This is Teathers’ policy for the production of research.

Recommendation Scheme (includes quarterly ratings and distribution table) and Valuation Methodology.

Teathers is committed to providing customers with research of the highest quality and acts in accordance with the Financial Services Authority (‘FSA’) principles. Specifically, in the production and distribution of research, Teathers endeavours to ensure that the research is clear, fair and not misleading (Principle 7 and COBS 4.2 and that it manages its conflicts of interests fairly (Principle 8 and SYSC 10). Teathers believes that it is in its clients' interest to set out the policies it has in place for the production of research which aim to achieve this.

Teathers does not produce independent investment research under COBS 12.2. Its research is non–independent research under COBS 12.3, which means it is a marketing communication under the Markets in Financial Instruments Directive (‘MiFID’) and is not required to be prepared in accordance with the legal requirements designed to promote the independence of investment research. Non independent research is not subject to any prohibition on dealing ahead of the dissemination of investment research. However, Teathers is required to have policies to manage the conflicts which may arise in the production, including preventing dealing ahead (see Means and timing of publication).

This policy details Teathers compliance with the FSA rules and is not intended to create third party rights or duties or to form part of any contractual agreement between Teathers and any client. The policy covers research communicated only in formal publications or through other written comments prepared by persons described in the publication as analysts but does not cover technical analysis concerning the supply for a security or industry based on trading volume and price without any analysis of the specific security itself.

Communications from sales, trading or sales trading are not generally regarded as research for the purpose of this policy. Research Recommendation, for the purpose of this policy and Teathers research publications, includes research or other information produced by an analyst which:

1. Explicitly or implicitly, recommends or suggests an investment strategy; or
2. Directly or indirectly, expresses a particular investment recommendation; or
3. Expresses an opinion as to the present or future value or price of such instruments.

It does not include trading ideas or comments produced by Teathers sales persons or sales traders and such documents published to clients will make clear that they are produced by sales or trading.

General

Teathers believes that its policy and procedures are suitable for its size, organisational structure and business model. Furthermore, it believes that the policy outlined in this statement enables it to act in the best interests of its investment clients and that its research is clear, fair and not misleading. Teathers research covers the UK equity market and is distributed only to those persons who fall within the FSA's definition of Eligible Counterparty or Professional Client. Teathers' policies and procedures are regularly reviewed by senior management to ensure their ongoing effectiveness and appropriateness for identifying and managing potential conflicts of interest within the firm, both in relation to the production of research and within other areas of the business. This policy will be updated to reflect any changes in Teathers policies on the production of research.

Supervision and remuneration of analysts

Teathers ensures that its organisational structure and reporting lines are such that an individual involved in advising or raising capital for corporate clients (thus having responsibilities that might reasonably be considered to conflict with the interest of Teathers institutional clients) is not responsible for:

1. The day-to-day supervision or control of analysts.
2. Decisions on the subject matter or content of a research publication or the timing of that publication. The final decision on such matters rests with the relevant analyst, in conjunction with senior research colleagues, as appropriate. Teathers writes research on both corporate and non-corporate clients.
3. The remuneration of analysts. Analysts are incentivised in a way that is consistent with providing clear, fair and non-misleading research. Their remuneration is not linked to specific corporate finance transactions, nor to recommendations contained in research, but is determined by the general profitability of Teathers.

Analysts are free to express their own views in research reports and procedures are in place to prevent inappropriate influence by non-research staff or subject companies over the content of research reports. Non-research staff and subject companies are prohibited from reviewing or approving the content of draft research reports before publication other than for the purpose of verifying the factual accuracy of information in these reports.

Involvement of analysts in other activities

1. Relationship with Corporate Finance

Chinese walls are barriers to the passing of information. Teathers has established policies, procedures and physical arrangements (collectively "Chinese walls") to manage confidential information and prevent the inadvertent spread and misuse of inside information.
Corporate Finance, which routinely has access to information which is confidential and/or inside is located in a separate restricted-access area of the building and its activities and the information connected thereto, where confidential and/or price sensitive are behind the Chinese wall.

If Corporate Finance is acting as adviser to a client company on a confidential matter, then that information is segregated behind a Chinese Wall; the policy of Teathers normally allows an analyst to continue to comment on the company, even though colleagues in Corporate Finance are aware of the impending transaction.
There are occasions when an analyst is taken over the Chinese Wall to assist in corporate finance activities. This process is controlled by the Compliance Department The normal activities of such an analyst are restricted and controlled during the period that they are over the wall.

An analyst may put forward ideas to the corporate finance department; he may assist it in researching business opportunities (subject to controls to prevent him receiving price sensitive information).

The FSA's guidance on the appropriate policies required to ensure independent investment research (see COBS 12.2.9) advises that it is likely to be inappropriate to allow a firm to use its analysts in a marketing capacity (for example, in pitches to solicit or obtain corporate finance or corporate broking business or in attendance at road shows relating to issues or allocations).

Teathers business model and size means that analysts do attend pitches for new business, subject to any constraints required by maintaining an effective Chinese Wall in respect of any price-sensitive matter. In particular, sector analysts will attend pitches for new brokerships and may in exceptional circumstances attend road shows for a new issue, although the analyst cannot present on behalf of the issuing company. For this reason Teathers believes that its research cannot be independent in accordance with FSA COBS 12.2.

However, Teathers does make clear to any potential or existing corporate client that the company cannot influence the contents of that research except where there are issues of a factual nature.

2. Relationship with Sales and Trading

Analysts are located in an area of the sales and trading floor. However they may not be told or have access to specific information concerning the firm's current trading positions. An analyst may generate ideas to sales and trading staff and provide information and advice to the firm's institutional investment clients. To prevent an allegation of dealing ahead of the publication of research material before clients have had a reasonable opportunity to act upon it, the traders and sales traders are not allowed to know the contents of planned research material, or the intention to publish a piece of research until that information has been notified to clients (see Means and Timing of Publication below).

Policies concerning inducements given to analysts

Teathers’ procedures prohibit any of its analysts or other employees from offering or accepting inducements or remuneration to provide favourable research.
These restrictions do not preclude the acceptance of reasonable corporate hospitality or de minimus gifts in accordance with the firm's general policies regarding inducements. They do not prevent a company from reimbursing reasonable travel expenses incurred by an analyst to enable the analyst to carry out research on the company.

Issuer paid research

It is generally not the policy of Teathers to be remunerated by the company on which it is writing research.  However, at the discretion of Senior Management, Teathers may decide that this is acceptable.  Teathers’ procedures, this policy, the Conflicts of Interest Policy and disclaimers on its research account for this possibility.  Through the disclaimers, Teathers ensures that clients are properly notified of the potential conflict.

To ensure that any potential conflict of interest is managed effectively and in accordance with FSA Rules, the company concerned must sign an agreement with Teathers which expressly provides that, although Teathers is being remunerated for its service of writing research on the company, the analysis, opinions, projections, forecasts and estimates expressed in such research reports will be honest, unbiased and in no way influenced by any remuneration received by Teathers from the company.  Before any such research is distributed or made public, it must receive sign-off from the Head of Research to ensure compliance with this policy, Teathers’ Conflicts of Interest Policy and to confirm that the research reflects Teathers’ honest, unbiased opinion and is clear, fair and not misleading.

Means and timing of publication

Teathers procedures require research to be published or distributed to its clients in an appropriate manner. Save for in exceptional circumstances that are monitored by compliance, written research is communicated via email to internal and external recipients simultaneously. Employees may not communicate the substance of any research other than in accordance with Teathers policy and procedures, which include a requirement that analysts generally are prevented from disclosing the timing, subject matter or content of forthcoming research reports to any salesperson, sales trader or trader. Teathers compliance function monitors these procedures.

Teathers procedures lay down guidelines for restrictions on the publication of research in certain circumstances (for example, around the time of an investment offering or in a takeover code offer period), where Teathers has a corporate relationship with the relevant company.

Teathers does not have a policy covering frequency of up dates on research recommendations.

Ceasing Coverage

The decision to cease coverage must be approved by the Head of Research. Notification to clients of this decision will be made in a Morning Meeting note and in the next published Compendium

Disclosures

Teathers discloses any relationship, interest or conflicts of interest they have with any company the subject of the research, as required by the FSA COBS 12.4. This disclosure is made within the research publication in respect of most publications, however in respect of shorter publications where such disclosures would be disproportionate in relation to the length of the publications, disclosures are made by hyperlink link. An example of such shorter publications would be the Teathers early morning comments or a company specific intra day email update. It should be noted that if Corporate Finance is giving advice to a company on a confidential basis, the analyst will not normally be aware and thus it will not be possible to disclose this on a research publication.

Personal Account Dealings

Teathers personal account dealing restrictions prevent analysts and specialist salesmen from dealing in the shares of companies within their sector, save where such dealing has taken place in a discretionary managed portfolio over which the employee has no control. In the event of analysts or specialist salesman having a holding in a company within their sector that pre-dates their employment with Teathers, sales of that holding will be allowed in a supervised and carefully controlled manner. In addition any holding would be disclosed on any research publication the subject of which is the company in which the author analyst or specialist salesman holds shares. No Teathers employees are permitted to deal personally in the securities of companies with whom we have a corporate advisory or broking relationship, save as aforementioned in the case of a holding that pre-dates employment with Teathers.