MIRA INFORM REPORT

Report Date :

24.05.2008

IDENTIFICATION DETAILS

Name :	MANGALAM TIMBER PRODUCTS LIMITED
Registered Office :	Kusumi, Navrangpur, District Koraput - 764 059, Orissa
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	27.08.1982
Com. Reg. No.:	1101
CIN No.: [Company Identification No.]	L02001OR1982PLC001101
TAN No.: [Tax Deduction & Collection Account No.]	BBNM00033F
PAN No.: [Permanent Account No.]	AABCM5187C
Legal Form :	It is a public limited liability company. The company's shares are listed on the Stock Exchanges.
Line of Business :	Manufacturing of Medium Density Fibre Board.

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 740000
Status :	Satisfactory
Payment Behaviour :	Slow but correct
Litigation :	Clear
Comments :	Subject is an established concern of Birla Group which has wiped act all previous losses. The company’s financial position has improved. However, it’s payments are slow but correct. The company can be considered normal for business dealings at usual trade terms and conditions

LOCATIONS

Registered Office / Factory :	Kusumi, Navrangpur, District Koraput - 764 059, Orissa, India
Tel. No.:	91-6858-222148/222143/144/148/201
Fax No.:	91-6858-222042
E-Mail :	secretal@mangalamtimber.com 1. mangalam.cal@gncal.globalnet.ems.vsnl.net.in admin@mangalamtimber.com mtplnwp@sancharnet.in admfac@mangalamtimber.com
Website :	http://www.mangalamtimber.com
Head Office :	Birla Building, 7^th Floor, 9/1, R. N. Mukherjee Road, Kolkata – 700001, West Bengal, India
Tel. No.:	91-33-22438706/8707/8853/8856/8857
Fax No.:	91-33-22438709
E-Mail :	admin@mangalamtimber.com
Corporate Office :	Rawdon Chambers, 11-A, Rawdon Street (3^rd floor), Kolkata - 700 017, West Bengal, India
Tel. No.:	91-33-2247 1474 / 0466 / 2240 6214 / 1324
Fax No.:	91-33-2247 0604
Branches :	Located At :- Delhi Chennai Ahmedabad Bangalore Bhubaneswar Kochi Hyderabad Indore Jaipur Kanpur Jallandhar Pune

DIRECTORS

Name :	Mr. N. G. Khaitan
Designation :	Director
Name :	Mr. S. K. Parikh
Designation :	Director
Name :	Mr. V. P. Dixit
Designation :	Director
Name :	Mrs. Vidula Jalan
Designation :	Director
Name :	Mr. Sarvadaman Ray
Designation :	Managing Director

KEY EXECUTIVES

Name :	Mrs. Sarita Chowbey
Designation :	Company Secretary

SHAREHOLDING PATTERN

AS ON 31.03.2007

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters	4347800	23.73
Axis	13000	0.08
Mutual Funds	11900	0.06
FI’s	333767	1.82
Banks	800	0.0
FII’s	2,200	0.01
Corporate	2183969	11.92
Individuals	10890495	59.42
NRI / OCB	543469	2.96
Total	18327400	100.00

BUSINESS DETAILS

Line of Business :

Manufacturing of Medium Density Fibre Board.

Products :

Item Code No. (ITC Code)	Product Description
44112190	Medium Density Fibre Board
29121100	Formaldehyde

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
MDF Board	MT	26400	30000	26920
Formaldehyde	MT	N.A.	13200	8354
Laminated Particle Board	MT	--	--	87170

GENERAL INFORMATION

No. of Employees :

2000

Bankers :

v State Bank of India

v State Bank of Hyderabad

v State Bank of Travancore

v Bank of America NT & SA

v IDBI Bank Limited

v Indusland Bank

Facilities :

SECURED LOANS	Rs in Millions
Cash Credit	170.708
Bill Discounting	1.278
Total	171.986
Note:- Cash Credit, bill discounting, outstanding Bank Guarantees and Letters of Credit amounting to Rs.33.741 Millions are secured by prior charge by way of hypothecation of stocks, debts and other current assets and second charge to be created over entire fixed assets both present and future.

Banking Relations :	Satisfactory
Auditors :
Name :	SM Daga and Company Chartered Accountants
Address :	11, Clive Row, Kolkata - 700001
Associates/Subsidiaries :	Grasim Industries Limited

CAPITAL STRUCTURE

AS ON 31.03.2007

Authorised Capital :

No. of Shares	Type	Value	Amount
20000000	Equity shares	Rs. 10 each	Rs. 200.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
18327400	Equity shares	Rs. 10 each	Rs. 183.274 millions
Add :	Shares Forfeited		Rs. 0.021millions
	Total		Rs. 183.295 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006
SHAREHOLDERS FUNDS
1] Share Capital		183.295	183.295
2] Share Application Money		0.000	0.000
3] Reserves & Surplus		2.352	1.500
4] (Accumulated Losses)		0.000	[35.520]
NETWORTH		185.647	149.275
LOAN FUNDS
1] Secured Loans		171.986	134.316
2] Unsecured Loans		47.500	85.000
TOTAL BORROWING		219.486	219.316
DEFERRED TAX LIABILITIES		0.000	0.000
TOTAL		405.133	368.591
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		101.746	80.330
Capital work-in-progress		3.967	12.567
INVESTMENT		0.500	0.500
DEFERREX TAX ASSETS		56.856	70.530
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	117.550	157.509
	Sundry Debtors	131.240	102.865
	Cash & Bank Balances	29.867	19.878
	Other Current Assets	5.787	6.831
	Loans & Advances	92.545	63.566
Total Current Assets		376.989	350.649
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	134.925	145.985
	Provisions	0.000	0.000
Total Current Liabilities		134.925	145.985
Net Current Assets		242.064	204.664
MISCELLANEOUS EXPENSES		0.000	0.000
TOTAL		405.133	368.591

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006
Sales Turnover		796.092	590.858
Other Income		31.684	16.776
Total Income		827.776	607.634
Profit/(Loss) Before Tax		55.595	41.156
Provision for Taxation		19.223	12.547
Profit/(Loss) After Tax		36.372	28.609
Imports :
	Raw Materials	90.412	86.177
	Stores & Spares	2.753	4.461
Total Imports		93.165	90.638
Expenditures :
	Excise Duty	95.834	75.951
	Increase/(Decrease) in Finished Goods	36.581	[48.412]
	Payment and Benefits to Personnel	64.427	56.178
	Manufacturing / Administrative/ Selling and other Expenses	543.751	457.379
	Interest and Finance Expenses	23.990	17.817
	Depreciation & Amortization	7.598	21.152
	Transfer from Revaluation Reserve	0.000	[13.587]
Total Expenditure		772.181	566.478

SUMMARISED RESULT

PARTICULARS	31.03.2008 [Full Year]
Sales Turnover	600.900
Other Income	22.000
Total Income	622.900
Total Expenditure	521.100
Operating Profit	101.800
Interest	30.600
Gross Profit	71.200
Depreciation	9.900
Tax	6.300
Reported PAT	44.800
Dividend (%)	60.000

KEY RATIOS

PARTICULARS	31.03.2007	31.03.2006
Debt-Equity Ratio	1.31	1.64
Long Term Debt-Equity Ratio	0.40	0.78
Current Ratio	1.46	1.65
TURNOVER RATIOS
Fixed Assets	1.18	0.91
Inventory	5.53	4.58
Debtors	6.80	6.22
Interest Cover Ratio	2.71	2.74
Operating Profit Margin(%)	9.12	9.54
Profit Before Interest And Tax Margin(%)	8.16	8.26
Cash Profit Margin(%)	4.28	4.89
Adjusted Net Profit Margin(%)	3.33	3.60
Return On Capital Employed(%)	16.06	12.01
Return On Net Worth(%)	14.30	11.53

LOCAL AGENCY FURTHER INFORMATION

HISTORY

A Birla group company in a joint venture with the Government of Orissa, the company is the pioneer in the manufacture of medium density fibre boards. It went public in April’86. It introduced the technology for the first time in the country under technical collaboration with G. Siempelkamp, Germany in 1987. Its brand name is Duratuff MDF, and the product is manufactured using plantation timber/waste wood/agro waste. The product is suitable for furniture, doors, door frames, panelling, partitioning, cupboards, ceiling, etc.

The company has assumed a leadership role in the industry by promoting social forestry projects and industrial plantations to meet its requirements of raw materials. More than five mln trees have been planted in non-cultivated barren lands, thereby providing employment and earning opportunity to poor tribals in the backward areas of Orissa.

Since its inception, the company found its proceedings tough due to various reasons, primary amongst them being : acceptance of the new product by the market and availability of raw materials, i.e. wood fibres which is derived from trees like eucalyptus. In 1994-95, the company exported products worth Rs. 70.800 millions to various countries including the UK. It has the ISI certification for its products.

Adverse market conditions and non-availability of wood and timber from the Government of Orissa resulting in high cost of timber, among other factors, have resulted in losses and erosion of the company’s net worth. The company has submitted the revival package to IDBI, the operating agency appointed by BIFR.

The rehabilitation package seeks certain reliefs and concessions, which Inter-alia, included waiver of overdue interest on term loans/Non-convertible debentures and also one time settlement of major part of outstanding on account term loans to institutions.

During 2000-01, the company was awarded ISO 9002 certificate by ‘Des Norske Veritas (DNV) – Netherlands, and company is the only Medium Density Fibreboard Plant in India having ISO 9002 Certificate. The formaldehyde plant which is mechanically complete was expected to commence its production in the current year. The trial run was being carried out.

FINANCIALS

The company during the current year has wiped out all accumulated losses and has posted a profit before tax of Rs. 55.595 Millions during the period and after adjusting all accumulated losses the Profit and Loss Account of the company has a credit balance of Rs. 0.852 Millions as at March 31, 2007. 

During the year the Company reported 34.74% sales growth and 27.13% PAT growth as compared to the previous year. This has been made possible by adopting better production planning and scheduling along with robust demand growth for Medium Density Fibre Board (MDF), the main product of the Company, in India and the directors expect this demand growth to be strong in the foreseeable future due to the intensive marketing efforts made by the company during the last two decades as pioneers of MDF products in India and the acceptability of the company's products as a much superior product compared to other panel boards in all major markets in India. Large scale imports of MDF coupled with the reduction in the Import duties has also helped the actual users to shift from other products like ply-wood and particle boards to MDF/HDF Panel Boards. 

In view of the increased demand of the company's products, the company is envisaging increasing the production capacity in the near future, The company has already initiated talks with a number of machinery manufacturers both in India and abroad and shall in due course place a detailed plan for capacity expansion before the shareholders in the near future. 

During the year, based on the Company's requirements, consortium bankers have enhanced the Working Capital facilities to Rs. 210 Millions from Rs. 150 Millions. 

As in the past years, the focus on the Plantation under the Farm Forestry Scheme and/or Public Private Partnership (PPP) Scheme was maintained. 

During the year, the Company has undertaken Plantation of about 14000 acres under these schemes in the States of Orissa, Chhattisgarh and Andhra Pradesh. As in the previous years, the plantation has been undertaken under a tripartite. agreement among the Farmers/Van Samities, financing banks and the Company. Under the terms of tripartite agreement, the plantation is raised, maintained and owned by the concerned Farmers/Van Samities, which is financed by the financing bankers by providing loans to the Farmers/Van Samities as the case may be. The Company has the right to buy the Timber from harvesting the plantation at a pre-determined price as agreed in the tripartite agreement or prevailing market price, whichever is higher, With the plantation of the current year, the total plantation undertaken by the Company since 2000-01 till date is over 60000 Acres. The Company expects to maintain continued emphasis on plantation activities which will ensure the availability of timber the main raw material of the company not only for the company's existing capacity but also for future expansion plans. Apart from making the Company self-sufficient in availability of its principal, raw material, plantation activity plays a major role in providing large-scale job opportunities to the poor, tribal and landless labourers in the respective areas. The Company is doing a laudable job as far as plantation activity is concerned and the Board hopes that sooner than later, the Company's contribution in this field will be suitably acknowledged by the concerned Government Agencies. 

The Company has complied with the requirements of Corporate Governance through constitution and reconstitution of various committees and has taken adequate steps to ensure that all mandatory provisions of Corporate Governance as provided in the Listing Agreement with the Stock Exchanges are duly complied with. 

In compliance with Section 217(2AA) of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 2000, the Directors confirm: 

1. That the applicable Accounting Standards have been. followed in the preparation of Annual Accounts along with proper explanations relating to material departures, if any. 

2. That the accounting policies have been selected and applied consistently and such judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st March, 2007 and the Profit & Loss Account for the year ended on that date. 

3. That proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 

4. That the Annual Accounts have been prepared on a going concern basis. 

MANAGEMENT DISCUSSION AND ANALYSIS REPORT: 

Industry Structure and Development: 

Demand of Medium Density Fibre Board, during the year, was far in excess than Indian production. As the MDF market in India is recording double digit growth during the past several months, and since the Indian production is not enough to meet the demand, large imports of MDF and HDF material have taken place from countries like Sri Lanka, Thailand, China. Malaysia, New Zealand, Australia and some European countries. 

Opportunities and Threats: 

Growth in the Indian economy is bound to result into increase in demand of Medium Density Fibre Board even more. The year gave strong indications regarding future demand for this industry. With the buoyancy in the construction sector, demand for MDF is expected to grow. The extended product range of the Company's product, especially in value added segments provides an excellent opportunity to the Company. Import of MDF from countries like Malaysia, Thailand, Sri Lanka further cheaper. Moreover, free trade agreements with various countries are in the offings. which are likely to add to the availability of imported MDF. However, more worrisome is the fact that the Company is preparing itself ,o compete with new producers in India,who have set up new plants with lower project costs and with new technology and are already offering lower prices as a market entry strategy. The company therefore needs to quickly enhance capacity and modernize to remain competitive. 

Outlook: 

The Company looks forward to a further improvement in the demand of MDF. Focus on Plantation activities continues, which will definitely help the Company in remaining competitive and the market leadership status. 

Internal Control Systems and their adequacy: 

The Company has adequate Internal Control Systems in all its areas of operation which is commensurate with its size. Reputed outside Firm of Chartered Accountants has been appointed as the Internal Auditors to carry out thorough audit of the Company's functions. The adequacy of the system has also been examined by the Statutory Auditors of the Company and no adverse remark on the adequacy of internal control system has been made. 

Discussion on Financial Performance and Operational Performance: 

During the year the Company report 34.74% sales growth and 27.13% PAT growth as compared to the previous year. This has been made possible by adopting better production planning and scheduling along with robust demand growth for Medium Density Fibre Boards (MDF), the main product of the Company, in India and the directors expect this demand growth to be strong in the foreseeable future due to the intensive marketing efforts made by the company during the last two decades as pioneers of MDF producers in India and the acceptability of the company's products as a much superior product compared to other panel boards in all major markets in India. Large scale imports of MDF coupled with the reduction in the Import duties has also helped the actual users to shift from other products like plywood and particle boards to MDF/HDF Panel Boards. 

Royalty on wood had been increased by the Government of Orissa with retrospective effect from 19 April, 1988 vide its letter dated 2nd September, 1993 against which the Company had filed a writ petition before the Orissa High Court. The Orissa High Court vide its order dated 16th May, 1995 had upheld the writ petition of the Company. Government of Orissa had filed a Special Leave Petition before the Supreme Court. The Hon'ble Supreme Court vide its order dated 11th November, 2003 has dismissed the special leave petition filed by the Government of Orissa and upheld the decision of the Hon'ble High Court of Orissa passed in favour of the Company. The Hon'ble Supreme Court had also directed the Govt. of Orissa to implement the judgement of the Hon'ble High Court of Orissa expeditiously and in any case within a period of four months from the date of the order of the Supreme Court. Subsequently, Government of Orissa has lodged a claim for Rs. 30.349 Millions (net of excess amount of royalty paid by the Company in earlier years) on the Company on account of alleged failure in taking up replantation in the area harvested by the Company.

This claim has been denied by the company. In terms of the Supreme Court judgement, the Company has lodged its claim with the Government of Orissa, the monetary value of which is much higher in comparison to the claim lodged by the Govt. of Orissa against the company, to honour its commitments made to the Company as directed by the Hon'ble High Court of Orissa and upheld by the Hon'ble Supreme Court. The Management is of the view that no provision against the said demand is necessary, as no liability is likely to arise on this account and Rs. 8.104 Millions paid in earlier year and included under advances recoverable has been considered good of recovery.

Demand for Rs. 2.728 Millions (Previous year Rs.2.628 Millions) against maximum demand charges from Orissa State Electricity Board has not been accepted by the Company and the matter is under dispute. However, as a matter of abundant caution an equivalent amount has been set aside and kept as a contingency provision to take care of the liability, if any, in this respect.

In order to sustain long-term availability of timber, principal raw material for the Company's main product, namely, Medium Density Fibre Board, the Company is engaged in plantation under various schemes on the land owned by third parties. The Company's role is to develop and supply seedlings to such third parties. Since development of seedlings is an integral part of plantation activity which is incidental to main activity of the Company, this operation has not been treated as a separate segment under Accounting Standard AS -17 issued by the Institute of Chartered Accountants of India.

In accordance with the licence granted by the Goverment of Orissa in the year 1986, the Company had undertaken plantation in certain Government land which is ready for harvesting. Despite consistent follow up, the Government did not allow the Company to harvest the plantation on the pretext that the Special Leave Petition filed by the Government of Orissa was pending before the Hon'ble Supreme Court. The Hon'ble Supreme Court had dismissed the Special Leave Petition filed by the Government of Orissa in the royalty matter. Since the Government of Orissa had not allowed the Company to harvest the plantation done by the Company even after the dismissal of Special Leave Petition filed by the Government of Orissa, the Company had no alternative but to file a Writ Petition in the High Court of Orissa seeking direction to allow the Company to harvest the plantation done by the Company on its own cost on Government land and also other stipulations relating to rate of royalty and weighment norms. The Hon'ble High Court of Orissa had vide its order dated 8m July, 2004, had without expressing any opinion with regard to merits of the contentions raised by the company, disposed of the petition with a direction to the Government of Orissa and its various officers to dispose of the representations made to them strictly in accordance with law as expeditiously as possible preferably within a period of six months. In compliance with the directions from the Hon'ble High Court of Orissa, the Government has reiterated its claim for recovering cost of plantation on 244.825 hectares. The Company has denied its liability to any such claim.

The Company has undertaken Plantation under Farm Forestry Scheme, inter-alia, in the State of Chhattisgarh in association with the forest department of Chhattisgarh Government. As per the agreement part sale consideration of supply of seedlings is to be paid to the Company at the time of harvesting of the plantation. Accordingly, part sale consideration of Rs. 7.348 Millions (including Rs. 7.298 Millions relating to previous year) along with interest will be received by the company at the time of harvesting. Based on the legal opinion obtained by the company, the same will be accounted for in the year in which the plantation is harvested.

FIXED ASSETS

• Land
• Roads & Buildings
• Plant & Machinery
• Electrical Installations & Fittings
• Furniture & Fittings
• Office Equipments
• Vehicles

AS PER WEBSITE

Subject is a part of the diverse B.K. Birla Group, is the pioneer in the Country in the field of Medium Density Fibre Board, more commonly  known as MDF.

The Company set up the first MDF plant in India and today, is the only one in MDF industry, in the country to manufacture both Plain & Pre-laminated MDF.

They are a total solution provider, be it in plain or pre-laminated MDF, in Exterior or Interior Grades in the thickness range of 6mm through till 35mm. They manufacture MDF in the sizes that can be in any combination of 18 x 4 or 16 x 4.

The Duratuff range of Plain and Pre-laminated MDF has been Certified by Bureau of Indian Standards under IS:12406/2003 for Plain MDF & IS : 14587 / 98 for Pre-laminated MDF. Duratuff MDF is also certified by the Bureau of Indian Standards under the ECO marking/Grrade ~ ECO Friendly MDF.. 

The only Company to have been awarded the ISO certification for both IS0: 9001:2000 and 14001 by DNV, Netherlands.

Board of Director

Shri N. G. Khaitan, an eminent Solicitor and Advocate, Senior Partner in Khaitan & Co., Kolkata is on the Board of the Company since its inception.

Smt. Vidula Jalan, an MBA - Strategic Marketing and Leadership and Change Management from Indian School of Business, Hyderabad.

Shri S. K. Parik, a Chartered Accountant with vast experience and also a Director and Secretary in Kesoram Industries Limited one of the Promoters of the Company.

Shri. V. P. Dixit, a Chartered Accountant and former Managing Director of Life Insurance Corporation of India and first Chairman of Industrial Investment Corporation of India (formerly known as Industrial Reconstruction Bank of India).

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.42.84
UK Pound	1	Rs.84.78
Euro	1	Rs.67.32

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
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	5
--LEVERAGE	1~10	4
--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		41

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.	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

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