Pennon : Trust Deed and Rules of The Pennon Group Share Incentive Plan

June 10, 2024 at 02:44 am

DRAFT TRUST DEED

PENNON GROUP PLC

THE PENNON GROUP

SHARE INCENTIVE PLAN

(the "PENNON GROUP SHARE INCENTIVE PLAN")

TRUST DEED AND RULES

Approved by shareholders at AGM on 31 July 2014

Amended by the Board on [•] 2024

Amendments approved by shareholders at AGM on [•] 2024

THIS DEED is made on July 2014

BETWEEN

(1) Pennon Group Plc whose registered office is at Peninsula House, Rydon Lane, Exeter Devon EX2 7HR (hereafter called "the Company")

(2) Capita IRG Trustees Limited whose registered office is at The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU (hereafter called "the Trustees")

1 PURPOSE

The purpose of this Deed is to establish a trust for the share incentive plan known as the Pennon Group Share Incentive Plan ("the Plan") which satisfies Schedule 2 ITEPA 2003.

2 STATUS

The Plan consists of this Deed and the rules of the Plan ("Rules") as set out in Appendix A. The definitions in the Rules apply to this Deed. The Company shall from time to time determine which of parts A to F of the Rules shall have effect.

IT IS HEREBY AGREED AS FOLLOWS

3 DECLARATION OF TRUST

3.1 The Company and the Trustees have agreed that all the Shares and other assets which are issued to or transferred to the Trustees are to be held on the trusts declared by this Deed, and subject to the terms of the Rules. When Shares or assets are transferred to the Trustees by any Participating Company with the intention of being held as part of the Plan they shall be held upon the trusts and provisions of this Deed and the Rules.

3.2 The Trustees shall hold the Trust Fund upon the following trusts namely:

(a) as to Shares which have not been awarded to Participants ("Unawarded Shares") upon trust during the Trust Period to allocate those Shares in accordance with the terms of this Deed and the Rules;

(b) as to Shares which have been awarded to a Participant ("Plan Shares") upon trust for the benefit of that Participant on the terms and conditions set out in the Rules;

(c) as to Partnership Share Money upon trust to purchase Shares for the benefit of the contributing Qualifying Employee in accordance with the Rules; and

(d) as to other assets ("Surplus Assets") upon trust to use them to purchase further Shares to be held on the trusts declared in (a) above, at such time during the Trust Period and on such terms as the Trustees in their absolute discretion think fit.

3.3 The income of Unawarded Shares and Surplus Assets shall be accumulated by the Trustees and added to, and held upon the trusts applying to, Surplus Assets.

3.4 The income of Plan Shares and Partnership Share Money shall be dealt with in accordance with the Rules.

3.5 The perpetuity period in respect of the trusts and powers declared by this Deed and the Rules shall be the period of 80 years from the date of this Deed.

4 NUMBER OF TRUSTEES

Unless a corporate Trustee is appointed, there shall always be at least 2 Trustees. Where there is no corporate Trustee, and the number of Trustees falls below 2, the continuing Trustee has the power to act only to achieve the appointment of a new Trustee.

5 INFORMATION

The Trustees shall be entitled to rely on information supplied by any Participating Company for the purposes of the Plan and on any direction, notice or document given or executive by or with the authority of any Participating Company or any Participant in the Plan.

6 RESIDENCE OF TRUSTEES

Every Trustee shall be resident in the United Kingdom. The Company shall immediately remove any Trustee who ceases to be so resident and, if necessary, appoint a replacement.

7 CHANGE OF TRUSTEES

The Company has the power to remove any Trustee or appoint any person to be an additional Trustee for any reason. The change of Trustee shall be effected by executing a deed even if the effect of such an appointment is to increase the number of Trustees in excess of, or further in excess of, four. This power is supplementary to any statutory power of the Company to appoint new and/or additional Trustees.

Any Trustee may retire on not less than three months' notice given in writing to the Company, provided that there will be at least two Trustees or a corporate Trustee immediately after the retirement. If by virtue of the operation of this clause there is no continuing Trustee, the Company will immediately appoint a new Trustee. If the retiring Trustee is a sole corporate trustee the Trustee may appoint a successor as a Trustee if the Company does not itself do so before the date of such retirement.

8 INVESTMENT AND DEALING WITH TRUST ASSETS

8.1 Save as otherwise provided for by the Plan the Trustees shall not sell or otherwise dispose of Plan Shares.

8.2 The Trustees shall obey any directions given by a Participant in accordance with the Rules in relation to their Plan Shares and any rights and income relating to those Shares. In the absence of any such direction, or provision by the Plan, the Trustees shall take no action. Subject to clause 11, the Trustee will only dispose of a Participant's Plan Shares and deal with any right conferred in respect of such Plan Shares to be allotted other shares, securities or rights of any description pursuant to a direction given by or on behalf of the Participant.

8.3 The Company and Participating Companies shall, as soon as practicable after deduction from Salary, pass the Partnership Share Money to the Trustees who will put the money into an account with:

(a) a person falling within section 991(2)(b) of Income Tax Act 2007;

(b) a building society; or

until it is either used to acquire Partnership Shares on the Acquisition Date, or, in accordance with the Plan, returned to the individual from whose Salary the Partnership Share Money has been deducted.

The Trustees shall pass on any interest arising on this invested money to the individual from whose Salary the Partnership Share Money has been deducted.

8.4 The account into which the Partnership Share Money is put may, but not need to, pay interest. If it does, the Trustees will pass on any interest arising on such invested Partnership Share Money to the individual from whose Salary the Partnership Share Money has been deducted.

8.5 The Trustees may either retain or sell Unawarded Shares at their absolute discretion. The proceeds of any sale of Unawarded Shares shall form part of Surplus Assets.

8.6 The Trustees shall have all the powers of investment of a beneficial owner in relation to Surplus Assets.

8.7 The Trustees shall not be under any liability to the Participating Companies or to current or former Qualifying Employees by reason of a failure to diversify investments, which results from the retention of Plan or Unawarded Shares.

8.8 The Trustees may delegate powers, duties or discretions to any persons and on any terms, provided that the Company gives its prior written consent. The Trustees may, in the performance of their duties under the Plan, employ or pay any appropriate person as their agent to transact business and act on the advice or any professional or business person. No delegation made under this clause shall divest the Trustees of their responsibilities under this Deed or under the Schedule.

8.9 The Trustees may allow any Shares to be registered in the name of an appointed nominee provided that such Shares shall be registered in a designated account. Such registration shall not divest the Trustees of their responsibilities under this Deed or the Schedule.

8.10 The Trustees may at any time, and shall if the Company so directs, revoke any delegation made under this clause or require any Plan assets held by another person to be returned to the Trustees, or both.

8.11 The Trustees hereby waive all dividends payable or to be paid at any time in the future in respect of any Unawarded Shares in the Trust Fund unless requested to do otherwise by the Company in writing.

8.12 On a poll of the Company's shareholders the Trustees will exercise any voting rights arising from Plan Shares in accordance with any directions given to it by the relevant Participant at least three working days before the date of the relevant meeting of the Company's shareholders. If the Participant does not give any such directions or if the Company's shareholders are asked to vote by means of a show of hands the Trustees will not exercise any such rights. The Trustees will not be under any obligation to demand or join in demanding a poll of the Company's shareholders. The Trustees will not exercise any voting rights arising from Unawarded Shares or where Shares held under the Plan are registered in the name of a nominee for the Trustees (in which case the Trustee will arrange for the directions of Participants received by it to be carried out by the nominee).

8.13 Notwithstanding any duty of the Trustees imposed by law, the Trustees will be under no obligation to:

(a) become a director or other officer or interfere in the management or affairs of any company, any of the shares or stocks of which are for the time being comprised in the Plan or of any company associated with such company; or

(b) seek information about the affairs of any such company but may leave the conduct of the affairs of any such company to its officers or other persons managing the company.

9 LOANS TO TRUSTEES

The Trustees shall have the power to borrow money for the purpose of:

(a) acquiring Shares for the purposes of the Plan; and

(b) paying any other expenses properly incurred by the Trustees in administering the Plan.

10 PLAN EXPENSES

The Trustees will pay the expenses of the Plan (including their own expenses incurred in attending to Plan business) from the Surplus Assets, if the assets are sufficient and the Company decides in writing. If there is no such direction, the expenses of the Plan will be met by the Participating Companies in proportion to the amounts paid by them under the Plan or (if the Trustees decide) in proportion to the number of Shares awarded to their Participants under the Plan in the related year, or in proportion to both.

11 TRUSTEES' OBLIGATIONS UNDER THE PLAN

Notice of Award of Free and Matching Shares

11.1 As soon as practicable after Free and Matching Shares have been awarded to a Participant, the Trustees shall give the Participant a notice stating:

(a) the number and description of those Shares;

(b) if the Shares are subject to a restriction, the details of that restriction;

(d) the Holding Period applicable to them.

Notice of Award of Partnership Shares

11.2 As soon as practicable after any Partnership Shares have been acquired for a Participant, the Trustees shall give the Participant a notice stating:

(a) the number and description of those Shares;

(b) if the Shares are subject to a restriction, the details of that restriction;

(c) the amount of Partnership Share Money applied by the Trustees in acquiring those shares on behalf of the Participant; and

(d) the Market Value of those Shares in accordance with which the number of Shares comprising the Award was determined at the Acquisition Date.

Notice of acquisition of Dividend Shares

11.3 As soon as practicable after Dividend Shares have been acquired on behalf of a Participant, the Trustees shall give the Participant a notice stating:

(a) the number and description of those Shares;

(b) their Market Value on the Acquisition Date;

(d) any amount not reinvested and carried forward for acquisition of further Dividend Shares.

Notice of any foreign tax deducted before dividend paid

11.4 Where any foreign cash dividend is received in respect of Plan Shares held on behalf of a Participant, the Trustees shall give the Participant notice of the amount of any foreign tax deducted from the dividend before it was paid.

Restrictions during the Holding Period

11.5 During the Holding Period the Trustees shall not dispose of any Free Shares, Matching Shares or Dividend Shares (whether by transfer to a Participant or otherwise) unless the Participant has ceased to be in Relevant Employment except as allowed by the following paragraphs of the Schedule:

(a) paragraph 37 (power of participants to direct Trustees to accept general offers etc.);

(b) paragraph 77 (power of Trustees to raise funds to subscribe for rights issue);

(d) paragraph 90(5) (termination of plan: early removal of shares with participant's consent).

PAYE Liability etc.

11.6 Where Plan Shares cease to be subject to the Plan in circumstances where the employer has a consequent PAYE obligation, the Trustees will pay to the employer a sum which is sufficient to enable the employer to discharge that obligation unless the Participant makes a payment to the employer as referred to in section 510(4) of ITEPA 2003.

The Trustees may dispose of a Participant's Shares or accept a sum from the Participant in order to meet a PAYE liability in any of the circumstances provided in sections 510-512 of ITEPA 2003 (PAYE: shares ceasing to be subject to the plan).

Where the Trustees receive a sum of money which constitutes a Capital Receipt or the proceeds of any disposal in respect of which a Participant is chargeable to income tax as employment income, the Trustees shall pay to the employer company a sum equal to that on which income tax is so payable and transfer the balance to the Participant, unless section 514 of ITEPA 2003 applies.

The Trustees shall maintain the records necessary to enable them to carry out their PAYE obligations, and the PAYE obligations of the employer company so far as they relate to the Plan.

The Trustees shall maintain records of Participants who have participated in one or more share incentive plans under the Schedule established by the Company or a Connected Company.

Where the Participant becomes liable to income tax under ITEPA 2003, or Chapter 3 or 4 of Part 4 of the ITTOIA 2005, the Trustees shall inform the Participant of any facts which are relevant to determining that liability.

Money's worth received by Trustees

11.7 The Trustees shall pay over to the Participant as soon as is practicable, any money or money's worth received by them in respect of or by reference to any shares, other than new shares within paragraph 87 of the Schedule (consequences of company reconstructions).

This is subject to:

(a) the provisions of Part 8 of the Schedule (dividend reinvestment);

(b) the Trustees obligations under sections 510-514 of the ITEPA 2003); and

General offers etc.

11.8 If any offer, compromise, arrangement or scheme is made which affects the Free Shares or Matching Shares the Trustees shall notify Participants. Each Participant may direct how the Trustees shall act in relation to that Participant's Plan Shares. In the absence of any direction, the Trustees shall take no action.

12 POWER OF TRUSTEES TO RAISE FUNDS TO SUBSCRIBE FOR A RIGHTS ISSUE

If instructed by Participants in respect of their Plan Shares the Trustees may dispose of some of the rights under a rights issue arising from those Shares to obtain enough funds to exercise the remaining rights.

The rights referred to are the rights to buy additional shares or rights in the same company.

13 POWER TO AGREE MARKET VALUE OF SHARES

Where the Market Value of Shares falls to be determined for the purposes of the Schedule, the Trustees may agree with the HMRC that it shall be determined by reference to such date or dates, or to an average of the values on a number of dates, as specified in the agreement.

14 PERSONAL INTEREST OF TRUSTEES

Trustees, and directors, officers or employees of a corporate Trustee, shall not be liable to account for any benefit accruing to them by virtue of their:

(a) participation in the Plan as a Qualifying Employee;

(b) ownership, in a beneficial or fiduciary capacity, of any shares or other securities in any Participating Company; or

being a creditor, or being in any other contractual relationship with any such Company.

15 TRUSTEES' MEETINGS

The Trustees shall hold meetings as often as is necessary for the administration of the Plan. There shall be at least two Trustees present at a meeting except where the sole Trustee is a corporate Trustee and the Trustees shall give due notice to all the Trustees of such a meeting. Decisions made at such a meeting by a majority of the Trustees present shall be binding on all the Trustees. A written resolution signed by all the Trustees shall have the same effect as a resolution passed at a meeting.

16 SUBSIDIARY AND JOINTLY OWNED COMPANIES

Any Subsidiary and Jointly Owned Company (where a Jointly Owned Company is not a constituent company in another share incentive plan) may with the agreement of the Company become a party to this Deed and the Plan by executing a deed of adherence agreeing to be bound by the Deed and Rules.

Any company which ceases to be a Subsidiary or a Jointly Owned Company shall automatically cease to be a Participating Company.

17 TRUSTEES' LIABILITY AND INDEMNITY

17.1 The Participating Companies shall jointly and severally indemnify each of the Trustees (except a remunerated Trustee) against any expenses and liabilities which are incurred through acting as a Trustee of the Plan and which cannot be recovered from the Trust Fund. This does not apply to expenses and liabilities which are incurred through fraud or wilful wrongdoing or for which the Trustee is reimbursed under a contract of insurance in accordance with clause 17.3. This indemnity is in addition to and without prejudice to the right which the Trustees have under general law and the Trustee Act 2000 to be indemnified out of assets held in the Trust Fund. The indemnity described in this clause 17.1 will similarly apply after the removal or retirement of a Trustee.

17.2 No Trustee except a remunerated Trustee shall be personally liable for any breach of trust (other than through fraud, wilful wrongdoing or negligence) over and above the extent to which the Trustee is indemnified by the Participating Companies in accordance with clause 17.1 above. This does not apply to expenses and liabilities which are received from any insurances held in accordance with clause 17.3.

17.3 A non-remunerated Trustee may insure the Plan against any loss caused by them or any of their employees, officers, agents or delegates. A non-remunerated Trustee may also insure himself and any of these persons against liability for breach of trust not involving fraud or wilful wrongdoing or negligence of the Trustee or the person concerned. Any premiums for such insurance may be paid for out of assets held in the Trust Fund.

17.4 A Trustee who carries on a profession or business may charge for services rendered on a basis agreed with the Company. A firm or company in which a Trustee is interested or by which they are employed may also charge for services rendered on this basis.

18 COVENANT BY THE PARTICIPATING COMPANIES

The Participating Companies hereby jointly and severally covenant with the Trustees that they shall pay to the Trustees all sums which they are required to pay under the Rules and shall at all times comply with the Rules.

19 ACCEPTANCE OF GIFTS

The Trustees may accept gifts of Shares and other assets which shall be held upon the trusts declared by clause 3.2 as the case may be.

20 TRUSTEES' LIEN

The Trustees' lien over the Trust Fund in respect of liabilities incurred by them in the performance of their duties (including the repayment of borrowed money and tax liabilities) shall be enforceable subject to the following restrictions:

(a) the Trustees shall not be entitled to resort to Partnership Share Money for the satisfaction of any of their liabilities; and

(b) the Trustees shall not be entitled to resort to Plan Shares for the satisfaction of their liabilities except to the extent that this is permitted by the Plan.

21 ENTITLEMENTS

Where in respect of shares of the same class as the Plan Shares an offer or invitation is made conferring rights to acquire against payment additional securities in the Company or where new securities by way of capitalisation are to be allotted by the Company the Trustees shall allocate such rights or securities amongst the Participants concerned on a proportionate basis and if such allocation shall give rise to a fraction of a right or a security shall round such allocation down to the next whole right or security and the Trustees shall use their best endeavours to sell any rights or securities which are not allocated and distribute the net proceeds or sale (after deducting there from any expenses of sale and any taxation which may be payable by the Trustees in respect thereof) among the Participants whose allocation was rounded down such proceeds which derive from Plan Shares being treated as a Capital Receipt in accordance with section 502 of ITEPA 2003 provided that any sum of less than £3 otherwise distributable to a particular Participant may be retained by the Trustees.

22 AMENDMENTS

The Company may, with the Trustees' written consent, from time to time amend this Deed provided that no amendment which would adversely prejudice to a material extent the rights attaching to any Plan Shares awarded to or acquired by Participants may be made nor may any alteration be made giving to Participating Companies a beneficial interest in Plan Shares.

24 TERMINATION OF THE PLAN

24.1 The Plan may be terminated as set out in rule 8 of the Plan.

24.2 Any Shares or other assets which remain undisposed of after the requirements of paragraph 90 of the Schedule have been complied with shall be held by the Trustees upon trust to pay or apply them to or for the benefit of the Participating Companies as at the termination date in such proportion, having regard to their respective contributions, as the Trustees shall in their absolute discretion think appropriate.

25 COUNTERPARTS

This Deed may be executed in any number of counterparts and by the parties hereto on separate counterparts, each of which when so executed will be an original, but all such counterparts will together constitute one and the same Deed.

26. GOVERNING LAW

This Deed will be governed by and construed in accordance with the laws of England and Wales. The parties and any other person referred to in this Deed submits to the exclusive jurisdiction or the Courts of England and Wales.

Executed as a deed on the date shown at the top of this document.

EXECUTED as a DEED on behalf of

PENNON GROUP PLC acting by

Director

Director/Secretary

EXECUTED as a DEED on behalf of

CAPITA IRG TRUSTEES LIMITED acting by

Director

Director/Secretary

Appendix A

RULES OF THE PENNON GROUP

SHARE INCENTIVE PLAN

1 DEFINITIONS

2 PURPOSE OF THE PLAN

3 ELIGIBILITY OF INDIVIDUALS

4 PARTICIPATION ON SAME TERMS

5 FREE SHARES (PART A)

6 PARTNERSHIP SHARES (PART B)

7 MATCHING SHARES (PART C)

8 DIVIDEND SHARES (PART D)

9 FORFIETURE AND CESSATION OF EMPLOYMENT (PART E)

10 COMPANY EVENTS (PART F)

1 DEFINITIONS

1.1 The following words and expressions have the following meanings:

"Accumulation Period" in relation to Partnership Shares, a period not exceeding twelve months during which the Trustees accumulate a Qualifying Employee's Partnership Share Money before acquiring Partnership Shares or repaying it to the employee

"Acquisition Date" (a) in relation to Partnership Shares, where there is no Accumulation Period, the date set by the Trustees in relation to an Award which must not be later than 30 days after the last date on which the Partnership Share Money to be applied in acquiring the Partnership Shares was deducted

(b) in relation to Partnership Shares, where there is an Accumulation Period, the date set by the Trustees in relation to an Award, which must be not later than 30 days after the end of the Accumulation Period which applies in relation to the Award; and

(c) in relation to Dividend Shares, the date set by the Trustees in relation to the acquisition of such Dividend Shares, falling not later than 30 days after the dividend is received by them

"Associated Company" the same meaning as in section 94 of the Schedule

"Award" (a) in relation to Free Shares and Matching Shares, the appropriation of Free Shares and Matching Shares to Qualifying Employees in accordance with the Plan; and

(b) in relation to Partnership Shares and Dividend Shares, the acquisition of Partnership Shares on behalf of Qualifying Employees in accordance with the Plan

"Award Date" in relation to Free Shares or Matching Shares, the date on which such Shares are awarded

"Board" the board of the Company or any committee or person duly authorised by the board, or any duly successor body

"Capital Receipt" the same meaning as in section 502 of ITEPA 2003

"Company" Pennon Group Plc registered in England and Wales under number 2366640

"Connected Company" the same meaning as in paragraph 18(3) of the Schedule

"Control" the same meaning as in section 995 of ITA 2007

"CTA 2010" the Corporation Tax Act 2010

"Dealing Day" a day on which the Stock Exchange is open for the transaction of business

"Dealing Restrictions" restrictions imposed by the Company's share dealing code, the Listing Rules, the MAR or any other laws or regulations that impose restrictions on share dealing

"Deed" thePennon Group Share Incentive Plan Trust Deed, entered into by the Company and the Trustees establishing the trust that operates in connection with the Plan

"Dividend Shares" Shares acquired on behalf of a Participant from reinvestment of dividends under Part D of the Plan and which are subject to the Plan

"Forfeiture Period" in relation to an Award of Free Shares or Matching Shares, such period as is determined by the Board beginning on the Award Date

"Free Shares" Shares awarded under Part A of the Plan which are subject to the Plan

"Free Share Agreement" an agreement in the terms set out in Appendix B which complies with Schedule 2

"Free Share Offer" an offer relating to an Award of Free Shares, which complies with the Schedule

"HMRC" HM Revenue and Customs

"Holding Period" (a) in relation to Free Shares, the period specified by the Board as mentioned in Rule 5.12;

(b) in relation to Matching Shares, the period specified by the Board as mentioned in Rule 7.5; and

which will be subject to the Participant remaining in Relevant Employment and, where the Participant ceases to be in Relevant Employment, such period will come to an end

"Initial Market Value" the Market Value of a Share on an Award Date. Where the Share is subject to a restriction or risk of forfeiture, the Market Value shall be determined without reference to that restriction or risk

"ITA 2007" the Income Tax Act 2007

"ITEPA 2003"the Income Tax (Earnings and Pensions) Act 2003

"ITTOIA 2005" the Income Tax (Trading and Other Income) Act 2005

"Jointly Owned Company" any company of which 50% of the issued share capital is owned by the Company or a Subsidiary and 50% by another company and which is not controlled by any one person

"Listing Rules" the UKLA's listing rules, as amended from time to time

"MAR" the EU Market Abuse Regulation 596/2014 and any associated EU Regulation to the extent each is incorporated into the law of the United Kingdom by virtue of section 3 of the European Union (Withdrawal) Act 2018 and as amended by any instrument related to their incorporation into the law of the United Kingdom

"Market Value" if and so long as the Shares are listed by the UK Listing Authority:

(a) if, and only if, all the Shares acquired for allocation to Participants on an Award Date or an Acquisition Date are purchased and allocated to all Participants on the same day, the average of the prices paid by the Trustees for those Shares; or

(b) if all the Shares acquired for Participants are not purchased and awarded to all Participants on the same day, the closing price on the 5 days preceding Dealing Days (as derived from the Daily Official List of the Stock Exchange)

"Matching Shares" Shares awarded under Part C of the Plan and which are subject to the Plan

"NICs" National Insurance Contributions

"Participant" an individual who has received under the Plan an Award of Free Shares, Matching Shares or Partnership Shares, or on whose behalf Dividend Shares have been acquired

"Participating Company" the Company such of its Subsidiaries, Jointly Owned Companies as have executed deeds of adherence to the Plan under clause 17 of the Deed

"Partnership Shares" Shares awarded under Part B of the Plan and which are subject to the Plan

"Partnership Share Agreement" an agreement relating to the acquisition of Partnership Shares with deductions from a Qualifying Employee's Salary and, where relevant, any related Awards of Matching Shares and Dividend Shares, which complies with Schedule 2

"Partnership Share Money" money deducted from a Qualifying Employee's Salary pursuant to a Partnership Share Agreement and held by the Trustees to acquire Partnership Shares or to be returned to such a person

"Performance Allowances" the criteria for an Award of Free Shares where:

(a) whether Shares are awarded; or

(b) the number or value of Shares awarded

is conditional on performance targets being met

"Permitted Reason" the relation to a Participant ceasing to be in Relevant Employment, any of:

(a) injury or disability;

(b) Redundancy

(d) the company by which the Participant is employed ceasing to be an Associated Company of the Company;

(e) retirement; or

(f) death

"Plan" Pennon Group Share Incentive Plan as amended from time to time

"Plan Shares" (a) Free Shares or Matching Shares awarded to Participants;

(b) Partnership Shares or Dividend Shares acquired on behalf of Participants; and

(c) shares in relation to which paragraph 87(2) (consequence of company reconstructions: new shares) of the Schedule applies,

that remain subject to the Plan

"Plan Termination Notice" a notice issued under paragraph 89 of the Schedule

"Qualifying Company" the same meaning as in paragraph 17 of the Schedule

"Qualifying Corporate Bond" the same meaning as in section 117 of the Taxation of Chargeable Gains Act 1992

"Qualifying Employee" an employee who must be invited to participate in the Plan in accordance with Rule 3.3 and any employee who the Board has invited in accordance with Rule 3.4

"Qualifying Period" (a) in the case of Free Shares, fifteen months (or such other period determined by the Board not exceeding 18 months) ending on the Award Date;

(b) in the case of Partnership Shares and Matching Shares where there is an Accumulation Period, such period determined by the Board not exceeding six months ending with the start of the Accumulation Period; and

(c) in the case of Partnership Shares and Matching Shares where there is no Accumulation Period, not more thanthree months (or such other period determined by the Board not exceeding 18 months) ending with the deduction of Partnership Share Money relating to the Award

"Redundancy" the same meaning as in the Employment Rights Act 1996

"Relevant Employment" employment by the Company or any Associated Company

"Salary" the same meaning as in paragraph 43(4) of the Schedule

"Schedule" Schedule 2 to ITEPA 2003

"Shares" fully paid, non-redeemableordinary shares in the capital of the Company which comply with the conditions set out in paragraph 25 of the Schedule

"Stock Exchange" the London Stock Exchange PLC

"Subsidiary" any company which is for the time being under the Control of the Company

"Tax Year" the meaning given by section 4(2) of ITA 2007

"Trustees" the trustees or trustee under the Deed from time to time

"Trust Fund" all assets transferred to the Trustees to be held on the terms of the Deed and the assets from time to time representing such assets, including any accumulations of income

"Trust Period" the period of 80 years beginning with the date of the Deed

"UK Listing Authority" the Financial Conduct Authority acting as the competent authority for listing for the purposes of Part VI of the Financial Services and Markets Act 2000.

1.2 References to any Act, or Part, Chapter, or section (including ICTA 1988 and ITEPA 2003) shall include any statutory modification, amendment or re-enactment of that Act, for the time being in force.

1.3Words in the singular shall include the plural and vice versa unless the context otherwise requires or it is otherwise stated.

1.4 Terms not otherwise defined in the Plan will have the same meanings as are set out for them in Schedule 2.

2 PURPOSE OF THE PLAN

The purpose of the Plan is to enable employees of Participating Companies to acquire Shares in the Company which give them a continuing stake in the Company.

3 ELIGIBILITY OF INDIVIDUALS

3.1 Subject to rule 3.4, individuals are eligible to participate in an Award only if:

(a) they are employees of a Participating Company;

(b) they have been such employees of a Qualifying Companyat all times during any Qualifying Period;

(d) they do not fail to be eligible under Rule 3.2.

3.2 Individuals are not eligible to participate in an Award of Free Shares Partnership Shares or Matching Shares in any Tax Year if in that Tax Year they are at the same time participating in an award under another plan established by the Company or a Connected Company in accordance with the Schedule, or if they would have received such an award but for their failure to meet a Performance Allowances for that plan. If the Qualifying Employee participates in an Award in a Tax Year in which they have has already participated in an award of shares under one or more share incentive plans in accordance with the Schedule and established by the Company or a Connected Company then the limits specified in Rules 9.6 and 10.3 apply as if the Plan and the other plan or plans were a single plan as required by paragraph 18A of the Schedule.

Employees who must be invited to participate in Awards

3.3 Individuals shall be eligible to receive an Award of Shares under the Plan if they meet the requirements in Rule 3.1 and are UK resident taxpayers (within the meaning of paragraph 8(2) of the Schedule.

In this case they shall be invited to participate in any Awards of Free Shares, Partnership Shares or Matching Shares, and acquisitions of Dividend Shares, as are set out in the Plan.

Employees who may be invited to participate in Awards

3.4 The Board may also invite any employee who meets the requirements in Rule 3.1 to participate in any Award of Free Shares, Partnership Shares or Matching Shares, and acquisitions of Dividend Shares, as are set out in the Plan.

4 PARTICIPATION ON SAME TERMS AND IMPACT OF DEALING RESTRICTIONS

4.1 Every Qualifying Employeeshall be invited to participate in an Awardon the same terms. All who do participate in an Award shall do so on the same terms.

4.2 The Company may make an Award of Free Shares to Qualifying Employees by reference to their remuneration, length of service or hours worked in accordance with paragraphs 9(3) and 9(4) of the Schedule.

4.3 The Board may make an Award of Free Shares to Qualifying Employees by reference to their performance as set out in Rule 9.7.

4.4 The Board must ensure that the Plan is not operated at any time, or in any circumstances, when to do so would breach any Dealing Restrictions.

5 SOURCE OF SHARES AND PLAN LIMIT

5.1 For the purposes of the Plan, Shares may be newly issued, transferred from treasury and/or purchased in the market including that they may be transferred from an employee benefit trust established by the Company.

5.3 References in this Plan to the Trustees acquiring Shares include the Trustees transferring to a Participant the beneficial interest in surplus Shares already held by the Trustees. Any monies which the Trustees would otherwise have used to buy the Shares must be held by the Trustees as Surplus Assets (as defined in the Deed).

5.4 The Board must not grant an Award which would cause the number of Shares allocated under the Plan and under any other employee share scheme adopted by the Company to exceed such number as represents ten per cent. of the ordinary share capital of the Company in issue.

5.5 Subject to rules 5.7 and 5.8, in determining the limit set out in rule 5.4, Shares are treated as allocated if, on any day, they have been newly issued by the Company or transferred from treasury to satisfy an option, award or other right granted during the period of ten years before that day (an "award"), or in the case of such an award in respect of which Shares are yet to be delivered, if the Board intends that new Shares will be issued or that Shares from treasury will be transferred and for these purposes the number of Shares allocated includes:

(a) Shares that have been issued or may be issued to the trustees for the time being of any employee benefit trust, the beneficiaries of which include employees of the Company or its Subsidiaries;

(b) Shares that have been or may be transferred from treasury to the trustee or trustees for the time being of any employee benefit trust, the beneficiaries of which include employees of the Company or its Subsidiaries,

and in either case for such trustee or trustees to then transfer to satisfy an award (unless these Shares have already been counted under this rule).

5.6 The Board may determine that Shares transferred from treasury will cease to count as allocated for the purposes of rule 5.5 if guidelines published by institutional investor representative bodies no longer require such Shares to be counted.

5.7 The number of Shares allocated does not include:

(a) Shares that were allocated to satisfy awards to the extent that such awards have lapsed, been relinquished or been satisfied in cash; and

(b) existing Shares (other than treasury Shares) which have been transferred to satisfy awards or which have been allocated to satisfy awards.

5.8 The Board may make such adjustments to the method of assessing the limit set out in rule 5.4 as it considers appropriate in the event of any variation of the Company's share capital.

6. AMENDMENTS

6.1 Except as described in this rule 6, the Board may, with the Trustees' written consent, amend the rules of the Plan or the terms of any Award. If any such amendment would result in the Plan ceasing to meet the requirements of the Schedule, the amendment will not have effect unless and until the Board has determined that the amendment will take effect even if this causes the Plan to cease to meet the requirements of the Schedule.

6.2 Following the approval of the Plan by the members of the Company in general meeting, subject to rule 6.3, no amendment to the advantage of individuals eligible to participate in the Plan under rule 3.1 and/or Participants may be made under this rule 6 to the provisions relating to:

(a) the persons to whom, or for whom, Shares or cash are provided under the Plan;

(b) limitations on the number or amount of Shares subject to the Plan;

(d) the basis for determining a Participant's entitlement to, and the terms of, Shares to be provided under the Plan;

(e) the adjustments that may be made in the event of a variation of capital; and

(f) the terms of this rule 6.2,

without the prior approval of the members of the Company in general meeting.

6.3 Rule 6.2 will not apply to any minor amendment that is to benefit the administration of the Plan or is necessary or desirable to take account of any change in legislation or to obtain or maintain favourable taxation, exchange control or regulatory treatment for the Company or any Associated Company of the Company or Participant.

6.4 No amendment to the material disadvantage of existing rights of Participants will be made under rule 6.1 unless:

(a) every Participant who may be affected by such amendment has been invited to indicate whether or not the Participant approves the amendment; and

(b) the amendment is approved by a majority of those Participant who have so indicated.

6.5 No amendment will be made under this rule 6 if it would prevent the Plan from being an employees' share scheme within the meaning given by section 1166 of the Companies Act 2006 or which infringes the rule against perpetuities.

7 LEGAL ENTITLEMENT

7.1 This rule 7 applies during a Participant's employment with the Company or any Associated Company of the Company and after a Participant's cessation of employment, whether or not such cessation is lawful.

7.2 Nothing in the Plan or its operation forms part of the terms of employment of a Participant and the rights and obligations arising from a Participant's employment with the Company or any Associated Company of the Company are separate from, and are not affected by, the Participant's participation in the Plan. Participation in the Plan does not create any right to continued employment for any Participant.

7.3 The grant of any Award to a Participant does not create any right for that Participant to be granted any further Awards or to be granted Awards on any particular terms, including the number of Shares to which Awards relate.

7.4 By participating in the Plan, a Participant waives all rights to compensation for any loss in relation to the Plan, including:

(a) any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason (including lawful or unlawful termination of the Participant's employment); or

(b) the operation, suspension, termination or amendment of the Plan.

8 GENERAL

8.1 The Plan will terminate at any time by the passing of a resolution by the Board. Termination of the Plan will be without prejudice to the existing rights of Participants.

8.2 If the Board resolves to terminate the Plan:

(a) a Plan Termination Notice will be sent without delay to the Trustees and each individual who has Plan Shares or who has entered into a Partnership Share Agreement which was in force immediately before the Plan Termination Notice was issued; and

(b) paragraph 90 of the Schedule will have effect.

8.3 The Company will give a Plan Termination Notice to expire on or before the end of the Trust Period.

8.4 Shares issued or transferred from treasury under the Plan will rank equally in all respects with the Shares then in issue, except that they will not rank for any voting, dividend or other rights attaching to Shares by reference to a record date preceding the date of issue or transfer from treasury.

8.5 If it is found following an Award Date that as a result of an error or omission:

(a) a Qualifying Employee has not been given the opportunity to participate in the Plan in respect of any invitation to apply for an Award; or

(b) the number of Shares over which an Award was expressed to be granted to any Qualifying Employee is incorrect,

any Award expressed to have been granted in respect of more than the correct number of Shares will be void as to the excess and any Award expressed to have been granted in respect of fewer than the correct number of Shares will relate to the correct number of Shares if the Trustee holds unallocated Shares that could otherwise have been used to make that Award and the Company, any relevant Associated Company and the Trustee may do all acts and things as may be agreed with HMRC to rectify such error or omission notwithstanding that such actions may not otherwise be in accordance with the rules of the Plan.

8.6 The personal data of any Qualifying Employee, Participant or former Participant may be processed in connection with the operation of the Plan in accordance with the Company's prevailing data protection policy and as notified to Qualifying Employees pursuant to a privacy notice or otherwise. If a Qualifying Employee, Participant, or former Participant is employed outside the European Economic Area and outside the United Kingdom and consent is needed for the processing of their personal data in connection with the operation of the Plan, by participating in the Plan, they consent to such processing of their personal data.

8.7 The Plan will be administered by the Board. The Board will have full authority, consistent with the Plan, to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt regulations for administering the Plan. Decisions of the Board will be final and binding on all parties.

8.8 Any notice or other communication in connection with the Plan may be delivered personally or sent by electronic means or post, in the case of a company to its registered office (for the attention of the company secretary), and in the case of an individual to the individual's last known address, or, where the individual is a director or employee of the Company or an Associated Company of the Company, either to the individual's last known address or to the address of the place of business at which the individual performs the whole or substantially the whole of the duties of the individual's office or employment. Unless otherwise stated in the Plan, where a notice or other communication is given by post, it will be deemed to have been received 72 hours after it was put into the post properly addressed and stamped, and if by electronic means, when the sender receives electronic confirmation of delivery or, if not available, 24 hours after sending the notice.

8.9 No benefits under the Plan will be pensionable.

8.10 If any rule of the Plan or any term of an Award is held to be void but would be valid if part of its wording were deleted, such rule or term will apply with such deletion as may be necessary to make it valid.

8.11 No third party will have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Plan (without prejudice to any right of a third party which exists other than under that Act).

8.12 The rules of the Plan will be governed by and construed in accordance with the laws of England and Wales. Any person referred to in the Plan submits to the exclusive jurisdiction of the Courts of England and Wales.

PART A

9 FREE SHARES

9.1 The Board may at any time:

(a) make a Free Share Offer to all Qualifying Employees; or

(b) invite all Qualifying Employees to enter into a Free Share Agreement with the Company.

9.2 Where rule 9.1(a) applies, every Qualifying Employee will be given a period of not less than 25 days to reject the Free Share Offer. No Award of Free Shares will be made to any Qualifying Employee who rejects the Free Share Offer.

9.3 Where 9.1(b) applies, every Qualifying Employee will be given a period of not less than 14 days to enter into a Free Share Agreement with the Company in the terms of the draft in Appendix B to these Rules. No Award of Free Shares will be made to any Qualifying Employee who does not sign the Free Share Agreement.

9.4 The Trustees, acting with the prior consent of the Board, may from time to time award Free Shares to all Qualifying Employees who:

(a) where rule 9.1(a) applies, do not reject the Free Share Offer; or

(b) where rule 9.1(b) applies, sign the Free Share Agreement.

9.5 The number of Free Shares to be awarded by the Trustees to each Qualifying Employee on an Award Date shall be determined by the Board in accordance with this Rule 9.

Maximum annual Award

9.6 The Initial Market Value of the Shares awarded to a Qualifying Employee in any Tax Year shall not exceed £3,600 (or such other limit as may be permitted by paragraph 35 of the Schedule from time to time).

Allocation of Free Shares by reference to performance

9.7 The Board may stipulate that the number of Free Shares (if any) to be awarded to each Qualifying Employee on a given Award Date shall be determined by reference to Performance Allowances.

9.8 If Performance Allowances are used, they shall apply to all Qualifying Employees participating in that Award.

9.9 If Performances Allowances are used:

(a) Performance Allowances shall be determined by reference to such fair and objective measures ("performance targets") relating to business results or such other objective criteria as the Board shall determine over such period as the Board shall specify;

(b) performance targets must be set for performance units of one or more employees; and

9.10 Where the Board decides to use Performance Allowances it shall, as soon as reasonably practicable:

(a) notify each Qualifying Employee participating in the Awardof the performance targets and measures which, under the Plan, shall be used to determine the number or value of Free Shares to be awarded to them; and

(b) notify all Qualifying Employees, in general terms, of the performance targets and measures to be used to determine the number or value of Free Shares to be awarded to each Qualifying Employee in the Award, provided that the Board may exclude any information the disclosure of which it reasonably considers would prejudice commercial confidentiality.

9.11 The Board shall determine the number of Free Shares (if any) to be awarded to each Qualifying Employee by reference to performance using "Method 1" or "Method 2". The same method shall be used for all Qualifying Employees for each Award.

Performance Allowances: Method 1

9.12 By this Method:

(a) at least 20% of Free Shares awarded in any performance period shall be awarded without reference to performance;

(b) the remaining Free Shares shall be awarded by reference to performance; and

(c) the highest Award made to an individual by reference to performance in any period shall be no more than four times the highest Award to an individual without reference to performance.

If this Method is used:

· the Free Shares awarded without reference to performance (paragraph (a) above) shall be awarded on the same terms as mentioned in Rule 4; and

· the Free Shares awarded by reference to performance (paragraph (b) above) need not be allocated on the same terms as mentioned in Rule 4.

Performance Allowances: Method 2

9.13 By this Method:

(a) some or all Free Shares shall be awarded by reference to performance;

(b) the Award of Free Shares to Qualifying Employees who are members of the same performance unit shall be made on the same terms, as mentioned in Rule 4; and

(d) Free Shares awarded for each performance unit shall be treated as separate Awards.

Holding Period for Free Shares

9.14 The Board shall, in relation to each Award Date, specify a Holding Period throughout which a Participant shall be bound by the terms of the Free Share Offer or Free Share Agreement:

(a) to permit the Free Shares awarded to them to remain in the hands of the Trustee; and

(b) not to assign, charge or otherwise dispose of their beneficial interest in the Free Shares.

9.15 The Holding Period shall, in relation to each Award, be a specified period of not less than 3 years nor more than 5 years (or such other periods as may be permitted by paragraph 36 of the Schedule from time to time), beginning with the Award Date and shall be the same for all Participants who receive an Award at the same time. The Holding Period shall not be increased in respect of Free Shares already awarded under the Plan. The Participant's obligations with respect to the Holding Period will be subject to paragraph 37, paragraph 79 and paragraph 90(5) of the Schedule.

9.16 A Participant may during the Holding Period direct the Trustees:

(a) to accept an offer for any of their Free Shares if the acceptance or agreement shall result in a new holding being equated with those shares for the purposes of capital gains tax; or

(b) to accept an offer of a Qualifying Corporate Bond (whether alone or with other assets or cash or both) for their Free Shares if the offer forms part of such a general offer as is mentioned in paragraph (c); or

(c) to accept an offer of cash, with or without other assets, for their Free Shares if the offer forms part of a general offer which is made to holders of shares of the same class as the Participant's shares, or to holders of shares in the Company and which is made in the first instance on a condition such that if it is satisfied the person making the offer shall have control of the Company, within the meaning of sections 450 and 451 of CTA 2010; or

(d) to agree to a transaction affecting their Free Shares or such of them as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting;

(i) all of the ordinary share capital of the Company or, as the case may be, all the shares of the class in question; or

(ii) all the shares, or all the shares of the class in question, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in a plan in accordance with the Schedule; or

(e) to exercise any rights arising under section 983 of the Companies Act 2006 to require the offeror to acquire their Free Shares, or such of them as are of a particular class in the event of a takeover offer (as defined in section 974 of that Act).

PART B

10 PARTNERSHIP SHARES

10.1 The Board may at any time invite every Qualifying Employee to enter into a Partnership Share Agreement with the Company.

10.2 Partnership Shares shall not be subject to any provision under which they may be forfeit.

Maximum amount of deductions

10.3 The amount of Partnership Share Money deducted from a Qualifying Employee's Salary shall not exceed £1,800 in a Tax Year (or such other maximum amount as may be permitted by paragraph 46(1) of the Schedule from time to time).

10.4 The amount of Partnership Share Money deducted in a Tax Year must not exceed 10% (or such other maximum as may be permitted by paragraph 46(2) of the Schedule from time to time) of the Qualifying Employee's Salary for that Tax Year.

10.5 The Board may set lower limits than those specified in rules 10.3 and 10.4 above.

10.6 When setting a lower limit in accordance with rule 10.5, the Board may stipulate:

(a) a lower percentage than the maximum permitted by paragraph 46(2) of the Schedule; and/or

(b) that a particular description of earnings will not count towards a Qualifying Employee's salary for the purposes of assessing the limit.

10.7 Any amount deducted in excess of that allowed by Rule 10.3 or 10.4 shall be paid over to the employee, subject to both deduction of income tax under PAYE and NICs, as soon as practicable.

Minimum amount of deductions

10.8 The minimum amount to be deducted under the Partnership Share Agreement in any month shall be the same in relation to all Partnership Share Agreements entered into in response to invitations issued on the same occasion. It shall not be greater than £10 (or such other minimum amount as may be permitted by paragraph 47(2) of the Schedule from time to time) and will be set by the Board in relation to each invitation to participate in the Plan.

Notice of possible effect of deductions on benefit entitlement

10.9 Every Partnership Share Agreement shall contain a notice under paragraph 48 of the Schedule.

Restriction imposed on number of Shares awarded

10.10 The Board may specify the maximum number of Shares to be included in, or the maximum amount of individual salary deductions relating to, an Award of Partnership Shares, provided that such maximum number does not breach the limits set out in rules 10.3 and 10.4.

10.11 The Partnership Share Agreement shall contain an undertaking by the Company to notify each Qualifying Employee of any restriction on the number of Shares or the maximum amount of individual salary deductions to be included in an Award.

10.12 The notification in Rule 10.11 above shall be given:

(a) if there is no Accumulation Period, before the deduction of the Partnership Share Money relating to the Award; and

(b) if there is an Accumulation Period, before the beginning of the Accumulation Period relating to the Award.

10.13 The Participating Companies will, as soon as practicable after its deduction from Salary, pass the Partnership Share Money to the Trustees to be held, subject to rule 10.19, by them on behalf of the Qualifying Employees until such time as it is applied by the Trustees in acquiring Partnership Shares on behalf of the Qualifying Employees.

Plan with no Accumulation Period

10.14 The Trustees shall acquire Shares on behalf of the Qualifying Employee using the Partnership Share Money. They shall acquire the Shares on the Acquisition Date. The number of Shares awarded to each employee shall be determined in accordance with the Market Value of the Shares on that date.

Plan with Accumulation Period

10.15 If there is an Accumulation Period, the Trustees shall acquire Shares on behalf of the Qualifying Employee, on the Acquisition Date, using the Partnership Share Money.

10.16 The number of Shares acquired on behalf of each Participant shall be determined by reference to the lower of:

(a) the Market Value of the Shares at the beginning of the Accumulation Period; and

(b) the Market Value of the Shares on the Acquisition Date.

10.17 If there is an Accumulation Period, it will be the same for all Participants receiving Partnership Shares under the relevant Award.

10.18 If a transaction occurs during an Accumulation Period which results in a new holding of shares being equated for the purposes of capital gains tax with any of the shares to be acquired under the Partnership Share Agreement, the Participant may agree that the Partnership Share Agreement shall have effect after the time of that transaction as if it were an agreement for the purchase of shares comprised in the new holding.

Surplus Partnership Share Money

10.19 Any surplus Partnership Share Money remaining after the acquisition of Shares by the Trustees:

(a) may, with the agreement of the Participant, be carried forward to the next Accumulation Period (where there is an Accumulation Period) or to the next deduction (where there is no Accumulation Period); and

(b) in any other case, shall be paid over to the Participant, subject to both deduction of income tax under PAYE and NICs, as soon as practicable.

Scaling down

10.20 If the Company receives applications for Partnership Shares exceeding the Award maximum determined in accordance with Rule 10.10 then (unless HMRC and the Company agree an alternative approach to scale down Awards prior to such scaling down taking place) the following steps shall be taken in sequence until the excess is eliminated.

Step 1 the excess of the deduction chosen by each applicant over the amount specified pursuant to rule 10.6 shall be reduced pro rata;

Step 2 all deductions shall be reduced to the amount specified pursuant to rule 10.6;

Step 3 applications shall be selected by lot, each based on the amount specified pursuant to rule 10.6; and

Step 4 no Awards will be made.

Each application shall be deemed to have been modified or withdrawn in accordance with the foregoing provisions, and each employee who has applied for Partnership Shares shall be notified of the change.

Withdrawal from Partnership Share Agreement

10.21 An employee may withdraw from a Partnership Share Agreement at any time by notice in writing to the Company. Unless a later date is specified in the notice, such a notice shall take effect 30 days after the Company receives it. Any Partnership Share Money then held on behalf of an employee shall be paid over to that employee as soon as practicable. This payment shall be subject to income tax under PAYE and NICs.

Repayment of Partnership Share Money on withdrawal of approval or Termination

10.22 If a Plan Termination Notice is issued in respect of the Plan or if the Plan is not or ceases to be a plan established in accordance with the Schedule by virtue of paragraph 81H or 81I of the Schedule, after the relevant day (within the meaning of paragraph 56 of the Schedule), any Partnership Share Money held on behalf of employees shall be repaid to them as soon as practicable, subject to deduction of income tax under PAYE, and NICs.

Stopping and restarting deductions under a Partnership Share Agreement

10.23 A Participant may at any time give notice to the Company to stop deductions under the Partnership Share Agreement. A Participant may vary their deductions under the Partnership Share Agreement with the agreement of the Company. Unless a later date is specified in the notice, the Company will ensure within 30 days of receiving the notice that either no such further deductions are made by it or that such variation of deductions will take effect.

10.24 A Participant who has stopped deductions may subsequently give notice in writing to the Company to restart deductions under the Partnership Share Agreement but the Participant may not make up any deductions that have been missed. A Participant may not restart deductions more than once in any Accumulation Period. Where a Participant notifies the Company that they wish to restart deductions under their Partnership Share Agreement, the Company will ensure that deductions are restarted under the Partnership Share Agreement not later than the restart date (within the meaning of paragraph 54(6) of the Schedule).

10.25 When Partnership Shares have been awarded to a Participant, the Participant may at any time withdraw any or all of the Partnership Shares from the Plan subject to the deduction of income tax under PAYE and NICs.

PART C

11 MATCHING SHARES

11.1 The Partnership Share Agreement will set out the basis on which a Participant is entitled to Matching Shares (if any) in accordance with this Part of the Rules

General requirements for Matching Shares

11.2 Matching Shares shall:

(a) be Shares of the same class and carrying the same rights as the Partnership Shares to which they relate;

(b) subject to Rule 11.4, be awarded on the same day as the Partnership Shares to which they relate are acquired on behalf of the Participant; and

Ratio of Matching Shares to Partnership Shares

11.3 The Partnership Share Agreement shall specify the ratio of Matching Shares to Partnership Shares for the time being offered by the Company and that ratio shall not exceed 2:1 (or such other ratio as may be permitted by paragraph 60 of the Schedule). The Board may vary the ratio before Partnership Shares are acquired. Employees shall be notified of the terms of any such variation before the Partnership Shares are awarded under the Partnership Share Agreement.

11.4 If the Partnership Shares acquired on that day are not sufficient to produce a Matching Share, the match shall be made when sufficient Partnership Shares have been acquired to allow at least one Matching Share to be appropriated.

Holding Period for Matching Shares

11.5 The Board shall, in relation to each Award Date, specify a Holding Period throughout which a Participant shall be bound by the terms of the Partnership Share Agreement:

(a) to permit the Matching Shares awarded to them to remain in the hands of the Trustees; and

(b) not to assign, charge or otherwise dispose of their beneficial interest in the Matching Shares.

11.6 The Holding Period shall, in relation to each Award, be a specified period of not less than 3 years nor more than 5 years (or such other periods as may be permitted by paragraph 36 of the Schedule from time to time), beginning with the Award Date and shall be the same for all Participants who receive an Award at the same time. The Holding Period shall not be increased in respect of Matching Shares awarded under the Plan. The Participant's obligations with respect to the Holding Period will be subject to paragraph 37, paragraph 79 and paragraph 90(5) of the Schedule.

11.7 A Participant may during the Holding Period direct the Trustees:

(a) to accept an offer for any of their Matching Shares if the acceptance or agreement shall result in a new holding being equated with those original Shares for the purposes of capital gains tax; or

(b) to accept an offer of a Qualifying Corporate Bond (whether alone or with other assets or cash or both) for their Matching Shares if the offer forms part of such a general offer as is mentioned in paragraph (c); or

(c) to accept an offer of cash, with or without other assets, for their Matching Shares if the offer forms part of a general offer which is made to holders of shares of the same class as their Shares or to the holders of shares in the Company, and which is made in the first instance on a condition such that if it is satisfied the person making the offer shall have control of the Company, within the meaning of section 450 and 451 of CTA 2010, notwithstanding such an offer may be made to different shareholders by different means;; or

(d) to agree to a transaction affecting their Matching Shares or such of them as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting;

(i) all of the ordinary share capital of the Company or, as the case may be, all the shares of the class in question; or

(e) to exercise any rights arising under section 983 of the Companies Act 2006 to require the offeror to acquire their Matching Shares, or such of them as are of a particular class, in the event of a takeover offer (as defined in section 974 of that Act).

PART D

12. DIVIDEND SHARES

Reinvestment of cash dividends

12.1 The Free Share Offer, Free Share Agreement or Partnership Share Agreement, as appropriate, shall set out the rights and obligations of Participants receiving Dividend Shares under the Plan.

12.2 The Board may direct that any cash dividend in respect of Plan Shares held on behalf of Participants may be applied in acquiring Dividend Shares on their behalf.

12.3 Dividend Shares shall be Shares:

(a) of the same class and carrying the same rights as the Shares in respect of which the dividend is paid; and

(b) which are not subject to any provision for forfeiture.

12.4 The Board may decide to:

(a) apply all Participants' dividends to acquire Dividend Shares;

(b) to pay all dividends in cash to all Participants; or

12.5 The Board may modify or revoke any directionfor reinvestment of cash dividends.

12.6 The Trustees shall apply any cash dividend to acquire Shares on behalf of the Participant on the Acquisition Date. The number of Dividend Shares acquired on behalf of each Participant shall be determined by the Market Value of the Shares on the Acquisition Date. The Trustee will treat Participants fairly and equally in acquiring Dividend Shares.

Certain amounts not reinvested to be carried forward

12.7 Any amount that is not reinvested:

(a) because the amount of the cash dividend is insufficient to acquire a Share; or

(b) because there is an amount remaining after acquiring the Dividend Shares;

may be retained by the Trustees and carried forward to be added to the amount of the next cash dividend to be reinvested. Where an amount is so retained, the Trustees must hold such amount so as to be separately identifiable for the purposes of rule 12.8.

12.8 If, during the period of three years beginning with the date on which the dividend was paid:

(a) it is not reinvested; or

(b) the Participant ceases to be in Relevant Employment; or

the amount shall be repaid to the Participant as soon as practicable. On making such a payment, the Participant shall be provided with the information specified in paragraph 80(4) of the Schedule.

12.9 Any cash dividends so far as they are not required to be reinvested under the Plan in respect of Plan Shares held on behalf of a Participant must be paid over to the Participant as soon as practicable.

Holding Period for Dividend Shares

12.10 The Holding Period shall be a period of 3 years (or such other period as may be permitted by paragraph 67 of the Schedule from time to time), beginning with the Acquisition Date.

12.11 During the Holding Period the Participant will be bound by the terms of the Partnership Share Agreement and/or Free Share Offer or Free Share Agreement:

(a) to permit the Dividend Shares awarded to the Participant to remain in the hands of the Trustee; and

(b) not to assign, charge or otherwise dispose of their beneficial interest in the Dividend Shares.

12.12 A Participant may during the Holding Period direct the Trustees:

(a) to accept an offer for any of their Dividend Shares if the acceptance or agreement shall result in a new holding being equated with those shares for the purposes of capital gains tax; or

(b) to accept an offer of a Qualifying Corporate Bond (whether alone or with other assets or cash or both) for their Dividend Shares if the offer forms part of such a general offer as is mentioned in paragraph (c); or

(c) to accept an offer of cash, with or without other assets, for their Dividend Shares if the offer forms part of a general offer which is made to holders of shares of the same class as their shares or to holders of shares in the Company, and which is made in the first instance on a condition such that if it is satisfied the person making the offer shall have control of the Company, within the meaning of sections 450 and 451 of CTA 2010, notwithstanding such an offer may be made to different shareholders by different means; or

(d) to agree to a transaction affecting their Dividend Shares or such of them as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting:

(i) all of the ordinary share capital of the Company or, as the case may be, all the shares of the class in question; or

(e) to exercise any rights arising under section 983 of the Companies Act 2006 to require the offeror to acquire their Dividend Shares, or such of them as are of a particular class, in the event of a takeover offer (as defined in section 974 of that Act).

12.13 Where a Participant is charged to tax in the event of their Dividend Shares ceasing to be subject to the Plan, they shall be provided with the information specified in paragraph 80(4) of the Schedule.

PART E

FORFEITURE AND CESSATION OF EMPLOYMENT

13 FORFEITURE

13.1 If the Board decides that an Award of Free Shares or Matching Shares will be subject to forfeiture in accordance with the Plan, a Participant will forfeit some or all of such Free Shares or Matching Shares under their Award when:

(a) the Participant ceases to be in Relevant Employment at any time during the Forfeiture Period other than for a Permitted Reason;

(b) the Participant withdraws their Free Shares or Matching Shares from the Plan at any time during the Forfeiture Period other than following, and by reason of, the occurrence of an event referred to in rule 9.16 (in the case of Free Shares) or rule 11.7 (in the case of Matching Shares); or

(c) in the case of Matching Shares, the Participant withdraws the Partnership Shares in respect of which Matching Shares were awarded from the Plan within the Forfeiture Period other than by reason of having ceased to be in Relevant Employment for a Permitted Reason or following, and by reason of, an event as referred to in rule 11.7.

13.2 Forfeiture may not be linked to the performance of any person or persons.

13.3 The same provision for forfeiture must apply in relation to all Free Shares or Matching Shares included in the Award.

14 PARTICIPANT CEASING TO BE IN RELEVANT EMPLOYMENT

14.1 If a Participant ceases to be in Relevant Employment then, subject to the Trustee selling any of the Participant's Plan Shares in accordance with its PAYE obligations and to any forfeiture of Plan Shares as referred to in rule 13, a Participant's Plan Shares (or any balance of their Plan Shares after the Trustee has discharged its PAYE obligations) will be transferred to such Participant by the Trustee as soon as practicable.

14.2 If a Qualifying Employee ceases to be in Relevant Employment during an Accumulation Period, any Partnership Share Money deducted in the Accumulation Period from that Qualifying Employee's Salary is, subject to the Trustee meeting its PAYE obligations, to be paid over to the Qualifying Employee as soon as practicable.

14.3 If a Qualifying Employee ceases to be in Relevant Employment during an acquisition period relating to an Award of Partnership Shares, they will, for the purposes of the relevant Award of Partnership Shares and, where appropriate, Matching Shares, be treated as ceasing to be in Relevant Employment immediately after the Award is made. For these purposes, "acquisition period" has the meaning given by paragraph 97(3) of the Schedule.

14.4 For the purposes of the Plan, a Participant will only be treated as ceasing to be in Relevant Employment once they no longer hold employment with the Company or any Associated Company.

PART F

COMPANY EVENTS

15 COMPANY RECONSTRUCTIONS

15.1 The following provisions of this Rule apply if there occurs in relation to any of a Participant's Plan Shares (referred to in this Rule as "the Original Holding"):

(a) a transaction which results in a new holding (referred to in this Rule as "the New Holding") being equated with the Original Holding for the purposes of capital gains tax; or

(b) a transaction which would have that result but for the fact that what would be the new holding consists of or includes a Qualifying Corporate Bond.

15.2 If an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises) is made as part of a company reconstruction, those shares shall be treated for the purposes of this Rule as not forming part of the New Holding:

(a) redeemable shares or securities issued as mentioned in paragraph C or D in section 1001(1) of CTA 2010;

(b) share capital issued in circumstances such that section 1022(3) of CTA 2010 applies; or

(c) share capital to which section 410 of ITTOIA 2005 applies that is issued in a case where subsection (2) or (3) of that section applies.

15.3 In this Rule 15:

"Corresponding Shares" in relation to any New Shares, means the Shares in respect of which the New Shares are issued or which the New Shares otherwise represent; and

"New Shares" means shares comprised in the New Holding which were issued in respect of, or otherwise represent, shares comprised in the Original Holding.

15.4 Subject to the following provisions of this Rule 15, references in this Plan to a Participant's Plan Shares shall be respectively construed, after the time of the company reconstruction, as being or, as the case may be, as including references to any New Shares.

15.5 For the purposes of the Plan:

(a) a company reconstruction shall be treated as not involving a disposal of Shares comprised in the Original Holding; and

(b) the date on which any New Shares are to be treated as having been appropriated to or acquired on behalf of the Participant,

shall be that on which Corresponding Shares were so appropriated or acquired.

15.6 In the context of a New Holding, any reference in this Rule 15 to shares includes securities and rights of any description which form part of the New Holding for the purposes of Chapter II of Part IV of the Taxation of Chargeable Gains Act 1992.

16 RIGHTS ISSUES

16.1 Any shares or securities allotted under clause 12 of the Trust Deedshall be treated as Plan Shares identical to the shares in respect of which the rights were conferred. They shall be treated as if they were awarded to or acquired on behalf of the Participant under the Plan in the same way and at the same time as those shares.

16.2 Rule 16.1 does not apply:

(a) to shares and securities allotted as the result of taking up a rights issue where the funds to exercise those rights were obtained otherwise than by virtue of the Trustees disposing of rights in accordance with this rule; or

(b) where the rights to a share issue attributed to Plan Shares are different from the rights attributed to other ordinary shares of the Company,

and in these circumstances any shares, securities or rights allotted are not Plan Shares, and sections 127 to 130 of the Taxation of Chargeable Gains Act 1992 do not apply in relation to them.

Appendix B

Pennon Group Share Incentive Plan : Free Share Agreement

Please use block capitals and read the whole of the agreement before signing below

This agreement is between:

Participant ("the Participant")			Company ("the Company")
Name:			Name: Pennon Group Plc
Home Address:			Registered Address: Peninsula House, Rydon Lane, Exeter, Devon EX2 7HR



Payroll Number:			Registered Number: 2366640

This agreement sets out the terms on which the Participant agrees to take part under the terms of the Plan and is subject to the rules of the Plan. The definitions in the Plan Rules apply to this agreement:

PARTICIPANT

1 I agree to accept the Free Shares in Pennon Group Plc awarded to me under the Plan.

2 I agree to leave the Free Shares in the hands of the Trustees, and not to assign, charge or otherwise dispose of my beneficial interest in the shares for the whole of the Holding Period [insert number of years being not less than 3 and not more than 5].

3 I agree that all dividends paid on my shares will be used by the Trustees to buy more shares in Pennon Group Plc for me according to the rules of the Plan.

4 I agree to leave the Dividend Shares in the hands of the Trustees, and not to assign, charge or otherwise dispose of my beneficial interest in the shares for the whole of the Holding Period of 3 years.

5 I have read this agreement and agree to be bound by it and by the rules of the Plan.

COMPANY

6 The Company agrees to arrange for shares in Pennon Group Plc to be awarded and bought for me, according to the rules of the Plan.

7 [Insert the terms (or a cross reference to an explanation of the terms] on which the Free Shares will be awarded -for example the application of Rule 4 and the method for any performance award (Rule 9).]

Signature:			Date:

DRAFT FREE SHARE AGREEMENT

Rights and Obligations

1 I agree that taking part in the Plan does not affect my rights, entitlements and obligations under my contract of employment, and does not give me any rights or additional rights to compensation or damages if my employment ceases.

2 I may ask the Trustees for my Free Shares and Dividend Shares at any time after the end of the Holding Period, but I may have to pay income tax and National Insurance Contributions when they are taken out of the Plan.

3 I agree to allow the Trustees to sell some or all of my shares to pay any income tax and National Insurance Contributions in respect of my shares ceasing to be subject to the Plan, unless I provide them in advance with sufficient funds to pay these amounts.

4 If there is a rights issue, I agree to allow the Trustees to sell some of the rights attached to my shares in the Plan, to exercise the rights attached to other shares held by me in the Plan.

5 I can at any time withdraw from this agreement, by writing to my employer.

6 I agree that withdrawal from this agreement will not affect the terms on which I agreed to accept any shares that have already been awarded to or bought for me under the terms of the Plan.

7 I understand that my obligations during the Holding Period will end:

(a) if I cease to be in Relevant Employment, and this may lead to forfeiture of the Free Shares;

(b) if the Company terminates the Plan in accordance with Rule 8 and I have consented to the transfer of the Shares to me.

8 I understand that my obligations under the Holding Period are subject to:

(a) the right of the Trustees to sell my shares to meet PAYE obligations;

(b) the Trustees accepting at my direction an offer for my shares in accordance with the Plan.

9 I will lose my Free Shares if I cease to be in Relevant Employment within [insert time not exceeding 3 years] from the date of the Award, unless the employment ceased for one of the following reasons:

(a) injury or disability

(b) redundancy

(d) change of control or other circumstances ending the associated company status of the employer company

(e) retirement

(f) death.

Dividend Reinvestment

10 Cash dividends will be used to buy more shares (Dividend Shares) for me.

11 Any amount not used to buy shares shall be carried forward and added to the next cash dividend to be reinvested.

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Pennon Group plc published this content on 10 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 June 2024 06:43:00 UTC.

Market Closed - London S.E. Other stock markets 11:35:13 2024-07-03 EDT			5-day change	1st Jan Change
585 ^GBX	+3.82%		-0.34%	-22.16%

06-21	Barclays cuts Ryanair and Wizz Air	AN
06-17	Goldman Sachs cuts SSP Group to 'sell'	AN

Barclays cuts Ryanair and Wizz Air	06-21	AN
Goldman Sachs cuts SSP Group to 'sell'	06-17	AN
Pennon given green light for merger by UK competition watchdog	06-14	AN
UK Watchdog Accepts Pennon's Undertakings for Sutton and East Surrey Group Deal	06-14	MT
BoA ups L&G; Deutsche Bank cuts Iomart	06-14	AN
Goldman Sachs Lowers Pennon Group PT, Keeps at Neutral	06-12	MT
Goldman Sachs raises National Grid to 'buy'	06-12	AN
Britain's Pennon Group Appoints Chair Designate	06-10	MT
Water utility Pennon picks Starling Bank chair as own chair	06-10	AN
British equities fall ahead of slew of economic data	06-10	RE
UK Stocks-Factors to watch on June 10	06-10	RE
UK water firm Pennon names David Sproul as chair designate	06-10	RE
Pennon Group plc Announces Board Changes	06-10	CI
Berenberg raises Ricardo; Goldman cuts LandSec	06-03	AN
FTSE 100 stumbles as rain dampens retail sales	05-24	AN
Ofwat delays price plans reveal until after UK election	05-24	AN
U.K. Utilities' Shares Fall on U.K. Election News, National Grid Discounted Fundraise	05-23	DJ
UK Regulator Seeks Comments on Pennon's Proposed Undertakings for Sumisho Osaka Deal	05-21	MT
Pennon reports widened loss; CMA opens consultations	05-21	AN
Transcript : Pennon Group Plc, 2024 Earnings Call, May 21, 2024	05-21
Correction: Pennon Group Swings to Loss in FY24; Revenue Up	05-21	MT
Pennon Group Swings to Loss in FY24; Revenue Up	05-21	MT
Pennon Group Plc Recommends Revised Final Dividend for the Year 2023-24	05-21	CI
Transcript : Pennon Group Plc, 2024 Earnings Call, May 21, 2024	05-21
UK's Pennon to pay 3.5 million pounds compensation for Brixham water contamination	05-21	RE

	1st Jan change	Capi.
PENNON GROUP PLC	-22.16%	2.04B
ESSENTIAL UTILITIES, INC.	-1.63%	10.14B
COMPANHIA DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO - SABESP	+7.09%	9.38B
SEVERN TRENT PLC	-6.63%	8.94B
UNITED UTILITIES GROUP PLC	-7.05%	8.29B
BEIJING CAPITAL ECO-ENVIRONMENT PROTECTION GROUP CO., LTD.	+3.35%	2.8B
CALIFORNIA WATER SERVICE GROUP	-7.79%	2.79B
AMERICAN STATES WATER COMPANY	-11.03%	2.7B
JIANGXI HONGCHENG ENVIRONMENT CO.,LTD.	+29.43%	2B
ALKHORAYEF WATER AND POWER TECHNOLOGIES COMPANY	+30.89%	1.67B

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