MIRA INFORM REPORT

Report Date :

02.11.2012

IDENTIFICATION DETAILS

Name :	SHANGHAI GEMDEM DIAMOND CO., LTD.
Registered Office :	Room A803b, No. 1701 Century Avenue, Pudong New District, Shanghai, 200135 Pr
Country :	China
Financials (as on) :	31.12.2011
Date of Incorporation :	25.01.2007
Com. Reg. No.:	310115000993437
Legal Form :	Limited Liabilities Company
Line of Business :	Selling Diamond
No. of Employees :	20 (Including Subsidiary)

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

Status :	Satisfactory
Payment Behaviour :	No Complaints
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 (31.03.2011)	Current Rating (30.06.2012)
China	A2	A2

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

SHANGHAI GEMDEM DIAMOND Co., Ltd.

ROOM A803B, NO. 1701 CENTURY AVENUE,

PUDONG NEW DISTRICT, SHANGHAI, 200135 PR CHINA

TEL: 86 (0) 21-50472185/50158037/13682500517

FAX: 86 (0) 21-50471161

EXECUTIVE SUMMARY

INCORPORATION DATE : jan. 25, 2007

REGISTRATION NO. : 310115000993437

REGISTERED LEGAL FORM : LIMITED LIABILITIES COMPANY

CHIEF EXECUTIVE : MR. CHEN BAOKANG (CHAIRMAN)

STAFF STRENGTH : 20 (including subsidiary)

REGISTERED CAPITAL : CNY 10,000,000

BUSINESS LINE : trading

TURNOVER : CNY 119,310,000 (AS OF DEC. 31, 2011)

EQUITIES : CNY 30,540,000 (AS OF DEC. 31, 2011)

PAYMENT : AVERAGE

MARKET CONDITION : AVERAGE

FINANCIAL CONDITION : FAIRLY STABLE

OPERATIONAL TREND : STEADY

GENERAL REPUTATION : AVERAGE

EXCHANGE RATE : CNY 6.2441=USD 1

Adopted abbreviations:

ANS - amount not stated

NS - not stated

SC - subject company (the company inquired by you)

NA - not available

CNY - China Yuan Renminbi

SC was registered as a limited liabilities company at local Administration for Industry & Commerce (AIC - The official body of issuing and renewing business license) on Jan. 25, 2007.

Company Status: Limited liabilities co.

This form of business in PR China is defined as a legal person. No more than fifty shareholders contribute its registered capital jointly. Shareholders bear limited liability to the extent of shareholding, and the co. is liable for its debts only to extent of its total assets. The characteristics of this form of co. are as follows:

Upon the establishment of the co., an investment certificate is issued to the each of shareholders.

The board of directors is comprised of three to thirteen members.

The minimum registered capital for a co. is CNY 30,000.

Shareholders may take their capital contributions in cash or by means of tangible assets or intangible assets such as industrial property and non-patented technology.

Cash contributed by all shareholders must account for at least 30% of the registered capital.

Existing shareholders have pre-exemption right to purchase shares of the co. offered for sale by the other shareholders and to subscribe for the newly increased registered capital of the co.

SC’s registered business scope includes wholesaling diamond, jewelry accessories, jade accessories, gold & silver accessories, importing and exporting goods and technologies (with permit if needed)

SC is mainly engaged in selling diamond.

Mr. Chen Baokang is the legal representative and chairman of SC at present.

SC is known to have approx. 20 employees at present, including the ones in its subsidiary.

SC is currently operating at the above stated address, and this address houses its operating office in the commercial zone of Shanghai. Our checks reveal that SC rents the total premise about 60 square meters.

http://www.gemdem.net The design is professional and the content is well organized. At present it is in Chinese and English versions.

No significant changes were found during our checks with the local Administration for Industry and Commerce.

MAIN SHAREHOLDERS:

Name % of Shareholding

Zhejiang Yuewang Jewelry Co., Ltd. 66.7

Wang Xiguang 33.3

Zhejiang Yuewang Jewelry Co., Ltd.

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

Legal representative: Chen Baofang

Registration no.: 330600000088511

Registered capital: CNY 100,000,000

Legal form: Limited liabilities co.

Address: No. 378 Jiefang North Road, Shaoxing, Zhejiang Province
Tel: (+86-575)85116505

l Legal representative and Chairman:

Mr. Chen Baokang , in his 40’s. He is currently responsible for the overall management of SC.

Working Experience(s):

At present Working in SC as legal representative and chairman

l General Manager:

Mr. Wang Xiguang is currently responsible for the daily management of SC.

Working Experience(s):

At present Working in SC as general manager.

Also working in Shenzhen Gemdem Diamond Co., Ltd. as legal representative.

SC is mainly engaged in selling diamond.

SC’s main products include: thanksgiving diamonds, profiled series and fancy diamond series.

SC sources its materials 100% from overseas market. SC sells 100% of its products in domestic market.

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

Note: SC refused to release its major suppliers and clients.

SC is known to have the following subsidiary:

Shenzhen Gemdem Diamond Co., Ltd.

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

Incorporation date: Aug. 12, 2010

Registration No.: 440301104869488

Legal representative: Wang Xiguang

Registered capital: CNY 2,000,000

Legal form: One-person Limited Liability Company

Tel: 86-755-25470168

According to the website: http://www.gemdem.net

Gemdem Diamond & Jewelry Hong Kong Limited

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

Incorporation date: Jan. 26, 2010

Registration No.: 1415745

Legal form: Private

Add: Unit 08B, 13^th Floor, Blk B, Hunghom Commercial Centre, NO.37-39, Ma Tau WeiRoad, Hunghom, Kowloon, Hong Kong

Tel: 00852-31517020

Fax: 00852-31517021

Overall payment appraisal:

( ) Excellent ( ) Good (X) Average ( ) Fair ( ) Poor ( ) Not yet 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.

China Construction Bank Shanghai Jinmao Sub-branch

AC#: 31001611812050001539

Relationship: Normal.

Balance Sheet

Unit: CNY’000

	as of Dec. 31, 2010	as of Dec. 31, 2011
Cash & bank	250	23,610
Inventory	29,090	40,390
Accounts receivable	19,320	17,590
Advances to suppliers	0	0
Interest receivable	0	480
Other receivables	130	330
Other current assets	0	0
	------------------	------------------
Current assets	48,790	82,400
Long-term investments	2,010	2,010
Fixed assets net value	50	40
Projects under construction	0	0
Deferred income tax assets	120	50
Intangible assets	0	0
Other assets	0	0
	------------------	------------------
Total assets	50,970	84,500
	=============	=============
Short loans	0	0
Accounts payable	17,680	41,870
Advances from customers	650	2,720
Accrued Payroll	10	10
Welfare Payable	0	0
Taxes payable	-6,920	-9,080
Other accounts payable	15,760	18,440
Other current liabilities	0	0
	-----------------	-----------------
Current liabilities	27,180	53,960
Long term liabilities	0	0
	------------------	------------------
Total liabilities	27,180	53,960
Shareholders equities	23,790	30,540
	------------------	------------------
Total liabilities & equities	50,970	84,500
	=============	=============

Income Statement

Unit: CNY’000

	as of Dec. 31, 2010	as of Dec. 31, 2011
Turnover	84,770	119,310
Cost of goods sold	90,730	127,210
Taxes and additional of main operation	0	0
Sales expense	580	380
Management expense	2,180	1,190
Finance expense	-580	-510
Asset impairment loss	220	-380
Non-operating income	12,920	18,000
Non-operating expense	0	0
Profit before tax	4,560	9,420
Less: profit tax	970	2,670
Net profit	3,590	6,750

Important Ratios

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

	as of Dec. 31, 2010	as of Dec. 31, 2011
*Current ratio	1.80	1.53
*Quick ratio	0.72	0.78
*Liabilities to assets	0.53	0.64
*Net profit margin (%)	4.23	5.66
*Return on total assets (%)	7.04	7.99
*Inventory /Turnover ×365	126 days	124 days
*Accounts receivable/Turnover ×365	84 days	54 days
*Turnover/Total assets	1.66	1.41
* Cost of goods sold/Turnover	1.07	1.07

PROFITABILITY: FAIRLY GOOD

l The turnover of SC appears average in its line in 2010 and fairly good in 2011.

l SC’s net profit margin is average in 2010 and fairly good in 2011.

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

l SC’s cost of goods sold is too high in both years, comparing with its turnover.

LIQUIDITY: AVERAGE

l The current ratio of SC is maintained in a normal level in both years.

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

l The inventory of SC appears fairly large in both years.

l The accounts receivable of SC appears average in both years.

l There is no short-term loan of SC in both years.

l SC’s turnover is in an average level in both years, comparing with the size of its total assets.

LEVERAGE: AVERAGE

l The debt ratio of SC is average in both 2 years.

l The risk for SC to go bankrupt is average.

Overall financial condition of the SC: Fairly Stable

SC is considered small-sized in its line with fairly stable financial conditions. The large amounts of inventory could be a threat to SC’s financial condition.

DIAMOND INDUSTRY – INDIA

- From time immemorial, India is well known in the world as the birthplace for diamonds.  It is difficult to trace the origin of diamonds but history says that in the remote past, diamonds were mined only in India. Diamond production in India can be traced back to almost 8^th Century B.C.  India, in fact, remained undisputed leader till 18^th Century when Brazilian fields were discovered in 1725 followed by emergence of S. Africa, Russia and Australia.

- The achievement of the Indian diamond industry was possible only due to combination of the manufacturing skills of the Indian workforce and the untiring and unflagging efforts of the Indian diamantaires, supported by progressive Government policies.

- The area of study of family owned diamond businesses derives its importance from the huge conglomerate of family run organizations which operate in the diamond industry since many generations.

- Some of the basic traits of family run business enterprises include spirit of entrepreneurship, mutual trust lowers transaction costs, small, nimble and quick to react, information as a source of advantage and philanthropy.

- Family owned diamond businesses need to improve on many fronts including higher standard of corporate governance, long-term performance – focused strategies, modern management and technology.

- The diamond jewellery industry in India today may be more than Rs 60000 mil and is rated amongst the fastest growing  in the world. Indi ranks third in the world in domestic diamond consumption.

- Utmost caution is to be exercised while dealing with some medium and large diamond traders which are usually engaged in fictitious import – export, inter-company transactions, financially assisted by banks. In the process, several public sector banks lost several hundred million rupees. They mostly diverted borrowed money for diamond business into real estate and capital markets.

- Excerpts from Times of India dated 30^th October 2010 is as under –

DIAMOND SAGA – DIRTY DOZEN STUCK WITH 2K CR DEBT

This could be the biggest credibility crisis the Indian diamond industry has ever faced. Fifteen banks run the risk of losing Rs 2000 crore lent to a dozen diamond firms in Surat. Until about two months ago, they had not repaid  these dues. Bankers believe many diamantaires borrowed money during the economic downturn two years ago and diverted funds to businesses like real estate and capital markets. Many of themselves made money from these businesses but their diamond companies have gone sick and declared insolvency.

- Most of the money borrowed from the banks in the name of their diamond business has been diverted in real estate and the share market. The banks are not in a position to seize their properties because in many cases, these were purchased in the name of their relatives and friends.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.53.78
UK Pound	1	Rs.86.77
Euro	1	Rs.69.71

INFORMATION DETAILS

Report Prepared by :

PRL

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.