DIRECTORS' remuneration report

Purpose

The Directors' Remuneration Report is designed to provide for the benefit of shareholders details of:

the role of the Remuneration Committee
the Group's Remuneration Policy
Directors' remuneration
remuneration disclosures required by the Directors' Remuneration Report Regulations which are audited.

The Company understands investors' concerns relating to executive director remuneration and, whilst focus has been on the financial sector primarily, it is fully recognised that there is a need for other sectors to reflect this concern in their remuneration policies and overall remuneration practice. This is why last year, despite the Group's businesses being well positioned in the economic slowdown, the Remuneration Committee decided not to increase salaries for Executive Directors beyond those set in 2008.

Remuneration Committee

The Remuneration Committee of the Board comprises three Non-executive Directors who are all regarded by the Company as independent. Martin Angle is the Chairman of the Committee and the other two members are Gerard Connell and Dinah Nichols.

The Committee's Terms of Reference is available from the Group Company Secretary and can be found on the Company's website pennon-group.co.uk It includes:

advising the Board on the framework of executive remuneration for the Group
determining the remuneration and terms of engagement of the Chairman, the Executive Directors and Senior Management of the Group.

No Director or any other attendee participates in any discussion on, or determination of, his or her own remuneration.

During the year the Committee met on seven occasions and received advice or services which materially assisted the Committee in the consideration of remuneration matters from Ken Harvey, Chairman of the Company, and from the following advisors who were appointed directly by the Committee:

Ken Woodier, Group General Counsel & Company Secretary on remuneration and share scheme matters. He also provides legal advice and company secretarial services to the Company
Hewitt Associates Limited, pensions and remuneration consultants, on calculating total shareholder return for the Company's Restricted Share Plan (now replaced by the Company's Performance & Co-investment Plan). Hewitt also provide actuarial and investment pensions advice to the Trustees of the Group's Pension Schemes
Towers Perrin Limited (now Towers Watson Limited), remuneration consultants, who undertook a review of the Group's remuneration policy and practice for the Committee during the year.

Remuneration Policy

Last year the Remuneration Committee reported that it would undertake a review of Remuneration Policy in September 2009. Having undertaken this review with advice from Towers Perrin the Committee concluded that the current policy remained appropriate. This policy which will be applied in 2010/11, and is also currently intended to be applied in each subsequent year, is to provide for Executive Directors a remuneration package which is adequate to attract, retain and motivate good quality executives and which is commensurate with the remuneration packages provided by companies of similar size and complexity. The key guiding principles of this policy are to:

design an overall package to be competitive and to take account of the markets in which the Group's businesses operate
support the overarching business strategy for the Group
adopt incentive arrangements designed to reward performance and align the interests of the Executive Directors with those of shareholders
reinforce the incentive element of the package by maintaining base salaries for Executive Directors at the relevant market median
have a remuneration package which is fair and consistent with other companies in the sector and which provides incentives for outperformance.

The policy in respect of Non-executive Directors' fees is set out in the Non executive Directors remuneration section.

In setting executive remuneration the Remuneration Committee not only takes account of employment market conditions, but seeks to ensure that there are coherent pay and benefit structures across the Group which are consistent with the remuneration packages of the Executive Directors and Senior Management. From summary reports on workforce remuneration and terms and conditions of employment by the Executive Directors with regard to their respective business areas, the Committee has regard to the general levels of responsibility, qualifications and experience required throughout the Group in setting salary and other benefits of the Executive Directors and Senior Management. The Committee also ensures the incentive structures do not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour. A number of individual performance objectives specifically relate to achieving non-financial targets.

The balance between maximum performance-related remuneration receivable and direct remuneration (ie. excluding pensions, car benefit and health cover) is the same as last year with one-third direct and two-thirds performance-related. This is expected to continue for the foreseeable future. The Company also has a Shareholding Guideline which applies to Executive Directors and Senior Management. It is structured to demonstrate their commitment to the future success of the Group. Executive Directors are expected to build up their shareholding over a five-year period to a value which is at least equivalent to their basic annual salary.

Remuneration of Executive Directors

Below is an outline of the total remuneration package for Executive Directors.

Fixed	Variable (Performance-related)
Base Salary	Short-term - Annual	Long-term - 3 years
Pension - Final Salary (Defined Benefit) or cash alternative	Annual Incentive Bonus Plan - Maximum 100% of basic salary with 50% paid in cash and 50% in shares deferred for 3 years	Performance and Co-investment Plan (PCP) - future performance over 3 years
Other - car benefit and health cover	Assessed against corporate financial performance and individual personal achievements relating to a range of operational and compliance targets.	50% linked to water and waste comparator group and 50% linked to relative FTSE 250 with an underpin relating to operational and economic performance.

The following is a detailed summary of the elements of remuneration:

(i) Basic salary and benefits - these are set out in the 'Emoluments of Directors' section for each Executive Director and are not related to performance. The Committee reviews salaries annually taking account of market data available from independent remuneration consultants. A pay freeze was applied in 2009/10. When reviewing base salaries the Committee takes account of the performance of the individual Executive Directors which the Committee assesses with the advice of Ken Harvey, Chairman of the Company. Other benefits, not mentioned below, include contributory pension provision (or a cash alternative), four times salary life assurance cover, a fully expensed car, or a cash alternative and health cover.

(ii) Performance-Related Bonus - annual performance related bonuses are awarded in accordance with the Group's Annual Incentive Bonus Plan (the Bonus Plan) and are based on the achievement by the Executive Directors of overall corporate and individual objectives set by the Committee. The maximum bonus achievable under the Bonus Plan for Executive Directors for 2009/10 was 100% of basic salary. To achieve the maximum percentage bonus allocated in respect of the corporate targets of earnings per share and profit before tax it is necessary for the Company to achieve a specified level of superior outperformance. Half of any bonus awarded is in the form of ordinary shares in the Company which must usually be held for a period of three years before release (Deferred Bonus Shares). During this period the Directors, in respect of the Deferred Bonus Shares, are entitled to receive any dividends declared by the Company. No additional performance conditions applicable to the release of the Deferred Bonus Shares apart from maintaining continuous service with the Company, are considered appropriate by the Committee in view of the stretching performance conditions applicable to achieve the initial award of the Deferred Bonus Shares. The Committee, in setting the performance objectives for Executive Directors, takes account of corporate performance on environmental, social and governance (ESG) matters. Objectives set embrace appropriate ESG parameters which are important to the success of the Group and which seek to ensure that the Group meets a number of its ESG targets as set out in the Group's Corporate Responsibility Report of the Business Review. The Committee in setting such objectives and in determining its remuneration policy overall ensures that the relevant incentives to Directors and Senior Management raise no ESG risks by inadvertently motivating irresponsible behaviour. In addition the Committee will take into account ESG matters in determining the vesting of any awards under the Company's Performance & Co-investment Plan referred to below.

In 2009/10 the Committee structured and operated the Bonus Plan on a different basis. The Bonus Plan was amended by the Committee to permit its operation in conjunction with the Company's Executive Share Option Scheme (ESOS) which received shareholder approval in 2001 on the basis that the aggregate pre-tax value of the awards made under both the Bonus Plan and the ESOS would be the same as they would have been if the Bonus Plan had been operated alone, as in previous years. This has been achieved by providing for Deferred Bonus Shares awarded to be forfeited by the Directors up to the same value as that of any gain made in respect of options exercised by the Directors pursuant to the ESOS at the end of the three-year restricted period. Only the HMRC approved part of the ESOS was operated in 2009/10 which enabled options over ordinary shares in the Company to be granted to Directors to the value of £30,000 at the then prevailing price. Details of the options granted are set out in the table in paragraph (d) 'Executive Share Option Scheme'.

Set out below is a summary of the performance targets determined by the Committee for each Executive Director for 2009/10 and for 2010/11.

Colin Drummond - A bonus of up to 40% for outperformance of Group earnings per share against budget; up to 40% calculated by reference to outperformance of the profit before tax and net debt budgets of Viridor; and up to 20% for personal objectives relating to key business targets for Viridor.

David Dupont - A bonus of up to 40% for outperformance of Group earnings per share against budget; up to 40% for outperformance against budget relating to net debt and net interest of the Group and profit before tax of South West Water and Viridor; and up to 20% for personal objectives relating to Group financing and other Group initiatives.

Chris Loughlin - A bonus of up to 40% for outperformance of Group earnings per share against budget; up to 20% for personal objectives relating to implementing South West Water's new strategies and projects and meeting compliance targets; and up to 40% calculated by reference to the average bonus earned by the other executive directors of South West Water (which relate to outperformance against the operating costs, profit before tax, capital expenditure and net debt budgets of the company; the position the company achieves in the 'Overall Performance Assessment' of water and sewerage companies established by the Water Services Regulatory Authority (WSRA); the achievement of a range of service standards set for the company by the WSRA; and personal objectives relating to key initiatives, projects and compliance targets for South West Water).

The achievements of the Executive Directors against their individual performance objectives are assessed by the Committee following the financial year-end when the audited results of the Company and performance against the parameters set are known. This enables the Committee to apply largely objective criteria in determining the level of bonus (if any) which should be awarded, with the advice of the Chairman of the Company, Ken Harvey.

(iii) Long-term incentive plan - A Performance and Co-investment Plan (PCP) was operated by the Company during the year for Executive Directors and Senior Management.

The purpose of the PCP is to award shares to participants subject to the achievement of stretching performance conditions measured over three years. Awards under the PCP, in the form of a conditional right over ordinary shares in the Company, were made by the Committee in July 2009 and, for Executive Directors, the award was over shares worth 100% of basic salary. In accordance with its discretion pursuant to the rules of the PCP, the Committee made the vesting of the awards also subject to the fulfilment of a co-investment condition whereby Executive Directors were required to invest and hold shares in the Company equal to 20% of the value of their award over the Restricted Period (being a period of three years from the date of the award). The percentage requirement for senior management was suitably scaled back. The number of shares subject to each award in the event of vesting will be increased by such number of shares as could have been acquired by reinvesting the dividends which would otherwise have been received on those shares prior to vesting or exercise.

The PCP awards made in July 2009 will vest based on the Company's total shareholder return (TSR) performance over a three-year performance period against two different comparator groups as set out below. This is the same performance criteria that was applied to the PCP awards made in July 2008. TSR measures the value created for shareholders through increases in share price and the payment of dividends and was applied by the Committee because, based upon advice received from remuneration consultants, Deloitte & Touche LLP, it believes that this is an appropriate measure to align the interests of the Executive Directors with those of shareholders:

Up to 50% of an award will vest according to the Company's TSR performance measured against an index made up of the following six listed water and waste comparator companies:
Northumbrian Water Group
Séché Environnement
Severn Trent
Shanks Group
Suez Environnement
United Utilities

These are the Company's key listed sector comparators.

WATER/WASTE GROUP	Vesting % of total award
Above the index
+15%	50%
Equal to the index	15%
Straight-line vesting in between the above points
Below the index	0%

Up to 50% of the award will vest according to the Company's ranked TSR performance against the constituents of the FTSE 250 index (excluding investment trusts). This is the FTSE index to which the Company belonged at the time of the award.

FTSE 250 GROUP	Vesting % of total award
At or above the 75th percentile	50%
Above 50th percentile	15%
Straight-line vesting in between the above points
At or below the 50th percentile	0%

In addition to this TSR condition, before any award is capable of vesting, the Committee will also need to be satisfied that the underlying operational and economic performance of the Company is at a satisfactory level. This will include consideration of sustainability and environmental factors and safety performance, as well as financial performance.

For the first PCP awards made in August 2007 (following shareholder approval at the Annual General Meeting in July 2007) the same performance measures were used as set out above save that the sector comparator group included Biffa and Kelda Group (instead of Séché and Suez). As these companies have now de-listed, the Committee in respect of the 2007 award at the end of the three-year Restricted Period will have discretion to include them in the calculation of the index up to the date of de-listing (or other earlier date at its discretion) and exclude them from that date onwards or adopt an alternative approach.

Whilst the Committee intends currently to apply similar performance conditions to those set out above to any future PCP awards, they will be reviewed on an annual basis to ensure that they remain appropriate and suitably stretching for future awards.

Between 1997 and 2006 the Company operated a Restricted Share Plan (RSP). The final award made in September 2006 reached the end of its three-year restricted period in September 2009 with the TSR performance of the Company against a comparator group being measured over the three-year period ended on 31 March 2009 (details of the RSP and the TSR performance condition applied are set out in the notes to table (b) 'Restricted Share Plan and Performance Co-investment Plan'). Over this period the Company achieved the position equivalent to the 50th percentile of the comparator group which resulted in no shares vesting from the award. For at least part of the award to have vested the Company would have needed to achieve a position at least above the position of the company at or nearest to (but not above) the 50th percentile position of the comparator group. For the 2004 RSP award which vested in 2007, 85% of the award vested and for the 2005 award which vested in 2008, 70% of the award vested. Any awards which did not vest at the end of the relevant Restricted Period lapsed and therefore 15% and 30% of the awards which vested in 2007 and 2008 respectively lapsed and 100% of the 2006 award lapsed in September 2009.

(iv) Other share schemes - Executive Directors are entitled to participate in the Company's Sharesave Scheme and Share Incentive Plan. Both are all-employee plans to which performance conditions do not apply.

(v) Service contracts - In accordance with Company policy, all Executive Directors have service contracts subject to one year's notice. They are due to expire when Executive Directors reach their normal retirement age of 60 unless extended by agreement between the Director and the Company. No provision is made for termination payments under the service contracts. In the event of termination by the Company of any Executive Director's service contract, the Board would determine what payments (if any) should be made to the Director depending on the circumstances of the termination. The dates of the contracts are:

Colin Drummond	5 March 1992
David Dupont	2 January 2003
Chris Loughlin	16 May 2006

(vi) Provision for pensions - Colin Drummond and David Dupont participate in the Pennon Group Pension Scheme and the Pennon Group Executive Pension Scheme. These are funded defined benefit schemes which, dependent on length of service at normal retirement date, could amount to two-thirds of final pensionable pay, with the exception of service to 5 April 2006 where an Earnings Cap applied in these Schemes to these two Directors.

Both were provided with additional pension benefits under an unapproved funded Supplementary Pension Scheme of the Company in order to bring their pension benefits up to a level which would have been provided under the other schemes as if the Earnings Cap had not applied. With effect from 6 April 2006 the Earnings Cap no longer applied to pension schemes as part of the simplification of taxation of pensions legislation. The Committee accordingly decided to provide all of the Directors' future service pension benefits above the Earnings Cap level from the Pennon Group Executive Pension Scheme. The Supplementary Pension Scheme was therefore closed and the accrued benefits were paid out to its members in April 2006.

The pensionable pay for Executive Directors consists of the highest basic salary in any consecutive 12-month period of service within five years of retirement. Bonuses are not included in pensionable pay.

In lieu of the provision of pension benefits, Chris Loughlin receives an annual payment equivalent to 30% of his annual basic salary.

In determining remuneration arrangements for Executive Directors, the Committee gives full consideration to their impact on the pension schemes' funds and costs of providing individual pension arrangements or payments in lieu of pension provision.

TOTAL SHAREHOLDER RETURN (TSR)

The graph to the side shows the value, over the five-year period ending on 31 March 2010, of £100 invested in Pennon Group on 31 March 2005 compared with the value of £100 invested in the FTSE 250 Index. The other points plotted are the values at intervening financial year-ends. This Index is considered appropriate as it is a broad equity market index of which the Company has been a constituent over most of the period covered.

The graph above has been produced in accordance with regulations made pursuant to Section 421 of the Companies Act 2006.

NON-EXECUTIVE DIRECTORS AND THE CHAIRMAN

Non-executive Directors' remuneration (excluding that of the Chairman, Ken Harvey) consisting of fees only as set out below, is determined by the Board of Directors, including the Chairman, but in the absence of the other Non-executive Directors. It is usually reviewed each year to take account of market changes in non-executive directors' fees. The Non-executive Directors' fees were not increased for 2009/10 in line with the Executive Directors. In reviewing the fees, the Board takes into account market information on non-executive directors' fees. For 2009/10 the Non-executive Directors received a base fee of £35,000 per annum. The Audit, Remuneration and Corporate Responsibility Committee chairs were paid fees of £10,000, £7,000 and £7,000 per annum respectively and the Committee members received £4,000 each. For this and subsequent years the policy expected to be applied in respect of Non-executive Director fees will be to set fees around the median level compared with the market, which the Board believes is appropriate to attract and retain suitably experienced non-executive directors.

The Chairman's remuneration is set by the Remuneration Committee. The Chairman's fee was not increased for 2009/10 in line with the Executive Directors.

The policy of the Committee to be applied for this and in subsequent years is the same as that of the Executive Directors in reviewing the fees of the Non-executive Directors as set out above. In addition to a fee the Chairman receives a fully-expensed car benefit and health cover.

No other benefits or remuneration are received by the Chairman.

The Non-executive Directors (excluding the Chairman) have contracts for services setting out their terms and conditions of appointment which are subject to the Articles of Association of the Company and which may be extended by agreement between the Company and the Non-executive Directors. No provision is made for any termination payment under these contracts.

The Chairman has a contract for services dated 1 April 2005 which is subject to 12 months' notice to provide the Company with reasonable security with regard to his ongoing service. No provision is made for any termination payments under this contract.

The contracts for services of the Chairman and the Non-executive Directors reflect corporate governance best practice and, together with the Executive Directors' service contracts, are available for inspection at the Company's registered office during normal business hours.

The dates of the Non-executive Directors' contracts are:

Director	Date of contract	Expiry date of contract
Martin Angle	28 November 2008	30 November 2011
Gerard Connell	30 September 2003	30 September 2012
Dinah Nichols	10 June 2003	11 June 2012

The above contracts do not contain any notice periods.

The information set out below and on the remaining pages of this Remuneration Report has been audited by the Group's independent auditors, PricewaterhouseCoopers LLP.

EMOLUMENTS OF DIRECTORS

The emoluments of individual Directors holding office during 2009/10 were:

Director	Salary/fees £000	Performance related cash bonus paid or payable² £000	Other emoluments¹ £000	Payment in lieu of pension³ £000	Total 2010 - Year to 31 March £000	Total 2009 - Year to 31 March £000
Chairman:
Ken Harvey	220	-	26	-	246	246

Executive Directors:
Colin Drummond	330	155	22	-	507	432
David Dupont	330	1524	21	-	503	435
Chris Loughlin	315	1514	22	95	583	527
Non-executive Directors:
Martin Angle	50	-	-	-	50	17
Gerard Connell	53	-	-	-	53	50
Dinah Nichols	50	-	-	-	50	48
Total	1,348	458	91	95	1,992	1,755

¹ Other emoluments are car benefit and health cover.

² In addition to the performance-related cash bonus, Executive Directors are due to receive a conditional award of shares as referred to in a note to (c) 'Annual Incentive Bonus Plan - Deferred Bonus Shares (long term incentive element)'.

³ In lieu of any pension provision by the Company, Chris Loughlin receives a cash payment equivalent to 30% of his annual basic salary.

⁴ The performance-related cash bonus payable to David Dupont includes £4,000 and to Chris Loughlin includes £6,600 which were paid in February 2010. This was an additional bonus paid to the two Directors for the year 2008/09 due to a reassessment of performance against budgeted parameters.

No expense allowances chargeable to tax or termination or compensation payments were made during the year.

EXECUTIVE DIRECTORS' PENSIONS

Defined benefit pensions accrued and payable on retirement for Executive Directors holding office during 2009/10 were:

Director	Increase in accrued pension during 2009/10 (net of inflation) £000 a	Increase in accrued pension during 2009/10 £000 b	Accrued pension at 31 March 2010 £000 c	Transfer value at 31 March 2010 £000 d	Transfer value at 31 March 2009 £000 e	Increase in transfer value (net of Directors' contributions) £000 f	Transfer value of Column a (net of Directors' contributions) £000 g
Colin Drummond	5	8	146	3,424	2,930	464	79
David Dupont	6	9	131	2,798	2,319	450	91

Column a above is the increase in accrued pension during 2009/10 (net of inflation). It recognises:

i the accrual rate for the additional period's service based upon the pensionable pay at the end of the period; and

ii the effect of pay changes in real terms (net of inflation) upon the accrued pension at the start of the year.

Column b is the actual increase in accrued pension during 2009/10.
Column c is the accrued pension at 31 March 2010 payable at normal retirement age.
Column d is the transfer value of the accrued pension set out in column c as at 31 March 2010.
Column e is the transfer value of the accrued pension at the end of the previous financial year on 31 March 2009.
Column f is the increase in the transfer value during the year (column d minus column e) after deducting Directors' contributions.
Column g is the transfer value of column a, less Directors' contributions.
Columns d, e, f and g have been calculated in accordance with Actuarial Guidance Note GN11.

Under the Company's pension salary deduction arrangements, the Company pays all pension scheme members' contributions to the Group pension schemes and salaries are reduced by the same amount. The figures quoted above have not been adjusted to reflect this arrangement.

The above Directors have the option to pay additional voluntary contributions; neither the contributions nor the resulting benefits are included in the table shown above.

DIRECTORS' SHARE INTERESTS

(a) Shareholdings

The number of ordinary shares of the Company in which Directors held beneficial interests at 31 March 2010 and 31 March 2009 were:

Director	2010 Ordinary shares (40.7p each)	2009 Ordinary shares (40.7p each)	Director	2010 Ordinary shares (40.7p each)	2009 Ordinary shares (40.7p each)
Martin Angle	-	-	Ken Harvey	18,209	13,209
Gerard Connell	4,000	-	Chris Loughlin	38,876	29,442
Colin Drummond	239,218	216,363	Dinah Nichols	4,549	4,549
David Dupont	213,510	193,819

Since 31 March 2010 389 additional ordinary shares (40.7p each) have been acquired by Chris Loughlin as a result of participation in the Company's Scrip Dividend Alternative and the Company's Share Incentive Plan and 92 additional ordinary shares (40.7p each) have been acquired by David Dupont as a result of dividend reinvestment in an ISA.

There have been no other changes in the beneficial interests or the non-beneficial interests of the Directors in the ordinary shares of the Company between 1 April 2010 and 4 June 2010.

(b) Restricted Share Plan and Performance and Co-investment Plan (Long-Term Incentive Plans)

In addition to the above beneficial interests, the following Directors have or had a contingent interest in the number of 40.7p ordinary shares shown below, representing the maximum number of shares to which they would become entitled under the Group's Long-Term Incentive Plans should the relevant criteria be met in full:

Director and date of award	Conditional awards held at 1 April 2009	Conditional awards made in year	Market price of each share upon award in year	Vesting in year	Value of shares upon vesting (before tax) £000	Conditional Awards held at 31 March 2010	Date of end of period for qualifying condition to be fulfilled
Colin Drummond
18/9/06 ¹	41,363	-	498.62p	Lapsed	Nil Value	-	17/9/09
29/8/07 ²	53,859	-	557.00p	-	-	53,859	28/8/10
10/7/08 ²	51,764	-	637.50p	-	-	51,764	9/7/11
1/7/09 ²	-	67,831	486.50p	-	-	67,831	30/6/12
David Dupont
18/9/06 ¹	41,363	-	498.62p	Lapsed	Nil Value	-	17/9/09
29/8/07 ²	53,859	-	557.00p	-	-	53,859	28/8/10
10/7/08 ²	51,764	-	637.50p	-	-	51,764	9/7/11
1/7/09 ²	-	67,831	486.50p	-	-	67,831	30/6/12
Chris Loughlin
18/9/06 ¹	36,099	-	498.62p	Lapsed	Nil Value	-	17/9/09
29/8/07 ²	49,371	-	557.00p	-	-	49,371	28/8/10
10/7/08 ²	49,411	-	637.50p	-	-	49,411	9/7/11
1/7/09 ²	-	64,748	486.50p	-	-	64,748	30/6/12

¹ These awards relate to the Company's Restricted Share Plan (RSP).

² These awards relate to the Company's Performance and Co-investment Plan (PCP) which succeeded the RSP in 2007. Details of the PCP and the performance conditions applicable to these Awards are set out in section (iii) 'Long Term Incentive Plan'.

None of the 2006 RSP Award vested in September 2009 because the performance criterion had not been met. The Award therefore lapsed in its entirety. The performance criterion applicable to this Award was: the total shareholder return (TSR) achieved by the Company in the performance period must be greater than that of the company at or nearest to (but not above) the 50th percentile position of the comparator group. If the TSR performance condition had been met then 50% of an award would have vested with 100% vesting if the Company had achieved the position equal or closest to, but not above, the 75th percentile position of the comparator group. The achievement of a position between the 50th and the 75th percentile positions would have resulted in vesting in steps reflecting the number of companies within that third quartile of the comparator group. The comparator group consisted of nine of the water only, water and sewerage, electricity and gas companies in the FTSE Utilities Index and quoted on the London Stock Exchange. The TSR of each company in the comparator group was measured by Hewitt Associates Limited assuming that all dividends were reinvested and was calculated by taking the average market value of each company's shares for the whole of March before the beginning of the relevant three-year performance period and comparing this to the average market value of the same shares for the whole of March at the end of the three-year period. Based upon independent remuneration consultant's advice this method of measurement was considered to be fair and transparent to participants in the Plan and also an accurate measure of actual performance. The above performance criterion was chosen by the Remuneration Committee because it was considered to be an appropriate measure of the Group's performance which also aligned itself to the interests of shareholders.

During the year the Directors received dividends on the above shares in accordance with the conditions of the RSP as follows:

Colin Drummond £8,686; David Dupont £8,686; Chris Loughlin £7,580.

As the 2006 RSP Award was the final award made pursuant to that Plan (having been replaced in 2007 with the Performance and Co-investment Plan) no further dividends pursuant to the RSP will be payable to the Directors.

The following Directors have or had a contingent interest in the number of 40.7p ordinary shares shown below, representing the total number of shares to which they have (or would) become entitled under the deferred bonus element of the Annual Incentive Bonus Plan (the Bonus Plan) at the end of the relevant qualifying period:

Director and date of award	Conditional awards held at 1 April 2009	Conditional awards made in year	Market price of each share upon award in year	Vesting in year	Value of shares upon vesting (before tax) £000	Conditional awards held at 31 March 2010	Normal date of end of period for qualifying condition to be fulfilled
Colin Drummond
26/7/06 ¹	16,527	-	486.00p	16,527	75	-	25/7/09
26/7/07 ²	17,798	-	599.50p	17,798	94	-	25/7/10
27/6/08	22,838	-	620.00p	-	-	22,838	26/6/11
30/9/09 ³	-	16,730	473.40p	-	-	16,730	29/9/12
David Dupont
26/7/06 ¹	16,095	-	486.00p	16,095	73	-	25/7/09
26/7/07 ²	17,018	-	599.50p	17,018	90	-	25/7/10
27/6/08	21,145	-	620.00p	-	-	21,145	26/6/11
30/9/09 ³	-	17,880	473.40p	-	-	17,880	29/9/12
27/2/10	-	755	524.50p	-	-	755	26/2/13
Chris Loughlin
26/7/07 ²	8,767	-	599.50p	8,767	46	-	25/7/10
27/6/08	18,806	-	620.00p	-	-	18,806	26/6/11
30/9/09 ³	-	19,562	473.40p	-	-	19,562	29/9/12
27/2/10	-	1,261	524.50p	-	-	1,261	26/2/13

¹ The amount of the awards made on 26 July 2006 were adjusted in the ratio three-for-one consequent upon the Company's share capital split on 31 July 2006 and the awards vested on 25 July 2009 at a market price of 454.36p per ordinary share as the performance condition had been met.

² The 26 July 2007 awards vested on 12 March 2010 at a market price of 527.60p per ordinary share. The Remuneration Committee varied the terms of the Bonus Plan to bring forward the vesting of these awards from 25 July 2010 subject to possible clawback in the event that the Bonus Plan performance condition (relating to service) would not be met at the end of the original qualifying period on 25 July 2010.

³ In addition to the awards made on 30 September 2009 the Directors also received options pursuant to the Company's Executive Share Option Scheme (the ESOS), details of which are set out in the table of paragraph (d) below. These awards were made in conjunction with the operation of the Bonus Plan, the provisions of which have been varied by the Remuneration Committee to provide for forfeiture of equivalent shares from the Bonus Plan in the event that the ESOS options are exercised by the Directors. Further details of this variation to the Bonus Plan and to the operation of the ESOS are set out in paragraph (ii) 'Performance related bonus'.

During the year the Directors received dividends on the above shares in accordance with the conditions of the Bonus Plan as follows: Colin Drummond £9,649; David Dupont £9,100; Chris Loughlin £5,790.

A further conditional award of shares will be made in 2010/11 to the value of the amount of the performance-related cash bonus shown in the Emoluments of Directors table. (Paragraph (ii) 'Performance related bonus' sets out the provisions relating to the conditional award of shares pursuant to the Plan), save to the extent already awarded on 27 February 2010 as set out in the table above.

(d) Executive Share Option Scheme

The following Directors have a contingent interest in the number of share options pursuant to the Company's Executive Share Option Scheme shown below. Further details relating to the operation of the Scheme are set out in paragraph (ii) 'Performance related bonus'.

Director and date of grant	Options held at 1 April 2009	Granted in year	Exercised in year	Exercise price per share	Market price of each share on exercising	Market value of each share at 31 March 2010	Options held at 31 March 2010	Maturity date
Colin Drummond
30/9/09	-	6,337	-	473.40p	-	522.50p	6,337	29/9/12
David Dupont
30/9/09	-	6,337	-	473.40p	-	522.50p	6,337	29/9/12
Chris Loughlin
30/9/09	-	6,337	-	473.40p	-	522.50p	6,337	29/9/12

(e) Sharesave Scheme

Details of options to subscribe for shares of the Company under the all-employee Sharesave Scheme were:

Director and date of grant	Options held at 1 April 2009	Granted in year	Exercised in year	Exercise price per share	Market price of each share on exercising	Value of each share at 31 March 2010	Options held at 31 March 2010	Exercise period/ maturity date
Colin Drummond
4/7/06 †	2,613	-	2,613	357.66p	461.00p	-	-	1/9/09 - 28/2/10
6/7/09	-	2,351	-	386.00p	-	522.50p	2,351	1/9/12 - 28/2/13
David Dupont
3/7/07	3,136	-	-	522.00p	-	522.50p	3,136	1/9/12 - 28/2/13
Chris Loughlin
3/7/07	3,136	-	-	522.00p	-	522.50p	3,136	1/9/12 - 28/2/13

† The options held and the exercise price have been adjusted in the ratio three-for-one consequent upon the Company's share capital split on

31 July 2006.

(f) Share price

The market price of the Company's 40.7p ordinary shares at 31 March 2010 was 522.50p (2009 405.00p) and the range during the year was 404.00p to 549.50p (2008/09 380.75p to 663.00p).

By Order of the Board
KEN WOODIER, Group General Counsel & Company Secretary
24 June 2010

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