MIRA INFORM REPORT

Report Date :

11.05.2007

IDENTIFICATION DETAILS

Name :	H K FINECHEM LIMITED [w.e.f. 19.03.2001]
Formerly Known As :	H K AGROCHEM LIMITED
Registered Office :	201, "ANIKET", C. G. Road, Navrangpura, Ahmedabad 380 009, Gujarat
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	25.05.1985
Com. Reg. No.:	04-7845
CIN No.: [Company Identification No.]	L15140GJ1985PLC007845
TAN No.: [Tax Deduction & Collection Account No.]	AHMH00018E
PAN No.: [Permanent Account No.]	AAACH5113Q
Legal Form :	Public limited liability company. Company’s Shares are listed on Stock Exchange.
Line of Business :	Manufacture of high grades of rice bran oil, fatty acids and monoglycerides.

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

Maximum Credit Limit :	USD 580000
Status :	Satisfactory
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established and reputed company having satisfactory track. Directors are reported as experienced and respectable businessmen. Trade relations are reported as fair. Business is active. Payments are usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	201, "ANIKET", C. G. Road, Navrangpura, Ahmedabad 380 009, Gujarat,  India
Tel. No.:	91-79-26468752 / 26402429
Fax No.:	91-79-26460910
E-Mail :	hkindia@hkfinechem.com
Website :	http://www.hkfinechem.com
Factory :	253/P, Chekhala, Sanand-Kadi Highway, Taluka  Sanand, Dist. Ahmedabad 382 145, Gujarat,  India
Tel. No.:	91-2717-222618 – 19 - 20 – 324390
Fax No.:	91-2717-222616
E-Mail :	hkfl@hkfinechem.com

DIRECTORS

Name :	Mr. Rajan R. Harivallabhdas
Designation :	Chairman & Managing Director
Name :	Mr. Shyam B. Ghia (upto October 28, 2005)
Designation :	Director
Name :	Mr. Chinubhai R. Shah
Designation :	Director
Name :	Mr. Nahoosh J. Jariwala
Designation :	Executive Director
Name :	Mr. Prafull Anubhai
Designation :	Director
Name :	Mr. Janak G. Nanavaty
Designation :	Director
Name :	Dr. Himanshu C. Patel
Designation :	Director
Name :	Mr. Naishadh I. Parikh (w.e.f. October 28, 2005)
Designation :	Director

KEY EXECUTIVES

Name :	Mr. Rajen N. Jhaveri
Designation :	General Manager (Finance) & Company Secretary

SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Individual	33,20,412	34.96 %
Promoters
- Indian Promoters	26,87,510	28.29 %
- Foreign Promoter	29,50,000	31.05 %
Other Corporate Bodies	4,45,780	4.69 %
Financial Institutions / Mutual Funds / Banks	-	-
Director & their relatives	400	0.00
Foreign Institutional Investors / Overseas Corporate Bodies	-	-
Non-Resident Indians	95,898	1.01 %
TOTAL	95,00,000	100.00 %

BUSINESS DETAILS

Line of Business :

Manufacture of high grades of rice bran oil, fatty acids and monoglycerides.

Products :

I.T.C. Code No.(ITC Code)	Product Description
38249090	Deodorizer Distillate (Mixed Tocopherols)
29171990	Dimer Acid
38231900	Linoleic Acid

PRODUCTION STATUS

Particulars	Unit	Actual Production
Deodorizer Distillate (Mixed Tocopherols)	M.T.	400.010
Linoleic Acid / Oleic Acid	M.T.	874.577
Dimer Acid	M.T.	735.676
Other Fatty Acids	M.T.	2478.174

GENERAL INFORMATION

No. of Employees :

127

Bankers :

State Bank of India

ICICI Bank Limited

Facilities :

SECURED LOANS	Rs in Millions
FROM BANKS
(1) Term Loans	50.618
Interest Accrued & Due	0.431
(2) Working Capital Loans	18.892
(3) Vehicle Loans	1.971
1. All the above loans except Vehicle Loans from Bank are secured by first mortgage on the Company's immovable properties both present and future and hypothecation of all present and future machinery, other movable assets, goods and book debts of the Company. They are further secured by a personal guarantee given by the Managing Director of the Company.
2. The Vehicle Loans from ICICI Bank Limited are secured by hypothecation of specific assets and are further secured by a personal guarantee given by the Executive Director of the Company.
3. Payable within one year Rs. 21.160 Millions
UNSECURED LOANS
Inter-Corporate Deposits (Payable within one year)	10.000
Fixed Deposits (Payable within one year)	7.225

Banking Relations :	Satisfactory
Auditors :
Name :	C. C. Chokshi & Company Chartered Accountants,
Address :	Ahmedabad
Associates/Subsidiaries :	Ø Shri Aja Electro Chem Private Limited Ø Shri Abhyudaya Chemicals Private Limited Ø Shri Arya Investment Private Limited Ø Essenar Investments Private Limited Ø PCD Investment Private Limited Ø UKM Investment Private Limited Ø Sheth Harivallabhdas Kalidass Ø Charitable Trust No. 2 Ø Limat Developments Limited Ø Shri Ajita Investment Private Limited Ø Shri Amala Investment Private Limited Ø Rekhank Investment Private Limited Ø Archisa Investment Private Limited Ø Agam Investment Private Limited Ø Anugat Investment Private Limited Ø Harihar Manufacturing & Trading Private Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
9500000	Equity Shares	Rs. 10/- each	Rs. 95.000 Millions
50000	Preference Shares	Rs. 100/- each	Rs. 5.000 Millions
	Total		Rs. 100.000 Millions

Issued Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
9500000	Equity Shares	Rs. 10/- each	Rs. 95.000 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2006	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital		95.000	95.000	100.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		51.897	39.341	38.900
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		146.897	134.341	138.900
LOAN FUNDS
1] Secured Loans		71.913	67.952	32.100
2] Unsecured Loans		17.225	14.909	37.800
TOTAL BORROWING		89.138	82.861	69.900
DEFERRED TAX LIABILITIES		28.874	19.490	0.000
TOTAL		264.909	236.692	208.800
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		189.054	170.716	156.700
Capital work-in-progress		23.310	3.164	3.300
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	35.879	41.820	29.100
	Sundry Debtors	20.851	32.717	25.600
	Cash & Bank Balances	2.207	1.459	1.800
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	18.946	8.863	31.800
Total Current Assets		77.883	84.859	88.300
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	25.338	22.323	35.400
	Provisions			4.600
Total Current Liabilities		25.338	22.323	40.000
Net Current Assets		52.545	62.536	48.300
MISCELLANEOUS EXPENSES		0.000	0.276	0.500
TOTAL		264.909	236.692	208.800

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		237.051	225.426	215.100
Other Income		1.397	0.412	1.700
Total Income		238.448	225.838	216.800
Profit/(Loss) Before Tax		29.722	29.711	18.500
Provision for Taxation		17.094	11.331	8.000
Profit/(Loss) After Tax		12.628	18.380	10.500
Earnings in Foreign Currency :
	Export Earnings	77.871	83.277	NA
Total Earnings		77.871	83.277	NA
Imports :
	Raw Materials	1.289	3.705	NA
	Capital Goods	0.216	0.767	NA
Total Imports		1.505	4.472	NA
Expenditures :
	Manufacturing Expenses	188.614	182.625	0.000
	Increase/(Decrease) in Finished Goods	1.026	[4.753]	0.000
	Raw Materials	0.000	0.000	96.400
	Excise Duty	0.000	0.000	20.000
	Power & Fuel Cost	0.000	0.000	28.600
	Other Manufacturing Expenses	0.000	0.000	9.000
	Employee Cost	0.000	0.000	10.700
	Selling and Administration Expenses	0.000	0.000	9.700
	Miscellaneous Expenses	0.000	0.000	4.300
	Interest	6.184	6.630	8.400
	Depreciation & Amortization	12.903	11.624	11.200
Total Expenditure		208.727	196.126	198.300

QUARTERLY RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Type	1^st Quarter	2^nd Quarter	3^rd Quarter
Sales Turnover	57.100	73.600	79.000
Other Income	0.500	0.000	0.300
Total Income	57.600	73.600	79.300
Total Expenditure	50.600	66.200	67.400
Operating Profit	7.000	7.400	11.900
Interest	2.200	2.500	3.000
Gross Profit	4.800	4.900	8.900
Depreciation	3.500	3.800	3.900
Tax	0.300	[0.800]	0.800
Reported PAT	0.800	0.700	3.300

Notes

200606 Quarter 1 –

EPS is Basic and Diluted 1. The above results were reviewed by the Audit Committee and thereafter taken on record by the Board of Directors at their Meetings held on July 28, 2006. 2. On going expansion programme is expected to be completed by August, 2006. 3. The provision for current Income is made at the annual Income-tax rate. 4. The Company has only one reportable segment i.e. Speciality Oleo Chemicals. 5. Previous period's figures have been regrouped, wherever necessary. 6. The statutory auditors have carried out Limited Review of the results for the quarter ended June 30, 2006

200609 Quarter 2 –

EPS is Basic and Diluted Status of Investor Complaints for the quarter ended September 30, 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 were reviewed by the Audit Committee and thereafter taken on record by the Board of Directors at their Meetings held on October 27, 2006. 2. The Company has only one reportable segment i.e. Speciality Oleo Chemicals. 3. Previous period's figures have been regrouped, wherever necessary. 4. The statutory auditors have carried out Limited Review of the results for the Second quarter / half year ended September 30, 2006.

200612 Quarter 3 –

Expenditure Includes (Increase) / Decrease in Stock in Trade Rs (3.416) million Consumption of Raw Materials Rs 44.329 million Staff Cost Rs 4.074 million Power & Fuel Rs 13.123 million Other Expenditure Rs 9.271 million Tax Includes Provision for Current Tax Rs 0.850 million Fringe Benefit Tax Rs 0.016 million Deferred Tax Rs 0.870 million EPS is Basic and Diluted Status of Investor Complaints for the quarter ended December 31, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 01 Complaints disposed off during the quarter 01 Complaints unresolved at the end of the quarter Nil 1. The above results were reviewed by the Audit Committee and thereafter taken on record by the Board of Directors at their Meetings held on January 25, 2007. 2. The Company is mainly in the business of Speciality Oleo Chemicals. Hence, there is no separate reportable segment as per Accounting Standard-17 issued by the issued by the Institute of Chartered Accountants of India. 3. Previous period's figures have been regrouped, wherever necessary. 4. The statutory auditors have carried out Limited Review of the results for the Second quarter / nine months ended December 31, 2006.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt-Equity Ratio	0.61	0.56	0.57
Long Term Debt-Equity Ratio	0.37	0.32	0.38
Current Ratio	0.99	1.18	1.34
TURNOVER RATIOS
Fixed Assets	0.97	1.01	0.94
Inventory	6.76	6.98	7.52
Debtors	9.79	8.49	9.31
Interest Cover Ratio	5.01	4.71	3.20
Operating Profit Margin(%)	19.05	19.92	17.71
Profit Before Interest And Tax Margin(%)	14.13	15.23	12.51
Cash Profit Margin(%)	9.71	9.25	10.09
Adjusted Net Profit Margin(%)	4.80	4.57	4.88
Return On Capital Employed(%)	16.38	17.73	12.81
Return On Net Worth(%)	8.96	7.98	7.59

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.25.00/-
Low	Rs.24.00/-

LOCAL AGENCY FURTHER INFORMATION

History

Subject, was incorporated as H K Agro Oil in May '85, H K Agrochem is engaged in the manufacture of high grades of rice bran oil, fatty acids and monoglycerides. It acquired its present name in Jun.'94. The company was promoted by Rajan Harivallabhdas and Nahoosh J Jariwala. 

The company came out with a public issue in Feb.'95 to set up facilities at Sanand, near Ahmedabad, to manufacture 3248 tpa of distilled fatty acids like oleic acid, linoleic acid and palmitic acid; 2894 tpa of rice bran oil grade-1 and 625 tpa of monoglycerides. Company has made private placement in 1996-97, having paid up equity from 70.000 Millions to 85.000 Millions

The company has a technical collaboration with UIC, US. Equipment were procured from Sulzer, Switzerland; Feld & Hahn, Germany and UIC, US. During the year 1996-97, the second phase of Short Path Distillation Plant commenced its commercial production in the month of Nov'96. Company has export his main product viz.Deodorizer Distillate (Mixed Tocopherols) to Henkel Corporation who has buy entire production of this product.  
Company has placed the orders for putting up continuous fat splitting plant, which helps the company to upgrading the second stream of by product viz-Residual Oil by converting into split Fatty Acid, which can be upgraded by further processing in Fractionation plant & increased value of domestic sales. During 1999-2000, the company has successfully commissioned `Fat Splitting Plant' to increase the availiability of high value fatty acids for sale in domestic market. 

The Dimer Acid Project which was started earlier was implemented during 2001-02 and the main highlight of the project was developed 'in-house'by the company. This acid has been fully imported and it is of the first in India. The total cost was Rs. 30.000 Millions and this project was financed by Term Loan of Rs.22.500 Millions and balance through internal accruals.

Fixed Assets

Ø Land

Ø Building

Ø Plant & Machinery

Ø Electric Installation

Ø Air Conditioners

Ø Office Equipments

Ø Furniture & Fixtures

Ø Vehicles

OPERATIONS: 

(A) Sales and Profit: 

The sales and other income of the Company during 2005-06 were marginally higher at Rs. 238.448 Millions compared to Rs. 225.838 Millions of previous year. This was due to increase in the quantity of sales. The redeeming point for the year was better utilisation of the plant. 

(B) Technical Achievement: 

While continuing its efforts in establishing processing know-how to further concentrate Tocopherols and Sterols, the Company is also working on finding new applications for its fatty acids stream. 

(C) Raw Material: 

Both the raw materials continue to be available in adequate quantities from within India. 

(D) Export: 

International market of Natural Vitamin E which is mainly used by humans, experienced a lot of volatility and this has partly affected Company's export of MIXED TOCOPHEROLS. To overcome this slackness, the Company is exploring the possibility of its use as a replacement for relatively cheaper substitutes in the FEED category by matching the price. As regards STEROLS, the other export product, though demand has hot slowed down, the prices have gone down due to increased supply. 

INDUSTRY STRUCTURE :

The Company’s main products were Mixed Tocopherols, Sterols, Dimer Acid, Linoleic Acid and Monobasic Acid.

(A) Mixed Tocopherols :

There was a shift in consumption of Vitamin E from higher strength of 1000 I.U. to lower strength of 200 I.U. Natural Vitamin E tablets. The sale of vitamin E in Europe was restricted based on Genetically Modified Origin (GMO). These 2 factors had an effect on the demand of their export product viz. Mixed Tocopherol Concentrate.

(B) Sterols :

Their export of Sterols witnessed a slow down in the 2nd half of the year due to oversupply against Sterol requirements in the International market.

(C) Linoleic Acid :

HKFL’s Linoleic Acid continues to be in demand as a premium product.

(D) Dimer Acid :

The Company continued its growth for Dimer Acid which is an import substitute for sale to consumers in Surface Coating and Printing Ink industry. However, the Company is required to keep its price at a level to match Chinese import.

(E) Monobasic Acid :

Monobasic Acid is a by-product of Dimer Acid production. The Company is in a position to sell the increased quantity.

OPPORTUNITIES AND THREATS :

The crude soyabean oil processing is increasing in the country enabling them to procure more by-products as their raw material. The Indian economy is witnessing an upsurge in activities of industries like Paint and Surface Coating, Printing Ink and soap making requiring their finished products as their raw materials. Thus on implementation of their expansion project by July, 2006, they would be raising processing capacity to over 9,000 M. Tons per year.

There has been an excess production of Tocopherols and Sterols in the International market compared to growth in demand, particularly in U.S.A.. This has resulted in reduced values for their export products.

SEGMENT WISE AND PRODUCT WISE :

The Company has only one segment. As far as products are concerned, the Company now processes both the by-product streams of vegetable oil refineries viz. Vegetable Oil based Fatty Acid Distillate and Acid Oil.

OUTLOOK :

The Linoleic Acid of the Company is considered to be of premium quality among the resin / paint manufacturing Companies in India. They continue to be the only Indian manufacturer of Dimer Fatty Acid for Polyamides and Printing Ink Industry. They propose to increase production of these products.

To enhance their end product values of Tocopherols and Sterols, the Company will take active steps towards implementation of the project to produce > 50% Tocopherols and >90% Sterols for the international consumers.

The Company foresees reduced margins due to competition from Chinese supplies and slow growth in demand for their products in the international market.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE :

The financial performance of the Company for the year is at par with previous year's performance. The encouraging order book position during first half for 2 export products viz. Mixed Tocopherols and Sterols did not sustain in the second half and so initial signs of substantially improved performance did not materialize.

The Company’s debt-equity ratio at 0.48 : 1 will enable it to avail fresh borrowings if and when required at competitive rate.

State Bank of India has already sanctioned enhanced working capital facilities to ensure smooth operations after the capacity expansion is completed. The Company’s Share Capital stands at Rs. 95.000 Millions. The book value of the Company’s equity share stands at Rs. 15.46 as on March 31, 2006.

PARTICULARS	ANNUAL CAPACITY (in M.Tons)
(i) Distilled Fatty Acid	6500
(ii) Fractions of Vegetable Fats or Oils	3000
(iii) Gums & Residue	300
(iv) Glycerine Crude and Refined	300
(v) Oleic Acid	1000
(vi) Fatty Amines / Amides, Dimer Acid etc.	4000
(vii) Monoglycerides & Partial Glyceride Mixture	2000

As per website

Subject is a manufacturing company located near the city of Ahmedabad in the western region of India. Their company utilizes state of the art technology with critical equipments acquired from Germany and Switzerland. Fractions of natural oils and fats such as soyabean, sunflower and cottonseed are the source of the company's fine chemical products. They specialize in oleo chemicals and raw materials for the nutraceutical industry. Their hallmark has been consistent supply of products of superior quality in India, USA, Europe and Japan.

Product List
Oleo Chemicals
Product	Application
· Dimer Fatty Acid · Monomer Fatty Acid · Linoleic Fatty Acid · Soya Fatty Acid	Amines, Alkyd Resins, Plasticizer Emulsifiers, Lubricants, Metal Soap
· Saturated Fatty Acid	Alkyd Resin / Amines / Esters
· Distilled Fatty Acid	Alkyd Resin / Textile Auxiliaries
· Glycerine	Textile Auxiliaries / Paints
· Oil For Industrial Purpose	Oil Feed Chemicals / Biodiesel / Mould Release Agent
Nutraceutical & Health
· Natural Concentrated Tocopherols		Natural Vitamin E / Food, Feed And Cosmetic Industry
· Natural Concentratred Sterols		Natural Sterols / Food Industry / Pharmaceuticals

They take pride that H. K. Finechem has successfully commercialized for the first time in India manufacturing of Dimer Fatty Acid and Concentrated Tocopherols. The company has completed expansion to increase its processing capacity to 9600 M.T. per year.

They are implementing a downstream project to further purify their export products, Concentrated Tocopherols and Sterols for health and Nutrition industry in U.S.A. and Japan. This will enable the company to realize better export values.

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.40.93
UK Pound	1	Rs.81.20
Euro	1	Rs.55.42

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	4
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	5
--CREDIT LINES	1~10	5
--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		4

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
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

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