ITEM 5(a)

Glasgow City Council 10th September 2008

Strathclyde Pension Fund Committee

Report by Executive Director of Financial Services

Contact: Richard McIndoe Ext: 77383

Corporate Governance – Report to 30th June 2008

Purpose of Report:

To advise the Committee of progress during the quarter in respect of the Fund’s Corporate Governance policy, and to confirm investment managers’ compliance with the policy.

Recommendation:

The Committee is asked to NOTE the contents of this report.

Ward No(s): Citywide: 9

Local member(s) advised: Yes † No † consulted: Yes † No †

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1 1. Background The importance of Corporate Governance and Proxy Voting have long been recognised. The Cadbury Report in 1992, commissioned in response to continuing concern about companies’ standards of financial reporting and accountability and to controversy over directors’ pay clearly stated that “given the weight of their votes, the way in which institutional shareholders use their power to influence the standards of corporate governance is of fundamental importance.”

In January 2004, Paul Myners’ report to the Shareholder Voting Working Group re-iterated this. The Introduction states that “it cannot be stated too forcefully that institutional investors in the voting process have fiduciary duties to their beneficiaries to preserve and enhance value through informed and effective corporate governance of the companies in which they invest. Voting is the bedrock of governance and should not be approached lightly. The process must be efficient, effective and transparent.”

2. Policy Since 1995, the Fund has instructed its investment managers to vote in respect of the Fund's holdings at all AGM / EGMs of all companies in the UK portfolios. Since 2001, managers have also been instructed to vote their overseas holdings wherever this is practical and economically viable. Managers are instructed to vote in accordance with their own voting policies. This approach is consistent with the Fund's philosophy of externalising investment management, and places the voting responsibility where it can be effectively and economically exercised. The Fund’s participation in a securities lending programme means that portfolio securities will occasionally be on loan and not available for voting purposes unless specifically recalled. The Fund has instructed its investment managers that they may recall any security that is out on loan for the purpose of lodging votes.

3. Managers’ Voting Activity 3.1 UK Equity Holdings Managers’ voting activity in respect of the Fund’s UK equity holdings in the quarter to 30th June 2008 is summarised in the table below. UK equities were held as follows. ƒ The Fund has a substantial investment in Legal & General’s UK Equity Index Fund which in turn holds shares in all of the companies in the FTSE All Share index. ƒ Baillie Gifford, Capital International, Gartmore and Schroders (No.3 Fund) have core allocations to UK equity. ƒ AllianceBernstein, Edinburgh Partners, Invesco and Lazard may hold some UK equities within their global mandates. The expected norm would be for an investment manager, having invested in a company, to support that company's management in all but exceptional cases. The table below shows how votes were actually cast. Votes against management and abstentions are analysed in the Appendix in more detail (excluding Legal & General).

Voting Results Q2 2008 UK (excluding stocks on loan)

Manager No of No. of No. of No of Votes Votes Not Proxies Proxies meetings AGM's EGM's Resolutions For Against Abstentions Voted Lodged Not Lodged AllianceBernstein 8 7 1 117 110 6 1 0 8 0 Baillie Gifford 28 24 4 381 375 5 1 0 28 0 Capital International 26 25 1 408 396 12 0 0 26 0 Edinburgh Partners 43156550104 0 Gartmore 111 91 20 941 923 14 4 0 111 0 Invesco 110170001701 Lazard 8 6 2 114 114 0 0 0 8 0 Legal & General 394 327 67 4339 4245 66 28 0 394 0 Schroders (No. 3) 20 18 2 314 304 9 1 0 20 0

Total 600 502 98 6687 6522 112 36 17 599 1 97% 2% 1% 0% 100% 0%

Strathclyde Pension Fund Corporate Governance Q2 2008 2

3.2 Overseas Equity Holdings Managers’ voting activity in respect of the Fund’s overseas equity holdings in the quarter to 30th June 2008 is summarised in the table below. Overseas stocks were held by AllianceBernstein, Baillie Gifford, Capital International, Edinburgh Partners, Invesco, JP Morgan, Lazard and Schroders (No.3 Fund).

Voting Results Q2 2008 Overseas

Manager No of No. of No. of No of Votes Votes Not Proxies Proxies meetings AGM's EGM's Resolutions For Against Abstentions Voted Lodged Not Lodged AllianceBernstein 29 25 4 402 342 16 2 42 26 3 Baillie Gifford 57 54 3 601 515 29 1 56 51 6 Capital International 200 171 29 2383 2155 157 4 67 193 7 Edinburgh Partners 12 10 2 153 147 6 0 0 12 0 Invesco 28 25 3 425 131 9 144 141 19 9 JP Morgan 240 213 27 1987 1644 236 24 83 225 15 Lazard 60 48 12 694 625 48 0 21 59 1 Schroders (No. 3) 84 84 0 1071 971 80 5 15 82 2

Total 710 630 80 7716 6530 581 180 425 667 43 85% 7% 2% 6% 94% 6%

Managers generally do not vote proxies in markets where tendering shares to vote entails their being blocked from trading during the voting periods. However, 94% of Overseas proxies were lodged this quarter, with 85% of votes in support of company management.

3.3 Consolidated Activity for Quarter 2 2008 A table totalling all of the managers’ voting activity for the quarter is shown below:

Voting Results Q2 2008 Total UK & Overseas (excluding stocks on loan)

Manager No of No. of No. of No of Votes Votes Not Proxies Proxies meetings AGM's EGM's Resolutions For Against Abstentions Voted Lodged Not Lodged AllianceBernstein 37 32 5 519 452 22 3 42 34 3 Baillie Gifford 85 78 7 982 890 34 2 56 79 6 Capital International 226 196 30 2791 2551 169 4 67 219 7 Edinburgh Partners 16 13 3 209 202 6 1 0 16 0 Gartmore 111 91 20 941 923 14 4 0 111 0 Invesco 29 26 3 442 131 9 144 158 19 10 JP Morgan 240 213 27 1987 1644 236 24 83 225 15 Lazard 68 54 14 808 739 48 0 21 67 1 Legal & General 394 327 67 4339 4245 66 28 0 394 0 Schroders (No3) 104 102 2 1385 1275 89 6 15 102 2

Total 1310 1132 178 14403 13052 693 216 442 1266 44 91% 5% 1% 3% 97% 3%

3.4 Executive Remuneration The table below shows the total number of UK resolutions from the last quarter which related specifically to Executive Remuneration. Of the 6,687 UK resolutions voted by managers (excluding Legal & General, for whom detailed data is not held), 129 related to executive remuneration – either through seeking approval of Remuneration Reports or the approval of Long Term Incentive Schemes. As can be seen, of the 129 resolutions 84% of votes cast were in support of the resolutions. This would seem to indicate that, whilst there are still areas of concern regarding executive pay, the majority of awards are supported by the Fund’s external UK investment managers.

Strathclyde Pension Fund Corporate Governance Q2 2008 3

Voting Results Q2 2008 Resolutions on UK Executive Remuneration

Manager No of Votes Votes Not Resolutions For Against Abstentions Voted Alliance Bernstein 76010 Baillie Gifford 24 22 2 0 0 Capital International 25 18 4 3 0 Edinburgh Partners 00000 Gartmore 55 47 4 4 0 Invesco 10001 Lazard 66000 Schroders (No3) 18 15 1 2 0

Total 129 108 11 9 1 84% 8% 7% 1%

4. Other Company Engagement

Managers report a number of engagements with companies on corporate governance issues. Gartmore’s company engagement this quarter was particularly active and is summarized below.

4.1 ARC International Company Description ARC is an Intellectual Property (IP) semiconductor business that sells licence and royalty based IP to semiconductor developers. ARC has some unique technology that enables the development of highly programmable silicon chips.

Discussion ARC is not valued by the market with cash of £20m and a market capitalisation of £24m; its sales are £20m and it is expected to break even in 2009. The principal reason for this is that investors have, since float a number of years ago, expected the product to "take off". This has not happened but ARC has achieved solid growth on which it is now well placed to capitalise. ARC is in a sector that is better appreciated in the USA and so Gartmore have been working with management and US advisers to solicit US investor interest.

Gartmore have also helped to develop a strategy to address the problems this low valuation creates. In particular, they are reconsidering management options that are now underwater, and discussing the strategy to achieve profitability through acquisition and cost reduction.

4.2 Financial Objects Company Description Financial Objects sells software solutions to second tier banks.

Discussion The business disappointed on profits in the first quarter of 2008, and as a result the shares fell to half their value only 12 months ago. This left the business on a P/E of 5x (ex cash). Given the strong cashflows from maintenance revenues, Gartmore felt the business was undervalued. However, the market was unlikely to recognise this for some time.

Gartmore considered the business would be an attractive asset to a trade buyer in a similar market and urged the management, company directors and adviser to explore an exit. They also discussed the business with a corporate finance adviser who knew the sector. He

Strathclyde Pension Fund Corporate Governance Q2 2008 4 explored potential buyers which led to a purchase by Temenos at almost a 100% premium to the market price.

4.3 Iomart Company Description Iomart has three divisions: data centres, managed IT services and online directory services. Each division is managed separately.

Discussion The directory and managed services divisions are low growth but have strategic value to purchasers. The data centres are high growth and there is the potential to develop a small version of Telecity, a major quoted data centre business. Gartmore believe this will provide greater value for shareholders and so 9 months ago, they urged the management to sell off the two other divisions and focus on data centres.

The management recently announced that they had achieved a sale of the directory division for £20m, an excellent result in these markets. These funds will enable the company to develop the data centre strategy.

4.4 Redhall Company Description Redhall is an engineering group in the nuclear oil gas and petrochemical and food sectors. It manufactures doors, and fire blast protections systems, elevators and bespoke stainless steel products. It also provides installation, repair and maintenance services. Redhall operates in extremely sensitive environments. Gartmore believed that the company had strengths in areas associated with health and safety in these complex environments and had requested greater public disclosure of the key performance indicators and the groups performance against these criteria.

Discussion The company has now responded that the last 2 years at Redhall have seen a significant transformation in the business size and end market exposures. Common to all the assets within the group from nuclear to food is the importance of health and safety processes as an important end itself but also as a source of competitive advantage. In the last year significant investment has been made in the operational health and safety resources and personnel, especially in newly acquired businesses. This investment is now moving away from the centre and additional investment is currently being made to develop operational culture and process in consultation with clients. The company is already standard setting in the fields in which it operates (not least at Sellafield). In the 2007 annual report and accounts the company provided the first indication of the initiatives being taken internally. Management are keen to emphasise that this is just the first year of a 3-year programme which should see an ongoing upgrade of processes and disclosure.

4.5 Turbo Power Systems Company Description TPS manufactures power supply systems and high efficiency motors for the industrial, transport and aerospace markets. TPS has developed a strong product suite that has enabled it to make sales to major corporations such as Bombardier and Chicago Transit. However, it has struggled to control costs and reach profitability.

Discussion Gartmore have worked closely with the new Chairman, who has spearheaded significant management change with a new CEO and new NEDs. They have had various discussions on strategy and supported major cost reductions. In order to facilitate this, further financing was required - Gartmore encouraged the cost reductions, which had short-term cash costs and worked with the Chairman to arrange debt financing that was attractive to all parties.

Strathclyde Pension Fund Corporate Governance Q2 2008 5 The financing is forecast to get the business to profitability and is less dilutive than a rights issue would otherwise have been in this market.

Gartmore continue to work closely with the business to support it reaching profitability in these difficult economic conditions.

5 Developments in this Quarter – Managers’ Commentary

5.1 Combined Code Revised The Financial Reporting Council (FRC) has introduced two new changes to the Combined Code. The new changes apply to financial years beginning after June 2008 and, in practice, will be reported against in 2010. Under the new code, directors will be allowed to chair more than one FTSE 100 company. Chairmen of smaller companies will be permitted to be a member of, but not chair, the audit committee of the company provided that (s)he is independent at the time of appointment. The new rule brings the arrangements for small company audit committees into line with the arrangements for the remuneration committee.

The change allowing a director to chair multiple FTSE100 companies is in theory a retrograde step as it puts the subject companies at risk if they both need the chairman’s time in a simultaneous crisis. In practice it is not likely to be a heavily used provision of the code as not many individuals will be offered the opportunity or be willing to take it. Gartmore would treat each case on its merits but they would expect companies in this position to demonstrate in advance that the proposed chairmen can meet the demands on their time.

For smaller companies Gartmore’s policy has been to vote for the re-election of a smaller company chairman whose member of the audit committee provided that (s)he would be considered independent at the time of the vote, apart from the chairmanship.

5.2 Pre-emption Guidelines The Pre-emption Group has issued updated guidance during the quarter. Under the Companies Act 2006, companies are obliged to give existing shareholders first refusal on newly issued shares. This right can be waived by shareholder for example in the case of a takeover for shares. In addition, it is routine for companies to ask for a disapplication of pre- emption rights as part of the business at an annual general meeting.

Conventionally such disapplications are limited to 5% of the capital in any one year and the guidelines suggest a 7% limit over a rolling three-year period. Authority should be limited to a fifteen-month period. The disapplication applies to convertible securities as well as equities and includes the use of treasury shares.

The Pre-emption Group stress the need for shareholders to apply the guidance flexibly but urge companies to consult early and give adequate explanation if they want to exceed the guidelines. The company should make the business case for disapplication including the opportunity cost of not giving flexibility, explain why a non-pre-emptive issue is the most appropriate means of financing and demonstrate how any dilution of existing shareholder interests would be limited. Such issues should be at a discount of no more than 5% to the then share price and companies should disclose in their accounts how such issues have been used on a one and three year view. AIM companies should be able to expect greater flexibility from investors.

Gartmore policy has been in line with this guidance. They routinely vote in favour of a 5% disapplication in the UK and in line with best practice in overseas markets. For UK smaller companies they routinely vote for larger proportionate disapplications where the absolute amount is less than 10m and it is less than a majority of the share capital. In other cases they take into account any explanation that the company offers but find all too frequently that

Strathclyde Pension Fund Corporate Governance Q2 2008 6 companies do not offer any explanation in advance and fix upon an absolute increase in capital that is maintained from year to year as part of its conventions for AGM business.

The recent problems of the banking industry have demonstrated the limitations of rights issues in raising capital and the Treasury is investigating with industry and investors ways in which the process can be expedited. Investor bodies are concerned to maintain the pre- emption right but are working to find ways of speeding up the time taken to implement a rights issue.

5.3 Auditor Liability Limitation The recent Companies Act allows companies to reach agreement to restrict the liability of their statutory auditors, providing shareholders agree. The Financial Reporting Council (FRC) has issued guidance for company directors. While such agreements are not compulsory auditors are expected to press for them and, in consequence, the Institutional Shareholders Committee (ISC) has issued a statement setting out what might be expected before shareholders approve such agreements:

Institutional shareholders are only likely to agree a proportional limit on liability not a fixed limit. Agreement must be sought in advance of the completion of the audit as part of the process of ensuring that it will be to the advantage of shareholders Although the agreement approved by shareholders will in principle only apply to the holding company, shareholders will want companies to demonstrate that the proportional liability will not be frustrated by fixed liability agreements at the subsidiary level. Companies will need to demonstrate the improvements in audit quality that are secured by such agreements and in particular that defensive auditing is avoided and the true and fair view given a high weighting. Gartmore will seek to apply the ISC guidance in its voting policy.

6. Conclusions Voting results this quarter confirm that managers have complied with the Fund’s corporate governance policy. Voting activity continues to show a strong support for companies’ management, with 91% of votes cast in favour of resolutions. The vast majority of proxies (97%) were lodged with the registrars.

7. Recommendation The Committee is asked to NOTE the contents of this report.

SERVICE IMPLICATIONS Financial: None. Legal: None. Personnel: None. Service Plan: None.

Strathclyde Pension Fund Corporate Governance Q2 2008 7 APPENDIX

STRATHCLYDE PENSION FUND

INVESTMENT MANAGERS’ UK VOTING ACTIVITY – Q2 2008

RESOLUTIONS NOT SUPPORTED

1. AGMs - STOCKS HELD BY A SINGLE MANAGER

Alliance Bernstein (AB)

Meeting Issues Antofagasta plc AB opposed resolutions to elect Directors, and adopt new 11 June 2008 Articles and Charter. AGM

Baillie Gifford (BG)

Meeting Issues The Weir Group plc BG opposed the proposal to grant the CEO with a one-off 7 May 2008 award. AGM Provident Financial plc BG opposed the approval of the Remuneration Report. 8 May 2008 Executives granted additional rewards under a Long-term AGM Incentive Scheme.

Capital International (CAP)

Meeting Issues Bradford & Bingley plc CAP opposed the approval of the Remuneration Report 22 April 2008 and amended Executive Incentive Plan. AGM LogicaCMG plc CAP opposed the approval of the Remuneration Report. The 14 May 2008 EPS growth rates are not sufficiently demanding. AGM

Gartmore (GIM)

Meeting Issues Low & Bonar plc GIM opposed the approval of the Renumeration Report. The 9 April 2008 Share Matching Plan appears to offer potentially excessive AGM rewards. IPSA Group plc GIM opposed the re-election of S Hargrave as Director. GIM 23 April 2008 does not consider Mr Hargrave to be independent. GIM also AGM opposed the dis-application of Pre-emption Rights on the grounds that the dis-application exceeds guidelines. Fairpoint Group plc GIM abstained from supporting the re-election of C Mindelhall 25 April 2008 and S Gilbert as Directors who are members of the AGM Remuneration or Audit committees. As such they are not considered independent by GIM. The Company has insufficient independent directors. Senior plc GIM opposed the adoption of new amended Articles on the 25 April 2008 grounds they restrict rights of shareholders. AGM

Strathclyde Pension Fund Corporate Governance Q2 2008 8 Corac Group plc GIM abstained from approving the dis-application of Pre- 28 April 2008 emption Rights on the grounds they exceed normal guidelines, AGM but took into account the modest scale of the Company. CMR Fuel Cells plc GIM opposed the transaction of other business on the grounds 1 May 2008 that all business for a general meeting should be disclosed in advance. Hallin Marine GIM abstained from voting in a resolution to dis-apply Pre- Subsea International Plc emption rights. The scale of the dis-application exceeds normal 7 May 2008 guidelines, although the modest scale of the company should be AGM borne in mind. British Polythene GIM opposed the re-election of C McLatchie as Director. Mr Industries plc McLatchie is a former Chairman and Chief Executive of the 8 May 2008 Company, now Chairman. He is a member of the AGM Remuneration Committee. Spring Group plc GIM opposed the re-election of S Fink due to concerns about 8 May 2008 his independence. GIM also opposed the adoption of new AGM Articles of Association, which allows indemnification of auditors. Hill & Smith Holdings plc GIM abstained from approving the Remuneration Report. The 9 May 2008 Company has ended bonus arrangements for the Chairman, which is to be welcomed, but compensated him with a one off share award. In principle this does not appear to be good practice but GIM took into account the contribution that the individual has made to the Company and the scale of the award compared to the bonus opportunity foregone. Colliers CRE plc GIM abstained from approving the Remuneration Report. The 12 May 2008 Company allows participation of Non-Executives in the Share AGM Incentive Scheme, although the amounts involved to date have been modest.

Chime Communications plc GIM abstained from voting in a resolution proposing the re- 14 May 2008 election of P Richardson. The individual in question is not AGM considered independent because of links with significant shareholder. He is a member of the Audit and Remuneration Committees. Falkland Oil and Gas Ltd. GIM opposed the resolution to accept the Report and Accounts. 14 May 2008 The Company has insufficient independent Directors and has AGM awarded options to Non-Executives. The agenda does not give opportunity to vote directly on these issues. GIM also opposed the election of R Liddell as Director. Mr Liddell is in receipt of options, therefore not considered independent. Emerald Energy plc GIM abstained from voting for the re-election of F Ponsonby on 15 May 2008 the grounds that he is in receipt of options, therefore not AGM considered independent. He is also a member of Audit and Remuneration Committees. GIM opposed the approval of the Remuneration Report. The Incentive Scheme allows options to be awarded to Non-Executives. SMG plc GIM abstained from opposing the Remuneration Report. The 21 May 2008 Share Scheme allows re-testing for awards made in 2007. AGM Telit Communications plc GIM opposed the resolution to receive the Report and Accounts. 27 May 2008 The Executive Chairman is a member of the Remuneration AGM Committee. The Vitec Group plc GIM opposed the approval of the Remuneration Report. The 27 May 2008 severance terms for some Directors can exceed 12 months AGM notice. Alexander Mining Plc Scale of the disapplication exceeds guidelines

Strathclyde Pension Fund Corporate Governance Q2 2008 9 4 June 2008 AGM R.E.A. Holdings plc GIM abstained from voting on the re-election of Directors. The 6 June 2008 Directors on the Remuneration and Audit committees are not AGM considered to be independent. Sterling Energy plc GIM opposed the re-election of P Wilde as Director on the 6 June 2008 grounds that he had participated in incentive schemes and AGM therefore is not independent. Melrose Resources plc GIM opposed the adoption of new Articles of Association. The 12 June 2008 revised articles include power to indemnify the Auditors. AGM John David Group plc GIM opposed the approval of the Remuneration Report and 26 June 2008 Incentive Plan. Cash payments are made to Executives, with no AGM explanation as to why the Share Scheme is not used.

AGMs - STOCKS HELD BY MORE THAN ONE MANAGER

Meeting Issues Royal Bank of Scotland CAP opposed the approval of the Remuneration Report. EPS Group plc targets are not considered to be challenging enough. 23 April 2008 AGM SIM opposed the approval of the Remuneration Report due to concerns over exceptional bonus payments. The increase in Stock held by Authorised Ordinary Share Capital was opposed, along with the Alliance Bernstein associated issue of Equity-Linked Securities with Pre-emptive Baillie Gifford Rights. Capital Edinburgh Partners AB, BG & EP voted with management. Schroder Astrazeneca plc SIM opposed the re-election of two Directors reflecting material 24 April 2008 and continuing concern over a 4% shareholder (Wallenbergs) AGM having 2 affiliated Directors on the Board. SIM also opposed the approval of the Remuneration Report. The reason being Stock held by disappointing bonus payments and share awards following Alliance Bernstein years of poor share price performance. It appears pay is not Capital linked to performance and certainly not linked to returns to Schroder shareholders.

AB & CAP voted with management. HBOS plc CAP opposed the approval of the Remuneration Report. A 29 April 2008 maximum annual EPS target of RPI +6% falls well short of the AGM performance expected over time and does not incentivise management to deliver for shareholders. Stock held by Alliance Bernstein AB voted with management. Capital Xstrata Plc AB abstained from voting to elect various Directors. 6 May 2008 AGM BG opposed the approval of the Remuneration Report, amendments to Long-term Incentive Plan and re-election of Stock held by Remuneration Committee Chairman. Alliance Bernstein Baillie Gifford Standard Chartered plc SIM abstained from the resolution to approve the Remuneration 7 May 2008 Report on the grounds of the inadequate link between AGM performance and the Share Plan. Strathclyde Pension Fund Corporate Governance Q2 2008 10

Stock held by BG and LAZ voted with management. Baillie Gifford Lazard Schroder Royal Dutch Shell plc AB abstained from voting on a resolution to amend the 20 May 2008 Restricted Stock Plan. AGM BG opposed the approval of amendments to the Restricted Stock held by Stock Plan on the grounds that no performance conditions are Alliance Bernstein attached. Baillie Gifford Capital CAP opposed a resolution requesting authority to make certain donations on the grounds that the level of authority to incur political expenditure is excessive. CAP also opposed amendments to the Long-term Incentive Plan due to the potential for excessively high rewards. Glaxosmithkline plc AB and EP abstained on the approval of the Remuneration 25 May 2008 Report. AGM CAP opposed the approval of the Remuneration Report as Stock held by awards to JP Garnier under the Long-Term Incentive Schemes Alliance Bernstein have been excessive. Baillie Gifford Capital BG, LAZ & SIM voted with management. Edinburgh Partners Lazard Schroder HSBC Holdings plc CAP opposed the Amendment of HSBC Share Plan. The new 30 May 2008 targets do not reflect the bank’s new publicly-stated AGM performance indicators. The new public performance targets are an important step in building investor confidence that is Stock held by undermined by misalignment and remuneration. Capital Edinburgh Partners EP voted with management. Tesco plc CAP and SIM opposed a shareholder resolution requiring the 27 June 2008 company to ensure chickens are produced in systems ensuring AGM minimum welfare standards.

Stock held by BG voted in favour of the resolution. Baillie Gifford Capital Schroder

2. EGMs - STOCKS HELD BY A SINGLE MANAGER

Gartmore (GIM)

Meeting Issues Kofax plc GIM opposed the adoption of the new Articles of Association. 16 May 2008 The proposed new articles include a dispute resolution clause EGM less favourable to shareholders than current arrangements and remove the limit on borrowing powers.

Strathclyde Pension Fund Corporate Governance Q2 2008 11

EGMs - STOCKS HELD BY MORE THAN ONE MANAGER

Meeting Issues Royal Bank of Scotland Schroder opposed the resolution approving the increase in Group plc Authorised Share Capital by 6,123,010,462 Ordinary Shares; 14 May 2008 Authorise Issue of Equity or Equity-Linked Securities with Pre- EGM emptive Rights up to Aggregate Nominal Amount of GBP 2,364,677,687 due to concerns about poor performance of the Stock held by Company and the role of the Board in that underperformance. Alliance Bernstein Baillie Gifford AB, BG, CAP & EP voted with management. Capital Edinburgh Partners Schroder

Strathclyde Pension Fund Corporate Governance Q2 2008