MIRA INFORM REPORT

Report Date :

18.06.2008

IDENTIFICATION DETAILS

Name :	GOLDIAM INTERNATIONAL LIMITED
Registered Office :	Gems and Jewellery Complex, MIDC Seepz, Andheri (East), Mumbai – 400096, Maharashtra
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	10.10.1986
Com. Reg. No.:	11-41203
CIN No.: [Company Identification No.]	L36912MH1986PLC041203
TAN No.: [Tax Deduction & Collection Account No.]	MUMG08508D
PAN No.: [Permanent Account No.]	AAACG2271J
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchanges.
Line of Business :	Manufacturers of Jewellery and Diamonds.

RATING & COMMENTS

MIRA’s Rating :

Aa

RATING		STATUS	PROPOSED CREDIT LINE
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

Status :	Very Good
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 :	Gems and Jewellery Complex, MIDC Seepz, Andheri (East), Mumbai – 400096, Maharashtra, India
Tel. No.:	91-22-28291893 / 28290396 / 28292397
Fax No.:	91-22-28290418 / 28292885
E-Mail :	goldiam@bom2.vsnl.net.in goldiam@vsnl.com
Website :	http://www.goldiam.com
Factory :	Santacruz Electric Export Processing Zone, Seepz, Andheri (East), Mumbai – 400096, Maharashtra, India
Branches :	Located at: 2, Prasad Chambers, Opera House, Mumbai – 400004, Maharashtra 202, Daver House, D. N. Road, Mumbai – 400001, Maharashtra Tel. No. 91-22-22694127
Domestic Retail Office :	Building A- Kanakia Dynasty, Andheri – Kurla Road, Mumbai – 400093, Maharashtra, India
Email :	goldiam@vsnl.com
Website :	http://www.goldiam.com

DIRECTORS

Name :	Mr. Manhar R. Bhansali
Designation :	Chairman and Managing Director
Date of Birth/Age :	65Years
Qualification :	Int. Com
Experience :	41 Years
Date of Appointment :	24.01.2001
Name :	Mr. Rashesh M. Bhansali
Designation :	Vice Chairman and Managing Director
Date of Birth/Age :	39 Years
Qualification :	T. Y. B. Com
Experience :	21 Years
Date of Appointment :	01.09.1988
Name :	Mr. Ajay M. Khatlawalal
Designation :	Director
Name :	Mr. Rajesh G. Kapadia
Designation :	Director
Name :	Mr. V. N. Nadkarni
Designation :	Director
Name :	Dr. R. Srinivasan
Designation :	Director

KEY EXECUTIVES

Name :	Mr. M. K. Varma
Designation :	Company Secretary
Email :	investorrelations@goldiam.com

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2007)

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters and Directors	13738537	50.82
Non Promoters
-- Financial Institutions	125511	0.46
-- Others	13168752	48.72
Total	27032800	100.00

BUSINESS DETAILS

Line of Business :

Manufacturers of Jewellery and Diamonds.

Products :

Item Code Number	7113.19
Product Description	Jewellery

· Gold and Diamond-Studded Rings

· Light-Weight American Cluster Rings

· Cocktail Rings

· Channel Set Bands

· Pendants

· Diamond and Colour Studded Bracelets

· Earrings

PRODUCTION STATUS

Particulars	Unit	Actual Production
Jewellery	Kgs	768.54

GENERAL INFORMATION

No. of Employees :

450

Bankers :

· Hong Kong and Shanghai Banking Corporation Limited

· Punjab National Bank

· HDFC Bank Limited

· Bank of India

· ABN Amro Bank NV

Facilities :

SECURED LOANS:	31.03.2007 Rs in Millions
The Hongkong and Shanghai Banking Corporation Limited Packing Credit in Foreign Currency (Secured by Hypothecation of Present and Future Inventories, Receivables, Plant and Machinery and equitable mortgage of Office Premises at shop No. 2, Prasad Chambers, Swadeshi Mills Compound. Tata Road No, 1, Opera House, Mumbai – 400004)	82.821
Total	82.821

Banking Relations :	Satisfactory
Auditors :
Name :	Pulindra Patel and Company Chartered Accountants
Associates :	· Smart Style Inc. · Diagold Designs Limited
Subsidiaries :	· Diagold Design Limited · Goldiam Jewels Limited · Goldiam Jewellery Limited · Goldiam HK Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
31000000	Equity Shares	Rs.10/- each	Rs.310.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
27032800	Equity Shares	Rs.10/- each	Rs.270.328 Millions

1) Out of which NIL (13216400) Equity Shares of Rs.10/- each allotted as fully paid up by way of Bonus Shares capitalized from security premium and reserves and surplus.

2) 31,98,000 Convertible Equity share warrant of Rs.150/- each, paid up Rs.15/-each.

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006	31.03.2005
SHAREHOLDERS FUNDS
1] Share Capital		270.328	269.828	132.164
2] Share Application Money		47.970	0.000	0.000
3] Reserves & Surplus		1434.259	1346.157	1226.838
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1752.557	1615.985	1359.002
LOAN FUNDS
1] Secured Loans		82.821	80.118	0.000
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		82.821	80.118	0.000
DEFERRED TAX LIABILITIES		0.000	3.100	1.169
TOTAL		1835.378	1699.203	1360.171
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		224.752	116.192	81.667
Capital work-in-progress		0.000	0.083	0.000
INVESTMENT		302.647	495.037	370.035
DEFERREX TAX ASSETS		3.007	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	358.277	265.277	160.595
	Sundry Debtors	682.587	702.540	628.889
	Cash & Bank Balances	169.988	182.100	280.253
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	338.565	247.765	101.442
Total Current Assets		1549.417	1397.682	1171.179
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	150.363	264.367	252.044
	Provisions	4.082	45.424	10.666
Total Current Liabilities		154.445	309.791	262.710
Net Current Assets		1394.972	1087.891	908.469
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		1835.378	1699.203	1360.171

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		1661.265	1509.298	1796.874
Other Income		56.850	78.915	48.998
Total Income		1718.115	1588.213	1845.872
Profit/(Loss) Before Tax		203.743	259.427	248.105
Provision for Taxation		61.050	14.687	5.928
Profit/(Loss) After Tax		142.693	244.740	242.177
Earnings in Foreign Currency :
	Other Earnings	1624.475	1461.990	1792.265
Total Earnings		1624.475	1461.990	1792.265
Imports :
	Raw Materials	614.631	417.869	362.833
	Consumable Stores	9.553	3.581	5.843
	Capital Goods	1.173	1.974	1.648
Total Imports		625.357	423.424	370.324
Expenditures :
	Raw Material Consumed	1273.793	1112.100	1410.278
	Manufacturing & Other Expenses	10.431	192.812	173.127
	Other Operating Expenses	204.779	0.000	0.000
	Depreciation	6.861	12.693	11.026
	Loss on sale of assets	18.485	0.000	0.139
	Purchases made for re-sale	0.023	0.703	0.000
	Interest & Finance Charge	0.000	5.477	3.197
Total Expenditure		1514.372	1328.786	1597.767

QUARTERLY RESULTS

PARTICULARS	30.06.2007	30.09.2007	31.12.2007
Type	1st Quarter	2nd Quarter	3rd Quarter
Sales Turnover	205.400	252.100	381.900
Other Income	3.800	6.300	56.600
Total Income	209.200	258.400	438.500
Total Expenditure	213.100	242.800	380.300
Operating Profit	(3.900)	15.600	58.200
Interest	1.000	0.500	1.200
Gross Profit	(4.900)	15.100	57.000
Depreciation	4.800	5.000	5.100
Tax	0.200	1.200	16.700
Reported PAT	(1.000)	8.900	35.200

KEY RATIOS

PARTICULARS	31.03.2007	31.03.2006	31.03.2005
Debt-Equity Ratio	0.05	0.03	0.00
Long Term Debt-Equity Ratio	0.00	0.00	0.00
Current Ratio	4.42	3.98	4.33
TURNOVER RATIOS
Fixed Assets	7.41	8.10	12.00
Inventory	5.31	6.91	9.06
Debtors	2.39	2.21	3.02
Interest Cover Ratio	30.52	38.58	78.53
Operating Profit Margin(%)	13.84	15.29	14.50
Profit Before Interest And Tax Margin(%)	12.72	14.42	13.89
Cash Profit Margin(%)	9.74	14.10	14.00
Adjusted Net Profit Margin(%)	8.62	13.24	13.39
Return On Capital Employed(%)	12.09	13.89	20.00
Return On Net Worth(%)	8.59	13.10	19.27

LOCAL AGENCY FURTHER INFORMATION

HISTORY:

Promoted by M R Bhansali and K R Bhansali, Goldiam International started exports of cut and polished diamonds and of plain and studded gold jewellery in 1986. The company was converted into a public limited company in Aug.'94. 

The company has started manufacturing Platinum Jewellery, which is expected to give far better returns and increase profitability. During the year 1999-2000, the company has registered a growth of 45% and hence the directors are happy to inform the company could achieve this due to its reputation earned in the international market over the years and continued quality control measures. 

The company has enhanced its export and value addition by introducing Invisual Setting in Diamond Jewellery and Princess Cut Diamond Grooving Machinery. 

Goldiam Jewels Limited has become Subsidiary of Subject, during the month of February 2005 and this is as a consequence of company's stake in Goldiam Jewels which has risen to 50.05%.

OPERATIONS:

The turnover for the year review was Rs.1655.460 Millions. Though there is increase in the turnover, the profit has come down, the main reasons being fall in value of US$ and Tax impact, The net profit after provision for interest, depreciation and taxation is Rs.142.694 millions compared to previous year's profit of Rs.244.740 Millions.

SUBSIDIARY COMPANIES:

Goldiam Jewellery Limited, wholly owned subsidiary of the Company, has started Commercial Production in its plant in Seepz (SEZ), and have also started export of Jewellery from Seepz. The Company's subsidiary in Hong Kong, 'Goldiam HK Limited', is producing Fashion Jewellery in China, which is being retailed in India through the Company's retail outlets. As per the provisions of Section 212(1) of the Companies Act, 1956 copies each of the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies, viz. Diagold Designs Limited, Goldiam Jewels Limited, Goldiam Jewellery Limited. And Goldiam HK Limited is attached to this annual report. Pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statement is also attached. The turn over and profits of the subsidiaries are given below:

Subsidiary	Turnover (Millions)	Profit (Millions)
Diagold Designs Limited	914.252	62.929
Goldiam Jewels Limited	27.732	(4.348)
Goldiam Jewellery Limited	105.787	20.046
Goldiam HK Limited	97.475	(HK - 4.800 Millions

MANAGEMENT DISCUSSION AND ANALYSIS: 

Industry structure and overview

The gems and jewellery industry is one of the largest contributors to global trade. Currently, a $100 billion market worldwide, the sector is growing annually at a rate of 5-10%.

Consuming the largest quantity of gold in the world and with 11 out of every 12 diamonds polished here, India has a unique position in the international gems and jewellery business.

Exports

Indian exports of gems and jewellery grew at an annual rate of 22% over the last year. India exported US$ 16.6 billion worth of jewellery in 2005-06. This was significantly up from US$ 13.4 billion in the previous year. This sector continues to be the highest foreign exchange earner for India, with 29% of the produce exported to the USA and the balance to countries like UK, Singapore, Japan, UAE, Belgium, Israel, Thailand and Korea.

Subject with its manufacturing facilities comparable to international standards has been able to capture a sizeable portion of this burgeoning market.

Retail

The retail industry is India's largest industry, accounting for over 10% of the country's Gross Domestic Product (GDP). Emerging as one of the most dynamic and fast-paced sectors, it is also responsible for generating employment for 8% of the Indian populace.

Driven by changing lifestyles, strong income growth and favorable demographic patterns, Indian retail is expected to grow to $427 billion by 2010 from the current $328 billion.

Organised Retail - Branded Jewellery

The Indian retail industry is developing rapidly and the landscape once dominated by 'family-owned' shops is changing to malls and departmental stores. Industry reports and estimates suggest that organized retail in India is set to explode driven by a large young working population with a median age of 24 years, nuclear families in urban areas as well as the increasing working-women population. In fact, it is estimated that the sector will grow at a rate of 10-15% in the next five years, a rate higher than the GDP growth rate.

The organized Indian jewellery retail market is estimated to be Rs.16800.000 Millions and forms 2.8% of the total Indian jewellery retail market. In spite of the pessimism about the marketability of branded jewellery in a country rooted in buying ornaments from the traditional goldsmith, jewellery is now marketed for every occasion.

Branded jewellery as a lifestyle product has undergone a rapid change in its profile. Numerous malls opening across the country due to the emergence of an affluent class are the big drivers for this kind of jewellery.

Hence, branded jewellery has witnessed more than 50% growth in the last three years. Such is the potential of this industry that consulting firm McKinsey estimates that this market in India will grow at the rate of 40% per annum to touch Rs.100000.000 Millions by 2010.

With a view to augment revenue and thereby profitability, Subject entered the domestic retail market last year. Assessing further opportunities, the company will soon launch its second brand Subject which will retail gold and diamond jewellery.

Internal control and its adequacy

The Company has adequate internal controls for its business processes across departments to ensure efficiency of operations, compliance with internal policies and applicable laws and regulations, protection of resources and assets and accurate reporting of financial transactions.

Certified by the Internal Auditors and the Statutory Auditors of the Company, the internal control system is also supplemented by extensive internal audits, regular reviews by management and standard policies and guidelines to ensure reliability of financial and all other records.

Opportunities and threats

Subject believes that demographic-factors in India such as increase in discretionary income and the growing number of women in workplace are encouraging trends for the jewellery industry and provide a significant opportunity for subject growth. Seizing this opportunity, the Company entered into retail of fashion accessories in India through Ola last year and 'subject this year.

However, as the retail market continues to provide more opportunities, it also attracts more players, making the space more competitive. Diamond jewellery continues to enjoy a dominant position in the luxury market. Subject to keep pace with the world's jewellery design trends and manufacture the best quality jewellery. In the exports market, while the USA continues to be their largest buying market, the Company is expanding geographies by looking at the other large international markets like Russia, Canada, Europe, Latin America, Japan, Australia, South Africa and the Middle East. This helps them offset any negative impact from the prevalent condition in the USA, which is currently recovering from an economic slowdown.

The Company is also working towards improving the retail mix of the business by selling more directly to existing retailers and increasing the number of retailers.

Human Resource and Industrial relations:

The company is putting unremitting efforts to employ professionally qualified personnel in different hierarchy of administration. Further, requisite training is given to employees at different levels by identifying the needs.

The Company has an extremely low labour turn over and continues to enjoy a healthy and productive relationship with its employees.

There are no financial or commercial transactions that can have a potential conflict of interest between personnel in the management and the Company.

Risk Management

Bullion Risk

This risk arises due to the Company's exposure to gold and the volatility associated with gold prices.

The Company's export business is subject to bullion risk as gold forms approximately 30% of the cost of the finished product. The management has decided not to take any risk with gold prices, which are volatile. The Company hedges its position which mitigates the risks associated with gold prices. Thus, they do not speculate on gold.

Currency Risk

This risk arises from the exposure to foreign currency and volatility associated with the underline currencies.

Company exports in 2006-07 stood at Rs.3080.000 Millions of this, 100% of exports were transacted in US Dollars. While the Company hedges majority of its receivables, any sharp fluctuation in currency is likely to affect the cash flow of the company as well as its profitability.

Fashion Risk

This risk arises from the Company's positioning of being fashion-led and wanting to set trends, and not follow trends.

As the Company is part of the global design jewellery industry, it is clearly exposed to fashion risk. To mitigate this risk, the Company has an exclusive design team of 40 based out of India, Hong Kong, China and Los Angeles. The Company also works closely with its customers. Thus, the Company has its mitigation in place. However, fashion risk cannot be completely eliminated.

Duplication Risk

This risk arises due to the existence of more than 25,000 local jewelers who would replicate their designs and offer the same product to the customer at reduced prices. Imitation is a form of flattery and they take it as a compliment to their designs. However, to prevent this flattery from adversely affecting their business, they have leveraged the economies of scale to reduce cost of production. Thus, subject is able to offer a branded product at economical prices by effectively squeezing the market of duplicate jewellery.

Geography Risk

This, risk arises from dependence on any geographic region.

The company exports to various countries around the world and economic slowdown in any country is likely to affect business in that region. While USA continues to remain their major export destination, they also export to Europe, Thailand, UK, Russia and Japan. Considering the export destinations are spread across the globe and hence diversified, they believe they are well-managed against the risk.

Competition Risk

This risk arises from low entry barriers in the business and hence more players wanting a share of the same business.

Diamonds continue to remain one of the most desirable items for women, and jewellery as one of the most gifted items. Similarly in India, the retail boom prevailing is further boosting the demand and sale of jewellery. With such attractive opportunities, the space continues to remain crowded, thus giving rise to competition risk.

Company strong design focus, attractively priced products and unmatched finish differentiate the products in the market place. The Company also focuses on value-added stone setting by providing customers more stones per piece (thereby getting paid higher on a per piece basis).

Outlook

The outlook for the Company is extremely bright. The Company expects the export business to grow significantly in the future. With the overall boom in the retail sector and specifically in the branded jewellery retail market, they expect their retail foray to do phenomenally well too, in the coming years.

Cautionary Statement

Statements in the Management Discussion and Analysis describing Company's objective, projections, estimates, expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates changes in the Government regulations, tax laws, statute and other incidental factors.

Contingent Liabilities Not Provided For:

a) The Company has outstanding performance guarantee of Rs.10.019 Millions as on the Balance Sheet date, executed in favour of Deputy Commissioner of Customs (Previous Year Rs.10.019 Millions)

b) The Company had disputed the demand in respect of Custom Duty Rs.0.865 Million (Previous year Rs.0.865 Million) and Penalty of Rs.0.100 (Previous Year Rs.0.100) and the Commissioner of Customs Sahar Airport, has preferred an appeal before the Supreme Court of India against the order of the Customs, Excise and Gold (Control) Appellate Tribunal, West Zonal Bench, Mumbai.

c) The Municipal Corporation of Greater Mumbai has preferred an appeal in the High Court of Judicature at Bombay against the order of Small Causes Court rejecting the claim of Municipal Corporation of Greater Mumbai for an amount of Rs.13.698 Millions (Previous year Rs.13.696 -) on account of property tax.

d) The Company has outstanding demand of Income tax of Rs.0.271Million for assessment year 2004-05 as on the Balance Sheet date; the said demand is outstanding and not provided as disputed in appeal.

e) The Company has executed Bank Gurantee of US Dollar 1000000 favoring Hongkong and Shanghai Banking Corporation Limited, Hongkong for its Subsidiary Goldiam HK Ltd Hongkong.

f) Commitment as per contribution agreement with Kshitij Venture Capital Fund is Rs.8.100 Millions (Previous Year Rs.15.000 Millions)

Fixed Assets:

v Factory

v Building

v Office Premises

v Furniture and Fixture

v Office Equipment

v Plant and Machinery

v Computers

v Air Conditioner

v Lift

v Electrical

v Vehicles

AS PER WEBSITE

Subject is located in Mumbai, in India's premier jewelry manufacturing zone- seepz specially created by the Government of India to encourage Indian industrialists to set up world class jewelry manufacturing facilities for 100% Export.

Subject was set up by the entrepreneurial initiatives of its Managing Director, Mr. Rashesh Bhansali. Company is one of the largest exporters of Invisible Set jewelry. The annual turnover for the year 2005 is US $ 54 million. Company caters to the needs of all customers globally. 70% of their annual production is exported to the American market.

Company product line consists of 7000 designs, in Rings, Ear Rings, Pendants, Bracelets, Bangles and Necklaces. Subject manufactures the above in gold as well as in platinum. The continuous commitment of their management along with 450 skilled workers has enabled them to approach the new millennium with a positive and aggressive attitude.

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 :

The 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.

The 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. 42.90
UK Pound	1	Rs. 83.74
Euro	1	Rs. 66.46

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	8
--RESERVES	1~10	8
--CREDIT LINES	1~10	8
--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		72

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, they have no basis upon which to recommend credit dealings	No Rating

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