Joint Press Release issued by: Diageo plc; Thalidomide UK and the Thalidomide Trust, National Advisory Council;

Diageo plc has agreed a new financial settlement for those affected by the drug.

This historic agreement has been reached between Diageo plc, the Thalidomide Trust's National Advisory Council (NAC), and Thalidomide UK, all of whom recognised that existing resources supporting survivors of thalidomide were unlikely to be sufficient to meet their continuing needs in the coming years. All parties believe that this agreement will be full and final.

Thalidomide was originally distributed in the UK under licence by the pharmaceutical subsidiary of the Distillers Company. It was withdrawn in 1961 when the side effects for pregnant women were discovered.

In 1986 Guinness (a predecessor company of Diageo) acquired the Distillers Company. Diageo plc currently makes an annual payment of £2.8 million to the Trust and in 2005 an additional special contribution of £4.4 million was made. Under the terms of the agreement the future annual payment will increase to around £6.5 million per annum under a covenant payable over the period to 2037. This amount will be index-linked.

This will enable the Thalidomide Trust  - the charitable body that provides ongoing support to Thalidomide survivors - to gradually and significantly increase its annual payments to its beneficiaries and ensure that they will have financial security for the rest of their lives. In conjunction with this settlement, Diageo is giving one year's notice that no further direct individual claims against Distillers or Diageo will be considered after 31 December 2006.

Thalidomide UK President and NAC member, Freddie Astbury, said:

'After 13 years of campaigning which included a hunger strike to highlight the plight of the Thalidomide beneficiaries who were facing an uncertain future due to inadequate trust funds available, Thalidomide UK is extremely pleased and relieved to have finally reached this agreement. Diageo is to be commended for its positive approach and recognition of need that has brought about this agreement, and we feel vindicated in respect of the just struggle maintained on behalf of those afflicted so long by this drug.

The objects set out in the settlement will alleviate many of our concerns in that it establishes a securer future for us all.

We are delighted Diageo have recognised the further necessity for much needed funding and we commend its long-term commitment to Thalidomide beneficiaries.'

Lord Blyth, Chairman of Diageo plc, said:

'We very much regret the thalidomide tragedy which happened 44 years ago. The suffering and hurt of those affected has troubled us all. We are very pleased that this agreement has been reached after a process of very constructive negotiation with the representatives of the Thalidomide survivors’ community.

We acknowledge the efforts of all those involved in recent discussions to bring this matter to a mutually agreed conclusion'

Nick Dobrik campaigner and NAC deputy chairman said:

'This settlement is tremendously important for all those affected by thalidomide.

Some of the Thalidomide Trust's beneficiaries are wearing out their bodies at an accelerated rate because of initial damage by the drug and the ways in which they have tried to overcome its effects. These extra funds will help them to live with increasing levels of disability as they get older and will ensure that those affected by Thalidomide will have a future that is financially secure.

I'm pleased to say that Diageo, as the successor company to The Distillers Company, has taken its responsibilities seriously, listened carefully to our concerns, and we have been able to secure a sustainable future for all thalidomide survivors in the UK. This deal represents the spirit of co-operation in which they entered discussions with us.'

-Ends-

Notes to Editors:

The Thalidomide Trust was established in 1973 to provide ongoing support to those affected by the drug. The Trust currently supports 454 surviving thalidomide beneficiaries. The average payment from the Trust to each beneficiary was around £13,000 a year in 2004.

The National Advisory Council of the Thalidomide Trust (NAC) is a body elected by the Trust's beneficiaries to advise the trustees on matters of policy and expenditure.

Thalidomide UK was founded in 1993. As a group it had three main objectives: to highlight the inadequacy of the original financial settlement, to bring awareness and raise concerns in the deterioration of the health in beneficiaries and to pressurise those who are involved in the use of the drug today for stricter guidelines.

Diageo is the world's leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo trades in some 180 countries around the world and is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). For more information about Diageo, its people, brands and performance, visit  www.diageo.com

Background:

In the 1970s, The Distillers Company (Biochemicals) Limited (DCBL), which had been the distributor in the UK from 1958 to 1961 of Thalidomide products under licence from Chemie Gruenenthal of Germany, settled the vast majority of UK Thalidomide claims on terms approved by Court at that time.  DCBL has at all times denied legal liability for such claims.  DCBL is now a non-trading subsidiary of Diageo plc.

Since the 1970s, new claims have been made by individuals who claimed to have suffered injuries as the result of their mothers taking Thalidomide.  These claims were not covered by the earlier settlement arrangements.  In cases where it could be demonstrated that, on the balance of probabilities, UK Thalidomide was the cause of their injuries the claimants were brought within an 'unofficial' and ex gratia compensation scheme: without admission of liability or waiver of limitation defences they have been treated on a basis equivalent to the 1973 settlement for the purposes of the calculation of damages and interest.  Those claimants who were accepted by DCBL as having been injured by Thalidomide have normally applied to the Thalidomide Trust to be accepted as a beneficiary.

After pressure from campaigners, the Government changed the tax status of the Thalidomide Trust so that – with effect from August 9 2004 – all payments to beneficiaries were exempt from tax.

It is now more than 44 years since Thalidomide was withdrawn from the UK market and it has become increasingly difficult to find the relevant factual and expert evidence as to causation of injuries in individual cases.  Diageo has therefore decided that, in conjunction with the substantial additional long-term provision which it has made for the Thalidomide Trust, no further claims will be considered under the unofficial compensation scheme unless they are notified to Diageo with appropriate supporting evidence by 31 December 2006.  Any individuals who have not notified claims by that date may of course continue to apply to the Thalidomide Trust and, if accepted by the Trust as injured by UK Thalidomide, will be entitled to tax-exempt benefits from the Trust.