MIRA INFORM REPORT

Report Date :

8^th June, 2006

IDENTIFICATION DETAILS

Name :	MATRIX LABORATORIES LIMITED
Registered Office :	1-1-1151/1, Sairam Towers, 4^th Floor, Alexander Road, Secunderabad – 500 003, Andhra Pradesh, India
Country :	India
Financials (as on) :	31.03.2005
Date of Incorporation :	29.11.1984
Com. Reg. No.:	01-5146
CIN No.: [Company Identification No.]	L24231AP1984PLC005146
TAN No.:	HYDM02247A
Legal Form :	Public Limited Liability Company. The company’s Shares are listed on the Stock Exchange.
Line of Business :	Manufacturers of Bulk Drugs, Formulations, Medicinal Chemicals and Botanical Products such as Ibuprofen, Sulphamethoxazole, Pefloxacin, Ciproflxacion, Nimesulide and Norfloxacin.

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed company having fine track. Available information indicates high financial responsibility of the company having fine track records. Trade relations are fair. Payments are correct and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	1-1-1151/1, Sairam Towers, 4^th Floor, Alexander Road, Secunderabad – 500 003, Andhra Pradesh, INDIA
Tel. No.:	91-40-27700363/ 55327722
Fax No.:	91-40-27700343
E-Mail :	matrix@matrixlabsindia.com
Website :	http://www.matrixlabsindia.com
Factory 1 :	Survey No. 10, Gaddapotharam Village Kazipally Industrial Estate, Jinnaram Mandal, Medak District - 502 319, Andhra Pradesh, India
Factory 2 :	Survey No. 10 & 42, Gaddapotharam Village Kazipally Industrial Estate, Jinnaram Mandal, Medak District - 502 319, Andhra Pradesh, India
Factory 3 :	Plot No.s 38, 39, 40, 49, 50 & 51 Phase - IV, IDA Jeedimetla - Hyderabad - 500 055, Andhra Pradesh, India
Factory 4 :	Plot No. 36, Phase - IV, IDA, Jeedimetla Quthubullapur Mandal, R.R.Dist - 500 055, Andhra Pradesh, India
Factory 5 :	Plot No. 16/B/1 S V Co-operative Industrial Estate, Jeedimetla Quthubullapur Mandal, R.R.Dist - 500 055, Andhra Pradesh, India
Factory 6 :	10/A, Model Industrial Estate, Gaddapotharam, Jinnaram Mandal, Medak District, Andhra Pradesh, India
Factory 7 :	Plot Nos. 14, 99 and 100, Chemical Zone, Pashamylaram, Patancheru Mandal Medak District- 502 319, Andhra Pradesh, India
Factory 8:	G.Chodavaram Village, Poosapatirega Mandal, Vizianagaram District - 535 204, Andhra Pradesh, India
Factory 9 :	Plot No.45 A & B, Anrich Industrial Estate, Bollaram, Medak District - 502 325, Andhra Pradesh, India
Factory 10 :	Plot No.35/A, S.V.Co-operative Industrial Estate, Jeedimetla, Hyderabad, Andhra Pradesh, India

DIRECTORS

Name :	Mr. N. Prasad
Designation :	Chairman and Chief Executive Officer
Name :	Dr. C. Satyanarayana
Designation :	Chief Operating Officer
Age :	42 Years
Qualification :	Ph.D in Chemistry
Experience :	17 Years
Date of Joining :	03.02.2001
Previous Employment :	Vorin Laboratories Limited
Name :	Mr. C. Ramakrishna
Designation :	Director
Name :	Prof. P. V. Indiresan
Designation :	Director
Name :	Mr. K. R. V. Subramanian
Designation :	Director
Name :	Mr. Puneet Bhatia
Designation :	Director
Name :	Mr. S. Iswaran
Designation :	Director
Name :	Dr. Fred. E. Cohen
Designation :	Director
Name :	Dr. Micheal Wooldridge
Designation :	Director
Name :	Mr. Ong Beng Teck
Designation :	Alternate Director to Mr. S.Iswaran
Name :	Mr. Ashish J. Shastry
Designation :	Alternate director To Fred E. Cohen

OTHER PERSONNEL

Name :	Mr. N. Anjaneyulu
Designation :	Company Secretary

MAJOR SHAREHOLDERS

Category	No. of shares	% of shareholding
Promoters Holdings
Indian Promoters	26270010	17.10
Foreign Promoters	58595780	38.14
Total	84865790	55.25
Non Promoter's Holdings
Institutional Investors
Mutual Funds	5408657	3.52
UTI	-	-
Banks	128051	0.08
FIIS	25763364	16.77
Total	31300072	20.38
Others
Private Corporate Bodies	2663834	1.73
Indian Public	29312703	19.08
NRIs	1974141	1.29
OCBs	-	-
Any other	3500000	2.28
Total	37450678	24.38
Grand Total	153616540	100.00

BUSINESS DETAILS

Line of Business :	Manufacturers of Bulk Drugs, Formulations, Medicinal Chemicals and Botanical Products such as Ibuprofen, Sulphamethoxazole, Pefloxacin, Ciproflxacion, Nimesulide and Norfloxacin.
Products	· Ibuprofen · Sulphamethoxazole · Norfloxacin · Pefloxacin · Ciprofloxacin

PRODUCTION STATUS

The company’s production status for the year 31.03.2005 was as under :

Particulars	Unit	Installed Capacity	Actual Production
Bulk Drugs, Formulations, Medicinal Chemicals and Botanical Products	MT	1116.53	683.12

GENERAL INFORMATION

Customers :

Ø Glaxo Smithkline

Ø Beecham

Ø Pfizer

Ø Alpharma

Ø Merck Generics

Ø IVAX

Ø Apotex

Ø Ranabaxy

Ø Lek

Ø KRKA

Ø Sandoz

Ø Ratiopharm

Ø Hexal

Ø Stada

Ø Cipla

Ø Glaxo India

Ø Torrent

Ø Dr. Reddy’s

Ø Zydus

Ø Cadilla

Ø FDC

No. of Employees :

200

Bankers :

• State Bank of India, Overseas Branch Abids, Hyderabad

• Andhra Bank, R. P Road Branch, Secunderabad

• The Bank of Nova Scotia, Banjara Hills, Hyderabad

• Punjab National Bank, R. P Road Branch, Secunderabad

• HDFC Bank, Lakdikapool Branch, Hyderabad

• ABN AMRO Bank, Banjara Hills, Hyderabad

Facilities :

Secured loans:
Term loans	-	931.490
Working capital loans	385.160	1028.300
Deffered finance – HP/ Lease	9.740	198.900
Total	394.900	1979.680
Unsecured loans:
Sales Tax Deferment	62.480	58.630
Others	3.240	36.710
Total	65.720	95.340

Banking Relations :	Good
Joint Statutory Auditors
Auditors :	Rambabu & Co., Chartered Accountants
Address	31 Pancom Chambers, Raj Bhavan Road, Hyderabad - 500 082, Andhra Pradesh, India
Auditors :	Deloitte Haskins & Sells Chartered Accountants
Address	Lingapur House, 7th Floor, Amrutha Estates, Himayathnagar, Hyderabad - 500 029, Andhra Pradesh, India
Associates :	Fine Drugs and Chemicals Limited
Subsidiaries :	Medikon Laboratories Limited Calibre Engineering Private Limited Matrix Life Sciences (in liquidation)
Joint Venture	Medikon Gelenicals Private Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
20,000,000	Equity Shares	Rs. 2 each	Rs. 7400.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
Fully Paid Up
149720710	Equity Shares	Rs. 10 each	Rs. 299.440 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital	299.470	127.240
2] Reserves & Surplus	5934.090	1654.620
3]Stock options	6.480	-
Total	6240.040	1781.860
LOAN FUNDS
1] Secured Loans	394.900	1979.680
2] Unsecured Loans	65.720	95.380
Deferred Tax Liability	175.230	275.550
GRAND TOTAL	6875.890	4132.470
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]	3323.550	2253.950
Capital work-in-progress	387.520	415.940
INVESTMENTS	1594.930	30.980
CURRENT ASSETS, LOANS & ADVANCES
Inventories	1710.100	1251.150
Sundry Debtors	1367.440	941.510
Cash & Bank Balances	87.590	36.040
Loans & Advances	1260.730	587.120
Total Current Assets	4425.860	2815.820
Less :
Current Liabilities	2045.970	1084.290
Provisions	810.000	299.930
Net Current Assets	1569.890	1431.600
MISCELLANEOUS EXPENSES	--	--
GRAND TOTAL	6875.890	4132.470

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2005	31.03.2004
Sales Turnover	6522.900	5371.420
[including other income]
Profit/(Loss) Before Tax	1609.940	1479.430
Provision for Taxation	307.27	233.300
Profit/(Loss) After Tax	1302.670	1246.130
Import value	115.080	180.280
Export value	3404.220	2975.920
Total Expenditures	11344.870	7048.190

KEY RATIOS

PARTICULARS	31.03.2005	31.03.2004	31.03.2003
Debt Equity Ratio	0.32	1.21	1.22
Long Term Debt Equity Ratio	0.14	0.76	1.00
Current Ratio	1.18	1.16	1.39
TURNOVER RATIOS
Fixed Assets	1.81	2.35	4.22
Inventory	4.54	5.71	8.76
Debtors	5.82	7.42	13.18
Interest Cover Ratio	20.63	8.26	4.37
Operating Profit Margin (%)	28.20	32.28	31.32
Profit Before Interest and Tax Margin (%)	25.16	30.20	29.72
Cash Profit Margin (%)	22.41	24.44	19.60
Adjusted Net Profit Margin (%)	19.37	22.36	18.00
Return on Capital Employed (%)	32.07	54.48	90.87
Return on Net Worth (%)	32.52	90.06	124.59

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.205.00/-
Low	Rs.187.00/-

LOCAL AGENCY FURTHER INFORMATION

HISTORY

Subject was incorporated on 29^th November, 1984 at Secunderabad in Andhra Pradesh under the name and style of “Herren Drugs & Pharmaceuticals Limited” having Company Registration Number 5146.

The name of the company has been changed from Herren Drugs & Pharmaceuticals Limited to Matrix Laboratories Limited as per provision of the Companies Act, 1956.

The company was jointly promoted by Mr. Sarat Gopal and Mr. Krishna Prasad. Mr. Sarat Prasad has also promoted companies like Dolphin Drugs Private Limited, United Intermediaries & Chemicals Private Limited, Dymes Exports, etc.

The company entered into diversification arena by manufacturing formulations such as tablets, capsules, etc. at a cost of Rs. 131.50 millions and this was financed by a maiden public issue of Rs. 54.50 millions in 1994.

In 1998-99, Dolphin Drugs Private Limited and United Intermediaries & Chemicals Private Limited has been amalgamated with the company.

During 2001-02, the company has acquired 100% controlling interest in Medikon Laboratories Limited a Hyderabad based Formulation company at a consideration of Rs. 14.700 millions. It has upgraded its manufacturing facilities to the CGMP standards in Jeedimetla plant during the year. In 2002-03 the company has acquired 21% stake in Medicorp Technologies from Shriram Group. Further to this, it had made an open offer and has further acquired 3.47% of equity at a cost of Rs. 23 per share. It has also acquired Vorin Laboratories viz a subsidiary of Ranbaxy Laboratories. The amalgamation between three companies was approved by the Shareholders and appointed date was on 1^st April 2002. The shareholders of Vorin and Medicorp were issued shares in the company in the ratio of two shares for every 13 shares held.

The company commercialised 14 new products in 2002-03 and 30 APIs under development in the pipeline.

The company has strengthened its business in 2003-04 through the merger of Vera Laboratories Limited with the company in exchange for a synergy in manufacturing capacity,product profile and effluent handling facilities.Consequent of this acquisition,Matrix has emerged as one of the largest USFDA approved API manufacturers in India. 

 As per the Scheme of amalgamation, for every 163 Equity Shares of Rs.10/- each held by the shareholders of Vera Laboratories Ltd, One Equity Share of Rs.10/- each of Matrix Lab have been issued. Apart from Vera Lab,the company has also amalgamate Fine Drugs & Chemicals Ltd and Calibre Engineering Pvt Ltd with itself.As per the scheme of amalgamation,i) for every Twenty Five Equity Shares of Rs.10/- held by the shareholders of Fine Drugs & Chemicals Ltd, One Equity Share of Rs.10/- each of the company have been issued, ii)for every Eight Equity Shares of Rs.100/- each held by the shareholders of Calibre Engineering Pvt Ltd,One Equity Share of Rs.10/- each have been issued.

BUSINESS

Generic Names of the Principal Products/Services of the Company are :-

Item Code No.	Product Description
2942.00.39	Citalopram
2941.50.00	Clarithromycin
2941.90.03	Ciprofloxacin

REVIEW OF OPERATIONS

The Company recorded an impressive growth in sales and profit inspite of a higher R&D

expenditure and increased provision for depreciation and tax during the year under

review.

The increase transpired from the launch of a range of new products as well as sustained

revenue growth from regular products. Exports comprised 55 per cent of the total

turnover and despatches to the regulated markets continued to be the mainstay of the

Company's business.

The year under review has been an eventful one with the following significant developments:

• Agreement with William J. Clinton Presidential Foundation for the supply of anti-retrovirals (ARVs) for the treatment of HIV and AIDS patients in certain developing countries.

• Preferential offer of 11,25,000 equity shares of Rs. 10 each to India Newbridge Investments Limited and Maxwell (Mauritius) Pte Limited at a price of Rs.1500 per share, and the subsequent open offer made by the two strategic investors to the shareholders of the Company.

• Commissioning of a new facility built as per cGMP standards at Kazipally, near Hyderabad, with an investment of about Rs. 400 million.

• USFDA approval for Jeedimetla facility.

• Withdrawal of patent infringement cases on Citalopram in the European Courts by Lundbeck, the Danish pharmaceutical company, against the generic customers of Matrix.

• Merger of Vera Laboratories Limited (Vera), Fine Drugs and Chemicals Limited (Fine Drugs), Medikon Laboratories Limited (Medikon), and Calibre Engineering Private Limited (Calibre) with the Company.

DE-RISKING AND CONSILIDATION

During the year, the Company has succeeded significantly in de-risking itself on its

products, manufacturing locations, customers and market fronts. Though Citalopram

continued to contribute significant revenues in absolute terms to the Company, as it was

in the preceding year, the share of the product in the total sales lowered to 33 per cent in the year under review from 50 per cent in the previous year. This was made possible with the expansion of the product basket.

The Company also increased its sales to the US market during the year. While the

Company filed a cumulative number of 15 DMFs with the USFDA at the end of the year,

the same is expected to cross 40 by the end of the financial year 2004-05.

The Company's focus on intellectual property (IP) development is reflected well with the

filing of 18 innovation patents (process/ polymorphs) in the year under review. The

Company has filed another 15 innovation patents during the first half of the financial

year 2004-05, taking the total number of patents to 34 covering 21 products.

With the merger of Vera Laboratories, Matrix became one of the largest USFDA approved API manufacturers in the country. Vera's facility is located in a declared chemical zone with the presence of an elaborate, safe and large effluent treatment facility. This helps Matrix geographically derisk itself as the Company's other manufacturing facilities are located in and

around Hyderabad. It also helps the Company in terms of planning its capacities

and the addition of new customers.

JV FOR FINISHED DOSAGE PRODUCT DEVELOPMENT

During the year, your Company in association with German partners promoted a 50:50 joint-venture (JV) company in Hyderabad for the development of finished dosage forms for the European markets. The JV, called Medikon Galenicals Private Limited, is progressing as envisaged and eight products are currently under development.

The company's fixed assets of important value include Land, Buildings, Plant & Machinery, Electrical equipment, Laboratory Equipment, Water Treatment System, Pump Sets, Borewell, Fire Fighting Equipments, Office Equipments, Furniture and fittings, Computer, Vehicles and Effluent Treatment Plant.

Joint Venture:

Medikon Galenicals Limited, a Joint Venture formed by your company in association with german partners namely H Fischer & Co. International GmbH and CES Beteiligungs GmbH is developing dossiers for European markets. Currently eight products are developed. A new formulation development laboratory and a pilot plant built by the JV at Hyderabad have been commissioned on June 1, 2005

CEM Pharma Life Science is a company incorporated in Ireland. This is a Joint Venture between Matrixc Laboratories Limited and two German partners namely H Fischer & Co. International GmbH and CES Beteiligungs. While Medikon galenicals Limited develops the dossiers, CEM Pharma markets the same

Fixed Assets:

v Land

v Leasehold land

v Buildings

v Plant & Machinery

v Electrical Equipment

v Lab Equipment

v Office Equipment

v Furniture & Fixture

v Computers

v Vehicles

v Library

v Trademarks

Matrix posts consolidated net profit of Rs. 100 Cr for Q3
Hyderabad, 30th January 2006.

Highlights:

· Consolidated sales at Rs. 340.56 Cr for Q3

· Consolidated PAT stands at Rs.37.11 Cr in Q3, excluding exceptional items

· Standalone revenue for Q3 stands at Rs.198.61 Cr, representing a growth of 19.5%

· Standalone PAT up by 27% at Rs.32.46 Cr, excluding exceptional items

· Sequential standalone growth of 13.9% in topline and 6% in bottomline

· Action plan in place for achieving the integration benefits with Docpharma

· Astrix Laboratories Limited, a JV with Aspen of South Africa, became operational

Matrix Laboratories Limited has reported a net profit of Rs. 100.48 crore on sales of Rs. 340.56 crore on consolidated basis for the third quarter ended 31st December 2005. While the company made an operating profit of Rs. 152.79 crore for the quarter, a total amount of Rs. 52.31 crore has been provided for R&D, interest, depreciation & amortization and tax on consolidated basis.

The annualized earnings per share (EPS) for the quarter on consolidated basis stood at Rs. 14.14 (without annualizing the EPS in respect of exceptional items). Excluding exceptional items, the annualized EPS works out to be Rs. 9.91.

On standalone basis, the company’s sales for the quarter increased by 19.59% at Rs. 198.61 crore. The profit after tax (PAT) for the quarter stood at Rs. 95.83 crore (including exceptional items), as against Rs. 25.55 crore in the corresponding period of last year.

The profit after tax for the quarter includes an amount of Rs. 63.37 crore (net of taxes) arising out of certain exceptional items that include sale of know-how, intangibles and investments including the transfer of one of the manufacturing facilities to a Joint Venture (JV).

Excluding exceptional items, the standalone PAT for the quarter grew by 27% at Rs.32.46 crore. The expenditure on R&D went up by 56.39% at Rs. 7.10 crore during the quarter. The interest cost is also higher at Rs. 2.58 crore as against Rs. 0.92 crore, while the provision for depreciation increased to Rs. 5.89 crore during the quarter as compared with Rs. 4.42 crore in the corresponding period. The company made a tax provision of Rs. 23.15 crore for the quarter, as against Rs. 9.98 crore in the corresponding period last year.

Sequentially, as compared to the second quarter of the current financial year, the company has improved its performance both in terms of topline and bottomline in the third quarter. While the standalone sales increased by 13.90% in the third quarter over the second quarter, the profit after tax (excluding exceptional items) for the same period went up by 6%.

Docpharma NV, the 100% subsidiary of the company, recorded revenues of EUR 26.44 in million (Previous Year: EUR 24.56 million) for the quarter ended 31st December 2005 with a net income of EUR 1.85 million (Previous Year: EUR 1.07 million). On Docpharma front, action plan for key products has been initiated with an objective to optimise the operating margins. Various initiatives taken in this direction are expected to yield results progressively.

On consolidated basis, the sales and net profit for the nine months period ended 31st December 2005 stood at Rs.799.94 crore and Rs.170.11 crore, respectively. Since the consolidation exercise started in July 2005, the above consolidated figures, in effect, pertain to the nine months performance of Matrix standalone, and a part of the six months performance of Docpharma NV and Explora Laboratories SA.

During the quarter, the company has completed the transfer of one of its manufacturing facilities to Astrix Laboratories Limited, a 50:50 joint venture (JV) with Aspen Pharma, South Africa. Effective 1st January 2006, Matrix Laboratories Limited has acquired 50% stake in Fine Chemical Corporation (FCC), South Africa.

The company’s paid-up capital has been increased to Rs. 30.64 crore from 29.94 crore on allotment of 35 lakh equity shares of Rs. 2 each at a price of Rs. 225 per share on preferential basis to the erstwhile promoters of Docpharma on 29th December 2005.

On Finished Dosage Forms (FDF) front, the company has completed the manufacture of first set of ANDA batches meant for the US market. FDF R&D activities have been ramped up in terms of both infrastructure and organization. Under this business segment, the company is working on the development pipeline of 25 products.

“The company is now poised to leverage various strategic initiatives taken in the recent past. The full benefits of these initiatives will be visible in the coming quarters”, said Mr. Rajiv Malik, the Chief Executive Officer (CEO) of Matrix Laboratories Limited.

CMT REPORT [Corruption, Money laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.45.92
UK Pound	1	Rs.84.62
Euro	1	Rs.58.03

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	6
--CREDIT LINES	1~10	6
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		54

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions