Pillar 3 Disclosures - Unaudited

The Capital Requirements Directive ('the Directive') of the European Union establishes a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain. In the United Kingdom, the Directive has been implemented by the Financial Services Authority ('FSA') in its regulations through the General Prudential Sourcebook ('GENPRU') and the Prudential Sourcebook for Banks, Building Societies and Investment Firms ('BIPRU').

The FSA framework consists of three 'Pillars':

Pillar 1 sets out the minimum capital amount that meets the firm's credit, market and operational risk;
Pillar 2 requires the firm to assess whether its Pillar 1 capital is adequate to meet its risks and is subject to annual review by the FSA; and
Pillar 3 requires disclosure of specified information about the underlying risk management controls and capital position.

The rules in BIPRU 11 set out the provision for Pillar 3 disclosure. This document is designed to meet our Pillar 3 obligations.

We are permitted to omit required disclosures if we believe that the information is immaterial such that omission would be likely to change or influence the decision of a reader relying on that information.

In addition, we may omit required disclosures where we believe that the information is regarded as proprietary or confidential. In our view, proprietary information is that which, if it were shared, would undermine our competitive position. Information is considered to be confidential where there are obligations binding us to confidentiality with our customers, suppliers and counterparties.

We have made no omissions on the grounds that it is immaterial, proprietary or confidential.

Scope and application of the requirements

Fox-Davies Capital Limited ("the Firm") is authorised and regulated by the Financial Services Authority and as such is subject to minimum regulatory capital requirements. The Firm is categorised as a Full Scope firm by the FSA for capital purposes.

The firm is a limited liability company registered in the United Kingdom and 100% of FDC's ordinary shares are owned by the Managing Director, Daniel Fox-Davies.

The Firm's principle business activity is the provision of corporate finance and investor relations advisory service provided to junior natural resource companies. The firm specialises in assisting international resource companies to gain access to the UK, European and North American capital markets and has been advising and raising funds for the natural resource sector since February 2001.

The Firm is not a member of a group and so is not required to prepare consolidated reporting for prudential purposes.

Risk management

The Firm is governed by its directors ("Principals") who determine its business strategy and risk appetite. They are also responsible for establishing and maintaining the Firm's governance arrangements along with designing and implementing a risk management framework that recognises the risks that the business faces.

The Principals also determine how the risk our business faces may be mitigated and assess on an ongoing basis the arrangements to manage those risks. The Principals meet on a regular basis and discuss current projections for profitability, cash flow, regulatory capital management, and business planning and risk management. The Principals manage the Firm's risks business though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FSA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

The Principals have identified that market and operational risks are the main areas of risk to which the Firm is exposed. Annually the Principals formally review their risks, controls and other risk mitigation arrangements and assess their effectiveness. Where the Principals identify material risks they consider the financial impact of these risks as part of our business planning and capital management and conclude whether the amount of regulatory capital is adequate.

This assessment process is documented in the Firm's Internal Capital Adequacy Assessment Process ("ICAAP"), and the conclusion of the ICAAP is that the Firm's Pillar 2 requirement is £181,000.

Regulatory capital 31^st December 2009

The Firm is a Limited Liability Company and its capital arrangements are established in its Articles. Its capital is summarised as follows:

	31 December 2009
	£000
Share capital	110
Profit and loss	1,313

The main features of the Firm's capital resources for regulatory purposes are as follows:

	31 December 2009 £000s
Total capital after deductions - all Tier One Pillar 1 requirement Pillar 2 requirement	1,313 849 181

Surplus/(Deficit) of financial resources	523

Our Firm is small with a simple operational infrastructure.

The BIPRU approach that the firm has adopted is as follows:

(i) Credit risk: the standardised approach (BIPRU 3.4) and simplified method of calculating risk weights (BIPRU 3.5). Comprises of 8% x 100% of all debtors and fixed assets (excluding bank and cash balances);

(ii) Market risk: Standardised, and

(iii) Counterparty risk: Mark to Market (MTM). Exposure is calculated as the MTM plus the PFE where the PFE is determined as a percentage of the notional value of the contract. The rules in BIPRU 13.4 are followed.

The Firm's Pillar I figure comprises of the greater of base requirement which is €730,000, or variable capital requirement which is £849,000 (credit risk/market risk/concentration risk/counter party/operational risk).