Risks and resources

Changing weather patterns

The water cycle and the changing British weather has a direct influence on the provision of water and waste water services. NWL’s employees are experienced in managing the effects of too much or too little rainfall, but changing weather patterns will present a growing challenge for the business.

We have carried out research into the likely impact of climate change on all our assets and water resources and this has been incorporated in our ‘Climate Change Policy’ as part of our corporate responsibility work. We will continue to do work in this area using the latest projections of the impacts of climate change soon to be published by the UK Climate Impacts Programme.

Employees

People are our key asset and if we are to continue to meet the needs of our customers, and to achieve our regulatory obligations, we need to continue to recruit and retain talented and skilled people as a leading employer in our regions. We will continue to offer all our employees terms and conditions at least commensurate with other major employers as well as appropriate training and development to support their career progression. This includes the comprehensive management development framework, graduate and apprentice programmes, as well as initiatives such as the NVQ programme which reach many employees.

Directors’ remuneration and interests

Information about directors’ remuneration and their interests in the shares of the Company is contained in the directors’ remuneration report.

Indemnification of directors

The Company has in place directors’ and officers’ insurance and, on 28 November 2005, entered into a deed of indemnity to grant the directors further protection against liability to third parties, subject to the conditions set out in the Companies Acts. Such qualifying third party indemnity provision remains in force as at the date of approving the directors’ report and business review. The deed, together with directors’ service contracts, will be available for inspection by shareholders at the AGM, or from the Company Secretary.

Annual general meeting

The notice convening the AGM, to be held on 30 July 2009, was sent to shareholders with this report, together with an explanation of the business to be conducted at the meeting and a form of proxy.

Auditors

Ernst & Young LLP have indicated their willingness to continue in office and a resolution proposing their re-appointment as auditors will be put to shareholders at the AGM.

Directors’ declaration

As required under section 234ZA of the Companies Act 1985, so far as each current director is aware, there is no relevant audit information of which the Company’s auditors are unaware and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

By order of the Board

Martin Parker

General Counsel and Company Secretary

2 June 2009

Registered office: Northumbria House,

Abbey Road, Pity Me, Durham, DH1 5FJ

Registered in England and Wales No. 4760441