MIRA INFORM REPORT

Report Date :

28.12.2012

IDENTIFICATION DETAILS

Name :	HUZHOU XINLI STAINLESS STEEL PIPE CO., LTD.

Registered Office :	Zhudun Industrial Zone, Linghu Town, Huzhou, Zhejiang Province 313018 PR

Country :	China

Financials (as on) :	31.12.2011

Date of Incorporation :	27.03.2005

Com. Reg. No.:	330504000015872

Legal Form :	Limited Liabilities Company

Line of Business :	Engaged in manufacturing and selling stainless steel products

No. of Employees :	120

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Status :	Moderate
Payment Behaviour :	Slow
Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 30^th, 2012

Country Name

Previous Rating

(31.03.2012)

Current Rating

(30.06.2012)

China

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

china - ECONOMIC OVERVIEW

Since the late 1970s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, in July 2005 China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2010 stood as the second-largest economy in the world after the US, having surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed those of the US; China is second to the US in the value of services it produces. Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by 2011 more than 250 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development. In 2010-11, China faced high inflation resulting largely from its credit-fueled stimulus program. Some tightening measures appear to have controlled inflation, but GDP growth consequently slowed to near 9% for 2011. An economic slowdown in Europe is expected to further drag Chinese growth in 2012. Debt overhang from the stimulus program, particularly among local governments, and a property price bubble challenge policy makers currently. The government's 12th Five-Year Plan, adopted in March 2011, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent on exports in the future. However, China has made only marginal progress toward these rebalancing goals.

Source : CIA

Company name and address

HUZHOU XINLI STAINLESS STEEL PIPE CO., LTD.

zhudun industrial zone, linghu town, huzhou

zhejiang province 313018 PR CHINA

TEL: 86 (0) 572-2760599

FAX: 86 (0) 572-2761899

EXECUTIVE SUMMARY

Date of Registration : march 27, 2005

REGISTRATION NO. : 330504000015872

LEGAL FORM : Limited liabilities company

CHIEF EXECUTIVE : pan shuiqiang (LEGAL REPRESENTATIVE)

REGISTERED CAPITAL : cny 22,000,000

staff : 120

BUSINESS CATEGORY : manufacturing

Revenue : CNY 137,686,000 (AS OF DEC. 31, 2011)

EQUITIES : CNY 1,347,000 (AS OF DEC. 31, 2011)

WEBSITE : www.xinlisteel.com

E-MAIL : sales@xinlisteel.com

PAYMENT : AVERAGE

MARKET CONDITION : fair

FINANCIAL CONDITION : fair

OPERATIONAL TREND : FAIR

GENERAL REPUTATION : AVERAGE

EXCHANGE RATE : CNY 6.24 = USD

Adopted abbreviations (as follows)

SC - Subject Company (the company inquired by you)

N/A – Not available

CNY – China Yuan Ren Min Bi

OPERATIONAL TREND & GENERAL REPUTATION

This section aims at indicating the relative positions of SC in respect of its operational trend & general reputation

Operational Trend:- General Reputation:-

Upward Excellent

Steady Good

Fairly Steady Fairly Good

Ordinary Average

Fair Fair

Stagnant Detrimental

Downward Not known

Not known Not yet be determined

Not yet be determined

LEGAL STATUS & HISTORY

SC was established as a limited liabilities company of PRC with State Administration of Industry & Commerce (SAIC) under registration No.: 330504000015872 on March 27, 2005.

SC’s Organization Code Certificate No.: 77310773-1

SC’s Tax No.: 330501773107731

SC’s registered capital: cny 22,000,000

SC’s paid-in capital: cny 22,000,000

Registration Change Record:-

Date	Change of Contents	Before the change	After the change
2012	Registered Capital	cny 12,000,000	cny 22,000,000

Current Co search indicates SC’s shareholders & chief executives are as follows:-

Name of Shareholder (s)	% of Shareholding
Pan Shuiqiang	90
Zhu Weiqin	10

SC’s Chief Executives:-

Position	Name
Legal Representative, Chairman, and General Manager	Pan Shuiqiang
Supervisor	Zhu Weiqin

RECENT DEVELOPMENT

No recent development was found during our checks at present.

SHAREHOLDER CHART & BACKGROUND

Name % of Shareholding

Pan Shuiqiang

Zhu Weiqin

MANAGEMENT

Pan Shuiqiang, Legal Representative, Chairman and General Manager

-------------------------------------------------------------------------------------------------------

Ø Gender: M

Ø Age: 42

Ø ID# 330511197010204213

Ø Qualification: University

Ø Working experience (s):

From 2005 to present, working in SC as legal representative, chairman and general manager

Zhu Weiqin, Supervisor

------------------------------------------

Ø Gender: F

Ø Age: 40

Ø ID# 330501197201256582

BUSINESS OPERATION

SC’s registered business scope includes manufacturing, processing and selling stainless steel products, importing and exporting goods and technology.

SC is mainly engaged in manufacturing and selling stainless steel products.

Brand:

SC’s products mainly include:

n Seamless stainless steel pipe

n Welded stainless steel pipe

n Duplex stainless steel pipe

n U-tube

n stainless steel hollow bar

SC sources its materials 100% from domestic market, mainly Zhejiang. SC sells 30% of its products in domestic market, and 70% to overseas market, mainly Mid East, Southeast Asia, etc.

The buying terms of SC include Check, T/T and Credit of 30-60 days. The payment terms of SC include T/T, L/C and Credit of 30-60 days.

Staff & Office:

--------------------------

SC is known to have approx. 120 staff at present.

SC owns an area as its operating office & factory of approx. 20,000 sq. meters at the heading address.

RELATED COMPANY

SC is not known to have any subsidiary at present.

PAYMENT

Overall payment appraisal:

( ) Excellent ( ) Good (X) Average ( ) Fair ( ) Poor ( ) Not yet be determined

The appraisal serves as a reference to reveal SC's payments habits and ability to pay. It is based on the 3 weighed factors: Trade payment experience (through current enquiry with SC's suppliers), our delinquent payment and our debt collection record concerning SC.

Trade payment experience: SC did not provide any name of trade/service suppliers and we have no other sources to conduct the enquiry at present.

Delinquent payment record: None in our database.

Debt collection record: No overdue amount owed by SC was placed to us for collection within the last 6 years.

BANKING

Basic Bank:

Bank of Huzhou

AC#: 800016024000218

Nanxun Cooperative Bank Linghu Sub-branch

AC#: 1105081001201000073000

Agricultural Bank of China Huzhou Linghu Sub-branch

AC#: 1201040017700

***Note: SC’s management declined to release whether it has an account in Shangai Pudong development bank, Hanghzou Br.

FINANCIALS

Balance Sheet

Unit: CNY’000	As of Dec. 31, 2010	As of Dec. 31, 2011
Cash	20,563	27,690
Notes receivable	107	6,227
Accounts receivable	32,508	57,020
Advances to suppliers	0	0
Other receivable	14,669	12,719
Inventory	14,164	18,979
Non-current assets within one year	0	0
Other current assets	-53	-52
	------------------	------------------
Current assets	81,958	122,583
Fixed assets	21,419	25,675
Construction in progress	236	236
Intangible assets	1,966	1,927
Long-term prepaid expenses	0	0
Deferred income tax assets	0	0
Other non-current assets	237	0
	------------------	------------------
Total assets	105,580	150,421
	=============	=============
Short-term loans	38,570	34,610
Notes payable	40,000	66,000
Accounts payable	3,300	28,562
Wages payable	0	0
Taxes payable	16	129
Advances from clients	0	0
Other payable	17,424	19,773
Other current liabilities	0	0
	------------------	------------------
Current liabilities	99,310	149,074
Non-current liabilities	0	0
	------------------	------------------
Total liabilities	99,310	149,074
Equities	6,270	1,347
	------------------	------------------
Total liabilities & equities	105,580	150,421
	=============	=============

Income Statement

Unit: CNY’000	As of Dec. 31, 2010	As of Dec. 31, 2011
Revenue	82,254	137,686
Cost of sales	76,055	129,725
Taxes and surcharges	4	184
Sales expense	465	378
Management expense	3,271	3,494
Finance expense	4,795	9,822
Non-business income	50	474
Non-business expenditure	9	3
Profit before tax	-2,296	-5,447
Less: profit tax	0	0
Profits	-2,296	-5,447

Important Ratios

=============

	As of Dec. 31, 2010	As of Dec. 31, 2011
*Current ratio	0.83	0.82
*Quick ratio	0.68	0.69
*Liabilities to assets	0.94	0.99
*Net profit margin (%)	-2.79	-3.96
*Return on total assets (%)	-2.17	-3.62
*Inventory / Revenue ×365	63 days	51 days
*Accounts receivable/ Revenue ×365	145 days	152 days
* Revenue/Total assets	0.78	0.92
* Cost of sales / Revenue	0.92	0.94

FINANCIAL COMMENTS

PROFITABILITY: FAIR

l The revenue of SC appears average, and it was rising in 2011.

l SC’s net profit margin is fair in both years.

l SC’s return on total assets is fair in both years.

l SC’s cost of sales is fairly high, comparing with its revenue.

LIQUIDITY: FAIR

l The current ratio of SC is maintained in a fair level.

l SC’s quick ratio is maintained in a fair level.

l The inventory of SC appears average.

l The accounts receivable of SC appears large.

l SC’s short-term loans appear large.

l SC’s revenue is in a fair level, comparing with the size of its total assets.

LEVERAGE: FAIR

l The debt ratio of SC is high.

l The risk for SC to go bankrupt is above average.

Overall financial condition of the SC: Fair.

CONCLUSIONS

SC is considered small-sized in its line with fair financial conditions. The large amount of accounts receivable and short-term loans may be a threat to SC’s financial condition.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.54.84
UK Pound	1	Rs.88.54
Euro	1	Rs.72.63

INFORMATION DETAILS

Report Prepared by :

PDT

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	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
--	NB	New Business	--

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%)

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

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.