Arbuthnot Securities

Disclosures

Explanation of Recommendations

Our analysts award a Strong Buy rating in those cases where they believe there will be total shareholder return - defined as the absolute rise in share prices plus dividend payment - in excess of 20% over a 12-month period. We assign a stock a Buy recommendation where our analysts believe there will be a total shareholder return of 10% or more over a 12-month period. We apply a Neutral recommendation where we anticipate a shareholder return of between plus 10% and minus 10%. We assign a Reduce recommendation where we anticipate a shareholder return of between minus 10% and minus 20%. Our Sell recommendation implies an expected shareholder loss over a 12-month period of 20% or more. Analysts have assigned a 'trading view' to stocks that they think might move materially within the following ten trading days; possibly in response to a move in currency, sentiment, or a specific event. The trading view is a short-term suggestion and does not contradict the 'recommendation'.

Recommendation proportions in last quarter

The FSA Handbook (COBS12.4) requires firms to make certain disclosures on research recommendations. This includes a requirement to publish on a quarterly basis the following information in relation to its research recommendations:
(a) the proportion of all research recommendations published during the relevant quarter that are Buy, Hold, Sell or equivalent terms; and
(b) the proportion of relevant investments in each of these categories, issued by issuers to which the firm supplied material investment banking services during the previous 12 months.
The information in the table meets these requirements and will be updated as soon as possible after the relevant quarter end. The proportions will be calculated by reference to the research recommendations on the Firm’s website, during the quarter together with any other research recommendations published in the relevant quarter. Any short term trading views included in the research recommendation will be excluded from the disclosure, as will research on AIM listed securities.

All Stocks excluding AIM Corporate Stocks excluding AIM

Strong Buy 16.7% Strong Buy 56.34%

Buy 45.76% Buy 40.6%

Neutral 34.9% Neutral 3.1%

Reduce 1.1% Reduce 0.0%

Sell 1.6% Sell 0.0%

Conflict of interest management – Research

Summary of policies and procedures

The purpose of this document is to outline the policy, controls and procedures that Arbuthnot Securities Ltd (or “the firm”) has implemented to ensure that the firm’s research is of a high quality and to notify you of our response to the Financial Services Authority’s (“FSA”) rules and guidance on conflicts of interest in investment research (mainly FSA’s Conduct of Business (“COBS”) 12.2), non-independent research (COBS 12.3) and research recommendations (COBS 12.4).

Senior management are required by the FSA Handbook to ensure that a firm’s systems, controls and procedures are robust and adequate to identify and manage the conflicts of interest which arise in relation to research and research recommendations, and to ensure, as far as practical, that the arrangements operate effectively. We have identified the main conflicts of interest in relation to research and research recommendations, and controls and procedures have been implemented to manage these conflicts. These procedures have been included in the firm’s internal documentation including a Conflicts of Interest Management Policy, with which our staff are required to comply as part of their contract of employment.

The rules and guidance in COBS 12.2 require firms who hold out their research as being “investment research” to establish and implement a policy for managing the conflicts of interest, which may affect the impartiality of their research. Such a conflict of management policy should address in relation to research, interalia, supervision and remuneration of analysts, involvement of analysts in other activities, avoiding inappropriate influence, means and timing of publication etc.

The firm has decided, principally because of our analysts’ contacts with existing and prospective corporate clients (including participation at pitches for new business and attendance at road shows), that we cannot present our research as being “investment research”. It is therefore “non-independent research” and constitutes a “marketing communication” as those terms are defined by the FSA Handbook. Accordingly, our employees are prohibited from holding out our research as being an impartial assessment of the prospects or value of the company being the subject of that research. All research published or distributed by the firm is done so in accordance with this policy. All research shall include the following disclaimer: “This research is classified as being a 'marketing communication' as defined by the FSA’s Handbook. This is principally because analysts at Arbuthnot Securities are involved in investment banking activities and pitches for new business and consequently this research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Therefore the research is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nevertheless, the Firm's Conflict of Interest Management Policy prohibits dealing ahead of research except in the normal course of market making and to satisfy unsolicited client orders. Please refer to www.arbuthnotsecurities.co.uk for a summary of our conflict of interest management policy in relation to research. This includes organisational controls (departmental structure, a Chinese wall between corporate finance and other departments, etc), procedures on the supervision and remuneration of analysts, a prohibition on analysts receiving inducements for favourable research, editorial controls and review procedures over research recommendations and a prohibition on analysts undertaking personal account dealings in companies covered by them.”

However, the type, content and quality of our research will not change from research issued prior to 1st November 2007 when the rules in respect of “investment research” and “non-independent research” became effective. It is important to stress, in this context, that our research and research recommendations remains in accordance with FSA Principle for Business 7, ‘Communicating with clients’. This requires firms to have due regard to the information needs of those clients and to communicate information to them in a way that is ‘fair, clear and not misleading’. The firm has controls and procedures in place to ensure both the integrity of our analysts and the quality of their research (please see the following section for key controls and procedures).

This document is prepared for the sole purpose of enabling the firm to comply with the FSA’s Conduct of Business rules in respect of the management of conflicts of interest in relation to research and research recommendations and, is not intended to create third party rights or duties or to form part of any contractual agreement between Arbuthnot Securities Ltd and any client or other third party.

Key controls and procedures relating to research

The firm has implemented controls and procedures to manage and control conflicts of interest in relation to research and research recommendations. The following are the key controls and procedures:

(a) Organisation of the firm

The firm is divided into departments, with the corporate finance and broking departments being behind a Chinese wall separate from other departments. The Chinese wall includes physical and other barriers (e.g. Corporate Finance computer systems not accessible by Research, Sales, Trading etc); there are controls over analysts being taken over the wall and on the use and disclosure of confidential and price sensitive information by those persons over the wall;

(b) Supervision and remuneration of analysts

Analysts report to the Head of Research, who in turn reports to the firm’s Chief Executive Officer. The reporting line is independent of Corporate Finance, Sales and Trading; the Head of Research (or a person designate by the Head of Research) signs off on formal research reports along with the Research Editor and Compliance. Where a member of staff conducts a dual role as an analyst and as a salesperson, the member of staff shall report solely to the Head of Research in respect of research prepared by them;

The firm may agree, as part of its engagement letter with a corporate broking client, to issue research. However, the final decision on the companies to be covered by research is taken by the Head of Research in consultation with the analyst covering the sector. The views of Corporate Finance and Sales may, where appropriate, be obtained as part of this process;

Decisions on the content of research are to be taken only by the analyst responsible for the research (see also (e) below ‘Commenting on draft research before publication’);

Decisions on analysts’ recruitment, remuneration and termination are the responsibility of the Head of Research in conjunction with the Chief Executive. Sales may be consulted in respect of investment clients’ response to research, and if, appropriate, other matters. Where a member of staff conducts a dual role as analyst and a salesperson, the Head of Research and the Head of Sales will each make a recommendation to the Chief Executive Officer about remuneration to be paid in respect of the research and sales duties carried out by that person. The Chief Executive Officer’s decision shall be final;

Remuneration may be based on a number of factors including, but not limited to, the experience of the analyst, quality and accuracy of research, the firm’s overall performance and/or the aggregated results of other activities including investment banking. Analysts remuneration will not be based on expressing a specific view or recommendation about an issuer, security or industry;

Analysts may assist in the research of corporate finance business opportunities and provide ideas to sales or trading staff subject to the firm’s controls and procedures to prevent dealing ahead of research;

Subject to the firm’s Chinese wall policy and to Corporate Finance leading the pitch, analysts may assist in promoting the firm’s services to potential corporate clients, and advise Corporate Finance on the merits (or otherwise) of the proposed business. However, analysts are required to advise potential clients that they will exercise professional judgement in the preparation of their research and that it will be produced independently of the subject company. Notwithstanding the foregoing, analysts may, at their discretion, submit their draft research to the subject company for the checking of factual statements (see (e) ‘Commenting on draft research before publication’ below.)

Analysts may attend road shows and answer questions on pre-existing research. However, they must not participate in a manner, which could reasonably be perceived to be an endorsement of the issuer;

Analysts may answer calls from investment clients concerning their pre-existing research and the new issue, but their answers must be factual and not include any implicit or explicit recommendations;

(d) Inducements in connection with research

Analysts and other employees are prohibited from offering or accepting inducements to provide favourable research;

Attempts by the subject company or another person to put pressure on an analyst to produce favourable research are subject to disclosure to Compliance and to the firm’s internal procedures;

(e) Commenting on draft research before publication

Editorial control over draft research is not to be given to Corporate Finance, the subject company or anyone else whose role or commercial interest could conflict with the interests of investment clients. However, draft research may be submitted to the subject company for the sole purpose of checking facts and to the firm’s Corporate Finance Department for the same purpose.

A record is kept of any subject company comments;

(f) Timing and manner of publication and distribution of research

Printed research is only distributed through the firm’s usual channels (i.e. by email, post or on the firm’s website); Draft research or the substance thereof (irrespective of whether the analyst is the author of the research) shall not be distributed or otherwise made available to any third party investor or potential investor or any other person (otherwise than in accordance with the Firm’s procedures) after the decision to initiate coverage or publish research has been made. This restriction shall also apply to information on the timing of the publication of research and in relation to the distribution of analyst’s models;

Prior to the intention to publish research, sales may be consulted about likely investor interest in the prospective research. The analyst is prohibited from divulging either the likely timing or content of the research. Staff who conduct a dual role as an analyst and a salesperson are prohibited from divulging either the timing or content of research to trading or sales or selectively to clients or acting upon the forthcoming research (otherwise in accordance with the Firm’s procedures) until the research is published;

Once the intention to write research has been formed, the analyst must not (subject to the firm’s procedures over morning meetings–see next paragraph) communicate with trading, sales or selectively with investment clients prior to the publication or distribution of research to the firm’s clients (except that sales may be confidentially briefed by an analyst about forthcoming research after 4.30pm the day before the research is published, where publication is before the market opens the following day.) Where this exception is utilized, the sales force is subject to confidentiality restrictions until the research is published to the Firm’s clients;

Analysts’ contributions to the morning meeting will normally be included on the Firm’s website before the analyst speaks at the meeting, but in any event, in advance of market opening (or if later than market opening, before effecting own account transactions for the firm);

Traders are prohibited from effecting own account transactions in advance of research publication or distribution except firstly for market making in the normal course of business and in good faith and, secondly, for unsolicited client orders;

Analysts are prohibited from preparing research papers or analysis which are intended firstly for internal use for the firm’s own advantage, and later for publication to clients;

Staff are prohibited from distributing third party research to investment clients except with the prior written approval of the Compliance Department.

(g) New issues by corporate clients: Quiet periods

The firm restricts the publication and distribution of research around the time of both primary and secondary securities offerings through the operation of quiet periods; there are also restrictions designed to maintain the integrity of pre-flotation research published by the firm in respect of IPO’s;

(h) Personal account dealings

Personal account dealing restrictions apply to all staff. Staff are required to obtain prior Compliance approval before personal account dealing;

Analysts are prohibited from dealing in investments (or related investments) on which they produce research;