperformed the market generally, with Bathstore,
  the retail bathroom offering, and Heatmerchants and Brooks, the Irish businesses,
  performing particularly well, producing double-digit organic revenue growth.
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Wolseley UK's trading profit increased
  by 9.9% on the prior year mainly as a result of the acquisitions of William
  Wilson, Encon, AC Electrical and Brandon Hire, all of which have outperformed
  expectations at the time of acquisition. Although the gross margin improved,
  the trading margin fell slightly from 7.8% to 7.5%. This was the result of the
  ongoing investment in the business to increase management resources, improve
  the supply chain and logistics and expand the branch opening program. These
  investments provide a platform for future growth in both the traditional brands
  as well as those market sectors recently entered.
The new national DC in Leamington Spa, which
  is located alongside Wolseley UK's new headquarters, commenced deliveries
  to branches in August 2006. The regional DC in the north west of the UK is scheduled
  to open in autumn 2007. These investments and the current initiatives to centralize
  control of transport and branch inventory management should enhance customer
  service, improve efficiency and support continued growth in the business.
During the fiscal year, 288 net new locations
  were added in the UK and Ireland, including 262 branches added as a result of
  acquisitions, taking the total number of branches for Wolseley UK to 1,858 (2005:
  1,570 branches).
France
In France, government tax incentives continue
  to underpin growth in the new residential market, but RMI, representing approximately
  two thirds of fiscal 2006 revenue for both Brossette and PBM, continued to show
  only marginal improvement against the background of little growth in the overall
  economy, weak consumer confidence and persistent high levels of unemployment.
Wolseley's French operations, which since
  May 2006 have been managed through one central management team, generated revenue
  increases of 4.8%, to €2,515 million (£1,725 million) from €2,399
  million (£1,644 million), including organic growth of 2.1%. Trading profit
  in fiscal 2006 for France decreased 7.7% to €132 million (£91 million)
  from €143 million (£98 million) with a trading margin of 5.3% (2005:
  6.0%) as a result of the lower level of profitability in Brossette.
PBM achieved an increase in revenue of 6.8%
  in local currency in fiscal 2006, almost half of which was organic growth. The
  sales trends in PBM improved in the second half, and trends have continued to
  improve since the fiscal year end. Gross margin was down slightly. PBM's
  branch numbers increased by 57 during the fiscal year to 347 branches, including
  the opening of eight new satellites and twelve hire locations. The underlying
  trading profit, excluding a €11.5 million (£8 million) wood import
  duties rebate from the French customs authority, showed an improvement, as did
  the underlying trading margin.
Local currency revenue in Brossette was 1.8%
  up on the prior year. Trading profit was significantly lower, before taking
  account of a €7.6 million (£5 million) fine from the French Competition
  Authorities relating to matters which took place more than ten years ago. Brossette's
  results reflect the ongoing reorganization of the district, branch and management
  structures and the move to centralization of purchasing and logistics, all of
  which are designed to enhance customer service and facilitate future expansion.
  In order to accelerate the changes being made at Brossette a number of management
  and employee changes were made during the fiscal year, with associated severance
  costs of €3.5 million.
PBM is expanding the number of joint sites
  with Brossette, continuing to cross sell each others' products in their
  respective branches and exploiting opportunities to create purchasing synergies
  and indirect cost savings in cooperation with other Group companies.
Central Europe
The Group's other Continental European
  operations enjoyed generally good results in fiscal 2006 despite broadly flat
  markets. Revenue in Central Europe was up by 14.6% to £735 million (2005:
  £642 million), reflecting organic growth of 7.4% and the benefit of acquisitions.
  Trading profit was up 3.9% to £31 million (2005: £30 million).
Tobler, in Switzerland, had another record
  year with revenue up 17.8% to more than CHF300 million for the first time, including
  10.1% organic growth. Despite competitive market conditions exerting pressure
  on prices and a change in the business mix to lower margin products, trading
  margin improved.
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In the Netherlands, Wasco continued to make
  good progress expanding its product range into sanitaryware, developing its
  offerings to the more profitable RMI market and focusing on cost control. Wasco
  achieved organic revenue growth of 16.1% in fiscal 2006 and trading profit improved
  by 57.0%. In Luxembourg, CFM's revenue increased by 3.6%, although trading
  profit was down, reflecting an increasingly competitive market. Centratec, the
  Belgian business acquired in October 2005, performed in line with expectations
  and is now working with Wasco in the Netherlands and CFM in Luxembourg to achieve
  improvements in sourcing, logistics and inventory management.
ÖAG, in Austria, increased revenue by
  nearly 2.7% although trading profit fell due to continued competitive pressure
  on prices as a consequence of difficult housing and RMI markets and business
  restructuring. In Hungary and the Czech Republic, local market conditions remained
  difficult, but Wolseley Hungary achieved strong organic revenue growth and Cesaro
  in the Czech Republic improved profits.
In Italy, Manzardo increased revenue by 21.4%
  compared to the prior year, including 6.7% organic growth in a flat market and
  the incremental effect of Iser Zauli acquired in January 2005. The branch opening
  program of the past few years continued to benefit Manzardo's revenue growth.
  Trading profit rose by a lesser percentage than revenues, 13%, reflecting the
  costs of branch openings and preparations for the new DC opening. Four new branches
  were opened during the fiscal year. Progress on the €20 million new central
  DC in northern Italy continues, and the first branch deliveries are expected
  to commence before the end of calendar 2006, with other branches being rolled
  out over the following 12 to 18 months.
Further progress was made during the 2006 fiscal
  year to manage the businesses in a more integrated way across Europe. The focus
  was on sharing best practices in areas such as branch format and product/service
  offerings, rationalizing the product and supplier base, improving the supply
  chain and sourcing from low cost countries. All these initiatives are designed
  to enable the Group to benefit from cross-border synergies and accelerate growth
  in Europe.
European Central Costs
European central costs, representing the costs
  of the European management team, increased by £3 million to £7 million
  as a result of additional team members.
Group Central Costs
Group central costs representing the corporate
  office in Theale, UK and other centrally provided services, such as the captive
  insurance company, increased by 48% in fiscal 2006 to £37 million (2005:
  £25 million) as a result of the increasing operations of the office as
  a consequence of the continuing growth of the Group.
B. Liquidity and Capital Resources
Capital Resources
Wolseley believes the Group has adequate facilities
  and working capital to meet its current requirements. As of July 31, 2006, net
  debt amounted to £1,950 million, compared to £1,171 million at July
  31, 2005. Net debt includes both short-term and long-term borrowings less cash
  and current asset investments but excludes borrowings in respect of the construction
  loan portfolio, as disclosed in Note 35
of the Consolidated Financial
  Statements. The principal reason for the increase in debt in fiscal 2006 was
  attributable to acquisitions. The Group seeks a balance between certainty of
  funding and a flexible, cost-effective borrowings structure. The overall policy
  is to ensure that, at a minimum, all projected net borrowing needs are covered
  by committed facilities arranged by the corporate office, supplemented where
  appropriate by locally arranged overdraft facilities. The principal sources
  of funds to the Group have been committed bank debt and a US private placement
  of fixed and floating senior unsecured notes.
As at November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. In June 2006 Wolseley entered into a 5 year, €2.8 billion multi
  currency revolving credit facility (£1.9 billion at fiscal 2006 year-end
  exchange rates). The proceeds of both facilities were used principally to fund
  the Group's working capital, acquisition expenditures and to repay existing
  facilities.
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The year-end maturity profile of Wolseley's
  centrally managed facilities at July 31, 2006, was as follows:
Facility
amount
Maturity Date
£m
Less than 1 year
200
1-2 years
34
2-3 years
174
3-4 years
343
4-5 years
111
Greater than 5 years
2,282
Total
3,144
On September 25, 2006, Wolseley completed the
  acquisition of DT Group, for a cash consideration of £1,023 million. The
  indebtedness of DT Group of approximately £330 million at that time was
  also assumed. To provide committed business facilities in respect of the funding
  of this acquisition, Wolseley entered into an 18 month €1,500 million
  multicurrency revolving facility agreement with a syndicate of banks on September
  13, 2006. A repayment of €1.0 billion was made on September 28, 2006 and the facility was reduced to €500 million. Also on September 25, 2006, to reduce the Group's total indebtedness
  as a result of the DT Group acquisition and that arising from the £914
  million of acquisitions in fiscal 2006 and to provide appropriate headroom for
  further investment in the business, the Group undertook a placing of 10% of
  its issued ordinary share capital which raised £655 million before fees.
Cash Flows from Operations
Net cash flow from operating activities increased
  from £765 million to £850 million in fiscal 2006, due to improved
  profitability offset by increased working capital levels required to support
  organic growth.
There was a cashflow outflow of £178
     million being cash absorbed into working capital in fiscal 2006 (2005: £68
      million). Payables increased by £217 million during fiscal 2006,
      compared  with an increase of £168 million in the previous year.
      Receivables increased  by £243 million, compared with an increase
      of £180 million in the
  prior year, driven by the growth in revenues.
Borrowings
Net borrowings excluding construction loan
  borrowings, as set out in Note 35 of the Consolidated Financial Statements,
  increased during fiscal 2006 by £779 million to £1,950 million at
  July 31, 2006 from £1,171 million at July 31, 2005. The increase in borrowings
  was primarily due to expenditure on acquisitions of £914 million offset
  by operating cashflow. Construction loan borrowings relating to the US Building
  Materials Distribution segment increased to £313 million at July 31, 2006
  from £262 million at July 31, 2005. These loans relate to construction
  loan receivables, which also increased to £313 million at July 31, 2006
  from £262 million at July 31, 2005. The increase in construction loans
  in fiscal 2006 was due to an expanding loan book and additional business generated
  by five new construction lending offices. The construction loan receivables
  are funded principally from separately identifiable bank facilities; accordingly,
  it is considered appropriate that this specific funding should be separately
  identified from the Group's general debt on the balance sheet. In addition,
  this funding is excluded from the calculation of Wolseley's leverage or
  gearing figures. See Note 24 of the Consolidated Financial Statements for an
  additional description and maturity profile of borrowings. The Group's
  borrowings are not significantly affected by seasonality.
Financial Instruments and Treasury Policy
For a discussion of the Group's financial
  instruments and treasury policies, see Item 11 – Quantitative and Qualitative
  Disclosures About Market Risk — Treasury Risk Management.
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Capital Expenditure
Capital expenditure in fiscal 2006 increased
     by £107 million (45%) compared to the prior year to £346 million,
      reflecting Wolseley's policy of continued investment in the business.
      During  the period the DC and branch network in the US was expanded, investment
      continued
  in the UK and Italy, and further investments were made in the common IT platform.
       Capital expenditure is expected to remain at this relatively high level
      in fiscal
  2007 and 2008. At July 31, 2006, capital expenditure commitments amounted to £91
   million. Future capital expenditure including these commitments is expected

  to be financed through borrowings and primarily relates to the expansion of
   the branch network, investment in DCs and investment in the common IT platform.
Cash received on the sale of fixed assets reduced
  from £74 million to £52 million in fiscal 2006, primarily due to
  the sale of properties acquired as part of the Brooks acquisition included in
  the cashflow for fiscal 2005.
Exchange Rate Fluctuations
Wolseley earns a significant proportion of
  its sales and profits in foreign currencies, principally the US dollar and to
  a lesser extent the Euro and Canadian dollar. The average US dollar exchange
  rate appreciated against the pound by 3.5% during fiscal 2006, compared to a
  weakening of 5.4% during the fiscal year 2005. The effect of this currency fluctuation
  was to increase reported revenue and trading profits for the North American
  Distribution segment by approximately 3.5% in fiscal year 2006. During fiscal
  2006 the Euro strengthened against the pound by 0.1% compared to a strengthening
  of 0.3% during fiscal 2005. The effect of this movement was to increase the
  reported revenues and trading profits of the European Distribution segment by
  0.1% and 0.2%, respectively. During fiscal 2006, the Canadian dollar appreciated
  against the pound by 11.7% compared to an appreciation of 2.1% during fiscal
  2005. The effect of this investment was to increase the reported revenues and
  trading profits of the Canadian division by the same amounts.
C. Research and Development, Patents and
  Licenses
Wolseley did not incur any costs exceeding
  £1 million on product research and development expenditure during the
  fiscal years 2006 or 2005. For a discussion related to patents and licenses,
  see "Item 4 – Information on the Group, paragraph B, – Business
  Overview – Patents and Trademarks".
D. Trend Information
In the period since July 31, 2006, in the
    US,  new housing starts have continued to decline, but the repairs and remodelling

  market ("RMI") is benefiting from the positive economic environment
   and the commercial and industrial sectors have continued to improve. In this

  environment, Ferguson has continued to perform well. At Stock, local currency revenue and trading

  profit have been impacted by the continued slowdown in the new residential
  market  and by the impact of significantly lower lumber and structural panel
  prices.
  Housing starts in North America have fallen from an annual rate of more than
   2.1 million in September 2005 to around 1.77 million in September 2006 and there

  continue to be significant regional variations. The prices of lumber and structural
  panels, which when combined account for around 45% of Stock's revenues,
    have fallen by around 26% and 45% respectively compared to the equivalent
   period
  in the prior year.
In Canada, whilst there has been the anticipated
     slowing in housing starts generally and in manufacturing activity levels
    in
  Eastern Canada, the repairs and remodelling market continued to grow.
In Europe there have been improving trends
  from a number of European businesses including the UK and France.
Recently Issued Accounting Standards
Several new standards, amendments and interpretations
  to existing standards have been published that are mandatory for the Group's
  accounting periods beginning on or after August 1, 2006 or later periods, but
  which the Group has not early adopted. The new standards which are expected
  to be relevant to the Group's operations are as follows:
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Amendment to IAS 39 and IFRS 4 "Financial
  Guarantee contracts" (effective from August 1, 2006)
This amendment requires issued financial guarantees,
  other than those previously asserted by the entity to be insurance contracts,
  to be initially recognized at their fair value and subsequently measured at
  the higher of: (a) the unamortized balance of the related fees received and
  determined; and (b) the expenditure required to settle the commitment at the
  balance sheet date. Management is currently assessing the impact of this amendment
  on the Group's financial statements.
Amendment to IAS 39 "Cashflow Hedge
       Accounting of Forecast Intragroup Transactions" (effective from
August
       1, 2006)
This amendment allows the foreign currency
     risk of a highly probable forecast intragroup transaction to qualify as
    a hedged
  item in the consolidated financial statements, provided that: (a) the transaction
     is denominated in a currency other than the functional currency of the entity

  entering into that transaction; and (b) the foreign currency risk will affect
     consolidated profit or loss. Management does not expect adoption of this
    amendment
  to have a significant impact on the Group's financial statements.
Amendment to IAS 39 "The Fair Value
  Option" (effective from August 1, 2006)
This amendment changes the definition of the
  financial instruments classified at fair value through the income statement
  and restricts the ability to designate financial instruments as part of this
  category. Management does not expect adoption of this amendment to have a significant
  impact on the Group's financial statements.
IFRS 7 "Financial Instruments: Disclosures"
  (effective from August 1, 2007) and amendment to IAS 1
"Presentation
  of Financial Statements
  – Capital Disclosures" (effective from August 1, 2007)
IFRS 7 introduces new disclosures of qualitative
     and quantitative information about exposure to risks arising from financial

  instruments including specified minimum disclosures about credit risk, liquidity
     risk and market risk, including sensitivity analysis to market risk. The
    amendment
  to IAS 1 introduces disclosures about the level of an entity's capital
   and how it manages capital. Management is currently assessing the impact of

  IFRS 7 and the amendment to IAS 1 on the Group's financial statements.
IFRIC 7 "Applying the restatement
  approach under IAS 29" (effective from August 1, 2006)
IFRIC 7 deals with the accounting when an entity
  identifies the existence of hyperinflation in the economy of its functional
  currency and how deferred tax items in the opening balance sheet should be restated.
  The Group has no operations in hyperinflationary economies. The Group has assessed
  the impact of the interpretation and has concluded it not likely to have a significant
  impact on the Group's financial statements.
IFRIC 8 "Scope of IFRS 2" (effective
  from August 1, 2006)
IFRIC 8 clarifies that transactions within
     the scope of IFRS 2 "Share Based Payment" include those in which
     the  entity cannot specifically identify some or all of the goods and services
     received.
  The Group has assessed the impact of this interpretation and has concluded
     it  is not likely to have a significant impact on the Group's financial
     statements.
IFRIC 9 "Reassessment of embedded
  derivatives" (effective from August 1, 2006)
IFRIC 9 clarifies that an entity should assess
  whether an embedded derivative is required to be separated from the host contract
  and accounted for as a derivative when the entity first becomes a party to the
  contract. Subsequent reassessment is prohibited unless there is a change in
  the contract terms, in which case it is required. The Group has assessed the
  impact of this interpretation and has concluded it is not likely to have a significant
  impact on the Group's financial statements.
IFRIC 10 "Interim financial reporting
      and impairment" (effective
      from August 1, 2007)
IFRIC 10 clarifies that an impairment losses
    on goodwill and certain financial assets recognised in an interim financial
    statement must not be reversed in subsequent interim or annual financial
    statements. The Group has assessed the impact of this interpretation and
    has concluded it is not likely to have a significant impact on the Group's financial statements.
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New Accounting Developments under US GAAP
In February 2006, the Financial Accounting
     Standards Board ("FASB") issued SFAS No. 155 "Accounting
     for  Certain Hybrid Financial Instruments, an amendment of FASB Statements
     No. 133
  and 140". For periods beginning after 15 September 2006, this statement:
•
Permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded
derivative
      that otherwise would require bifurcation;
•
Clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of FAS
133;
•
Establishes a requirement to evaluate interests
      in securitized financial assets to identify interests that are freestanding
      derivatives or that are hybrid financial instruments that contain an embedded
      derivative requiring bifurcation
;
•
Clarifies that concentrations of credit
      risk in the form of subordination are not embedded derivatives; and
•
Amends FAS 140 to eliminate the prohibition
      on a qualifying special purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.
The adoption of SFAS No. 155 is not expected
  to have a material effect on the results of operations or net assets of the Group under US GAAP.
In March 2006, the FASB issued SFAS No. 156,
  "Accounting for Servicing of Financial Assets, an amendment of FASB Statement
  No. 140", which amends FASB Statement No. 140 "Accounting for Transfers
  and Servicing of Financial Assets and Extinguishments of Liabilities",
  with respect to the accounting for separately recognized servicing assets and
  servicing liabilities. The adoption of SFAS No. 156 is not expected to have
  a material effect on the results of operations or net assets of the Group under
  US GAAP.
In June 2006, the FASB issued FASB Interpretation
  No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation
  of FASB Statement No. 109". For periods beginning after 15 December 2006,
  this interpretation prescribes a recognition threshold and measurement attribute
  for the financial statement recognition and measurement of a tax position taken
  or expected to be taken in a tax return. This interpretation also provides guidance
  on derecognition, classification, interest and penalties, accounting in interim
  periods, disclosure, and transition. It is not yet possible to estimate the
  effect of the adoption of FIN 48 on the results of operations or net assets of the Group under US GAAP.
In September 2006, the FASB issued SFAS No.
  157, "Fair Value Measurements". For periods beginning after November
  15, 2007, this Statement defines fair value, establishes a framework for measuring
  fair value where that measurement attribute is permitted or required by other
  accounting pronouncements, and expands disclosures about fair value measurements,
  but does not require any new fair value measurements. It is not yet possible
  to estimate the effect of the adoption
  of SFAS No. 157 on the results of operations or net assets of the Group under US GAAP.
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In September 2006, the FASB issued SFAS No
  158, "Employers' Accounting for Defined Benefit Pension and Other
  Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106,
  and 132(R)." As of the end of any fiscal period ending on or after December
  15, 2006, this Statement requires an employer to recognize the overfunded or
  underfunded status of a defined benefit postretirement plan as an asset or liability
  in its statement of financial position and to recognize changes in that funded
  status in the year in which the changes occur through comprehensive income.
  Had SFAS No. 158 applied to the Group as of July 31, 2006, the impact would
  have been to increase the liability under US GAAP in respect of underfunded defined benefit
  postretirement plans by £95 million, and to increase the deferred tax
  asset by £29 million. The consequent reduction under US GAAP in the Group's net
  assets of £66 million would have been charged to other comprehensive income.
Critical Accounting Estimates
The Group's principal and critical accounting
    policies are set out on pages F-6 to F-12 of the consolidated financial statements
    and conform with IFRS. The preparation of financial statements in accordance
    with IFRS and US GAAP requires management to make estimates and assumptions
    in certain circumstances that affect amounts reported in the accompanying
    consolidated
  financial statements and related footnotes. The most sensitive estimates affecting
    the financial statements are in the areas of assessing the recoverability
    of
  receivables, the net realizable value of inventory, the impairment of goodwill
    and long-lived intangible assets, the reserves in respect of self-insured
    insurance,
  the consideration received from vendors and pensions and other post-retirement
  benefits.
Allowance for Doubtful Accounts
Provision is made against accounts receivable
  that in the estimation of management may be impaired. Within each of the businesses
  assessment is made locally of the likelihood of recoverability of accounts receivable
  based on a range of factors including the age of the receivable and the creditworthiness
  of the customer. The provision is assessed monthly with a detailed formal review
  of balances and security being conducted in conjunction with the publication
  of the full year and half year results. Determining the recoverability of an
  account receivable involves estimation as to the likely financial condition
  of the customer and its ability to subsequently make payment. If the Group is
  cautious as to the financial condition of the customer the Group may provide
  for accounts that are subsequently recovered. Similarly if the Group is optimistic
  as to the financial condition of the customer the Group may not provide for
  an account that is subsequently determined to be irrecoverable. Furthermore,
  while the Group has a large geographically dispersed customer base, a slowdown
  in the markets in which the Group operates may result in higher than expected
  uncollectible amounts and therefore higher than anticipated charges for irrecoverable
  receivables. In recent years Wolseley has not experienced significant variation
  in the amount charged to the income statement in respect of doubtful accounts,
  when compared to sales.
Wolseley held a provision for impairment of
  receivables at July 31, 2006 amounting to £41 million (2005: £32
  million).
Inventories
For financial reporting purposes the Group
  evaluates its inventory to ensure it is carried at the lower of cost or net
  realizable value. Provision is made against slow moving, obsolete and damaged
  inventories. Damaged inventories are identified and written down through the
  inventory counting procedures conducted within each business. Provision for
  slow moving and obsolete inventories is assessed by each business as part of
  ongoing financial reporting. Obsolescence is assessed based on comparison of
  the level of inventory holding to the projected likely future sales. Future
  sales are assessed based on historical experience and adjusted where the manufacturer
  has indicated that it will no longer continue to manufacture the particular
  item. To the extent that future events impact the saleability of inventory these
  provisions could vary significantly. For example, changes in specifications
  or regulations may render inventory, previously considered to have a realizable
  value in excess of cost, obsolete and requiring such inventory to be fully written
  off. The Group held allowances in respect of inventory balances at July 31,
  2006 amounting to £134 million (2005: £99 million).
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Impairment of long-lived assets
Wolseley periodically evaluates the net realizable
  value of long-lived assets, including goodwill, other intangible assets and
  tangible fixed assets, relying on a number of factors, including operating results,
  business plans and projected future cash flows.
Assets that have an indefinite useful life,
  such as goodwill, are not subject to amortization and are tested annually for
  impairment and whenever events or changes in circumstance indicate that the
  carrying amount may not be recoverable. Assets that are subject to amortization
  are tested for impairment whenever events or changes in circumstance indicate
  that the carrying amount may not be recoverable. An impairment loss is recognized
  for the amount by which the asset's carrying amount exceeds its recoverable
  amount. The recoverable amount is the higher of an asset's fair value less
  costs to sell and value in use. The fair value is in most cases based on the
  discounted present value of the future cash flows expected to arise from the
  cash generating unit to which the goodwill relates, or from the individual asset
  or asset group. Estimates are used in deriving these cash flows and the discount
  rate.
The complexity of the estimation process and
  issues related to the assumptions, risks and uncertainties inherent with the
  application of the intangible and tangible fixed asset accounting policies affect
  the amounts reported in the financial statements. In particular, if different
  estimates of the projected future cashflows or a different selection of an appropriate
  discount rate were made, these changes could materially alter the projected
  value of the cash flows of the asset, and as a consequence materially different
  amounts would be reported in the financial statements.
Self-insured insurance
The Group operates a captive insurance company,
  Wolseley Insurance Limited, which is registered and operational in the Isle
  of Man. This company provides reinsurance exclusively to certain companies within
  the Group, principally to cover US casualty and property damage risks. Provision
  is made based on actuarial assessment of the liabilities arising from the insurance
  coverage provided. The actuarial assessment of the reserve for future claims
  necessarily includes estimates as to the likely trend of future claims costs
  and the estimates as to the emergence of further claims subsequent to the periods
  presented. An actuarial review of claims is performed annually. To the extent
  that actual claims differ from those projected the provisions could vary significantly.
  At July 31, 2006, the provision for claims arising from this insurance was £47
  million (2005: £35 million).
Consideration received from vendors
The Group enters into agreements with many
  of its vendors providing for inventory purchase rebates primarily upon achievement
  of specified volume purchasing levels with many of these agreements applying
  to purchases in a calendar year. For a number of agreements the rebate rises
  as a proportion of purchases as higher quantities or values of purchases are
  made. The Group accrues the receipt of vendor rebates as part of its cost of
  sales for products sold, taking into consideration cumulative purchases of inventory
  to date and projected purchases through the end of the qualifying period. Rebates
  are accrued for each reporting period with an extensive reassessment of the
  rebates earned being performed at the end of the financial year and half way
  through the financial year. The Group has agreements with numerous and geographically
  dispersed suppliers, but a slowdown in the markets in which the Group operates,
  or a significant change in the profile of products purchased, may result in
  purchases for the remainder of the year differing significantly from those projected.
  Consequently, the rebate actually received may vary from that accrued in the
  financial statements.
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Pensions and other post retirement benefits
The Group operates defined benefit pension
  schemes in the UK and in a number of overseas locations that are accounted for
  using methods that rely on actuarial assumptions to estimate costs and liabilities
  for inclusion in the financial statements. These actuarial assumptions include
  discount rates, assumed rates of return, salary increases, associate turnover
  rates and mortality rates.
While management believes that the actuarial
  assumptions are appropriate, any significant changes to those used would affect
  the balance sheet and income statement. The Group considers that the most significant
  assumptions are the discount rate, mortality assumptions and the expected return
  on plan assets. The Group has estimated the sensitivity of the financial statements
  to changes in those financial assumptions as follows:
Impact on
Impact
balance
on income
sheet
statement
2006
2005
2006
2005
Effect of a change in discount rate
£m
£m
£m
£m
Increase of 0.5%
55
37
3
2
Decrease of 0.5%
(64
)
(40
)
(4
)
(2
)
Effect of a change in
      expected return on assets
Increase of 0.5%
2
2
Decrease of 0.5%
(2
)
(2
)
E. Off balance sheet arrangements
As at July 31, 2006, the Group had no material
  off balance sheet arrangements.
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F. Contractual obligations and commercial
  commitments
The following table sets forth the aggregate
  maturities of the Group's debt, operating leases and other long term obligations
  for the five fiscal years subsequent to July 31, 2006 and thereafter.
Fiscal Year ending
    July 31,
2007
2008
2009
2010
2011
Thereafter
Total
£m
£m
£m
£m
£m
£m
£m
Overdrafts
124
—
—
—
—
—
124
Long-term borrowings
68
35
175
108
120
1,671
2,177
Capital lease obligations
24
19
13
10
8
28
102
Operating lease obligations
199
173
146
119
95
372
1,104
Cash flow on derivative instruments
1
2
1
—
(1
)
(7
)
(4
)
416
229
335
237
222
2,064
3,503
Notes:
Borrowings are stated at the undiscounted
      contractual amount, are gross of cash and cash equivalents except where
      a right of set-off exists, and include construction loan borrowings, but
      exclude finance lease obligations. Borrowings due after five years include
      hedged fixed interest borrowings, and have a fair value of £1,646
      million as of July 31, 2006.
Cash flow on derivative instruments comprises
      two elements: the attributable interest component of short-term currency
      swaps, and the difference between the fixed and floating legs of interest
      rate swaps. Cash flows in respect of interest rate swaps reflect the difference
      between payments of interest at a contractually fixed rate, and receipts
      of interest at a variable rate, which have been estimated on the basis of
      a zero coupon yield curve as of July 31, 2006.
The Group is committed by its senior unsecured
      notes to interest payments over the period to November 2020. Under the revolving
      credit facilities in effect as of July 31, 2006 amounts are drawn down for
      periods of up to six months at a variable interest rate which is determined
      at inception of the period. In respect of amounts drawn down as of July
      31, 2006, the Group was committed to interest payments of £ 28 million
      in the year ending July 31, 2007. Assuming (i) that amounts continue to
      be drawn down and repaid in accordance with the maturity profile shown above,
      (ii) that the weighted average variable interest rates, the currency mix
      and the exchange rates applicable to borrowings as of July 31, 2006 remain
      constant throughout the term of the facilities, and (iii) that the availability
      of set off for Group deposits and short-term borrowings is unchanged from
      that as of July 31, 2006, the Group estimates that interest payments in
      the five fiscal years subsequent to July 31, 2006 and thereafter would be
      as follows:
Fiscal
      Year ending July 31,
2007
2008
2009
2010
2011
Thereafter
Total
£m
£m
£m
£m
£m
£m
£m
Senior unsecured notes
32
32
27
25
21
123
260
Other borrowings
65
63
62
59
57
—
306
97
95
89
84
78
123
566
The foregoing tables do not give effect
  to the additional borrowings incurred after July 31, 2006 in connection with
  the DT Group acquisition and other post July 31, 2006 acquisitions.
In addition, the Group makes contributions
  to a number of retirement benefit plans. Contributions for the year ending July
  31, 2007 are estimated to be £23 million in respect of the UK pension
  plan and £15 million in respect of non-UK plans.
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ITEM
  6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Wolseley's directors and senior management
  who served during fiscal 2006, and as at October 31, 2006, are as follows:
Age as of
October 31,
Name
2006
Title
John W. Whybrow
(1)
59
Chairman
Executive Directors
Charles A. Banks
(1) (2) (5)
65
Group Chief Executive Officer
(retired from the Board on July 31, 2006)
Fenton N. Hord
(2)
60
Chief Executive Officer, US Building
Materials Distribution
Claude A. S. Hornsby
(1) (2) (5) (8)
50
Group Chief Executive Officer designate
(until July 31, 2006) and
Group Chief Executive Officer
(from August 1, 2006)
Robert Marchbank
(2)
46
Chief Executive Officer, Europe
Frank W. Roach
(2)
55
Chief Executive Officer, Wolseley North
America (from December 16, 2005)
Stephen P. Webster
(2) (5)
53
Group Finance Director
Non Executive Directors
Gareth Davis
(1) (3) (4)
56
Director
Andrew J. Duff
(1) (4)
47
Director
James I. K. Murray
(3)
60
Director
Nigel M. Stein
(3)
51
Director
Robert M. Walker
(1) (4)
61
Director
Company Secretary
Mark J. White
(2) (6)
46
Group Company Secretary and Counsel
Member of Executive Committee
Adrian Barden
(2)
51
Chief Executive Officer, Wolseley UK Limited
(until September 30, 2006) and Group Senior
Vice President (from October 1, 2006)
(1)
Member of the nominations
      committee. Mr. Banks ceased to be a member of the nominations committee
      upon leaving the Board on July
31, 2006 and was succeeded by Mr. Hornsby, who became a member of the
      nominations committee on August 1, 2006.
(2)
Member of the executive
      committee. Mr. Roach became a member of the executive committee upon his
      appointment to the Board on
December 16, 2005.
(3)
Member of the audit committee.
(4)
Member of the remuneration
      committee.
(5)
Member of the treasury
      committee. Mr. Banks ceased to be a member of the treasury committee upon
      leaving the Board on July 31, 2006
and was succeeded by Mr. Hornsby, who became a member of the treasury
      committee on August 1, 2006.
(6)
Trustee of the Wolseley
      UK and Irish Defined Benefit Pension Schemes.
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As at July 31, 2006, Wolseley's board
  of directors (the "Board") was made up of 12 members comprising the
  Chairman, six executive directors and five non executive directors. The non
  executive directors are considered by the Board to be independent of management
  and free of any relationship which could materially interfere with the exercise
  of their independent judgment. The Board considers that each of the non executive
  directors brings his own senior level of experience gained in their own fields
  of mainly international operations. Frank W. Roach was appointed to the Board
  with effect from December 16, 2005. Mr. Roach was appointed as Chief Executive
  Officer of North America to succeed Mr. Hornsby, who became Group Chief Executive
  on August 1, 2006 following Mr. Banks' retirement on July 31, 2006. For
  the period from Mr. Roach's appointment until Mr. Bank's retirement,
  the provisions of the Combined Code on corporate governance as referred to in
  "Item 6 – Directors, Senior Management and Employees, Paragraph C
  – Board Practices" (the "Code") requiring a balance between
  executive and non executive directors was not met, albeit that this was a temporary
  position in advance of Mr. Banks' retirement. At the date of this annual
  report, there are 11 members of the Board, comprising the Chairman, five executive
  directors and five non executive directors. Accordingly, the Board considers
  that the Company once again satisfies the obligations under the Code.
The Board meets regularly during the year as
  well as on an ad hoc basis, as required by time-critical business needs. The
  Board has a formal schedule of matters reserved to it for its decision, which
  were reviewed during the year, although its primary role is to provide entrepreneurial
  leadership and to review the overall strategic development of the Group as a
  whole. Day-to-day operational decisions are delegated to the executive committee
  referred to in "Item 6 – Directors, Senior Management and Employees,
  Paragraph C – Board Practices". The Board met 11 times during the
  year, and director attendance for each meeting is shown in "Item 6 –
  Directors, Senior Management and Employees, Paragraph A – Meeting Attendance".
  The Board has established a procedure for directors, if deemed necessary, to
  take independent professional advice at Wolseley's expense in the furtherance
  of their duties. This is in addition to the access that every director has to
  the Group Company Secretary, who is charged with ensuring that Board procedures
  are followed and that good corporate governance and compliance is implemented
  within the Group. Board papers and other information are delivered at times
  to allow directors to be properly briefed in advance of meetings. In accordance
  with Wolseley's articles of association, directors are granted an indemnity
  from the Company to the extent permitted by law in respect of liabilities incurred
  as a result of their office. The indemnity would not provide any coverage to
  the extent that a director is proved to have acted fraudulently or dishonestly.
  Wolseley has also arranged appropriate insurance coverage in respect of legal
  action against its directors and officers. The differing roles of Chairman and
  Group Chief Executive are acknowledged and set out in writing. The Chairman
  has confirmed that he will not chair any other major company's board.
The Chairman addresses the developmental needs
  of the Board as a whole, with a view to developing its effectiveness as a team
  and assists in the development of skills, knowledge and expertise. During the
  year, the Board took forward the results of previous ongoing evaluation processes
  to assess its performance and that of its committees and to identify areas in
  which its effectiveness, policies and processes might be enhanced, utilizing
  both a questionnaire (in relation to the performance of the non executive directors)
  and discussions with Board members.
Performance evaluations, including the skills
  brought to the Board and the contributions each director made to it, were carried
  out for each member of the Board. Executive directors' performance has
  been assessed by the Chairman and Mr. Banks, Mr. Banks' performance was
  evaluated by the Chairman and the non executive directors. The senior non executive
  director led the review of the Chairman's performance in consultation with
  the executive and non executive directors. The non executive directors'
  performances were reviewed by both Mr. Banks and the Chairman, as well as by
  the Board as a whole, which considered the results of the questionnaires referred
  to above.
Meetings between the non executive directors,
  both with and without the presence of the Chairman and the Group Chief Executive
  Officer, are scheduled in the Board's annual timetable. The Board has also
  arranged to hold at least two Board meetings each year at divisional locations
  to help all Board members gain a deeper understanding of the business. This
  also provides senior managers from across the Group the opportunity to make
  formal presentations to the Board as well as to meet the directors on more informal
  occasions.
In line with the Code on corporate governance,
  as referred to in "Item 6 – Directors, Senior Management and Employees,
  Paragraph C – Board Practices" and as part of their ongoing development,
  the executive directors are encouraged to take up an external non executive
  position on a non competitor board, for which they may retain payments received
  in respect of the appointment. In order to avoid any conflict of interest, all
  such appointments are subject to the Board's approval. Generally outside
  appointments for executive directors are limited to one company board only,
  although Mr. Banks, by exception, served on two outside boards. The Board is
  satisfied that these appointments did not conflict with his duties to Wolseley.
  The Board monitors the extent of directors' other interests to ensure that
  the effectiveness of the Board is not compromised. Succession planning is considered
  to be a matter for the whole Board rather than for a committee.
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Wolseley's articles of association provide
  that one-third of the directors retire by rotation each year and that each director
  will seek re-election at the Annual General Meeting every three years. Additionally,
  new directors are subject to election by shareholders at the first opportunity
  after their appointment. Messrs. Davis, Hord, Roach and Stein have sought election
  or re-election at the Annual General Meeting of shareholders to be held on November
  29, 2006; Messrs. Duff, Hornsby and Murray no later than 2007; and Messrs. Marchbank,
  Walker, Webster and Whybrow no later than 2008. It is Board policy 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. It is also
  Board policy that non executive directors should not generally serve on the
  Board for more than nine years and that, in cases where it is proposed to exceed
  this period the director concerned will retire annually and offer himself for
  re-election. Following their appointment, a formal comprehensive and tailored
  induction is offered to all non executive directors supplemented by visits to
  key locations within the Group and meetings with members of the executive committee
  and other key senior executives. All the directors being proposed for re-election
  at the 2006 Annual General Meeting of Shareholders have been subject to a performance
  evaluation during the fiscal year ended July 31, 2006 and the Board is content
  that each has continued to be effective and has demonstrated his commitment
  to his respective role.
Although the non executive directors are not
  asked, at present, to meet the shareholders of Wolseley, their attendance at
  presentations of the annual and interim results is encouraged. The Chairman
  ensures that the Board maintains an appropriate dialogue with shareholders.
  Gareth Davis is the Company's senior independent non executive director.
The formal terms of reference for the main
     Board committees, approved by the Board and complying with the Code to assist

  in the discharge of its duties, are available from the Group Company Secretary
     and can also be found on Wolseley's website at www.wolseley.com. Membership
      of the various committees is shown at "Item 6
– Directors,
      Senior Management and Employees,  Paragraph C – Board Practices".
      The Group Company Secretary acts as secretary to all Board committees.
Meetings Attendance
The following table shows the attendance of
  directors at meetings of the Board, audit, remuneration and nominations committees
  during the fiscal year ended July 31, 2006:
Audit Committee
Remuneration
Nominations
Board Meetings
Meetings
Committee Meetings
Committee Meetings
Eligible
Eligible
Eligible
Eligible
Attended
to attend
Attended
to attend
Attended
to attend
Attended
to attend
C.A.Banks
10
11
—
—
—
—
—
1
G.Davis
8
11
4
4
5
5
1
1
A.J.Duff
11
11
—
—
5
*
5
1
1
F.N.Hord
8
11
—
—
—
—
—
—
C.S.Hornsby
11
11
—
—
—
—
—
—
R.H.Marchbank
11
11
—
—
—
—
—
—
J.I.K.Murray
10
11
4
*
4
—
—
—
—
F W Roach
(1)
6
6
—
—
—
—
—
—
N.M.Stein
10
11
4
4
—
—
—
—
R.M.Walker
10
11
—
—
5
5
—
1
S.P.Webster
10
11
—
—
—
—
—
—
J.W.Whybrow
11
*
11
—
—
—
—
1
*
1
*
Chairman
(1)
Appointed as a director
      on December 16, 2005.
This table
      shows only those meetings which each director attended as a member rather
      than as an invitee.
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Background Information Concerning Current
  Directors and Senior Management at July 31, 2006.
John W. Whybrow.
Mr. Whybrow was first appointed to the Board on August 1, 1997. Mr. Whybrow
  became Chairman on December 13, 2002. He is also Chairman of the nominations
  committee. Mr. Whybrow is a non executive director of DSG International plc
  and Chairman of CSR plc. He was President and Chief Executive Officer of Philips
  Lighting Holding B.V., based in The Netherlands, until 2001 and Executive Vice
  President, Philips Electronics N.V. from 1998 until March 2002, when he returned
  to the UK. Mr. Whybrow is also Chairman of Petworth Cottage Nursing Home.
Claude A. S. Hornsby
.
  Mr. Hornsby was first appointed to the Board on May 3, 2001. Mr. Hornsby was
  appointed Group Chief Executive on August 1, 2006 following Mr. Banks'
  retirement. He was previously Chief Executive North America, having been President
  and Chief Executive Officer of Ferguson Enterprises Inc., the US Plumbing and
  Heating Distribution Division since 2001. He has spent 28 years with Ferguson.
  Mr. Hornsby is a Non Executive Director of Virginia Company Bank.
Fenton N. Hord.
Mr. Hord was first appointed to the Board on October 2, 2000. Mr. Hord joined
  the Group as Chief Executive Officer of Stock Building Supply Inc., in 1987.
  Prior to joining the Group, Mr. Hord was President of Eskimo Pie Corporation,
  which was at the time a subsidiary of Reynolds Metals Co. He is a non executive
  director of Investors Management Corporation.
Robert H. Marchbank
.
  Mr. Marchbank was first appointed to the Board on January 24, 2005 as Chief
  Executive of Europe and is responsible for all the European businesses. Mr.
  Marchbank joined the Group at Ferguson Enterprises Inc. in 1982. In 2001 he
  moved to the UK to join the newly created Wolseley Group headquarters as Director
  of Strategic Planning. Most recently, he was the Director of Information and
  Processes.
Frank W. Roach
.
Mr. Roach was first appointed to the Board on December
  16, 2005 as Chief Executive of North America and is responsible for the North
  American businesses. Mr. Roach first joined Ferguson Enterprises Inc. in 1976
  and held a number of business roles. In 2005, Mr. Roach was appointed as Senior
  Vice President of the Wolseley North America management team, playing a key
  part in developing and expanding the Group's North American businesses.
Stephen P. Webster
.
  Mr. Webster was first appointed to the Board on August 1, 1994 as Group Finance
  Director designate. He was appointed as Group Finance Director on December 9,
  1994. Mr. Webster was formerly a partner in Price Waterhouse and is a Chartered
  Accountant. Mr. Webster is a non executive director of Bradford & Bingley
  plc.
Gareth Davis
.
  Mr. Davis was first appointed to the Board on July 1, 2003. He is a member of
  the audit, remuneration and nominations committees and is the Senior Independent
  Non Executive Director. Mr. Davis has been Chief Executive of Imperial Tobacco
  Group plc since its incorporation in 1996, having spent the last 34 years in
  the tobacco industry.
Andrew J. Duff
.
  Mr. Duff was first appointed to the Board on July 1, 2004. He is Chairman of
  the remuneration committee and a member of the nominations committee. Mr. Duff
  is Chief Executive of RWE npower plc. He spent 14 years at BP plc where he held
  leading positions in marketing and oil trading and was latterly the Director
  of Strategic Planning for BP Oil, USA. Mr. Duff is a member of the Confederation
  of British Industry's President's committee.
James I. K. Murray
.
  Mr. Murray was first appointed to the Board on April 12, 2002. A Chartered Accountant,
  Mr. Murray is Chairman of the audit committee. He was Finance Director of Land
  Securities PLC from 1991 until his retirement in 2001. He served as a non executive
  director of UK Coal plc from 2003 to 2006. Mr. Murray is the Chairman of Trustees
  of the Land Securities Pension Fund.
Nigel M. Stein
.
       Mr. Stein was first appointed to the Board on December 1, 2003. He is
      a member
  of the audit committee. Mr. Stein is a Chartered Accountant and has been Finance
       Director of GKN plc since August 2001. He has worked in a number of other
      senior
  financial roles during his 11 years with GKN plc, and prior to this, he held
       senior financial positions with Laird Security Systems and Hestair Duple
      Limited.
  Mr. Stein is the "Audit Committee Financial Expert" and is also considered
   to be independent. The report of the audit committee is set out at "Item
    6 – Directors, Senior Management and Employees, Paragraph C – Board
     Practices, Audit committee".
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Robert M. Walker
.
  Mr. Walker was first appointed to the Board on July 1, 1999. He is a member
  of the remuneration and nominations committees. Mr. Walker is Non Executive
  Chairman of WHSmith PLC and a non executive director of Tate & Lyle plc,
  Williams Lea Group Limited and Signet Group plc. Mr. Walker was, until February
  2005, Group Chief Executive of Severn Trent Plc and a Non Executive Director
  of BAA plc. He previously worked for Procter and Gamble, McKinsey and Company
  and for over 20 years with PepsiCo Inc., where he was a Division President.
  Mr. Walker is an advisor to Cinven.
Adrian Barden
.
  Mr. Barden was appointed Chief Executive of Wolseley UK Limited on August 1,
  2003. He is a member of the executive committee. Mr. Barden has been employed
  by the Group since 1991 and was appointed Managing Director of the Heavyside
  Division in 1996. He has spent his working life in the building materials distribution
  industry. He is Vice President of the Construction Products Association (CPA).
  On October 1, 2006, Mr. Barden was appointed as Group Senior Vice President.
Mark J. White
.
  Mr. White joined Wolseley on July 1, 2002 as the Group Company Secretary and
  Counsel. He is a solicitor and is secretary to the audit, nominations, treasury
  and remuneration committees. He is a member of the executive committee and a
  trustee of the UK and Irish defined benefit pension schemes. Mr. White was previously
  Company Secretary of Enterprise Oil plc and Rotork plc.
B. Compensation
Director and Senior Management Compensation
Wolseley's policy now, and for the foreseeable
  future, is to provide remuneration packages that fairly reward executives for
  the contribution they make to the business, taking into account the size and
  complexity of the Group's operations and the need to attract, retain and
  motivate executives of the highest quality. Remuneration packages comprise salary,
  performance bonuses, share options, long-term incentives, benefits-in-kind and
  pensions. Wolseley takes a total approach to remuneration, which includes all
  these elements. None of the long-term awards or options is pensionable. The
  packages, which link corporate and individual performance with an appropriate
  balance between short and long-term elements, are designed to be broadly comparable
  with those offered by other similar international businesses and reflect competitive
  practices in the countries and markets in which the executive directors operate.
  The policy is designed to incentivize the directors to meet Wolseley's
  financial and strategic objectives such that a significant proportion of remuneration
  is performance related. The remuneration committee considers that the targets
  set for the different elements of performance related remuneration are appropriate
  and demanding in the context of Wolseley's trading environment and the
  business challenges it faces. Under Wolseley's articles of association,
  the maximum aggregate amount of remuneration payable to Wolseley's non
  executive directors (as a group) was increased to £750,000 per annum with
  effect from January 1, 2005, following shareholder approval at the Annual General
  Meeting held on November 18, 2004.
For the fiscal year ended July 31, 2006, the
  aggregate compensation paid or accrued by Wolseley and its subsidiaries to or
  for all directors and senior management as a group (14 persons) for services
  in all capacities was £9,321 million. Such compensation was primarily
  in the form of salaries and amounts paid as bonuses pursuant to performance
  linked bonus plans in which all executive directors participated. Bonuses paid
  to directors are supervised by the remuneration committee.
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Remuneration during the fiscal year ended July
  31, 2006 of the directors and senior management in office during fiscal year
  2006 was as follows:
Pension
Total
Total
Salary/
Annual
Supplement/Life
Fiscal
Fiscal
Fees
Bonus
Benefits
Assurance
(i)
2006
2005
£'000
£'000
£'000
£'000
£'000
£'000
Non Executive Chairman
John W. Whybrow
300
—
—
—
300
210
Executive Directors
Fenton N. Hord
(a)
397
667
1
—
1,065
1,379
Claude A. S. Hornsby
(b)
453
847
92
38
1,430
1,201
Robert H. Marchbank
(c)
400
213
238
17
868
693
Frank W. Roach
(d)
247
283
20
31
581
—
Stephen P. Webster
(e)
475
481
51
70
1,077
1,084
Non Executive Directors
Gareth Davis
58
—
—
—
58
43
Andrew J. Duff
58
—
—
—
58
38
James I. K. Murray
63
—
—
—
63
48
Nigel M. Stein
50
—
—
—
50
38
Robert M. Walker
50
—
—
—
50
46
Executive Committee Member
Adrian Barden
(f)
355
187
19
72
598
593
Company Secretary
Mark J. White
(g)
245
157
19
31
452
380
Former Directors
Charles A. Banks
(h)
936
1,407
234
94
2,671
2,329
4,087
4,242
674
353
9,321
8,531
Notes:
(a)
£50,176 (2005: £150,000)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the 2002 Long Term Incentive Scheme referred
      in "Item 6 – Directors, Senior Management and Employees –
      Paragraph B, compensation – long-term cash incentive plans".
(b)
£55,913 (2005: £0)
      of the figure for benefits was paid by way of a one-off amount to assist
      with Mr. Hornsby's purchase of a house in the UK. Mr. Hornsby will
      receive an annual housing allowance of £75,000 pa from August 1, 2006.
      £65,283 (2005: £174,194) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred in "Item 6 – Directors,
      Senior Management and Employees – Paragraph B, compensation –long-term
      cash incentive plans".
(c)
£185,080 (2005: £191,018)
      of the figure for benefits relates to relocation from the USA to the UK.
      £36,256 (2005: £101,935) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred to in "Item 6 – Directors,
      Senior Management and Employees – Paragraph B, compensation –long-term
      cash incentive plans".
(d)
Appointed December 16, 2005.
      £17,867 of the figure for bonuses relates to the vesting on July 31,
      2006 of 34.5% of the award made in 2003 under the 2002 Long Term Incentive
      Scheme referred in "Item 6 – Directors, Senior Management and
      Employees – Paragraph B, compensation – long-term cash incentive
      plans".
(e)
£26,120 (2005: £35,917)
      of the figure for benefits relates to relocation from Droitwich to Theale.
      £66,412 (2005: £167,500) of the figure for bonuses relates to
      the vesting on July 31, 2006 of 34.5% of the award made in 2003 under the
      2002 Long Term Incentive Scheme referred to in "Item 6 – Directors,
      Senior Management and Employees – Paragraph B, compensation –
      long-term cash incentive plans".
(f)
£34,500 (2004: £47,200)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the Long Term Incentive Scheme referred
      to in "Item 6 – Directors, Senior Management and Employees –
      Paragraph B, compensation –long-term cash incentive plans".
(g)
£21,390 (2004: £56,000)
      of the figure for bonuses relates to the vesting on July 31, 2006 of 34.5%
      of the award made in 2003 under the Long Term Incentive Scheme referred
      to in "Item 6 – Directors, Senior Management and Employees –
      Paragraph B, compensation –long-term cash incentive plans" .
(h)
Mr. Banks retired from the
      Company on July 31, 2006, and the emoluments shown in the table relate to
      the period from August 1, 2005 to July 31, 2006. £70,000 (2005: £70,000)
      of the figure for benefits relates to relocation from the USA to the UK.
      £60,919 (2005: £66,633) of the figure for benefits relates to
      currency protection. £134,882 (2005: £369,908) of the figure
      for bonuses relates to the vesting on July 31, 2006 of 34.5% of the award
      made in 2003 under the 2001 Long Term Incentive Scheme referred to in "Item
      6 –Directors, Senior Management and Employees – Paragraph B, compensation
      –long-term cash incentive plans". In addition, Wolseley has agreed
      to pay the removal costs as well as the legal and estate agent fees in connection
      with the disposal of Mr. Banks' home in the UK in advance of his return
      to the US.
(i)
The payments in respect of
      life assurance relate to arrangements established before Messrs. Banks,
      Hord, Hornsby, Marchbank and Roach became Executive Directors. These payments
      will cease with effect from August 1, 2006 for Messrs. Hornsby, Marchbank
      and Roach. A final payment of £54,235 was made in the fiscal year
      ended July 31, 2005 in respect of life assurance arrangements for Mr. Hord.
      Payments totalling £1.55 million will be made over the next 16 years
      in respect of life assurance arrangements for Mr. Banks.
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Salaries
Basic salaries of executive directors are determined
  having regard to competitive market data, the degree of individual responsibility
  and individual performance. Market data is derived from a group of companies
  selected on the basis of comparable size, geographic spread and business focus.
  Due consideration is also given to the wider economic and employment backdrop,
  including general pay and employment conditions elsewhere in the Group. The
  target salary is at the median with the opportunity to go above this level,
  subject to sustained individual performance. The remuneration committee reviewed
  the salaries of the executive directors with effect from August 1, 2005, having
  sought the views of both the Chairman and (other than in the case of his own
  salary) Mr. Banks, the Group Chief Executive at that time. As a US national,
  40% of Mr. Banks' salary was currency protected based on an exchange rate
  of £1:$1.50. Mr. Hornsby will not benefit from such currency protection
  arrangements.
Performance bonuses
Performance bonus arrangements for the executive
  directors are designed to encourage individual performance, corporate operating
  efficiencies and profitable growth. The annual bonus awards are based on a mix
  of demanding financial targets derived from Wolseley's historic performance,
  annual long-term strategic business plan and annual budget, as well as market
  expectations and will depend on performance 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, account
  for 85% of the bonus, the majority of which relates to the profit before tax
  targets). The balance of 15% of the bonus depends 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, were used to determine the bonuses paid for the fiscal
  year ended July 31, 2006, subject to the achievement of the minimum, on-target
  and maximum levels of performance (with the percentages increasing on a linear
  basis for achievement between each level). The table also sets out the actual
  percentages paid:
Percentage
      of base salary payable on achievement of:
Actual awards
Minimum
Maximum
for the year (%
Name
Target
On-Target
Target
of base salary)
Charles A. Banks
60
120
170
159.00
Fenton N. Hord
80
120
160
154.00
Claude A. S. Hornsby
80
130
180
172.50
Robert H. Marchbank
40
70
100
42.38
Frank W. Roach
80
110
140
127.00
Stephen P. Webster
40
70
100
87.25
Stretching targets are set for each element
  of the bonus, determined by the remuneration committee each year, which also
  considers the levels of performance targets to be achieved for bonus payments
  to be made in the succeeding year. For the fiscal year ending July 31, 2007,
  the remuneration committee has determined that there will be no change from
  2006 for the minimum, on-target and maximum targets, which will be 80/130/180%
  of base salary for Mr. Hornsby, 80/120/160% for Mr. Hord, 80/110/140% for Mr.
  Roach and 40/70/100% for Messrs. Marchbank and Webster.
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Other Senior Executives and Management
There are a number of senior executives whose
  votes influence the ability of the Group to meet its strategic objectives. They
  include the members of the executive committee and other senior employees. The
  remuneration committee takes into account the level and structure of this group
  whose total remuneration including salary, target bonus and value of long-term
  incentives are summarized below:
Total remuneration bands
Number of senior executives in band
2005/6
(2004/5 in brackets)
201-250
1 (0)
251-300
1 (0)
301-350
0 (0)
351-400
0 (2)
401-450
1 (0)
451-500
1 (0)
501-550
1 (0)
551-600
0 (0)
601-650
0 (1)
651-700
0 (1)
701-750
2 (0)
751-800
1 (0)
Long-term incentive plans
Wolseley currently operates a long-term incentive
  plan which provides ordinary shares in the capital of Wolseley conditional upon
  Wolseley's total shareholder return ("TSR") over distinct three
  year periods. All awards are made subject to the achievement of stretching performance
  conditions, and TSR has been selected as the performance measure to more closely
  align the interests of the executive directors and senior executives with those
  of shareholders over the long-term. The plan rewards the relative out-performance
  of Wolseley against a defined list of comparator companies. Calculations are
  performed independently and are approved by the remuneration committee.
The long-term incentive plan is discretionary.
  The remuneration committee's current policy is to make annual awards to
  the Group Chief Executive, the executive directors and other senior executives
  under the Wolseley plc 2002 Long Term Incentive Scheme ("2002 Scheme"),
  which was originally approved by shareholders in December 2002 and amended at
  the annual general meeting held on November 18, 2004. Prior to this date only
  cash awards were made. Since 2004, awards will normally be made in shares, save
  where there are material securities or tax law constraints in overseas jurisdictions
  where the scheme is to be operated, in which case conditional awards in cash
  would continue to be made.
The maximum amount that can be granted under
  the amended 2002 Scheme for each award is 200% of base salary per annum; however,
  awards made to date have not exceeded 125% (or 150% in the case of the Group
  Chief Executive) of base salary. Each year the remuneration committee will assess
  the proportion of awards that should be made up of both share options and long-term
  incentive awards. It is the remuneration committee's intention that for
  the fiscal year ending July 31, 2007, awards will be made to the Group Chief
  Executive over 150% of salary with lower award levels for other executive directors.
  The vesting level for a maximum award under the amended 2002 Scheme requires
  performance to be in the upper decile. To better reflect market practice, shareholder
  approval was sought and received on November 18, 2004 so that 25% of awards
  made from that date would vest for achievement of performance at the median
  (with a straight line percentage to vest between median and upper decile). Extant
  awards remain subject to the achievement of performance conditions following
  a participant's agreed retirement and vesting is determined at the end
  of the performance period.
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During the year, the remuneration committee
  reviewed whether future grants under the amended 2002 Scheme should be subject
  to a financial performance underpin, in addition to the satisfaction of a TSR
  performance target. The remuneration committee has decided that future awards
  under the amended 2002 Scheme may, if deemed appropriate, be subject to performance
  criteria in addition to the current TSR targets. The factors which the remuneration
  committee would take into account in deciding whether to impose further performance
  criteria include: a substantial drop in Wolseley's share price; the presence
  of significant bid speculation in the sector; the adoption of weaker targets
  for the TSR condition; or, a significant change in policy away from granting
  options to granting only long-term incentive awards. The remuneration committee
  will continue to monitor whether circumstances warrant the imposition of such
  additional criteria. The remuneration committee decided that for the 2005 award,
  the continuing use of EPS as a performance target under the Wolseley Share Option
  Plan 2003 and the use of financial measures for the annual bonus plan provided
  an appropriate balance to the use of TSR within the amended 2002 Scheme.
The lists of comparator companies for awards
  made since 2001 under the 2001 cash plan (a plan introduced to facilitate Mr.
  Banks' recruitment, which is similar in structure to the 2002 Scheme) and
  since 2002 under the 2002 Scheme are based upon the constituent members of the
  FTSE 100 as at the respective dates of grant, excluding banks, telecommunications,
  IT and utility companies but together with CRH plc and Travis Perkins plc, which
  compete in the same sector as Wolseley. A similar group of companies has been
  selected for the 2006 awards under the amended 2002 Scheme.
Details of the awards conditionally made to
  the Executive Directors in office during the year under the amended 2002 scheme
  and outstanding at July 31, 2006, as well as at the date of this report, are
  shown in the table below:
Interests in
shares held at
Interests in £
Interests in
July 31, 2006
held at
shares held
Interests in
Interests in £
and at the
August 1,
at August
shares
held at July
date of this
2005
1, 2005
awarded
31, 2006
report (or
(or date of
(or date of
during the
(or date of
date of
Performance
Name of Director
appointment)
appointment)
year
1
departure)
departure)
periods
Charles A. Banks
369,908
95,308
106,862
1
0
202,170
August 1, 2003
      –July 31, 2008
Adrian Barden
100,000
14,332
18,994
1
0
33,326
August 1, 2003 – July
      31, 2008
Fenton N. Hord
145,439
38,843
35,347
1
0
74,190
August 1, 2003 –July
      31, 2008
Claude A.S.
189,227
40,281
50,406
1
0
90,687
August 1, 2003 –July
      31, 2008
Hornsby
Robert H. Marchbank
105,091
23,595
27,817
1
0
51,412
August 1, 2003 – July
      31, 2008
Frank W. Roach
51,789
6,905
19,409
2
0
26,314
August 1, 2003 – July
      31, 2008
Stephen P. Webster
192,500
34,884
42,147
1
0
77,031
August 1, 2003 – July
      31, 2008
Mark J. White
62,000
10,276
10,869
1
0
21,145
August 1, 2003 – July
      31, 2008
1.
The share price on the
      date of grant of the award was 1127 pence per share.
2.
The share price on the
      date of grant of the award was 1127 pence per share in respect of 9,409
      shares and 1281 pence per share in respect of 10,000 shares awarded on appointment
      as a director.
3.
Awards granted in 2003
      (granted at 50% of salary as at August 1, 2003, save for Messrs. Barden,
      Marchbank, Roach and White whose awards were granted at 40% of salary) vested
      at 34.5% of the award on July 31, 2006. Subsequent awards were made in shares.
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The following table sets out the percentage
  of each award which has vested and the percentage of each extant award had it
  vested on July 31, 2006:
Percentage vested on
      maturity or indicative vesting percentage
Year of Award
based on performance
      as at July 31, 2006
2001
100% (vested July
      31, 2004)
2002
100% (vested July 31, 2005)
2003
34.5% (vested July 31, 2006)
2004
45% (performance after 24
      months)
2005
0% (performance after 12
      months)
Restricted share scheme
On October 19, 2006 the remuneration committee
  of Wolseley approved the Wolseley Restricted Share Plan 2006 ("RSS"),
  which will provide awards of ordinary shares in the capital of Wolseley. Awards
  will be made at the discretion of the remuneration committee to employees of
  Wolseley, excluding any executive director and the Chairman of Wolseley plc.
Awards will be made on such terms as the remuneration
  committee shall determine. Awards may not be made later than October 18, 2016
  but may otherwise be made at any time by the remuneration committee, subject
  to obtaining any UK or overseas regulatory approval or consent. Awards under
  the RSS must be satisfied by the transfer of ordinary shares and no new ordinary
  shares may be issued.
The maximum total market value of ordinary shares
  which may be granted as an award to any participant under the RSS in any fiscal
  year is one-third of base salary, unless determined otherwise by the remuneration
  committee. Awards will normally vest on the third anniversary of the date of
  grant to those participants still employed by the Group and will be subject
  to the payment of any tax and social security liability arising on vesting.
  Early vesting may occur for reasons of death, disability, redundancy, retirement
  or at the discretion of the remuneration committee, but will normally be subject
  to a pro rata reduction in the number of shares originally granted based on
  the period of time from the date of grant to the date of termination. Awards
  may vest in full in the event of a takeover. No awards have been made under
  the RSS at the date of this report and it is the remuneration committee's
  intention that for the fiscal year ending July 31, 2007, awards will be considered
  for a limited number of Wolseley employees below board-level.
Pensions
Mr. Webster, as a UK executive director, participates
  in the Wolseley Group Retirement Benefits Plan (the "Plan"). The Plan
  is a defined benefit scheme and provides benefits based on final pensionable
  salaries. Wolseley makes contributions to the Plan based on the recommendation
  of the Plan actuary. Bonuses payable to UK executive directors are not pensionable.
  Mr. Webster currently contributes 7% per annum of his pensionable salary to
  the Plan.
The Finance Act 1989 introduced an earnings
  cap (the "Cap") for employees joining the Plan after May 31, 1989.
  This has the effect of limiting the amount of an employee's salary that
  can be pensioned through a tax approved pension scheme. A Plan specific earnings
  cap was introduced from April 6, 2006 when the Cap was prospectively abolished.
  The current Plan specific limit, which is part of the design of the Plan, to
  which Mr. Webster is subject, is £107,400 per annum. Wolseley has agreed
  to provide Mr. Webster with benefits which are broadly comparable with those
  that would have applied under the Plan had the Cap not been introduced. This
  was, until April 6, 2006, provided for by payments into a Funded Unapproved
  Retirement Benefits Scheme ("FURBS").
The remuneration committee approved Wolseley's
  approach in response to the UK pensions simplification, which became effective
  on April 6, 2006 for those executive directors who are, or will become, members
  of the UK approved pension plan. Such directors have the option of either maintaining
  the existing pension promise, in which case the executive would be responsible
  for any additional taxation arising; or ceasing to accrue pension benefit above
  the lifetime allowance in respect of service from April 6, 2006 and instead,
  receiving a cash retirement benefit allowance, subject to income taxation consistent
  with Wolseley's cost neutral objective. Wolseley will not compensate Board
  members for any change in their personal tax liability. Mr. Webster elected
  to cease to accrue pension benefit above the lifetime allowance in the Plan
  and to receive a cash retirement allowance in respect of the excess and in respect
  of prior underfunding of the FURBS.
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Past service benefit would remain linked to
  future salary increases subject to a cap similar to the existing Cap.
Additionally, the Finance Act 1989 capped life
  assurance payable through an approved pension scheme in respect of such executives.
  Wolseley has taken out an insurance policy to cover that part of the life assurance
  for Mr. Webster which is in excess of the Cap. The amount charged to the profit
  and loss account during the 2006 fiscal year in respect of his future obligation
  was £2,988 (2005: £66,812).
Messrs. Banks, Hornsby, Marchbank and Roach,
  who are US citizens, participate in the defined contribution pension arrangements
  of Ferguson Enterprises Inc. In line with current US practice, Messrs. Banks,
  Hornsby Marchbank and Roach received contributions in fiscal 2006 at the level
  of 15% of their earnings (for this purpose $420,000 for Mr. Banks, and $400,000
  for Messrs. Hornsby, Marchbank and Roach of bonus was included with base salary).
  Bonus ceased to be included in the calculation of pension contributions from
  August 1, 2006. Contributions will increase (but will be limited to base salary)
  to 20% for Mr. Hornsby and to 23% for Messrs. Marchbank and Roach.
Mr. Hord, also a US citizen, participates in
  the defined benefit and defined contribution plans of Stock Building Supply,
  Inc. Mr. Hord's pensionable earnings include his bonus up to a maximum
  of $742,400 as agreed when the bonus scheme was introduced in order to preserve
  his pension entitlement at that time. Mr. Hord is also a member of a US non-qualified
  plan, which will provide a benefit for 20 years after retirement at age 60 of
  40% of final pensionable salary. At Mr. Hord's option, and with Wolseley's
  consent, the benefit can be paid over a period of 1, 5, 10 or 15 years with
  the total amount of the benefit, in cash terms, being the same.
A US subsidiary of Wolseley has a commitment
  to a former Wolseley director, who is a United States citizen, to pay a joint
  survivor pension of $300,000 per annum for fifteen years from August 1, 1993.
  The net present value of the future obligation as of July 31, 2006 was £298,000
  (July 31, 2005: £460,110), which has been charged in prior years'
  accounts.
Additionally, Brossette, a French subsidiary
  of Wolseley, has a commitment to a former Wolseley director, who is a French
  citizen, to pay an annual pension of €221,833 (2005: €215,392),
  with a widow's entitlement of 60%, subject to an annual increase based
  on the agreed French pension index. The full actuarial cost of this arrangement
  was provided in previous years as part of Brossette's ongoing pension obligations.
  Wolseley is guarantor of this future pension commitment, which as of July 31,
  2006 was approximately £2.3 million (2005: £1.9 million).
The following table shows the executive directors
  and senior management in office at July 31, 2006 who participated during the
  year in the Group's defined benefit plans and the amounts of benefit accrued
  at the end of the year as if the director or manager had left service on July
  31, 2006, the change in accrued benefit over the year, the transfer value at
  both the beginning and end of the year as well as the change in the transfer
  value over the year as required by the UK Directors' Remuneration Report
  Regulations 2002. The increase in transfer value figures represents an obligation
  on the pension fund or Wolseley – they are not sums due or paid to the
  director or manager. The UK Listing Rules require additional disclosure of the
  change in accrued benefit net of inflation and the transfer value of this change.
  These pension liabilities are calculated using the cash equivalent transfer
  value method prescribed in the Listing Rules of the UK Listing Authority.
UK Directors'
      Remuneration Report/regulations
UK Listing
      Rules
Transfer value
Increase/
of the
(decrease) in
increase/
transfer value
(decrease) in
2006
Increase in
2006
Pension
Increase
Transfer
      Value
(excluding
Pension
Pension 2006
(excluding
Age at
accumulated
in pension
member
Accumulated
(net of
member
July 31,
2006
2006
2006
2005
contributions)
2006
revaluation)
contributions)
2005
£000
£000
£000
£000
£000
£000
£000
£000
Adrian Barden
51
32
2
348
304
37
32
1
6
Fenton N. Hord
59
326
4
4,518
4,470
(110)
326
(11)
(134)
Stephen P. Webster
(1)
53
43
24
634
267
354
43
23
328
Mark J.White
46
8
2
71
46
18
8
2
13
(1)
As previously noted, Mr. Webster elected,
      with effect from April 6, 2006, to cease to accrue pension benefit above
      the lifetime allowance in the Plan and to receive a cash retirement allowance
      in respect of the excess and in respect of prior underfunding of the FURBS,
      which became a defined contribution arrangement from the same date. The
      figures shown in the table above reflect this change and show the information
      required under the UK Listing Rules and under the UK Directors' Remuneration
      Report Regulations 2002 in respect of that part of his arrangements that
      continue to accrue pension on a defined benefit basis notwithstanding the
      changes that came into effect from April 6, 2006. The figure of £70,000
      included in the column headed "pension/life assurance" in the
      compensation table at "Item 6 – Directors, Senior Management and
      Employees, paragraph B – Compensation" includes £23,117
      in respect of the cash retirement allowance.
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The following table shows those directors participating
  in money purchase pension plans and the cost of Wolseley's contributions
  thereto:
2006
2005
Pensions: Money Purchase Plans
£000
£000
Charles A. Banks
151
138
Fenton N. Hord
5
4
Claude S. Hornsby
99
88
Robert H. Marchbank
107
26
Frank W. Roach
52
—
Mr. Roach was appointed to
      the board on December 16, 2005.
Other benefits
Executive directors receive a number of other
  benefits principally related to the provision of company car benefits, life
  assurance, health care arrangements and, in the case of Messrs. Banks, Hornsby,
  Marchbank and Webster, relocation and housing allowances following, respectively,
  their relocations from the US to the UK (Messrs. Banks, Hornsby and Marchbank)
  and from Droitwich, UK to Theale, UK (Mr. Webster), where Wolseley's head
  office is located.
Non executive directors
The remuneration of non executive directors
  during the fiscal 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 Wolseley's
  registered office during normal business hours and at the Annual General Meeting.
Executive share ownership
Wolseley introduced a share ownership program
  with effect from August 1, 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 Wolseley employee share plan (other than shares sold to pay a social security
  or income tax liability or sold to meet the price of the option). The program
  specifically excludes the need 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 program.
  The remuneration committee reviewed and noted the progress which has been made
  towards meeting these targets during the fiscal year. Directors' and senior
  management's current shareholdings are set out at "Item 6 – Directors,
  Senior Management and Employees – Paragraph B, compensation – long-term
  cash incentive plans".
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Share option plans
Wolseley has adopted seven share option plans:
  the 1984 Executive Share Option Scheme (the "1984 Scheme"), the 1989
  Executive Share Option Scheme (the "1989 Scheme") and the Wolseley
  Share Option Plan 2003 (the "2003 Scheme") (collectively, the "Executive
  Option Schemes"); the Wolseley Employees Savings Related Share Option Scheme
  1981 (the "UK Option Scheme") and the Wolseley Irish Sharesave Scheme
  2000 (the "Irish Option Scheme") (collectively, the "Employees
  Savings Option Schemes"); the Wolseley Employee Share Purchase Plan 2001
  (the "Purchase Plan"), which has now been extended to incorporate
  12 European countries; and the Wolseley Employees International Stock Appreciation
  Plan (the "SAP"), the final awards of which vested during the fiscal
  year ended July 31, 2006.
Wolseley monitors the awards made under the
  various employee and discretionary share plans which it operates. Options are
  either satisfied by the issue of new shares or shares purchased in the market
  (including treasury shares). The number of ordinary shares over which options
  may be granted under the Executive Option Schemes may not, in any ten year period,
  exceed five percent of the issued share capital of Wolseley from time to time.
  The number of ordinary shares over which options may be granted under the Employees
  Savings Option Schemes, the SAP and the Purchase Plan may not, in any ten year
  period, when aggregated with options under the Executive Option Schemes, exceed
  ten percent of the issued share capital of Wolseley from time to time. In addition,
  for US-based participants, the 2003 Scheme will be restricted such that the
  aggregate number of shares for which options may be granted to such participants
  during the life of the 2003 Scheme will not exceed 5% of the issued ordinary
  share capital at the date the 2003 Scheme was approved by shareholders. Shares
  are allotted under the Executive Option Schemes, the Employees Savings Option
  Schemes, the SAP and the Purchase Plan when the options are exercised.
Executive option schemes
Eligibility
– All executive directors and other senior company management, as well
  as all other employees of Wolseley as recommended by the remuneration committee,
  are eligible to participate in the Executive Option Schemes. At July 31, 2006,
  there were approximately 950 participants in the Executive Option Schemes. The
  2003 Scheme received shareholder approval at the annual general meeting held
  in November 2003. Consequently, no further options will be granted under the
  1984 Scheme nor under the 1989 Scheme, which are now closed schemes. No options
  under any such Scheme have or will be granted at a discount to the relevant
  middle market price at the time of grant and no option under any such Scheme
  can be exercised unless performance conditions have been satisfied. The remuneration
  committee will formally review the 2003 Scheme by no later than November 2008.
Options
–
  Options entitle the recipient to purchase Wolseley's ordinary shares and
  are evidenced by an option certificate, which includes the number of shares
  comprised in the option, the exercise price of the option and the date the option
  was granted to the recipient. Options are personal to the participant and his
  personal representatives and may not be transferred. No payment is required
  for the grant of an option.
Exercise price
– The exercise price of an option may not be less than the higher of (i)
  the nominal value of a share; and (ii) for European participants, an amount
  equal to the middle market quotation of a share on the dealing day immediately
  preceding the date of grant and for US participants, the dealing day of the
  date of grant, as derived from The London Stock Exchange Daily Official List.
Performance conditions
– The remuneration committee considers annually the levels of option grants.
  An option becomes exercisable on the third anniversary of the date of grant,
  but in respect of options granted after May 31, 1994. Such options cannot be
  exercised unless a performance test has been satisfied. Thereafter, they may
  be exercised at any time until they lapse 10 years from the date of grant. Options
  granted between May 1994 and December 1996 may not be exercised unless the growth
  in earnings per share over a period of three consecutive fiscal years during
  the life of the option exceeds the growth in the UK Retail Price Index over
  the same period by at least 6%. Options granted in, and subsequent to, December
  1997 may not be exercised unless growth in earnings per share over a period
  of three consecutive fiscal years during the life of the option exceeds the
  growth in the UK Retail Price Index over the same period by at least 9%. In
  addition, the number of options exercisable by executive directors in respect
  of awards made between 1997 and 2002 is determined by the return on capital
  employed achieved over the same rolling three year period. For options granted
  in 1997 and 1998, achieving a return on capital employed of 15% per annum will
  enable 50% of such options granted in these years to become exercisable, rising
  on a sliding scale to 100% for achieving a return on capital employed of 20%
  or more. With effect from October 1999, the maximum return on capital employed
  required to permit exercise of 100% of options granted was reduced from 20%
  to 17.5% and the sliding scale was adjusted accordingly.
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Options granted in, and subsequent to, November
  2003 may not be exercised unless growth in earnings per share over the period
  of three fiscal years (from the fiscal year immediately prior to date of the
  grant) exceeds growth in the UK Retail Price Index over the same period by at
  least 9%. For options so granted in excess of 100% of salary the earnings per
  share growth has to exceed the growth in the UK Retail Price Index by at least
  12%, rising to 21% for awards greater than 250% of salary. To the extent that
  the performance condition is not fully met for options granted in November 2003,
  the satisfaction of the condition will be retested on the fourth anniversary
  of the award, but from the same fixed base, with the further requirement that
  the earnings per share growth has to exceed the growth in the UK Retail Price
  Index by at least 12%, rising to 28% for awards greater than 250% of salary.
  Awards made from 2004 will not benefit from any such retest of the satisfaction
  of the performance condition.
Individual limit
– Under the 1984 and 1989 Schemes, the maximum number of shares over which
  a participant may be granted an option on any date is subject to the limit that
  the aggregate exercise price of that option, when added to the aggregate exercise
  prices of shares comprised in any extant options to subscribe for shares granted
  to the participant within the previous ten years under the Executive Option
  Schemes and any other employee share option scheme operated by Wolseley (excluding
  shares which are the subject of options granted under any savings related share
  option scheme and any shares issued upon the exercise of options), may not exceed
  four times the participant's total remuneration for Wolseley's current
  or preceding fiscal year (whichever of those years gives the greater amount)
  or, where the participant did not receive remuneration for the preceding fiscal
  year, four times his total remuneration for the 12 month period beginning with
  the first day of the current fiscal year in which the participant received remuneration.
  The maximum number of shares over which a participant may be granted an option
  under the 2003 Scheme may not exceed an amount equal to three times base salary
  for UK and other European-based executives and five times base salary for US
  based executives, although the remuneration committee may, as it so determines,
  also use the higher limit in exceptional circumstances. It is the remuneration
  committee's intention that for the year ending July 31, 2007, awards will
  not exceed 225% of base salary (or 300% in the case of the US executive directors).
Exercise of options
– Unvested options may be exercised in whole or in part following the
  earliest  of (i) the expiration of three years from the date of grant of the
  option subject
  to the satisfaction of the relevant performance condition; (ii) the participant's
   termination of employment by reason of his death, injury or disability (and,

  in the case of the 1984 Executive Share Option Scheme, redundancy and, in the
   case of options granted under the 2003 Scheme subject to both the satisfaction

  of the relevant performance condition and to the exercise of a discretion by
   the remuneration committee); (iii) the participant's termination of employment
    for any reason other than death, injury or disability if the Board in its
   absolute
  discretion so determines (under the 1984 and 1989 Schemes and, in the case
   of  anticipated retirement, awards made under the 2003 Scheme will be exercisable

  only after the third anniversary of grant and subject to the satisfaction of
    the relevant performance condition); or (iv) the date the option becomes
   exercisable
  upon a change of control of Wolseley or the winding up of Wolseley (save in
    the case of options granted under the 2003 Scheme where, in addition, the
   remuneration
  committee must be satisfied that Wolseley's performance over the curtailed
   period justifies vesting). Upon a change of control of Wolseley whereby Wolseley

  is under the control of another company or the business of Wolseley is carried
   on by another company, and subject to the Companies Act 1985 (the "Companies
    Act"), the general corporations law of England and Wales, a participant
  generally may exercise an option at any time within a six month period following
  the later of the date on which control of Wolseley passes to an acquirer and
  the date on which the offer to acquire becomes unconditional to exercise any
  unexercised option then held by the participant. Upon the voluntary winding-up
  of Wolseley, the participant may exercise an option upon receipt of notice
  of
  a meeting to consider such matter. The exercise of vested options under the
  1984 and 1989 Schemes is governed by the provisions noted above. The exercise
  of vested options under the 2003 Scheme must take place within six months of
  termination of employment by reason of injury, disability, ill health, redundancy
  or by reason that the participant's office or employment is in a company which
    ceases to be a Group company (or 12 months in the event of death), or within
    one
    month
    of
  termination of employment for those employees who resign or who are dismissed
  otherwise than for cause.
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Lapse of options
– An option lapses under the 1984 and 1989 Schemes (to the extent that
  it has not been previously exercised) upon the earliest of (i) the expiration
  of ten years from its date of grant; (ii) the expiration of 12 months from the
  date of participant's death; (iii) the expiration of 12 months from the
  date upon which the participant's employment terminates by reason of injury
  or disability (and in the case of the 1984 Scheme, redundancy); (iv) the expiration
  of 18 months from the date on which the participant retires from employment;
  (v) the date on which the participant's employment is otherwise terminated;
  (vi) upon a change of control of Wolseley, the date that is immediately after
  the expiration of the applicable six month time period for exercise of options;
  or (vii) upon the voluntary winding-up of Wolseley, a date that is immediately
  after the commencement of such winding up of Wolseley. An option lapses under
  the 2003 Scheme (to the extent that it has not previously been exercised) upon
  the earliest of (i) the fourth anniversary of grant to the extent that awards
  granted in November 2003 and June 2004 have not satisfied the performance condition;
  (ii) the third anniversary of grant to the extent that awards granted after
  November 2004 have not satisfied the performance condition; (iii) six months
  (or 12 months in the case of death) after termination of employment (or death)
  to the extent that the option award has satisfied the performance condition
  where termination occurs otherwise than by resignation or dismissal for cause;
  (iv) one month after termination of employment to the extent that the award
  has satisfied the performance condition where termination occurs by resignation
  or dismissal otherwise than for cause; (v) immediately upon termination of employment
  by reason of death, injury, disability, ill health, expected retirement, redundancy
  and sale of a Group employing company, unless the remuneration committee otherwise
  exercises its discretion and, subject thereto, to the satisfaction of the proportionate
  part of the performance condition as at that time.
Issue of shares
– Shares issued and allotted to any person pursuant to the Executive Option
  Schemes are entitled to receive all dividends and other distributions paid by
  reference to a record date falling on or after the date on which the allottee
  is entered on the register of shareholders of Wolseley and shall in all other
  respects rank equally with other shares issued by Wolseley of the same class.
Employees Savings Option Schemes
Eligibility
– Under the UK Option Scheme, all UK directors and employees of Wolseley
  with at least six months' service prior to the applicable results announcement
of Wolseley
which
  immediately precedes a grant of options are eligible to participate in the UK
  Option Scheme. Under the Irish Option Scheme, all Irish directors and employees
  of Wolseley with one year's service on the date of Wolseley's Annual
  General Meeting immediately preceding a grant of options are eligible to participate
  in the Irish Option Scheme. The Board has discretion to include other employees.
  At July 31, 2006, there were approximately 4,500 participants in the Employees
  Savings Option Schemes.
Options
–
  Options under the Employees Savings Option Schemes entitle the participant to
  acquire Wolseley's ordinary shares. Options will be personal to the participant
  and his or her personal representatives and may not be transferred or assigned.
  No payment is required for the grant of an option.
Exercise price
– The exercise price of an option under the Employees Savings Option Schemes
  is determined by the Board and may not be less than the greater of (i) the price
  which is the higher of (a) eighty percent and (b) such greater percentage as
  may be required by appropriate tax legislation, of the middle market quotation
  for ordinary shares for such dealing day falling as near to (but not earlier
  than) 30 days immediately preceding the date of grant, as derived from The London
  Stock Exchange Daily Official List; or (ii) the nominal value of an ordinary
  share.
Grant of options
– Options may be granted with durations of three, five or, for the UK Option
  Scheme, seven years. Participants choose the duration of their option at the
  time of grant. It is a condition of granting an option that participants enter
  into a savings contract with an approved savings institution under which participants
  save between £10 and £250 per month (for the UK Option Scheme) or
  €12 and €320 per month (for the Irish Option Scheme), for a three
  year (36 monthly contributions) or five and seven year (60 monthly contributions
  in each case) period depending on whether they have chosen a three, five or
  seven year option. After either 36 or 60 monthly contributions have been made,
  the three or five year option matures, a bonus is payable and participants may
  exercise their options and buy ordinary shares in Wolseley at the exercise price.
  Participants who choose a seven year option at the time of grant are required
  to leave their savings accumulated over five years undistributed for another
  two years, at which time a further bonus is payable and they may exercise their
  option. Options may be exercised only with the available proceeds of the savings
  contract together with the applicable bonus. Participants may withdraw from
  a savings contract at any time (though their options will then lapse) and are
  not obligated to exercise an option when the contract matures at the relevant
  bonus date. All savings contracts of any individual which are linked to options
  are aggregated for the purposes of an overall limit on savings of £250
  or €320 per month (as the case may be) per participant. No options may
  be granted more than 10 years after the first grant of options under the Employees
  Savings Option Schemes. The UK Option Scheme was extended for ten years in 1991,
  and approval was further renewed until December 2011 at the Extraordinary General
  Meeting of Wolseley shareholders held on December 14, 2001.
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Exercise of options
– Upon the maturity of a savings contract, a participant has six months
  in which to use the savings from the savings contract and the bonus to exercise
  his option and purchase Wolseley's ordinary shares at the exercise price.
  Once six months have passed, the option lapses. In some circumstances, a participant
  may use his savings and exercise his option before it reaches maturity. These
  circumstances include (i) the death of a participant; (ii) termination of a
  participant's employment by reason of his injury, disability, redundancy
  or retirement (if a participant's employment terminates other than in these
  circumstances, his options will lapse upon the date of such termination); (iii)
  the participant attaining his retirement date but remaining employed thereafter;
  (iv) a change of control of Wolseley; and (v) the voluntary winding-up of Wolseley.
Issue of ordinary shares
– Ordinary shares purchased on the exercise of options granted under a
  savings contract will rank equally with the issued ordinary shares, except for
  rights attaching to ordinary shares by reference to a record time or date preceding
  the time or date of purchase.
Individual limits
– The monthly contributions payable by participants under a savings contract
  (i) when added to any contributions payable in any month by such participant
  under other existing savings contracts, must not exceed £250 or €320
  (as the case may be) per participant or such greater sum as may be permitted
  by appropriate tax legislation and which have been approved by the Board and
  (ii) shall not be less than £10 (or the € equivalent).
Wolseley Employees International Stock
  Appreciation Plan ("SAP")
On September 12, 1997, Wolseley established
  the SAP for employees who were not eligible to participate in the Employees
  Savings Option Schemes. Directors were not entitled to participate in the SAP.
  Participants in the SAP must have been employed by a participating company,
  as determined by the Board from time to time. Participants were granted awards
  comprised of units of ordinary shares with a base price per unit not to exceed
  the greater of (i) a price which is 80% of the middle market quotation for ordinary
  shares on the date immediately preceding the date of grant as derived from the
  London Stock Exchange Daily Official List and (ii) the nominal value of an ordinary
  share.
Upon exercise, participants received an award
  in an amount determined by a formula reflecting the value of the ordinary shares
  on the date of exercise. Awards were automatically exercisable upon the earlier
  to occur of a specified date during the year that was the fifth year anniversary
  of the date of grant or a specified date during the year in which there was
  a change of control of Wolseley or a resolution to wind up Wolseley had been
  approved. A participant's awards lapsed upon his termination of employment
  from a company participating in the SAP. The final awards granted under the
  SAP were exercised during the fiscal year ended July 31, 2006. There are no
  outstanding awards under the SAP. The SAP has been succeeded by the Wolseley
  Employee Share Purchase Plan 2001.
Wolseley Employee Share Purchase Plan
  2001 (the "Purchase Plan")
On September 21, 2001, Wolseley established
  the Purchase Plan in place of the SAP noted above. The Purchase Plan (which
  is a US Revenue Code Section 423 Plan) offers to eligible employees of participating
  companies the opportunity to purchase ordinary shares (which include ADSs evidencing
  ordinary shares) through share options granted to them under the Purchase Plan.
  An employee or director of a participating company is eligible to participate
  in the Purchase Plan if he or she (i) has been employed continuously by a participating
  company for at least one year, (ii) customarily works more than twenty hours
  per week for a participating company and (iii) customarily works more than five
  months in a calendar year for a participating company. Wolseley directors may
  participate in the Purchase Plan if they satisfy the foregoing requirements.
  The Purchase Plan will be extended into 12 countries across Europe during 2007,
  and the rules of the Purchase Plan will be amended by means of a European schedule
  to allow the Purchase Plan to run in parallel with the UK and Irish Employees
  Savings Option Schemes, without amending the rules of the Purchase Plan.
Eligibility
– Employees participate in the Purchase Plan by submitting an enrollment
  form, which specifies the amount of their compensation that will be withheld
  and accumulated for Purchase Plan purposes. The amount of compensation to be
  withheld must be at least $25 per month but not more than $400 per month (or
  such other minimum or maximum amounts as may be established by the Board from
  time to time). Compensation that is withheld is applied to the purchase of ordinary
  shares as of the applicable exercise date unless the participant has terminated
  employment or withdrawn from the Purchase Plan before that date.
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Option Price
– The option price per share for ordinary shares purchased on the exercise
  of an option granted under the Purchase Plan shall not be less than 85% of the
  Fair Market Value of the ordinary shares on the date of grant (but in all cases
  must be at least the nominal value of an ordinary share). The term "Fair
  Market Value" means, on any given date, the closing middle market quotation
  of an ordinary share as derived from the London Stock Exchange Daily Official
  List or the primary stock exchange on which the ordinary shares are listed.
A participant may discontinue his or her participation
  in the Purchase Plan at any time by giving written notice to that effect to
  the Board at any time prior to the exercise date. The amount credited to a participant's
  account will be distributed to the participant upon a withdrawal from the plan.
The award made in March 2005, at an option
  price of 935.85 pence per share to purchase 2,780,555 ordinary shares was granted
  to 9,977 employees – 2,457,792 options over ordinary shares were granted
  to 9,036 employees based in the US and 322,763 options over ordinary shares
  were granted to 941 employees based in Canada. A total of 1,448,272 options
  vested on May 15, 2006. The award made in March 2006, at an option price of
  1236 pence per share to purchase 817,439 ordinary shares was granted to 8,593
  employees – 764,844 options over ordinary shares were granted to 8,151
  employees based in the US and 52,595 options over ordinary shares were granted
  to 442 employees based in Canada. These options over ordinary shares will be
  available for exercise no later than May 21, 2007.
Share option information
As of October 31, 2006, there were outstanding
  options to purchase a total of 3,161,090 ordinary shares that had been granted
  by Wolseley to its directors and senior management. Details of options outstanding
  under the Executive Option Schemes and the Employees Savings Option Schemes
  and of the interests of the directors and senior management in such schemes
  as of October 31, 2006 are set out below:
Number of ordinary
Range of exercise prices
shares issuable upon
per ordinary share
Range of
Title of plan
exercise
(pence per share)
expiration dates
Executive Option Schemes
14,582,218
349.75 – 1281.00
11/2005 –
      03/2016
Employees Savings Option Schemes
3,624,909
251.00 – 1236.00
04/2006 – 12/2013
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Executive option schemes
Options at
Options at
Exercise price per
Options
October 31, 2006
August 1, 2005
ordinary share
exercisable
Options at
(or date of
(or date of
Name of director/senior manager
(pence per share)
between
July 31, 2006
resignation)
appointment)
Charles A. Banks
(a)
      (b)
483.50
2000-2007
22,615
22,615
22,615
381.00
2001-2008
9,235
9,235
9,235
397.00
2002-2009
6,815
6,815
6,815
468.00
2004-2011
400,000
400,000
400,000
467.00
2004-2011
135,400
135,400
135,400
543.00
2005-2012
213,161
213,161
225,000
743.00
2006-2013
263,098
(d)
263,098
263,098
949.00
2007-2014
153,429
(d)
153,429
153,429
1185.00
2008-2015
138,010
(d)
138,010
—
Adrian Barden
(a)
381.00
2001-2008
—
—
6,000
397.00
2002-2009
—
—
8,000
349.75
2003-2010
—
—
13,000
467.00
2004-2011
7,600
—
7,600
543.00
2005-2012
20,000
—
20,000
743.00
2006-2013
60,000
(d)
60,000
60,000
949.00
2007-2014
27,924
(d)
27,924
27,294
1185.00
2008-2015
36,279
(d)
36,279
—
Fenton N. Hord
(a)
349.75
2003-2010
40,000
40,000
50,000
467.00
2004-2011
75,000
75,000
75,000
543.00
2005-2012
60,000
60,000
60,000
743.00
2006-2013
65,037
(d)
65,037
65,037
949.00
2007-2014
78,162
(d)
78,162
78,162
1185.00
2008-2015
68,474
(d)
68,474
—
Claude A. S. Hornsby
(a)
485.00
2004-2011
—
—
14,762
467.00
2004-2011
—
—
14,600
543.00
2005-2012
—
—
80,000
743.00
2006-2013
101,871
(d)
101,871
101,871
949.00
2007-2014
101,321
(d)
101,321
101,321
1185.00
2008-2015
117,179
(d)
117,179
—
Robert H. Marchbank
(a)
349.75
2003-2010
—
—
15,000
467.00
2004-2011
30,000
30,000
30,000
543.00
2005-2012
30,000
30,000
30,000
743.00
2006-2013
30,000
(d)
30,000
30,000
949.00
2007-2014
34,195
(d)
34,195
34,195
1100.00
2008-2015
50,000
(d)
50,000
50,000
1185.00
2008-2015
62,869
(d)
62,869
—
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Options at
Options at
Exercise price per
Options
October 31, 2006
August 1, 2005
ordinary share
exercisable
Options at
(or date of
(or date of
Name of director/senior manager
(pence per share)
between
July 31, 2006
resignation)
appointment)
Frank W. Roach
(b)
543.00
2005-2012
25,000
25,000
25,000
743.00
2006-2013
30,000
(d)
30,000
30,000
949.00
2007-2014
21,711
(d)
21,711
21,711
1185.00
2008-2015
27,341
(d)
27,341
27,341
1281.00
2009-2016
50,000
(d)
50,000
—
Stephen P. Webster
(a)
483.50
2000-2007
7,000
7,000
9,450
381.00
2001-2008
5,000
5,000
25,000
397.00
2002-2009
22,000
22,000
22,000
349.75
2003-2010
50,000
50,000
50,000
467.00
2004-2011
75,000
75,000
75,000
543.00
2005-2012
80,000
80,000
80,000
743.00
2006-2013
90,679
(d)
90,679
90,679
949.00
2007-2014
79,293
(d)
79,293
79,293
1185.00
2008-2015
90,189
(d)
90,189
—
Mark J. White
(a)
543.00
2005-2012
—
—
20,000
743.00
2006-2013
20,000
(d)
20,000
20,000
949.00
2007-2014
20,021
(d)
20,021
20,021
1185.00
2008-2015
20,675
(d)
20,675
—
Notes:
(a)
The following exercises of
      options took place during the 2006 fiscal year, and to October 31, 2006:
(i)
by Charles A. Banks of executive share
      options on December 16, 2005 in respect of 11,839 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1220.00
      pence);
(ii)
by Adrian Barden of executive share options
      on January 16, 2006 in respect of 6,000 ordinary shares at a per share option
      price of 381.00 pence, 8,000 ordinary shares at a per share option price
      of 397.00 pence and 13,000 ordinary shares at a per share option price of
      349.75 pence (closing middle market price 1290.00 pence), and of executive
      share options on October 18, 2006 in respect of 7,600 ordinary shares at
      a per share option price of 467.00 pence and 20,000 ordinary shares at a
      per share option price of 543.00 pence (closing middle market price 1233.00
      pence); (iii) by Fenton N. Hord of executive share options on December 13,
      2005 in respect of 10,000 ordinary shares at a per share option price of
      349.75 pence (closing middle market price 1213.00 pence);
(iv)
by Claude A. S. Hornsby of executive share
      options on December 12, 2005 in respect of 68,161 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1213.00
      pence); of executive share options on January 11, 2006 in respect of 14,762
      ordinary shares at a per share option price of 485.00 pence; 14,600 ordinary
      shares at a per share option price of 467.00 pence and 11,839 ordinary shares
      at a per share option price of 543.00 pence (closing middle market price
      1283.00 pence);
(v)
by Robert H. Marchbank of executive share
      options on January 26, 2006 in respect of 15,000 ordinary shares at a per
      share option price of 349.75 pence (closing middle market price 1342.00
      pence);
(vi)
by Stephen P. Webster of executive share
      options on January 26, 2006 in respect of 2,450 ordinary shares at a per
      share option price of 483.50 pence and 20,000 ordinary shares at a per share
      option price of 381.00 pence (closing middle market price 1342.00 pence);
      and
(vii)
by Mark J. White of executive share
      options on November 10, 2005 in respect of 20,000 ordinary shares at a per
      share option price of 543.00 pence (closing middle market price 1196.00
      pence);
(b)
Frank W. Roach was appointed
      to the board with effect from December 16, 2005. Charles A. Banks left the
      board on July 31, 2006.
(c)
The highest middle-market per
      share price of Wolseley's ordinary shares during fiscal year 2006 was
      1462 pence and the lowest was  1079 pence. The year-end price at July
      31, 2006 was 1140 pence per share.
(d)
Performance targets not yet
      met.
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Savings related share option schemes,
  including stock appreciation plan
Options at
July 31, 2006
and October
Options at
Per Share
31, 2006
August 1, 2005
Subscription
Options Expire
(or date of
(or date of
Name of Director/Senior Manager
Price
in
resignation)
appointment)
Charles A. Banks
935.85
p
2006
—
272
881.00
p
2008
1,075
1,075
1236.00
p
2007
222
—
Adrian Barden
336
p
2006
—
2,008
412
p
2008
956
956
881
p
2010
675
675
1164
p
2009
321
—
Fenton N. Hord
935.85
p
2006
—
272
1236.00
p
2007
222
—
Claude A. S. Hornsby
935.85
p
2006
—
272
1236.00
p
2007
222
—
Robert H. Marchbank
412
p
2006
—
2,293
935.85
p
2006
—
272
1164
p
2009
803
__
Frank W. Roach
935.85
p
2006
—
272
1236.00
p
2007
222
—
Stephen P. Webster
412
p
2006
—
917
1164
p
2009
803
—
Mark J. White
412
p
2008
3,986
3,986
Messrs. Banks, Hord, Hornsby, Marchbank and
  Roach each exercised options over 270 ordinary shares (a reduction of 2 options
  over ordinary shares (which lapsed) from the total of options over 272 ordinary
  shares listed at August 1, 2005 due to exchange rate fluctuations) under the
  Group's Purchase Plan, all on May 15, 2006. The closing middle market price
  on May 15, 2006 was 1242.00 pence per share. Mr. Barden exercised options in
  respect of 2,008 ordinary shares on May 8, 2006 at a price of 336 pence per
  share under the UK Options Scheme. The closing middle market price on May 8,
  2006 was 1378 pence per share. Mr. Webster exercised options in respect of 917
  ordinary shares on June 5, 2006 at a price of 412 pence per share also under
  the UK Options Scheme. The closing middle market price on June 5, 2006 was 1203
  pence per share.
C. Board Practices
Director Service Agreements
Wolseley is a party to director service agreements
  with each of the executive directors. The non executive directors do not have
  service agreements with Wolseley, but their appointments are terminable upon
  six months' notice. All current service agreements with the executive directors
  are subject to a maximum 12 months' notice of termination if given by Wolseley
  and 6 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 our shareholders. The date of each service agreement
  and the year in which each 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 remuneration committee will take a robust view of the mitigation, which
  should be taken into account when computing any compensation payable.
Name
Date of service contract
Year of election / re-election
Fenton N. Hord
June 27, 2003
2003
Claude A. S. Hornsby
July 18, 2003
2004
Robert H. Marchbank
March 18, 2005
2005
Frank W. Roach
February 27, 2006
to be elected at the 2006
      Annual
General Meeting
Stephen P. Webster
September 25, 2002
2005
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Wolseley has entered into service agreements
  with the executive directors (each an "Executive"). Mr.Webster's
  agreement provides for his employment as Group Finance Director at a current
  annual base salary, plus commission or bonus on a basis determined by Wolseley
  from time to time. Mr. Hord's agreement provides for his employment as
  Chief Executive Officer of SBS at a current base salary, plus commission or
  bonus on a basis determined by Wolseley from time to time. Mr. Hornsby's
  agreement provides for his employment as Group Chief Executive, following his
  appointment on August 1, 2006, at a current base salary, plus commission or
  bonus on a basis determined by Wolseley from time to time. Mr. Marchbank's
  agreement provides for his employment as Chief Executive Officer of Wolseley
  Europe at a current annual base salary plus commission or bonus on a basis determined
  by Wolseley from time to time. Mr. Roach's agreement provides for his employment
  as Chief Executive of Wolseley North America at a current annual base salary
  plus commission or bonus on a basis determined by Wolseley from time to time.
Each Executive's salary is subject to
  review on an annual basis. Each agreement provides for automatic termination
  at normal retirement age. Additionally, Wolseley may terminate the Executive's
  agreement at any time: (i) if the Executive, without reasonable cause, neglects
  or refuses to perform his duties under the agreement; (ii) if the Executive
  becomes insolvent or bankrupt in accordance with English or applicable US law;
  or (iii) if the Executive engages in dishonesty or other misconduct which, in
  the opinion of the Board, affects Wolseley's business. Each Executive's
  agreement contains restrictive covenants that would operate upon the Executive's
  termination of employment.
Corporate governance
The Board is committed to high standards of
  corporate governance throughout the Group as set out in the Combined Code on
  corporate governance, published by the Financial Reporting Council ("FRC")
  in July 2003 (the "Code"). The Board has applied the principles and
  provisions in the form set out in the revised draft Combined Code published
  by the FRC in June 2006 (the "Revised Code") in advance of its commencement
  date. The Board is accountable to Wolseley's shareholders for good governance,
  and this report describes how the Board applied the principles of good governance
  set out in the Code and the Revised Code during the year under review.
The Board has established a number of committees,
  each of which has formal terms of reference (copies of which for the main committees
  are available from the Group Company Secretary and can be found on Wolseley's
  website at www.wolseley.com) approved by the Board and complying with the Code
  and the Revised Code to assist in the discharge of its duties. Members of the
  various committees are referred to in the following paragraphs. The Group Company
  Secretary acts as secretary to all Board committees.
Nominations committee
The nominations committee meets on an as-needed
  basis and is comprised of Messrs. Whybrow (Chairman), Davis, Duff, Hornsby and
  Walker. Mr. Banks stepped down as a member of this committee upon his retirement
  on July 31, 2006 and was succeeded by Mr. Hornsby. Mr. Whybrow would not chair
  the committee when it considers the appointment of a successor chairman. The
  nominations 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 nominations committee also advises
  the Board on succession planning for executive Board appointments although the
  Board itself is responsible for succession generally. The nominations committee
  met once during the year, and attendance of members of the committee is shown
  at "Item 6 –Directors, Senior Management and Employees, Paragraph
  A –Meeting Attendance", although, as reported last year, a working
  party of the remuneration committee members 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 audit 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 audit committee is normally comprised of three
  independent non executive directors, and two members constitute a quorum.
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Each member of the audit committee brings
    relevant financial experience from senior executive levels and is considered
    by the Board in its business judgment to be financially literate under the
    rules of the NYSE. The expertise and
    experience of the members of the audit committee are summarized at "Item
    6 – Directors, Senior
  Management and Employees, Paragraph A – Directors and Senior Management".
   The Board considers that each member of the audit committee is independent
  within
  the definition set out in the Code and under the standards and rules of the
   NYSE and the Sarbanes-Oxley Act of 2002 as applicable. Mr. Stein, the Audit

  Committee Financial Expert, is considered to have significant, recent and relevant
   financial experience and expertise, 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 Wolseley's approach, including corporate policies;
  company financing; systems of internal control; matters that require the use
  of judgment 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 audit committee meets regularly throughout
  the year, and its agenda is linked to events in Wolseley'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.
  Director attendance for each meeting is shown at "Item 6 – Directors,
  Senior Management and Employees, Paragraph A – Meeting Attendance".
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 personnel 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 audit committee is set out at "Item 6 – Directors, Senior Management
  and Employees, Paragraph B – Compensation", and the policy with regard
  to the remuneration of non executive directors is set out at "Item 6 –
  Directors, Senior Management and Employees, Paragraph B – Compensation,
  non executive directors".
The audit committee is required to assist members
  of the Board to fulfill their responsibilities related to external financial
  reporting and associated announcements. During the year, the audit 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 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 Wolseley's annual report on Form 20-F, 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 Wolseley's whistleblowing
  policy; litigation and contingent liabilities and tax matters, including contingencies
  against tax liabilities together with compliance with statutory tax obligations.
The audit committee is also responsible for
  the development, implementation and monitoring of Wolseley's policy on
  external audit. The audit committee reserves oversight responsibility for monitoring
  the independence, objectivity and compliance with ethical and regulatory requirements.
  The audit committee recommends the appointment and reappointment of Wolseley's
  external auditors and reviews the scope, results (including schedules of unadjusted
  errors, where applicable, and representation letters) and cost-effectiveness
  of the audit as well as the auditors' remuneration and performance. The
  audit 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 Group audit engagement partner
  for the fiscal year ended July 31, 2006. The audit 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:
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•
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 adviser or
    investment banking services; or
•
legal and other services unrelated to
    the audit.
The policy requires pre-confirmation by the
    audit 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 UK and US 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 adviser 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 judgments 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 audit 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 judgments; 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 fiscal year 2006 were £9.6 million (2005: £7.2 million),
  of which £4.2 million (2005: £3.4 million) related to non-audit
  work. The increase in audit fees relates principally to work in respect of
  Sarbanes-Oxley Section 404.
The audit 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 audit 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 has also monitored the established policy which it approved regarding
  the recruitment of staff from both the external auditors and from KPMG LLP.
  The audit committee reviews internal audit reports and considers the effectiveness
  of the function.
The audit committee also reviews, where practicable,
  all proposed announcements to be made by Wolseley 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 this report 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 Group's
  statements on internal controls before they are agreed by the Board for each
  year's annual report. The audit committee has also monitored Wolseley's
  response to the requirements of the 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.
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Wolseley'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 Wolseley's website at www.wolseley.com as referred to at "Item
  16B – Code of Ethics".
Each year the audit 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 and it was agreed that no amendments were required.
Remuneration committee
The remuneration committee comprises Messrs.
  Davis, Duff (who chairs the committee) and Walker, all of whom are independent
  within the definition set out in the Code. Mr. Duff succeeded Mr. Walker as
  chairman of the committee on November 1, 2005. The remuneration committee met
  five times during the fiscal year, and director attendance for each meeting
  is shown at "Item 6 – Directors, Senior Management and Employees,
  Paragraph A – Meetings Attendance". The remuneration committee is
  responsible for making recommendations on remuneration to the Board. 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 Wolseley'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.
Executive committee
The executive directors of Wolseley, together
  with Mr. Barden, who has been responsible for Wolseley UK Limited since August
  1, 2003 and who became Senior Vice President with effect from October 1, 2006
  and Mr. White, the Group Company Secretary & Counsel, meet at least eight
  times each fiscal year, often on the day before formal Board meetings. The executive
  committee addresses operational business issues and shares best practise, thereby
  allowing the directors more time at Board meetings to focus on strategy.
Treasury committee
The treasury 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 July 31, 2006 and was succeeded by Mr. Hornsby. The role of the
  committee is to consider treasury policy, tax matters and related party transactions
  on behalf of the Group within a framework delegated by the Board. The treasury
  committee meets approximately six times each fiscal year, as required by the
  demands of the business.
Internal audit
The internal audit function is involved in
    the assessment of the quality of risk management and internal control and
    helps
  to promote and further develop effective risk management within the businesses.
    Certain internal audit assignments (such as those requiring specialist expertise)
    continue to be outsourced by the Head of Internal Audit to KPMG LLP as required.
    A policy has been established regarding the recruitment of staff from both
    KPMG
  LLP and PricewaterhouseCoopers LLP. The audit committee reviews internal audit
  reports and considers the effectiveness of the internal audit function.
Compliance statement
Wolseley applied all the principles set out
  in section 1 of the Code and the Revised Code for the period under review and
  has, throughout the fiscal year, complied with the detailed provisions set out
  therein, save that, during the period from December 16, 2005 to July 31, 2006
  there was an imbalance between executive and non executive directors on the
  Board, and following the introduction of a new directors' bonus scheme
  in 2000, the pensionable salary of one executive director includes his bonus
  capped at a fixed amount.
Wolseley's auditors, PricewaterhouseCoopers
  LLP, are required to review whether the above statement reflects Wolseley's
  compliance with the nine provisions of the Code specified for external auditor
  review by the Listing Rules of the UK Listing Authority and to report if it
  does not reflect such compliance. No such report has been made.
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New York Stock Exchange – corporate
  governance requirements
Whilst Wolseley, as a foreign private issuer,
  is not required to comply with the measures set by the board of the New York
  Stock Exchange, to strengthen corporate accountability it does comply in all
  material respects with those standards. Those standards state that companies
  should have a nominating/corporate governance committee composed entirely of
  independent directors with written terms of reference, which develops and recommends
  to the Board a set of corporate governance principles for the Company. Details
  of Wolseley's nominations committee are set out at "Item 6 –
  Directors, Senior Management and Employees, Paragraph C – Board Practices".
  The nominations committee does not develop corporate governance principles for
  the Board to approve. The Board itself approves Wolseley's overall system
  of internal controls, governance and authority limits. A majority of the members
  of the nominations committee are independent non executive directors and all
  such directors sit on the Board. Wolseley's practice, in accordance with
  the UK Companies Act and the Code in relation to the appointment and termination
  of the external auditors, is that a recommendation is made by the audit committee
  to the Board, which will then make a recommendation to shareholders in general
  meeting. This differs from US procedures, where the external auditors are accountable
  to the audit committee, which has the authority to appoint or dismiss the external
  auditors without reference to the shareholders.
The Sarbanes–Oxley Act, the Securities
  and Exchange Commission and the New York Stock Exchange introduced rules in
  July 2005 requiring Wolseley to comply with a number of provisions relating
  to the audit committee. These include a requirement related to the independence
  of audit committee members and procedures for the treatment of complaints regarding
  accounting or auditing matters. Wolseley is fully compliant with these requirements.
Internal control
In a highly decentralized Group, where local
  management has considerable autonomy to run and develop their businesses, a
  well designed system of internal control is necessary to safeguard shareholders'
  investment and Wolseley's assets. The directors acknowledge that they have
  overall responsibility for the Group's systems of internal control and
  for reviewing their effectiveness. In accordance with the guidance set out in
  the Turnbull Report "Internal Control: Guidance for Directors on the Combined
  Code", an ongoing process had been established for identifying, managing
  and evaluating the risks faced by the Group. This process has been in place
  for the full fiscal year and up to the date on which the UK financial statements
  were approved.
The systems are designed to manage rather than
  eliminate the risk of failure to achieve the Group's objectives, safeguard
  the Group's assets against material loss, fairly report the Group's
  performance and position and to ensure compliance with relevant legislation,
  regulation and best practice including that related to social, environmental
  and ethical matters. The systems provide reasonable, not absolute, assurance
  against material misstatement or loss. Such systems are regularly reviewed by
  the Board to deal with changing circumstances. A summary of the key financial
  risks inherent in Wolseley's business is included under "Item 3 –
  Key Information, paragraph D – Risk Factors Relating to Wolseley's
  Industry and Business". Risk assessment and evaluation is an integral part
  of the annual planning cycle. Each business documents the strategic objectives
  and the effectiveness of the Group's systems of internal control. As part
  of this review, each business area and function has been required to identify
  and document each significant risk, together with the mitigating actions implemented
  to manage, monitor and report to management on the effectiveness of these controls.
  Senior managers are also required to sign bi-annual confirmations of compliance
  with key procedures and to report any breakdowns in, or exceptions to, these
  procedures. Summarized results have been presented to senior management (including
  to the executive committee) and to the audit committee. These processes have
  been in place throughout the fiscal year ended July 31, 2006 and have continued
  to the date of this annual report. The Board has reviewed the effectiveness
  of the Group's system of internal control for the year under review, and
  a summary of the principal control structures and processes in place across
  the Group is set out below.
Control structures
Whilst the Board has overall responsibility
  for the Group's system of internal control and for reviewing its effectiveness,
  it has delegated responsibility for the internal control and risk management
  program to the Group Finance Director. The detailed review of internal control
  and risk management has been delegated to the audit committee. The management
  of each Group company is responsible for internal control and risk management
  within its own business and for ensuring compliance with the Group's policies
  and procedures. Each Group company has appointed a risk director whose primary
  role in such capacity is to ensure compliance by local management with the Group's
  risk management and internal control program. Both the internal and external
  auditors have reviewed the overall approach adopted by the Group towards its
  risk management activities so as to reinforce these internal control requirements.
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Control processes
The Board reviews its strategic plans and objectives
  on an annual basis and approves Group company budgets and strategies in light
  of these. Control is exercised at Group, continental and subsidiary boards level
  through monthly monitoring of performance by comparison to budgets, forecasts
  and cash targets, and by regular visits to Group companies by the Group Chief
  Executive, Group Finance Director and by the Chief Executives of each continent.
  Group companies approve and submit risk reports to the audit committee on a
  bi-annual basis, summarizing the key risks facing their businesses and the controls
  in place to manage those risks. These reports, together with reports on internal
  control and departures, if any, from established Group procedures prepared by
  the internal and external auditors, are reviewed by the Group Finance Director
  and the audit committee. Group companies also submit annual risk and internal
  control representation letters to the Group Finance Director on internal control
  and risk management issues, with comments on the control environment within
  their operations. The Group Finance Director summarizes these submissions for
  the audit committee, and the chairman of the audit committee reports to the
  Board on any matters which have arisen from the committee's review of the
  way in which the risk management and internal control processes have been applied.
  Key management of Group companies are also required to support the disclosures
  and attestations that the Group Chief Executive and Group Finance Director are
  required to give under the Sarbanes-Oxley Act.
The Board has formal procedures in place for
  the approval of investment and acquisition projects, with designated levels
  of authority, supported by post investment review processes for selected acquisitions
  and major capital expenditures. The Board considers social, environmental and
  ethical matters in relation to the Group's businesses and assesses these
  when reviewing the risks faced by the Group. The Board is conscious of the effect
  such matters may have on the short and long-term value of Wolseley. Wolseley's
  external auditors and the Head of Internal Audit attend audit committee meetings
  and receive its papers. The report of the audit committee is set out at "Item
  6 – Directors, Senior Management and Employees, Paragraph C – Board
  Practices, Audit Committee", and the audit committee members regularly
  meet the Head of Internal Audit and the external auditors without the presence
  of executive management.
Wolseley is required to comply with applicable
  US regulations, including the Sarbanes-Oxley Act, insofar as they apply to foreign
  private issuers. Accordingly, Wolseley has established a disclosure committee
  comprising the Group Chief Executive, Group Finance Director, Group Financial
  Controller, Director of Financial Reporting and Strategy and the Group Company
  Secretary and Counsel. The Group Chief Executive and Group Finance Director
  have evaluated the effectiveness of Wolseley's disclosure controls and
  procedures as of July 31, 2006. Based on such evaluation, such officers have
  concluded that, as of that date, Wolseley's disclosure controls and procedures
  were effective. There were no significant changes in Wolseley's disclosure
  controls and procedures or in other factors that could significantly affect
  those controls subsequent to the date that the evaluation was completed.
In accordance with the requirements of Section
  404 of the Sarbanes-Oxley Act, Wolseley's management is responsible for
  establishing and maintaining adequate internal control over financial reporting
  as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended.
  Wolseley's internal control over financial reporting is designed to provide
  reasonable assurance regarding the reliability of financial reporting and the
  preparation of financial statements for external purposes in accordance with
  IFRS, including the reconciliations required under US GAAP. Because of its inherent
  limitations, internal control over financial reporting is not intended to provide
  absolute assurance that a misstatement of Wolseley's financial statements
  would be prevented or detected.
Wolseley's management conducted an evaluation
  of the effectiveness of its internal control over financial reporting based
  on the framework in
Internal
  Control-Integrated Framework
issued by the Committee
  of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
  management concluded that Wolseley's internal control over financial reporting
  was effective as of July 31, 2006.
PricewaterhouseCoopers LLP, which has audited
  the consolidated financial statements of the Group for the fiscal year ended
  July 31, 2006, has also audited management's assessment of the effectiveness
  of Wolseley's internal control over financial reporting; their report is
  included herein.
Certifications by the Group Chief Executive
  and Group Finance Director as required by the Sarbanes-Oxley Act are submitted
  as exhibits to this Form 20-F.
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D. Employees
As of July 31, 2006, Wolseley had 72,750 employees,
  including 43,154 employees in North American Distribution and 29,441 employees
  in European Distribution.
A small proportion of Wolseley's employees
  are covered by collective bargaining or other similar labor agreements. Historically,
  the effects of collective bargaining and other similar labor agreements on the
  Group have not been significant. Any inability by Wolseley to negotiate acceptable
  new contracts with unions could cause strikes or other work stoppages, and new
  contracts could result in increased operating costs. While there are a few collective
  bargaining agreements covering Wolseley employees which are in the process of
  being renegotiated, the non-renewal of these contracts would not have a material
  impact on Wolseley's operations. At this time, Wolseley does not currently
  anticipate any problems re-negotiating acceptable contracts in these cases.
E. Share Ownership
The following table sets forth information
  known to Wolseley with respect to the beneficial ownership of Wolseley's
  ordinary shares as of October 31, 2006 by each of Wolseley's executive
  and non executive directors and members of Wolseley's senior management
  in office on such date. Beneficial ownership is determined in accordance with
  the rules of the SEC and generally includes voting or investment power with
  respect to securities. Ordinary shares subject to stock options currently exercisable
  or exercisable within 60 days are deemed to be outstanding for computing the
  percentage ownership of the person holding these options and the percentage
  ownership of any group of which the holder is a member, but are not deemed outstanding
  for computing the percentage of any other person. Subject to community property
  laws where applicable, the persons named in the table have sole voting power
  and investment power with respect to all ordinary shares shown as beneficially
  owned by them.
Number
      of Shares
Beneficially
Percentage
Owned
      at
of Shares
Name
October
      31, 2006
Outstanding
Adrian Barden
19,735
*
Gareth Davis
10,664
*
Andrew J. Duff
7,006
*
Fenton N. Hord
91,470
*
Claude A.S. Hornsby
57,709
*
Robert H. Marchbank
26,462
*
James I. K. Murray
7,000
*
Frank W. Roach
27,248
*
Nigel M. Stein
4,500
*
Robert M. Walker
10,908
*
Stephen P. Webster
50,220
*
Mark J. White
4,674
*
John W. Whybrow
70,284
*
*
denotes less than 1% of issued share capital
      of Wolseley.
As of both July 31, 2006 and October 31, 2006,
  none of the directors had any beneficial interest in the shares of any Wolseley
  subsidiary. Apart from contracts of employment, none of the persons listed above
  had a material beneficial interest in any contract of significance to which
  Wolseley or any of its subsidiaries was a party during the fiscal year ended
  July 31, 2006 or the period from then until October 31, 2006. For information
  regarding option ownership and equity plans, see "Item 6 – Directors,
  Senior Managers and Employees, Paragraph B – Compensation".
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ITEM
  7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
Wolseley does not presently have any 5% or
  greater shareholders. Under the Companies Act 1985, holders of voting securities
  of a listed UK company must notify Wolseley of the level of their holding whenever
  it reaches, exceeds or falls below specified thresholds. These thresholds are
  3% (beneficial) and 10% (non-beneficial) and every one percentage movement in
  the number of shares held which have voting rights. The following table sets
  forth, as of October 31, 2006, the number of ordinary shares held by holders
  of more than 3% and their percentage ownership which have been notified to Wolseley
  in accordance with the provisions noted above.
Name
%
Lloyds TSB Group plc
4.126
Barclays plc
3.020
Legal & General Investment Management
      Limited
3.000
None of Wolseley's major shareholders
  has voting rights different from any other shareholder.
As of October 31, 2006, Wolseley had a total
  of 14,648 shareholders who owned a total of 657,303,997 ordinary shares. Of
  these, 14,238 were registered with addresses in the UK and collectively these
  shareholders owned a total of 651,857,106 ordinary shares, representing 99.17%
  of Wolseley's outstanding ordinary shares, including those held through
  ADSs. Wolseley is not directly or indirectly controlled by another corporation,
  government or by any other legal or natural person.
As of October 31, 2006, 790,195 ordinary shares
  were held on record in the US, held by 46 record holders and representing less
  than 0.0012% of the total number of ordinary shares outstanding and 49,635 ordinary
  shares were held on record in Canada by 13 record holders. As of October 31,
  2006, ADRs evidencing 8,510,349 ADSs were held by 36 record holders. There may
  be additional beneficial owners resident in the US that have not been specifically
  identified.
B. Related Party Transactions
Details of the Group's material related
  party transactions are set out in Note 36 to the financial statements.
C. Interests of Experts and Counsel
Not applicable.
ITEM
  8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial
  Information
Financial information
Wolseley's financial condition is presented
  in the Consolidated Financial Statements and related notes filed as part of
  this Annual Report on Pages F-1 through F-71
.
Legal proceedings
Wolseley is involved in various legal proceedings
  incidental to the nature of its business. Although it is not possible to predict
  the outcome of these proceedings, or any claim against Wolseley related thereto,
  Wolseley believes that such proceedings will not, individually or in the aggregate,
  have a material adverse effect on its financial condition or results of operations.
  Wolseley maintains various insurance coverages to minimize financial risk associated
  with claims related to these proceedings. In the opinion of management, uninsured
  losses, if any, resulting from the ultimate resolution of these matters will
  not have a material effect on Wolseley's financial position or results
  of operations.
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Dividends
Wolseley has paid cash dividends on its ordinary
  shares in every fiscal period since 1958. Cash dividends are paid to shareholders
  as of record dates that are fixed between Wolseley and the London Stock Exchange,
  and such record dates are also announced in accordance with applicable NYSE
  rules. Wolseley historically pays dividends twice a year. Future cash dividends
  will be dependent upon Wolseley's earnings, financial condition (including
  cash requirements), future earnings prospects and other factors.
B. Significant Changes
None.
ITEM
  9. THE OFFER AND LISTING
A. Offer and Listing Details
Ordinary Shares Price History
The ordinary shares are listed on the London
  Stock Exchange and since May 2001 (in the form of ADSs) on the NYSE. The following
  table sets forth, for the periods indicated, the reported high and low market
  quotations based on the Daily Official List of the London Stock Exchange for
  the ordinary shares, and the reported high and low for ADSs quoted on the NYSE.
London Stock Exchange
NYSE (US Dollars per)
(pence per) Ordinary Share
ADS
(1)
Period
High
Low
High
Low
(p)
(p)
($)
($)
Fiscal year 2001
546.00
260.00
42.00
26.01
Fiscal year 2002
750.00
370.00
55.40
26.00
Fiscal year 2003
706.75
600.00
60.24
48.50
Fiscal year 2004
875.00
649.00
33.45
21.60
Fiscal year 2005
First Quarter
971.00
822.00
35.35
30.75
Second Quarter
1098.50
877.00
42.25
34.65
Third Quarter
1149.00
1048.00
44.59
40.77
Fourth Quarter
1202.00
1040.00
43.40
39.54
(1)
Each ADS represented five Wolseley
      ordinary shares until February 2, 2004 when the ratio was altered such that
      each ADS represented two Wolseley ordinary shares. The market quotations
      shown in the table above for periods prior to February 2, 2004 have not
      been adjusted to reflect the subsequent ratio of two ordinary shares per
      ADS.
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London Stock Exchange
NYSE (US Dollars per)
(pence per) Ordinary Share
ADS
(2)
Period
High
Low
High
Low
(p)
(p)
($)
($)
Fiscal year 2006
First Quarter
1240.00
1102.00
22.03
19.88
Second Quarter
1356.00
1164.00
24.51
20.53
Third Quarter
1462.00
1350.00
25.99
24.05
Fourth Quarter
1396.00
1079.00
26.10
20.32
May 2006
1396.00
1181.00
26.10
22.55
June 2006
1225.00
1101.00
23.50
20.75
July 2006
1194.00
1079.00
22.46
20.32
August 2006
1155.00
1063.00
22.19
20.35
September 2006
1193.00
1094.00
22.70
20.73
October 2006
1263.00
1134.00
24.22
21.63
(2)
The Company further changed the ratio
      with effect from June 30, 2006 such that each ADS represented one Wolseley
      ordinary share. The market quotations shown in the table above for the fiscal
      year 2006 have been adjusted to reflect the ratio of one ordinary share
      per ADS.
B. Plan of Distribution
Not applicable.
C. Markets
The principal trading market for the ordinary
  shares is the London Stock Exchange. Wolseley's ADSs, each representing
  one ordinary share, are listed on the NYSE under the symbol 'WOS'.
  The ADSs are evidenced by ADRs issued by The Bank of New York, as Depositary
  under the Amended and Restated Deposit Agreement, originally dated as of February
  2, 2004, and restated as of June 30, 2006, among Wolseley, the Depositary and
  the holders from time to time of ADRs (the "Deposit Agreement").
D. Selling Shareholders
Not applicable.
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E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM
  10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
For details on Wolseley's Memorandum and
  Articles of Association, please refer to Item 10B of the Annual Report for the
  fiscal year ended July 31, 2003 as filed with the SEC on November 21, 2003,
  which section is incorporated herein by reference.
C. Material Contracts
On November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. The funds raised are being used principally to fund the Group's
  working capital and refinance existing facilities that are due to mature within
  the next two years. Of the eight tranches, six are at fixed rates with maturities
  ranging from 3 to 15 years and two tranches are floating with maturities of
  3 and 7 years. Exhibit 4.24 to this document contains the note and guarantee
  agreement.
On June 2, 2006 Wolseley agreed to a €
  2.8 billion, five year, multicurrency revolving facility agreement with a syndicate
      of banks. Exhibit 4.34 to this document contains the loan facility and
      guarantee agreement.
On September 13, 2006, Wolseley agreed to
    a  borrowing facility of €1.5 billion with six of its relationship
    banks.  The purpose of the facility was to finance the purchase of the equity
    of the
  DT Group, which was completed on September 25, 2006. A repayment of €1.0
   billion was made on September 28, 2006, and the facility was reduced to €500
    million. This facility will mature on March 31, 2008, but may be repaid at
   any
  time prior to this date.
On July 24, 2006, Sale and Purchase Agreements
     were entered into between DT Holding 1 A/S and DT Officers A/S and Wolseley

  to acquire DT Group (formerly known as Danske Traelast), conditional only upon
     regulatory approval and copies of which are included in the exhibits to
    this
  Annual Report. The aggregate value of the transaction, representing the equity
     value of DT Group, was €1,982 million, including net debt of €484
      million, (approximately $2,530
million using the prevailing exchange rate on October 31, 2006) and was completed
   on September 25 2006.
D.
Exchange
  Controls
There are no UK restrictions on the import or
  export of capital including foreign exchange controls that affect the remittances
  of dividends in cash or other payments to non-resident holders of ordinary shares
  except for certain restrictions imposed from time to time by the UK government
  pursuant to legislation, such as The United Nations Act 1946 and the Emergency
  Powers Act 1964, against the government or residents of certain countries.
Except for certain restrictions that may be
  imposed from time to time by the UK government under legislation as described
  above, under English law, persons who are neither residents nor nationals of
  the UK may freely hold, vote and transfer ordinary shares in the same manner
  as UK residents or nationals.
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E. Taxation
The following discussion summarizes the material
  US and UK tax consequences regarding the ownership and disposition of the ADSs
  and ordinary shares and is not a complete analysis or listing of all the possible
  tax consequences of such ownership and disposition. This section is based on
  the US Internal Revenue Code of 1986, as amended (the "Code"), its
  legislative history, Treasury Regulations promulgated thereunder, the Convention
  Between the United States of America and the United Kingdom which entered into
  force on March 31, 2003 (the "Income Tax Convention"), the Convention
  Between the United States of America and the United Kingdom which entered into
  force in 1980 (the "Old Income Tax Convention"), and administrative
  and judicial interpretations of the Code, the Income Tax Convention and the
  Old Income Tax Convention, all as in effect as of the date of this Annual Report,
  and all of which are subject to change, possibly on a retroactive basis. Statements
  regarding UK tax laws and practices set out below are based on those UK laws
  and published practices of the UK HM Revenue and Customs as in force on the
  date of this Annual Report, which are subject to change.
This discussion only applies to US holders
  (as defined below) who hold their ADSs or ordinary shares as capital assets
  and use the US dollar as their functional currency. It does not address the
  tax treatment of US holders subject to special rules, such as banks or other
  financial institutions, dealers in securities, insurance companies, traders
  in securities that mark to market, tax-exempt entities, entities treated as
  partnerships for US federal income tax purposes or their partners, holders of
  10% or more of the voting shares of Wolseley, persons holding their ADSs or
  ordinary shares as part of a hedging, straddle, conversion or constructive sale
  transaction, persons subject to the alternative minimum tax and persons who
  are resident or ordinarily resident in the UK (or who ceased to be so resident
  on or after March 17, 1998 and thereafter became resident within five years
  of assessment). The summary also does not discuss the tax consequences under
  state, local or non-US or non-UK laws.
This discussion does not consider particular
  circumstances. It is not a substitute for tax advice. Shareholders are urged
  to consult their tax advisors about the US federal, state and local, the UK
  and other tax consequences to them in light of their particular circumstances
  of purchasing, owning and disposing of ADSs or ordinary shares, and in particular
  whether they are eligible for the benefits of the Income Tax Convention and
  the Old Income Tax Convention.
As used in this discussion, "US holder"
  means a beneficial owner of ordinary shares or ADSs that is (i) a US citizen
  or resident, (ii) a corporation or other entity taxable as an association created
  or organized under the laws of the US or any political subdivision thereof,
  (iii) a trust if a court within the United States is able to exercise primary
  supervision over the administration of the trust and one or more United States
  persons have the authority to control all substantial decisions of the trust,
  or (iv) an estate the income of which is subject to US federal income taxation
  regardless of its source.
On March 31, 2003, the US and the UK ratified
  the current income tax treaty (the Income Tax Convention) to replace the Old
  Income Tax Convention. The Income Tax Convention generally became effective
  with respect to withholding taxes on May 1, 2003, other US taxes on January
  1, 2004, UK income and capital gains tax on April 6, 2003 and UK corporation
  tax on April 1, 2003. Taxpayers may elect to have the Old Income Tax Convention
  apply for a twelve month period from the date on which the Income Tax Convention
  would otherwise apply. US holders should consult their tax advisors regarding
  the potential application of the Income Tax Convention and the Old Income Tax
  Convention, including the relevant effective dates of the Income Tax Convention.
Considerations Relevant to the ADSs and
  Ordinary Shares
US holders of ADSs are treated as the owners
  of the underlying ordinary shares for purposes of the Income Tax Convention,
  the Old Income Tax Convention and the Estate and Gift Tax Convention (defined
  below), and for US federal income tax purposes.
Taxation of Dividends
For US federal income tax purposes, distributions
  paid to a US holder by Wolseley are treated as dividends to the extent paid
  out of Wolseley's current or accumulated earnings and profits, as determined
  for US federal income tax purposes. Distributions by Wolseley in excess of current
  and accumulated earnings and profits, as determined for US federal income tax
  purposes, are treated as a return of capital to the extent of the US holder's
  adjusted tax basis in its ADSs or ordinary shares, as the case may be, and thereafter
  as capital gain.
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Under current UK taxation law, Wolseley is
  not required when paying a dividend on ordinary shares to withhold any tax at
  source. Under the terms of the Old Income Tax Convention, a US holder that is
  eligible for benefits thereunder is treated as having paid a notional UK withholding
  tax in an amount equal to a tax credit payment (a "Related Tax Credit")
  that the holder is entitled to receive from the UK HM Revenue and Customs. At
  current tax rates, a dividend of £90 entitles an eligible US holder to
  a Related Tax Credit of £10 offset by a notional UK withholding tax of
  £10. Because the Related Tax Credit and the notional UK withholding tax
  offset each other, the UK HM Revenue and Customs neither makes the Related Tax
  Credit payment nor collects the notional UK withholding tax. In Revenue Procedure
  2000-13, 2000-6 I.R.B. 515, the Internal Revenue Service confirmed that under
  the Old Income Tax Convention, an eligible US holder will continue to be entitled
  to claim the US dollar value of such notional UK withholding tax as a credit
  against the US holder's US federal income tax liability, subject to certain
  conditions and limitations. To qualify for the foreign tax credit, a US holder
  must make an election to receive a foreign tax credit by filing Form 8833 with
  the taxpayer's US federal income tax return for the relevant year. Pursuant
  to this election, the US holder is treated as having paid the notional UK withholding
  tax on the date of distribution. No claim need be filed with the UK HM Revenue
  and Customs. US Holders are urged to consult their tax advisors as to whether
  they are eligible for the benefits of the Old Income Tax Convention. US holders
  are required to satisfy certain holding period requirements with respect to
  an ADS or ordinary share in order to claim the U.S. foreign tax credit for the
  notional UK withholding tax.
The rules relating to foreign tax credits are
  extremely complex, and US holders should consult their tax advisors with regard
  to the availability of any foreign tax credit and application of the foreign
  tax credit rules to their particular situation.
Dividends and amounts in respect of the Related
  Tax Credit will be income to a US Holder for US federal income tax purposes
  but generally will not be eligible for the dividends received deduction allowed
  to corporate holders. Any dividends paid by Wolseley in pounds sterling are
  included in the gross income of a US holder as an amount equal to the US dollar
  value of the dividend at the spot rate of exchange on the date the dividend
  is includable in the income of the US person, regardless of whether the payment
  is in fact converted into US dollars. US holders should consult their tax advisors
  regarding the treatment of any foreign currency gain or loss on any pounds sterling
  received by the US holder that is not converted into US dollars on the day the
  pounds sterling are includable in the income of the US holder.
A US holder who is a resident of the United
  States for purposes of the Old Income Tax Convention will nonetheless not be
  entitled to the Related Tax Credit and consequently will not be entitled to
  a credit against US tax liability for the notional withholding tax thereon,
  if (a) the holding of ordinary shares or ADSs is (i) effectively connected with
  a permanent establishment situated in the United Kingdom through which the holder
  carries on business in the United Kingdom or (ii) effectively connected with
  a fixed base in the United Kingdom from which the holder performs independent
  personal services or (b) in the case of a US holder that is a corporation, the
  US holder (i) is also a resident of the United Kingdom for purposes of the Old
  Income Tax Convention or (ii) is, in certain circumstances, an investment or
  holding company at least 25% of the capital of which is held, directly or indirectly,
  by persons who are neither individual residents of the United States nor citizens
  of the United States. Furthermore, special rules may apply in respect of the
  Related Tax Credit if the US holder (a) owns at least 10% of the class of shares
  in respect of which the dividend is paid (or, in the case of a US Holder that
  is a corporation, controls, alone or with one or more associated corporations,
  at least 10% of the voting stock of Wolseley plc) or (b) is exempt from tax
  in the United States on dividends paid by Wolseley plc. In addition, if a US
  holder is a trust or estate, the Related Tax Credit will be available only to
  the extent that the income derived by such trust or estate is subject to US
  tax as the income of a resident either in its hands or in the hands of its beneficiaries.
Under the Income Tax Convention, the Related
  Tax Credit and the notional UK withholding tax discussed above are eliminated
  and it would therefore not be possible to claim a foreign tax credit in respect
  of any dividend payment made by the Company. As stated above, US holders may
  elect to have the Old Income Tax Convention apply for a twelve-month period
  from the date on which the new Income Tax Convention would otherwise apply.
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Taxation of Capital Gains
A US holder will not be liable for UK tax on
  gains realized on the disposal of ADSs or ordinary shares unless, at the time
  of disposal, that holder carries on a trade (or profession or vocation) in the
  UK through a branch or agency or permanent establishment and the ADSs or ordinary
  shares are or have been used, held or acquired for the purposes of such trade,
  branch or agency or permanent establishment. For US federal income tax purposes,
  a US resident holder of ADSs or ordinary shares generally will recognize a capital
  gain or loss on the sale or other taxable disposition of ADSs or ordinary shares
  in an amount equal to the difference between the amount realized on the sale
  or other disposition (or its US dollar equivalent, determined at the spot rate
  on the date of sale if the amount is realized in a foreign currency) and the
  US holder's adjusted tax basis in the ADSs or ordinary shares. Such gain
  or loss generally will be treated as long-term capital gain or loss if the ADSs
  or ordinary shares are held for more than one year as of the date of the sale
  or other taxable disposition. Gains or losses recognized by US holders generally
  will be considered US source income or loss for US foreign tax credit limitation
  purposes. The deductibility of capital losses is subject to certain limitations.
Information Reporting and Backup Withholding
In general, information reporting requirements
  will apply to dividend payments (or other taxable distributions) and proceeds
  paid in respect of ADSs or ordinary shares made within the US (and, in certain
  cases, outside the US) to a non-corporate US person, and "backup withholding"
  will apply to such payments paid during year if the US holder or beneficial
  owner fails to provide an accurate taxpayer identification number in the manner
  required by US law and applicable regulations, if there has been notification
  from the US Internal Revenue Service of a failure by the holder or beneficial
  owner to report all interest or dividends required to be shown on its federal
  income tax returns or, in certain circumstances, if the holder or beneficial
  owner fails to comply with applicable certification requirements. Certain corporations
  and persons that are not US persons may be required to establish their exemption
  from information reporting and backup withholding by certifying their status
  on the appropriate US Internal Revenue Service forms W-8 or W-8BEN.
Amounts withheld under the backup withholding
  rules may be credited against a holder's tax liability, and a holder may
  obtain a refund of any excess amounts withheld under the backup withholding
  rules by filing the appropriate claim for refund with the US Internal Revenue
  Service.
Inheritance Tax
Under the convention which entered into force
  on November 11, 1979 between the US and UK for the avoidance of double taxation
  and the prevention of fiscal evasion with respect to taxes on estates of deceased
  persons and on gifts (the "Estate and Gift Tax Convention"), ADSs
  or ordinary shares held by an individual who is domiciled in the US and is not
  a national of or domiciled in the UK will generally not be subject to UK inheritance
  tax on the individual's death or on a gift of the ADSs or ordinary shares
  during the individual's lifetime except in certain cases where the ADSs
  or ordinary shares are placed in trust by a settlor domiciled in the UK and
  not domiciled in the US and in the exceptional case where the ADSs or ordinary
  shares are part of the business property of a UK permanent establishment of
  the individual or pertain to a UK fixed base of the individual used for the
  performance of independent personal services. In a case where the ADSs or ordinary
  shares are subject both to UK inheritance tax and to US federal gift or estate
  tax, the Estate and Gift Tax Convention generally provides a credit for the
  amount of any tax paid in the UK against the US federal tax liability, or for
  any tax paid in the US against the UK liability, based on priority rules set
  forth in the Estate Tax and Gift Convention.
Stamp Duty and Stamp Duty Reserve Tax
  ("SDRT")
UK stamp duty will, subject to certain exceptions,
  be payable on any instrument transferring ordinary shares to the Custodian of
  the Depositary at the rate of 1.5% (rounded up to the nearest £5) on the
  value of such ordinary shares. SDRT will be payable at the rate of 1.5% of the
  consideration under any agreement to issue or transfer ordinary shares to the
  Custodian of the Depositary. In accordance with the terms of the Deposit Agreement,
  any tax or duty payable by the Depositary or the Custodian of the Depositary
  with respect to any ADSs shall be payable by the owner or beneficial owner of
  the ADSs.
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No UK stamp duty will be payable on any transfer
  of an ADS, provided that the ADS (and any separate instrument of transfer) is
  executed and retained at all times outside the UK. A transfer of an ADS in the
  US thus will not give rise to UK stamp duty. Any transfer of ordinary shares
  not held in the form of ADSs could result in a stamp duty liability at the rate
  of 0.5% rounded up to the nearest £5. The amount of stamp duty payable
  is generally calculated on the purchase price of the ordinary shares. There
  is no charge to ad valorem stamp duty on most gifts. On a transfer from the
  Depositary or its nominee to the relevant ADS holder under which no beneficial
  interest passes, a fixed £5 stamp duty should be payable.
UK SDRT at a rate of 0.5%, will be payable
  on any agreement to transfer ordinary shares or any interest therein. If an
  instrument transferring the ordinary shares is executed and stamped within six
  years of the date on which the agreement is made, any SDRT paid will be refundable
  and any SDRT not paid will cease to be due. SDRT will not be payable on any
  agreement to transfer ADSs.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
Any statement in this annual report about any
  of Wolseley's documents is not necessarily complete. If the document is
  filed as an exhibit to this annual report, the document is deemed to modify
  the description contained in this Annual Report.
Investors must review the exhibits themselves
  for a complete description of the document. Investors may review a copy of Wolseley's
  filings with the SEC, including exhibits and schedules filed therewith, at the
  SEC's public reference facilities at the Headquarters Office, 450 Fifth
  Street, N.W., Washington, D.C. 20549 and at the regional offices of the SEC
  located at the Woolworth Building, 233 Broadway, 16th Floor, New York, New York,
  10279 and at the Northwestern Atrium Center, 1751W. Jackson Boulevard, Suite
  900, Chicago, Illinois, 60604. Investors may also obtain copies of such materials
  from the Public Reference Section of the SEC, at the Headquarters Office, 450
  Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Investors may
  call the SEC at 1-800-SEC-0330 for further information on the public reference
  rooms.
Investors may read and copy any reports, statements
  or other information that Wolseley files with the SEC at the addresses indicated
  above. These SEC filings are also available to the public from commercial document
  retrieval services and on the SEC's website at www.sec.gov.
Wolseley is required to file reports and other
  information with the SEC under the Securities Exchange Act of 1934. Reports
  and other information filed by Wolseley with the SEC may be inspected and copied
  at the SEC's public reference facilities described above. As a foreign
  private issuer, Wolseley is exempt from the rules under the Exchange Act prescribing
  the furnishing and content of proxy statements, and Wolseley's officers,
  directors and principal shareholders are exempt from the reporting and short-swing
  profit recovery provisions contained in Section 16 of the Exchange Act. Under
  the Exchange Act, as a foreign private issuer, Wolseley is not required to publish
  financial statements as frequently or as promptly as US companies.
I. Subsidiary Information
Not applicable.
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ITEM
  11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Treasury Risk Management
Wolseley is exposed to market risks arising
  from its international operations. The Group has well defined and consistently
  applied policies for the management of foreign exchange and interest rate exposures.
  There has been no change since July 31, 2006 in the major financial risks faced
  by the Group.
The main risks arising from the Group's
     financial instruments are interest rate risk, liquidity risk and foreign
    currency
  risk. The treasury committee of the Board reviews and agrees policies for managing
     each of these risks, and they are summarized below. These policies are regularly

  reviewed. The Group's financial instruments, other than derivatives, comprise
   borrowings, cash and liquid resources and various items, such as trade receivables

  and trade payables that arise directly from its operations. The Group also
  enters  into derivative transactions (principally interest rate swaps and forward
  foreign
  currency contracts). The purpose of such transactions is to hedge certain interest
   rate and currency risks arising from the Group's operations and its sources
    of finance. Details of financial instruments are shown in Note
20 of
  the Consolidated Financial Statements.
Derivatives are also used to a limited extent
  to hedge movements in the price paid for lumber. These options and futures hedging
  contracts mature within one year, and all are with organized exchanges. The
  Group's policy is to control credit risk by only entering into financial
  instruments with authorized counterparties after taking account of their credit
  rating.
It is, and has been throughout the period under
  review, the Group's policy that no trading in financial instruments or
  speculative transactions be undertaken.
Interest Rate Risk
Wolseley finances its operations and acquisitions
  through a mixture of retained profits and bank and other borrowings. Wolseley
  borrows in the desired currencies principally at floating rates of interest
  and then uses interest rate swaps to generate the desired interest rate profile
  thereby managing the Group's exposure to interest rate fluctuations. At
  July 31, 2006, approximately £1,023 million of Wolseley's net borrowings
  were at fixed rates for one year or more after taking account of swaps. Wolseley
  reviews deposits and borrowings by currency at treasury committee and Board
  meetings. The treasury committee gives prior approval to any variations from
  floating rate arrangements. On the basis of Wolseley's analysis as of July
  31, 2006 it is estimated that the maximum effect of a rise of one percentage
  point in the principal interest rates on Wolseley's outstanding indebtedness
  would result in an increase in the interest charge of approximately £9
  million.
Liquidity Risk
Wolseley seeks a balance between certainty
  of funding and a flexible, cost-effective borrowings structure. Wolseley's
  policy is to ensure that, as a minimum, all projected net borrowing needs are
  covered by committed facilities arranged and provided by the corporate office,
  supplemented where appropriate by local facilities.
Wolseley's principal sources of funds
  are committed bank debt and borrowings under a US private placement.
On November 16, 2005, Wolseley raised $1.2
  billion through the private placement of fixed and floating senior unsecured
  notes. The funds raised were used principally to fund the Group's working
  capital and refinance existing facilities. Of the eight tranches, six are at fixed rates with maturities
  ranging from 3 to 15 years and two tranches are floating with maturities of
  3 and 7 years. Exhibit 4.24 to this document contains the note and guarantee
  agreement.
In June 2006, the Group refinanced the great
     majority of its bank debt with a bank syndication which raised €2,800
  million with a maturity of just over 5 years. Exhibit 4.34
  to this document contains the facility agreement.
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The year-end maturity profile of Wolseley's
  centrally managed facilities at July 31, 2006 was as follows:
Facility
Maturity Date
amount £m
Less than 1 year
200
1-2 years
34
2-3 years
174
3-4 years
343
4-5 years
111
Greater than 5 years
2,282
Total
3,144
As at the year-end, undrawn committed facilities
  are as follows:
£m
Less than 1 year
200
1-2 years
—
Over 2 years
580
On September 25, 2006, Wolseley completed the
  acquisition of DT Group, for cash consideration of £1,023 million. The
  indebtedness of DT Group of approximately £330 million at that time was
  also assumed. To provide committed business facilities in respect of the funding
  of this acquisition, Wolseley entered into, on September 13, 2006, an 18 month
  €1,500 million multicurrency revolving facility agreement with a syndicate
  of six of its relationship banks. A repayment of €1.0 billion was made on September 28, 2006 and the facility was reduced to €500 million. Also, on September 25, 2006, to reduce the
  Group's total indebtedness as a result of the DT Group acquisition and
  that arising from the £914 million of acquisitions in fiscal 2006 and
  to provide appropriate headroom for further investment in the business, the
  Group undertook a placing of 10% of its issued ordinary share capital, which
  raised £655 million before fees.
Foreign Currency Risk
Wolseley has significant overseas businesses
  whose revenues are mainly denominated in the currencies of the countries in
  which the operations are located. Approximately 59.1% of the Group's revenue
  during fiscal year 2006 were in US dollars. Wolseley does not have significant
  transactional foreign currency cash flow exposure. However, those that do arise
  are generally hedged with either forward contracts or currency options. Wolseley
  does not normally hedge profit translation exposure since such hedges have only
  temporary effect. Most of the foreign currency earnings generated by Wolseley's
  overseas operations are reinvested in the business to fund growth in those territories.
  Wolseley's policy is to maintain the majority of its debt in the currencies
  of its operating companies as this hedges both the net assets and cash flows
  of the Group.
Details of average exchange rates used in the
  translation of overseas earnings, and of year end exchange rates used in the
  translation of overseas balance sheets, for the principal currencies used by
  the Group are as follows:
2006
2005
US
        Dollar translation rate:
Income
        statement
1.7885
1.8514
Balance
        Sheet
1.8673
1.7564
Canadian
        Dollar translation rate:
Income
        statement
2.0595
2.2997
Balance
        sheet
2.1128
2.1464
Euro
        translation rate:
Income
        statement
1.4577
1.4587
Balance
        sheet
1.4628
1.4479
The net effect of currency translation during
  fiscal year 2006 was to increase revenue by £274 million (2.4%) and to
  increase trading profit by £18 million (2.5%).
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These currency effects reflect a movement during
  the 2006 fiscal year of the average pound sterling exchange rate against each
  of the major currencies with which the Group is involved as follows:
(Strengthening)/
Weakening
of sterling
US Dollar
3.5%
Euro
0.1%
Canadian Dollar
11.7%
Similarly, it is estimated that a strengthening
  of sterling by 10% against all the currencies in which Wolseley does business
  would have reduced operating profit before amortization of acquired intangibles
  for fiscal 2006 by approximately £75 million (8.5%) due to currency translation.
Commodity Risk
Wolseley's operating performance is affected
  by price fluctuations in steel, nickel alloy, copper, aluminum, plastic, lumber
  and other commodities. Wolseley seeks to minimize the effects of changing prices
  through economies of purchasing and inventory management resulting in cost reductions
  and productivity improvements as well as price increases to maintain reasonable
  profit margins. With the exception of lumber futures held to hedge future sales
  commitments, no trading instruments are used in respect of these commodities.
  At July 31, 2006, the Group held no lumber futures contracts.
As discussed above, Wolseley's results
  of operations were both favorably and unfavorably affected by increases and
  decreases in the pricing of commodity-based products. Such commodity price fluctuations
  have from time to time have had a significant effect on Wolseley's financial
  performance and could continue to do so in the future.
ITEM
  12. DESCRIPTION OF SECURITIES OTHER THAN ORDINARY SHARES
Not applicable.
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PART
  II
ITEM
  13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM
  14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM
  15. CONTROLS AND PROCEDURES
Details of the internal controls and procedures
  in place are set out at "Item 6C – Directors, Senior Management and
  Employees – Board Practices", which also sets out the conclusions
  of Wolseley's Chief Executive Officer and Group Finance Director about
  the effectiveness of the Group's disclosure controls and procedures and
  internal controls over financial reporting based on their evaluation as of the
  end of the period covered in this annual report. There were no significant changes
  to Wolseley's disclosure controls and procedures or in other factors that
  could significantly affect those controls subsequent to the date of their evaluation
  was completed.
ITEM
  16A. AUDIT COMMITTEE FINANCIAL EXPERT
Details of the audit committee and of Mr. Stein,
  the Audit Committee Financial Expert, are set out at "Item 6C –Directors,
  Senior Management and Employees – Board Practices".
ITEM
  16B. CODE OF ETHICS
Details of the matters related to the Group
     wide code of ethics and the additions thereto approved by the audit committee

  to create a confidential and anonymous process for dealing with submissions
     by employees and others of any concerns or complaints received by the Group

  regarding, inter alia, accounts, internal accounting or auditing matters, are
     set out at "Item 6C – Directors, Senior Management and Employees –
  Board Practices". Wolseley will provide to any person without charge upon
   request a copy of the Code of Ethics and additional disclosures policy. Requests

  should be made to the Group Company Secretary and Counsel at the address set
   out on page 1 of this annual report or by facsimile to 011 44 118 929 8701
  or
  by e-mail to mark.white@wolseley.com.
No amendment to or waiver from the Code of
  Ethics has been made since its introduction to the Chief Executive Officer,
  Group Financial Director, principal accounting officer or controller or persons
  performing similar functions.
ITEM
  16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Details of the aggregate fees billed for each
     of the last two fiscal years for professional services rendered by the principal

  accountant, PricewaterhouseCoopers LLP (and its predecessor firm PricewaterhouseCoopers),
     for the audit of the Group's annual financial statements are set out
     at
  "Item 18 – Financial Statements" and Note 3 Amounts Charged
  in  arriving at operating profit of the Consolidated Financial Statements.
  Details
  are also disclosed in such note of audit related fees (which comprise "Other
  assurance services" and "Due diligence reviews"), tax fees and all other fees
  for such fiscal years together with a description of
  the
  nature
  of the

  services comprising such fees.
The audit committee's pre-approval policy
  and procedure is incorporated herein by reference to Exhibit 11.3 to the Annual
  Report for the fiscal year 2003, filed with the SEC on November 21, 2003.
ITEM
  16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
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ITEM
  16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Total Number
Maximum
of Shares
Number of
Purchased as
Shares that
Part of
May Yet be
Publicly
Purchased
Total Number
Announced
Under the
of Shares
Average Price
Plans or
Plans or
Period
Purchased
Paid per Share
Programs
Programs
August 1, 2004 – August 31, 2004
—
—
—
—
September 1, 2004 – September 30,
      2004
—
—
—
—
October 1, 2004 – October 31, 2004
—
—
—
—
November 1, 2004 – November 30, 2004
2,000,000
(1)
£9.25
(1)
—
—
December 1, 2004 – December 31, 2004
—
—
—
—
January 1, 2005 – January 31, 2005
—
—
—
—
February 1, 2005 – February 28, 2005
—
—
—
—
March 1, 2005 – March 31, 2005
—
—
—
—
April 1, 2005 – April 30, 2005
—
—
—
—
May 1, 2005 – May 31, 2005
—
—
—
—
June 1, 2005 – June 30, 2005
—
—
—
—
July 1, 2005 – July 31, 2005
—
—
—
—
August 1, 2005 – August 31, 2005
—
—
—
—
September 1, 2005 – September 30,
      2005
—
—
—
—
October 1, 2005 – October 31, 2005
—
—
—
—
November 1, 2005 – November 30, 2005
250,000
(1)
£11.91
(1)
—
—
December 1, 2005 – December 31, 2005
200,000
(1)
£12.34
(1)
—
—
January 1, 2006 – January 31, 2006
400,000
(1)
£12.90
(1)
—
—
February 1, 2006 – February 28, 2006
—
—
—
—
March 1, 2006 – March 31, 2006
200,000
(1)
£14.50
(1)
—
—
April 1, 2006 – April 30, 2006
961,478
(1)
£13.82
(1)
—
—
May 1, 2006 – May 31, 2006
—
—
—
—
June 1, 2006 – June 30, 2006
—
—
—
—
July 1, 2006 – July 31, 2006
—
—
—
—
Total
4,011,478
£12.474
—
—
(1)
The ordinary shares noted
      in the table above were purchased by the trustees of Wolseley's employees
      benefit trusts between November 2004 and April 2006 in anticipation of settlement
      of awards made under diverse employee incentive arrangements as referred
      to under "Item 6 –Directors, Senior Management and Employees –
      Compensation".
(2)
A further 588,522 ordinary
      shares were purchased by the trustee of Wolseley's employees benefit
      trust on September 25, 2006 at a price of £11.00 per share in anticipation
      of settlement of awards made under diverse employee incentive arrangements
      as referred to under "Item 6 –Directors, Senior Management and
      Employees – Compensation".
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PART
  III
ITEM
  17. FINANCIAL STATEMENTS
Not applicable.
ITEM
  18. FINANCIAL STATEMENTS
The Consolidated Financial Statements and notes
  thereto as required by Item 18 are attached hereto and found immediately after
  the text of this annual report.
ITEM
  19. EXHIBITS
Exhibit
No.
Description
1.1
Memorandum and Articles of Association
      of Wolseley plc.*
2.1
Form of Deposit Agreement between
      Wolseley plc and The Bank of New York, as Depositary.*
4.1
Service Agreement dated September
      25, 2002 between Stephen P. Webster and Wolseley plc.**
4.2
Agreement dated April 30, 2003
      between Saprodis S.A.S. (1), Cofiger S.A.S. (2), Pinault- Printemps
Redoute S.A.(3) and Wolseley
      plc (4) for the acquisition of Pinault Bois et Matériaux S.A.***
4.3
Service Agreement dated June
      27, 2003 between Fenton Norton Hord and Wolseley plc.***
4.4
Service Agreement dated July
      9, 2003 between Charles Augustus Banks and Wolseley plc.***
4.5
Service Agreement dated July
      18, 2003 between Claude A. Swanson Hornsby III and Wolseley plc.***
4.6
Service Agreement dated July
      21, 2003 between Gérard Legtmann and Wolseley plc.***
4.7
Service Agreement dated June
      6, 2003 between Adrian Barden and Wolseley plc.***
4.8
Engagement Letter dated September
      2, 2002 between John Whybrow and Wolseley plc.***
4.9
Engagement Letter dated October
      15, 2002 between Robert Walker and Wolseley plc.***
4.10
Engagement Letter dated November
      12, 2002 between John Allan and Wolseley plc.***
4.11
Engagement Letter dated October
      18, 2002 between James Murray and Wolseley plc.***
4.12
Engagement Letter dated June
      16, 2003 between Gareth Davis and Wolseley plc.***
4.13
Rules of the Wolseley plc 2002
      Long Term Incentive Scheme.***
4.14
Deed of Variation to Service
      Agreement dated July 29, 2003, between Wolseley plc and Charles A. Banks.***
4.15
Deed of Variation to Service
      Agreement dated July 30, 2003, between Wolseley plc and Stephen P. Webster.***
4.16
Deed of Variation to Service
      Agreement dated August 11, 2003, between Wolseley plc and Fenton N. Hord.***
4.17
Deed of Variation to Service
      Agreement dated September 12, 2003, between Wolseley plc and Gérard
      Legtmann.***
4.18
Service Agreement dated October
      20, 2003 between Jacques Régis-Descours and Wolseley Centers France.****
4.19
Rules of the Wolseley Share Option
      Plan 2003.****
4.20
Engagement Letter dated October
      17, 2003 between Nigel Stein and Wolseley plc.****
4.21
Engagement Letter dated June
      25, 2004 between Andrew J. Duff and Wolseley plc.****
4.22
Service Agreement dated March
      18, 2005 between Robert H. Marchbank and Wolseley plc.*****
4.23
Rules of the Wolseley plc 2002
      Long Term Incentive Scheme (as applying to Awards made after November 18,
      2004).*****
4.24
Note and Guarantee Agreement
      dated November 16, 2005 by Wolseley Capital Inc and Wolseley plc*****
4.25
Service Agreement dated February
      27, 2006 between Frank W. Roach and Wolseley plc.******
4.26
Deed of Variation to Service
      Agreement dated August 6, 2006, between Wolseley plc and Stephen P. Webster.******
4.27
Rules of the Wolseley Share Option
      Plan 2003, as amended.******
4.28
Rules of the Wolseley plc 2002
      Long Term Incentive Scheme (as applying to Awards made after November 18,
      2004) (as amended).******
4.29
Agreement dated July 22, 2006 between the sellers (as defined in the Agreement) and Wolseley plc for the acquisition of DT Holdings 1 A/S and the Amendment
      letter dated
September 21, 2006. ******
4.30
Agreement dated July 22, 2006 between the sellers (as defined in the Agreement) and Wolseley plc for the acquisition of DT Officers A/S and the Amendment
      letter dated
September 21, 2006.******
4.31
Rules of the Wolseley Restricted Share
    Plan 2006. ******
4.32
Rules of the Wolseley Employee Share Purchase
    Plan 2001 as amended. *****
4.33
€ 1,500,000,000
          multicurrency revolving facility agreement dated September 13, 2006
      ******
4.34
€ 2,800,000,000
        multicurrency revolving facility agreement dated June 2, 2006 ******
8.1
List of Subsidiaries******
8.2
Principal Subsidiary Trade Names ******
10.1
PricewaterhouseCoopers LLP consent, dated
        November 29
,
    2006.
11.1
Group Code of Ethics***
11.2
Group Whistleblowing Policy***
11.3
Pre-approval policy and procedures for
    the provision of non-audit services by the Auditors.***
12.1
Certification by Claude A. S. Hornsby******
12.2
Certification by Stephen P. Webster******
13.1
Certification by Group Chief Executive
    and Group Finance Director ******
*
incorporated by reference to Wolseley's
    Registration Statement on Form 20-F (No. 1-15186).
**
incorporated by reference to Wolseley's
    Annual Report on Form 20-F for fiscal year 2002 (No. 1-15186).
***
incorporated by reference to Wolseley's
    Annual Report on Form 20-F for fiscal year 2003 (No. 1-15186).
****
incorporated by reference to Wolseley's
    Annual Report on Form 20-F for fiscal year 2004 (No. 1-15186).
*****
incorporated by reference to Wolseley's
    Annual Report on Form 20-F for fiscal year 2005 (No. 1-15186).
******
filed with the Securities and Exchange
        Commission, as exhibits to this Form 20-F but not reproduced in the printed
    version of the Annual Report.
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SIGNATURE
The registrant hereby certifies that it meets
  all of the requirements for filing on Form 20-F and that it has duly caused
  and authorized the undersigned to sign this Annual Report on its behalf.
WOLSELEY plc
By:
/s/ M. J. White
Mark J. White
Group Company Secretary and Counsel
Date: November 30, 2006
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WOLSELEY PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of independent registered public accounting firm
F-2
Group income statement for the year
        ended July 31, 2006
F-3
Group statement of recognized income
        and expense for the year ended July 31, 2006
F-3
Group balance sheet as
          of July 31, 2006
F-4
Group cash flow statement for the year
        ended July 31, 2006
F-5
Group accounting policies
F-6
Notes to the consolidated financial
        statements
F-13
Acquisitions completed during the year
F-72
F-1
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Wolseley plc
We have completed an integrated audit of Wolseley plc's
    July 31, 2006 consolidated financial statements and of its internal control
    over financial
  reporting as of July 31, 2006 and an audit of its July 31, 2005 consolidated
  financial statements in accordance with the standards of the Public Company
  Accounting Oversight Board (United States). Our opinions, based on our audits,
  are presented below.
Consolidated financial statements
In
      our opinion, the accompanying group income statements and the related group
      balance sheets, group statements of cash flows, group statements of recognized
      income and expense present fairly, in all material respects, the financial
      position of Wolseley plc and its subsidiaries as of July 31, 2006 and 2005,
      and the results of their operations and their cash flows for each of the
      two years in the period ended July 31, 2006, in conformity with International
      Financial Reporting Standards (IFRSs) as adopted by the European Union.
    These financial statements are the responsibility of the Company's
    management. Our responsibility is to express an opinion on these financial
    statements
      based on our audits. We conducted our audits of these statements in accordance
      with the standards of the Public Company Accounting Oversight Board (United
      States). Those standards require that we plan and perform the audit to
    obtain reasonable assurance about whether the financial statements are free
    of material
      misstatement. An audit of financial statements includes examining, on a
    test basis, evidence supporting the amounts and disclosures in the financial
    statements,
      assessing the accounting principles used and significant estimates made
    by management, and evaluating the overall financial statement presentation.
    We believe that our audits provide a reasonable basis for our opinion.
IFRSs as adopted by the European Union vary
    in certain significant respects from accounting principles generally accepted
    in the United States of America.
      Information relating to the nature and effect of such differences is presented
      in Note 44 to the consolidated financial statements.
Internal control over financial reporting
Also, in our opinion, management's assessment, included in the accompanying "Managements' Evaluation
  of the Effectiveness of Internal Control" as set out in Item 6C - Board Practices - Control Processes-paragraphs 4-6, that the Company maintained effective internal control over financial
  reporting as of July 31, 2006 based on criteria established in Internal Control
  - Integrated Framework issued by the Committee of Sponsoring Organizations
  of the Treadway Commission (COSO), is fairly stated, in all material respects,
  based on those criteria. Furthermore, in our opinion, the Company maintained,
  in all material respects, effective internal control over financial reporting
  as of July 31, 2006, based on criteria established in Internal Control - Integrated
  Framework issued by the COSO. The Company's management is responsible
  for maintaining effective internal control over financial reporting and for
  its assessment of the effectiveness of internal control over financial reporting.
  Our responsibility is to express opinions on management's assessment
  and on the effectiveness of the Company's internal control over financial
  reporting based on our audit.
We conducted our audit of internal control over financial reporting
    in accordance with the standards of the Public Company Accounting Oversight
    Board (United
  States). Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether effective internal control over financial
  reporting was maintained in all material respects. An audit of internal control
  over financial reporting includes obtaining an understanding of internal control
  over financial reporting, evaluating management's assessment, testing
  and evaluating the design and operating effectiveness of internal control,
  and performing such other procedures as we consider necessary in the circumstances.
  We believe that our audit provides a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed
  to provide reasonable assurance regarding the reliability of financial reporting
  and the preparation of financial statements for external purposes in accordance
  with the applicable accounting standards. A company's internal control
  over financial reporting includes those policies and procedures that (i) pertain
  to the maintenance of records that, in reasonable detail, accurately and fairly
  reflect the transactions and dispositions of the assets of the company; (ii)
  provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with the applicable
  accounting standards, and that receipts and expenditures of the company are
  being made only in accordance with authorizations of management and directors
  of the company; and (iii) provide reasonable assurance regarding prevention
  or timely detection of unauthorized acquisition, use, or disposition of the
  company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
  may not prevent or detect misstatements. Also, projections of any evaluation
  of effectiveness to future periods are subject to the risk that controls may
  become inadequate because of changes in conditions, or that the degree of compliance
  with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
London
United Kingdom
November 29, 2006
F-2
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Group income statement
Year ended July 31, 2006
2006
2005
Notes
£m
£m
Continuing operations
Revenue
2
14,158
11,256
Cost of sales
(10,222
)
(8,174
)
Gross profit
3,936
3,082
Distribution costs
(2,413
)
(1,930
)
Administrative expenses: amortization
      of acquired intangibles
(48
)
(6
)
Administrative expenses: other
(665
)
(468
)
Administrative expenses: total
(713
)
(474
)
Other income
24
24
Operating profit
2, 3
834
702
Finance revenue
4
49
27
Finance costs
5
(114
)
(64
)
Profit before tax
769
665
Tax expense
6
(232
)
(186
)
Profit for the year attributable
      to equity shareholders
537
479
Earnings per share
8
Basic earnings per share
90.77
p
81.61
p
Diluted earnings per share
90.02
p
80.75
p
Group statement of recognized income and expense
Year ended July 31, 2006
2006
2005
£m
£m
Profit for the financial year
537
479
Net exchange adjustments offset
      in reserves
(124
)
57
Cash flow hedges
– fair value gains and losses
14
(11
)
– reclassified and reported
      in net profit for the year
(1
)
—
Actuarial gain/(loss) on retirement
      benefits
7
(4
)
Change in fair value of available-for-sale
      investments
(7
)
—
Tax (charge)/credit not recognized
      in the income statement
6
(13
)
34
Net (losses)/gains not recognized
      in the income statement
(124
)
76
Total recognized income for
      the year attributable to shareholders
413
555
The accompanying notes are an integral part
  of these consolidated financial statements.
F-3
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Group balance sheet
As at July 31, 2006
2006
2005
Notes
£m
£m
Assets
Non-current assets
Intangible
      assets: goodwill
11
1,173
815
Intangible assets: other
12
333
133
Property,
      plant and equipment
13
1,144
883
Deferred tax assets
15
16
55
Trade and
      other receivables
17
36
37
Financial assets: available-for-sale
      investments
14
21
6
2,723
1,929
Current assets
Inventories
16
1,954
1,706
Trade and other receivables
17
2,650
2,198
Current tax
      receivable
1
7
Financial assets: trading investments
19
4
5
Derivative
      financial assets
20
10
3
Financial receivables: construction
      loans (secured)
21
313
262
Cash and
      cash equivalents
22
416
381
5,348
4,562
Assets held
      for sale
18
7
8
Total
      assets
8,078
6,499
Liabilities
Current liabilities
Trade and
      other payables
23
2,294
1,943
Current tax payable
91
70
Borrowings:
      construction loans (unsecured)
21
313
262
Bank loans and overdrafts
24
192
439
Obligations
      under finance leases
25
18
4
Derivative financial liabilities
20
29
14
Provisions
26
29
22
Retirement benefit obligations
27
29
17
2,995
2,771
Non-current liabilities
Trade and
      other payables
23
25
18
Bank loans
24
2,084
1,045
Obligations
      under finance leases
25
57
58
Deferred tax liabilities
15
88
62
Provisions
26
77
63
Retirement benefit obligations
27
160
181
2,491
1,427
Total
      liabilities
5,486
4,198
Net assets
2,592
2,301
Shareholders' equity
Called up
      share capital
28
149
148
Share premium account
30
288
241
Foreign currency
      translation reserve
30
(49
)
82
Retained earnings
30
2,204
1,830
Equity
      shareholders' funds
2,592
2,301
The accompanying notes are an integral part
  of these consolidated financial statements.
F-4
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Group cash flow statement
Year ended July 31, 2006
2006
2005
Notes
£m
£m
Cash flows from operating
      activities
Cash generated from operations
34
850
765
Interest received
45
26
Interest paid
(102
)
(57
)
Tax paid
(206
)
(151
)
Net cash generated from
      operating activities
587
583
Cash flows from investing
      activities
Acquisition of businesses (net
      of cash acquired)
32
(822
)
(406
)
Disposals of businesses (net
      of cash disposed of)
33
2
5
Purchases of property, plant
      and equipment
(326
)
(218
)
Proceeds from sale of property,
      plant and equipment
52
74
Purchases of intangible assets
(20
)
(21
)
Purchases of investments
(23
)
—
Proceeds from disposal of investments
—
1
Net cash used in investing
      activities
(1,137
)
(565
)
Cash flows from financing
      activities
Proceeds from the issue of
      shares to shareholders
31
33
Purchases of shares by Employee
      Benefit Trusts
(27
)
(19
)
Proceeds from new borrowings
2,486
410
Repayments of borrowings and
      derivatives
(1,405
)
(234
)
Finance lease capital payments
(17
)
(5
)
Dividends paid to shareholders
(162
)
(145
)
Net cash generated from
      financing activities
906
40
Net cash generated
356
58
Effects of exchange rate changes
(8
)
(26
)
Net increase/(decrease) in
      cash, cash equivalents and bank overdrafts
348
32
Cash, cash equivalents and
      bank overdrafts at the beginning of the year.
35
(56
)
(88
)
Cash, cash equivalents and
      bank overdrafts at the end of the year
35
292
(56
)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
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Group accounting policies
Year ended July 31, 2006
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, including interpretations issued by the
International Accounting Standards Board ("IASB") and its committees, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The disclosures required by IFRS 1, "First-Time Adoption of
International Financial Reporting Standards" concerning the transition from UK GAAP to IFRS are given in note 45. The date of transition to IFRS is August 1, 2004.
A summary of the principal accounting policies applied by the Group in the preparation of the consolidated financial statements is set out below.
Basis of accounting
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of available for sale investments and financial assets and liabilities held for trading.
First time adoption of International Financial
Reporting Standards
IFRS 1, "First-time Adoption of International Financial Reporting Standards" sets
out the procedures that the Group must follow when it adopts IFRS for the first
time as the basis for preparing its consolidated financial statements. The Group
is required to establish its IFRS accounting policies as at July 31, 2006 and,
in general, apply these retrospectively to determine the IFRS opening balance
sheet at its date of transition, August 1,
2004.
Certain optional exemptions to this general principle are available under IFRS 1, and the significant first-time adoption choices made by the Group are as follows:
•
The Group has elected not to apply IFRS
      3 retrospectively to business combinations that took place before August
1, 2004. As a result, in the IFRS opening
      balance sheet, goodwill arising from past business combinations of £666
million remains as stated under UK GAAP at
      that date.
•
The Group has elected to recognize all
      cumulative actuarial gains and losses in relation to post employment
defined benefit schemes at the date of transition.
      In addition, the Group has elected to recognize actuarial gains
and
      losses in full in the period in which they occur in a statement of recognized
      income and expense.
•
The Group has elected to apply IFRS 2,
      "Share Based Payment" only to equity-settled awards that had not
      vested
as at August 1, 2004 and were
      granted on or after 7 November 2002 and cash-settled awards that had not
      vested
as at August 1, 2004.
•
The Group has elected to reset the foreign
      currency translation reserve to zero at August 1, 2004. Going forward,
IFRS requires amounts taken to reserves on
      the retranslation of foreign subsidiaries to be recorded in a separate
foreign currency translation reserve and
      be included in the future calculation of profit or loss on sale of the
subsidiary.
•
The Group has elected to implement IAS
      39, "Financial Instruments: Recognition and Measurement" and IAS 32,
"Financial Instruments: Disclosure and
      Presentation" at its date of transition, August 1, 2004, and apply
      hedge
accounting where the requirements
      of IAS 39 are met.
Consolidation
The consolidated financial information
    includes the results of the parent Company and its subsidiary undertakings drawn
  up to July 31, 2006.
The trading results of businesses acquired, sold or discontinued during the year are included in profit on ordinary activities from the date of effective acquisition or up to the date of sale or discontinuance.
Intra-group transactions and balances and any unrealized gains and losses arising from intra-group transactions are eliminated on consolidation.
F-6
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Group accounting policies
Year ended July 31, 2006
Foreign currencies
Items included in the financial statements
  of each of the Group's subsidiary undertakings are measured using the currency
  of the primary economic environment in which the subsidiary undertaking operates
  (the "functional currency"). The consolidated financial statements
  are presented in sterling, which is the presentational currency of the Group
  and the functional currency of the parent Company.
The trading results of overseas subsidiary undertakings are translated into sterling using average rates of exchange ruling during the relevant financial period.
The balance sheets of overseas subsidiary undertakings are translated into sterling at the rates of exchange ruling at the period end. Exchange differences arising between the translation into sterling of the net
assets of these subsidiary undertakings at rates ruling at the beginning and end of the year are recognized in the currency translation reserve as are exchange differences on foreign currency borrowings to the extent that they are used to finance or
provide a hedge against foreign currency net assets.
Changes in the fair value and the final settlement value of derivative financial instruments, entered into to hedge foreign currency net assets and that satisfy the hedging conditions of IAS 39, are recognized in the
currency translation reserve (see the separate accounting policy on derivative financial instruments).
In the event that an overseas subsidiary undertaking is sold, the gain or loss on disposal recognized in the income statement is determined after taking into account the cumulative currency translation differences that
are attributable to the subsidiary undertaking concerned. As permitted by IFRS 1, the Group has elected to deem the cumulative currency translation differences of the Group to be £nil as at August 1, 2004. As a result the gain or loss on
disposal of an overseas subsidiary undertaking does not include currency translation differences arising before August 1, 2004.
Foreign currency transactions entered into during the year are translated into sterling at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet date. All currency translation differences are taken to the income statement with the exception of differences on foreign currency borrowings to the extent that they are
used to finance or provide a hedge against foreign currency net assets as detailed above.
Revenue
Revenue is the amount receivable for
  the provision of goods and services falling within the Group's ordinary activities,
  excluding intra-group sales, estimated and actual sales returns, trade and early
  settlement discounts, value added tax and similar sales taxes.
Revenue from the provision of goods is recognized when the risks and rewards of ownership of goods have been transferred to the customer. The risks and rewards of ownership of goods are deemed to have been transferred
when the goods are shipped to, or are picked up by, the customer.
Revenue from services, other than those that arise from construction service contracts (see below), are recognized when the service provided to the customer has been completed.
Revenue in respect of construction service contracts, where the Group is providing framing lumber installation services to residential property companies, is recognized using the percentage of completion method, with
the percentage complete being determined by comparing the percentage of costs incurred to date with the estimated total costs of the contract. Losses on these contracts, if any, are recognized in the period when such losses become probable and can
be reasonably estimated.
Revenue from the provision of goods and all services is only recognized when the amounts to be recognized are fixed or determinable and collectibility is reasonably assured.
Vendor rebates
The Group enters into arrangements with
    certain vendors providing for inventory purchase rebates. These purchase rebates
    are accrued as earned and are recorded initially as a reduction in inventory with
    a subsequent reduction in cost of sales when the related product is sold.
F-7
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Group accounting policies
Year ended July 31, 2006
Business combinations
The Group has applied the purchase
  method in its accounting for the acquisition of subsidiaries.
As permitted by IFRS 1, the Group has elected not to apply IFRS 3 "Business Combinations" to acquisitions of subsidiaries that were recognized before August 1, 2004 and as a result the carrying amount of
goodwill recognized as an asset under UK GAAP has been brought forward unadjusted as the cost of goodwill recognized under IFRS as at August 1, 2004. IFRS 3 has been applied with effect from August 1, 2004 and goodwill amortization ceased from that
date.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
Group's share of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.
Intangible assets
Goodwill
Goodwill represents the excess of
  the cost of an acquisition over the fair value of the Group's share of
  the net identifiable assets of the acquired subsidiary undertaking at the date
  of acquisition. Goodwill on acquisitions of subsidiary undertakings is included
  in intangible assets.
Goodwill is not amortized but is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the lowest level within the Group at which the associated goodwill is monitored for
management purposes and each is not larger than the primary or secondary reporting segments determined in accordance with IAS 14 "Segmental Reporting".
Other intangible assets
An intangible asset, which is an identifiable
  non-monetary asset without physical substance, is recognized to the extent that
  it is probable that the expected future economic benefits attributable to the
  asset will flow to the Group and that its cost can be measured reliably. The
  asset is deemed to be identifiable when it is separable or when it arises from
  contractual or other legal rights.
Intangible assets, primarily brands, trade names and customer relationships, acquired as part of a business combination are capitalized separately from goodwill and are carried at cost less accumulated amortization and
accumulated impairment losses. Amortization is calculated using the reducing balance method for customer relationships and the straight-line method for other intangible assets. The cost of the intangible assets is amortized over their estimated
useful lives, which can range from less than a year to 25 years, depending on the nature of the intangible asset.
Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset and is carried at cost less accumulated amortization and accumulated impairment losses.
Costs include software licences, consulting costs attributable to the development, design and implementation of the computer software and internal costs directly attributable to the development, design and implementation of the computer software.
Costs in respect of training and data conversion are expensed as incurred. Amortization is calculated using the straight-line method so as to charge the cost of the computer software to the income statement over its estimated useful life (3-5
years).
F-8
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Group accounting policies
Year ended July 31, 2006
Property, plant and equipment ("PPE")
PPE is carried at cost less accumulated
  depreciation and accumulated impairment losses, except for land and assets in
  the course of construction, which are not depreciated and are carried at cost
  less accumulated impairment losses. Cost includes expenditure that is directly
  attributable to the acquisition of the items. In addition, subsequent costs
  are included in the asset's carrying amount or recognized as a separate
  asset, as appropriate, only when it is probable that future economic benefits
  associated with the item will flow to the Group and the cost of the item can
  be measured reliably. All other repairs and maintenance costs are charged to
  the income statement during the financial period in which they are incurred.
Depreciation on assets is
        calculated using the straight-line method to allocate the cost of each
    asset to its residual value over its estimated useful life, as follows:
Freehold buildings and long leaseholds
35-50 years
Short leaseholds
over the period of the lease
Plant and machinery
7-10 years
Fixtures and fittings
5-7 years
Computers
3-5 years
Motor vehicles
4 years
The residual values and useful lives of PPE are reviewed and adjusted if appropriate at each balance sheet date.
Borrowing costs attributable to assets under construction are charged to the income statement in the period in which they are incurred.
Leased assets
Assets held under finance leases,
  which are leases where substantially all the risks and rewards of ownership
  of the asset have transferred to the Group, are capitalized in the balance sheet
  and depreciated over the shorter of the lease term or their useful lives. The
  asset is recorded at the lower of its fair value and the present value of the
  minimum lease payments at the inception of the lease. The capital elements of
  future obligations under finance leases are included in liabilities in the balance
  sheet and analysed between current and non-current amounts. The interest elements
  of future obligations under finance leases are charged to the income statement
  over the periods of the leases and represent a constant proportion of the balance
  of capital repayments outstanding in accordance with the effective interest
  rate method.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. The cost of operating leases (net of any incentives received from the lessor) is charged to the
income statement on a straight line basis over the periods of the leases.
Assets held for sale
Assets are classified as held for
  sale if their carrying amount will be recovered by sale rather than by continuing
  use in the business. For this to be the case, the asset must be available for
  immediate sale in its present condition, management must be committed to and
  have initiated a plan to sell the asset which, when initiated, was expected
  to result in a completed sale within 12 months. Assets that are classified as
  held for sale are not depreciated and are measured at the lower of their carrying
  amount and fair value less costs to sell.
Impairment of assets
Assets that have an indefinite useful
  life, such as goodwill, are not subject to amortization and are tested annually
  for impairment and whenever events or changes in circumstance indicate that
  the carrying amount may not be recoverable. Assets that are subject to amortization
  are tested for impairment whenever events or changes in circumstance indicate
  that the carrying amount may not be recoverable. An impairment loss is recognized
  for the amount by which the asset's carrying amount exceeds its recoverable
  amount. The recoverable amount is the higher of an asset's fair value less
  costs to sell and value in use. For the purposes of assessing impairment, assets
  are grouped at the lowest levels for which there are separately identifiable
  cash flows.
Inventories
Inventories are stated at the lower
  of cost and net realizable value. Cost is determined using the first-in, first-out
  (FIFO) method or the average cost method as appropriate to the nature of the
  transactions in those items of inventory. The cost of goods purchased for resale
  includes import and custom duties, transport and handling costs, freight and
  packing costs and other attributable costs less trade discounts, rebates and
  other subsidies. It excludes borrowing costs. Net realizable value is the estimated
  selling price in the ordinary course of business, less applicable variable selling
  expenses.
F-9
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Group accounting policies
Year ended July 31, 2006
Taxation
Current tax represents the expected
  tax payable (or recoverable) on the taxable income for the year using tax rates
  enacted or substantively enacted at the balance sheet date and taking into account
  any adjustments arising from prior years.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax
assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred tax is provided on temporary differences arising on investments in subsidiaries
except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Derivative financial instruments
Derivative financial instruments,
  in particular, interest rate swaps and currency swaps, are used to manage the
  financial risks arising from the business activities of the Group and the financing
  of those activities. There is no trading activity in derivative financial instruments.
At the inception of a hedging transaction entailing the use of derivative financial instruments, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management
objective and the strategy underlying the proposed transaction. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedge in offsetting
movements in the fair values or cash flows of the hedged items.
Derivative financial instruments are recognized as assets and liabilities measured at their fair values at the balance sheet date. Where derivative financial instruments do not fulfil
the criteria for hedge accounting contained in IAS 39, changes in their fair values are recognized in the income statement.
When hedge accounting is used, the relevant hedging relationships are classified as fair value hedges, cash flow hedges or
net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the increase or decrease in its fair value attributable to the hedged risk and the
resulting gain or loss is recognized in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. Where the hedging relationship is classified as a cash flow
hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument arising from the hedged risk are recognized directly in equity rather than in the income statement. When the hedged item is
recognized in the financial statements, the accumulated gains and losses recognized in equity are either recycled to the income statement or, if the hedged item results in a non-financial asset, are recognized as adjustments to its initial carrying
amount.
Pensions and other post retirement benefits
Contributions to defined contribution
  pension plans and other post retirement benefits are charged to the income statement
  as incurred.
For defined benefit pension plans and other retirement benefits, the cost is calculated annually using the projected unit credit method and is recognized over the average expected remaining service lives of
participating employees, in accordance with the recommendations of independent qualified actuaries. The current service cost of defined benefit plans is recorded within operating profit. The total expected return from pension scheme assets less the
total interest on pension scheme liabilities is recorded within finance revenue if a gain and finance costs if an expense. Past service costs resulting from enhanced benefits are recorded within operating profit and recognized on a straight-line
basis over the vesting period, or immediately if the benefits have vested. Actuarial gains and losses, which represent differences between the expected and actual returns on the plan assets and the effect of changes in actuarial assumptions, are
recognized in full in the statement of recognized income and expense in the period in which they occur. The defined benefit liability or asset recognized in the balance sheet comprises the net total for each plan of the present value of the benefit
obligation at the balance sheet date, less any past service costs not yet recognized, less the fair value of the plan assets, if any, at the balance sheet date. Where a plan is in surplus, the asset recognized is limited to the amount of any
unrecognized past service costs and the present value of any amount which the Group expects to recover by way of refunds or a reduction in future contributions.
F-10
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Group accounting policies
Year ended July 31, 2006
Trade receivables
Trade receivables are recognized initially
  at fair value and measured subsequently at amortized cost using the effective
  interest method, less provision for impairment. A provision for impairment of
  trade receivables is established when there is objective evidence that the Group
  will not be able to collect all amounts due according to the original terms
  of the receivables.
Cash and cash equivalents
Cash and cash equivalents includes
  cash in hand, deposits held at call with banks, other short-term highly liquid
  investments with original maturities of three months or less, and bank overdrafts.
  Bank overdrafts are shown within borrowings in current liabilities on the balance
  sheet to the extent that there is no right of offset and practice of net settlement
  with cash balances.
Share capital
The Company only has one class of
  shares, ordinary shares, which are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax.
Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity
attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction
costs and the related tax effects, is included in equity attributable to the Company's equity holders.
Borrowings
Borrowings are recognized initially
  at cost being the fair value of the consideration received net of transaction
  costs incurred.
Borrowings are subsequently stated at amortized cost with any difference between the proceeds (net of transaction costs) and the redemption value being recognized in the income statement over the period of the
borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Investments
The Group classifies its investments
  in the following categories: financial assets at fair value through profit or
  loss; loans and receivables; held-to-maturity investments; and available-for-sale
  financial assets. The classification depends on the purpose for which the investments
  were acquired. Management determines the classification of its investments at
  initial recognition and re-evaluates this designation at every reporting date.
(a)
Financial assets at fair value through
      profit or loss
This category comprises financial
      assets held for trading which have been acquired principally for the purpose
      of selling in the short-term. Derivatives also fall within this category
      unless they are designated as hedges and the hedge is effective for accounting
      purposes. Assets in this category are classified as current.
(b)
Loans and receivables
Loans and receivables are
      non-derivative financial assets with fixed or determinable payments that
      are not quoted in an active market and with no intention of trading. They
      are included in current assets, except for maturities greater than 12 months
      after the balance sheet date, which are classified as non-current assets.
      Loans and receivables are included in trade and other receivables in the
      balance sheet.
(c)
Held-to-maturity investments
Held-to-maturity investments
      are non-derivative financial assets with fixed or determinable payments
      and fixed maturities that the Group's management has the positive intention
      and ability to hold to maturity. They are included in non-current assets
      unless the investment is due to mature within 12 months of the balance sheet
      date.
(d)
Available-for-sale financial assets
Available-for-sale financial
      assets are non-derivative financial assets that are either designated in
      this category or not classified in any of the other categories. They are
      included in non-current assets unless management intends to dispose of the
      investment within 12 months of the balance sheet date.
F-11
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Group accounting policies
Year ended July 31, 2006
Investments (continued)
Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognized when the rights to receive cash flows
from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are subsequently carried at
amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of the "Financial assets at fair value through profit or loss" category are included in the income
statement in the period in which they arise. Unrealized gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognized in equity. When securities classified as available-for-sale
are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.
Provisions
Provisions
for environmental restoration, restructuring costs and legal claims are recognized
when the Group has a present legal or constructive obligation as a result of
past events, it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated.
Such provisions are measured at the present value of management's best estimate
of the expenditure required to settle the present obligation at the balance sheet
date. The discount rate used to determine the present value reflects current
market assessments of the time value of money. Provisions are not recognized
for future operating losses.
Provisions for insurance represent an estimate, based on historical experience, of the ultimate cost of settling outstanding claims and claims incurred but not reported at the balance sheet.
Share-based payments
Share-based
incentives are provided to employees under the Group's executive share option,
long-term incentive and share purchase schemes. The Group recognizes a compensation
cost in respect of these schemes that is based on the fair value of the awards,
measured using Black-Scholes, Binomial and Monte Carlo valuation methodologies.
For equity-settled schemes, the fair value is determined at the date of grant
and is not subsequently re-measured unless the
conditions on which the award was granted are modified. For cash-settled schemes,
the fair value is determined at the date of grant and is re-measured at each
balance sheet date until the liability is settled. Generally, the compensation
cost is recognized on a straight-line basis over the vesting period. Adjustments
are made to reflect expected and actual forfeitures during the vesting period
due to the failure to satisfy service conditions or non-market performance conditions.
As permitted by IFRS 1, the Group has applied IFRS 2 "Share-based Payment" retrospectively only to equity-settled awards that had not vested as at August 1, 2004 and were granted on or after 7 November 2002
and cash-settled awards that had not vested as at August 1, 2004.
Dividends payable
Dividends on ordinary shares are recognized
  in the Group's financial statements in the period in which the dividends
  are approved by the shareholders of the Company (generally in the case of the
  final dividend) or paid (in the case of interim dividends).
F-12
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
1.
Critical accounting estimates
The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions in certain circumstances that affect reported amounts. The most sensitive estimates affecting the
financial statements are in the areas of assessing the recoverability of receivables, the net realizable value of inventory, the impairment of goodwill and long-lived intangible assets, the reserves in respect of self-insured insurance, the
consideration received from vendors and pensions and other post-retirement benefits.
Allowance for doubtful accounts
Provision is made against accounts that in the estimation of management may be impaired. Within each of the businesses assessment is made locally of the recoverability of accounts receivable based on a range of factors
including the age of the receivable and the creditworthiness of the customer. The provision is assessed monthly with a detailed formal review of balances and security being conducted at the full year and half year. Determining the recoverability of
an account involves estimation as to the likely financial condition of the customer and their ability to subsequently make payment. If the Group is cautious as to the financial condition of the customer the Group may provide for accounts that are
subsequently recovered. Similarly if the Group is optimistic as to the financial condition of the customer the Group may not provide for an account that is subsequently determined to be irrecoverable. Furthermore, while the Group has a large
geographically dispersed customer base, a slowdown in the markets in which the Group operates may result in higher than expected uncollectable amounts and therefore higher (or lower) than anticipated charges for irrecoverable receivables. In recent
years the Group has not experienced significant variation in the amount charged to the income statement in respect of doubtful accounts, when compared to sales.
The Group held a provision for impairment of receivables at July 31, 2006 amounting to £41 million (2005: £32 million).
Inventories
For financial reporting purposes the Group evaluates its inventory to ensure it is carried at the lower of cost or net realizable value. Provision is made against slow moving, obsolete and damaged inventories. Damaged
inventories are identified and written down through the inventory counting procedures conducted within each business. Provision for slow moving and obsolete inventories is assessed by each business as part of their ongoing financial
reporting. Obsolescence is assessed based
on comparison of the level of inventory holding to the projected likely future
sales. Future sales are assessed based on historical experience and adjusted
where the manufacturer has indicated that it will no longer continue to manufacture
the particular item. To the extent that future events impact the saleability
of inventory these provisions could vary significantly. For example, changes
in specifications or regulations may
render inventory, previously considered to have a realizable value in excess
of cost, obsolete and requiring such inventory to be fully written off. The Group
held allowances in respect of inventory balances at July 31, 2006 amounting to £134
million (2005: £99 million).
Impairment of long-lived assets
Wolseley periodically evaluates the net realizable value of long-lived assets, including goodwill, other intangible assets and tangible fixed assets, relying on a number of factors, including operating results,
business plans and projected future cash flows.
Assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually for impairment and whenever events or changes in circumstance indicate that the carrying amount may
not be recoverable. Assets that are subject to amortization are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. The fair value is in most cases based on the discounted present value of the future
cash flows expected to arise from the cash generating unit to which the goodwill relates, or from the individual asset or asset group. Estimates are used in deriving these cash flows and the discount rate.
The complexity of the estimation process and
  issues related to the assumptions, risks and uncertainties inherent with the
  application of the intangible and tangible fixed asset accounting policies affect
  the amounts reported in the financial statements. In particular, if different
  estimates of the projected future cash flows or a different selection of an
  appropriate discount rate were made, these changes could materially alter the
  projected value of the cash flows of the asset, and as a consequence materially
  different amounts would be reported in the financial statements.
F-13
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Self-insured insurance
The
Group operates a captive insurance company, Wolseley Insurance Limited, which
is registered and operational in the Isle of Man. This company provides reinsurance
exclusively to certain companies within the Group, principally to cover US casualty
and property damage risks. Provision is made based on actuarial assessment of
the liabilities arising from the insurance coverage provided. The actuarial assessment
of the reserve for future claims necessarily
includes estimates as to the likely trend of future claims costs and the estimates
as to the emergence of further claims subsequent to the year end. An actuarial
review of claims is performed annually. To the extent that actual claims differ
from those projected the provisions could vary significantly. At July 31, 2006,
the provision for claims arising from this insurance was £47 million (2005: £35
million).
Consideration received from vendors
The Group enters into agreements with many of its vendors providing for inventory purchase rebates primarily upon achievement of specified volume purchasing levels with many of these agreements applying to sales in a
calendar year. For certain agreements the rebate rises as a proportion of purchases as higher quantities or values of purchases are made. The Group accrues the receipt of vendor rebates as part of its cost of sales for products sold, taking into
consideration cumulative purchases of inventory to date and projected purchases through to the end of the qualifying period. Rebates are accrued for each reporting period with an extensive reassessment of the rebates earned being performed at the
end of the financial year and halfway through the financial year. The Group has agreements with numerous and geographically dispersed suppliers, but a slowdown in the markets in which the Group operates, or a significant change in the profile of
products purchased, may result in purchases for the remainder of the year differing significantly from those projected. Consequently the rebate actually received may vary from that accrued in the financial statements.
Pensions and other post retirement benefits
The Group operates defined benefit pension schemes in the United Kingdom and in a number of overseas locations, that are accounted for using methods that rely on actuarial assumptions to estimate costs and liabilities
for inclusion in the financial statements.  These actuarial assumptions include discount rates, assumed rates of return, salary increases, employee turnover rates and mortality rates.
While management believes that the actuarial assumptions are appropriate, any significant changes to those used would affect the balance sheet and income statement. The Group considers that the most significant
assumptions are the discount rate and the expected return on plan assets. The Group has estimated the sensitivity of the financial statements to changes in these assumptions as follows:
Impact on balance
      sheet
Impact on income
      statement
2006
2005
2006
2005
Effect of a change in discount
      rate
£m
£m
£m
£m
Increase of 0.5%
55
37
3
2
Decrease of 0.5%
(64
)
(40
)
(4
)
(2
)
Effect of a change in expected
      return on assets
Increase of 0.5%
2
2
Decrease of 0.5%
(2
)
(2
)
F-14
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
2.
Segmental analysis
The Group has a single business segment, the distribution and supply of construction materials and services.
The Group's geographical segments are Europe, consisting of UK and Ireland, France and Central Europe, and North America. The Group has determined that its geographical segments are its primary segments for IFRS
reporting purposes. The revenue, operating profit and trading profit of the Group's geographical segments are detailed in the following three tables.
2006
2005
Revenue
£m
£m
UK and Ireland
2,690
2,351
France
1,725
1,644
Central Europe
735
642
Europe
5,150
4,637
North America
9,008
6,619
Group
14,158
11,256
2006
2005
Operating profit
£m
£m
UK and Ireland
188
181
France
90
97
Central Europe
30
30
European central costs
(7
)
(4
)
Europe
301
304
North America
570
423
Group central costs
(37
)
(25
)
Group
834
702
2006
2005
Trading profit (note 9)
£m
£m
UK and Ireland
201
183
France
91
98
Central Europe
31
30
European central costs
(7
)
(4
)
Europe
316
307
North America
603
426
Group central costs
(37
)
(25
)
Group
882
708
F-15
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Other segmental information:
UK and Ireland
France
Central Europe
North America
Group Centre
Total
For the year ended July 31, 2006
£m
£m
£m
£m
£m
£m
Depreciation of property, plant and equipment
33
22
7
72
—
134
Amortization of non-acquired intangibles
—
—
—
1
5
6
Amortization of acquired intangibles
13
1
1
33
—
48
46
23
8
106
5
188
Additions to property, plant and equipment
93
33
18
217
4
365
Additions to non-acquired intangible assets
—
—
1
3
21
25
93
33
19
220
25
390
Additions to goodwill
192
19
11
165
—
387
Additions to acquired intangible assets
83
3
3
162
—
251
Segment assets
1,812
1,063
414
4,247
74
7,610
Reconciliation to total assets as reported in the Group Balance Sheet:
Deferred tax assets
16
Financial assets – current and non-current
25
Current tax receivable
1
Derivative financial assets
10
Cash and cash equivalents
416
Total assets as reported in the Group Balance Sheet
8,078
Segment liabilities
668
532
136
1,489
102
2,927
Reconciliation to total liabilities as reported in the Group Balance Sheet:
Current tax payable
91
Bank loans and overdrafts
2,276
Obligations under finance leases
75
Derivative financial liabilities
29
Deferred tax liabilities
88
Total liabilities as reported in the Group Balance Sheet
5,486
F-16
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
UK and Ireland
France
Central Europe
North America
Group Centre
Total
For the year ended July 31, 2005
£m
£m
£m
£m
£m
£m
Depreciation of property, plant and equipment
35
23
6
49
1
114
Amortization of non-acquired intangibles
1
1
—
1
—
3
Amortization of acquired intangibles
2
1
—
3
—
6
38
25
6
53
1
123
Additions to property, plant and equipment
54
37
12
134
1
238
Additions to non-acquired intangible assets
—
—
—
2
19
21
54
37
12
136
20
259
Additions to goodwill
34
7
2
78
—
121
Additions to acquired intangible assets
19
3
3
83
—
108
Segment assets
1,226
986
342
3,470
18
6,042
Reconciliation to total assets as reported in the Group Balance Sheet:
Deferred tax assets
55
Financial assets – current and non-current
11
Current tax receivable
7
Derivative financial assets
3
Cash and cash equivalents
381
Total assets as reported in the Group Balance Sheet
6,499
Segment liabilities
631
491
124
1,241
19
2,506
Reconciliation to total liabilities as reported in the Group Balance Sheet:
Current tax payable
70
Bank loans and overdrafts
1,484
Obligations under finance leases
62
Derivative financial liabilities
14
Deferred tax liabilities
62
Total liabilities as reported in the Group Balance Sheet
4,198
Revenue, trading profit and operating profit for North America can be further analyzed by operating segment as follows:
F-17
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
2006
2005
Revenue
£m
£m
US Plumbing and Heating
5,396
3,858
US Building Materials
2,966
2,249
Canada
646
512
North America
9,008
6,619
Operating profit
£m
£m
US Plumbing and Heating
369
258
US Building Materials
168
130
Canada
44
36
North American central costs
(11
)
(1
)
North America
570
423
Trading profit (note 9)
£m
£m
US Plumbing and Heating
378
260
US Building Materials
192
131
Canada
44
36
North American central costs
(11
)
(1
)
North America
603
426
The
    change in revenue and trading profit between the years ended July 31, 2005
    and 2006 can be analyzed into the effects of changes
of exchange rates, the effects of acquisitions made during the financial year,
and the
effect of taking in a full year's revenue and trading profit of businesses
acquired
part way through the previous year, with the remainder being organic change.
New
Increment
acquisitions
on 2005
Organic
Organic
2005
Exchange
2006
acquisitions
change
change
2006
Analysis of movement in revenue
£m
£m
£m
£m
£m
%
£m
UK and Ireland
2,351
—
277
14
48
2.1
2,690
France
1,644
1
27
17
36
2.1
1,725
Central
        Europe
642
(1
)
28
19
47
7.4
735
Europe
4,637
—
332
50
131
2.8
5,150
US Plumbing
        and Heating
3,858
135
264
168
971
24.3
5,396
US Building Materials
2,249
79
262
280
96
4.1
2,966
Canada
512
60
4
9
61
10.7
646
North America
6,619
274
530
457
1,128
16.4
9,008
Group
11,256
274
862
507
1,259
10.9
14,158
New
Increment
acquisitions
on 2005
Organic
Organic
2005
Exchange
2006
acquisitions
change
change
2006
Analysis of change in trading profit (note 9)
£m
£m
£m
£m
£m
%
£m
UK and Ireland
183
—
19
1
(2
)
(1.1
)
201
France
98
—
2
—
(9
)
(9.2
)
91
Central Europe
30
—
1
1
(1
)
(2.1
)
31
European central costs
(4
)
—
—
—
(3
)
(7
)
Europe
307
—
22
2
(15
)
(4.9
)
316
US Plumbing and Heating
260
9
18
10
81
30.0
378
US Building Materials
131
5
20
27
9
6.0
192
Canada
36
4
—
1
3
10.0
44
North American central costs
(1
)
—
—
—
(10
)
(11
)
North America
426
18
38
38
83
18.6
603
Group central costs
(25
)
—
—
—
(12
)
(37
)
Group
708
18
60
40
56
7.8
882
F-18
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
3.
Amounts charged in arriving at operating
          profit
2006
2005
£m
£m
Depreciation of property, plant and equipment
134
114
Amortization of non-acquired intangible assets
6
3
(Profit) on disposal of property, plant and equipment and assets available for sale
(16
)
(11
)
Staff costs (note 10)
1,943
1,526
Amortization of acquired intangible assets
48
6
Operating lease rentals: land and buildings
168
125
Operating lease rentals: plant and machinery
20
12
Amounts included in costs of goods sold with respect to inventory
10,007
8,182
Amounts charged to write inventory down to net realizable value
32
11
Trade receivables impairment
5
(14
)
Amounts payable to the auditors:
Audit fees
5.1
3.5
Other assurance services
0.3
0.3
Taxation
4.0
2.8
Due diligence reviews
0.2
0.4
Other services
—
0.2
Total fees payable to the auditors
9.6
7.2
The increase in audit fees mainly reflects the audit cost associated with Section 404 of the US Sarbanes-Oxley Act.
4.
Finance revenue
2006
2005
£m
£m
Interest receivable
49
27
Net interest receivable on construction
    loans included in finance revenue and finance costs amounted to £12 million (2005: £9
million).
5.
Finance costs
2006
2005
£m
£m
Interest payable
– Bank loans and overdrafts
110
55
– Finance lease charges
3
3
Net pension finance cost
1
7
Valuation losses/(gains) on financial instruments
– Derivatives held at fair value through profit and loss
27
(1
)
– Loans in a fair value hedging relationship
(26
)
—
– Recycled from equity
(1
)
—
Total finance costs
114
64
F-19
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
6.
Taxation
2006
2005
The tax charge for the year comprises:
£m
£m
Current year tax charge
230
150
Adjustments to tax charge in respect of prior years
(7
)
(8
)
Total current tax charge
223
142
Deferred tax charge: origination and reversal of temporary differences
9
44
Total tax charge
232
186
2006
2005
Tax on items charged to equity:
£m
£m
Current tax (charge)/credit on exchange movements offset in reserves
(7
)
25
Deferred tax (charge)/credit on changes in the fair value of cash flow hedges
(4
)
3
Deferred tax (charge)/credit on actuarial loss on retirement benefits
(2
)
2
Deferred tax credit/(charge) on available for sale investments
2
—
Deferred tax (charge)/credit on share based payments
(2
)
4
Total tax on items charged
      to equity
(13
)
34
2006
2005
Tax reconciliation:
%
%
Statutory UK corporation tax rate
30
30
Prior year amounts
(1
)
(1
)
Non deductible and non-taxable items
(6
)
(4
)
Higher average tax rates in overseas companies
5
3
Effective current tax rate on profit on ordinary activities before tax (and the amortization of intangibles)
28
28
2006
2005
The tax expense can be analyzed as follows:
£m
£m
UK
18
38
Overseas
205
104
Current tax
223
142
UK
4
7
Overseas
5
37
Deferred tax
9
44
F-20
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
7.
Dividends
2006
2005
£m
£m
Final paid for the year ended July 31, 2005 of 17.6 pence per share (year ended July 31, 2004: 16.0 pence)
104
94
Interim paid for the year ended July 31, 2006 of 9.85 pence per share (year ended July 31, 2005: 8.8 pence)
58
51
Total 27.45 pence per share (2005: 24.8 pence)
162
145
Proposed final for the year ended July 31, 2006 of 19.55 pence per share (year ended July 31, 2005: 17.6 pence)
128
104
The final dividend will be authorized by the
  shareholders at the Annual General Meeting and is not included as a liability
  in these financial statements. The final dividend is based on an anticipated
  657 million shares in issue on October 6, 2006, an increase of 59 million shares
  on the shares in issue as at July 31, 2006 due to the placing on September 25,
  2006.
8.
Earnings per share
Basic earnings per share of 90.77 pence (2005: 81.61 pence) is calculated on the profit for the year attributable to equity shareholders of £537 million (2005: £479 million) on a weighted average number of
ordinary shares in issue during the year of 592 million (2005: 587 million).
The impact of all potentially dilutive share options
on earnings per share would be to increase the weighted average number of shares
in issue to 597 million (2005: 593 million) and to reduce basic earnings per
share

to 90.02 pence (2005: 80.75 pence).
9.
Trading profit
Trading profit is defined as operating profit before the amortization of acquired intangibles and is a non-GAAP measure. The current businesses within the Group have arisen through internal organic growth and through
acquisition. Operating profit includes only the amortization of acquired intangibles arising on those businesses that have been acquired subsequent to July 31, 2004 and as such does not reflect equally the performance of businesses acquired prior to
July 31, 2004 (where no amortization of acquired intangibles was recognized), businesses that have developed organically (where no intangibles are attributed) and those businesses more recently acquired (where amortization of acquired intangibles is
charged). The Group believes that trading profit provides valuable additional information for users of the financial statements in assessing the Group's performance since it provides information on the performance of the business that local
managers are more directly able to influence and on a basis consistent across the Group.
2006
2005
£m
£m
Operating profit
834
702
Add back: amortization
        of acquired intangibles
48
6
Trading profit
882
708
Profit before tax
769
665
Add back: amortization
        of acquired intangibles
48
6
Profit before tax
        and the amortization of acquired intangibles
817
671
F-21
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
10.
Employee information and Directors'
        remuneration
2006
2005
Employee benefit costs:
£m
£m
Wages and salaries
1,630
1,257
Social security costs
249
210
Pension costs – Defined contribution schemes
28
19
Pension costs – Defined benefit schemes (note 27)
14
17
Share options granted to directors and employees
22
23
Total employee benefit costs
1,943
1,526
Details of Directors' remuneration and share
options are set out in Item 6 – Directors, Senior Management and Employees – Paragraph
B, Compensation
.
The aggregate
emoluments for all key management are set out in note 36.
2006
2005
Average weekly number of employees:
UK and Ireland
13,869
12,688
France
9,631
9,196
Central Europe
2,983
2,767
Europe
26,483
24,651
North America
38,740
29,017
Group
65,223
53,668
The average weekly number of Group and Europe head office employees is included in UK and Ireland in the above table.
F-22
Back to Contents
Notes to the consolidated financial
  statements
Year ended July 31, 2006
11.
Intangible assets: goodwill
£m
Cost and net book value
At August 1, 2004
666
Exchange rate adjustment
31
Additions
120
Disposals
(2
)
At July 31, 2005
815
Exchange rate adjustment
(29
)
Additions
387
Disposals
—
At July 31, 2006
1,173
The carrying value of goodwill by segment is as follows:
2006
2005
£m
£m
UK and Ireland
410
219
France
153
135
Central Europe
61
50
Europe
624
404
North America
549
411
Group
1,173
815
All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash generating units (CGUs). These are independent sources of income
streams, and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes, which may be at country, divisional, brand or regional level. Goodwill arising on business combinations after August 1,
2004 has been allocated to the CGUs that are expected to benefit from that business combination.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use cash flow projections based on five year financial forecasts approved by management. The key assumptions for
these forecasts are those regarding revenue growth, net margin and the level of working capital required to support trading, which management estimates based on past experience and expectations of future changes in the market. To prepare value in
use calculations, the cash flow forecasts are extrapolated after the five-year period at the estimated average long-term inflation rate for each market (ranging from 1% to 3%), and discounted back to present value. The key assumption is the discount
rate, which uses an estimate of the Group's weighted average cost of capital, based on the three-month historic volatility of Wolseley shares and on benchmark interest rates, adjusted for the risk attributable to individual CGUs.
Impairment tests were performed for all CGUs during the year ended July 31, 2006. No impairments were identified.
F-23
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
12.
Intangible assets: other
Trade names
Customer
Software costs
and brands
relationships
Other
Total
£m
£m
£m
£m
£m
Cost
At August 1, 2005
40
14
87
7
148
Exchange rate adjustment
—
(1
)
(12
)
—
(13
)
Additions
25
26
220
5
276
Disposals
(12
)
—
—
—
(12
)
At July 31, 2006
53
39
295
12
399
Accumulated amortization
At August 1, 2005
9
—
4
2
15
Exchange rate adjustment
(1
)
—
(2
)
—
(3
)
Charge for the year
6
5
40
3
54
At July 31, 2006
14
5
42
5
66
Net book amount at July 31, 2006
39
34
253
7
333
Trade names
Customer
Software costs
and brands
relationships
Other
Total
£m
£m
£m
£m
£m
Cost
At August 1, 2004
19
—
—
—
19
Additions
21
14
87
7
129
At July 31, 2005
40
14
87
7
148
Accumulated amortization
At August 1, 2004
6
—
—
—
6
Charge for the year
3
—
4
2
9
At July 31, 2005
9
—
4
2
15
Net book amount at July 31, 2005
31
14
83
5
133
Net book amount at August 1, 2004
13
—
—
—
13
Software costs are either purchases from third parties or internally generated. Other intangible assets arise on business combinations. Included in the amounts above are £28 million (2005: £25 million)
relating to assets under construction.
F-24
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
13.
Property, plant and equipment
Land and buildings
Operating
Plant
Finance
leasehold
machinery
Freehold
lease
improvements
equipment
Total
£m
£m
£m
£m
£m
Cost
As of August 1, 2005
619
56
146
717
1,538
Exchange rate adjustment
(17
)
(1
)
(10
)
(29
)
(57
)
New businesses
46
1
6
46
99
Additions
104
8
48
205
365
Disposals and transfers
(25
)
—
(2
)
(53
)
(80
)
Property reclassified as held for sale
(7
)
—
—
—
(7
)
As of July 31, 2006
720
64
188
886
1,858
Accumulated depreciation
As of August 1, 2005
131
11
81
432
655
Exchange rate adjustment
(3
)
(1
)
(3
)
(15
)
(22
)
Charge for the year
– owned assets
22
—
12
85
119
– leased assets
—
1
—
14
15
Disposals and transfers
(6
)
—
(2
)
(44
)
(52
)
Property reclassified as held for sale
(1
)
—
—
—
(1
)
As of July 31, 2006
143
11
88
472
714
Owned assets
577
—
100
375
1,052
Assets under finance leases
—
53
—
39
92
Net book amount as of July 31, 2006
577
53
100
414
1,144
Net book amount as of August 1, 2005
488
45
65
285
883
Cost
As of August 1, 2004
507
50
121
630
1,308
Exchange rate adjustment
19
2
3
20
44
New businesses
67
—
1
12
80
Additions
86
6
24
122
238
Disposals and transfers
(54
)
(2
)
(3
)
(67
)
(126
)
Property reclassified as held for sale
(6
)
—
—
—
(6
)
As of July 31, 2005
619
56
146
717
1,538
Accumulated depreciation
As of August 1, 2004
117
11
66
395
589
Exchange rate adjustment
3
—
2
10
15
Charge for the year
– owned assets
16
—
15
72
103
– leased assets
—
1
—
10
11
Disposals and transfers
(3
)
(1
)
(2
)
(55
)
(61
)
Property reclassified as held for sale
(2
)
—
—
—
(2
)
As of July 31, 2005
131
11
81
432
655
Owned assets
488
—
65
253
806
Assets under finance leases
—
45
—
32
77
Net book amount as of July 31, 2005
488
45
65
285
883
Net book amount as of August 1, 2004
390
39
55
235
719
Included in the amounts above are £89 million (2005: £48 million) relating to assets under construction. At July 31, 2006, £92 million of property, plant and equipment had been pledged as security for
liabilities (2005: £77 million).
F-25
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
14.
Financial assets - available for sale
      investments
2006
2005
£m
£m
Financial assets
21
6
These assets comprise investments in listed
  and unlisted companies, tradeable government securities and fiduciary deposits.
  They are primarily equity securities that have no fixed maturity or yield.
15.
Deferred tax assets and liabilities
The deferred tax assets and liabilities shown
in the balance sheet are analyzed as follows:
2006
2005
Deferred tax
£m
£m
Deferred tax assets
16
55
Deferred tax liabilities
(88
)
(62
)
(72
)
(7
)
Current
(67
)
(40
)
Non-current
(5
)
33
(72
)
(7
)
The following are the major deferred tax liabilities and assets recognized by the Group and movements thereon during the current and prior reporting period:
Goodwill
and
Share
based
Retirement
benefit
intangibles
payment
Properties
obligations
Inventory
Other
Total
£m
£m
£m
£m
£m
£m
£m
As of August 1, 2004
(7
)
15
(40
)
29
(26
)
72
43
Charge to income
(10
)
8
1
45
(16
)
(72
)
(44
)
Charge to equity
—
4
—
2
—
3
9
Acquisition of subsidiaries
(13
)
—
—
—
—
4
(9
)
Currency translation adjustment
—
(1
)
—
(3
)
—
(2
)
(6
)
As of July 31, 2005
(30
)
26
(39
)
73
(42
)
5
(7
)
Charge to income
9
(7
)
(2
)
(1
)
(15
)
7
(9
)
Charge to equity
—
(6
)
—
(3
)
—
(2
)
(11
)
Acquisition of subsidiaries
(45
)
—
(5
)
3
—
(4
)
(51
)
Currency translation adjustment
2
—
—
(1
)
3
2
6
As of July 31, 2006
(64
)
13
(46
)
71
(54
)
8
(72
)
There are other potential deferred tax assets
in relation to tax losses totalling £43 million (2005: £13 million)
that have not been recognized on the basis that their future economic benefit
is uncertain.
All of these losses may be carried forward indefinitely.
No deferred tax liability has been recognised in respect of a further £459 million (2005: £406 million) of unremitted earnings of subsidiaries because the Group is in a position to control the timing of
reversal of the associated temporary deferred tax differences and it is probable that such differences will not reverse in the foreseeable future.
F-26
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
16.
Inventories
2006
2005
£m
£m
Goods purchased for resale
1,954
1,706
£10,007 million has been charged to operating profit in relation to inventories recognized as an expense in the year (2005: £8,182 million). In addition, an amount of £32 million has been charged to the
income statement to write down inventories to net realizable value (2005: charge of £11 million).
17.
Trade and other receivables
2006
2005
Current
£m
£m
Trade receivables
2,309
1,964
Less: provision for impairment
(41
)
(32
)
Net trade receivables
2,268
1,932
Other receivables
107
131
Prepayments and accrued income
275
135
2,650
2,198
Non-current
Other receivables
36
37
£5 million has been charged to operating profit in respect of impairment losses recognized in the year on receivables (2005: credit of £14 million). Other receivables classified as non-current include an
amount of £31 million (2005: £32 million) which has been discounted at a rate of 5.2% (2005: 4.5%) due to the long-term nature of the receivable. The fair value of the remaining balances in trade and other receivables approximates to book
value.
Concentration of credit risk in trade receivables is limited as the Group's customer base is large and unrelated.
Accordingly, management considers that there is no further credit risk provision required above the current provision for impairment.
18.
Assets held for sale
2006
2005
£m
£m
Properties awaiting disposal
7
8
19.
Financial assets: trading investments
2006
2005
£m
£m
US Life Assurance policies (denominated in US dollars)
4
5
These securities have no fixed maturity or yield.
F-27
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
20.
Derivative financial instruments
2006
2005
Current assets
£m
£m
Interest rate swaps
10
2
Currency swaps: at fair value through profit and loss
—
1
Derivative financial assets
10
3
2006
2005
Current liabilities
£m
£m
Interest rate swaps
(27
)
(2
)
Currency swaps: net investment hedge
(2
)
(12
)
Derivative financial liabilities
(29
)
(14
)
Interest rate swaps
The Group uses interest rate swaps to manage its exposure to interest rate movements on its borrowings. The fair value of interest rate swaps is estimated on the basis of the market values of equivalent instruments at
the balance sheet date.
The Group's bank borrowings generally attract variable interest rates based on 6 month LIBOR. Certain interest rate swaps are designated and effective as cash flow hedges, with the valuation gains being deferred
in equity until realized.
2006
2005
Hedge of interest rate cash flows
£m
£m
At August 1
—
(1
)
Valuation gains on effective hedges credited to equity
9
1
Valuation losses charged to income statement
(1
)
—
At July 31
8
—
The Group's private placement borrowings
in the USA are at fixed rates. Certain interest rate swaps are designated as
hedges of the fair values of these borrowings. The movement in fair value of
these interest rate swaps has been analyzed into a proportion that is effective
as a hedge and a proportion that is ineffective: both portions have been charged
to the income statement with the effective portion offsetting the change in fair
value of the hedged
borrowings. The ineffective portion was less than £1 million.
2006
2005
Hedge of fair value of fixed interest borrowings
£m
£m
At August 1
—
—
Valuation losses charged to income statement
(26
)
—
Exchange
1
—
At July 31
(25
)
—
Outstanding interest rate swap contracts at July 31, 2006 comprised fixed interest payable on notional principal of US$650 million, €770 million and £7 million (2005: US$575 million and €785
million) and fixed interest receivable on notional principal of US$1,079 million. The contracts expire between September 2006 and November 2020 (2005: August 2005 and August 2009), and the gains deferred in equity will reverse in the income
statement over that period. The fixed interest rates vary between 2.313% and 5.415% (2005: 2.0375% and 4.3275%) .
Currency swaps
The Group uses currency swaps either to obtain the optimum return on its surplus funds or to hedge cash flows in respect of committed transactions. The fair value of currency swaps has been estimated as the cost of
closing out the contracts using market prices at the balance sheet date.
At the balance sheet date the Group had entered into certain short-term currency swaps amounting to assets of US$3 million (2005: assets of €130 million, C$33 million and CHF 22 million) and liabilities of
£2 million (2005: £4 million, US$53 million and C$170 million) which were held at fair value through the income statement.
F-28
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
2006
2005
At fair value through income statement
£m
£m
At August 1
1
—
Valuation gains charged to income statement
—
1
Transferred to 'net investment in overseas operations'
(1
)
—
At July 31
—
1
At the balance sheet date the Group had entered into certain short-term currency swaps amounting to assets of US$627 million, €222 million and CHF 22 million (2005: assets of £287 million) and liabilities
of £419 million and C$169 million (2005: liabilities of US$525 million) which were designated and effective as hedges of net investments in overseas operations. Valuation gains have been deferred in equity.
2006
2005
Hedge of net investment in overseas operations
£m
£m
At August 1
(12
)
—
Transferred from 'at fair value through income statement'
1
—
Cash settlements in the period
4
—
Valuation gains/(losses) on effective hedges credited/(charged) to equity
5
(12
)
At July 31
(2
)
(12
)
21.
Construction loans
2006
2005
£m
£m
Construction loans receivable (secured)
313
262
Borrowings to finance construction loans (unsecured)
(313
)
(262
)
—
—
Construction loans receivable, which are secured principally against homes in the course of construction or completed homes awaiting sale, are made to customers of Stock Building Supply Inc and are all denominated in
US dollars. These loans have an average maturity of 9 months (2005: 8 months). As of July 31, 2006, the effective rate of interest thereon was 8.85% (2005: 6.98%) .
22.
Cash and cash equivalents
2006
2005
£m
£m
Cash and cash equivalents
359
371
Short-term bank deposits
57
10
Total cash and cash equivalents
416
381
The effective interest rate as of July 31, 2006 on cash and cash equivalents was 2.1% (2005: 2.0%) . The average maturity of short-term bank deposits was 1 week (2005: 1 week). The fair values of cash and cash
equivalents approximate to book value due to their short maturities.
The currency analysis of cash and cash equivalents is as follows:
Sterling
104
33
US dollar
230
224
Euro
56
94
Other
26
30
Total
416
381
F-29
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
23.
Trade and other payables
2006
2005
Current
£m
£m
Amounts falling due within one year:
Trade payables
1,504
1,273
Bills of exchange payable
188
194
Other tax and social security
142
102
Other payables
148
80
Share based payment liabilities
—
12
Accruals
305
280
Deferred income
7
2
Total trade and other payables
2,294
1,943
Non-current
Other payables
25
18
The fair value of other payables falling due after more than one year is estimated at £21 million (2005: £15 million), by discounting the anticipated cash flows at a money market rate of appropriate maturity.
The fair value of other amounts included in trade and other payables approximates to book value.
24.
Bank loans and overdrafts
2006
2005
Current
£m
£m
Bank overdrafts
124
437
Bank loans
68
2
Total bank loans and overdrafts
192
439
The fair values of current overdrafts and loans approximate to book value due to their short maturities.
The currency analysis of bank loans and overdrafts is as follows:
Sterling
—
—
US dollar
65
265
Euro
116
122
Other
11
52
Total
192
439
2006
2005
Non-current
£m
£m
Bank loans
1,465
1,043
Other loans
1
1
Senior unsecured notes
617
—
US Industrial Revenue Bonds
1
1
Total bank loans
2,084
1,045
The non-current loans are repayable as follows:
Due in one to two years
35
516
Due in two to five years
403
529
Due in over five years
1,646
—
Total
2,084
1,045
At July 31, 2006, £651 million of loans carried
a fixed interest rate (2005: £34 million). The weighted average interest
rate paid on fixed interest borrowings is 5.0% (2005: 6.2%). Interest receipts
and  payments on the floating rate assets and liabilities are determined by reference
to short-term benchmark rates applicable to the relevant currency or market,
such as LIBOR.
F-30
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
The fair value of fixed interest rate loans payable after one year is £621 million, compared to their book value of £626 million (2005: no material difference). The floating rate loans payable after one year
generally attract variable interest rates based on 6 month LIBOR. Thus the fair value of these instruments approximates to their book value.
The Group's undrawn committed facilities
amount to £780
million. Further details of these centrally managed facilities and the financial
risk management activities of the Group are set out in Item 5 – Operating
and Financial Review and Prospects – Paragraph B, Liquidity and Capital
Resources.
The currency analysis of non-current loans
is as follows:
2006
2005
£m
£m
Sterling
136
1
US dollar
1,246
455
Euro
645
558
Other currencies
57
31
Total
2,084
1,045
The Group's financial assets and liabilities are exposed to both fair value interest rate risk (fixed rate borrowings) and cash flow interest rate risk (floating rate borrowings). The interest rate profile of the
financial assets and liabilities that comprised the Group's net debt at July 31, 2006 and July 31, 2005, after including the effect of interest rate swaps, are set out in the following tables.
Assets at July 31, 2006
Weighted
Weighted
average fixed
average time for
Currency
interest rate
which rate is fixed
Currency
Floating
Fixed
swaps
Total
%
Years
Sterling
104
—
—
104
—
—
US dollars
550
—
—
550
—
—
Euros
63
—
—
63
—
—
Other currencies
26
—
—
26
—
—
Total
743
—
—
743
Liabilities at July 31, 2006
Weighted
Weighted
average fixed
average time for
Currency
interest rate
which rate is fixed
Currency
Floating
Fixed
swaps
Total
%
Years
Sterling
(135
)
(5
)
(419
)
(559
)
9.5
10.0
US dollars
(1,255
)
(423
)
336
(1,342
)
5.0
2.9
Euros
(235
)
(563
)
152
(646
)
3.0
2.0
Other currencies
(43
)
(32
)
(71
)
(146
)
5.6
4.4
Total
(1,668
)
(1,023
)
(2
)
(2,693
)
Assets at
        July 31, 2005
Weighted
Weighted
average
        fixed
average
        time for
Currency
interest
        rate
which rate
        is fixed
Currency
Floating
Fixed
swaps
Total
%
Years
Sterling
33
—
—
33
—
—
US dollars
491
—
—
491
—
—
Euros
100
—
—
100
—
—
Other currencies
30
—
—
30
—
—
Total
654
—
—
654
Liabilities at July 31, 2005
Weighted
Weighted
average fixed
average time for
Currency
interest rate
which rate is fixed
Currency
Floating
Fixed
swaps
Total
%
Years
Sterling
—
(5
)
282
277
—
—
US dollars
(725
)
(274
)
(329
)
(1,328
)
4.2
1.5
Euros
(250
)
(463
)
90
(623
)
3.0
2.6
Other currencies
(53
)
(38
)
(54
)
(145
)
6.0
1.4
Total
(1,028
)
(780
)
(11
)
(1,819
)
F-31
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Hedge of net investment in overseas operations
The Group has financial instruments denominated in foreign currencies which have been designated as hedges of the net investment in its subsidiaries in North America and Europe. The value of these financial instruments
at the balance sheet date was:
2006
2005
£m
£m
US dollar
926
922
Euro
611
573
Other currencies
112
106
Total
1,649
1,601
The gain on translation of the borrowings into sterling of £58 million (2005: loss of £36 million) has been taken to the translation reserve.
25.
Obligations under finance leases
Gross
Gross
Net
Net
2006
2005
2006
2005
£m
£m
£m
£m
Due within one year
24
6
18
4
Due in one to five years
50
30
37
23
Due in over five years
28
42
20
35
102
78
75
62
Less: future finance charges
(27
)
(16
)
Present value of finance lease obligations
75
62
Current
18
4
Non current
57
58
Total obligations under finance leases
75
62
It is the Group's policy to lease certain
of its property, plant and equipment under finance leases. The average lease
term is 7 years (2005: 7 years). For the year ended July 31, 2006, the average
effective  borrowing rate was 4.7% (2005: 4.9%). Finance lease obligations included
above are secured against the assets concerned.
The currency analysis of the present value of finance lease obligations is as follows:
Net
Net
2006
2005
£m
£m
Sterling
5
4
US dollar
26
16
Euro
37
34
Other
7
8
Total
75
62
F-32
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
26.
Provisions
Environmental
Wolseley
Other
and legal
Insurance
provisions
Total
£m
£m
£m
£m
At August 1, 2004
30
33
20
83
Utilized in the year
—
(9
)
(1
)
(10
)
Charge for the year
2
10
1
13
Transfers
—
—
(3
)
(3
)
New businesses
—
—
—
—
Exchange difference
1
1
—
2
At July 31, 2005
33
35
17
85
Utilized in the year
—
(9
)
(3
)
(12
)
Charge for the year
6
23
6
35
Transfers
1
—
(4
)
(3
)
New businesses
1
—
4
5
Exchange differences
(2
)
(2
)
—
(4
)
At July 31, 2006
39
47
20
106
Provisions have been analyzed between current and non current as follows:
Environmental
Wolseley
Other
and legal
Insurance
provisions
Total
At July 31, 2006
£m
£m
£m
£m
Current
8
13
8
29
Non current
31
34
12
77
Total provisions
39
47
20
106
Environmental
Wolseley
Other
and legal
Insurance
provisions
Total
At July 31, 2005
£m
£m
£m
£m
Current
2
9
11
22
Non current
31
26
6
63
Total provisions
33
35
17
85
Wolseley Insurance provisions represent an estimate, based on historical experience, of the ultimate cost of settling outstanding and potential claims on certain risks retained by the Group (principally US casualty and
global property damage).
Environmental and legal liabilities include known
and potential legal claims and environmental liabilities arising from past events
where it is probable that a payment will be made and the amount of such payment
can be
reasonably estimated. Included in this provision is an amount of £31 million
(2005: £32 million) related to asbestos litigation involving certain Group
companies. This liability is fully covered by insurance, and accordingly an equivalent

insurance receivable has been recorded in 'Trade and other receivables' (note
17). The liability has been actuarially determined as at July 31, 2006 based
on advice from independent professional advisors. The provision and the related
 receivable have been stated on a discounted basis using a long-term discount
rate of 5.2% (2005: 4.5%). The level of insurance cover available significantly
exceeds the expected level of future claims, and no profit or cash flow impact
is therefore
expected to arise in the foreseeable future.
F-33
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
27.
Retirement benefit obligations
(i)
Description of plans
United Kingdom
The principal plan operated for UK
  employees is the Wolseley Group Retirement Benefits Plan which provides benefits
  based on final pensionable salaries. The assets are held in separate trustee
  administered funds. The plan's retirement benefits are funded by a contribution
  from employees with the balance being paid by Group companies. The contribution
  rates paid by employees at July 31, 2006 are either 5% or 6% of earnings depending
  on the level of benefits that were accruing at that date. The Group and employee
  contribution rates are calculated on the Projected Unit Method and agreed with
  an independent consulting actuary.
Outside the United Kingdom
North America
The principal plans operated for US employees
  are defined contribution schemes, which are established in accordance with US
  401K rules. Companies contribute to both employee compensation deferral and
  profit sharing plans. Contributions are charged to the income statement in the period in which they fall due. In the year to July 31, 2006 the cost of defined contribution plans charged to the income statement was £23 million (2005:
£18 million).
In addition, the Group operates three defined benefit schemes in the United States. In Canada a defined benefit scheme and a defined contribution scheme are operated. Two of the US plans and the Canadian plan are
funded; two plans are closed to new entrants. The majority of assets are held in trustee administered funds independent of the assets of the companies. The closed plans now provide a minimum pension guarantee in conjunction with a defined
contribution plan. The remaining plans provide benefits based on final pensionable salaries. The contribution rate is calculated on the Projected Unit (credit) Method as agreed with independent consulting actuaries.
Europe
Both defined contribution and defined benefit
  schemes are operated. Liabilities arising under defined benefit schemes are
  calculated in accordance with actuarial advice. Contributions to defined contribution
  schemes are accounted for in the period in which they fall due. The cost of
  defined contribution schemes charged to the income statement was £5 million
  (2005: £1 million).
Post retirement health care
There are no material obligations to provide
  post retirement health care benefits.
The Group expects to contribute £23 million to the UK defined benefit scheme and £15 million to the non-UK schemes in the year ending July 31, 2007.
(ii)
Financial impact of plans
2006
2005
As disclosed in the balance sheet
£m
£m
Current liability
(29
)
(17
)
Non-current liability
(160
)
(181
)
Total liability
(189
)
(198
)
2006
2006
2005
2005
Analysis of balance sheet liability
£m
£m
£m
£m
Fair value of plan assets:
UK
501
404
Non-UK
112
105
613
509
Present value of defined benefit obligation:
UK
(619
)
(527
)
Non-UK
(182
)
(180
)
(801
)
(707
)
Net deficit
(188
)
(198
)
Unrecognized past service cost
1
—
Unrecognized surplus
(2
)
—
Net liability recognized in balance sheet
(189
)
(198
)
F-34
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
2006
2005
Analysis of total expense recognized in
      income statement
£m
£m
Current service cost
19
18
Past service cost
1
—
Curtailment
(1
)
—
Settlement
(5
)
(1
)
Charged to administrative expenses
14
17
Interest on pension liabilities
36
35
Expected return on scheme assets
(35
)
(28
)
Charged to finance costs
1
7
Total expense recognized in income statement
15
24
2006
2005
Analysis of amount recognized in the statement
      of recognized income and expense
£m
£m
Actuarial gain/(loss)
8
(4
)
Unrecognized past service cost
1
—
Unrecognized surplus
(2
)
—
7
(4
)
Deferred tax thereon
(2
)
2
Total amount recognized in the statement
      of recognized income and expense
5
(2
)
The cumulative amount of actuarial gains recognized
  in the statement of recognized income and expense was a gain of £3 million
  (2005: loss of £4 million).
The assets in the UK schemes and the expected
  rates of return were:
2006
2005
UK
UK
Long-term
Long-term
rate of
rate of
return
Value at
return
Value at
expected at
July 31,
expected at
July 31,
July 31,
2006
July 31,
2005
2006
£m
2005
£m
Equities
7.4
%
344
7.3
%
354
Bonds
4.2
%
154
4.1
%
49
Other
5.0
%
3
5.0
%
1
Total market value of assets
6.5
%
501
6.9
%
404
The assets in the non-UK schemes and the expected rates of return were:
2006
2005
Non-UK
Non-UK
Long-term
Long-term
rate of
rate of
return
Value at
return
Value at
expected at
July 31,
expected at
July 31,
July 31,
2006
July 31,
2005
2006
£m
2005
£m
Equities
8.0
%
59
7.2
%
55
Bonds
5.1
%
39
4.8
%
38
Property
5.3
%
9
5.3
%
9
Other
3.0
%
5
3.0
%
3
Total market value of assets
6.6
%
112
6.2
%
105
F-35
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
UK
Non-UK
Total
UK
Non-UK
Total
2006
2006
2006
2005
2005
2005
Fair value of plan assets
£m
£m
£m
£m
£m
£m
At August 1
404
105
509
323
73
396
Expected return on plan assets
28
7
35
22
6
28
Actuarial gain
36
—
36
46
4
50
Employer's contributions
24
6
30
20
7
27
Participants' contributions
8
1
9
5
1
6
Acquisition
17
—
17
—
17
17
Transfers
—
1
1
—
—
—
Benefits paid
(16
)
(6
)
(22
)
(12
)
(8
)
(20
)
Currency translation
—
(2
)
(2
)
—
5
5
At July 31
501
112
613
404
105
509
Actual return on plan assets
64
7
71
68
10
78
The expected long-term rates of return for equities have been determined by reference to government bond rates (minimum risk rates) in the countries in which the plans are based. To reflect the additional risks
associated with equities, expected long-term rates of return on equities include a risk premium. These risk premiums are long-term assumptions and were set after taking actuarial advice and considering the assumptions used by listed companies. The
expected long-term rates of return for other assets are determined in a similar way, i.e., by using an appropriate risk premium relative to government bonds in the relevant country. For the UK scheme a premium of 3.0% per year as at July 31, 2006
(2005: 3.0%) was applied to the expected return from government bonds. For the principal overseas schemes in USA, Canada and Switzerland a similar approach was adopted with returns set by reference to long-term bond rates after taking actuarial
advice.
The Group's investment strategy for its funded post employment plans is decided locally by the Group and, if relevant, the trustees of the plan, and takes account of the relevant statutory requirements. The
Group's objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities.
This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return. Most investment strategies have significant
allocations to equities, with the intention being that this will result in the ongoing cost to the group of the post employment plans being lower over the long term and be within acceptable boundaries of risk.
For the UK scheme the policy is to invest approximately 75% of the assets in equities, and 25% in other asset classes, principally bonds. The investment strategy is subject to regular review by the scheme trustees in
consultation with the Group. For the overseas schemes the investment strategy involves the investment in defined levels of predominantly equities with the remainder of the assets being invested in cash and bonds.
UK
Non-UK
Total
UK
Non-UK
Total
2006
2006
2006
2005
2005
2005
Present value of defined benefit
      obligation
£m
£m
£m
£m
£m
£m
At August 1
527
180
707
460
131
591
Current service cost
14
5
19
13
5
18
Past service cost
—
1
1
—
—
—
Curtailment and settlement
—
(6
)
(6
)
—
(1
)
(1
)
Interest cost
26
10
36
26
9
35
Participants' contributions
8
1
9
5
1
6
Acquisitions
28
—
28
—
17
17
Benefits paid
(16
)
(6
)
(22
)
(12
)
(10
)
(22
)
Transfers
—
5
5
—
—
—
Actuarial (gain)/loss
32
(4
)
28
35
19
54
Currency translation
—
(4
)
(4
)
—
9
9
At July 31
619
182
801
527
180
707
F-36
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
2006
2005
Analysis of present value of
      defined benefit obligation
£m
£m
Amounts arising from wholly
      unfunded plans
57
44
Amounts arising from plans
      that are wholly or partly funded
744
663
801
707
(iii)
Valuation assumptions
The financial assumptions used to estimate defined benefit obligations are:
2006
2005
UK
Non-UK
UK
Non-UK
Discount rate
5.1
%
5.1
%
5.0
%
5.1
%
Inflation rate
3.1
%
1.4
%
2.8
%
1.4
%
Increase to deferred benefits
      during deferment
3.1
%
2.2
%
2.8
%
2.0
%
Increases to pensions in payment
3.0
%
1.5
%
2.7
%
0.8
%
Salary increases
4.6
%
2.4
%
3.3
%
2.5
%
The life expectancy assumptions used to estimate defined benefit obligations at July 31, 2006 are:
2006
UK
Non-UK
Current pensioners (at age
      65) – male
19.0
18.3
Current pensioners (at age
      65) – female
21.9
20.9
Future pensioners (at age 65)
      – male
19.8
17.9
Future pensioners (at age 65)
      – female
22.8
20.4
UK
Non-UK
UK
Non-UK
2006
2006
2005
2005
History of experience gains
      and losses
£m
£m
£m
£m
Fair value of plan assets
501
112
404
105
Present value of defined benefit
      obligation
(619
)
(182
)
(527
)
(180
)
Deficit in the plan
(118
)
(70
)
(123
)
(75
)
Experience adjustments to scheme
      assets
Amount
36
—
46
4
Percentage
      of scheme assets
7
%
—
11
%
4
%
Experience adjustments on scheme
      liabilities
Amount
—
(2
)
—
—
Percentage
      of the present value of scheme liabilities
—
1
%
—
—
F-37
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
28.
Share capital
Authorized
Allotted and issued
2006
2005
2006
2005
Number of ordinary 25 pence
      shares (million)
800
800
598
592
Nominal value of ordinary 25
      pence shares (£ million)
200
200
149
148
All the allotted and issued shares are fully paid or credited as fully paid.
Allotment of shares
From August 1, 2005 to July 31, 2006,
  new ordinary shares of 25 pence each in the Company have been issued as follows:
Proceeds to the Group
Allottees
Number of shares
Price per share (p)
£m
Purpose of issue
Various
2,318,435
251.00
      – 935.85
17
Exercise
      of savings related share options
Various
3,235,350
349.75 – 543.00
14
Exercise of executive share
      options/stock appreciation rights
5,553,785
31
Limits on grant of options
The maximum number of shares over
  which options may be granted (but excluding any which lapse) under all share
  option schemes and the stock appreciation plan in any ten year period is 10%
  of the issued share capital from time to time. The number of shares over which
  options may be granted under all such schemes as at July 31, 2006 was 59,769,622
  (2005: 59,214,243) of which 20,632,264 (2005: 15,510,090) have already been
  issued pursuant to options exercised in the ten year period ended on July 31,
  2006.
The maximum number of shares over which options may be granted (but excluding any which lapse) under the rules of the executive share option schemes in any ten year period is 5% of the issued share capital from time to
time. The number of shares over which options may be granted as at July 31, 2006 was 29,884,811 (2005: 29,607,122) of which 6,181,529 (2005: 4,886,655) have already been issued pursuant to options exercised on or before July 31, 2006.
Executive Benefit Trusts
Three Employee Benefit Trusts have
  been established in connection with the Wolseley Share Option Plan 2003 and
  the Wolseley plc 2002 Long Term Incentive Scheme. During the year one of these
  trusts purchased 2,011,478 ordinary shares of the Company, with a nominal value
  of £1 million, for a cash consideration of £27 million. The market
  value of the 4,011,478 shares held by the employee benefit trusts at July 31,
  2006, which have a nominal value of £1 million, was £46 million (2005:
  £24 million), and none of them had been allocated to employees or Directors
  at that date. Dividends due on shares held by the Employee Benefit Trusts are
  waived in accordance with the provisions of the trust deeds.
F-38
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
29.
Share-based payments
The Group operates six share option plans: the 1984 Executive Share Option Scheme, the 1989 Executive Share Option Scheme and the Wolseley Share Option Plan 2003 (collectively, the "Executive Option
Schemes"); the Wolseley Employees Savings Related Share Option Scheme 1981 and Wolseley Irish Sharesave Scheme 2000 (collectively, the "Employees Savings Option Schemes"); and the Wolseley Employee Share Purchase Plan 2001 (the
"ESPP"). The Wolseley Employees International Stock Appreciation Plan (the "SAP") expired during the year ended July 31, 2006.
Awards granted under the Executive Option Schemes are subject to a condition such that they may not be exercised unless the growth in earnings per share over a period of three consecutive financial years exceeds growth
in the UK Retail Price Index over the same period by at least 9% and consequently vest over a period of three years. Awards granted under the Employee Savings Option Schemes vest over periods ranging from three to seven years. Awards granted under
the Employee Share Purchase Plan vest over a one-year period. Awards granted under the SAP vested over a period of five years.
The Group also operates a Long Term Incentive Scheme ("LTIS") for senior executives. Under this Scheme, executives will be awarded a variable number of shares depending on the level of total shareholder
return over the next three years relative to that of a number of comparator companies. The vesting period is three years. The maximum award under the scheme is determined at grant date and then adjusted at vesting date in accordance with the market
performance condition.
Share options outstanding during the year
Year ended July
      31
2006
2006
2005
2005
Weighted
Weighted
average
average
exercise
exercise
Shares
price
Shares
price
000
's
£
000
's
£
Executive Option Schemes
Outstanding as at August 1
11,809
7.22
11,061
5.64
Granted
4,588
11.87
4,131
9.51
Exercised
(1,358
)
5.09
(2,819
)
4.37
Surrendered or expired
(457
)
8.89
(564
)
7.07
Outstanding as at July 31
14,582
8.83
11,809
7.22
Exercisable as at July 31
3,172
5.10
1,831
4.42
Weighted average fair value
      of options granted during the year
3.97
3.06
Employees Savings Option
      Schemes, ESPP and SAP
Outstanding as at August 1
8,129
6.38
10,708
4.83
Granted
1,521
12.01
3,434
9.26
Exercised
(2,725
)
3.80
(4,215
)
4.85
Surrendered or expired
(3,247
)
8.75
(1,798
)
6.24
Outstanding as at July 31
3,678
8.53
8,129
6.38
Exercisable as at July 31
88
4.44
72
4.12
Weighted average fair value
      of options granted during the year
3.83
2.70
The weighted average share price at the date
  of exercise for share options exercised during the period was £12.67 (2005:
  £10.16) . The total intrinsic value of options exercised during the period
  was £22 million (2005: £29 million). The aggregate intrinsic value
  of options outstanding and exercisable at July 31, 2006 was £48 million
  and £21 million
respectively (2005:
  £99 million and £14 million).
F-39
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Maximum number of shares that can be issued
  under the Long Term Incentive Scheme
Year ended July 31
2006
2006
2005
2005
Share
Share
price at
price at
award
award
Shares
date
Shares
date
000's
£
000's
£
Outstanding as at August 1
604
9.27
—
Granted
730
11.29
628
9.27
Surrendered or expired
(12
)
9.25
(24
)
9.25
Outstanding as at July 31
1,322
10.39
604
9.27
Exercisable as at July 31
—
—
—
—
Weighted average fair value of shares awarded
3.99
4.85
Details of options exercisable
Options outstanding and exercisable
  at July 31, 2006 under the Executive Option Schemes, the Employees Saving Option
  Schemes and ESPP can be analyzed as follows:
Options Outstanding
Options Exercisable
Weighted
Weighted
average
Weighted
average
Weighted
remaining
average
remaining
average
contractual
exercise
contractual
exercise
Shares
life
price
Shares
life
price
Range of exercise prices
000's
Years
£
000's
Years
£
£2.51
– £3.50
404
2.5
3.15
211
3.8
3.48
£3.51
–
      £4.50
668
2.0
4.07
198
2.1
3.96
£4.51
– £5.50
2,740
5.7
5.14
2,740
5.7
5.14
£5.51
–
      £6.50
228
1.1
5.62
3
1.1
5.63
£6.51
– £7.50
3,774
6.3
7.29
57
6.8
7.37
£7.51
–
      £8.50
24
7.9
8.42
—
—
—
£8.51
– £9.50
4,376
7.4
9.40
52
7.8
9.44
£10.51
–
      £11.50
50
8.6
11.00
—
—
—
£11.51
– £12.50
5,883
7.3
11.90
4
7.7
11.64
£12.51
–
      £13.50
111
9.5
12.81
—
—
—
18,258
6.5
8.77
3,265
5.4
5.08
The fair value at the date of grant of options awarded during the year has been estimated by the binomial methodology for all schemes except the LTIS, for which a Monte Carlo simulation was used.
The principal assumptions required by these
  methodologies were:
Long Term Incentive
Executive Share Options
Employee Share Options
Schemes
2006
2005
2006
2005
2006
2005
Risk free interest rate
4.45
%
4.72
%
4.52
%
4.60
%
4.40
%
4.70
%
Expected annual increase in dividends*
10
%
10
%
10
%
10
%
—
—
Expected dividend yield*
—
—
—
—
2.75
%
2.29
%
Expected volatility
39.00
%
40.10
%
31.06
40.00
%
20.58
%
27.74
%
Expected life
5.7 years
5.7 years
1-7 years
1-7 years
3 years
3 years
*
The initial
      assumption was for 2006 interim and final dividends of 9.68 pence and 19.36
      pence respectively (2005: 8.73 pence and 17.45 pence respectively)
Expected volatility has been estimated on the
    basis of historic volatility over the expected term. Expected life has been
estimated on the basis of historical data on the exercise pattern.
F-40
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
30.
Shareholders' funds and statement
      of changes in shareholders' equity
Retained Earnings
Share
Share
Translation
Hedging
Own
Profit and Loss
Capital
Premium
Reserve
Reserve
Shares
Account
Total
For the year ended July 31,
      2006
£m
£m
£m
£m
£m
£m
£m
Profit for
      the year attributable to equity shareholders
—
—
—
—
—
537
537
Exchange loss on translation
      of overseas operations
—
—
(182
)
—
—
—
(182
)
Exchange
      gain on translation of borrowings designated as
      hedges of overseas operations
—
—
58
—
—
—
58
Valuation gain
      on interest rate swaps (less amounts reclassified
      and reported in net income)
—
—
—
8
—
—
8
Valuation
      gain on currency swaps
—
—
—
5
—
—
5
Actuarial gain on retirement
      benefits
—
—
—
—
—
7
7
Change in
      fair value of available for-sale-investments
—
—
—
—
—
(7
)
(7
)
Tax on gains/(losses) not recognized
      in the income statement
—
—
(7
)
(4
)
—
(2
)
(13
)
Total recognized
      income and expense
—
—
(131
)
9
—
535
413
New share capital subscribed
1
30
—
—
—
—
31
Premium on
      share options issued through share
      symmetry arrangements
—
17
—
—
—
(17
)
—
Purchase of own shares by Employee Benefit Trust
—
—
—
—
(27
)
—
(27
)
Credit to
      equity for share-based payments
—
—
—
—
—
36
36
Dividends
—
—
—
—
—
(162
)
(162
)
Net additions
      to shareholders' funds
1
47
(131
)
9
(27
)
392
291
Opening shareholders'
      funds
148
241
82
(8
)
(19
)
1,857
2,301
Closing shareholders'
      funds
149
288
(49
)
1
(46
)
2,249
2,592
Retained earnings
Share
Share
Translation
Hedging
Own
Profit and loss
Capital
Premium
Reserve
Reserve
Shares
Account
Total
For the year ended July 31,
        2005
£m
£m
£m
£m
£m
£m
£m
Profit for
        the year attributable to equity shareholders
—
—
—
—
—
479
479
Exchange gain on translation
        of overseas operations
—
—
93
—
—
—
93
Exchange
        loss on translation of borrowings designated as hedges of overseas operations
—
—
(36
)
—
—
—
(36
)
Valuation gain on interest
        rate swaps
—
—
—
1
—
—
1
Valuation
        loss on currency swaps
—
—
—
(12
)
—
—
(12
)
Actuarial loss on retirement
        benefits
—
—
—
—
—
(4
)
(4
)
Tax on gains/(losses)
        not recognized in the income statement
—
—
25
3
—
6
34
Total recognized
        income and expense
—
—
82
(8
)
—
481
555
New share capital subscribed
2
31
—
—
—
—
33
Premium
        on share options issued through
share
        symmetry arrangements
—
10
—
—
—
(10
)
—
Purchase of own shares by
        Employee
Benefit Trust
—
—
—
—
(19
)
—
(19
)
Credit to
        equity for share-based payments
—
—
—
—
—
23
23
Dividends
—
—
—
—
—
(145
)
(145
)
Net additions
        to shareholders' funds
2
41
82
(8
)
(19
)
349
447
Opening shareholders' funds
146
200
—
—
—
1,508
1,854
Closing
        shareholders' funds
148
241
82
(8
)
(19
)
1,857
2,301
F-41
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
31.
Acquisitions
A list of businesses acquired during the year,
and the month of acquisition, is set out on page F-72. All these businesses are
engaged in the  distribution of building materials. In all these acquisitions,
the Group acquired 100% of the issued share capital, and has accounted for the
transaction by the purchase method of accounting.
Fair
Provisional
Book values
value
fair values
acquired
alignments
acquired
All acquisitions
£m
£m
£m
Intangible fixed assets
–
Customer relationships
—
220
220
–
Trade names and brands
—
26
26
–
Other
13
(8
)
5
Property, plant and equipment
68
31
99
Inventories
155
(7
)
148
Receivables
310
(3
)
307
Cash, cash equivalents and bank overdrafts
5
—
5
Borrowings
(76
)
—
(76
)
Payables
(205
)
(6
)
(211
)
Deferred tax
(1
)
(50
)
(51
)
Retirement benefit obligations
—
(11
)
(11
)
Provisions
(2
)
(3
)
(5
)
Total
267
189
456
Goodwill arising
387
Consideration
843
Satisfied by:
Cash
799
Deferred consideration
35
Contingent consideration
2
Directly attributable costs
7
Total consideration
843
The fair value adjustments shown above for the year ended July 31, 2006 are provisional figures, being the best estimates currently available. Further adjustments to goodwill may be necessary when additional
information is available concerning some of the judgmental areas.
The goodwill arising on these acquisitions is
attributable to the anticipated profitability of the new markets and product
ranges to which the Group has gained access, and to additional profitability
and operating
efficiencies in respect of existing markets.
The acquisitions contributed £862 million
to revenue, £60 million to trading profit and £33 million to the Group's
operating profit for the period between the date of acquisition and the balance

sheet date.
If each acquisition had been completed on the first day of the financial year, Group revenue would have been £14,940 million and Group trading profit would have been £934 million.
32.
Analysis of the net outflow of cash
    in respect of the purchase of businesses
2006
2005
£m
£m
Purchase consideration (note 31)
843
423
Deferred and contingent consideration (net of payments in the year)
(16
)
(25
)
Cash consideration
827
398
Cash, cash equivalents and bank overdrafts acquired
(5
)
8
Net cash outflow in respect of the purchase of businesses
822
406
F-42
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Notes to the consolidated financial statements
Year ended July 31, 2006
33.
Disposals
The Group made no disposals of operations in the year ended July 31, 2006. £2 million of deferred consideration was received in the year in respect of a disposal in the year ended July 31, 2005.
34.
Reconciliation of operating profit
      to net cash inflow from operating activities
2006
2005
£m
£m
Profit for the year
537
479
Net finance costs
65
37
Tax expense
232
186
Depreciation of property, plant and equipment
134
114
Amortization of non-acquired intangibles
6
3
Profit on disposal of property, plant and equipment
(16
)
(11
)
Amortization of acquired intangibles
48
6
Increase in inventories
(171
)
(56
)
Increase in trade and other receivables
(243
)
(180
)
Increase in trade and other payables
217
168
Increase in provisions and other liabilities
19
—
Share based payments and other non-cash items
22
19
Cash generated from operations
850
765
35.
Reconciliation of opening to closing
    net debt
New
finance
Fair value
Exchange
At August 1
Cash flows
Acquisitions
leases
adjustments
movement
At July 31
For the year ended July 31,
      2006
£m
£m
£m
£m
£m
£m
£m
Cash and
      cash equivalents
381
52
—
—
—
(17
)
416
Bank overdrafts
(437
)
304
—
—
—
9
(124
)
(56
)
356
—
—
—
(8
)
292
Financial assets: trading investments
5
—
—
—
—
(1
)
4
Derivative financial instruments
(11
)
4
—
—
(13
)
1
(19
)
Bank loans
(1,047
)
(1,085
)
(74
)
—
26
28
(2,152
)
Obligations under finance leases
(62
)
17
(2
)
(30
)
—
2
(75
)
(1,171
)
(708
)
(76
)
(30
)
13
22
(1,950
)
New
finance
Fair value
Exchange
At August 1
Cash flows
Acquisitions
leases
adjustments
movement
At July 31
For the year ended July 31,
      2005
£m
£m
£m
£m
£m
£m
£m
Cash and cash equivalents
291
66
—
—
—
24
381
Bank overdrafts
(379
)
(8
)
—
—
—
(50
)
(437
)
(88
)
58
—
—
—
(26
)
(56
)
Financial assets: trading investments
6
(1
)
—
—
—
—
5
Derivative financial instruments
(1
)
—
—
—
(10
)
—
(11
)
Bank loans
(835
)
(176
)
(1
)
—
—
(35
)
(1,047
)
Obligations under finance leases
(52
)
5
—
(13
)
—
(2
)
(62
)
(970
)
(114
)
(1
)
(13
)
(10
)
(63
)
(1,171
)
F-43
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Notes to the consolidated financial statements
Year ended July 31, 2006
36.
Related party transactions
There are no related party transactions requiring
disclosure under IAS 24, Related Party Disclosures other than the compensation
of key management personnel which is set out in the following table.
2006
2005
Key management personal compensation (including directors)
£m
£m
Salaries, bonuses and other short-term employee benefits
9
8
Termination and post employment benefits
1
1
Share-based payments
4
1
Total compensation
14
10
More detailed disclosures on the remuneration
of the Directors are provided in Item 6 – Directors, Senior Management
and Employees – Paragraph B, Compensation.
37.
Capital commitments
Authorised capital expenditure which was contracted for but not provided in these accounts was as follows:
2006
2005
£m
£m
Property, plant and equipment
77
96
Intangible assets: software
14
—
Total capital commitments
91
96
38.
Operating lease commitments
Future minimum lease payments under non-cancellable
operating leases for the following periods are:
2006
2005
£m
£m
Within one year
199
153
Later than one year and less than five years
533
402
After five years
372
323
Total operating lease commitments
1,104
878
Operating lease payments represent rental payable by the Group for certain of its properties. Some of these operating lease arrangements have renewal options and rental escalation clauses, though the effect of these is
not material. No arrangements have been entered into for contingent rental payments.
The total minimum sublease payments expected to be received under non-cancellable subleases at July 31, 2006 is £8 million (2005: £5 million).
39.
Contingent liabilities
The Group has the following quantifiable contingent liabilities which arose in the ordinary course of business and which have not been provided in these accounts since no actual liability is expected to arise:
2006
2005
£m
£m
Sundry guarantees, performance bonds and indemnities
114
78
Obligations under forward foreign exchange contracts
497
413
An amount of £499 million (2005: £402 million) is expected to be received from counterparties in respect of the obligations under forward foreign exchange contracts detailed above.
As of July 31, 2006, cash deposits of Wolseley Insurance Limited amounting to £52 million (2005: £41 million) were charged in favor of LloydsTSB Bank plc to secure letters of credit provided by that bank.
F-44
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Notes to the consolidated financial statements
Year ended July 31, 2006
40.
Post balance sheet events
The Group has made the following acquisitions between August 1 and September 24, 2006:
Estimated
Estimated
Estimated
Percentage
cost
net assets
goodwill
Name
Date of acquisition
acquired
£m
£m
£m
Water Works Suppliers Corporation
August 2006
100
%
5
4
1
Palermo Supply Co., Inc.
August 2006
100
%
21
9
12
Lunts Heath Limited
August 2006
100
%
1
—
1
Sigmatec SAS
August 2006
100
%
1
—
1
United Automatic Heating Supply Ltd.
September 2006
100
%
3
2
1
Morris Insulation Limited, et al
September 2006
100
%
18
5
13
Both the cost of acquisition and the fair values of assets and liabilities acquired are estimates, based on information available to the Group at the date of approval of these financial statements. Further adjustments
will be necessary when additional information is available.
The Group has made the following acquisitions
between September 25 and October 31, 2006:
Estimated
Percentage
cost
Name
Date of acquisition
acquired
£m
DT Group A/S
September 2006
100
%
1,353
Castle Group
October 2006
100
%
69
Northern Water Works Supply, Inc
October 2006
100
%
35
Murdock EDC Ltd & Murdock Haworth Ltd
October 2006
100
%
2
Helatukku Finland Oy
October 2006
100
%
5
Gulf Refrigeration Supply Inc.
October 2006
100
%
12
Kandall Fabricating & Supply Corporation
October 2006
100
%
12
Lee Window & Door Company
October 2006
100
%
2
Perfection Truss Company, Inc
October 2006
100
%
4
Woodcote-stavebni materialy a.s.
October 2006
100
%
26
The fair value of assets and liabilities acquired,
  and hence the amount of goodwill arising, cannot yet be estimated. Further details
  of the acquisition of DT Group and a vendor placing of approximately 59 million
  ordinary shares are provided in Item 5 – Operating and Financial Review
  and Prospects – Liquidity and Capital Resources – Capital Resources.
41.
Parent company
Wolseley plc is a limited liability company incorporated in England and Wales and domiciled in the United Kingdom. It operates as the ultimate parent company of the Wolseley Group. Its registered office is Parkview
1220, Arlington Business Park, Theale, Reading RG7 4GA, United Kingdom.
F-45
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Notes to the consolidated financial statements
Year ended July 31, 2006
42.
Accounting standards, interpretations
      and amendments to published standards not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting periods beginning on or after August 1, 2006 or later periods, but
which the Group has not early adopted. The new standards which are expected to be relevant to the Group's operations are as follows:
Amendment to IAS 39 and IFRS 4 "Financial Guarantee Contracts" (effective from August 1, 2006)
This amendment requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be initially recognized at their fair value and subsequently measured at the higher
of: (a) the unamortized balance of the related fees received and determined; and (b) the expenditure required to settle the commitment at the balance sheet date. Management is currently assessing the impact of this amendment on the Group's
financial statements.
Amendment to IAS 39 "Cash Flow Hedge Accounting of Forecast Intragroup Transactions" (effective from August 1, 2006)
This amendment allows the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a hedged item in the consolidated financial statements, provided that: (a) the transaction is
denominated in a currency other than the functional currency of the entity entering into that transaction; and (b) the foreign currency risk will affect consolidated profit or loss. Management does not expect adoption of this amendment to have a
significant impact on the Group's financial statements.
Amendment to IAS 39 "The Fair Value Option" (effective from August 1, 2006)
This amendment changes the definition of the financial instruments classified at fair value through the income statement and restricts the ability to designate financial instruments as part of this category. Management
does not expect adoption of this amendment to have a significant impact on the Group's financial statements.
IFRS 7 "Financial Instruments: Disclosures" (effective from August 1, 2007) and amendment to IAS 1 "Presentation of Financial Statements – Capital Disclosures" (effective from August 1,
2007)
IFRS 7 introduces new disclosures of qualitative and quantitative information about exposure to risks arising from financial instruments including specified minimum disclosures about credit risk, liquidity risk and
market risk, including sensitivity analysis to market risk. The amendment to IAS 1 introduces disclosures about the level of an entity's capital and how it manages capital. Management is currently assessing the impact of IFRS 7 and the
amendment to IAS 1 on the Group's financial statements.
IFRIC 7 "Applying the restatement approach under IAS 29" (effective from August 1, 2006)
IFRIC 7 deals with the accounting when an entity identifies the existence of hyperinflation in the economy of its functional currency and how deferred tax items in the opening balance sheet should be restated. The
Group has no operations in hyperinflationary economies. The Group has assessed the impact of the interpretation and concluded it is not likely to have a significant impact on the Group's financial statements.
IFRIC 8 "Scope of IFRS 2" (effective from August 1, 2006)
IFRIC 8 clarifies that transactions within the scope of IFRS 2 'Share Based Payment' include those in which the entity cannot specifically identify some or all of the goods and services received. The Group
has assessed the impact of this interpretation and has concluded it is not likely to have a significant impact on the Group's financial statements.
IFRIC 9 "Reassessment of embedded derivatives" (effective from August 1, 2006)
IFRIC 9 clarifies that an entity should assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract.
Subsequent reassessment is prohibited unless there is a change in the contract terms, in which case it is required. The Group has assessed the impact of this interpretation and has concluded it is not likely to have a significant impact on the
Group's financial statements.
IFRIC 10 "Interim financial reporting
      and impairment" (effective
from August 1, 2007)
IFRIC 10 clarifies that any impairment losses
    on goodwill and certain financial assets recognised in an interim financial
    statement must not be reversed in subsequent interim or annual financial
    statements.  The Group
    has assessed the impact of this interpretation and has concluded it is not
    likely to have a significant impact on the Group's financial statements.
F-46
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Notes to the consolidated financial statements
Year ended July 31, 2006
43.
Reconciliation of net assets and profit
      under UK GAAP to IFRS
This is the first year that the Group has presented its financial statements under IFRS. In the year ended July 31, 2005, Wolseley plc reported under UK GAAP.
IFRS 1, "First-time Adoption of International
Financial Reporting Standards" sets out the procedures that the Group must
follow when it adopts IFRS for the first time as the basis for preparing its
 consolidated financial statements. The Group is required to establish its IFRS
accounting policies as at July 31, 2006 and, in general, apply these retrospectively
to determine the IFRS opening balance sheet at its date of transition, August
1,
2004.
Certain optional exemptions to this general
    principle are available under IFRS 1 and the significant first-time adoption
    choices made by the Group are
  as follows:
Business combinations before August 1, 2004
(IFRS 3, "Business Combinations")
The
Group has elected not to apply IFRS 3 retrospectively to business combinations
that took place before August 1, 2004. As a result, in the IFRS opening balance
sheet, goodwill arising from past business combinations
(£665.9 million) remains as stated under UK GAAP at that date.
Employee Benefits – actuarial gains and losses (IAS 19, "Employee Benefits")
The Group has elected to recognize all cumulative actuarial gains and losses in relation to employee benefit schemes at the date of transition. In addition, the Group has elected to recognize actuarial gains and losses
in full in the period in which they occur in a statement of recognized income and expense.
Share-based Payments (IFRS 2, "Share-based
Payment")
The Group has elected to apply IFRS 2 only to equity-settled awards that had not vested as at August 1, 2004 and were gra
nted on or after 7 November 2002 and cash-settled awards
that had not vested as at August 1, 2004.
Foreign Currency Translation Reserve (IAS 21, "The
Effects of Changes in Foreign Exchange Rates")
The Group has elected to reset the foreign currency translation reserve to zero at August 1, 2004. Going forward, IFRS requires amounts taken to reserves on the retranslation of foreign subsidiaries to be recorded in a
separate foreign currency translation reserve and be included in the future calculation of profit or loss on sale of the subsidiary.
Financial Instruments (IAS 39, "Financial
Instruments: Recognition and Measurement" and IAS 32, "Financial Instruments:
Disclosure and Presentation")
The Group has elected to implement IAS 32 and IAS 39 at its date of transition, August 1, 2004, and apply hedge accounting where the requirements of IAS 39 are met.
The Group is also required to provide reconciliations of equity at the transition date, equity at July 31, 2005, and profit for the year ended July 31, 2005 under UK GAAP and IFRS, and to provide explanations of the
effect of the transition on its financial position, financial performance and cash flows. These are presented in the following tables.
F-47
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Restatement of profit and loss account
Effect of
UK GAAP
transition
IFRS
Year ended July 31, 2005
Notes
£m
£m
£m
Revenue
(ix)
11,257
(1
)
11,256
Cost of sales
(ix)
(8,175
)
1
(8,174
)
Gross profit
3,082
—
3,082
Distribution costs
(1,930
)
—
(1,930
)
Administrative expenses: amortization
      of acquired intangibles
(i)
(43
)
37
(6
)
Administrative expenses: other
(i)-(v), (viii), (ix)
(455
)
(13
)
(468
)
Administrative expenses: total
(498
)
24
(474
)
Other operating income
24
—
24
Operating profit
678
24
702
Finance revenue
27
—
27
Finance costs
(ii), (iii), (v), (ix)
(57
)
(7
)
(64
)
Profit before tax
648
17
665
Tax expense
(vii)
(187
)
1
(186
)
Profit for the period
461
18
479
Restatement of reconciliation of shareholders'
  funds
Effect of
UK GAAP
transition
IFRS
Year ended July 31, 2005
Notes
£m
£m
£m
Profit for the financial year
461
18
479
Net exchange adjustments offset
      in reserves
(viii)
60
(3
)
57
Cash flow hedges
– net fair value gains
(v)
—
(11
)
(11
)
Actuarial loss on retirement
      benefits
(iii)
—
(4
)
(4
)
Tax credit recognized directly
      in equity
(vii)
25
9
34
Net gains not recognized in
      the income statement
85
(9
)
76
Total recognized income for
      the year attributable to shareholders
546
9
555
New share capital subscribed
33
—
33
Purchase of own shares
(19
)
—
(19
)
Credit to equity for share-based
      payments
(iv)
—
23
23
Dividends
(vi)
(155
)
10
(145
)
Net additions to shareholders'
      funds
405
42
447
Opening shareholders'
      funds
1,902
(48
)
1,854
Closing shareholders'
      funds
2,307
(6
)
2,301
F-48
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Restatement of balance sheet
Effect of
UK GAAP
transition
IFRS
As of July 31, 2005
Notes
£m
£m
£m
Assets
Non-current assets
Intangible assets: goodwill
(i)
866
(51
)
815
Intangible assets: other
(i)
—
133
133
Property, plant and equipment
(i), (ii), (ix)
916
(33
)
883
Deferred tax asset
(vii)
26
29
55
Trade and other receivables
37
—
37
Financial assets: available
      for sale investments
(ix)
4
2
6
1,849
80
1,929
Current assets
Inventories
(ix)
1,705
1
1,706
Trade and other receivables
(iii), (ix)
2,213
(8
)
2,205
Financial assets: trading investments
5
—
5
Derivative financial assets
(v)
—
3
3
Financial receivables: construction
      loans (secured)
(ix)
264
(2
)
262
Cash and cash equivalents
381
—
381
4,568
(6
)
4,562
Assets held for sale
(ix)
—
8
8
Total assets
6,417
82
6,499
Liabilities
Current liabilities
Trade and other payables
(ii)-(iv), (vi), (ix)
2,029
(86
)
1,943
Current tax payable
70
—
70
Borrowings: construction loans
      (unsecured)
(ix)
264
(2
)
262
Bank loans and overdrafts
(ix)
437
2
439
Obligations under finance leases
(ii)
4
—
4
Derivative financial liabilities
(v)
—
14
14
Provisions
22
—
22
Retirement benefit obligations
17
—
17
2,843
(72
)
2,771
Non-current liabilities
Trade and other payables
18
—
18
Bank loans
1,045
—
1,045
Obligations under finance leases
(ii)
44
14
58
Deferred tax liabilities
(vii)
71
(9
)
62
Provisions
(ii), (ix)
57
6
63
Retirement benefit obligations
(iii)
32
149
181
1,267
160
1,427
Total liabilities
4,110
88
4,198
Net assets
2,307
(6
)
2,301
Shareholders' equity
Called up share capital
148
—
148
Share premium account
241
—
241
Foreign currency translation
      reserve
—
82
82
Retained earnings
1,918
(88
)
1,830
Shareholders' funds
2,307
(6
)
2,301
F-49
Back to Contents
Notes to the consolidated financial statements
Year ended July 31, 2006
Restatement of balance sheet
UK GAAP
Effect of
IFRS
As of August 1, 2004
Notes
£m
transition
£m
Assets
Non-current assets
Intangible assets: goodwill
666
—
666
Intangible assets: other
(i)
—
13
13
Property, plant and equipment
(i), (ii), (ix)
716
3
719
Deferred tax assets
(vii)
34
25
59
Trade and other receivables
34
—
34
Financial assets: available
      for sale investments
(ix)
2
—
2
1,452
41
1,493
Current assets
Inventories
1,502
—
1,502
Trade and other receivables
(ix)
1,897
(5
)
1,892
Financial assets: trading investments
6
—
6
Financial receivables: construction
      loans (secured)
(ix)
188
(3
)
185
Cash and cash equivalents
291
—
291
3,884
(8
)
3,876
Assets held for sale
(ix)
—
7
7
Total assets
5,336
40
5,376
Liabilities
Current liabilities
Trade and other payables
(ii)-(vi), (ix)
1,701
(77
)
1,624
Current tax payable
152
—
152
Borrowings: construction loans
      (unsecured)
(ix)
188
(3
)
185
Bank loans and overdrafts
(ix)
379
3
382
Obligations under finance leases
(ii)
5
3
8
Derivative financial liabilities
(v)
—
1
1
Provisions
26
—
26
Retirement benefit obligations
26
—
26
2,477
(73
)
2,404
Non-current liabilities
Bank loans
832
—
832
Obligations under finance leases
(ii)
22
22
44
Deferred tax liabilities
(vii)
31
(15
)
16
Provisions
(ii), (iii)
51
6
57
Retirement benefit obligations
(iii)
21
148
169
957
161
1,118
Total liabilities
3,434
88
3,522
Net assets
1,902
(48
)
1,854
Shareholders' equity
Called up share capital
146
—
146
Share premium account
200
—
200
Foreign currency translation
      reserve
—
—
—
Retained earnings
1,556
(48
)
1,508
Shareholders' funds
1,902
(48
)
1,854
F-50
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Notes to the consolidated financial statements
Year ended July 31, 2006
Restatement of cash flow statement
Effect of
UK GAAP
transition
IFRS
Year ended
      July 31, 2005
£m
£m
£m
Cash flows from operating
      activities
Cash generated from operations
764
1
765
Interest received
26
—
26
Interest paid
(56
)
(1
)
(57
)
Tax paid
(151
)
—
(151
)
Net cash generated from
      operating activities
583
—
583
Cash flows from investing
      activities
Acquisition of businesses (net
      of cash acquired)
(406
)
—
(406
)
Disposals of businesses (net
      of cash disposed of)
5
—
5
Purchases of property, plant
      and equipment
(239
)
21
(218
)
Proceeds from sale of property,
      plant and equipment
74
—
74
Purchase of intangible assets
—
(21
)
(21
)
Proceeds from disposal of current
      asset investments
1
—
1
Net cash used in investing
      activities
(565
)
—
(565
)
Cash flows from financing
      activities
Proceeds from the issue of
      shares to shareholders
33
—
33
Purchase of shares by Employee
      Benefit Trusts
(19
)
—
(19
)
Proceeds from new borrowings
410
—
410
Repayment of borrowings and
      derivatives
(234
)
—
(234
)
Finance lease capital payments
(5
)
—
(5
)
Dividends paid to shareholders
(145
)
—
(145
)
Net cash generated from
      financing activities
40
—
40
Net increase in cash, cash
      equivalents and overdrafts
58
—
58
Effects of exchange rate changes
(26
)
—
(26
)
Cash, cash equivalents and
      overdrafts at the beginning of the year
(88
)
—
(88
)
Cash, cash equivalents and
      overdrafts at the end of the year
(56
)
—
(56
)
Effect of
UK GAAP
transition
IFRS
Year ended July 31, 2005
£m
£m
£m
Profit for the year
461
18
479
Tax expense
187
(1
)
186
Depreciation of property, plant
      and equipment and amortization of non-acquired intangibles
114
3
117
Profit on disposal of property,
      plant and equipment
(11
)
—
(11
)
Amortization of acquired intangibles
43
(37
)
6
Net finance costs
30
7
37
Increase in inventories
(55
)
(1
)
(56
)
Decrease in trade and other
      receivables
(181
)
1
(180
)
Decrease in trade and other
      payables
169
(1
)
168
Decrease in provisions and
      other liabilities
7
(7
)
—
Share-based payments and other
      non-cash items
—
19
19
Net cash flow from operating
      activities
764
1
765
F-51
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Notes to the consolidated financial statements
Year ended July 31, 2006
(i)
Intangible assets
Arising on business combinations
Under UK GAAP, goodwill was amortized
  over its useful economic life, tested for impairment and provided against as
  necessary. Under IFRS, goodwill is no longer amortized but must be tested for
  impairment as at August 1, 2004 (the transition date) and at least annually
  thereafter. Goodwill amortization charged under UK GAAP during the year ended
  July 31, 2005 has been credited back to the income statement under IFRS.
In addition IFRS requires identifiable intangible
  assets to be recognized separately on the balance sheet and consequently certain
  intangible assets, such as contractual customer relationships and trade names,
  which were previously recorded as part of goodwill under UK GAAP, have been
  separately recognized as intangible assets under IFRS and amortized over their
  expected useful lives.
Software
Under UK GAAP, software was included
  in plant and equipment, and the allocation of its cost over its estimated useful
  life was charged as depreciation. Under IFRS, only software which is necessary
  to operate hardware is included in plant and equipment. Other expenditure on
  software is included in intangible assets, and the allocation of its cost over
  its estimated useful life is charged as amortization.
Year ended
July 31, 2005
Increase/(decrease) in income
      statement headings
£m
Administrative expenses: amortization
      of acquired intangibles
37
Administrative expenses: other
—
Profit for the year
37
As of July 31, 2005
As of July 31, 2004
Increase/(decrease) in balance
      sheet headings
£m
£m
Intangible assets: goodwill
(51
)
—
Intangible assets: other
133
13
Property, plant and equipment
(31
)
(12
)
Equity
51
1
(ii)
Leases
IAS 17, "Leases"
      requires that the land and buildings elements of property leases are considered
      separately for the purposes of determining whether the lease is a finance
      or operating lease. The majority of the Group's leased buildings are on
      short-term leases and, consistent with UK GAAP, are classified as operating
      leases under IFRS. There are, however, a small number of leases where the
      building element of the lease has been reclassified as a finance lease based
      on the criteria set out in IAS 17.
Under
  UK GAAP, committed rental increases, which could be considered in the same way
  as inflationary increases and increases due to market comparables, were generally
  recognized as they arose, and property lease incentives were generally recognized
  over the period to the first market rent review. Under IFRS, committed rental
  increases and lease incentives are required to be spread over the entire lease
  term.
Year ended
July 31, 2005
Increase/(decrease) in income
      statement headings
£m
Administrative expenses: other
—
Finance costs
(1
)
Profit for the year
(1
)
As of July
      31, 2005
As of July
      31, 2004
Increase/(decrease)
      in balance sheet headings
£m
£m
Property, plant and equipment
11
24
Trade and other payables (included
      in current liabilities)
(1
)
(1
)
Obligations under finance leases:
      due in less than one year
—
(3
)
Obligations under finance leases:
      due in more than one year
(14
)
(22
)
Provisions (included in non-current
      liabilities)
(4
)
(4
)
Equity
(8
)
(6
)
F-52
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Notes to the consolidated financial statements
Year ended July 31, 2006
(iii)
Post-employment benefits
Under UK GAAP, the Group
        accounted for post-employment benefits under SSAP 24, "Accounting
        for pension costs", whereby the cost of providing defined benefit
        pensions and post-retirement healthcare benefits was charged against operating
        profit on a systematic basis with surpluses and deficits arising recognized
        over the expected average remaining service lives of participating employees.
        The Group has adopted the amendment to IAS 19, "Employee Benefits"
        which allows actuarial gains and losses to be charged to equity and, as
        a result, the net deficit on the Group's defined benefit pension
        schemes is carried in full in the Group's IFRS balance sheet.
Year ended
July 31, 2005
Increase/(decrease) in income
      statement headings
£m
Administrative expenses: other
8
Finance costs
(7
)
Profit for the year
1
Year ended
July 31, 2005
Increase/(decrease) in statement
      of recognized income and expense headings
£m
Actuarial loss on retirement
      benefits
(4
)
Net gains not recognized in
      the income statement
(4
)
As of July
      31, 2005
As of July
      31, 2004
Increase/(decrease)
      in balance sheet headings
£m
£m
Trade and other receivables
(3
)
—
Trade and other payables
—
2
Provisions (included in non-current
      liabilities)
—
(2
)
Retirement benefit obligations
      (included in non-current liabilities)
(149
)
(148
)
Equity
(152
)
(148
)
(iv)
Share-based payments
Under UK GAAP, the cost of
      awards made under the Group's employee share schemes was based on the
      intrinsic value of the awards, with the exception of Save As You Earn schemes
      for which no cost was recognized. Under IFRS 2, "Share-based Payment",
      the cost of employee share schemes, including Save As You Earn schemes,
      is based on the fair value of the awards, which must be assessed using an
      option-pricing model. The Group has principally used a binomial model for
      this purpose.
Generally, for an equity-settled award, the
  fair value of the award at the grant date is expensed on a straight-line basis
  over the vesting period, with adjustments being made to reflect expected and
  actual forfeitures during the vesting period due to failure to satisfy service
  conditions or achieve non-market performance conditions, such as EPS growth
  targets. For a cash-settled award, the fair value of the award at each balance
  sheet date is used to calculate the probable liability of the Group; changes
  in this liability from the opening to closing balance sheet are charged or credited
  to the income statement.
Year ended
July 31, 2005
Increase/(decrease) in income
      statement headings
£m
Administrative expenses: other
(21
)
Profit for the year
(21
)
Year ended
July 31, 2005
Increase/(decrease) in statement
      of changes in shareholders' equity headings
£m
Credit to equity for share-based
      payments
23
Net additions to shareholders'
      funds
23
As of July
      31, 2005
As of July
      31, 2004
Increase/(decrease)
      in balance sheet headings
£m
£m
Trade and other payables
(12
)
(14
)
Equity
(12
)
(14
)
F-53
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Notes to the consolidated financial statements
Year ended July 31, 2006
(v)
Derivatives and hedge accounting
The Group uses derivative contracts
      to manage its economic exposure to movements in interest rates and currency
      exchange rates. Under UK GAAP, such derivative contracts were not recognized
      as assets and liabilities on the balance sheet and gains or losses arising
      on them were not recognized until the hedged item had itself been recognized
      in the financial statements.
Under IFRS, all derivative financial instruments
    are accounted for at fair market value whilst other financial instruments
    are accounted for either at amortized cost or at fair value depending on
    their classification. Subject to stringent criteria, derivative financial
    instruments, financial assets and financial liabilities may be designated
    as forming hedge relationships as a result of which fair value changes are
    offset in the income statement or charged/credited to equity depending on
    the nature of the hedge relationship. Hedge accounting has been applied to
    the Group's interest rate swaps (which are hedging floating rate debt)
    and foreign currency financial instruments (which are hedging the net assets
of the Group's foreign operations).
Year ended
July 31, 2005
Increase/(decrease) in income statement headings
£m
Administrative expenses: other
(1
)
Finance costs
1
Profit for the year
—
Year ended
July 31, 2005
Increase/(decrease) in statement of recognized income and expense headings
£m
Cash flow hedges: net fair value losses
(11
)
Net gains not recognized in the income statement
(11
)
As of July 31, 2005
As of July 31, 2004
Increase/(decrease) in balance
      sheet headings
£m
£m
Derivative financial assets
3
—
Derivative financial liabilities
(14
)
(1
)
Equity
(11
)
(1
)
(vi)
Post balance sheet events
Under UK GAAP, dividends
        were recognized in the period to which they related. IAS 10, "Events
        after the Balance Sheet Date" requires that dividends declared or
        approved after the balance sheet date should not be recognized as a liability
        at that balance sheet date as the liability does not represent a present
        obligation as defined by IAS 37, "Provisions, Contingent Liabilities
        and Contingent Assets".
As of July 31, 2005
As of July 31, 2004
Increase/(decrease) in balance sheet headings
£m
£m
Trade and other payables
104
94
Equity
104
94
Year ended
July 31, 2005
Increase/(decrease) in statement of changes in shareholders' equity headings
£m
Dividends
10
Net additions to shareholders' funds
10
(vii)
Taxation
Under UK GAAP, deferred tax
      was provided on timing differences between the accounting and taxable profit
      (an income statement approach). Under IFRS, deferred tax is provided on
      temporary differences between the book carrying value and tax base of assets
      and liabilities (a balance sheet approach). As a result, the Group's IFRS
      balance sheet includes an additional deferred tax liability in respect of
      fair value property revaluations on acquisitions and property roll-over
      gains.
In addition, deferred tax has been recognized on the adjustments between UK GAAP and IFRS with the majority of the net deferred tax asset relating to the adjustments for share options and post-employment benefits
(reflecting the substantially increased defined benefit liability under IFRS).
F-54
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Notes to the consolidated financial statements
Year ended July 31, 2006
Year ended
July 31, 2005
Increase/(decrease) in income
        statement headings
£m
Income tax expense
1
Profit for the year
1
As of July 31, 2005
As of July 31, 2004
Increase/(decrease) in balance sheet headings
£m
£m
Deferred tax assets
29
25
Deferred tax liabilities
9
15
Equity
38
40
Year ended
July 31, 2005
Increase/(decrease) in statement of recognized income and expense headings
£m
Tax credit recognized directly in equity
9
Net gains not recognized in the income statement
9
(viii)
Foreign exchange gains and losses
A small number of the Group's
      subsidiary companies have changed their functional currency in order to
      comply with the more stringent functional currency requirements of IAS 21,
      "The Effects of Changes in Foreign Exchange Rates" which requires
      companies that are acting on behalf of the parent company to have the same
      functional currency as the parent company. As a result, some foreign exchange
      differences arising in these companies have been recorded in the Group's
      income statement under IFRS rather than in equity, as required under UK
      GAAP.
Year ended
July 31, 2005
Increase/(decrease) in income statement headings
£m
Administrative expenses: other
3
Profit for the year
3
Year ended
July 31, 2005
Increase/(decrease) in statement of recognized income and expense headings
£m
Net exchange adjustments offset in reserves
(3
)
Net gains not recognized in the income statement
(3
)
(ix)
Other adjustments
•
The Group holds invoiced products on its premises for later collection by customers: under UK GAAP such products are generally treated as sold, while under IFRS they are held in inventory.
•
Available-for-sale financial assets are stated at historical cost under UK GAAP, but at fair value under IFRS.
•
Assets held for sale are shown in a single balance sheet caption under IFRS, but under UK GAAP are included in property, plant and equipment, trade and other receivables or, where they arise out of foreclosed loans, in
construction loans receivable.
•
Under IFRS, holiday pay is accrued over the period when employees render the service that increases their entitlement to paid leave. Under UK GAAP, there is no requirement to adjust salary costs to reflect the timing
when such benefits are taken.
F-55
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Notes to the consolidated financial statements
Year ended July 31, 2006
Year ended
July 31, 2005
Increase/(decrease) in income statement headings
£m
Revenue
(1
)
Cost of sales
1
Administrative expenses: other
(2
)
Finance costs
—
Profit for the year
(2
)
As of July 31, 2005
As of July 31, 2004
Increase/(decrease) in balance sheet headings
£m
£m
Property, plant and equipment
(13
)
(9
)
Financial assets: available-for-sale investments (included in non-current assets)
2
—
Inventories
1
—
Trade and other receivables
(5
)
(5
)
Construction loans receivable (secured)
(2
)
(3
)
Assets held for sale
8
7
Trade and other payables
(5
)
(4
)
Borrowings: construction loans (unsecured)
2
3
Bank loans and overdrafts
(2
)
(3
)
Provisions (included in non current liabilities)
(2
)
—
Equity
(16
)
(14
)
F-56
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Notes to the consolidated financial statements
Year ended July 31, 2006
44.
Summary of significant differences between
      International Financial Reporting Standards and accounting principles generally
      accepted in the United States
The Consolidated Financial Statements have been
  prepared in accordance with International Financial Reporting Standards as adopted
  by the European Union ("IFRS"), which differ in certain significant
  respects from generally accepted accounting principles in the United States
  ("US GAAP"). Such differences involve methods for measuring the amounts
  shown in the financial statements, as well as additional disclosures required
  by US GAAP.
There are no significant differences between IFRS as adopted for use in the EU and full IFRS as published by the International Accounting Standards Board ("IASB"), as applied to the Group.
The following is a summary of the material adjustments to consolidated profit for the financial year and consolidated shareholders' funds that would have been required in applying the significant differences between
IFRS and US GAAP.
Year ended July
      31,
2006
2005
Reconciliation of consolidated
      profit for the financial year
Note
£m
£m
Profit
      for the financial year under IFRS
537
479
US GAAP adjustments:
Amortization of intangible
      assets
(i)
(8
)
(3
)
Pensions
(iv)
(13
)
(15
)
Deferred taxation
(v)
13
(2
)
Share based
      payments
(vi)
1
(5
)
Leases
(vii)
(12
)
(19
)
Other adjustments
(viii)
1
(7
)
Taxation effect of US GAAP
      adjustments
(v)
7
16
Profit for
      the year before cumulative effect of accounting change
526
444
Cumulative effect of change
      in accounting principle
(vi)
(18
)
—
Tax effect of change in accounting
      principle
2
—
Profit
      for the financial year under US GAAP
510
444
Presentation of earnings
      per share under US GAAP
(ix)
Basic earnings
      per share before cumulative effect of accounting change
88.91
p
75.61
p
Cumulative effect of accounting
      change, net of tax
(2.70
)p
—
Basic earnings
      per share
86.21
p
75.61
p
Diluted earnings
      per share before cumulative effect of accounting change
88.10
p
74.94
p
Cumulative effect of accounting
      change, net of tax
(2.68
)p
—
Diluted earnings
      per share
85.42
p
74.94
p
Weighted
      average shares outstanding (millions)
592
587
Dilutive effect of stock options
      (millions)
5
5
Weighted
      average shares outstanding assuming dilution (millions)
597
592
F-57
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Notes to the consolidated financial statements
Year ended July 31, 2006
Year ended July
      31,
2006
2005
Reconciliation of consolidated
      shareholders' funds
Note
£m
£m
Shareholders'
      funds under IFRS
2,592
2,301
US GAAP adjustments:
Goodwill
(i)
170
174
Intangible
      assets
(ii)
82
94
Contingent consideration
(iii)
19
31
Pensions
(iv)
96
88
Deferred taxation
(v)
13
7
Share based
      payments
(vi)
(23
)
12
Leases
(vii)
(15
)
(2
)
Other adjustments
(viii)
8
7
Taxation effect of US GAAP
      adjustments
(v)
(73
)
(99
)
Total US
      GAAP adjustments
277
312
Shareholders'
      funds under US GAAP
2,869
2,613
A summary of the principal differences between IFRS and US GAAP, and additional disclosures under US GAAP applicable to the Group, are set out below:
(i)
Goodwill
On transition to IFRS, the amount of goodwill
        at August 1, 2004 is the previous carrying amount under UK GAAP. Under
    IFRS goodwill is no longer amortized but tested annually for impairment.
Prior to August 1, 1998, purchased goodwill was written off to reserves in the year of acquisition as permitted under UK GAAP. Since August 1, 1998, all acquired goodwill has been capitalized and amortized over a period not
exceeding 20 years. If a subsidiary or a business is subsequently sold or closed, previously written off goodwill which was the result of the initial acquisition is taken into account in determining the profit or loss on sale or closure.
Under US GAAP prior to August 1, 2002, goodwill arising on acquisitions prior to July 1, 2001 was capitalized and amortized over its estimated useful life, not exceeding 40 years. Following implementation of SFAS 142,
"Goodwill and Other Intangible Assets," goodwill is no longer amortized, but is reviewed at least annually for impairment.
The Group completed the required impairment tests under both IFRS and US GAAP during 2006, which indicated that no impairment charge was required under either set of accounting principles.
A roll-forward of goodwill in total and by reportable segment accounted for under US GAAP for 2006 and 2005 is as follows:
North
Europe
America
Total
£m
£m
£m
Balance at August 1, 2004
426
429
855
Additions
44
87
131
Disposals
1
(3
)
(2
)
Foreign exchange movements
18
(13
)
5
Balance at July 31, 2005
489
500
989
Additions
229
160
389
Foreign exchange movements
(4
)
(31
)
(35
)
Balance at July 31, 2006
714
629
1,343
F-58
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Notes to the consolidated financial statements
Year ended July 31, 2006
Central
UK and Ireland
France
Europe
Europe
£m
£m
£m
£m
Balance at August 1, 2004
202
164
60
426
Additions
35
7
2
44
Disposals
1
—
—
1
Foreign exchange movements
2
11
5
18
Balance at July 31, 2005
240
182
67
489
Additions
199
19
11
229
Foreign exchange movements
(1
)
(2
)
(1
)
(4
)
Balance at July 31, 2006
438
199
77
714
US Plumbing
US Building
North
and Heating
Materials
Canada
America
£m
£m
£m
£m
Balance at August 1, 2004
188
179
62
429
Additions
26
58
3
87
Disposals
(2
)
(1
)
—
(3
)
Foreign exchange movements
(12
)
(9
)
8
(13
)
Balance at July 31, 2005
200
227
73
500
Additions
56
99
5
160
Foreign exchange movements
(15
)
(17
)
1
(31
)
Balance at July 31, 2006
241
309
79
629
F-59
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Notes to the consolidated financial statements
Year ended July 31, 2006
(ii)
Intangible assets from business combinations
Under IFRS, the accounting for business combinations
        prior to transition to IFRS has not been revisited. Therefore intangible
        assets arising in respect of acquisitions prior to the transition date
        of August 1, 2004, previously recognized under US GAAP, have not been
    recognized under IFRS and remain within goodwill.
The intangible assets arising
        on business combinations under US GAAP for 2006 and 2005 can be analyzed
    as follows:
Gross carrying
Accumulated
amount
amortization
Net book value
£m
£m
£m
Customer relationships
378
58
320
Trademarks
54
11
43
Licensing agreements
11
4
7
Other
34
28
6
As of July 31, 2006
477
101
376
Customer
      relationships
172
16
156
Trademarks
30
6
24
Licensing
      agreements
11
3
8
Other
31
24
7
As of July
      31, 2005
244
49
195
Intangible assets arising on business combinations are being amortized over their
useful lives, which range from one to 25 years.
£m
Actual aggregate amortization expense
–
      For the year ending July 31, 2005
13
– For the year ending
    July 31, 2006
56
Estimated aggregate amortization expense
– For the year ending
      July 31, 2007
67
– For the year ending
      July 31, 2008
58
– For the year ending
      July 31, 2009
50
– For the year ending
      July 31, 2010
42
– For the year ending
      July 31, 2011
35
Weighted average period of amortization
The weighted average periods of amortization of intangible assets acquired in the fiscal years ended July 31, 2006 and 2005 are as follows:
Year ended
    July 31, 2006
Weighted
average
amortization
Amount
period
Class
£m
Years
Customer relationships
220
11.8
Trademarks
26
7.1
Other
5
2.7
251
11.1
F-60
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Notes to the consolidated financial statements
Year ended July 31, 2006
Year ended July 31, 2005
Weighted
average
amortization
Amount
period
Class
£m
Years
Customer relationships
87
10.3
Trademarks
14
9.4
Other
7
4.1
108
11.1
(iii)
Contingent purchase consideration
Under IFRS, contingent
        purchase consideration is recorded as part of the purchase cost at the
        date of acquisition if it is reliably measurable and probable. Under US
        GAAP, this cost is not recognized until the contingency is resolved and
        the amount determinable.
(iv)
Pensions
Under IFRS, pension costs are
      accounted for in accordance with IAS 19 (revised 2004). Under US GAAP, pension
      costs comprise the estimated cost of benefits accruing in the period as
      determined in accordance with SFAS 87, "Employers' Accounting
      for Pensions", and SFAS 88, "Employers' Accounting for Settlements
      and Curtailments of Defined Benefit Plans and for Termination Benefits."
Under IFRS, actuarial gains
      and losses, which represent differences between the expected and actual
      returns on the plan assets and the effect of changes in actuarial assumptions,
      are recognized in full in the statement of recognized income and expense
      in the period in which they occur. The defined benefit liability or asset
      recognized in the balance sheet comprises the net total for each plan of
      the present value of the benefit obligation at the balance sheet date, less
      any past service costs not yet recognized, less the fair value of the plan
      assets, if any, at the balance sheet date. Where a plan is in surplus, the
      asset recognized is limited to the amount of any unrecognized past service
      costs and the present value of any amount which the Group expects to recover
      by way of refunds or a reduction in future contributions.
Under US GAAP, the annual pension
      cost comprises the estimated cost of benefits accruing in the period as
      determined in accordance with SFAS 87, "Employers' Accounting
      for Pensions." SFAS 87 requires the use of the projected unit credit
      actuarial method for determining defined benefit pension costs and provides
      for the deferral of actuarial gains and losses (in excess of a specified
      corridor) that result from changes in assumptions or actual experience.
SFAS 132, "Employers'
      Disclosure about Pensions and Other Post-Retirement Benefits", requires
      disclosure of the components of net periodic pension cost and the funded
      status of the pension plans.
The components of net periodic pension cost for all Group-sponsored defined benefit
plans are as follows:
Year ended July
            31,
UK Plans
Non-UK Plans
2006
2005
2006
2005
£m
£m
£m
£m
Service cost
15
12
5
5
Interest cost
27
26
9
8
Expected return on plan assets
(29
)
(22
)
(7
)
(6
)
New entrants' prior service cost
—
—
—
1
Amortization of unrecognized net loss
12
12
1
1
Curtailments and settlements
—
—
(6
)
1
Net periodic pension cost
25
28
2
10
F-61
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Notes to the consolidated financial statements
Year ended July 31, 2006
The following table sets out the benefit obligation and plan assets of the
UK pension plans in accordance with US GAAP:
UK Plans as of July 31,
2006
2005
£m
£m
Change in benefit obligation:
Benefit obligation at beginning of year
527
460
Service cost
15
12
Interest cost
27
26
Plan participants' contribution
8
6
Acquisition
28
—
Actuarial loss/(gain)
30
35
Benefits paid
(16
)
(12
)
Benefit
      obligation at end of year
619
527
Change in plan assets:
Fair value of plan assets at beginning of year
409
326
Actual return on plan assets
59
69
Employer contribution
24
20
Plan participants' contribution
8
6
Acquisition
17
—
Benefits paid
(16
)
(12
)
Fair value of plan assets at end of year
501
409
Funded status
(118
)
(118
)
Unrecognized net actuarial
      loss
142
154
Prepaid pension cost
24
36
Net amount recognized
Amounts recognized in the balance sheet:
Prepaid
      pension cost
36
36
Accrued pension cost
(66
)
(84
)
Accumulated
      other comprehensive loss
54
84
Net amount recognized
24
36
Estimated future benefit payments
Year ended July 31,
2007
13
2008
13
2009
13
2010
14
2011
15
Years from August 1, 2011 to July 31, 2016
82
The Group expects to contribute £23 million to the UK pension plans
in the year ending July 31, 2007.
F-62
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Notes to the consolidated financial statements
Year ended July 31, 2006
The following table sets out the benefit obligation
  and plan assets of the non-UK pension plans in accordance with US GAAP:
Non-UK Plans
      as of July 31,
2006
2005
£m
£m
Change in benefit obligation:
Benefit obligation at beginning
      of year
181
127
Change due to remeasurement
3
3
Amendments
1
—
Service cost
5
5
Interest cost
9
8
Settlements and curtailments
(6
)
1
Member contributions
1
1
Actuarial (gain)/loss
(5
)
18
Acquisition and reclassification
3
19
Benefits paid
(6
)
(10
)
Exchange rate fluctuation
(4
)
9
Benefit obligation at end of
      year
182
181
Change in plan assets:
Fair value of plan assets at
      beginning of year
105
73
Actual return on plan assets
7
10
Employer contribution
6
10
Member contributions
1
1
Acquisition
—
16
Transfers
1
—
Benefits paid
(6
)
(10
)
Exchange rate fluctuation
(2
)
5
Fair value of plan assets at
      end of year
112
105
Funded status
(70
)
(76
)
Business combinations
1
—
Unrecognized net actuarial loss
13
19
Unrecognized prior service cost
2
3
Accrued
    pension cost
(54
)
(54
)
Amounts recognized in the balance
      sheet consist of:
Prepaid pension cost
3
3
Accrued pension cost
(67
)
(70
)
Intangible asset
2
1
Accumulated other comprehensive
      loss
8
12
Net amount recognized
(54
)
(54
)
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Notes to the consolidated financial statements
Year ended July 31, 2006
Estimated future benefit
      payments
£m
Year ended July 31,
2007
17
2008
9
2009
8
2010
8
2011
9
Years from August 1, 2011 to
      July 31, 2016
53
The Group expects to contribute £15 million
  to the non-UK pension plans in the year ending July 31, 2007.
The accumulated benefit obligation for all defined
  benefit plans was £691 million (2005: £579 million). The projected
  benefit obligation, accumulated benefit obligation and fair value of plan assets
  for the plans with accumulated benefit obligations in excess of plan assets
  were £758 million, £653 million and £569 million, respectively,
  as of July 31, 2006 (2005: £667 million, £579 million and £474
  million).
The amount included within other comprehensive
  income for the year ended July 31, 2006 arising from a change in the additional
  minimum liability recognized is a credit of £31 million (2005: £17
  million).
Assumptions used to determine the pension cost
  for the defined benefit plans under US GAAP were as follows:
Year ended
      July 31,
UK Plan
Non-UK
      Plans
2006
2005
2006
2005
Discount rate
5.1
%
5.0
%
5.1
%
5.1
%
Expected return on plan assets
6.5
%
6.9
%
6.6
%
6.2
%
Rate of compensation
      increase
4.6
%
*3.3
%
2.4
%
2.5
%
* In addition, a promotional salary
          scale was added to the salary increase assumption as of July 31, 2005.
      This was equivalent to an overall increase of 1.5% per annum.
The assumed discount rates were determined by
  benchmarking from published long-term bond indices at a maturity appropriate
  to the anticipated timing and amount of expected benefit payments.
The Group also sponsors defined contribution
  pension plans covering employees. Contributions are recognized as paid and amounted
  to approximately £28 million and £19 million during the years ended
  July 31, 2006 and 2005, respectively.
(v) Deferred taxation
Under IFRS and US GAAP, deferred tax is provided
  in full, using the liability method, on temporary differences arising between
  the tax bases of assets and liabilities and their carrying amounts in the consolidated
  financial statements. There is a difference in the definition of tax basis between
  IFRS and US GAAP, which gives rise to an additional deferred tax liability under
  IFRS. Under IFRS, deferred tax is not accounted for if it arises from initial
  recognition of an asset or liability in a transaction, other than a business
  combination, that at the time of the transaction affects neither accounting
nor taxable profit or loss.
Under US GAAP, a valuation allowance is established
  against deferred tax assets when it is more likely than not that some portion
  or all of these will not be realized. Under IFRS it is recognized net.
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Notes to the consolidated financial statements
Year ended July 31, 2006
Under IFRS the deferred tax asset in relation
     to share based payments is based upon the intrinsic value of the share option

  and is adjusted at every year end to reflect changes in the share price valuation,
     as well as pre-vesting forfeitures, change in tax rate, relocation of employees,

  or changes in tax legislation. If the cumulative estimated tax deduction – either
   during vesting or on exercise – exceeds the "book expense" tax
    deduction, the difference is credited to equity.
Under US GAAP this asset is based upon the fair
  value expensed under SFAS 123R and only adjusted for pre-vesting forfeitures,
  change in tax rate, relocation of employees, or changes in tax legislation.
  If the final tax deduction exceeds book expense ("windfall"), the
  difference is credited to additional paid-in capital. If the final tax deduction
  is less than book expense ("shortfall"), the difference is included
  in additional paid-in capital to the extent there have been previous windfalls
  credited; otherwise the difference is recorded in the income statement.
The tax effects of temporary differences that
  give rise to significant deferred tax assets and liabilities under US GAAP are
  as follows:
2006
2005
£m
£m
Deferred tax assets:
Accounts receivable
1
12
Inventory
5
23
Property, plant and equipment
—
4
Intangible assets
1
1
Pensions
40
38
Loss carryforwards
51
33
Stock options
9
5
Derivatives
—
3
Purchase incentive volume
      rebates
—
3
Leases
1
6
Bank loans and overdrafts
3
—
Trade and other payables
21
6
Other
3
—
Total deferred tax
      assets
135
134
Deferred tax liabilities:
Accounts receivable
(13
)
—
Inventory
(9
)
(64
)
Property, plant and equipment
(42
)
(32
)
Goodwill and intangible
      assets
(100
)
(86
)
Purchase volume incentive
      rebates
(51
)
(21
)
Derivatives
(2
)
—
Capitalized interest
(2
)
—
Other
(5
)
(2
)
Total deferred tax
      liabilities
(224
)
(205
)
(89
)
(71
)
Valuation allowance
(43
)
(27
)
Net deferred tax
      liability
(132
)
(98
)
Deferred taxes are
      classified as follows:
2006
2005
£m
£m
Current
(68
)
(41
)
Non-current
(64
)
(57
)
(132
)
(98
)
F-65
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Notes to the consolidated financial statements
Year ended July 31, 2006
Recognized deferred tax assets are based
  upon the expected future utilization of tax loss carry forwards and the reversal
  of other temporary differences. The tax loss carry forwards do not expire,
  and there are no current restrictions on their utilization. For financial reporting
  purposes, the Group has recognized a valuation allowance for those benefits
  for which realization does not meet the "more likely than not" criterion.
  The valuation allowance has increased by £16 million in the year ended
  July 31, 2006, because of an increase in the level of capital losses and overseas
tax credits the
realization of which is uncertain. No provision has been made in respect of
    unremitted foreign earnings because they are intended to be permanently reinvested,
and accordingly no tax has been calculated on these amounts..
Profit before tax on an IFRS basis can be
    analyzed
as follows:
2006
2005
£m
£m
United Kingdom
181
241
Overseas
588
424
Total profit before tax
769
665
(vi)
Share based payments
Under the transition provisions of IFRS,
    the Group has elected to apply IFRS2 "Share-based
  Payment" retrospectively only to equity-settled awards that had not vested
  as at August 1, 2004 and were granted on or after November 7, 2002 and cash-settled
  awards that had not vested as at August 1, 2004. Under US GAAP, the Group adopted
  SFAS 123 (Revised), "Share Based Payments" with effect from August
  1, 2005 using a modified prospective transition method, and the Group's
  prior periods have not been restated to reflect, and do not include the impact
  of, SFAS 123 (R). Under SFAS 123 (R), share based compensation expense is recognized
  during the period based on the portion of share based payments awards that
  is ultimately expected to vest during
the period.
The Group operates a number of plans which are defined within note 29. The
  Executive Option Schemes are subject to a condition such that they may not
  be exercised unless the growth in earnings per share over a period of three
  consecutive fiscal years exceeds growth in the UK Retail Price Index over the
  same period by at least 9% (for options granted in and after December 1997).
Under IFRS such options are treated as equity-settled.
For the fiscal year ended July 31, 2005,
    the Group was accounting for the Executive Option Schemes under SFAS 123, "Accounting for Stock Based Compensation." The
  condition described above was regarded as a performance condition, and such
  options were also treated as equity-settled. On application of SFAS 123 (R),
  the condition is not regarded as a performance condition, as the performance
  target is set by reference to an index, rather than being fixed at the date
  of award. As the condition is not a service or market condition either, the
  options are accounted for as liabilities under US GAAP, and revalued at every
reporting date until the option has vested.
Under SFAS 123, the cumulative cost recorded
    up to July 31, 2005 in respect of executive options was £11 million. Under SFAS 123 (R), £18 million
  has been charged in the year ended July 31, 2006 in respect of the cumulative
  effect of a change in accounting principle. Under SFAS 123 (R), the charge
  in the year ended July 31, 2006 in respect of executive options is £12
million.
Additional disclosures
The total expense
      in respect of share based payments in the year ended July 31, 2006 was £41 million (2005: £27
    million), the tax benefit of which was £2 million (2005: charge of £3
    million). The effect of the transition to SFAS 123 (R) has been to reduce
    income from continuing operations and income before taxes by £20 million,
    to reduce net income by £19 million, to reduce basic earnings per share
    by 3.17p, of which 2.70p relates to the cumulative effect of the change in
    accounting principle, and to reduce diluted earnings per share by 3.14p,
    of which 2.68p relates to the cumulative effect of the change in accounting
    principle. There is no impact on cash flows.
As at July 31, 2006, the compensation cost
    related to non-vested equity-accounted awards expected to be recognized in
    future periods was £9 million, and the weighted average period over
    which this cost was expected to be recognized was 1.6 years.
During the year ended July 31, 2006, cash
    proceeds of £31 million (2005: £33 million) were received from
    the exercise of share options, of which the tax benefit recognized through
    equity  was £4
    million (2005: £4 million). Cash of £17 million (2005: £10
    million) was used to settle share based liabilities.
All options exercised during the year ended
    July 31, 2006 were satisfied by the issue of new shares.
F-66
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Notes to the consolidated financial statements
Year ended July 31, 2006
(vii)
Sale and leaseback accounting
Under IFRS, in a sale and leaseback transaction
        where the leaseback is recognized as an operating lease, and the sale
        price equals fair value, the profit or loss on the sale should be recognized
        immediately. Under US GAAP, in general, the gains or losses on disposal
        of the properties are deferred and amortized over the term of the operating
    lease.
(viii)
Other adjustments
Restructuring costs
Under IFRS, a provision for restructuring costs
        is recognized only when a present obligation (legal or constructive)
        exists as a result of a past event; it is probable that a transfer of
        economic benefits will be required to settle the obligation; and a reliable
    estimate can be made of the amount of the obligation.
Under US GAAP, for restructuring plans initiated after January
      1, 2003, a liability for a cost associated with an exit or disposal activity
      can only be recognized when the liability is incurred. An entity's
      commitment to a plan, by itself, does not create a present obligation to
      others that
      meets the definition of a liability. The timing of recognition and related
      measurement
      of a liability for one-time termination benefits in relation to employees
      who are to be
      involuntarily terminated depends on whether the employees are required
      to render service until they are terminated in order to receive the termination
      benefits
      and, if so, whether employees will be retained to render service beyond
      the
minimum retention period.
Capitalized interest
Under IFRS, the Group has chosen not to capitalize interest on
  specific or general borrowings to finance the construction of certain property,
  plant and equipment. Under US GAAP, this interest is capitalized. The amount
  of interest capitalized is based on a weighted average method considering the
  general borrowings outstanding during the period.
Employers' payroll taxes in respect of share based payments
Under
IFRS, employers' social security liability arising from share-based payment transactions is recognized over the same period or periods as the share-based payment charge.  Under US GAAP, employers' payroll
      taxes due on the exercise of share options are recognized as an expense when the liability arises, which is generally at the option's
exercise date.
(ix)
Presentation of earnings per share
Basic net income per share is computed by dividing
        net income by the weighted average number of ordinary shares outstanding.
        Diluted net income per share is computed by dividing net income by the
        weighted average number of ordinary shares and potentially dilutive ordinary
        shares, which includes the dilutive effect of stock options. Dilutive
        potential ordinary shares for all periods presented are computed utilizing
    the treasury stock method.
F-67
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Notes to the consolidated financial statements
Year ended July 31, 2006
(x)
Other disclosures required by US GAAP
Segmental Analysis
Under IFRS, the Group discloses North America
as a single geographical segment. Under US GAAP, US Plumbing and Heating, US
Building Materials and Canada are distinct reportable segments.
Additional analysis of segment assets and
    liabilities and additions to and the depreciation of property, plant and
    equipment and intangible assets under IFRS for the years ended July 31, 2006
    and 2005 is as follows:
US Plumbing
US Building
North
and Heating
Canada
Materials
America
£m
£m
£m
£m
Segment assets
Year ended July 31, 2006
2,335
301
1,611
4,247
Year ended July 31, 2005
1,906
265
1,299
3,470
Segment liabilities
Year ended July 31, 2006
765
93
631
1,489
Year ended July 31, 2005
614
108
519
1,241
Depreciation of property, plant and equipment
Year ended July 31, 2006
43
3
26
72
Year ended July 31, 2005
30
2
17
49
Amortization of non-acquired intangibles
Year ended July 31, 2006
1
—
—
1
Year ended July 31, 2005
1
—
—
1
Amortization of acquired intangibles
Year ended July 31, 2006
9
—
24
33
Year ended July 31, 2005
2
—
1
3
Additions to goodwill
Year ended July 31, 2006
56
5
104
165
Year ended July 31, 2005
22
2
54
78
Additions to acquired intangible assets
Year ended July 31, 2006
51
5
106
162
Year ended July 31, 2005
16
1
66
83
Additions to non-acquired intangible assets
Year ended July 31, 2006
3
—
—
3
Year ended July 31, 2005
2
—
—
2
Additions to property, plant and equipment
Year ended July 31, 2006
149
5
63
217
Year ended July 31, 2005
100
5
29
134
F-68
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Notes to the consolidated financial statements
Year ended July 31, 2006
Pro forma information (unaudited)
The following unaudited pro forma
  information presents the results of operations of the Group under IFRS as if
  the fiscal 2006 and 2005 acquisitions had occurred on August 1, 2004.
Year ended July 31,
2006
2005
(unaudited)
(unaudited)
Sales (£m)
14,940
13,148
Net profit (£m)
575
548
Basic earnings per share
97.07
p
93.28
p
Diluted earnings per share
96.09
p
92.53
p
The unaudited pro forma information has been prepared for comparative purposes
only and excludes certain adjustments, such as amortization expense and interest
expense related to the acquisitions. The pro forma results do not necessarily
represent the results of operations that would have occurred if the acquisitions
had been effective at the beginning of fiscal 2005, nor are they necessarily
indicative of future results.
During 2006 goodwill arising on acquisitions was £387 million. Of that total
amount, £97
million is expected to be deductible for tax purposes.
Operating profit
The following table reconciles operating profit under IFRS to US GAAP:
Year ended July 31,
2006
2005
£m
£m
Operating profit under IFRS
834
702
US GAAP adjustments, excluding capitalized interest and taxes
(51
)
(63
)
Operating profit under US GAAP
783
639
Provisions
Under US GAAP, provisions arising
  in respect of an acquired business can be discounted, but subsequent adjustments
  to the provision should be recorded
    gross, although they relate to changes in the estimated cost of settling
      liabilities incurred prior to acquisition. Provisions for liabilities arising
      in respect
    of continuing businesses should be recorded gross. Accordingly, the provision
    for asbestos litigation as reported under US GAAP would be £51 million (2005:
£52 million), of which £43 million (2005: £44 million) is an undiscounted
  amount with the balance representing a discounted amount. This liability is
fully covered by insurance, and accordingly an equivalent insurance receivable
would
be recorded.
Taxation
The taxation effects of US GAAP adjustments, including the taxation
  effect of the change in accounting principle, comprised £22 million credited to net income and £1
million charged to other comprehensive income in the year ended July 31, 2006.
F-69
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Notes to the consolidated financial statements
Year ended July 31, 2006
Debt
US GAAP requires disclosure of the
  maturity of long-term debt in each of the five years following the end of the
  financial year. The following
  is a summary of the Group's debt maturity as of July 31, 2006:
Due in the year ending July 31:
£m
2007
68
2008
35
2009
175
2010
108
2011
120
Thereafter
1,646
Total
2,152
The Group has given certain covenants to lenders in connection
  with credit facilities totaling £2,944 million. They relate mainly to
  maintaining a level of tangible net worth, total borrowings, interest cover and net debt to earnings before interest, taxes, depreciation and amortization.
The Group was in compliance with all such covenants as of July 31, 2006.
Capital and operating lease commitments
The Group leases property, buildings and plant, machinery and equipment under capital and operating lease agreements, which are subject to various renewal options and escalation clauses. The following is a summary as of
  July 31, 2006 of the future minimum lease payments under these agreements:
Capital
Operating
leases
leases
Year ending July 31:
£m
£m
2007
24
199
2008
19
173
2009
13
146
2010
10
119
2011
8
95
Thereafter
28
372
Total minimum lease payments
102
1,104
Less interest element
(27
)
Present value of net minimum lease payments
75
Consolidated statement of cash flows
Under
  both IFRS and US GAAP, cash flows are classified under operating activities,
  investing activities and financing activities. Under IFRS, cash
    and cash equivalents includes cash in hand, deposits held at call with banks,
    other short-term highly liquid investments with original maturities of three
    months or less and bank overdrafts. Under US GAAP, cash and cash equivalents
    does not include bank overdrafts. Therefore, under US GAAP, the net increase
    in cash and
    cash equivalents would have been reduced by £313 million (2005: increased by £58
  million).
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Notes to the consolidated financial statements
Year ended July 31, 2006
New Accounting Developments under US GAAP
In February 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140".
For periods beginning after 15 September 2006, this statement
•
Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative
that otherwise would require bifurcation
•
Clarifies which interest-only strips and principal-only strips are not subject
    to the requirements of FAS 133
•
Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring
bifurcation
•
Clarifies that concentrations of credit risk in the form of subordination
    are not embedded derivatives
•
Amends FAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument
The adoption of SFAS No. 155 is not expected to have a material effect on the
results or net assets of the Group.
In March 2006, the FASB issued SFAS No. 156 "Accounting
    for Servicing of Financial Assets, an amendment
of FASB Statement No. 140", which amends FASB Statement No. 140 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",
with respect to the accounting for separately recognized servicing assets and
servicing liabilities. The adoption of SFAS No. 156 is not expected to have a
material effect on the results or net assets of the Group.
In June 2006, the FASB issued FASB Interpretation
    No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109". For periods beginning after 15 December
    2006, this interpretation prescribes a recognition threshold and measurement
    attribute for the financial statement recognition and measurement of a tax
    position taken or expected to be taken in a tax return. This interpretation
    also provides guidance on derecognition, classification, interest and penalties,
    accounting in interim periods, disclosure, and transition. It is not yet
    possible to estimate the effect on the results or net assets of the Group
    of the adoption of FIN 48.
In September 2006, the FASB issued SFAS No.
    157 "Fair Value Measurements". For periods beginning after November
    15, 2007 this Statement defines fair value, establishes a framework for measuring
    fair value where that measurement attribute is permitted or required by other
    accounting pronouncements, and expands disclosures about fair value measurements,
    but does not require any new fair value measurements. It is not yet possible
    to estimate the effect on the results or net assets of the Group of the adoption
    of SFAS No. 157.
In September 2006, the FASB issued SFAS No 158 "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans – an amendment
of FASB Statements No. 87, 88, 106, and 132(R)." As of the end of any fiscal
period ending on or after December 15, 2006, this Statement requires an employer
to recognize the overfunded or underfunded status of a defined benefit postretirement
plan as an asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income. Had SFAS No. 158 applied to the Group as of July 31, 2006,
the impact would have been to increase the liability in respect of underfunded
defined benefit postretirement plans by £95 million, and to increase the
deferred tax asset by £29 million. The consequent reduction in the Group's
net assets of £66 million would have been charged to other comprehensive
income.
In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108 "Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements." With immediate effect, this Bulletin requires that, in order
to assess whether a misstatement is sufficiently material to require adjustment,
a registrant should consider the amount of misstatement of both the current year
income statement and of the closing balance sheet, and assess whether either
approach results in a material misstatement. The adoption of SAB No. 108 is not
expected to have a material effect on the results or net assets of the Group.
F-71
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Acquisitions completed during the year
Country of
Name
Date
incorporation
Sudbury Valve Fitting &
      Control Ltd.
August 2005
Canada
Park Supply
August 2005
USA
S & S Fabrication &
      Supply Co.
August 2005
USA
HGH Plumbing Supplies Limited
September 2005
UK
Contractors Field Products,
      Inc.
September 2005
USA
Economy Heating & Plumbing
      Supply Co., Inc.
September 2005
USA
Endries Incorporated &
      Endries International Inc.
September 2005
USA
Centratec N.V.
October 2005
Belgium
Encon Limited
October 2005
UK
William Wilson Holdings Limited
October 2005
UK
Cammillia Valley Supply
October 2005
USA
Seigles, Inc.
October 2005
USA
John H. Frischkorn Jr., Incorporate
November2005
USA
Canyon Drive Lumber, LP
November 2005
USA
LAB Distributing, Inc.
November 2005
USA
Mobile Supply Company, Inc.
November 2005
USA
SAS MCSO
December 2005
France
South Tahoe Plumbing Supply
December 2005
USA
SAS Charpentes Calonge
January 2006
France
SAS Bigmat Boismat
January 2006
France
Friosol AG
January 2006
Switzerland
Colgan Distributors, Inc. and
      Colgan Cabinets, Inc.
January 2006
USA
Can-Con Industries Inc.
February 2006
Canada
SA Alain Carrelages
February 2006
France
Universal Supply Company, Inc.
February 2006
USA
Central Georgia Plumbing Supply
      Co., Inc.
February 2006
USA
SAS Centrale Reolaise des Bois
March 2006
France
SAS A+
(Centrale
      des Materiaux)
March 2006
France
Hermann Frei
March 2006
Switzerland
Nevill Long Limited
March 2006
UK
K & A Lumber Company, Inc.
March 2006
USA
Indiana Plumbing Supply Oc.,
      Inc.
March 2006
USA
Alamo Pipe and Supply Company
March 2006
USA
SAS DAFI
April 2006
France
K & R Building Supplies
      Limited
April 2006
UK
AC Electrical Holdings Limited
April 2006
UK
MDJ Inc.
April 2006
USA
Pipe Products, Inc.
April 2006
USA
Davis Homes LLC - Wholesale
      Division
April 2006
USA
Davies Water Equipment Co.
      Of Wisconsin, Inc.
April 2006
USA
SA Borgetto Materiaux
May 2006
France
Ivybridge Building Supplies
      Limited
May 2006
UK
Brandon Hire plc
May 2006
UK
Efficient Enterprises Inc.
      Group
May 2006
USA
Central Lighting, Inc.
May 2006
USA
Central Supply Company, Inc.
May 2006
USA
Supply North Central Group,
      Inc.
May 2006
USA
Davidson Electric Wholesale
      Supply, Inc.
June 2006
USA
Coleman Floor Company, Inc.
June 2006
USA
Marmon Keystone Anbuma N.V.
July 2006
Belgium
Larivière
July 2006
France
SARL Depont Materiaux
July 2006
France
Martin Architectural Products,
      LLC
July 2006
USA
F-72