Final Results

United Utilities Group PLC

23 May 2013

FULL YEAR RESULTS FOR THE YEAR ENDED 31 MARCH 2013

£m Year ended (Continuing operations) 31 March 2013 31 March 2012 Underlying operating profit* 607.1 594.1 Underlying profit before 354.3 327.0taxation* Underlying profit after 266.3 240.9taxation* Underlying earnings per share*, 39.1 35.3 ** (pence) Revenue 1,636.0 1,564.9 Operating profit 604.5 591.5 Profit before taxation 304.7 280.4 Profit after taxation 282.3 311.4 Basic earnings per share** 41.4 45.7(pence) Total dividends per ordinary 34.32 32.01share (pence) *Underlying profit measures have been provided to give a more representativeview of business performance and are defined in the underlying profit measuretables

** Earnings per share and underlying earnings per share are explained in theearnings per share section

* Operational improvement delivers benefits for customers

- further customer service improvements: Ofwat's quantitative SIM score

improved by 34%

- met water and wastewater asset serviceability standards

- outperformed regulatory leakage target

* Effective delivery of capital investment programme

- accelerated the programme with investment up 16% at £787m for the year

- much improved capex delivery - internal Time: Cost: Quality index up from

c50% to c90%

- delivered all capital investment Environment Agency commitments this year

* On track to meet outperformance targets, benefiting customers and

shareholders

- reinvesting c£200m of capex outperformance for the benefit of customers and

the environment

- customers will benefit from opex outperformance in 2015-20 regulatory period

- reinvesting c£40m of financing outperformance on unfunded private sewers

costs for customers * Strong financials - underlying operating profit up £13m to £607m - RCV gearing of 60% in the middle of Ofwat's range

- final dividend of 22.88 pence per share (total for the year of 34.32 pence),

in line with policy

Steve Mogford, Chief Executive Officer, said:

"Customer satisfaction with our service continues to improve, underpinned bystrong operational and environmental performance. We are improving the qualityand reliability of our infrastructure and, across the 2010-15 period, expect toreinvest around £200 million of capital expenditure outperformance for thebenefit of our customers and the environment. "We accelerated our capital investment programme and invested £787 million inthe year, taking the total investment in our network, since the start of theregulatory period in 2010, to just over £2 billion, providing an importantcontribution to the North West economy. We are delivering a smoother and moreeffective programme and we expect to invest around a further £800 million in2013/14."

For further information on the day, please contact:

Gaynor Kenyon - Corporate Affairs Director +44 (0) 7753 622282 Darren Jameson - Head of Investor Relations +44 (0) 7733 127707 Peter Hewer / Michelle Clarke - Tulchan Communications +44 (0) 20 7353 4200 A presentation to investors and analysts starts at 9.00 am on Thursday 23 May2013, at the Auditorium, Deutsche Bank, Winchester House, 1 Great WinchesterStreet, London, EC2N 2DB. The presentation can be accessed via a live listen inconference call facility by dialling: +44 (0) 20 7162 0025, access code 932243.A recording of the call will be available for seven days following Thursday 23May 2013 on +44 (0) 20 7031 4064, access code 932243.

This results announcement and the associated presentation will be available onthe day at: http://corporate.unitedutilities.com/investors.aspx

BUSINESS REVIEW KEY OPERATIONAL PROGRESS Improving operational performance and delivering benefits for customers and theenvironment remain top priorities for United Utilities (UU). Alongside this, weare on track to outperform our regulatory contract. We have made significantprogress since the start of the 2010-15 regulatory period, as outlined below: * Significant improvements in customer service - We have significantly improvedthe customer experience over the last three years, as demonstrated throughOfwat's customer service measure the service incentive mechanism (SIM). Weachieved the best improvement in the industry on Ofwat's combined SIM score in2011/12, moving up five places to 16th position out of the 21 water companies.We have built on this and have improved further in 2012/13, although ourqualitative SIM score for the last quarter of the year saw us slip back againstthe trend achieved in the first three quarters. We ended the 2012/13 year in14th place in the sector on this measure, up two places on the previous year.This represents a mid-ranking position among the ten water and wastewatercompanies. Encouragingly, we have recently received our qualitative SIM scorefor the first quarter of 2013/14 and we achieved 10th position out of the 21water companies. Customer complaints to the Consumer Council for Water (CCW)have continued to fall with zero complaints warranting investigation by the CCWin 2012/13, the first time we have achieved this. * Strong operational performance - We performed well across a broad front, asmeasured in Ofwat's latest (2011/12) key performance indicators report. Of thefifteen assessments, UU was rated `Green' for eleven and `Amber' on four, withno areas assessed as `Red' on the traffic light reporting matrix. This balanceof ratings is above the average performance level, in respect of the ten waterand sewerage companies. This performance has helped provide benefits forcustomers, for example in terms of better customer service and very high levelsof reliability and availability of water supply and wastewater services,alongside a range of environmental benefits. * Effective capital delivery drives customer and environmental benefits - Wecontinue to drive more effective and efficient delivery of our capitalprogramme. This is reflected in a significant improvement in our Time: Cost:Quality index (TCQi) score from around 50% in 2010/11 to approximately 90% in2012/13, meeting our target two years ahead of schedule. This has helped usaccelerate our capital investment programme and has helped us deliver all ofour capital investment Environment Agency commitments this year. We have metour water and wastewater asset serviceability standards and have confidencethat our performance in respect of meeting our 2010-15 regulatory commitmentswill be much improved, compared with the 2005-10 period. Our aim is to deliverour commitments on time and to specification in order to avoid or minimise anyrevenue penalties in the 2015-20 period. We have now invested just over £2billion across the first three years of this regulatory period, as we havesought to deliver a smoother investment profile to support efficient deliveryof outputs and reduce risk.

* Outperformed regulatory leakage target - We have met or outperformed ourregulatory leakage target for the seventh consecutive year. This reflectsstrong year round operational focus, coupled with the benefits from ourreinvestment initiatives, helping to support a robust water supply and demandposition in our region and provide high levels of reliability for ourcustomers.

* Regulatory outperformance on track - We have set clear targets for the2010-15 period and remain on track or ahead of schedule in delivering thesetargets. We expect to reinvest around £200 million of capex outperformance,over 2010-15, for the benefit of our customers and the environment.

* Corporate responsibility - We have held a `World Class' rating in the DowJones Sustainability Index for five consecutive years, attaining our highestever score in the most recent assessment. We also have the highest `PlatinumBig Tick' ranking in Business in the Community's Corporate ResponsibilityIndex. In addition, we hold membership of the FTSE 350 Carbon DisclosureLeadership Index and are the top UK utility company in this index by somedistance. We are one of only four FTSE 100 companies to hold all three awards. * Extending our presence in the retail water market for business customers - Wehave been building our capability to help ensure we are in a strong position asthe competitive business retail market evolves and are very active in thisexpanding market. We appointed Sue Amies-King from Aviva, in the newly createdrole of Retail Director in June 2012, and subsequently recruited Tony McHardyfrom Business Stream as Sales Director. We secured a Scottish water supplylicence in 2012 and have won several business customers in Scotland, with asignificant pipeline of opportunities. We are also delivering a range ofvalue-added services.

FINANCIAL OVERVIEW

The group has delivered another good set of financial results for the yearended 31 March 2013. Revenue was up by £71 million to £1,636 million,principally as a result of the impact of the regulated price increase for 2012/13 of 5.8% nominal (0.6% real price increase plus 5.2% RPI inflation) partiallyoffset by reduced volumes and the ongoing impact of customers switching tometers.

Underlying operating profit increased by £13 million to £607 million, despitean expected increase in depreciation, as we kept cost increases below priceinflation.

Total regulatory capital investment for the year, including £161 million ofinfrastructure renewals expenditure, was £787 million, representing an increaseof 16% compared with last year, reflecting continued progress on the capitalinvestment programme.

Underlying profit before taxation was up 8%, at £354 million. This was a resultof higher underlying operating profit, coupled with a lower underlying netfinance expense mainly due to lower RPI inflation.

Underlying profit after taxation was 11% higher than last year, at £266million, reflecting the reduction in the mainstream UK corporation taxationrate. Reported profit after taxation benefited from a £53 million deferredtaxation credit (£105 million credit in 2011/12), which follows the UKGovernment's changes to reduce the mainstream corporation taxation rate.

The group has a robust capital structure and gearing (measured as group netdebt to regulatory capital value) as at 31 March 2013 was 60%, in the middle ofOfwat's assumed range of 55% to 65%, supporting a solid investment grade creditrating. United Utilities Water PLC (UUW) has a long-term credit rating of A3from Moody's Investors Service with a stable outlook. The group benefits from headroom to cover its projected financing needs into2015, following the recent raising of a £100 million index-linked loan at ourlowest ever annual interest rate of 0.5% real. This provides good flexibilityin terms of when and how further debt finance is raised to help fund theregulated capital investment programme. Reflecting this robust financingposition, UU has completed early all previously agreed pension deficit repairpayments covering the 2010-15 regulatory period. In line with its policy, the board has proposed a final dividend of 22.88 penceper ordinary share, an increase of 7.2%, taking the total dividend for 2012/13to 34.32 pence. OUTLOOK Our sustained focus on operational performance, combined with continuedsubstantial investment in our assets, is delivering benefits for our customersand the environment. We have improved further on Ofwat's service incentivemechanism and believe there is plenty of scope to deliver more for ourcustomers. We have made good progress on our capital expenditure programme andour disciplined investment approach provides us with confidence that we willdeliver a good performance in respect of meeting our regulatory commitmentsacross the 2010-15 period. We remain on track or ahead of schedule in meetingour five-year regulatory outperformance targets. We intend to continue with ourdividend policy of targeting 2% per annum growth above the rate of RPIinflation through to at least 2015, underpinned by a robust capital structure.We will continue to positively engage with Government and regulators to supportthe progressive evolution of the water industry and are actively involving ourcustomers to help shape our business plan for the forthcoming price review.

OPERATIONAL PERFORMANCE

Supporting our drive to improve operational performance, last year we put inplace a revised management structure with a strong focus on accountability anddelivery. We moved from our previous functional structure, to an organisationalstructure where managers are responsible for end-to-end delivery of capitalprojects and operational performance within their respective regions, providinga more integrated approach. We have refined our organisational structurefurther in preparation for a more competitive environment and to align with theseparated price controls that will apply at the 2014 price review. With effectfrom April 2013, we have revised our structure and activities around threebusiness areas: Wholesale; Domestic Retail; and Business Retail. We continue to make good progress towards our objective of becoming a leadingNorth West service provider and one of the best UK water and wastewatercompanies. We are pleased to have been consistently ranked third out of tenleading organisations in the North West, through an independent brand trackersurvey which is undertaken quarterly. We are behind Marks & Spencer and JohnLewis, but ahead of seven other major organisations covering utilities,telecoms, media and banking services. We have made further operationalimprovements during the year and have improved our performance relative to ourwater sector peers. United Utilities aims to deliver long-term shareholder value by providing:

* The best service to customers

* At the lowest sustainable cost

* In a responsible manner Best service to customers We believe in delivering a fair deal for our customers and have continued toinvest in our people, assets, systems and processes to improve the service ourcustomers can expect of us. In addition, we expect to reinvest around £200million of capex outperformance over the 2010-15 period for the benefit of ourcustomers and the environment. Robust water supply and reliability - We have implemented active pressuremanagement in our water network to reduce bursts and leakage, helping us tomeet or outperform our leakage target. Should we have a burst, the additionalinvestment completed during the year in strategic mains refurbishment andconnectivity has improved the capability of our water network to maintainsupply. Whilst the North West did not experience the hose-pipe bans seenelsewhere in the country last spring, rainfall across our region was much lowerthan expected. We were able to benefit from our investment in an integratedregional water network to keep customers supplied throughout the dry period.Overall, our customers continue to benefit from our robust water supply anddemand balance and high levels of water supply reliability. We have againachieved a high level of water quality, with mean zonal compliance continuingto be over 99.9%. Investing to mitigate sewer flooding - The latter half of 2012 wascharacterised by a large number of exceptionally high rainfall events and thisproved to be a testing time for our wastewater assets. We were disappointed tomiss our Ofwat target in respect of the number of sewer flooding incidents, buthave continued to invest heavily in schemes designed to mitigate the risk offlooding of our customers' homes. Our wastewater network will continue tobenefit from significant investment going forward as we adapt to weatherpatterns likely to result from climate change. Improving customer service performance - We have continued to develop oursystems and processes to deliver the experience our customers seek when theyneed to contact us, including multi-channel contact centre technology. This hashelped us deliver further improvements in our performance on Ofwat's serviceincentive mechanism (SIM), reflecting our continuing strong focus on dealingwith customer enquiries. The number of customer complaints made to the ConsumerCouncil for Water (CCW) in 2012/13 has reduced by a further 11%, compared with2011/12. We are pleased to report that the total number of escalated complaintsassessed by the CCW was zero in the 2012/13 financial year, which is the firsttime we have achieved this. This has helped us improve our SIM performancefurther, as detailed in the KPIs section below, although our qualitative SIMscore for the last quarter of 2012/13 saw us slip back against the trendachieved in the first three quarters. We ended the year in 14th place in thesector on this measure, up two places on the previous year. Encouragingly, wehave recently received our qualitative SIM score for the first quarter of 2013/14 and we achieved 10th position out of the 21 water companies. Asset serviceability - We have a range of actions to help support theserviceability of our assets. We are improving the robustness of our watertreatment processes, refurbishing service reservoir assets, continuing with ourcomprehensive mains cleaning programme and are optimising water treatment toreduce discoloured water events. To help reduce sewer flooding, the actionsinclude incident based targeting to focus on areas more likely to experienceflooding, effective intervention in cleaning and rehabilitation orrefurbishment of sewers and advising customers about items not suitable forsewer disposal. Our programme also includes defect identification through CCTVsewer surveys, along with continual improvement of wastewater reporting systemsto enable real time operational information to be made visible at allmanagement levels and promote early intervention. Our comprehensive range ofactions has helped us meet our water and wastewater serviceability standards,as detailed in the KPIs section below. Retail competition for business customers - We have been building ourcapability to help ensure we are in a strong position to compete as thebusiness market for retail customers evolves. We secured a water supply licencein 2012 to compete in Scotland and have built a team with a deep retailbackground in the utility and commercial sectors. Although the financialbenefits from retail activities are relatively small at this stage, the marketwill evolve and business customers are looking for services over and abovemeter reading and billing. We are delivering a range of value-added services,such as on-site engineering solutions and water efficiency advice. We arepleased to have extended our presence and have now won several businesscustomers outside of our region. We also have a significant pipeline ofopportunities, a number of which are multi-site customers.

Improving customer service remains a significant area of continued managementfocus and we see plenty of opportunity to deliver further benefits for ourcustomers.

Key performance indicators:

* Serviceability - Long-term stewardship of assets is critical and Ofwatmeasures this through its serviceability assessment (Ofwat definesserviceability as the capability of a system of assets to deliver a referencelevel of service to customers and to the environment now and in the future).Our range of actions has helped us return our wastewater infrastructure assetsto a `stable' rating, from a `marginal' rating, and we are now meeting ourserviceability standards. We are currently assessed as `improving' for ourwastewater non-infrastructure assets and `stable' for our water infrastructure,water non-infrastructure and wastewater infrastructure assets. The aim is tocontinue to hold at least a `stable' rating for all four asset classes, whichis aligned with Ofwat's target. * Service incentive mechanism (SIM) - UU made significant progress on Ofwat'scombined SIM assessment for 2011/12, moving up five places to 16th of the 21water companies, compared with 2010/11. This represented the largest overallSIM score improvement in the industry. Further progress has been made in 2012/13, with a quantitative score of 179 points, representing a further 34%improvement compared with 2011/12. On the qualitative measure, UU has improvedits 2012/13 average score by 0.25 points to 4.43 points, moving up two furtherplaces to 14th position, which represents 6th place among the ten water andsewerage companies. Our continued progress is encouraging, as we aim to move tothe first quartile in the medium-term.

Lowest sustainable cost

We are continuing to implement a wide range of initiatives to help optimise ourperformance and deliver sustainable efficiencies.

Materials - Our asset optimisation programme continues to provide the benefitsof increased and more effective use of operational site management to optimisepower and chemical use and the development of more combined heat and powerassets to generate renewable energy. Proactive network management - We are implementing a more proactive approach toasset and network management, with the aim of improving our modelling andforecasting to enable us to address more asset and network problems before theyaffect customers, thereby reducing the level of reactive work and improvingefficiency. Energy costs - We have substantially locked in the cost of our powerrequirements through to 2014/15, via hedging, securing outperformance. Althoughpower unit costs for 2013-15 have been secured at higher levels than those for2011/12, this still delivers additional outperformance versus the regulatorycontract. Debt collection - We are continuing to enhance our proactive approach to debtcollection and are implementing a detailed action plan. The North West faces aparticularly tough economic environment, with unemployment having increased ata faster rate than any other UK region in 2011/12, particularly in the secondhalf, resulting in an adverse impact on customers' ability to pay this year.Although North West unemployment improved in 2012/13, its remains higher thanthe position at March 2011 and is still above the national average. Werecognise the financial difficulties facing many of our customers and provide arange of options to help our customers who are struggling to pay their bills,including our charitable trust, and we have helped many customers back ontomanageable payment plans. Despite the tough economic climate, our range ofactions have helped us to again deliver a good performance and we havesustained bad debts at 2.2% of regulated revenue for 2012/13, consistent withlast year. Pensions - UU placed its pension provision on a more sustainable footing in2010 and has subsequently taken additional steps to de-risk the pension schemefurther, with the group now benefiting from a small pension surplus. Furtherdetails on the group's pension provision are provided in the pensions section. Capital delivery - The business is strongly focused on delivering itscommitments efficiently and on time and has a robust commercial capitaldelivery framework in place for the 2010-15 period. We have improved ourinternal Time: Cost: Quality index (TCQi) score from around 50% in 2010/11 toapproximately 90% in 2012/13. This means we have met our target two years aheadof schedule and we are firmly focused on sustaining this substantialimprovement. This helped us accelerate our capital programme to help optimisecapital delivery and reduce risk towards the end of the regulatory period.Regulatory capital investment in 2012/13, including £161 million ofinfrastructure renewals expenditure, was £787 million, an increase of 16%compared with last year. This increase of over £100 million means that ourcumulative investment across the first three years of the 2010-15 regulatoryperiod is now just over £2 billion, reflecting a smoother and more effectiveinvestment profile than the previous five-year cycle. We remain on track todeliver the five-year programme within the regulatory allowance of around £3.5billion and we are reinvesting any capex outperformance to deliver furthercustomer benefits. We expect to deliver around £800 million of capitalinvestment in 2013/14. Regulatory commitments - Delivering our regulatory commitments is key, not onlyin terms of service to customers and the environmental impact, but also inrespect of shareholder value. UU received a shortfalling revenue penalty ofover £80 million at the last price review in 2009. Shortfalling is effectivelywhere a company fails to deliver agreed requirements on time or tospecification. We are strongly focused on meeting our regulatory commitments,as we aim to avoid, or at least minimise, any shortfalling revenue penalties atthe 2014 price review. We are making good progress and we have delivered all ofour capital investment Environment Agency commitments this year. Thisrepresents a much improved performance, so far, compared with the 2005-10regulatory period, and we will continue to treat this as a priority area. Private sewers - The transfer of private sewers around 18 months ago has gonewell and is now embedded within our `business as usual' activities. The volumeof work and the level of expenditure continues to be a little below ourexpectations. The mix of work continues to relate more to enhancement capexthan opex, compared with what we initially expected at the onset. Our operatingmodel has evolved to reflect the revised work scope and volumes. In addition toroutine maintenance activity, we are enhancing the quality of the assets whereappropriate. This will bring the private sewer infrastructure more in line withour asset standards and will reduce the risk of future problems for ourcustomers. In 2012/13, we spent £8 million on opex, £11 million oninfrastructure renewals expenditure and £14 million in relation to enhancementcapex. Although spend rates remain a little lower than we anticipated, we arestill only 18 months into the transfer so we are not changing our 2011-15 totalcost estimate of £160 million (£40 million opex, £60 million infrastructurerenewals expenditure and £60 million enhancement capex) at this stage. Thislower rate of spend and the mix of work continues to be positive for both ourcustomers and our investors. Key performance indicators: * Financing outperformance - UU has secured over £300 million of financingoutperformance across the 2010-15 period, when compared with Ofwat's allowedcost of debt of 3.6% real, based on an average RPI inflation rate of 2.5% perannum. We expect to reinvest around £40 million of our financing outperformancein unfunded private sewers costs. * Operating expenditure outperformance - The business is targeting totaloperating expenditure outperformance over the 2010-15 period of at least £50million, or approximately 2%, compared with the regulatory allowance. This isin addition to the base operating expenditure efficiency targets set by Ofwat,which equate to a total of approximately £150 million over the five years. Wehave now delivered cumulative operating expenditure outperformance of around £50 million in the first three years of the regulatory period and are ahead ofschedule. * Capital expenditure outperformance - UU is continuing to deliver significantefficiencies in the area of capital expenditure and expects to meet Ofwat'sallowance after adjusting, through the regulatory methodology, for the impactof lower construction output prices. We expect to reinvest around £200 millionof capital expenditure outperformance for the benefit of our customers and theenvironment. Responsible manner

Acting responsibly is fundamental to the manner in which we undertake ourbusiness and the group has for many years included corporate responsibilityfactors as a strategic decision in its decision making.

Leakage - We were pleased to beat our regulatory leakage target in 2012/13.This reflects our year round operational focus and the implementation of rangeof initiatives, such as active pressure management. Our leakage performance,alongside the network resilience improvements we are making, are helping us tomaintain a robust water supply and demand balance and deliver high levels ofreliability for our customers. Improving rivers and bathing water quality - We have a range of capitalprojects which are delivering significant customer and environmental benefits.We are undertaking a £100 million+ project in Preston, which is designed toimprove river and bathing quality. The project involves building a 3.5kilometre storm water storage tunnel and the construction of shafts to divertstorm water flows, which will be retained in the new storage tunnel. It willreduce the number of spills to the River Ribble from combined sewers and shoulddeliver significant improvements to the Flyde Coast bathing waters and theRibble Estuary. This is one our largest projects in the 2010-15 period and isnow nearing completion. Our Liverpool wastewater treatment works expansionproject, at around £200 million, is our largest capital programme in thisregulatory cycle. The project will enhance the capacity of the works so it cantreat up to 11,000 litres of wastewater per second. The project is progressingwell and the higher standards of treatment will continue the rejuvenation ofthe River Mersey and improve bathing waters across the river on the Wirral. Italso provides a significant contribution to the local economy. The extendedworks are expected to come online in early 2016. Reducing our carbon footprint - We are committed to reducing our carbonfootprint and increasing our generation of renewable energy. Our carbonfootprint for 2012/13 was 524,264 tonnes of carbon dioxide equivalent, a minorincrease of 0.4% compared with last year. This was as a result of an increasein the amount of electricity purchased as we undertook additional pumpingactivity. Not only did we experience one of the wettest years on record,resulting in significantly more wastewater in our sewers and treatment works,the year began and ended with a prolonged dry spell, so we needed to pumpadditional volumes of water around our integrated network. We were pleased toretain the Certified Emissions Measurement and Reduction Scheme certificationfor our carbon accounting methodology. We remain on track to meet our target ofa 21% reduction in carbon emissions by 2015 (measured from a 2005/06 baseline).UU has consistently generated around 100 GWh of renewable electricity annuallyfor the past four years, principally from sludge processing. By 2014, we expectto have finished commissioning an innovative £100 million+ recycling and energyplant at one our largest wastewater treatment works at Davyhulme, nearManchester. By treating sludge that is left over at the end of the wastewatertreatment process, we can generate enough electricity from biogas to power theDavyhulme site. Sludge is also converted into a valuable agriculturalfertiliser. Environmental performance - This is a high priority for UU and we were pleasedto report the lowest number of major pollution incidents of the ten water andwastewater companies, per kilometre of pipe, for 2011/12 (the latest availableassessment). Our operational and environmental focus is delivering results andwe were pleased to achieve our best performance for many years in theEnvironment Agency's performance metrics, where we have been rated as an `aboveaverage performer', as detailed in the KPIs section below. Employees - A committed, capable and motivated workforce is central todelivering our vision and we remain strongly focused on high levels of employeedevelopment and engagement. We continue to be successful in attracting andretaining people and we were pleased to also extend our apprentice programmeduring the last year. We currently employ over 80 apprentices and plan torecruit up to a further 40 apprentices each year through to 2015. Alongsidethis, we are continuing to expand our graduate recruitment scheme, with plansto add more than 20 graduates in 2013/14. This is in addition to over 35graduates we currently employ. As part of our health and safety improvementprogramme, we implemented a number of initiatives throughout the year andlaunched a set of behavioural standards at our main office sites, called the`Safety Six'. Health and safety will continue to be a significant area of focusfor the company, as we strive for continuous improvement. Communities - We continue to support community partnerships, which help inmeeting our company objectives. For example, our partnership with UTV Mediatakes an online programme into schools to enable them to create a radio advert(part of the national curriculum) linked to one of our key campaigns, such aswater efficiency or reservoir safety. With an emphasis on promoting the advertsthrough social media, this provides an innovative way for our key messages toreach our customers. Education is an integral part of our community approachand our new outreach education partnership started this year and has alreadyreached 139 schools and 4,754 children. Where we cause disruption as part ofour major capital works, we invite local community groups to apply for smallscale grants to support their work. Last year we contributed to 116 groups in10 locations across the North West. We also contributed approximately £2million supporting local communities providing debt advisory services andundertook over 26,000 hours of employee volunteering. Leading credentials - Our environmental and sustainability performance across abroad front has received external recognition. UU continues to be rated `WorldClass' in the Dow Jones Sustainability Index and has retained the highestranking, `Platinum Big Tick', in Business in the Community's CorporateResponsibility Index. In addition, UU holds membership of the FTSE 350 CarbonDisclosure Leadership Index. UU is one of only four FTSE 100 companies to holdall three awards. Key performance indicators: * Leakage - UU met its economic level of leakage rolling target for the seventhconsecutive year in 2012/13, with a performance of 457 megalitres per dayversus the regulatory target of 464 megalitres per day. The aim is to meet ourregulatory leakage target each year. * Environmental performance - On the Environment Agency's latest assessment,which covers a broad range of operational metrics, UU has been rated as an`above average performer'. UU has three areas highlighted as `Green', four as`Amber', and, importantly, no areas highlighted as `Red' on the traffic lightreporting matrix. This would indicate 3rd position among the ten water andsewerage companies. Although the EA has revised its performance measure, UU wasin 7th position on the EA's composite assessment for the previous year, so thisrepresents good progress against the medium-term goal of being a first quartilecompany on a consistent basis. * Corporate responsibility - UU has a strong focus on corporate responsibilityand is the only UK water company to have a `World Class' rating as measured bythe Dow Jones Sustainability Index. The group aims to retain this `World Class'rating each year.

POLITICAL AND REGULATORY DEVELOPMENTS

UU is actively involved in political and regulatory developments that relate tothe UK water sector and has a proactive programme to engage with all keystakeholders. The retention of investor confidence and customer affordabilityremain key areas of importance.

Water Bill

We have been actively engaging with the UK Government on its reform agenda. TheUK Government published a draft Water Bill in July 2012 and we providedevidence to the Efra Select Committee, as we strive to achieve the optimaloutcome for all of our stakeholders. The reform agenda for our sector is alsoproviding new opportunities for us. In addition to the adoption of privatesewers and the expanding retail water market for business customers, we arecurrently exploring opportunities in areas such as water and sludge tradingwith our regulators. A Water Bill was announced in the Queen's Speech on 8 May2013 and we now await the UK Government's publication of the Bill withinterest.

2014 price review

We continue to play an active role and engage positively in regulatory reform.Following a period of constructive dialogue with Ofwat, we were pleased toaccept the revised licence modification proposals which were published by theregulator on 21 December 2012. These revised licence proposals focus on thechanges required to facilitate the 2014 price review and we are now workingclosely with the regulator to help shape the forthcoming price review. Ofwatpublished its 2014 price review methodology consultation in January 2013 and wesubmitted our response to Ofwat in March. We await Ofwat's methodology documentlater in the year. We are actively engaging our customers and otherstakeholders to help us formulate our business plan for the 2015-20 period. Weexpect to submit this plan to Ofwat later this year.

FINANCIAL PERFORMANCE

Revenue

UU has delivered a good set of financial results for the year ended 31 March2013. Revenue increased by £71 million to £1,636 million, principallyreflecting a 5.8% nominal (0.6% real price increase plus 5.2% RPI inflation)regulated price increase, partially offset by reduced volumes and the ongoingimpact of customers switching to meters. The impact of meter switching was inline with our expectations while commercial and domestic volumes continued tobe impacted by the persisting tough economic climate. We would expect torecover a substantial element of any regulated revenue shortfall through theregulatory methodology. Operating profit Underlying operating profit increased by 2% to £607 million, primarily as aresult of an increase in revenue, largely offset by an expected increase indepreciation alongside higher infrastructure renewals expenditure, power andother operating costs. Reported operating profit increased by 2% to £605million.

Investment income and finance expense

The underlying net finance expense of £253 million was £14 million lower thanlast year, principally reflecting lower RPI inflation in respect of the group'sindex-linked debt with an eight month lag. The indexation of the principal onindex-linked debt amounted to a net charge in the income statement of £86million, compared with a net charge of £100 million last year. The group hadapproximately £2.9 billion of index-linked debt as at 31 March 2013. The lowerRPI indexation charge contributed to the group's average underlying interestrate of 4.9% being lower than the rate in 2011/12 of 5.5%. Reported investment income and finance expense of £300 million was £11 millionlower than in 2011/12, principally reflecting a reduction in the underlying netfinance expense. The £42 million net fair value loss in the year is largely dueto losses on the regulatory swap portfolio, resulting from a further decreasein sterling interest rates during the period. The group uses these swaps to fixinterest rates on a substantial proportion of its debt to better match thefinancing cash flows allowed by the regulator at each price review. The groupfixed the majority of its non index-linked debt for the 2010-15 financialperiod, providing a net effective nominal interest rate of approximately 5%.

Profit before taxation

Underlying profit before taxation was £354 million, £27 million higher thanlast year due to the £13 million increase in underlying operating profit andthe £14 million reduction in underlying finance expense. This underlyingmeasure adjusts for the impact of one-off items, principally from restructuringand reorganisation within the business, and fair value movements in respect ofdebt and derivative instruments. Reported profit before taxation increased by £24 million to £305 million. Taxation The current taxation charge was £74 million in the year and the currenttaxation effective rate was 24%. This compares with 16% in the previous yearwhich included a £16 million credit following agreement with the UK taxationauthorities of prior years' taxation matters. The group has recognised a net deferred taxation credit of £52 million for theyear, which primarily relates to a £53 million credit in respect of the changesubstantively enacted by the UK Government on 3 July 2012 to reduce themainstream rate of corporation taxation from 24% to 23% with effect from 1April 2013. A net deferred taxation credit of £77 million was recognised inthe previous year, which included a £105 million credit reflecting a 2% stagedreduction in the rate of corporation taxation. An overall taxation charge of £22 million has been recognised for the yearended 31 March 2013. Excluding the deferred taxation impact relating to thefuture reduction in the corporation taxation rate, the total taxation chargewould have been £75 million or 25% compared with a £74 million charge or 26% inthe previous year. This reduction is principally due to the decrease in themainstream rate of corporation taxation from 26% for 2011/12 to 24% for 2012/13. The taxation benefit of £16 million relating to pension contributions fordeficit funding has been recorded in the statement of comprehensive income,rather than the income statement, as the actuarial movements giving rise to thedeficit were previously recorded there. Deferred taxation movements of £26million are also included in the statement of comprehensive income. Thecomparative prior year figures were a current taxation benefit of £33 millionand a £29 million deferred taxation charge. The group made cash taxation payments during the year of £55 million. This washigher than the group's net taxation payment of £5 million in 2011/12 primarilyreflecting a £35 million cash taxation inflow last year relating to prioryears' taxation matters and also reflecting the higher levels of pensioncontributions made last year.

Profit after taxation

Underlying profit after taxation of £266 million was £25 million higher thanthe previous year, principally reflecting the increase in underlying profitbefore taxation. Reported profit after taxation was £282 million, compared with£311 million last year, as the increase in underlying profit was more thanoffset by a decrease in deferred taxation credits associated with the enactmentof the reductions in corporation taxation rates between the two years.

Earnings per share

Underlying earnings per share increased from 35.3 pence to 39.1 pence. Thisunderlying measure is derived from underlying profit after taxation. Thisincludes the adjustments for the deferred taxation credits in both 2012/13 and2011/12, associated with the reductions in the corporation taxation rate. Basicearnings per share decreased from 45.7 pence to 41.4 pence, mainly due to thehigher deferred taxation credit in 2011/12.

Dividend per share

The board has proposed a final dividend of 22.88 pence per ordinary share inrespect of the year ended 31 March 2013. Taken together with the interimdividend of 11.44 pence per ordinary share, paid in February, this produces atotal dividend per ordinary share for 2012/13 of 34.32 pence. This is anincrease of 7.2%, compared with the dividend relating to the previous year, inline with group's dividend policy of targeting a growth rate of RPI+2% perannum through to at least 2015. The inflationary increase of 5.2% is based onthe RPI element included within the allowed regulated price increase for the2012/13 financial year (i.e. the movement in RPI between November 2010 andNovember 2011). The final dividend is expected to be paid on 2 August 2013 to shareholders onthe register at the close of business on 21 June 2013. The ex-dividend date is19 June 2013. Cash flow Net cash generated from continuing operating activities for year ended 31 March2013 was £631 million, compared with £560 million last year. This mainlyreflected a reduction in the total pension contribution payments between thetwo years. The group's net capital expenditure was £642 million, principally inthe regulated water and wastewater investment programmes. This excludesinfrastructure renewals expenditure which is treated as an operating cost underInternational Financial Reporting Standards. Net debt including derivatives at 31 March 2013 was £5,451 million, comparedwith £5,076 million at 31 March 2012. This expected increase reflectsexpenditure on the regulatory capital expenditure programmes and payments ofdividends, interest and taxation, alongside the accelerated pension deficitrepair payments and an increase in the principal of our index-linked debt,partly offset by operating cash flows.

Debt financing and interest rate management

Gearing (measured as group net debt divided by UUW's regulatory capital valueadjusted for actual capital expenditure) marginally increased to 60% at 31March 2013, compared with 59% at 31 March 2012, and is in the middle of Ofwat's55% to 65% assumed gearing range. The group now has a small pension surplus of£15 million, on an IFRS basis, compared with a deficit of £92 million as at 31March 2012. At 31 March 2013, UUW had long-term credit ratings of A3/BBB+ and UnitedUtilities PLC had long-term credit ratings of Baa1/BBB- from Moody's InvestorsService and Standard & Poor's Ratings Services respectively. The split ratingreflects differing methodologies used by the credit rating agencies. InDecember 2012, Standard & Poor's put both the group's ratings on positiveoutlook, citing improving financial metrics and operational performance. Cash and short-term deposits at 31 March 2013 amounted to £202 million. InMarch 2013, UUW arranged a new £100 million, 10-year index-linked loan with anexisting relationship bank. The group also renewed £150 million of existingbank facilities in the period. The group has headroom to cover its projectedfinancing needs into 2015.

The group has access to the international debt capital markets through its €7billion euro medium-term note programme which provides for the periodicissuance by United Utilities PLC and UUW of debt instruments on terms andconditions determined at the time the instruments are issued. The programmedoes not represent a funding commitment, with funding dependent on thesuccessful issue of the debt securities.

Long-term borrowings are structured or hedged to match assets and earnings,which are largely in sterling, indexed to UK retail price inflation and subjectto regulatory price reviews every five years.

Long-term sterling inflation index-linked debt is the group's preferred form offunding as this provides a natural hedge to assets and earnings. At 31 March2013, approximately 52% of the group's net debt was in index-linked form,representing around 31% of UUW's regulatory capital value, with an average realinterest rate of 1.7%. The long-term nature of this funding also provides agood match to the company's long-life infrastructure assets and is a keycontributor to the group's average term debt maturity profile which isapproximately 25 years. Where nominal debt is raised in a currency other than sterling and/or with afixed interest rate, to manage exposure to long-term interest rates, the debtis generally swapped to create a floating rate sterling liability for the termof the liability. To manage exposure to medium-term interest rates, the groupfixed interest costs for a substantial proportion of the group's debt for theduration of the 2010-15 regulatory period at around the time of the pricereview. Following the 2009 price review, the group reassessed its interest rate hedgingpolicy with a view to further reducing regulatory risk. To help address theuncertainty as to how Ofwat may approach the setting of the cost of debtallowance at the next price review in 2014, UU revised its interest ratemanagement strategy to extend its fixed interest rate hedge out to a ten-yearmaturity on a reducing balance basis. The intention is that the effectiveinterest rate, on the group's nominal debt, in any given year will, over time,be a ten-year rolling average interest rate. UU believes that this revisedinterest rate hedging policy, which provides for a longer fixing of interestrates, will put the company in a more flexible position to respond to whateverapproach Ofwat adopts to the industry cost of debt in future.

Liquidity

Short-term liquidity requirements are met from the group's normal operatingcash flow and its short-term bank deposits and supported by committed butundrawn credit facilities. In addition to its €7 billion euro medium-term noteprogramme, the group has a €2 billion euro-commercial paper programme, both ofwhich do not represent funding commitments. In line with the board's treasury policy, UU aims to maintain a robust headroomposition. Available headroom at 31 March 2013 was £336 million based on cash,short-term deposits and medium-term committed bank facilities, net ofshort-term debt. This headroom is sufficient to cover the group's projectedfinancing needs into 2015. UU believes that it operates a prudent approach to managing bankingcounterparty risk. Counterparty risk, in relation to both cash deposits andderivatives, is controlled through the use of counterparty credit limits. UU'scash is held in the form of short-term (generally no longer than three months)money market deposits with either prime commercial banks or with triple A ratedmoney market funds. UU operates a bilateral, rather than a syndicated, approach to its corerelationship banking facilities. This approach spreads maturities more evenlyover a longer time period, thereby reducing refinancing risk and providing thebenefit of several renewal points rather than a large single refinancingrequirement.

Pensions

As at 31 March 2013, the group had an IAS 19 net retirement benefit, orpension, surplus of £15 million, compared with a net pension deficit of £92million at 31 March 2012. This £107 million positive movement principallyreflects payments of £65 million in respect of accelerated, previously agreed,deficit repair contributions, payments under the inflation funding mechanismand investment returns exceeding expectation. Following the accelerated deficitrepair contributions paid in the first half of 2012/13, the group completedearly all scheduled deficit repair payments through to March 2015. The group has sought to adopt a more sustainable approach to the delivery ofpension provision and prior to the start of the 2010-15 regulatory periodamended the terms of its defined benefit pension schemes. UU stated previouslythat it would continue to evaluate its pensions investment strategy to de-riskfurther its pension provision and introduced an inflation funding mechanism,which facilitates a move to a lower risk investment strategy. This allowed UUto reduce the allocation of its pension assets to approximately 25% in equitiesand other high risk assets, down from 48% at 31 March 2010. In addition, UU hasadopted the use of more prudent longevity assumptions. Over the last twofinancial years, the group also progressively increased its interest rate hedgeand this has now been extended to around 90% of the pension scheme liabilities.Although any additional payments under the inflation funding mechanism wouldreduce financing outperformance, there would be a positive benefit to thepensions surplus or deficit position. From an accounting perspective, IAS 19 treats the inflation funding mechanismas a schedule of contributions rather than a pension scheme asset. This meansthat the liabilities position can change to reflect a change in marketexpectations of long-term inflation, without a commensurate movement in assets.This accounting treatment means that there is likely to be a degree ofvolatility in future IAS 19 pension valuations. The last actuarial valuations of the United Utilities Pension Scheme and theUnited Utilities PLC Group of the Electricity Supply Pension Scheme werecarried out as at 31 March 2010. The valuations are performed on a triennialbasis, and therefore discussions will take place over the coming months betweenthe group and the trustees regarding the basis of the 31 March 2013valuations. The actuarial valuations are based on scheme specific factorswhich may result in a different assessment of the pension schemes' position tothe IAS19 numbers reported in the group's financial statements.

Further detail is provided in note 8 ("Retirement benefit surplus/(obligations)") of these condensed consolidated financial statements.

BOARD CHANGES

Paul Heiden will stand down at the forthcoming AGM, on 26 July 2013, after overseven years as a non-executive director. Brian May, who was appointed as anon-executive director on 1 September 2012, will replace Paul as chair of boththe audit and risk committee and the treasury committee.

Underlying profit

In considering the underlying results for the period, the directors haveadjusted for the items outlined in the table below to provide a morerepresentative view of business performance. Reported operating profit andprofit before taxation from continuing operations are reconciled to underlyingoperating profit, underlying profit before taxation and underlying profit aftertaxation (non-GAAP measures) as follows: Continuing operations Year ended Year endedOperating profit 31 March 2013 31 March 2012 £m £m Operating profit per published results 604.5 591.5 One-off items* 2.6 2.6 ----- ----- Underlying operating profit 607.1 594.1 ----- ----- Net finance expense £m £mFinance expense (302.1) (315.5) Investment income 2.3 4.4 ----- ----- Net finance expense per published results (299.8)

(311.1)

Net fair value losses on debt and derivative 41.5 43.2instruments Adjustment for interest on swaps and debt under 8.3 7.2fair value option Adjustment for net pension interest expense 11.5

3.3

Adjustment for capitalised borrowing costs (14.3) (9.7) ----- ----- Underlying net finance expense (252.8) (267.1) ----- ----- Profit before taxation £m £mProfit before taxation per published results 304.7 280.4 One-off items* 2.6 2.6 Net fair value losses on debt and derivative 41.5 43.2instruments Adjustment for interest on swaps and debt under 8.3 7.2fair value option Adjustment for net pension interest expense 11.5

3.3

Adjustment for capitalised borrowing costs (14.3) (9.7) ----- ----- Underlying profit before taxation 354.3 327.0 ----- ----- Profit after taxation £m £mUnderlying profit before taxation 354.3 327.0 Reported taxation (22.4) 31.0 Deferred taxation credit - change in taxation (53.0) (104.6)rate Agreement of prior years' UK taxation matters (0.7)

(0.4)

Taxation in respect of adjustments to (11.9)

(12.1)

underlying profit before taxation ----- ----- Underlying profit after taxation 266.3 240.9 ----- -----

* Principally relates to restructuring costs within the business

Underlying operating profit reconciliation

The table below provides a reconciliation between group underlying operatingprofit and United Utilities Water PLC historical cost regulatory underlyingoperating profit (non-GAAP measures) as follows:

Continuing operations Year ended Year endedUnderlying operating profit 31 March 2013 31 March 2012 £m £m Group underlying operating profit 607.1 594.1 Underlying operating profit not relating to (1.8) (10.9)United Utilities Water Infrastructure renewals accounting 32.6 40.2 Other differences - (3.9) ----- ----- United Utilities Water statutory underlying 637.9 619.5operating profit Revenue recognition 1.7 2.6 Infrastructure renewals accounting 5.1 (2.5) Non-appointed business (6.2) (7.0) ----- ----- United Utilities Water regulatory underlying 638.5 612.6 operating profit ----- -----

PRINCIPAL RISKS AND UNCERTAINTIES

We manage risk through line management supported by our corporate riskmanagement framework which aims for continuous improvement. With an overarchingmandate from and commitment by the group board, the framework consists of fourkey areas: governance; approach; guidance; and process.

The application of our framework involves regular review of internal andexternal risk environments, the assessment of factors that will limit orprevent the achievement of our company objectives and the prioritisedimplementation of controls and mitigation to manage the exposure and buildresilience.

The audit and risk committee regularly reviews the framework's effectivenessand our compliance with it. There is also twice yearly formal reporting of themost significant risks and profile summary to the executive and the groupboard. These activities facilitate the determination of the nature and extentof those risks we are willing to take in pursuing our objectives and accordwith good corporate governance practice.

Key developments during the year

Regulatory related risks have featured prominently in our risk profile over thelast 12 months with key areas of focus typically being the Government's marketreform agenda and Ofwat's proposals for future price limits. In addition, the risk of potential change in RPI methodology with the potentialimpact to RCV and income continues to exist but is a reduced risk for thegroup. This risk was highlighted in our half year accounts but the Office ofNational Statistics has now recommended no change to the methodology. There are two on-going pieces of material litigation worthy of note but, basedon the facts and matters currently known to us and the provisions carried inthe group's statement of financial position, our directors are of the opinionthat the possibility of the disputes having a material adverse effect on thegroup's financial position is remote.

Government market reform agenda

The Government's White Paper (Water for Life) highlighted key policy prioritiesfor the water industry. A draft Water Bill was published on 10 July 2012 andincorporates changes to legislation that would be required to enable many ofthe changes set out in the White Paper. These include measures to introducecompetition and the removal of barriers to entry. The scale and impact ofretail and upstream competition will depend on the mechanisms set out in anexpected new draft bill and what ultimately becomes legislation. As a resultand until this publication, there is significant uncertainty about thepotential impacts; however, these could include: increased costs, reducedincome and reduced confidence in the RCV mechanism leading to a rise in futurecosts of borrowing. Control/Mitigation

We have been fully engaged, as has the whole industry, in all Government andOfwat consultations in relation to competition and industry reform.

We are also making determined efforts to retain customers in area, win out ofarea customers and prepare for a more competitive environment and the potentialopportunities that this may bring.

Future price limits and the price control review 2014

In May 2012, Ofwat published a document setting out the key principles itexpects to follow in future price reviews. Ofwat then undertook a lengthy andongoing consultation over its proposals for reform of the methodology andapproach for setting prices from 2015, the most recent of which was the draftmethodology issued on 28 January 2013. The principal decision to date is thatOfwat will set two binding retail price controls (one for household and one fornon-household) and two binding wholesale controls (one for water and one forwastewater). Other proposals include: household/non-contestable retail costrecovery based on an average cost to serve; the introduction of a new `Totex'menu approach to assessing cost assumptions; the setting of a lower cost ofcapital and the potential for different approaches to sharing the benefits ofoutperformance between shareholders and customers. These areas contribute to awider risk of failing to achieve a successful Final Determination followingOfwat's price control review which could result in loss of income and profit,significant cost recovery shortfall, a reduction in allowed expenditure (bothcapital and operating expenditure) and the ability to outperform. There willalso be additional costs for preparing for and administrating separate pricecontrols for retail and wholesale.

Control/Mitigation

We have raised and explained our concerns with Ofwat and, where appropriate,made alternative proposals as part of the consultation process. We continue tomake strong representation to Ofwat on these issues, particularly in relationto the `cost to serve' proposals.

More generally, a successful price control review (meeting the needs ofcustomers and stakeholders) is being targeted through a dedicated PR14programme team whose activities are focused on appropriate deliverables andstakeholder engagement. The final price review methodology proposals are due tobe issued later this summer.

Failure to comply with applicable law or regulations

We are subject to various UK and international laws and regulations associatedwith water and wastewater service, health and safety, the environment, property/land management and the general running of a company. If we fail to comply, orbecome involved in third party proceedings including civil actions by thirdparties for infringement of rights or nuisance, we could face a range ofoutcomes. These include financial penalties (of up to 10 per cent of relevantregulated turnover), the imposition of an enforcement order requiringadditional capital/operating expenditure, or compensation following litigation.In more extreme circumstances, impacts could ultimately include the revocationof our licence to operate or the appointment of a special administrator. The UK Government has lost a case in the Court of Justice of the European Unionrelating to the Government's approach to enforcement of the Urban Waste WaterTreatment Directive (the `Whitburn' case). The Directive relates to waste waterdischarges and, if this case leads to a change in the law or enforcement of it,our capital investment programme and associated funding requirements couldchange.

Control/Mitigation

We have robust processes in place to identify risks to our compliance withlegal and regulatory obligations. This includes the continual monitoring oflegislative and regulatory developments, the training of employees in newdevelopments and the participation in consultations to influence their outcome,either directly or through industry trade associations for wider issues.Funding for any additional compliance costs in our regulated business is soughtas part of the price determination process. We also robustly defend litigationwhere appropriate and seek to minimise our exposure by establishing a provisionand seeking recovery wherever appropriate.

No decision has been made on potential change to the law or its enforcementfollowing `Whitburn' but we are engaged with the industry and industry tradeassociations on this issue.

Material litigation In February 2009, United Utilities International Limited (UUIL) was served withnotice of a multiparty `class action' in Argentina related to the issuance andpayment default of a US$230 million bond by Inversora Eléctrica de Buenos AiresS.A. (IEBA), an Argentine project company set up to purchase one of theArgentine electricity distribution networks which was privatised in 1997. UUILhad a 45 per cent shareholding in IEBA which it sold in 2005. The claim is fora non-quantified amount of unspecified damages and purports to be pursued onbehalf of unidentified consumer bondholders in IEBA. UUIL has filed a defenceto the action and will vigorously resist the proceedings given the robustdefences that UUIL has been advised that it has on procedural and substantivegrounds. In March 2010, Manchester Ship Canal Company (MSCC) issued proceedings seeking,amongst other relief, damages alleging trespass against United Utilities WaterPLC (UUW) in respect of UUW's discharges of water and treated effluent into thecanal. UUW filed a Defence and Counterclaim in support of its believedentitlement to make discharges into the canal without charge and await MSCC'sresponse. Although UUW won a `summary judgment' application against MSCC inJanuary on a significant element of the claim, MSCC subsequently appealed tothe Court of Appeal who dismissed UUW's summary judgment. UUW was then grantedpermission to appeal to the Supreme Court, the hearing to be in the next 6 to12 months. Control/Mitigation The group faces the general risk of litigation in connection with itsbusinesses. In most cases, liability for litigation is difficult to assess orquantify; recovery may be sought for very large and/or indeterminate amountsand the existence and magnitude of liability may remain unknown for substantialperiods of time. The group robustly defends litigation, where appropriate, andseeks to minimise its exposure to such claims by early identification of risksand compliance with its legal and other obligations. Based on the facts andmatters currently known and the provisions carried in the group's statement offinancial position, the directors are of the opinion that the possibility ofthe disputes referred to in this risk section having a material adverse effecton the group's financial position is remote.

Pension deficit risk

The group participates in a number of pension arrangements. Estimates of theamount and timing of future funding for these schemes are based on variousactuarial assumptions and other factors including, among other things, theactual and projected market performance of the scheme assets, future long-termbond yields, average life expectancies and relevant legal requirements. Theimpact of these assumptions and other factors may require the group to makeadditional contributions to these pension schemes which, to the extent they arenot recoverable under the regulatory price determination process, couldmaterially adversely affect the group's financial position.

Control/Mitigation

In the 2009 water price review, Ofwat took account of broadly 50 per cent ofthe pension deficit shown in UUW's final business plan over a 10-year period(subject to reaffirmation at the next price review) and allowed for half ofthis deficit when setting its overall price controls for the 2010-15 period. Inresponse to the size of our ongoing pension risks and pension costs weintroduced a series of changes for employees in defined benefit (DB) schemes.These changes, which came into force on 31 March 2010, should result in reducedcosts and risks, including deficit, associated with DB liabilities in thefuture. In conjunction with the trustees we continue to monitor and to look toreduce the investment strategy risks for the pension schemes, including ourexposure to investment risks. We are also engaged with Ofwat on the appropriateallowance for pension deficits for the next price review period.

Counterparty risk

The group participates in treasury activities including the depositing of cashand holding of derivatives and foreign exchange instruments. Although we do notconsider there to be an imminent exposure, a potential loss of deposits,financial assets or hedge due to bank failure, error or delay in receivingfunds from a bank or sequestration could impact cash flow, the ability to meetdebt obligations, credit rating and cost of borrowing.

Control/Mitigation

Risks from treasury activities are covered by policies set by our treasurycommittee with operational management the responsibility of our treasurydepartment. These include establishing a total credit limit for eachcounterparty which comprises a counterparty credit limit and an additionalsettlement limit to cover intra day gross settlement cash flows. In addition,potential derivative exposure limits are also established to take account ofpotential future exposures. These limits are based on a number of factors,including the credit rating and the size of the asset base of the individualcounterparty. In respect of cash, short-term deposits and derivative financialinstruments, the group does not have a material exposure to any financialinstruments based within the Eurozone with the exception of Germany and has notexperienced any credit issues in the financial year.

Customer service risk

Failure to deliver good customer service can be caused by failures in supplyand quality requirements (see below) and also the effectiveness ofcommunication and response. The Service Incentive Mechanism (SIM), introducedby Ofwat for the 2010-15 period, replacing the Overall Performance Assessment(OPA), compares companies' performance in terms of the number of `unwanted'contacts received from customers and how well a company then deals with thosecontacts. Depending on UUW's relative performance under SIM it could receive arevenue penalty (up to 1 per cent of turnover in 2010-15) or reward (up to 0.5per cent of turnover in 2010-15) when price limits are next reset in 2014.

Control/Mitigation

The group has been monitoring and measuring customer satisfaction for a numberof years and results have been improving consistently. We have already improvedour SIM score as detailed in our KPIs. We have an overall customer experienceprogramme covering a range of initiatives to improve customer service,responding to our customers' requirements and focusing on people, processes andsystems. The company's focus is on ensuring right first time service deliveryto our customers, thus avoiding the need for `unwanted' contacts and reducingassociated operating costs. Where `unwanted' contacts do arise, there is aclear focus on identifying the root causes to improve the overall customerexperience and the SIM score. These actions are intended to ensure that thecompany's performance under SIM is optimised thereby mitigating the risk of apenalty at the next price review.

Bad debt risk

The service we provide is predominantly in the North West of England where thelevel of socio-economic deprivation is much higher than in any other region,leading to, amongst other things, an increased risk of bad debt. The lawprohibits the disconnection of a water supply from certain premises includingdomestic dwellings as a method of enforcing payment.

Control/Mitigation

Bad debt risk is managed in-house by the customer collections department whoseapproach includes the adoption of best practice collection techniques andsegmentation of customers based on their credit risk profile.

Operational service risk

The group controls and operates water and wastewater networks and maintains theassociated assets with the objective of providing a continuous service.Physical, environmental, technological or human factors, either within oroutside the company's control, could result in impacts ranging from a declinein performance to interruptions and environmental impact. Ofwat could makefinancial adjustments at the next price review if corrective actions do notrestore service to the required reference levels for each of theirserviceability measures and could go on to force additional operating orcapital expenditure if performance were to continue to decline. Additionally,depending on the nature and extent of an operational service incident, we couldbe fined for breaches of statutory obligations, be held liable to third partiesor be required to provide an alternative water supply of equivalent quality, atadditional cost. Control/Mitigation Operational processes combined with the capital investment programme aretargeted to maintain stable serviceability of our water and wastewater assetsand to minimise the risk of significant operational events occurring. Thevarious indicators of performance are closely and routinely monitored bymanagement. There are also governance and inspection regimes for keyinfrastructure assets such as aqueducts, dams, reservoirs and treatment works.Where adverse trends in performance or asset integrity develop, correctiveaction is identified and taken. The sustainability and resilience of our watersupply is also managed through regional aqueduct networks allowing flexibilityand we operate emergency plans, incident management and disaster recoveryprocesses for the response and/or recovery of operational service failures.Insurance cover is also in place against loss and liabilities associated withsignificant risks. Capital delivery risk

Our core business requires significant capital expenditure, particularly inrelation to new and replacement plant and equipment for water and wastewaternetworks and treatment facilities.

Delivery of our capital investment programmes could be affected by a number offactors including adverse legacy effects of earlier capital investments (suchas increased maintenance, repair, reinstatement or renewal costs) or amountsbudgeted in prior capital investment programmes proving insufficient to meetthe actual amount required. This may affect our ability to meet regulatory andother environmental performance standards.

Control/Mitigation

Capital investment programmes are regularly monitored to identify the risk oftime, cost and quality variances from plans and budgets and to identify, wherepossible, any appropriate opportunities for outperformance and any necessarycorrective actions. Executive directors are incentivised, as part of theirbonusable measures, on time, cost and quality of delivery of our capitalinvestment programme.

Secure supply of safe clean drinking water risk

A secure and reliable supply of safe, clean drinking water is critical for ourway of life. There are several events, either within or outside our control,that could put at risk this key requirement. These include inadequate supplyand demand prediction, leakage performance issues, operational or assetfailures, changes to abstraction licences, low rainfall or malicious acts.Depending on the nature and extent of these circumstances, the impact to thegroup may include: failure to meet the security of supply index or qualitystandards with associated regulatory penalties, increased frequency of hosepipebans and drought permits and additional operational activity and cost. Inextreme and remote circumstances, impacts may include unavoidable waterresource shortfalls or an impact on public health.

Control/Mitigation

Our management of water catchments is designed to ensure reliable yields ofgood quality raw water. In addition, our water resources management plancompares future demand with availability, analyses historic droughts andclimate change data and seeks to inform the delivery of supply enhancements anddemand reductions. It covers leakage reduction programmes, enhanced waterefficiency and network enhancements. We also maintain a drought management planwhich includes processes, supporting communication plans and options forreserve supplies. Our treatment of water is based on quality assurance procedures and watersupply is through an increasingly integrated network. Security measures are inplace to protect these assets and our capital investment programme targetsimprovements to water quality and supply. This is all supported by testingregimes through our scientific services department and drinking water safetyplans to ensure that risks to drinking water quality are identified and managedacross our entire network. We also operate emergency and incident managementprocesses should there ever be a need for alternative water supply ofequivalent quality.

Significant and catastrophic events

Our core activity involves the building, control and operation of water andwastewater networks and the maintenance of the associated assets with theobjective of providing a continuous service. This includes major constructionwork and operations above and below ground and includes the use of vehicles,equipment and chemicals subject to a variety of physical and environmentalfactors/conditions. In exceptional and remote circumstances, such as thefailure of an asset, an element of a network or supporting systems, plant orequipment, the impact could be significantly greater than operational servicefailures set out in other risks in this section. These could range fromenvironmental impact, economic and social disruption to loss of life. Suchconsequences may arise due to a number of circumstances either within oroutside our control e.g. human error, an individual's malicious intervention orunavoidable resource shortfalls. Whilst we seek to ensure that we have appropriate processes and preventativecontrols in place, there can be no certainty that such measures will beeffective in preventing or, when necessary, managing large-scale incidents tothe satisfaction of our customers, regulators, Government and the widerstakeholder community. We could be fined for breaches of statutory obligationsor be held liable to third parties or be required to provide an alternativewater supply of equivalent quality, which could increase our costs.

Control/Mitigation

We have developed and continue to focus on a strong safety and health culturethroughout the organisation and seek to achieve the highest safety standardsnot simply to comply with legislation but to contribute to our overall businessperformance while protecting employees, contractors and the public from harm.In support of this, the business operates a Health and Safety Management System(HSMS) which sets out minimum expectations and requirements includingmonitoring the occupational health of individuals when appropriate. We operate long-standing, well tested and appropriately resourced incidentresponse and escalation procedures. Our processes continue to be refinedalongside related risk management and business continuity procedures whichcomplement the governance and inspection regimes for key infrastructure assetssuch as aqueducts, dams, reservoirs and treatment works. Disaster recoveryprocesses also exist for the recovery of IT applications, all recognising thatpossible events can have varying causes, impacts and likelihoods. Thesustainability and resilience of our water supply is also managed throughregional aqueduct networks which are enhanced by the West East Link pipeline.We also maintain insurance cover in relation to losses and liabilities likelyto be associated with such significant risks, although potential liabilitiesarising from a catastrophic event could exceed the maximum level of insurancecover that can be obtained cost-effectively. The licence of the regulatedbusiness also contains a `shipwreck' clause that, if applicable, may offer adegree of recourse to Ofwat/customers (by way of interim determination) in theevent of a catastrophic incident.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This financial report contains certain forward-looking statements with respectto the operations, performance and financial condition of the group. By theirnature, these statements involve uncertainty since future events andcircumstances can cause results and developments to differ materially fromthose anticipated. The forward-looking statements reflect knowledge andinformation available at the date of preparation of this financial report andthe company undertakes no obligation to update these forward-lookingstatements. Nothing in this financial report should be construed as a profitforecast.

Certain regulatory performance data contained in this financial report issubject to regulatory audit.

Consolidated income statement Year ended Year ended 31 March 31 March 2013 2012 £m £m Continuing operations ----- ----- Revenue 1,636.0 1,564.9 ----- ----- Employee benefits expense: - excluding restructuring costs (127.5) (135.4) - restructuring costs (2.6) (2.6) ----- ----- Total employee benefits expense (130.1) (138.0) ----- ----- Other operating costs (414.1) (388.0) Other income 3.1 4.8 Depreciation and amortisation expense (329.2)

(297.8)

Infrastructure renewals expenditure (161.2) (154.4) ----- ----- Total operating expenses (1,031.5) (973.4) ----- ----- Operating profit 604.5 591.5 Investment income 2.3 4.4 Finance expense (note 3) (302.1) (315.5) ----- ----- Investment income and finance expense (299.8) (311.1) ----- ----- Profit before taxation 304.7 280.4 Current taxation charge (74.2) (45.5) Deferred taxation charge (1.2) (28.1) Deferred taxation credit - change in taxation rate 53.0 104.6 ----- ----- Taxation (note 4) (22.4) 31.0 ----- ----- Profit after taxation from continuing operations 282.3 311.4 Discontinued operations Profit after taxation from discontinued operations 14.6 5.1(note 5) ----- ----- Profit after taxation 296.9 316.5 ----- ----- Earnings per share from continuing and discontinued operations (note 6) Basic 43.5p 46.4p Diluted 43.5p 46.4p Earnings per share from continuing operations (note 6) Basic 41.4p 45.7p Diluted 41.3p 45.6p Dividend per ordinary share (note 7) 34.32p

32.01p

Consolidated statement of comprehensive income

Year ended Year ended 31 March 31 March 2013 2012 £m £m Profit after taxation 296.9 316.5 Other comprehensive income Actuarial gains/(losses) on defined benefit pension 42.1 (24.3)schemes (note 8) Taxation on items taken directly to equity (note 4) (10.0) 4.4 Foreign exchange adjustments 0.6 (1.9) ----- ----- Total comprehensive income 329.6 294.7 ----- ----- Consolidated statement of financial position 31 March 31 March 2013 2012 £m £m ASSETS Non-current assets Property, plant and equipment 8,990.7 8,644.5 Goodwill 5.0 5.0 Other intangible assets 99.9 89.5 Investments 5.7 3.3 Trade and other receivables 2.2 1.1 Retirement benefit surplus (note 8) 15.1

-

Derivative financial instruments 659.2 567.5 ----- ----- 9,777.8 9,310.9 ----- ----- Current assets Inventories 39.6 47.4 Trade and other receivables 326.9 301.4 Cash and short-term deposits 201.7 321.2 Derivative financial instruments 62.0 49.9 ----- ----- 630.2 719.9 ----- ----- ----- ----- Total assets 10,408.0 10,030.8 ----- ----- LIABILITIES Non-current liabilities Trade and other payables (419.8) (378.0) Borrowings (6,007.4) (5,728.1) Retirement benefit obligations (note 8) -

(92.0)

Deferred taxation liabilities (1,219.0) (1,245.2) Provisions (3.4) (4.0) Derivative financial instruments (196.2) (159.7) ----- ----- (7,845.8) (7,607.0) ----- ----- Current liabilities Trade and other payables (440.1) (447.6) Borrowings (166.1) (127.1) Current taxation liabilities (71.5) (78.1) Provisions (8.8) (6.3) Derivative financial instruments (3.8) (0.1) ----- ----- (690.3) (659.2) ----- ----- Total liabilities (8,536.1) (8,266.2) ----- ----- Total net assets 1,871.9 1,764.6 ----- ----- EQUITY Share capital 499.8 499.8 Share premium account 2.9 2.4 Revaluation reserve 158.8 158.8 Cumulative exchange reserve (4.4) (5.0) Merger reserve 329.7 329.7 Retained earnings 885.1 778.9 ----- ----- Shareholders' equity 1,871.9 1,764.6 ----- ----- Consolidated statement of changes in equity Year ended 31 March 2013 Share Share Revaluation Cumulative Merger Retained Total capital premium reserve exchange reserve earnings account reserve £m £m £m £m £m £m £m At 1 April 2012 499.8 2.4 158.8 (5.0) 329.7 778.9 1,764.6 Profit after taxation - - - - - 296.9 296.9 Other comprehensiveincome Actuarial gains on - - - - - 42.1 42.1defined benefitpension schemes (note8) Taxation on items - - - - - (10.0) (10.0)taken directly toequity (note 4) Foreign exchange - - - 0.6 - - 0.6adjustments ----- ----- ----- ----- ----- ----- ----- Total comprehensive - - - 0.6 - 329.0 329.6income ----- ----- ----- ----- ----- ----- ----- Transactions withowners Dividends (note 7) - - - - - (223.5) (223.5) New share capital - 0.5 - - - - 0.5issued Equity-settled - - - - - 1.7 1.7share-based payments Exercise of share - - - - - (1.0) (1.0)options - purchase ofshares ----- ----- ----- ----- ----- ----- ----- At 31 March 2013 499.8 2.9 158.8 (4.4) 329.7 885.1 1,871.9 ----- ----- ----- ----- ----- ----- ----- Year ended 31 March 2012 Share Share Revaluation Cumulative Merger Retained Total capital premium reserve exchange reserve earnings account reserve £m £m £m £m £m £m £m At 1 April 2011 499.8 1.3 158.8 (3.1) 329.7 691.0 1,677.5 Profit after taxation - - - - - 316.5 316.5 Other comprehensiveincome Actuarial losses on - - - - - (24.3) (24.3)defined benefitpension schemes (note8) Taxation on items - - - - - 4.4 4.4taken directly toequity (note 4) Foreign exchange - - - (1.9) - - (1.9)adjustments ----- ----- ----- ----- ----- ----- ----- Total comprehensive - - - (1.9) - 296.6 294.7(expense)/income ----- ----- ----- ----- ----- ----- ----- Transactions withowners Dividends (note 7) - - - - - (209.0) (209.0) New share capital - 1.1 - - - - 1.1issued Equity-settled - - - - - 1.2 1.2share-based payments Exercise of share - - - - - (0.9) (0.9)options - purchase ofshares ----- ----- ----- ----- ----- ----- ----- At 31 March 2012 499.8 2.4 158.8 (5.0) 329.7 778.9 1,764.6 ----- ----- ----- ----- ----- ----- ----- Consolidated statement of cash flows Year ended Year ended 31 March 31 March 2013 2012 £m £m Operating activities Cash generated from continuing operations 852.2 727.4 Interest paid (168.3) (167.2) Interest received and similar income 2.4 4.4 Tax paid (55.2) (39.8) Tax received - 35.0 ----- ----- Net cash generated from operating activities 631.1 559.8(continuing operations) ----- -----

Net cash used in operating activities (discontinued (1.4)

-operations) ----- ----- Investing activities Proceeds from disposal of discontinued operations -

3.5

Transaction costs, deferred consideration and cash - 2.0disposed ----- ----- Proceeds from disposal of discontinued operationsnet of transaction costs, deferred consideration and - 5.5cash disposed Purchase of property, plant and equipment (625.6)

(502.2)

Purchase of other intangible assets (35.3)

(17.3)

Proceeds from sale of property, plant and equipment 2.9

4.8

Grants and contributions received 16.3 13.0 Purchase of investments (3.0) (2.2) Proceeds from sale of investments 0.9 - ----- ----- Net cash used in investing activities (continuing (643.8) (498.4)operations) Financing activities ----- ----- Proceeds from issue of ordinary shares 0.5 1.1 Proceeds from borrowings 147.9 446.3 Repayment of borrowings (39.4) (231.7) Exercise of share options - purchase of shares (1.0)

(0.9)

Dividends paid to equity holders of the company (223.5) (209.0) ----- ----- Net cash (used in)/generated from financing (115.5)

5.8

activities (continuing operations) ----- ----- Effects of exchange rate changes (continuing - 0.5operations) ----- ----- Net (decrease)/increase in cash and cash equivalents (128.2) 67.7(continuing operations) ----- ----- Net decrease in cash and cash equivalents (1.4) -(discontinued operations) ----- ----- Cash and cash equivalents at beginning of the year 312.1 244.4 ----- ----- Cash and cash equivalents at end of the year 182.5 312.1 ----- ----- Cash generated from continuing operations Year ended Year ended 31 March 31 March 2013 2012 £m £m Operating profit 604.5 591.5 Adjustments for: Depreciation of property, plant and equipment 305.9

278.0

Amortisation of other intangible assets 23.3

19.8

Loss on disposal of property, plant and equipment 6.6

5.5

Loss on disposal of other intangible assets 3.2

2.6

Amortisation of deferred grants and contributions (7.1)

(6.9)

Equity-settled share-based payments charge 1.7 1.2 Other non-cash movements (1.9) (0.1) Changes in working capital: Decrease/(increase) in inventories 7.8

(0.1)

Increase in trade and other receivables (26.5)

(8.2)

Increase/(decrease) in trade and other payables 9.3

(11.9)

Decrease in provisions and retirement benefit (74.6) (144.0)obligations ----- ----- Cash generated from continuing operations 852.2 727.4 ----- ----- NOTES

1. Basis of preparation and accounting policies

The condensed consolidated financial statements for the year ended 31 March2013 have been prepared in accordance with the Disclosure and TransparencyRules of the Financial Services Authority.

The accounting policies, presentation and methods of computation have beenprepared on a basis consistent with the United Utilities Group PLC full yearfinancial statements which are prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as adopted by the European Union (EU)that are effective for the year ended 31 March 2013.

The adoption of the following standards and interpretations, at 1 April 2012,had no material impact on the group's financial statements:

Amendments to IFRS 7 `Financial Instruments'

This amendment introduces new disclosure requirements about transfers offinancial assets which will impact the group only if it enters into anyrelevant transactions in the future.

The condensed consolidated financial statements do not include all of theinformation and disclosures required for full annual financial statements, donot comprise statutory accounts within the meaning of section 434 of theCompanies Act 2006 and should be read in conjunction with the group's annualreport and financial statements for the year ended 31 March 2013. The comparative figures for the year ended 31 March 2012 do not comprise thegroup's statutory accounts for that financial year. Those accounts have beenreported upon by the group's auditor and delivered to the registrar ofcompanies. The report of the auditor was unqualified and did not include areference to any matters to which the auditor drew attention by way of emphasiswithout qualifying their report and did not contain a statement under section498(2) or (3) of the Companies Act 2006.

Going concern

The directors have a reasonable expectation that the company has adequateresources available to it to continue in operational existence for theforeseeable future and have therefore continued to adopt the going concernpolicy in preparing the financial statements. This conclusion is based upon,amongst other matters, a review of the group's financial projections togetherwith a review of the cash and committed borrowing facilities available to thegroup as well as consideration of the group's capital adequacy. In addition,the directors considered, amongst other matters, the regulator's legal duty toensure that United Utilities Water PLC is able to finance its activities.

2. Segmental reporting

The board of directors of United Utilities Group PLC (the board) is providedwith information on a single segment basis for the purposes of assessingperformance and allocating resources. The board reviews revenue, underlyingoperating profit, operating profit, assets and liabilities at a consolidatedlevel. In light of this, the group has a single segment for financial reportingpurposes and therefore no further detailed segmental information is provided inthis note. 3. Finance expense Continuing operations Year ended Year ended 31 March 31 March 2013 2012 £m £m Interest payable (249.1) (269.0) Net fair value losses on debt and derivative (41.5) (43.2)instruments ----- ----- (290.6) (312.2) Expected return on pension schemes' assets 96.8

100.5

Interest cost on pension schemes' obligations (108.3) (103.8) ----- ----- Net pension interest expense (note 8) (11.5) (3.3) ----- ----- (302.1) (315.5) ----- ----- The group has fixed interest costs for a substantial proportion of the group'snet debt for the duration of the regulatory pricing period. Following therevision in the prior year to its interest rate management strategy, the grouphas continued to extend the fixing of interest rates out to a one year maturityon a reducing balance basis, seeking to lock in a 10-year rolling average of10-year interest rates, on the group's nominal liabilities. In addition, thegroup has hedged currency exposures for the term of each relevant debtinstrument. The group has hedged its position through the use of interest rateand cross currency swap contracts where applicable.

The underlying net finance expense for the continuing group of £252.8 million(2012: £267.1 million) is derived as shown in the table below.

Year ended Year ended 31 March 31 March 2013 2012 £m £m Finance expense (302.1) (315.5) Investment income 2.3 4.4 Net fair value losses on debt and derivative 41.5 43.2instruments Interest on swaps and debt under fair value option 8.3

7.2

Adjustment for net pension interest expense (note 8) 11.5 3.3

Adjustment for capitalised borrowing costs (14.3) (9.7) ----- ----- Underlying net finance expense (252.8) (267.1) ----- ----- 4. Taxation Continuing operations Year ended Year ended 31 March 31 March 2013 2012 £m £m Current taxation UK corporation tax 79.4 60.1 Foreign tax 1.3 1.3 Adjustments in respect of prior years (6.5) (15.9) ----- ----- 74.2 45.5 ----- ----- Deferred taxation Current year (4.6) 12.6 Adjustments in respect of prior years 5.8 15.5 ----- ----- 1.2 28.1 Change in taxation rate (53.0) (104.6) ----- ----- Total deferred taxation credit for the year (51.8) (76.5) ----- ----- Total taxation charge/(credit) for the year 22.4 (31.0) ----- ----- The deferred taxation credit for the year ended 31 March 2013 includes a creditof £53.0 million to reflect the change enacted on 3 July 2012 to reduce themainstream rate of corporation tax from 24 per cent to 23 per cent effectivefrom 1 April 2013. A related deferred taxation charge of £0.9 million isincluded within items taken directly to equity. The deferred taxation credit for the year ended 31 March 2012 includes a creditof £104.6 million to reflect the change enacted on 5 July 2011 to reduce themainstream rate of corporation tax from 26 per cent to 25 per cent and thesubsequent change enacted on 26 March 2012 to reduce the mainstream rate ofcorporation tax further to 24 per cent effective from 1 April 2012. A relateddeferred taxation charge of £3.9 million is included within items takendirectly to equity. There will be a further phased reduction in the mainstream rate of corporationtax to 20 per cent effective from 1 April 2015. The total deferred taxationcredit in respect of this further reduction is expected to be in the region of£150.0 million. For a group of our size, negotiations with tax authorities in relation to taxreturns can span a number of years. The net adjustment of £0.7 million (2012:0.4 million) in respect of prior years relates to those matters agreed in thecurrent year.

Taxation on items taken directly to equity

The taxation charge/(credit) relating to items taken directly to equity is asfollows: Continuing operations Year ended Year ended 31 March 31 March 2013 2012 £m £m Current taxation Relating to other pension movements (15.6) (33.1) ----- ----- Deferred taxation On actuarial gains/(losses) on defined benefit 9.7 (5.8)pension schemes Relating to other pension movements 15.0 30.6 Change in taxation rate 0.9 3.9 ----- ----- 25.6 28.7 ----- ----- ----- ----- Total taxation charge/(credit) on items taken 10.0 (4.4)directly to equity ----- ----- 5. Discontinued operations

Discontinued operations represent the retained obligations in respect ofbusinesses sold in prior years. In accordance with IFRS 5 `Non-current assetsheld for sale and discontinued operations,' the post-tax results ofdiscontinued operations are disclosed separately in the consolidated incomestatement and consolidated statement of cash flows.

The profit after taxation from discontinued operations is analysed as follows: Year ended Year ended 31 March 31 March 2013 2012 £m £m Total proceeds - 3.5 Net assets disposed of - (0.4) Transaction and other costs of disposal 14.6 2.0 ----- ----- Profit after taxation from discontinued operations 14.6 5.1 ----- -----

The profit after taxation from discontinued operations for the year ended 31March 2013 relates primarily to the release of accrued costs of disposal inrespect of certain elements of the group's non-regulated disposal programme.

6. Earnings per share

Basic and diluted earnings per share are calculated by dividing profit aftertaxation by the following weighted average number of shares in issue:

Basic Diluted million million Year ended 31 March 2013 681.9 682.8 Year ended 31 March 2012 681.8 682.2 The difference between the weighted average number of shares used in the basicand diluted earnings per share calculations arises due to the group's operationof share-based payment compensation arrangements. The difference representsthose ordinary shares deemed to have been issued for no consideration on theconversion of all potential dilutive ordinary shares in accordance with IAS 33`Earnings per Share'. The basic and diluted earnings per share for the current and prior years are asfollows: Year ended Year ended 31 March 31 March 2013 2012 From continuing and discontinued operations Basic 43.5p 46.4p Diluted 43.5p 46.4p From continuing operations Basic 41.4p 45.7p Diluted 41.3p 45.6p 7. Dividends Year ended Year ended 31 March 31 March 2013 2012 £m £m Dividends relating to the year comprise: Interim dividend 78.0 72.7 Final dividend 156.0 145.5 ----- ----- 234.0 218.2 ----- ----- Year ended Year ended 31 March 31 March 2013 2012 £m £m Dividends deducted from shareholders' equity comprise: Interim dividend 78.0 72.7 Final dividend 145.5 136.3 ----- ----- 223.5 209.0 ----- ----- The proposed final dividends for the years ended 31 March 2013 and 31 March2012 were subject to approval by equity holders of United Utilities Group PLCand hence have not been included as liabilities in the consolidated financialstatements at 31 March 2013 and 31 March 2012 respectively.

The final dividend of 22.88 pence per ordinary share (2012: final dividend of21.34 pence per ordinary share) is expected to be paid on 2 August 2013 toshareholders on the register at the close of business on 21 June 2013. Theex-dividend date for the final dividend is 19 June 2013.

The interim dividend of 11.44 pence per ordinary share (2012: interim dividendof 10.67 pence per ordinary share) was paid on 1 February 2013 to shareholderson the register at the close of business on 19 December 2012.

8. Retirement benefit surplus/(obligations)

The main financial assumptions used by the group's actuary to calculate thedefined benefit surplus/(obligations) of the United Utilities Pension Scheme(UUPS) and the United Utilities PLC Group of the Electricity Supply PensionScheme (ESPS) were as follows:

Year ended Year ended 31 March 31 March 2013 2012 %pa %pa Discount rate 4.60 5.00 Expected return on assets 4.60 4.50 Pensionable salary growth and pension increases 3.30 3.25 Price inflation 3.30 3.25

The current life expectancies at age 60 underlying the value of the accruedliabilities for the schemes are:

Year ended Year ended 31 March 31 March 2013 2012 Years Years Retired member - male 26.7 26.5 Non-retired member - male 28.5 28.3 Retired member - female 30.0 29.8 Non-retired member - female 31.9 31.7 The net pension expense before taxation for continuing operations in the incomestatement in respect of the defined benefit schemes is summarised as follows: Year ended Year ended 31 March 31 March 2013 2012 £m £m Current service cost (15.9) (13.3) Curtailments/settlements arising on reorganisation (0.6) (5.4) ----- ----- Pension expense charged to operating profit (16.5) (18.7) ----- ----- Expected return on pension schemes' assets 96.8

100.5

Interest cost on pension schemes' obligations (108.3) (103.8) ----- ----- Net pension interest expense charged to finance (11.5) (3.3)expense (note 3) ----- ----- Net pension expense charged before taxation (28.0) (22.0) ----- -----

The reconciliation of the opening and closing net pension surplus/(obligations)included in the statement of financial position is as follows:

Year ended Year ended 31 March 31 March 2013 2012 £m £m At the start of the year (92.0) (195.0) Expense recognised in the income statement - (28.0) (22.0)continuing operations Expense recognised in the income statement - - (0.4)discontinued operations Contributions paid 93.0 149.7 Actuarial gains/(losses) gross of taxation 42.1 (24.3) ----- ----- At the end of the year 15.1 (92.0) ----- ----- The closing surplus/(obligations) at each reporting date are analysed asfollows: 31 March 31 March 2013 2012 £m £m Present value of defined benefit obligations (2,426.9) (2,205.0) Fair value of schemes' assets 2,442.0 2,113.0 ----- ----- Net retirement benefit surplus/(obligations) 15.1 (92.0) ----- ----- 9. Related party transactions

Transactions between the company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote.

The following trading transactions were carried out with the group's jointventures: Year ended Year ended 31 March 31 March 2013 2012 £m £m Sales of services 1.3 1.1 Purchases of goods and services 0.7 0.3 ----- -----

Amounts owed by the group's joint ventures are as follows:

31 March 31 March 2013 2012 £m £m Amounts owed by related parties 1.0 1.0 ----- -----

Sales of services to related parties were on the group's normal trading terms.

The amounts outstanding are unsecured and will be settled in accordance withnormal credit terms. The group has issued guarantees of £5.2 million (2012: £5.4 million) in support of its joint ventures. No allowance has been made for doubtful receivables in respect of the amountsowed by related parties (2012: £nil). No expense has been recognised for badand doubtful receivables in respect of the amounts owed by related parties(2012: £nil).

10. Contingent liabilities

The group has entered into performance guarantees as at 31 March 2013 where afinancial limit has been specified of £72.1 million (2012: £85.2 million).

11. Changes in circumstances significantly affecting the fair value offinancial assets and financial liabilities

From 1 April 2012 to 31 March 2013 market interest rates have fallensignificantly and there has generally been a decrease in credit spread inrelation to the group's borrowings.

The group's borrowings have a carrying amount of £6,173.5 million (2012: £5,855.2 million). The fair value of these borrowings is £6,470.0 million (2012:£5,830.3 million). There has been a net increase in funds from new borrowingsduring the year of £108.5 million (2012: £214.6 million). The group'sderivatives measured at fair value are a net asset of £521.2 million (2012: £457.6 million).

12. Events after the reporting period

There were no events arising after the reporting date that required recognitionor disclosure in the financial statements for the year ended 31 March 2013.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The responsibility statement below has been prepared in connection with thecompany's full annual report for the year ended 31 March 2013. Certain partsthereof are not included within this announcement.

Responsibility statement

We confirm that to the best of our knowledge:

* the financial statements, prepared in accordance with IFRS as adopted by

the European Union, give a true and fair view of the assets, liabilities,

financial position and profit or loss of the company and the undertakings

included in the consolidation taken as a whole; and

* the management report, which is incorporated into the directors' report,

includes a fair review of the development and performance of the business

and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. The directors of United Utilities Group PLC at the date of this announcementare listed below: Dr John McAdam Steve Mogford Russ Houlden Dr Catherine Bell CB Paul Heiden Nick Salmon Sara Weller

Brian May (appointed 1 September 2012)

This responsibility statement was approved by the board and signed on itsbehalf by:

……………………….. ………………………. Steve Mogford Russ Houlden 22 May 2013 22 May 2013 Chief Executive Officer Chief Financial Officer