West Yorkshire Pension Fund will vote as follows:

FOR - where the proposal meets best practice guidelines and is in shareholders' long-term interests;

ABSTAIN - where the proposal raises issues which do not meet best practice guidelines but either the concern is not regarded as sufficiently material to warrant opposition or an oppose vote could have a detrimental impact on corporate structures or the issue is being raised formally with the company for the first time.

OPPOSE - where the proposal does not meet best practice guidelines and is not in shareholders' interests over the long term.

The voting policy will be applied to UK companies, European Eurotop 300 companies, US S&P 500 companies, and Japanese TOPIX companies in whom the WYPF has a shareholding.

Voting policy - Best practice guideline
General principles

In supporting any resolution of any type, the West Yorkshire Pension Fund (WYPF) will only vote on the resolution provided that:

• the resolution deals with one substantive issue and is not bundled with other items;
  
• the resolution is fully explained and justified by the proposers;
  
• there is full disclosure of information relevant to the consideration of a resolution and such information is presented in a fair and balanced way.

Directors

a) There should be a clear division of responsibilities at the head of the company.

• there is a separate chairman and chief executive;
  
• the combination of roles of chairman and chief executive can only be justified on a temporary basis in exceptional circumstances;
  
• the chairman has not previously been chief executive;
  
• the chairman meets the definition of independence upon appointment;
  
• there is a senior independent director.

b) The board should contain sufficient numbers of independent non-executives.

• there are at least three non-executives on the board;
  
• non-executives should meet at least once a year without executives present;
  
• at least one half of the board (excluding the chairman) is independent by the guidelines shown in Annex 1.

c) All directors should be accountable to shareholders by facing regular re-election.

• all directors are required to seek election in the articles;
  
• all directors face election every year;
  
• a full-time executive should not be permitted to take up more than one outside position at another listed company.

d) There should be an independent and transparent appointment and review process.

• a nomination committee exists comprised wholly of independent directors;
  
• recruitment practices for new directors are transparent;
  
• process for succession planing is disclosed;
  
• process for regular board and individual appraisals and general outcomes are disclosed;
  
• individual directors' attendance at board meetings is disclosed;
  
• there is evidence that the training needs of the board are regularly reviewed and acted upon.

Directors' remuneration

a) Executive remuneration should be determined by a formal and independent procedure.

• remuneration committee exists comprised wholly of independent directors. The chairman may not sit on this committee;;
  
• remuneration committee receives independent advice;
  
• remuneration committee has at least three members;
  
• remuneration committee has written terms of reference which is made publicly available.

b) There should be full and transparent disclosure of directors' remuneration.

• all elements of each director's cash remuneration are disclosed;
  
• all share incentive awards are fully disclosed with award dates and prices;
  
• expected values are disclosed for all share incentive awards for each director;
  
• pension contributions and entitlements are fully disclosed;
  
• pay policy aims are fully explained in terms of the company's objectives;
  
• all the individual components of the pay package are fully described;
  
• there is information on the composition of the NED's remuneration and how it is determined;
  
• duration of contracts and company liabilities on termination are given;
  
• compensation payments or significant changes in policy are fully explained;
  
• future performance conditions and/or past targets for annual bonuses paid are stated;
  
• maximum potential awards under annual bonuses are stated;
  
• performance conditions for long term incentive schemes disclosed;
  
• vesting scale for long-term incentives schemes is clear;
  
• contracts of executives and non-executives should be published on the company's website.

c) Long term incentives should provide rewards scaled towards supervisor performance.

• maximum vesting targets are challenging relative to performance required;
  
• minimum vesting targets are challenging relative to performance required;
  
• vesting scales are sufficiently broad and geared towards better performance;
  
• there are at least two performance criteria, one of which uses a comparator group;
  
• companies should adopt a five-year performance period during which the shares or options do not vest to the executive;
  
• share schemes should not exceed 10% of issued share capital in any ten year period of which a 5% limit should be placed upon executive schemes to allow the remaining 5% to be used for all-employee schemes.

d) Remuneration structure as whole should not be excessive.

• total potential rewards under all incentive schemes are not excessive;
  
• average salaries are broadly in line with the sector;
  
• directors are required to build up a significant shareholding;
  
• share incentive schemes conform with dilution guidelines;
  
• schemes are available to enable all employees to benefit from business success;
  
• transaction bonuses are strongly discouraged (i.e. on takeovers/mergers);
  
• other remuneration practices do not raise concerns.

e) Contracts policy should balance potential costs to shareholders with directors' interests.

• no current directors have rolling contracts of longer than one year;
  
• statement on application of mitigation made;
  
• contracts do not provide for liquidated damages or automatic payments in excess of one year's salary and benefits in any circumstances;
  
• future bonuses are not taken into account in determining compensation entitlements on termination or change-in-control.

Audit and reporting

a) The system of internal controls should be fully described.

• the statement on internal controls meets minimum Turnbull requirements;
  
• the board reports on issues on non-financial risk;
  
• staff should be able to raise concerns about possible improprieties in financial reporting or other matters, with high-level disclosure of such concerns in the annual report of the company's procedures.

b) The auditors should be independent of the company and management.

• no directors have a significant connection with the auditors;
  
• audit firm is subject to regular fixed term rotation after a period of five years.

c) Non-audit fees should be disclosed and should not potentially affect independence.

• UK and global non-audit fees disclosed;
  
• fees paid for non-audit work should be no more than 25% of the audit fee;
  
• an adequate break-down of the nature of non-audit fees is provided;
  
• level of non-audit fees do not raise independence concerns;
  
• an explanation must be given of how auditor objectivity and independence is safeguarded where non-audit services are provided.

d) Independent audit committee demonstrates accountability and expertise.

• there is a fully independent audit committee. The chairman may not sit on this committee;
  
• audit committee must have written terms of reference which are publicly available;
  
• audit committee includes at least one member with significant financial experience;
  
• audit committee reports on its activities beyond boilerplate 'terms-of- reference' type statements;
  
• audit committee has the ability to engage outside advisers;
  
• audit committee's policy on awarding non-audit work is fully described; and
  
• the audit committee should meet at least three times a year.

Share capital and shareholder relations

a) Shareholders should have an opportunity to vote on dividend policy.

• declared dividend or policy is put to the vote.

b) Shareholders should have adequate information on an access to all directors.

• sufficient biographical information on all directors is disclosed;
  
• justification for new direction appointments is provided;
  
• meetings between NEDs and shareholders are reported.

c) All ordinary shares should have equal rights.

• each ordinary share has equal voting rights;
  
• there is no controlling shareholder;
  
• no persons have the right to designate directors to the board.

d) Voting by shareholders should be democratic and transparent.

• all voting is conducted by poll on the basis of one share one vote;
  
• at least 20 days notice must be given for an AGM and EGM;
  
• the report and accounts should be put to the AGM for acceptance;
  
• proxy votes should be disclosed at the AGM and published via a regulatory information service.

Environmental issues

a) There should be a comprehensive, published policy.

• group-wide environmental policy published;
  
• the acceptance of the report and accounts will not be supported where there is inadequate disclosure of corporate environmental policy;
  
• areas of environmental risk identified;
  
• policy for managing environmental risk set out.

b) There should be clear lines of accountability, management and stakeholder engagement.

• board director with environmental responsibilities is identified;
  
• environmental standards for suppliers disclosed.

c) Companies should report fully on environmental performance.

• environmental initiatives disclosed;
  
• improvements in environmental performance reported;
  
• target setting disclosed;
  
• company is aware of its environmental impact through the supply chain and can provide evidence of evaluation;
  
• company produces a separate environmental report.

d) There should be an independent auditing and verification process.

• environmental audit undertaken;
  
• environmental report is externally verified.

Memoranda and articles of association

Companies should provide shareholders with the full text of any proposed amendment to existing articles, and it is considered best practice to put separate resolutions relating to associated article changes rather than bundle all charges in one resolution.

Proposals to adopt or amend memoranda and articles will be analysed on a case-by-case basis. The overriding principle underpinning analysis is the effect on share- holder rights.

All employee share option schemes

Involving all employees in the business through encouraging share ownership is viewed as a positive development, and support will be given to schemes in which all employees can participate.

Scrip dividends

Scrip dividends are a useful way for companies to assist their cash flow and cut tax liabilities, and WYPF will generally support scrip dividend proposals.

Political donations

WYPF will not support a resolution seeking approval for making political donations, unless political parties are specifically excluded, the authority is for no more than one year, the types of organisations that may receive donations are indicated, and there is clear justification for how any donations will be in shareholders' interests.

Should political donations be disclosed which have not been previously authorised by shareholders, WYPF will not normally support approval of the report and accounts.

Shareholder resolutions

Shareholder resolutions allow shareholders to focus on a particular area of concern, and WYPF will support resolutions where:

• the proposal is appropriate for shareholders to consider;
  
• it is addressing an issue of strategic importance to the company;
  
• it is proposing a course of action by the directors that is reasonable and within their powers;
  
• the supporting statements sets out evidence to support the case made by the requisitionists;
  
• the directors do not provide compelling arguments against the resolution.

Investment trusts

The most important factor relating to investment trust boards is the presence of a board sufficiently independent of the company's investment managers to ensure objective scrutiny of their activities. Unlike other listed companies, the chairman's independence will be assessed beyond appointment, as will it be considered in the context of the balance of independence on the board. The following guidelines must be in place relating to investment trusts:

• no current representative, employee or director of the investment manager should be a director of the investment trust;
  
• a majority of the board should be independent;
  
• management contracts should have a notice period of no more than one year;
  
• there should be no cross shareholding between the trust and the management company;
  
• a director who has served more than nine years on the board will not be considered as independent.

Corporate activity

In deciding on how to vote on resolutions relating to takeovers, mergers, capital reorganisations, share issue authorities and market purchases, the WYPF will be guided by whether:

• the company has provided adequate information, explanation and justification for the proposal;
  
• adequate information on the financial implications of the proposals for the company has been provided;
  
• the board's corporate governance structures provide assurance that independent scrutiny of the proposal has occurred;
  
• there are any significant negative implications for shareholder rights;
  
• there are any negative implications for corporate governance in the company on which there will be no future opportunity to vote;
  
• remuneration committees take the impact of market purchases into account when assessing the achievement of performance targets by executive directors;
  
• there are significant negative impacts for other stakeholders which could have an adverse impact on corporate reputation or performance

Controlling shareholders and takeover code waivers

Corporate governance safeguards are required for shareholders in companies where there is a controlling shareholder, defined as one that holds more than 30% of the voting rights. Companies with controlling shareholders should comply with normal best practice guidelines, and safeguards for minority and non-controlling shareholders be built into board structures and company articles.

In particular, a majority of the board should not have any connection to the controlling shareholder and the board chairman should not have any connection to the controlling shareholder. Additionally, where the controlling shareholder owns or controls, singly or jointly, more than 50% of the voting rights, the controlling shareholder should abstain from voting on the election of any director unrelated to the controlling shareholder.

Share buy-backs and other capital changes can have the effect of increasing the proportionate stake of controlling shareholders. In such circumstances, companies may seek waivers from the Takeover Code requirement that a controlling shareholder should make an offer to all shareholders if their holding increases. WYPF will not give support for waivers from the Takeover Code if there is the potential that a controlling shareholders' stake could increase beyond 50%, due to the reduced protections that apply for minority shareholders when a majority stake exists.

Non-routine resolutions and extraordinary general meetings

WYPF will vote on all non-routine resolutions, including those at EGMs on their merits on a case-by-case basis, and will take account of corporate governance structures and implications, the impact on stakeholders, and the adequacy of information and explanations.

Annex 1

Independence of non-executives

In order to be viewed as independent, directors should not:

• have held an executive position within the company group;
• have had an association with the company of more than 9 years;
  
• have close family ties with any of the company's advisers, directors or senior employees;
  
• have been appointed other than through an appropriately constituted nomination committee or equivalent independent process;
  
• have or had in the recent past, a material business relationship with the company directly;
  
• have received or receive additional remuneration from the company apart from a director's fee, participates in the company's share option scheme or performance related pay scheme, or is a member of the company's pension scheme;
  
• receive remuneration from a third party in relation to the directorship;
  
• hold cross directorships or have significant links with other directors through involvement in other companies or bodies;
• currently hold or recently have held a senior position with a political or charitable body that receives material support from the company;
• represent a significant shareholder;
  
• serve as a director or employee of a company in which the company has a notifiable holding thereby facing potentially conflicting fiduciary duties;
  
• act as the appointee or representative of a stakeholder group other than the shareholders as whole;
  
• serve as a director or employee of a significant competitor of the company.

The chairman will only be assessed for independence upon appointment.

July 2007