2 CHANGES TO THE COMBINED CODE

On 27 June 2006 the Financial Reporting Council ("FRC") published its final version of the amended Combined Code on Corporate Governance (the "Code") which will supersede and replace the previous version of the Code published in July 2003. The changes to the Code have been made following two consultation exercises, the first on the overall impact of the 2003 Code (held between July and October 2005) and the second on draft amendments to be made to the Code (held between January and April 2006).

Only a small number of changes have been made to the previous version of the Code, the effect of which will (amongst other things) enable the company chairman to sit on the remuneration committee if considered independent on appointment; provide shareholders voting by proxy with the option of withholding their vote on a resolution; and encourage companies to publish the details of proxies lodged on resolutions where votes are taken on a show of hands.

2.1 Remuneration Committee
Provision B.2.1 has been amended to allow the Chairman of the company to sit on the remuneration committee where he or she was considered independent at the time of appointment. The Chairman would be in addition to the recommended minimum number of independent directors (three for FTSE 350 companies, two for other types of companies) and it is recommended that he or she should not also chair the remuneration committee.

2.2 Relations with Shareholders
Provision D.2.1 (previously D.2.2) has been amended to provide that:

2.2.1 at any general meeting (not only the AGM) the company should propose a separate resolution on each substantially separate issue;

2.2.2 proxy forms should provide a 'vote withheld' option to enable shareholders to indicate if they have reservations on a resolution but do not wish to vote against it (although many listed companies already provide this option);

2.2.3 the proxy form and any announcement of results of a vote should make it clear that a 'vote withheld' is not a vote in law and will not be counted in the calculation of votes.
Provision D.2.2 (previously D.2.1) provides that where votes are taken on a show of hands, the company must ensure that details of proxies lodged at the AGM, the number of votes for and against the resolution and the number of votes withheld must be published on the company's website. The Companies Bill currently with Parliament includes clauses that would require companies to publish details of votes taken on a poll. This amendment to the Code means that details of all votes would be made available.

2.3 Making information available
The terms of reference of the company's nomination, remuneration and audit committees can be "made available" by including the information on a website that is maintained on or on behalf of the company. The relevant footnotes to provisions A.4.1, B.2.1 and C.3.3 no longer refer to making this information available on request.

2.4 Update
On 25 October 2006, the Financial Services Authority changed the definition of the Combined Code in the Listing Rules and Handbook Glossary to make it clear the listed companies should make their comply or explain statement against the updated Code for reporting years beginning on or after 1 November 2006.

A copy of the updated Code can be found at: http://www.frc.org.uk/documents/pagemanager/frc/Combined%20Code%20June%202006.pdf

If you require further information on any matter covered in this note, please contact your principal contact at Charles Russell or Simon Gilbert, Clive Hopewell or Alexander Keepin (London), Francis Rundall, Richard Norton, or Adrian Mayer (Cheltenham), Catherine Drew or Geoff Sparks (Guildford) or Peter Elliott (Oxford) on 0207 203 5000.

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