Profile

WRc WRc is dedicated to improving the efficiency and effectiveness of water and waste utilities and their regulators:

Driven by the needs of its customers and the challenges they face

Enables both regulators and utilities to become more efficient and effective

Delivers results from research

Provides innovative and sustainable solutions that are easy to implement

Brings together consortia of European expertise and funders to solve new and unusual challenges

Acts with a high degree of integrity and confidentiality to remain trustworthy in the eyes of its customers and staff

Attracts exceptional people and is supportive of them achieving their full potential

Helps its customers to be successful and shares in that success

Has over 80 years' experience in the international water and waste field WRc Corporate Responsibility Statement We take our Corporate Responsibility seriously and are committed to making it an integral part of whatever we do:

in the work we undertake for our customers and through involvement in key strategic projects that benefit the environment, assist customers fulfil their legal obligations and those to their customers;

by making WRc ―The Place to Work‖ by investing in the wellbeing of our employees and providing opportunities for them to fulfil their own aspirations;

through minimising our impact on the environment and running our business operations responsibly and effectively;

in our relationships with the local, national and international communities in which we operate.

Our Corporate Responsibility Policy has buy-in from our staff and influences our way of thinking and our approach to everything we do. This is an ongoing process and we will continuously strive to improve and set ourselves new challenges. You can learn more on our website (www.wrcplc.co.uk)

Contents

Chairman‘s Message 1

Directors' Report 2012/13 2

Profit and Loss Account for the Year Ended 31 March 2013 7

Balance Sheet as at 31 March 2013 8

Cash Flow Statement for the Year Ended 31 March 2013 9

Note of Historical Cost Profits and Losses for the Year Ended 31 March 2013 10

Statement of Total Recognised Gains and Losses for the Year Ended 31 March 2013 10

Notes to the Financial Statements 11

1

Chairman’s Message

WRc continued to make steady progress in the year. The results show a further 8% increase in turnover. This resulted in a pre-FRS 17 operating profit of £0.5m being made in the year. Careful cash management allowed WRc to end the year with increased net cash of over £0.9m. The FRS17 valuation showed a further increase in the pension deficit to £31m as bond yields continued to be depressed by the Bank of England‘s Quantatative Easing programme. The company made a payment of over £0.5m towards reducing the deficit during the year. The next triennial valuation is now due and a new three year funding plan will need to be agreed with the Trustees. Looking forward there continue to be many reasons for optimism. Climate change will mean that all water companies will need to step up significantly their investment in innovation and WRc is seen as natural partner in this work. The first WRc Open Innovation Day brought 145 representatives of water and wastewater companies together with experts, technologists and innovators who were able to provide solutions to the industry's problems. It showcased new technologies, provided focussed workshop sessions, presented the views and experiences of the industry‘s regulators and leaders in research and demonstrated WRc‘s research facilities at its base in Swindon. The day was universally acclaimed and a follow up event is planned for 2013. Finally I would like to thank all our staff for their continued commitment and hard work over the year. Ron Chapman Chairman 15 July 2013

2

Directors' Report 2012/13

Principal Activities WRc is an innovative, research-based Company, providing consultancy in the water, waste and environment sectors. We have staff with skills in engineering, science, environmental, social and financial fields and with an expertise built from over 80 years of national and international work. WRc assists governments and regulatory bodies in creating soundly based regulation. We also help organisations impacted by regulation (particularly water utilities, their suppliers, local authorities, and waste operators) to optimise operational efficiency and minimise risk. WRc has a strong research and development base and a proven track record of delivering quality-assured, innovative and technologically robust projects around the world. Results and Dividend The loss after taxation was £511,000 (2012: loss of £170,000). The Directors have not recommended the payment of a dividend. Business Review The business uses a number of Key Performance Indicators (KPIs) to evaluate progress. The productivity of our employees is an important factor and is measured in turnover per employee. The accounts are prepared using accounting standards FRS 17 Retirement Benefits and FRS 20 Share Based. To gauge underlying performance the operating profit before the FRS 17 and FRS 20 adjustments is another KPI.

The KPIs for 2012/13 are as follows: 2013 2012

Turnover Number of employees Turnover per employee

£8,848,000

117 _________

£75,624

_________

£8,192,000

121 _________

£67,702

_________

Operating Profit before nonrecurring items FRS 17 Transactions*

£1,012,000

(£502,000)

£510,000

(£490,000)

Underlying Operating Profit

_________

£510,000 _________

_________

£20,000 _________

* Deduction of actual contributions, added back under FRS 17. In terms of risk the Company has exposure to the regulated water sector in the UK and environmental public sector in both the UK and Europe. A strategy of key account development is intended to mitigate this exposure through better understanding of customer needs.

3

Board of Directors The Directors who served during the year were: Ron Chapman - Chairman Tony Griffiths Mark Smith Roberto Zocchi - Non Executive In line with normal practice, the Company provides indemnity insurance for Directors and Officers in relation to their duties on behalf of the Company. In accordance with the Company's Articles of Association, there is no automatic re-election of Directors. All Directors are subject to re-election, with one third retiring by rotation each year. Directors’ Interests in Shares The Directors‘ interests in ‗A‘ Ordinary shares of the Company are:

31.03.13

Ron Chapman 11,986

Tony Griffiths 11,752

Mark Smith 8,766

Roberto Zocchi 75

Share Options In pursuance of its objective to increase employee share ownership, the Board continued to operate the Share Incentive Plan Scheme and Equity Management Incentive Schemes to enable employees to acquire shares in a tax efficient way. Payment of Creditors The Company aims to pay suppliers in accordance with agreed terms. In 2013 the average creditor balance represented 54 days of purchases (2012: 43 days). Employees The Company has retained its Investors in People status. Staff are recruited and promoted on an equal opportunity basis, without regard for gender, partnership status, race, creed or disability. The Board regularly reviews reports on Health and Safety issues which remain a high priority.

Share Capital The share capital is 580,000 A Ordinary Shares. Employee Benefit Trust Shares are held by the Employee Benefit Trust for the benefit of employees. The maximum number of shares held by the Employee Benefit Trust was 138,329 shares with a nominal value of £138,329 and representing 23.8% of the issued share capital. At 31 March 2013 the Employee Benefit Trust held 115,060 shares with a nominal value of £115,060 and representing 19.8% of the issued capital at that date. Share Incentive Plan (SIP) Trust The Company‘s SIP Scheme offers a tax efficient way for employees to acquire WRc shares. Dutybound Limited is the corporate trustee for both the SIP Trust and the Employee Benefit Trust. Shares are held by the SIP Trust on behalf of employees who have purchased WRc shares or acquired free WRc shares under the SIP Scheme. At 31 March 2013 the SIP Trust held 81,167 shares representing 14.0% of the issued capital at that date. Research and Development The amount spent on internally funded research in 2013 was £52,000 (2012: £66,000). Charitable Donations The Company provides ongoing support to Water Aid, the UK charity funding basic water services for the developing world. Support is also given to selected local charities. The aggregate value of charitable donations in the year was £2,122 (2012: £1,690). Accountability and Audit The Board conducts regular reviews of the Company's performance against its business plan and annual operating budget. The Board retains authority for the key strategic, financial and investment decisions of the Company. After reviewing the Company's business plans and forecasts, the cash resources available and investment plans, the Directors have a reasonable expectation that the Company will have adequate resources to continue its operations for the foreseeable future. They have therefore continued

4

to adopt the going concern basis in preparing the financial statements. The Board has overall responsibility for the Company's system of internal financial control, which is designed to set consistent standards to protect against material error and loss, and to provide reasonable assurance that exceptions are identified and dealt with promptly and appropriately. No such system can provide absolute assurance against material error or loss. The Company's review of its system of financial controls extends to operational, compliance and risk management and the Board is satisfied with the reliability of financial reporting and the safeguarding of assets. Auditors In accordance with section 489 of the Companies Act 2006, a resolution for the reappointment of KPMG LLP as auditors of the Company is to be proposed at the forthcoming Annual General meeting.

Disclosure of Information to Auditors The Directors who held office at the date of approval of this Directors' report confirm that, so far as they are each 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 ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company‘s auditors are aware of that information. By Order of the Board Tony Griffiths Company Secretary 15 July 2013

5

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE DIRECTORS' REPORT AND THE FINANCIAL STATEMENTS

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgments and estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

6

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WRC PLC

We have audited the financial statements of WRc plc for the year ended 31 March 2013 set out on pages 7 to 25.The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor‘s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors' Responsibilities Statement set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's web-site at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion the financial statements:

give a true and fair view of the state of the company's affairs as at 31 March 2013 and of its loss for the year then ended;

have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors' remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

James Ledward (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 100 Temple Street Bristol BS1 6AG 15 July 2013

7

Profit and Loss Account for the Year Ended 31 March 2013

Notes 2013 £000

2012 £000

Turnover 2 8,848 8,192 Staff costs Direct costs Other operating charges Depreciation Other operating income

3

4 11

5

(4,509) (4,560) (2,002) (1,887) (1,331) (1,285)

(265) (241) 271 291

———

———

Operating profit

1,012 510

Exceptional item Income from shares in group undertaking

6 67 102

54

30

Net interest (payable)

7

(31)

(36)

Other finance expenses 8 (1,777)

———

(1,050) ———

Loss on ordinary activities before taxation

(675) (444)

Tax on loss on ordinary activities 9 164 ———

274 ———

Loss on ordinary activities after taxation

(511) (170)

Basic loss per share

10

113.4p

39.4p

The notes on pages 11 to 25 form part of these financial statements. Company Number: 2262098

8

Balance Sheet as at 31 March 2013

Notes 2013 £000

2013 £000

2012 £000

2012 £000

Fixed Assets Tangible assets Investments Investments Investments in joint ventures Investment in associates

11 12

360 100 157

———

4,182

617

4,799

360 100 196

———

4,259

656

4,915

Current Assets Debtors Cash at bank and in hand

13 2,901 1,408

——— 4,309

2,982 1,356

——— 4,338

Creditors: Amounts falling due within one year

14

(2,525) ———

(3,117) ———

Net current assets 1,784 ———

1,221 ———

Total assets less current liabilities 6,583 6,136

Creditors: Amounts falling due after more than one year

15

(394)

(589)

Provisions 16 (216) ———

(86) ———

Net assets excluding pension liability 5,973 5,461

Defined benefit pension liability 24 (30,879) ———

(26,022) ———

Net liabilities (24,906) ———

(20,561) ———

Capital and reserves Called up share capital Capital redemption reserve Share premium account Revaluation reserve Other reserves Profit and loss account Shareholders' deficit

17 18 18 18 18 18

580 420

1,562 479 416

(28,363) ———

(24,906) ———

580 420

1,562 486 416

(24,025) ———

(20,561) ———

These financial statements were approved by the board of Directors on 15 July 2013 and were signed on its behalf by: Ron Chapman - Chairman Tony Griffiths – Managing Director Company Number: 2262098 The notes on pages 11 to 25 form part of these financial statements.

9

Cash Flow Statement for the Year Ended 31 March 2013

Notes 2013 £000

2013 £000

2012 £000

2012 £000

Net cash inflow / (outflow) from operating activities

20 227 (255)

Dividends received from joint ventures & associates

54 30

Returns on investments and servicing of finance Interest received Interest paid

2

-

(33) ———

(36) ———

Net cash outflow from returns on investments and servicing of finance

(31)

(36)

Taxation Tax paid

(42)

———

(1)

———

Net cash outflow from taxation (42) (1)

Capital expenditure and financial investment Payments to acquire tangible fixed assets Receipts from sales of tangible fixed assets Net proceeds of sale of investment

(188) -

106 ———

(141) -

142 ———

Net cash (outflow) / inflow from capital expenditure and financial investment

(82)

———

1

———

Net cash inflow / (outflow) before financing

126 (261)

Financing Purchase of shares by EBT Repayment of bank loans

59

(133) ———

73

(129) ———

Net cash outflow from financing

(74) ———

(56) ———

Net increase / (decrease) in cash 21 52 ———

(317) ———

The notes on pages 11 to 25 form part of these financial statements.

10

Note of Historical Cost Profits and Losses for the Year Ended 31 March 2013

2013 £000

2012 £000

Reported loss on ordinary activities before taxation

(675)

(444)

Difference between the historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount

7 ———

6 ———

Historical cost loss on ordinary activities before taxation

(668)

———

(438)

——— Historical cost loss for the year retained after taxation, minority interests and dividends

(504) ———

(164) ———

Statement of Total Recognised Gains and Losses for the Year Ended 31 March 2013

Notes 2013 £000

2012 £000

Loss for the financial year

(511) (170)

Actuarial loss recognised in the pension scheme

24 (4,622) (10,832)

Deferred tax on actuarial loss in the pension scheme 729 2,143 Total recognised gains and losses relating to the financial year

——— (4,404) ———

——— (8,859) ———

The notes on pages 11 to 25 form part of these financial statements.

11

Notes to the Financial Statements

1. ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements. a) Basis of accounting – The financial statements have been prepared in accordance with applicable accounting

standards and under the historical cost accounting rules, modified to include the revaluation of the freehold and long leasehold property.

b) Consolidation – The Company is exempt by virtue of section 402 of the Companies Act 2006 from the requirement to prepare group financial statements. These financial statements present information about the company as an individual undertaking and not about the Group.

c) Turnover - Turnover, which excludes value added tax, represents the sales of services and products to customers. For long-term contracts, turnover is recognised by reference to the total sales value and estimated stage of completion of the contract. The amount of profit attributable to the stage of completion of a long term contract is recognised on a straight line basis. Turnover for such contracts represents the estimated value of work executed during the year, which excludes VAT.

d) Tangible Fixed assets - These are held at modified historic cost, in accordance with the transition arrangements provided under FRS 15.

e) Depreciation - Tangible fixed assets with a cost in excess of £2,000 and an effective life of three years or more are capitalised and the provision for depreciation is calculated on the cost or valuation, less residual value, in order to write off such amounts in equal instalments over their estimated effective lives, which are as follows:

Land Not depreciated Buildings - freehold 50 years Buildings - short leasehold Over the length of lease Fixed plant 10 years Other plant, equipment and operating software 3 to 4 years Research plant 3 to 10 years Intangible assets 5 years

f) Stock - Publication stock is stated at the lower of cost and net realisable value.

g) Amounts recoverable on contracts - These are stated at net cost, plus profit attributable, less foreseeable losses. Net cost comprises cumulative direct labour, direct costs and attributable overheads.

h) Payments on account - Progress payments received and receivable in excess of amounts transferred to turnover are included in creditors as payments on account to the extent that they exceed the value of amounts recoverable on contracts on a contract by contract basis.

i) Deferred taxation - Deferred tax is recognised without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.

j) Patent costs - The costs of registering patents are written off in the period in which they are incurred.

k) Foreign currencies i) Balances denominated in foreign currencies are translated at the rate of exchange ruling at the balance

sheet date. Transactions denominated in foreign currencies are recorded at the rate ruling at the date of the transaction. Differences on exchange are taken to the profit and loss account.

ii) The results and assets and liabilities of all overseas investments are translated at the closing rate for the period. Exchange differences arising from the retranslation of the opening net investment are recorded as a movement in reserves.

l) Research and development - Research plant is classified as a fixed asset and depreciated in accordance with the Company's depreciation policy. All other research and development costs are written off in the period in which they are incurred except to the extent that they relate to amounts recoverable on contracts and are included therein.

12

m) Pension accounting policy - The Company operates a pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of the Company. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The pension scheme deficit is recognised in full. The movement in the scheme deficit is split between operating charges, finance items and, in the statement of total recognised gains and losses, actuarial gains and losses.

The Company also operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The amount charged to the profit and loss account represents the contributions payable to the scheme in respect of the accounting period.

n) Operating leases - The annual payments under operating leases are charged to the profit and loss account as incurred.

o) Finance leases - Assets held under finance leases are capitalised and depreciated over their effective lives. The net obligations outstanding are recorded as a liability. The interest element of rental obligations is charged to the profit and loss account over the period of the lease in proportion to the balance of capital repayments outstanding.

p) Investments - Investments in subsidiary undertakings, associates, and joint ventures are stated at cost less amounts written off.

q) Employee Benefit Trust - The WRc Employee Benefit Trust ("the EBT") is governed by a trust deed and has the object of ensuring that shares in WRc plc are acquired and held by the trustee, Dutybound Limited, for the benefit of employees, either by sale or the grant of share options, so that employees have an interest in the business of the Company. In accordance with FRS 5, the assets and liabilities of the EBT are aggregated into the Company balance sheet, and the surplus or deficit of the EBT is included in the Company profit and loss account. In accordance with UITF 38 the cost of shares held are deducted from distributable reserves. Dividends received by the EBT are shown as sundry income to the Company.

r) Share Based Payment - The Company has a share option scheme which is open to Directors and members of the senior management team. Options vest on the date of grant and expire ten years after the date of grant. There are no performance conditions attaching to the exercise of the options. The fair value of the options granted is measured using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The options are considered as cash-settled share based payment transactions, the fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. The liability is revalued at each balance sheet date and settlement date with any changes to fair value being recognised in the profit and loss account.

2. SEGMENTAL ANALYSIS

2013 £000

2012 £000

All turnover arises from one class of business

Geographical analysis - by destination United Kingdom Rest of Europe Americas Middle and Far East, and Africa

7,106 1,604

131 7

——— 8,848

———

6,587 1,431

78 96

——— 8,192

——— No material operating profits are generated outside the UK. No material net assets are held outside the UK.

13

3. STAFF NUMBER AND COSTS 2013 Number

2012 Number

The average number of persons, including Directors, employed by the Group during the year was as follows: Scientists, engineers and technicians Indirect staff Management

85

92 17 18

15 11 ———

117 ———

——— 121

———

2013 £000

2012 £000

The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Pension costs Share based payments (see Note 25)

3,840

3,922 399 354 270 284

- -

——— 4,509

———

——— 4,560

———

The total emoluments of Directors, charged before arriving at profit on ordinary activities, were: Total Pension Costs

Name Salary/Fees

£000 Benefits in kind

£000 2013 £000

2012 £000

2013 £000

2012 £000

Ron Chapman (Chairman)

52

2 54 52 3 3

Tony Griffiths Mark Smith

93 2 95 92 5 6

5 7 90 2 92 30

Roberto Zocchi 16 - 16 16 - - Total

——— 251

———

——— 6

———

——— 257

———

——— 190

———

——— 14

———

——— 15

———

4. OTHER OPERATING CHARGES

2013 £000

2012 £000

Included in other operating charges are: Operating lease rentals - plant and machinery 57 49 - other - - Equipment hire - plant and machinery 13 15 - other 43 58 Exchange loss 5 17 Patent costs 11 20 R&D expenditure 52 66 Auditors Remuneration: Audit of the annual accounts 33 35 Amounts payable to auditors: Other services relating to : Taxation Pension scheme Other services

23

10

- 28 1 2

14

5. OTHER OPERATING INCOME

2013 £000

2012 £000

Rent receivable 104 101 Royalties 58 38 Other income Total other operating income

109 152

——— 271

———

——— 291

———

6. EXCEPTIONAL ITEM

2013 £000

2012 £000

Gain on part disposal of investment in NSF-WRc Limited

67 ———

102 ———

In 2012 WRc plc sold a 3.5% stake in NSF-WRc Limited to its JV partner, NSF International. A further 3.5% stake was sold in 2013.

7. NET INTEREST PAYABLE

2013 £000

2012 £000

Interest payable on bank loans and overdrafts (5) (9) Interest payable on other loans (28)

——— (27)

——— Gross interest payable (33) (36) Interest receivable 2

——— -

——— Net interest payable (31)

——— (36)

———

8. OTHER FINANCE EXPENSES

2013 £000

2012 £000

Interest on pension scheme liabilities (note 24) 1,777 1,050 ———

———

15

9. TAX ON PROFIT ON ORDINARY ACTIVITIES

2013 £000

2012 £000

The tax charge is based on the taxable loss for the year and comprises: Current tax: Corporation tax

33

(-)

Adjustment in respect of prior period (49) - Overseas tax suffered 1

——— 1

———

Total current tax (15) ———

1 ———

Deferred tax: Timing differences 82 17 Adjustments in respect of prior period 48

——— (156)

——— Total deferred tax (note 16) 130

——— (139)

——— Deferred tax on movement in FRS 17 liability (279) (136) ——— ——— Total tax on ordinary activities (164) (274) ——— ———

Factors affecting the tax charge for the current period The current tax credit for the year is higher (2012: higher) than the standard rate of corporation tax in the UK of 24% (2012: 26%). The differences are explained below. Current tax reconciliation

Loss on ordinary activities before taxation (675) (444) ——— ——— Loss on ordinary activities at standard rate of corporation tax in the UK of 24% (2012: 26%) Effects of:

(162) (115)

Permanent timing differences 21 24 Capital allowances in excess of depreciation (11) (23) Short term timing differences (1) (2) Expenses not deductible for tax purposes 2 - Marginal relief (5) - Prior period adjustments (50) - Overseas tax rates 1 1 Utilisation / no relief for losses (79) - Non-taxable income (29) (32) FRS17 pension charge in excess of contributions 298 148 ——— ——— Total current tax (See above) (15) 1 ——— ———

Factors that may affect future current and total tax charges Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and 23% (effective from 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively. This will reduce the company's future current tax charge accordingly. The deferred tax asset at 31 March 2013 has been calculated based on the rate of 23% substantively enacted at the balance sheet date.

The March 2013 Budget announced that the rate will further reduce to 20% by 2015 in addition to the planned reduction to 21% by 2014 previously announced in the December 2012 Autumn Statement. It has not yet been possible to quantify the full anticipated effect of the announced further 3% rate reduction, although this will further reduce the company's future current tax charge and reduce the company's deferred tax asset accordingly.

16

10. EARNINGS PER SHARE

Earnings per share has been calculated as follows:

2013 £000

2012 £000

Loss on ordinary activities after taxation and minority interests 511 170

Shares Shares Weighted average ordinary shares in issue during the year 580,000 580,000 Less: weighted average number of shares held by the Employee Benefit Trust (129,351)

————— (148,643)

————— 450,649

————— 431,357

————— Basic loss per share – pence 113.4

39.4

11. TANGIBLE ASSETS

Buildings Land

Freehold £000

Freehold £000

Short Leasehold

£000

Plant & Equipment

£000 Total £000

Cost 1 April 2012 1,717 3,728 - 3,470 8,915 Additions at cost - 17 - 171 188 Disposals - - - (3) (3) ———— ———— ———— ———— ———— 31 March 2013 1,717

———— 3,745

———— -

———— 3,638

———— 9,100

————

Depreciation 1 April 2012 - 1,523 - 3,133 4,656 On disposals - - - (3) (3) Charge for the year - 88 - 177 265 ———— ———— ———— ———— ———— 31 March 2013 -

———— 1,611

———— -

———— 3,307

———— 4,918

————

Net book value 31 March 2013 1,717 2,134 - 331 4,182 31 March 2012 1,717 2,205 - 337 4,259

The depreciation charge for the year includes £Nil (2012: £Nil) related to finance leases. An independent professional valuation of the freehold land and buildings at Swindon, at £4,500,000, was approved by the Directors on 24 June 1999. This valuation was adopted as deemed cost under the transitional rules of FRS15. The Net book value of assets held under leases at 31 March 2013 was £Nil (2012: £Nil).

Original historical cost of the Swindon property is as follows: £000 Cost 2,755 Depreciation (1,201) ———— Net book value 1,554

————

17

12. INVESTMENTS

Investments £000

Interests in joint

ventures £000

Interests in

associates £000

Total £000

Cost at 1 April 2012 360 100 196 656 Disposals - - (39) (39) ———— ———— ———— ———— 31 March 2013 360

———— 100

———— 157

———— 617

————

The Companies in which the Company‘s interests at year end are more than 20% are set out on page 26.

13. DEBTORS

2013

£000 2012 £000

Trade debtors 1,783 1,957 Amounts recoverable on contracts 712 645 Amounts owed by subsidiary undertakings 50 51 Corporation tax 273 216 Other debtors 23 30 Prepayments 60

——— 83

——— 2,901 2,982 ——— ———

14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2013 £000

2012 £000

Bank loan 132 116 Payments in advance 326 426 Trade creditors 179 143 Amounts owed to subsidiary undertakings 478 478 Social security and other taxes 394 408 Other creditors 21 14 Accruals and deferred income 993 1,529 Share based payments 2

——— 3

——— 2,525 3,117 ——— ———

18

15. CREDITORS: OTHER AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

2013

£000 2012 £000

Other Creditors over one year 47 93 Bank loans 3 152 Unsecured loan stock 344

——— 344

——— 394

——— 589

——— The Company entered into a ten year term loan in November 2004. The loan attracts interest at 2.125% over base rate. The loan is secured by a fixed and floating charge on the assets of the Company. The unsecured loan stock is held by shareholders who previously held 'B' ordinary shares. The loan stock will be redeemed on 31 March 2014, although it may be redeemed sooner by agreement, or in the event of an offer being made for all the share capital of the Company, or on a listing of that capital on a recognised Stock Exchange. Due as follows:

2013

£000 2012 £000

Less than one year 132 116 Within one-two years 347 112 Within two-five years - 40 More than 5 years -

——— 344

——— 479 612 ——— ———

16. PROVISIONS FOR LIABILITIES

Deferred taxation

£000 1 April 2012 86 Provision for the year (note 9) 130 31 March 2013

——— 216

——— The amounts provided for deferred taxation the Company are set out below:

2013

£000 2012 £000

Provided Accelerated capital allowances 342 315 Short term timing differences (17) (18) Tax losses carried forward (109)

——— (211) ———

216 86 ——— ——— There were no amounts unprovided for.

19

17. SHARE CAPITAL

The authorised share capital of the Company consists of 1,250,000 £1 ‗A‘ shares (2012: 1,250,000 £1 ‗A‘ shares). The issued share capital is 580,000 £1 ‗A‘ shares (2012: 580,000 £1 ‗A‘ shares).

18. RESERVES

Capital redemption

reserve £000

Share premium account

£000

Revaluation reserve

£000

Other reserves

£000

Profit and loss account

£000 Total £000

1 April 2012 420 1,562 486 416 (24,025) (21,141) Movement in shares held in the EBT - - - - 59 59 Profit for the year - - - - (511) (511) Transfers - - (7) - 7 - Actuarial loss recognised in pension scheme (net of tax) - - - - (3,893) (3,893) ——— ——— ——— ——— ——— ——— 31 March 2013 420 1,562 479 416 (28,363) (25,486) ——— ——— ——— ——— ——— ——— Revaluation and other reserves are not distributable. The revaluation reserve all relates to property.

19. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ DEFICIT 2013

£000 2012 £000

Loss for the financial year (511) (170) Other recognised gains & losses relating to year (net of tax) (3,893) (8,689) Movement in shares held in the EBT 59

——— 73

——— Net reduction in shareholders‘ funds (4,345) (8,786) Opening shareholders‘ deficit (20,561)

——— (11,775) ———

Closing shareholders‘ deficit (24,906) (20,561) ——— ———

20

20. NET CASH INFLOW FROM OPERATING ACTIVITIES 2013

£000 2012 £000

Operating profit 1012 510 Depreciation 265 241 Decrease/(Increase) in debtors 80 (227) (Decrease) in creditors (597) (297) Difference between FRS 17 service cost and contributions paid (533) (782)

———

——— Net cash inflow / (outflow) from operating activities 227 (255) ——— ———

21. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET SURPLUS 2013

£000 2012 £000

Net increase / (decrease) in cash 52 (317) Repayment of bank and other loans 133

——— 129

——— Movement in net surplus in the year 185 (188) Net surplus at beginning of year 744

——— 932

——— Net surplus at end of year 929 744 ——— ——— ANALYSIS OF NET SURPLUS

At 1 April 2012 £000

Cash flow changes

£000

At 31 March 2013 £000

Cash at bank 1,356 52 1,408 Bank loan (268) 133 (135) Loan stock (344)

——— -

——— (344)

——— Net surplus 744 185 929 ——— ——— ———

22. FUTURE CAPITAL EXPENDITURE

2013

£000 2012 £000

Contracted but not provided for 8 24 ——— ———

21

23. COMMITMENTS UNDER OPERATING LEASES

As at 31 March 2012 amounts payable in the year to 31 March 2013 under non-cancellable operating leases are as follows:

2013

£000 2012 £000

Other One year 14 - Two to five years inclusive 26

——— 41

——— 40

——— 41

———

24. PENSION SCHEME

The Company participates in the Water Associated Employers Pension Scheme (WAEPS). The scheme had an actuarial valuation carried out effective 31 March 2010. Because the defined benefit scheme is closed to new employees, the valuation basis used was the attained age method. The WAEPS scheme operates both a defined benefit and a defined contribution money purchase arrangement. The valuation of the defined benefit scheme at 31 March 2010 was carried out by the scheme actuary, Hymans Robertson. It disclosed assets of £72.4 million, and liabilities of £96.5 million to give a deficit of £24.1 million. The defined benefit arrangements are not offered to new employees and the defined benefit section closed to future accrual with effect from 1 April 2012. The Company agreed with Hymans Robertson that, from 6 April 2012, it will make a fixed annual contribution of £501,304 per annum. This represents around 21% of the pensionable pay of the scheme members at that date. The contribution to the defined contribution money purchase scheme was £146,000 (2012: £60,000). Contributions outstanding at year end were £12,000 (2012: £5,000). Under FRS 17 the assets and liabilities of the defined benefit pension scheme are included on the balance sheet of the Company. The current service cost and financing income/expense are included in the profit and loss account of the period to which they relate. Actuarial gains and losses are included in the statement of total recognised gains and losses. The latest triennial valuation was updated for FRS 17 purposes to 31 March 2013 by a qualified independent actuary (Hymans Robertson). The valuation was carried out on the projected unit method, under which the current service cost will increase as the scheme members approach retirement. The principal actuarial assumptions used in the FRS 17 valuation of the scheme were as follows: Actuarial assumptions In assessing the status of the pension fund at 31 March 2013, the following assumptions have been made, in accordance with the recommendation of the scheme actuary:

2013 2012 2011 % % %

Discount rate 4.10 4.60 5.50 Rate of increase in salary 3.30 3.30 3.60 Rate of increase of pensions in payment 3.30 3.30 3.60 Rate of increase in deferred pensions 3.30 3.30 3.60 Assumed rate of inflation 3.30 3.30 3.60

22

Assets of the scheme and expected rates of return Having taken advice from the actuary, the Company has set the following expected rate of return on the assets of the scheme: 2013

Expected rate of return

% pa

2013 Market

value of assets

£000

2012 Expected

rate of return % pa

2012 Market

value of assets

£000

2011 Expected

rate of return % pa

2011 Market

value of assets

£000 Equities 5.75 20,715 6.2 34,192 7.4 41,085 Corporate Bonds 4.10 9,936 4.6 10,251 5.3 12,974 Government Bonds

3.00 19,683 3.3 20,766 4.3 13,732

Property 3.9 6,960 4.4 7,111 5.5 6,995 Currency - - - - 4.6 - Cash 0.50 353 0.5 2,354 0.5 351 Other 5.75 21,921

———— 0.5 541

———— -

———— Total 79,568 75,215 75,136 Estimated liabilities (119,671)

———— (109,454)

———— (97,975)

———— Deficit in scheme (40,103) (34,239) (22,839) Deferred tax asset 9,224

———— 8,217

———— 5,938

———— Net pension liability recognised in balance sheet

(30,879) ————

(26,022) ————

(16,901) ————

Analysis of amount charged to operating profit 2013

£000 2012 £000

Current service cost - 294 Past service cost -

———— -

———— Total operating charge -

———— 294

———— Analysis of amount charged to other finance expense 2013

£000 2012 £000

Expected return on pension scheme assets (3,163) (4,256) Interest on pension scheme liabilities 4,940 5,306 ———— ———— Total finance charge 1,777

———— 1,050

———— Analysis of amount recognised in statement of total recognised gains and losses (STRGL) 2013

£000 2012 £000

Actuarial (losses)/gains on plan assets 4,784 (1,613) Actuarial (losses)/gains on obligations (9,406) (9,219) ———— ———— Actuarial (losses)/gains in pension scheme (4,622)

———— (10,832)

————

23

Reconciliation of defined benefit obligation 2013

£000 2012 £000

Opening defined benefit obligations 109,454 97,975 Current service cost - 294 Interest costs 4,940 5,306 Contribution by plan participants - 178 Actuarial losses/(gains) 9,406 9,219 Past service cost - - Benefits paid (4,129)

———— (3,518)

———— Closing defined benefit obligation 119,671 109,454 ———— ———— Reconciliation of fair value of plan assets 2013

£000 2012 £000

Opening fair value of scheme assets 75,215 75,136 Expected return on assets 3,163 4,256 Contributions by scheme participants - 178 Contributions by the employer 535 776 Actuarial losses 4,784 (1,613) Benefits (including expenses paid) (4,129)

———— (3,518)

———— Closing fair value of scheme assets 79,568 75,215 ———— ———— WRc plc expects to contribute £565,000 to its benefit pension plans in the period ended 31 March 2014. The major categories of plan assets as a percentage of total plan assets are as follows: 2013 2012 Equities 26% 45% Corporate bonds 12% 14% Bonds 25% 27% Property 9% 10% Cash - 3% Other 28% 1%

2013 £000

2012 £000

2011 £000

2010 £000

2009 £000

Fair value of plan assets

79,568

75,215

75,136

72,545

59,375

Present value of defined benefit obligations

(119,671)

(109,454)

(97,975)

(100,625)

(74,569)

Deficit

———— (40,103)

————

———— (34,239) ————

———— (22,839) ————

———— (28,080)

————

———— (15,194) ————

24

2013 £000

2012 £000

2011 £000

2010 £000

2009 £000

Experience adjustments on scheme assets Amounts

(4,473)

(1,613)

886

12,401

(14,561) Percentage of scheme assets

5.6%

171%

1.2%

17.1%

(24.5%)

Experience adjustment on scheme liabilities Amount

(1)

-

8,046

499

(234) % of present value of scheme liabilities

0.0%

0.0%

8.2%

0.5%

(0.3%)

Total actuarial gain / (losses) on obligation Amount

(9,406)

(9,219)

4,451

(24,106)

(207) % of present value of scheme liabilities

(7.9%) (8.4%) 4.5% (24.0%) (0.3%)

This disclosure has been prepared using mortality tables generated by Club Vita plus an allowance for medium cohort projections with a 1.5% or 1.0% minimum improvement underpin for males and females respectively. The assumed life expectancy for a man currently aged 65 years is 21.7 years, whereas for a man currently 45 years, the life expectancy once they reach 65 is assumed to be 24.8 years.

25. SHARE BASED PAYMENTS The Company has a share option scheme which is open to Directors and members of the senior management team. Options vest on the date of grant and expire ten years after the date of the grant. There are no performance conditions attaching to the exercise of the options. Option Scheme (Exercise Price)

Options outstanding at

start of year

Granted during year

Exercised during year

Lapsed during year

Forfeited during year

Options outstanding

& exercisable at the end

of the year 2009 Grant (£10.16) 261 - - - - 261 2010 Grant (£9.79) 202 - - (202) - - ———— ———— ———— ———— ———— ———— Total 463 - - (202) - 261 ———— ———— ———— ———— ———— ———— Weighted average exercise price

£10.00

£10.16

Weighted average contractual life remaining

6.4 years

5 years

The estimate of the fair value of the services received is measured based on the Black-Scholes formula, a financial model used to calculate the fair value of shares and share options. The options are considered as being cash-settled share based payment transactions.

25

For the year ended 31 March 2013 the company recognised a credit of £1,000 (2012: Nil) in respect of outstanding share option awards. The carrying amount of liabilities was £2,000 as at 31 March 2013 (2012: £3,000). The fair values and assumptions to calculate this expense are set out below. 24

September 2008 Grant

Fair value £5.08 Share price £2.46 Exercise price £10.16 Expected volatility 20.0% Option life 6 months Dividend yield 0.0% Risk free interest rate

0.4%

The expected volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information.

26

DIRECTORY OF SUBSIDIARIES AND ASSOCIATED UNDERTAKINGS Company Principal

activity Shares held Proportion of

Shares held Country of

incorporation and registration

Subsidiary undertakings

Dutybound Limited Corporate Trustee

2 ordinary £1 shares

100% Great Britain

Water Research Centre Limited Dormant 452 ordinary shares of £1

100% Great Britain

WRc Aqua Limited Dormant 50,000 ordinary shares of £1

100% Great Britain

WRc Evaluation and Testing Centre Limited

Dormant 22,960 ordinary shares of £1

100% Great Britain

WRc Waste Research Limited Dormant 2 ordinary shares of £1

100% Great Britain

Associated undertakings, joint ventures and investments

Cognica Limited Multimedia Products

100,001 ordinary shares

of £1

50% Great Britain

NSF-WRc Limited Testing and Laboratory

Services

78,568 ‗A‘ £1 ordinary shares and 78,568 ‗C‘

£1 ordinary shares

14.3% Great Britain

Buildcert Limited Certification Services

12 ordinary shares of £1

12% Great Britain

Meter Logik Limited Meter Performance

Diagnosis

2,250 ordinary shares of

£0.444

5% Great Britain

All subsidiary and associated undertakings operate in their country of incorporation.

WRc plc Frankland Road, Blagrove Swindon, Wilts, SN5 8YF

Tel: +44 1793 865000 Fax: +44 1793 865001 Email: solutions@wrcplc.co.uk

URL http://www.wrcplc.co.uk