MIRA INFORM REPORT

Report Date :

20.11.2008

IDENTIFICATION DETAILS

Name :	GOVAN INDUSTRIES (INDIA) PRIVATE LIMITED
Registered Office :	B-602, Sahayog CHS Limited, Above Central Bank of India, S V Road, Kandivali (West), Mumbai – 400067, Maharashtra
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	01.05.1996
Com. Reg. No.:	11-99241
CIN No.: [Company Identification No.]	U31900MH1996PTC099241
IEC No.:	0396034578
TAN No.: [Tax Deduction & Collection Account No.]	MUMG05174B
PAN No.: [Permanent Account No.]	AAACG2243G
Legal Form :	Private Limited Liability Company
Line of Business :	Manufacturer and Sales of Explosion Protected Electrical Equipments, Hoses and Fittings.

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.	Small

Status :	Moderate
Payment Behaviour :	No Complaints
Litigation :	Clear
Comments :	Subject is a prelty old company having moderate track records. The company has already taken sizable loans from its bankers. General financial position is weak. Trade relations are fair. No complaints have been heard from market sources. If Would be advisable to take adequate securities while dealing with the subject.

INFORMATION PARTED BY

Name :	Mr. S. Selvamuthu
Designation :	Head – Finance
Contact No.:	91-9840217899
Date :	19.11.2008

LOCATIONS

Registered Office :	B-602, Sahayog CHS Limited, Above Central Bank of India, S V Road, Kandivali (West), Mumbai – 400067, Maharashtra, India
Tel. No.:	91-22-28630159/ 28705264
Mobile No.:	91-9840217899
Fax No.:	91-22-28630380/ 57081000
E-Mail :	govanmumbai@govanindia.com selvamuthhu@gmail.com govanmumbai@vsnl.net govanmumbai@govan.com.au
Website :	http://www.govanindia.com
Location :	Leased
Factory :	Plot No.A-13, SIPCOT Industrial Growth Centre, Mattur Post, Sriperumbudur Taluk, Oragadam, Kancheepuram – 602105, Tamilnadu, India
Tel. No.:	91-44-32523679
E-Mail :	Govan_south@rediffmail.com
Location :	Owned

DIRECTORS

Name :	Mr. Zafarudin Abdus Salam
Designation :	Chairman and Managing Director
Address :	661, 6^th Cross, 16^th Main, 3^rd Block, Koramangala, Bangalore – 560034, Karnataka, India
Date of Birth/Age :	20.05.1947
Experience :	40 years
Date of Appointment :	31.07.2002
Name :	Mr. Nabeel Zafar Salam
Designation :	Director
Address :	661, 6^th Cross, 16^th Main, 3^rd Block, Koramangala, Bangalore – 560034, Karnataka, India
Date of Birth/Age :	09.06.1978
Experience :	5 years
Date of Appointment :	15.01.2005
Name :	Mr. Prabhakar Subramanian
Designation :	Director
Address :	Old No.10, New No.17/1, Sai Nikatan, Tanjore Road, T. Nagar, Chennai – 600017, Tamilnadu, India
Date of Birth/Age :	04.08.1952
Experience :	35 years
Date of Appointment :	18.01.2007
Name :	Mr. Sethuraman Kongad
Designation :	Director
Address :	A/ 303, Shreenath Nagar, CHS, Shiv Valabh Road, Dahisar (East), Mumbai – 400068, Maharashtra, India
Date of Birth/Age :	01.10.1960
Date of Appointment :	16.12.2002

KEY EXECUTIVES

Name :	Mr. S. Selvamuthu
Designation :	Head – Finance

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2008)

Names of Shareholders	No. of Shares
Zafarudin Abdus Salam	832761
Nabeel Zafar Salam	146958
Total	979719

(As on 30.09.2007)

Category	Percentage
Directors or relatives of directors	100.00

BUSINESS DETAILS

Line of Business :

Manufacturer and Sales of Explosion Protected Electrical Equipments, Hoses and Fittings.

Products :

Products Descriptions	Item Code No.
Explosion Protected Electrical Apparatus	8543.90

Exports :

Products :

Explosion Proof Electrical Equipment

Countries :

• Australia
• Middle East

Terms :

Selling :

Credit (30-60 days)

Purchasing :

Credit (30-60-90 days)

PRODUCTION STATUS (As on 31.03.2008)

Particulars	Unit	Actual Production
Manufactured
Electrical Fittings	Nos.	7481
Junction Boxes (MS, SS and Cast)	Nos.	28451

Quantities/ Value Information:

(As certified by the Management)

Licensed Capacity:

No License is required for any of the products manufactured by the company hence not applicable.

Installed capacity:

In view of the fact that several products can be fabricated on the same machinery and there is no standard product manufactured by the company, it is not feasible to indicate the installed capacity.

GENERAL INFORMATION

No. of Employees :

107 (Office – 35, Factory – 62 and Branches – 10)

Bankers :

• Corporation Bank

Ashokvan Branch, Pavanputra Complex, Maruthi Nagar, Dahisar (East), Mumbai – 400068, Maharashtra, India

Facilities :

Secured Loans	31.03.2008 (Rs. In Millions)
Term Loans: Rupee term loans from Bank: Corporation Bank (Term loans from banks secured against exclusive first charge by way of EMG of factory land and building and by way of hypothecation of movable assets proposed to be purchased in addition to existing plant/ Machinery at a total cost of Rs.24.700 Millions)	31.809
Working Capital Loans:
Export Packaging Credit facility	13.476
Post Shipment/ Bill Discounting	12.212
Cash Credit Facility	1.011
(Secured against hypothecation of inventory, book debts, movable and other current assets both present and future, a corporate guarantee by a company in which directors are interested)
Vehicle Loans: (From Kotak Mahindra Prime Limited) (Secured against hypothecation of Vehicles) (Repayable within one year Rs.0.213 Millions)	0.345
Total	58.853
Unsecured Loans	31.03.2008 (Rs. In Millions)
From a Director (Interest Free)	27.292
Total	27.292

Banking Relations :	-
Auditors :
Name :	Suresh and Surana Associates Chartered Accountant
Address 1:	309, Ahura Centre, 82 Mahakali Caves Road, Andheri (East), Mumbai - 400093, Maharashtra, India
Address 2:	5^th Floor, Khetan Bhavan , Churchgate, Mumbai – 400020, Maharashtra, India
Address 3:	602-3, 6^th Floor, Regent Chambers, 208 Nariman Point, Mumbai – 400021, Maharashtra, India
Tel. No.:	91-22-66960644/ 22875770/ 66515570
Fax No.:	91-22-28205685/ 22875771
Email :	email@ss-associates.com
Website :	http://www.ss-associates.com
Mumbai Branch Office :	310, Ahura Centre, 82Mahakali Caves Road, Andheri (East), Mumbai – 400093, Maharashtra, India Tel No.: 91-22-66975289/ 66960644 Fax No.: 91-22-28205685
Branch Office :	Located at: New Delhi Chennai Kolkata Bangalore Surat Ahmedabad Gandhidham
Associates/Subsidiaries :	Govan Industry Pty Limited 131-149 Link Drive, Campabellfield, Victoria, Australia (Manufacturer of Explosion Proof Electrical Equipment)

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
1000000	Equity Shares	Rs.10/- each	Rs.10.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
979719	Equity Shares	Rs.10/- each	Rs.9.797 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2008	31.03.2007	31.03.2006
SHAREHOLDERS FUNDS
1] Share Capital		9.797	9.797	9.797
2] Share Application Money		1.819	1.819	1.819
3] Reserves & Surplus		7.035	4.316	4.282
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		18.651	15.932	15.898
LOAN FUNDS
1] Secured Loans		58.853	22.764	0.000
2] Unsecured Loans		27.292	8.250	0.000
TOTAL BORROWING		86.145	31.014	0.000
DEFERRED TAX LIABILITIES		0.000	0.448	0.336
TOTAL		104.796	47.394	16.234
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		20.934	21.085	7.520
Capital work-in-progress		41.654	2.191	0.504
INVESTMENT		0.000	0.000	0.000
DEFERREX TAX ASSETS		0.090	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	21.663	17.768	9.253
	Sundry Debtors	22.179	22.689	6.096
	Cash & Bank Balances	10.296	4.527	3.480
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	19.187	11.170	2.276
Total Current Assets		73.325	56.154	21.105
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	26.595	29.717	11.838
	Provisions	4.612	2.319	1.057
Total Current Liabilities		31.207	32.036	12.895
Net Current Assets		42.118	24.118	8.210
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		104.796	47.394	16.234

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		71.291	49.747	39.968
Other Income		11.141	11.162	2.183
Total Income		82.432	60.909	42.151
Profit/(Loss) Before Tax		4.034	1.115	3.384
Provision for Taxation		1.188	1.081	1.271
Profit/(Loss) After Tax		2.846	0.034	2.113
Earnings in Foreign Currency :
	Export Earnings	55.843	41.213	26.872
	Reimbursement of expenses (On Accrual Basis)	9.937	1.069	0.910
Total Earnings		65.780	42.282	27.782
Expenditures :
	Cost of Goods Sold	47.837	35.793	21.288
	Manufacturing Expenses	17.532	16.320	3.262
	Increase/(Decrease) in Finished Goods	(3.227)	(5.061)	0.508
	Managerial Remuneration	12.728	10.519	6.856
	Interest	2.285	1.173	0.008
	Depreciation & Amortization	1.243	1.050	0.778
	Other Expenditure	0.000	0.000	6.067
Total Expenditure		78.398	59.794	38.767

KEY RATIOS

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
PAT / Total Income	(%)	3.45	0.06	5.01
Net Profit Margin (PBT/Sales)	(%)	4.89	2.24	8.47
Return on Total Assets (PBT/Total Assets}	(%)	4.28	1.44	11.82
Return on Investment (ROI) (PBT/Networth)		0.22	0.07	0.21
Debt Equity Ratio (Total Liability/Networth)		6.29	3.96	0.81
Current Ratio (Current Asset/Current Liability)		2.35	1.75	1.64

LOCAL AGENCY FURTHER INFORMATION

Note:

The Registered Office of the company has been shifted from B-301, Crown Vasant Marvel, Borivali East, Mumbai – 400066, Maharashtra, India, to the present address w.e.f. 26.10.2006

Contingent Liabilities not provided for as at year-end are as follows:

Particulars	31.03.2008 (Rs. In Millions)
Counter guarantees given to bankers for guarantees given by them customers for performance and other contingencies	0.573
Value of Bond executed in favour of the president of India through joint Director of Foreign Trade for Licenses/ Authorisations value (duty saved) for import under the E.P.C.G. Scheme.	1.875
Letter of Credit Outstanding	7.255

• Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) Rs.36.822 Millions

Capital Work in Progress including capital advances and pre-operative expenditure (Pending allocation)

Particulars	31.03.2008 (Rs. In Millions)
a. Factory Building		19.745
b. Borewell		0.207
c. Electrical Installation		0.315
d. Land Development Expenses		-
e. Advances to suppliers for Capital Expenditure		11.490
f. Pre-operative Expenses:
Opening balance	1.717
Salary and other allowances	3.038
Conveyance	0.054
Hotel Expenses	0.056
Printing and Stationery	0.042
Processing Charges	0.423
Staff Welfare Expenses	0.045
Stamp Duty	-
Sundry Expenses	0.042
Interests Expenses	1.691
Travelling Expenses	0.380
Telephone Expenses	0.040
Bank Charges	0.022
Electricity Charges	0.002
Hire Charge	0.006
Insurance	0.117
LC Charges	0.110
Licence Fees	0.003
Postage and Courier	0.008
Professional Fees	0.341
Rates and Taxes	0.040
Repairs	0.015
Security Charges	0.111
Water Charges	0.002
Architect’s Fees	1.596
Less: Pre-operative Income: Interests received (Tax deducted at source Rs.0.017 Millions)	(0.056)
Balance Carried Forward	9.898
Total		41.655

• The company is a small and medium sized company (SMC) as defined in the General Instructions in respect of Accounting Standards notified under the companies Act, 1956. Accordingly, the company has complied with the According Standard as applicable to a small and medium sized company.

• The company determines cost of inventory of semi-finished and finished goods on an established basis, instead of by adding appropriate of direct and indirect overheads to raw materials cost as per accounting standard (AS-2) (Revised) ‘ Valuation of Inventories’ issued by the institute of chartered accountant of India as proper stock records are not available. Similarly, the value of imported raw materials of Rs.0.723 Million as appearing in raw materials are valued on estimated basis instead of cost or net realized value as per accounting standard (AS-2) (Revised) ‘ Valuation of Inventories’ issued by the institute of chartered accountant of India. The impact of above deviation, on the profit for the year, the value of inventories and reserve and surplus as at 31.03.2008 could not be determined.

Related Party Disclosures:

Key Management Personnel - Mr. Zafarudding Salam

Enterprises over which Key Management Personal have significant influence – Govan Industries Pty Limited

Notes:

• The related party relationships have been determined on the basis of the requirement of the Accounting Standard (AS) – 18 “Related Party Disclosures” issued by the Institute of Charted Accountants of India (ICAI) and the same have been relied upon by the Auditors.

• The relationships as mentioned above pertain to those related parties with whom transactions have taken place during the year, except where control exists in which case relationship have been mentioned irrespective of transaction with the related party.

• This being the first year of applicability of Accounting Standard (AS) – 18 “Related Party Disclosures” to the company and hence previous year figure have not been furnished.

Particulars	Key Management Personnel	Enterprise over which Key Management Personnel have significant influence
	(Rs. In Millions)
Related Party Transactions
Sales	-	52.181
Compensation charges received	-	7.826
Expenses incurred on behalf of others	-	2.111
Reimbursement received for expenses incurred on behalf of others	-	4.154
Unsecured Loan Taken	19.042	-
Related Party Balances
Outstanding as at year end:
Debtors	-	12.974
Reimbursement received for expenses incurred on behalf of others	-	5.981
Unsecured Loan	27.292	-

As the company has entered into transactions only with Key Management Personnel and Enterprises over which Kay Management Personnel have significant influence, the disclosure in respect of transactions which are more than 10% total transaction of the same type with related party during the year not applicable.

The company has revalued its factory building and plant machinery situated at factory, GIDC, Umbergaon as on 31.03.2003 and the resultant decrease in book value amounting to Rs.3.469 Millions for building and Rs.1.518 Millions for plant and machinery had been charged to profit and loss account during the 2002.03. The valuation was carried out by an external approved valuer on the basis of estimated market value of similar assets after considering the obsolescence and age of individual assets.

The following revalued amounts remains substituted for the historical cost in the gross block of fixed assets:

Building - Rs.3.476 Millions

Plant and Machinery – Rs.4.436 Millions

The company has made provision on account of retirement benefits like gratuity and leave encashment on mathematical basis. The above practice followed by the company is not in accordance with Accounting Standard (AS)- 15 ‘Employees Benefits (Revised 2005) issued by the institute of chartered Accounts of India. The impact whereof on the profit for the year, reserve and surplus and provision as at 31.03.2008 could not be ascertained. However, in the opinion of the management, the impact would not be materials.

Deferred tax assets/liability (net) arising on account of timing difference has been accounted in accordance with the Accounting Standard (AS)- 22 Accounting for Taxes on Income issued by the Institute of Chartered Accountants of the India, Major components of deferred tax assets and liabilities as at year-end as under:

Particulars	31.03.2008 (Rs. In millions)
Deferred Tax Assets on Account of:
Preliminary expenses written off	0.002
Expenses allowable on Payment basis	0.469
Amount inadmissible u/s 40(a)(ia)	0.166
Unabsorbed capital loss	0.420
Total	1.057
Deferred Tax Liability on account of:
Depreciation	0.967
Total	0.967
Deferred Tax Assets/ (Liability)(Net) (A-B)	0.090

Earning Per Shares -

Particulars	31.03.2008 (Rs. In millions)
Net Profit After Tax as per Profit and Loss Account	2.846
Weighted average number of Equity Shares outstanding during the year for basic and diluted loss per shares (No of Shares)	0.980
Basic and Diluted earning per Shares (Rs.)	2.91
Nominal Value of Shares (Rs.)	10

• Debtors include Rs.12.974 Millions being amount due from Govan Industries Pty Limited., a company under the same management. Maximum balance outstanding at any time during the year Rs.19.165 Millions

• The company is in the process of compiling relevant information from its suppliers about their coverage under the Micro small and medium Enterprises Development Act, 2006. As the company has not received intimation from its suppliers as on date regarding their status under the above said Act, no disclosure has been made.

• In the opinion of the management, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated and provision for all known and determined liabilities are adequate and not in the excess of the amount reasonably stated. The balances in certain sundry creditors, debtors and loans and advances are, however, subject to formal confirmations.

Details of brought forward loss or depreciation allowance in the following manner, to the extent available.

Assessment year	Nature of Loss/ Allowances (In Millions)	Amount as returned	Amount as assessed (Give reference to relevant order)
2003-04	Long Term Capital Loss (Rs.0.037 Million)	Rs.0.037 Million	Assessment Pending
2007-08	Short term capital loss (Rs.1.815 Millions)	Rs.1.815 Millions	Assessment Pending

Value of Fringe Benefits In Terms Of Section 115 WC Read with Section 115wb for the Assessment Year 2008-2009 (Rs. In Millions)

Section under which chargeable to Fringe Benefit Tax	Name	Amount of expenditure incurred or payment made	Percentage expenditure/ Payment being fringe benefits	Value of fringe benefits
1] 115WB(1)(b)	Free or concessional ticket provided by the employer for private journeys of this employees or their family members	-	100%	-
2] 115WB(1)(c)	Any contribution by the employer to any approved Superannuation fund for employees	-	100%	-
3] 115WB(2)(A)	Entertainment	-	20%	-
4] 115WB(2)(B)	Provision of Hospitality of every kind by the employer to any person	0.279	20%	0.056
5] 115WB(2)(C)	Conference (Other than fee for participation by the employees in any conference)	-	20%	-
6] 115WB(2)(D)	Sales promotion including publicity	-	20%	-
7] 115WB(2)(E)	Employees’ Welfare	0.185	20%	0.037
8] 115WB(2)(F)	Conveyance	0.946	20%	0.189
9] 115WB(2)(G)	Use of hotel, boarding and lodging facilities	0.181	20%	0.036
10] 115WB(2)(H)	Repair, Running (including fuel), maintenance of motor cars and the amount of depreciation thereon	0.396	20%	0.079
11] 115WB(2)(I)	Repair, Running ( Including Fuel) and maintenance of aircraft and the amount of depreciation thereon	-	20%	-
12] 115WB(2)(J)	Use of Telephone (Including mobile phone) other than expenditure on leased telephone lines	0.590	20%	0.118
13] 115WB(2)(K)	Maintenance of any accommodation in the nature of guest house other than accommodation used for training purpose	0.397	20%	0.079
14] 115WB(2)(L)	Festival Celebrations	0.015	50%	0.007
15] 115WB(2)(M)	Use of health club and similar facilities	-	50%	-
16] 115WB(2)(N)	Use of any other club facilities	-	50%	-
17] 115WB(2)(O)	Gifts	-	50%	-
18] 115WB(2)(P)	Scholarships	-	50%	-
19] 115WB(2)(Q)	Tour and Travel (Including foreign travel) (see Note 12)	0.082	5%	0.004
Total		3.072		0.606

Note:

Repair, running (including fuel) and maintenance of motor car and depreciation thereon includes depreciation aggregating to Rs.0.134 Millions calculated as per Income Tax Act, 1961, which has not been debited to profile and loss account (Shown under ‘Any other head)

Festival celebration aggregating to Rs.0.015 Millions have been debited under the account head Pooja Expenses.

Particulars of Each Loan or Deposit in an Amount Exceeding the limit specified in section 269SS Taken or accepted during the previous year (Rs. In Millions)

Name, address and permanent account number of the lender	Amount of the Loan Taken/ Accepted	Whether the loan was squared up during the previous year	Maximum amount outstanding in the account at any time during the previous year
Mr. Zafaruddin Abdus Salam 661, 16^th Main , 6^th Cross Block, Cross 3^rd Road, Koramangala, Bangalore, Karnataka PAN No.: ABCPS1762N	19.042	No	27.292

Fixed Assets:

• Leasehold Land
• Factory Building
• Plant and Machinery
• Electrical Installation
• Dies and Patterns
• Measuring Instrument
• Other Factory Equipment
• Computers and Data Processing Machinery
• Office Equipment
• Cycle
• Furniture and Fixture
• Furniture and Fitting
• Motor Car
• Vehicles

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] 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.49.74
UK Pound	1	Rs.74.37
Euro	1	Rs.62.78

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	4
PAID-UP CAPITAL	1~10	4
OPERATING SCALE	1~10	3
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--PROFITABILIRY	1~10	2
--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	YES
--LISTED	YES/NO	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		36

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

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