Toyota Tsusho Metals Limited

PILLAR 3 DISCLOSURE (BIPRU 11) - Financial year ending 31 March 2011

Background

Toyota Tsusho Metals Limited is authorised and regulated by the Financial Services Authority (FSA). The company is classified as an Exempt BIPRU Commodity Firm by FSA. It is also exempt from the capital requirements of the Capital Adequacy Directive of June 2006 and accordingly calculates its regulatory capital requirements in accordance with Chapter 3 of FSA's Prudential rule book IPRU (INV). The company is neither a parent nor subsidiary undertaking or is part of a UK Consolidated Group for regulatory purposes. As a result, these Pillar 3 disclosures that follow herein are made on an individual basis.

Disclosure Policy

The company has adopted a policy of reviewing annually its disclosures for the purposes of BIPRU 11 in conjunction with the preparation and publishing of its annual audited accounts. The company's financial year end is 31st March. If disclosure items coincide with accounting disclosures, then the disclosure statement used in the audited accounts is reproduced as a Pillar 3 disclosure.

Chosen location of disclosures

The chosen location is the company's website.

Risk Management - objectives and policies

The company's activities expose it to a variety of financial risks: price/market risk, credit risk, liquidity risk and cash flow, and fair value interest rate risk. The company's overall risk management programme focuses on the unpredictability of relevant markets and seeks to minimise potential adverse effects on the company's financial performance. The Board of Directors determines the level of risk acceptable to the company by setting limits within which senior managers monitor the company's operations.

Price/Market risk:

This risk arises from adverse movements in the price of derivatives in which the company trades. The company's objective is to be aware, control and minimise this risk. The Company's principal business involves acting as a broker and dealer in commodity derivatives and it holds positions primarily on a back to back basis with clients and brokers. Open trading positions held by the Company are small and largely result from client facilitation activities. Where open positions exist the Company is exposed to adverse price movement in the price of commodities in which it trades and holds positions.

The company has a policy to create trading limits have been set that take into account each commodity's volatility. These limits are monitored on a daily basis against both marked to market movement and position structure.

Credit risk:

This risk arises from a counterparty defaulting on a contractual obligation involving cash and cash equivalents, deposits with banks and financial institutions, and from derivative financial instruments transactions. In particular, the company operates in a market that is largely driven by providing credit to counterparties and has an objective of being aware of, and controlling, counterparty exposure against limits set down.

The company has credit policies and procedures in place under its Adequate Credit Management Policy (ACMP) and this helps ensure it deals only with counterparties of suitable credit standing. After considering a counterparty's financial results and other relevant data, all applications for credit lines are submitted to the parent company's credit committee for formal approval, or rejection. Such lines granted are advised to the counterparty and are reviewed at least on an annual basis. All counterparty positions are monitored at least on a daily basis against lines granted. The company calls margin for cover should net exposures covered by netting agreements, exceed the lines granted. It considers its dealings with the present range commodities as one class of financial asset.

The company has determined that concentration risk can arise through exposure to any one counterparty or counterparty group, from the industry segment those counterparties are involved in, and from geographic region. Management, however, have in place master netting agreements that reduce the credit exposure significantly and through the netting of assets and liabilities in the event of a default.

Liquidity risk:

This is the risk that the company is unable to meet funding obligations as they fall due. The company's objective is to ensure adequate financial arrangements are in place to prevent this risk occurring. Prudent liquidity risk management requires maintaining sufficient cash, cash equivalent, deposits and adequate bank facilities readily available to fund the company's day to day business. Funding levels are reviewed at least annually by the company and its parent company and account taken of both business plans and market levels to ensure an appropriate level of uncommitted bank facilities are available to support the business.

Foreign exchange risk:

This risk arises from adverse exchange rate movement in the currencies to which the company is exposed. The company's objective is to be aware of and control and minimise this risk. The company is exposed to movement in United States dollar and sterling exchange rates because it operates mainly in dollar denominated commodities and reports the financial statements in sterling.

Management has set a policy that where the company contracts in a currency other than dollar, that contract is immediately covered with respect to the dollar. The company is also required to sell its dollar income stream for sterling on a monthly basis. The company has receivables and payables in non sterling currencies and the resulting currency exposure within net assets are exposed to currency translation risk.

Interest rate risk:

The company has an excess of current assets over current liabilities and is exposed to minimal cash flow interest rate risk. Surplus cash is invested on term deposits. Interest is not charged or incurred on outstanding derivative asset and liabilities with brokers or clients.

Operational risk:

This risk is the potential impact of both financial and reputational loss that could arise from failings in operational processes, systems, or internal controls. As a regulated company the reporting and other disciplines required of it ensure a constant awareness and review of operations.

Capital resources

Share capital constitutes the managed capital of the company. Called up share capital and the profit and loss reserve on the balance sheet qualify for inclusion as financial resources for regulatory purposes. In addition, the company can call on subordinated loans from third parties to supplement regulatory capital if required and during the year drew down funds under facilities provided for this purpose. The Company is authorised and regulated by the Financial Services Authority ("FSA"), and is subject to the FSA's minimum capital standards and requirements as applicable to UK Non-ISD Firms. These require, inter alia, that a minimum ratio of Capital available to risk weighted Capital Requirements of 100% is maintained at all times. In addition there are concentration and liquidity mismatch calculations and reporting requirements and is measured on a daily basis.

The Company's sets of objectives, policies and processes relating to the management of capital, and for ensuring that the FSA's minimum capital standards are met. FSA requirements are fully incorporated into capital management objectives, policies and processes.

The company calculates, at least daily, the regulatory capital resources in accordance with FSA IPRU (INV) chapter 3 rules and this requires deduction from its financial resources of investments and other disallowed assets, and the following:

Primary Requirement

This is the base requirement plus other liquidity adjustments. At 31 March 2011 this requirement was £1,142,300.

Position Risk Requirement (PRR)

This is a calculation of all commodity futures and options positions based on the maturity ladder method which allows offsetting of positions to adjacent maturity bands. At 31 March 2011 this requirement was £2,497,900.

Foreign Exchange Requirement (FER)

This calculation takes the exposure in each non base currency at spot rate to base currency and the aggregate multiplied by 5% is the resultant requirement. At 31 March 2011 this requirement was £152,775.

Counterparty Risk Requirement (CRR)

Exposure on each counterparty after taking account of any acceptable collateral held, multiplied by 10% is the resultant requirement. At 31 March 2011 this requirement was £2,494,166. An additional CRR is taken in respect of concentration risk should there be exposure to single counterparty, or in the same group. At 31 March 2011 there was a zero requirement in respect of concentration.

At 31 March 2011 the company had Financial Resources of £17,691,184 and a Financial Resources Requirement of £6,287,141 and a consequential excess of financial resources of £11,404,043.

PILLAR 3 DISCLOSURE (BIPRU 11) - Financial year ending 31 March 2010

Background

Disclosure Policy

Chosen location of disclosures

The chosen location is the company's website.

Risk Management - objectives and policies

Price/Market risk:

Credit risk:

Liquidity risk:

Foreign exchange risk:

Interest rate risk:

Operational risk:

Capital resources

p>Share capital constitutes the managed capital of the company. Called up share capital and the profit and loss reserve on the balance sheet qualify for inclusion as financial resources for regulatory purposes. In addition, the company can call on subordinated loans from third parties to supplement regulatory capital if required and during the year drew down funds under facilities provided for this purpose. The Company is authorised and regulated by the Financial Services Authority ("FSA"), and is subject to the FSA's minimum capital standards and requirements as applicable to UK Non-ISD Firms. These require, inter alia, that a minimum ratio of Capital available to risk weighted Capital Requirements of 100% is maintained at all times. In addition there are concentration and liquidity mismatch calculations and reporting requirements and is measured on a daily basis.

Primary Requirement

This is the base requirement plus other liquidity adjustments. At 31 March 2010 this requirement was £856,723.

Position Risk Requirement (PRR)

Foreign Exchange Requirement (FER)

This calculation takes the exposure in each non base currency at spot rate to base currency and the aggregate multiplied by 5% is the resultant requirement. At 31 March 2010 this requirement was £13,753.

Counterparty Risk Requirement (CRR)

Exposure on each counterparty after taking account of any acceptable collateral held, multiplied by 10% is the resultant requirement. At 31 March 2010 this requirement was £1,115,571. An additional CRR is taken in respect of concentration risk should there be exposure to single counterparty, or in the same group. At 31 March 2010 there was a zero requirement in respect of concentration.

At 31 March 2010 the company had Financial Resources of £17,674,682 and a Financial Resources Requirement of £4,261,923 and a consequential excess of financial resources of £13,412,759.