MIRA INFORM REPORT

Report Date :

31^st May, 2006

IDENTIFICATION DETAILS

Name :	KINETIC MOTOR COMPANY LIMITED
Formerly Known As :	KINETIC HONDA MOTOR LIMITED
Registered Office :	Plot No. 2, Industrial Area No. 1, Pithampur, District. Dhar (Madhya Pradesh) 454 775.
Country :	India
Financials (as on) :	30.09.2005
Date of Incorporation :	08.09.1984
Com. Reg. No.:	10-2353
TAN No.: [Tax Deduction & Collection Account No.]	PNEK00054F/PNEK05172G
Legal Form :	A public limited liability company. The company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacturer of Mopeds and Scooters

RATING & COMMENTS

MIRA’s Rating :

B

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small

Maximum Credit Limit :
Status :	Moderate
Payment Behaviour :	Slow and Delayed
Litigation :	Unknown
Comments :	Financial position is moderate. Directors are reported as experienced, respectable and resourceful industrialists. Their trade relations are fair. Payments are slow and delayed. The company can be considered for normal business dealings at usual trade terms and conditions with slight caution in view of substantial losses.

LOCATIONS

Registered Office :	Plot No. 2, Industrial Area No. 1, Pithampur, District. Dhar (Madhya Pradesh) 454 775.
Website :	http://www.kineticindia.com
Head Office :	D 1 Block, Plot No. 18/2 MIDC, Chinchwad, Pune – 411018, Maharashtra
Tel. No.:	91-20-27476624/27474301-5
Fax No.:	91-20-27475842-3
Factory	Located at Pithampur, District .Dhar (Madhya Pradesh) and at Delhi Road, Meerut (Uttar Pradesh).

DIRECTORS

Name :	Mr. A.H. Firodia
Designation :	Chairman
Name :	Air Chief Marshal H. Moolgavkar
Designation :	Director
Name :	Mrs. Sulajja Firodia Motwani
Designation :	Director
Name :	Mr. S. S. Marathe
Designation :	Director
Name :	Mr. Dinesh Munot
Designation :	Director
Name :	Mr. M. Venkataiah
Designation :	Director
Name :	Mr. R. J. Kabra
Designation :	Director
Name :	Mr. A. M. Shirolkar
Designation :	Director (Technical)
Name :	Wu Hsiung Liu
Designation :	Additional Director

KEY EXECUTIVES

Name :	Mr. V. M. Achwal
Designation :	Company Secretary

MAJOR SHAREHOLDERS

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters	9159000	60.69
Persons acting in Concert	1383250	9.17
Non-Promoters' Holding
Institutional Investors and Corporate Bodies	718378	4.76
Indian Public	3531575	23.40
Non-Resident Indians/ Overseas Corporate Bodies	299097	1.98
Total	15091300	100.00

BUSINESS DETAILS

Line of Business :	Manufacturer of Mopeds and Scooters
Products :	Scooter - 87112002

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
Motorised two wheelers and three wheelers upto 350 cc engine capacity and spare parts and accessories upto 20% of value of annual production	NOS	600000	175000	72237

GENERAL INFORMATION

No. of Employees :

2000

Bankers :

v Canara Bank

v State Bank of Indore

v HDFC Bank Limited

Facilities :

SECURED LOANS	30.09.2005
From Banks
Term Loan	106.854
Cash Credit, Working Capital Demand Loan,	276.257
Total	383.111
UNSECURED LOANS
From Banks	55.272
Short Term Loan Including interest accrued and due
From other than Banks Short Term Loan (Inter-corporate deposit)	110.000
Total	165.272

Banking Relations :	Unknown
Auditors :	M/s. A.F. Ferguson & Co. Chartered Accountants Cost Auditors M/s. Dhananjay V. Joshi & Co. Chartered Accountants
Associates/Subsidiaries :	Nil
Holding Company	Kinetic Engineering Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
3,02,00,000	Equity Shares	Rs. 10/- Each	Rs. 302.000 Millions
4,80,000	Redeemable Preference Shares	Rs. 100/- Each	Rs. 48.000 Millions
	Total		Rs. 350.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
1,50,91,300	Equity Shares	Rs. 10/- Each	Rs. 150.913 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		30.09.2005 (18^th Month)	31.03.2004	31.03.2003
SHAREHOLDERS FUNDS
1] Share Capital		150.913	150.913	150.900
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		99.569	355.926	569.300
4] (Accumulated Losses)		(203.709)	0.000	0.000
NETWORTH		46.773	506.839	720.200
LOAN FUNDS
1] Secured Loans		383.111	551.906	565.600
2] Unsecured Loans		165.272	50.000	120.000
TOTAL BORROWING		548.383	601.906	685.600
DEFERRED TAX LIABILITIES		0.000	0.000	0.000
TOTAL		595.156	1108.745	1405.800
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		568.450	483.015	506.900
Capital work-in-progress		1.971	21.781	3.800
INVESTMENT		0.900	31.960	14.000
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	245.937	410.692	660.600
	Sundry Debtors	355.894	329.840	392.600
	Cash & Bank Balances	2.446	2.927	12.400
	Other Current Assets	7.863	3.137	0.000
	Loans & Advances	145.937	387.917	375.600
Total Current Assets		758.077	1134.513	1441.200
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	710.104	533.426	527.700
	Provisions	24.138	29.098	32.400
Total Current Liabilities		734.242	562.524	560.100
Net Current Assets		23.835	571.989	881.100
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		595.156	1108.745	1405.800

PROFIT & LOSS ACCOUNT

PARTICULARS	30.09.2005 (18^th Month)	31.03.2004	31.03.2003
Sales Turnover [including other income]	2167.635	2030.381	3347.200
Profit/(Loss) Before Tax	(461.461)	(278.776)	14.900
Provision for Taxation	1.750	64.000	1.600
Profit/(Loss) After Tax	(463.211)	(214.776)	13.300
Export Value	4.873	18.256	NA
Import Value	21.372	93.007	NA
Total Expenditure	2153.635	2028.351	3345.100

QUARTERLY

PARTICULARS	31.12.2005 [1^ST Quarter]	31.03.2006 [2^ND Quarter]
Sales Turnover	278.000	265.200
Other Income	9.600	3.400
Total Income	287.600	268.600
Total Expenditure	371.700	346.300
Operating Profit	(84.100)	(77.700)
Interest	13.200	12.600
Gross Profit	(97.300)	(90.300)
Depreciation	16.000	15.800
Tax	(6.700)	0.200
Reported PAT	(106.600)	(106.300)

200512 Quarter 1 - Expenditure Includes (Increase) / Decrease in Stock in Trade Rs (80.80) million Consumption of Raw Materials & Components Rs 266.00 million Staff Cost Rs 43.40 million Advertisement & Sales Promotion Rs 39.70 million Other Expenditure Rs 103.40 million Tax Includes Provision for Credit for taxation Rs (7.40) million Fringe Benefit Tax Rs 0.70 million EPS is Basic and Diluted Status of Investor Complaints for the quarter ended December 31, 2005 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 04 Complaints disposed off during the quarter 04 Complaints unresolved at the end of the quarter Nil 1. The above results have been reviewed by the Auditors and taken on record by the Board of Directors of the Company at their meeting held on January 30, 2006. 2. The Board of Directors on November 21, 2005 allotted to Bennett Coleman & Company Ltd 14,18,000 equity shares of Rs 10/- each at a price of Rs 70.52 per share on preferential basis amounting to Rs 100 million. 3. Subsequent to the above result for the period ended December 31, 2005, the Company has entered into an Agreement with Sanyang Industry Company Ltd, Taiwan in pursuance of which the Company proposes to issue 20,65,000 shares of Rs 10/- each at a price of Rs 66 per share on preferential basis amounting to Rs 136.30 million, subject to the necessary approvals.

200603 Quarter 2 - Expenditure Includes (Increase) / Decrease in Stock in Trade Rs 39.00 million Consumption of Raw Materials & Components Rs 160.40 million Staff Cost Rs 45.90 million Advertisement & Sales Promotion Rs 31.60 million Other Expenditure Rs 69.40 million Tax Includes Provision for Fringe Benefit Tax EPS is Basic and Diluted Status of Investor Complaints for the quarter ended March 31, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 02 Complaints disposed off during the quarter 02 Complaints unresolved at the end of the quarter Nil 1. The above results have been reviewed by the Auditors and taken on record by the Board of Directors of the Company at their meeting held on April 28, 2006. 2. The Board of Directors on February 20, 2006 allotted to Sanyang Industries Company Ltd's wholly owned subsidiary Company Billion Ally Ltd 20,65,000 equity shares of Rs 10/- each at a price of Rs 66 per share on preferential basis amounting to Rs 136.30 million.

KEY RATIOS

PARTICULARS	30.09.2005 (18^th Month)	31.03.2004	31.03.2003
Debt Equity Ratio	2.08	1.05	0.85
Long Term Debt Equity Ratio	0.59	0.57	0.46
Current Ratio	0.90	1.48	1.56
TURNOVER RATIOS
Fixed Assets	1.35	2.14	3.08
Inventory	4.78	4.24	5.11
Debtors	4.58	6.29	7.19
Interest Cover Ratio	(5.35)	(3.27)	1.26
Operating Profit Margin (%)	(12.26)	(6.79)	4.23
Profit Before Interest and Tax Margin (%)	(16.51)	(9.39)	2.24
Cash Profit Margin (%)	(15.29)	(6.79)	2.41
Adjusted Net Profit Margin (%)	(19.54)	(9.39)	0.42
Return on Capital Employed (%)	0.00	(16.97)	5.42
Return on Net Worth (%)	0.00	(34.77)	1.86

STOCK PRICES

Face Value	Rs.10/-
High	Rs.54.00/-
Low	Rs.49.65/-

LOCAL AGENCY FURTHER INFORMATION

History

Established in 1984 by the Firodias of Kinetic Engineering -- the leading manufacturers of mopeds -- Kinetic Motor Company Ltd, formerly known as Kinetic Honda Motor has a technical and financial collaboration with the world leaders in automobiles, Honda Motor Company, Japan. The Japanese collaborator which was holding 50.92% stake in the company divested its stake in favour of Kinetic Engineering for Rs 344.700 Millions in 1998. At present Kinetic Engineering holds 50.92% stake in KMCL. 

 Sales of its sleek 100-cc version of the Honda 90-cc scooter, an international best-seller, was restricted by its high price. The company entered into an agreement with The Indian Oil Corporation (IOC), whereby, IOC is to manufacture Kinetic Honda Genuine 2T oil and market it through its outlets all over India. In 1993, Honda Motor Company picked up a majority stake in KHML, providing the company, access to the Honda group's latest technology and global dealer network. 

 The company got the status of a government-recognised Export House, in 1995-96. 

 Kinetic Motor exports to countries like Singapore, Srilanka, Macau, Africa, etc. Recently, the company started producing mopeds. 

 The company has received All India Award for the year 1998-99 in the category of "Highest Exporter, Exporter for Export with continuous Excellence - Non SSI". This is the eight time the company has received such recognition at Regional/National level. 

 The company is planning to upgrade its present product range,develop new vehicle models using latest technology etc. During the year 2000-2001 the company has introduced an economy scooter Model 'Kinetic Ax' and 'Marvel Cx'.The 'Marvel Cx' has an imported technology from Honda Motor Company

MANAGEMENT DISCUSSION & ANALYSIS REPORT 

 Indian Two-Wheeler Industry

 During the year 2004-05, 6.6 million Two-wheelers were sold in India. Motorcycles, Scooters and Mopeds accounted for 80%, 15% and 5% of total Two-Wheeler sales respectively. Motorcycle, Scooter and Moped segments recorded growth of 20.2%, 4.7% and 5.5% respectively. 

 Company's Performance 

 Last year, the Company decided to take a long-term view and undertake numerous initiatives which would strengthen the company's offerings and position for the next several years, rather than focusing on short-term objectives which would distract resources. These initiatives include  

 carrying out key technological and cosmetic upgrades to several important current brands - launch of Kinetic 4S (i.e. upgradation of company's popular scooter Zoom with a new 4 stroke technology which would offer very high mileage), introduction of Kine' (an important upgrade to the Scooterette Zing80 that would strengthen their presence in the growing small capacity scooters segment) and launch of Nova 135. 

 Important revamp of the company's distribution network which has involved setting up over 40 new dealerships in every important market across the country at attractive locations with beautiful interiors, sound management and state of the art workshop facilities. This is critical with a view to improve overall customer experience at Kinetic dealerships. 

 Significant re-branding exercise involving creation of a new brand identity comprising a new logo that appears on all products, dealerships and other insignia and the launch of an exciting new corporate website to signal a new Kinetic to the market. 

 Expansion of international network with new distributors appointed in several emerging markets, with a view to increase global presence in view of higher global acceptance of Indian two wheelers. 

 Preparation for launch of the Italiano series of scooters in terms of design and productionizing. 

Reduction of excess inventory.

 While these initiatives were being carried out, it was considered prudent to defer huge investments in marketing and promotional expenses. Absence from mainstream advertising, combined with two months of reduced sale due to activity of phasing out of previous models and replacing them with new upgrades while ensuring that excess inventory did not accumulate has led to a drop in sales and correspondingly, in income. During the 18 month period ended 30th September, 2005 (`period under review'), the Company produced 72.237 nos. Two-wheelers as against 75.726 nos. in the previous year ending 31st March, 2004 ('previous year'). During the period under review, Company sold 79.972 nos. as against sale of 81.189 nos. in the previous year. In order to maintain brand presence, the Company has absorbed the increase in  

 cost of inputs and applied aggressive pricing strategies. Such short term factors have resulted in loss for the year under review. However, the new products, new branding and revamped distribution network are expected to be valuable to the Company in the coming years. 

Restructuring 

 The Company had accumulated losses of Rs. 203.7 Millions at the end of the financial year ended 30th September, 2005. The Company has already initiated steps for restructuring including entering into negotiations with financial investors for infusion of fresh funds for improving net worth, dialogues for debt restructuring and increased moratorium etc. Subsequent to the Balance Sheet date, the Company issued on 21st November, 2005 on Preferential basis 14,18,000 Equity shares of Rs.10/- each at price of Rs. 705.200 per share to Bennett Coleman and Company Limited. 

Opportunities, threats, risks and concerns 

 The market for automatic scooters has been showing continued growth and we believe that currently, good opportunity exists for creating new segments within the automatic scooters market by introducing differentiated products. Along with growth in segment size, competition is also increasing. Kinetic's long presence in modern scooter market, expertise in designing and production and strong brand equity would help in quicker acceptance of their new launches. Kinetic would also be aiming to play a stronger role in global markets, especially with the new Italiano series scooters in their fold. 

 Outlook 

 They have received encouraging market feedback for their new four stroke scooter Kinetic 4S and Scooterett Kine'. Both have been well received in the market. The Company is preparing to begin launch of the Italiano series of scooters during the current year and these scooters have the potential to completely change the gearless scooters segment. As explained earlier, several new world-class dealerships were opened in important cities such as Pune, Bangalore, Nagpur, Goa, Rajkot, Chennai, Nasik, Chandigarh to provide better service to customers. Various restructuring initiatives have been undertaken. All these efforts, barring unforeseen circumstances, would help increase in sales volumes and improvement in financial position in the years to come. 

Fixed assets

v Land (freehold and leasehold)

v Buildings

v Plant, machinery

v Equipment

v Furniture, fixtures

v Office equipments

v Vehicles

As per website Details:

Kinetic Motor Company Limited is part of the Kinetic group of companies, a leading manufacturer of two wheelers in India.

Kinetic Motor began in 1984 as a Joint Venture with Honda Motor of Japan, to manufacture and market advanced scooters in India. The company soon became renowned for having revolutionized the scooter market with its introduction of a modern scooter featuring modern styling. variomatic gearless transmission, self start and several other comfort and conveniece features. In 1998, the arrangement with Honda Motor was realigned as a technical collaboration. With that, the company became the first Indian company to buy out the controlling stake from its foreigh partner. After the realignment the company has posted major growth in sales and profitability, introduced new models and made several key improvements in all products.

Product Range:

Kinetic Motor manufactures a wide range of scooters at different price and power points. All scooters come with modern styling, and comfort, convenience features like self start, variomatic transmission, high mileage, auto choke, auto fuel cock.

Kinetic Zx Zoom:
Zx Zoom is a modern scooter with a 110 cc engine and a mileage of 50+ on the road. It has a centrally mounted engine for improved stability, wide and soft seats and an impressive pick up of 0 - 50 km in just 8 seconds. The scooter is available in two variants, Kinetic AX and Kinetic DX with 100 cc engines, and prices starting at Rs. 32,000. This model is exported worldwide under "Honda" brand name.

Kinetic Style:
Kinetic Style is a powerful scooterette with a 4 bhp, 75 cc engine. It features stylish millennium design, wide seats and zippy engine.

Kinetic Marvel:
Marvel is a 110 cc full size family scooter, ideal for urban commuting. It features large comfortable seats, outstanding mileage, international styling. It is the most luxurious scooter in India today.

Kinetic Motor is nearing completion on two new important models - a four stroke scooter titled Nova with breakthrough design and best in class performance; and a 65 cc scooterette titled Zing, custom designed and priced affordably for college going students.

The company, incorporated in 1970, has a state of the art manufacturing facility - at Pithampur, near Indore. It is ISO 9001 certified from DNV for all models and activities It has a strong dealership network of over 400 dealers and authorized service centers across the country. It is a leading exporter of vehicles across the globe with thousands of vehicles exported to countries like USA, Canada, Latin America, Europe, Africa, Middle East and South Asia. It enjoys "Export House" status and has won the Exports Excellence award nine consecutive years.

Kinetic Motor has a technical collaboration with Honda Motors of Japan, a leading manufacturer of scooters. This includes an exports arrangement.

Kinetic Motor Company launches cool new scooterette Kine in Ahmedabad. Attractive exchange schemes on offer

Ahmedabad, August 12^th, 2005

Leading scooter manufacturer Kinetic Motor Company today launched an exciting gearless scooterette in Ahmedabad - Kine. Conceptualized as "the small Kinetic", Kine brings together cool looks, high comfort & convenience and power packed performance in a lightweight and easy to handle package, along with a reduced price tag of Rs. 26,650* It is the ideal two wheeler for students, executives and others looking for a value-for-money two wheeler that does not compromise on any aspect. The Kine was launched at hands of Ms. Sulajja Firodia Motwani, Jt. Managing Director of Kinetic at 'Spice Auto', the companys swanky new dealership on satellite road". Ms. Motwani also announced exciting special exchange schemes exclusively for Ahmedabad.

The cute Kine offers a host of customer benefits:

• Style: The essential intelligent Kine design is further enhanced by Indias first three-tone colors and attractive new headlamp
• Performance: Kines 72cc, 4.2 bhp engine provides quick acceleration as well as easy double seat riding and load carrying
• Easy riding: Kine scores high on convenience by way of electric start and gearless transmission and being lightweight, it is easy to ride and handle
• Utility: special features like mobile chargepoint, puncture resistant tyres, cola can holder, large underseat storage area and spacious footboard enhance the Kines utility
• Affordability The Kine is well-priced compared to other gearless scooters and gives high mileage of 55-60 kmpl

Launching the new exciting scooter, Ms. Sulajja Firodia Motwani, Jt. Managing Director of Kinetic said," Its a matter of pride and joy for us to offer the Kine to the intelligent Ahmedabad consumer. With my new dealership and new Scooterette, I hope to charm the residents here! Gujarath is the most important market in the country for this segment, and we have worked hard to tailor-make the Kine to ensure a perfect fit. I hope the small Kinetic will be appreciated here.

The Kine is priced very attractively at Rs. 26.650. It was launched at the companys new world class dealership Spice Auto on Satellite Road. The large showroom with beautiful interiors, provides total sales, service and spares solutions and is equipped with the latest in interiors, facilities and workshop equipment. This dealership, managed by Ahmedabads trusted patel family, will be the launch pad of Kinetics new exciting range of Italian designed automatic scooters in Ahmedabad. In my experience, people of Ahmedabad are intelligent, value-conscious buyers and the Kine launched today is perfect for you.

To make the purchase even sweeter, Kinetic Motor Company is offering a very special "exchange offer" for all new buyers of Ahmedabad a whopping 3000 Rs. extra in exchange value for all those exchanging their old vehicles for brand new Kinetic machines such as Nova 135, Kine and Zoom. The Nova 135 is a great mix of comfort, convenience, performance, utility and economy with Indias only 135cc scooter engine while the Zoom is Indias most loved scooter that has given mobility to tens of lakhs of happy users.

Since 1974, Kinetic group is a leading manufacturer of two wheelers in India and is known for its spirit of innovation and customer friendliness. Kinetic has brought to India the gearless scooter revolution, known for having enriched lives of over 6 million of people. Some of the companys popular brand names are Nova 135, Zoom, Zing, Luna, Velocity etc. Kinetic is preparing to launch exciting Italian scooters, which will revolutionize the Indian two-wheeler market.

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 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.46.22
UK Pound	1	Rs.86.07
Euro	1	Rs.59.03

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	4
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	4
--PROFITABILIRY	1~10	4
--LIQUIDITY	1~10	4
--LEVERAGE	1~10	4
--RESERVES	1~10	4
--CREDIT LINES	1~10	4
--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	NO
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		40

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