MIRA INFORM REPORT

Report Date :

26.04.2013

IDENTIFICATION DETAILS

Name :	LAPP INSULATORS SA
Formerly Known as:	ARGILLON ROMANIA SA
Registered Office :	Cluj county / 401113 Turda – “22 Decembrie 1989” Street No. 31
Country :	Romania
Financials (as on) :	30.06.2012
Date of Incorporation :	1990
Legal Form :	Joint Stock Company, Joint Venture of private Romanian and foreign (German) capital
Line of Business :	Manufacturer of ceramic insulators and insulating fittings
No. of Employees :	428

RATING & COMMENTS

MIRA’s Rating :

B

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

Status :	Moderate
Payment Behaviour :	Slow but Correct
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)
Romania	B1	B1

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

romania - ECONOMIC OVERVIEW

Romania, which joined the European Union on 1 January 2007, began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Domestic consumption and investment fueled strong GDP growth, but led to large current account imbalances. Romania's macroeconomic gains have only recently started to spur creation of a middle class and to address Romania's widespread poverty. Corruption and red tape continue to permeate the business environment. Inflation rose in 2007-08, driven by strong consumer demand, high wage growth, rising energy costs, a nation-wide drought, and a relaxation of fiscal discipline. As a result of the increase in rising fiscal and current account defcits and the global financial crisis, Romania signed on to a $26 billion emergency assistance package from the IMF, the EU, and other international lenders. Worsening international financial markets, as well as a series of drastic austerity measures implemented to meet Romania's obligations under the IMF-led bail-out agreement contributed to a GDP contraction of 6.6% in 2009, followed by a 1.1% GDP contraction in 2010. The economy returned to positive growth in 2011 due to strong exports, a better than expected harvest, and weak domestic demand. In 2012, however, growth slowed to less than 1%, partially due to slackening export demand and an extended drought that resulted in an exceptionally poor harvest. In March 2011, Romania and the IMF/EU/World Bank signed a 24-month precautionary stand-by agreement, worth $6.6 billion, to promote fiscal discipline, encourage progress on structural reforms, and strengthen financial sector stability. The Romanian authorities announced that they do not intend to draw funds under the agreement

Source : CIA

Company SUMMARY

NAME OF THE COMPANY	LAPP INSULATORS SA (former ARGILLON ROMANIA SA, until 20^th of March, 2009)
Address	Cluj county / 401113 Turda – “22 Decembrie 1989” Street No. 31
Phone no. Cell phone no.	0040-264-307900, 307918 0040-731-919625				Fax no.			0040-264-307924, 307906
Web-site	www.lappinsulators.com				E-mail address			office@argillon.com; romania@argillon.com; camelia.miclea@argillon.com
HISTORIC/OFFICIAL DATA
Date of foundation		before 1990, as a State enterprise named “Intreprinderea ELECTROCERAMICA Turda”. According to the Governmental Decision no. 1296/13.12.1990, beginning with January, 1991, it became a joint stock company, entire State capital named “IZOCER SA”. In 2005, after the taking over by ARGILLON Germany, it changed its name into ARGILLON ROMANIA SA. In March 2009, after the taking over by the American LAPP INSULATORS company, our subject company changed again its name into LAPP INSULATORS SA.
Present legal form		joint stock company, joint venture of private Romanian and foreign (German) capital
Registered with the Trade Registry		J12/26/1991
VAT no.		254947
Registered capital		49,199,415.2 RON
Shareholders		Legal person
		1. LAPP INSULATORS GmbH – German legal person
		Address: Germany / Redwitz – Bahnhofstrasse No. 43
		Participation					99.996%
		Individuals
		2. List of individuals, not detailed with the National Trade Registry
		Participation				0.004%
Obligation to publish		According to the Romanian Financial Legislation, subject company is obliged to lodge with the Ministry of Public Finance its half-yearly accounts
EMPLOYEES		2007	2008	2009		2010			2011	30.06.2012
total		517	502	423		384			401	428
BUSINESS ACTIVITY - Manufacture of ceramic insulators and insulating fittings, according to the National Trade Registry updated files (NACE: 2343) Lapp Insulators, which has its headquarters in the U.S., is a world-leading manufacturer of high voltage ceramic and composite insulators for the global electric utility industry. Its Romanian plant produces medium and high voltage porcelain insulators, long rod insulators, post insulators, hollow core insulators, alumina for technical applications, piezoelectric ceramics and equipment of high voltage. The company’s most part of the production – 99% - goes to the export, 50% in the USA and 49% in Western Europe, just 1% remaining for the Romanian market. Its clients portfolio includes Siemens, ABB, Areva, Bohemia, E.ON, and the group's unit in Redwitz, Germany. The company expects to attract new clients from Switzerland, Canada, Thailand and Arab countries.

OTHER PARTICIPATION

1. Company’s participation	not applicable
2. Shareholders other participation	not applicable
REAL ESTATE (RON)
- lands & buildings	2007	2008	2009	2010	2011
	7,440,447	9,044,215	9,212,290	8,345,693	9,816,868
TANGIBLES*	33,062,931 RON, at 30.06.2012 *According to the accounting standards, for the middle of the year the company is no more obliged to detail its tangible assets, anymore. Therefore, the real estates are included in “Tangibles” position among the other assets
BANKS	Romanian Commercial Bank, Raiffeisen Bank
MANAGEMENT · as officially registered with the National Trade Registry	General Manager Mr. Zintl Mike Hermann – German citizen, born on 25.06.1966 Appointed on: 1.07.2011; Expiration date of mandate: 31.12.2013 Member of the Board Mr. Johnson Robert – American citizen, born on 30.12.1962 Appointed on 14.05.2012; Expiration date of mandate: 14.05.2015 Member of the Board Mrs. Capek Veronika – German citizen, born on 6.12.1972 Appointed on: 14.05.2012; Expiration date of mandate: 14.05.2015 Member of the Board Mr. Kahl Bernhard Manfred – German citizen, born on 9.05.1962 Appointed on: 30.06.2011; Expiration date of mandate: 14.05.2012
CURRENCY Exchange rate of EURO	1 EURO = 3.6102 RON on 31.12.2007 1 EURO = 3.9852 RON on 31.12.2008 1 EURO = 4.2282 RON on 31.12.2009 1 EURO = 4.2848 RON on 31.12.2010 1 EURO = 4.2341 RON on 30.06.2011 1 EURO = 4.3197 RON on 31.12.2011 1 EURO = 4.4494 RON on 30.06.2012

BALANCE SHEET	31.12.2011	30.06.2012
INTANGIBLES - TOTAL	9,314	4,668
TANGIBLES - TOTAL	34,804,714	33,062,931
FINANCIALS - TOTAL	56,190	56,190
FIXED ASSETS - TOTAL	34,870,218	33,123,789
STOCKS - TOTAL	14,436,408	15,498,992
CLAIMS - TOTAL	12,376,668	13,549,433
CURRENT ASSETS	26,849,228	29,128,584
PREPAID EXPENSES	169,864	282,231
DEBTS WITHIN 1 YEAR	38,289,998	39,684,309
DEBTS OVER 1 YEAR	131,017	165,172
PROVISIONS	443,593	719,505
ADVANCED INCOMES	0	0
REGISTERED CAPITAL	49,199,415	49,199,415
RESERVES from reassessment of the fixed assets	4,568,510	4,568,510
RESERVES	4,143	4,143
LOSSES CARRIED FORWARD	22,351,439	30,747,366
NET RESULT - PROFIT	0	0
NET RESULT - LOSS	8,395,927	1,059,084
NET WORTH	23,024,702	21,965,618
PROFIT & LOSS ACCOUNT	30.06.2011	30.06.2012
Turnover	24,689,003	30,001,127
Own production & services	24,643,001	29,660,984
Sales	46,002	340,143
INCOMES FROM ORDINARY OPERATING ACTIVITY	25,600,962	31,093,575
Raw materials	11,117,270	12,031,415
Costs of goods sold	26,497	206,842
Wages	6,816,633	6,774,904
Depreciations & provisions	1,893,146	2,060,056
Other operating costs	3,171,626	3,750,739
COSTS OF ORDINARY OPERATING ACTIVITY	27,683,862	31,311,108
ORDINARY OPERATING RESULT - PROFIT	0	0
ORDINARY OPERATING RESULT - LOSS	2,082,900	217,533
FINANCIAL INCOMES	2,044,578	1,241,390
FINANCIAL COSTS	2,652,610	2,082,941
FINANCIAL RESULT - PROFIT	0	0
FINANCIAL RESULT - LOSS	608,032	841,551
CURRENT RESULT - PROFIT	0	0
CURRENT RESULT - LOSS	2,690,932	1,059,084
Extraordinary incomes	0	0
Extraordinary costs	0	0
EXTRAORDINARY RESULT - PROFIT	0	0
EXTRAORDINARY RESULT - LOSS	0	0
TOTAL INCOMES	27,645,540	32,334,965
TOTAL COSTS	30,336,472	33,394,049
PRETAX RESULT - PROFIT	0	0
PRETAX RESULT - LOSS	2,690,932	1,059,084
TAX ON PROFIT	0	0
NET RESULT - PROFIT	0	0
NET RESULT - LOSS	2,690,932	1,059,084

N.B.: any difference occurred between former reports and the present one regarding some positions of the “Balance Sheet” or P/L Account for previous periods does not belong to us.

The financial data from this report are the ones officially declared by the subject with the Ministry of Public Finance data basis for 30.06.2012. As consequence, the responsibility for their accuracy belongs exclusively to the company.

OUR OPINION

based upon financial figures reported in the latest balance-sheet – 30.06.2012

- all figures are reported in RON if otherwise not specified.

Size

large, considering the total no. of employees.

Position & trend

Large volume of activity developed, but with obvious turnover fluctuations in the investigated period and constant negative returns.

The registered losses are coming quite from the operating activity; beside the current losses, the previous cumulative losses totaled at the mid of 2012 almost 7 m. euro.

In terms of B/S accounts, both liquidity and solvability are on a descendant trend.

Still, the payments behavior seems correct, no delays being reported.

Overall, we do appreciate business transactions with the subject company should be taken with maximum of prudence. Any credit based transaction should be fully secured.

Business trend should be closely monitored.

31.12.2007

31.12.2008

31.12.2009

31.12.2010

30.06.2011

31.12.2011

30.06.2012

Turnover

RON

28,285,110

36,444,231

49,339,186

35,723,091

24,689,002

50,298,402

30,001,127

EURO

13,374,636

8,619,325

12,380,605

8,337,166

5,830,992

11,643,957

6,742,735

Gross profit

RON

-7,374,391

-2,861,707

-5,156,277

-6,040,263

-2,690,932

-8,395,927

-1,059,084

EURO

-2,042,654

-676,814

-1,293,857

-1,409,695

-635,538

-1,943,637

-238,318

Net profit

RON

-7,374,391

-2,876,374

-5,156,277

-6,056,763

-2,690,932

-8,395,927

-1,059,084

EURO

-2,042,654

-680,283

-1,293,857

-1,413,546

-635,538

-1,943,637

-238,318

30.06.2012

CREDITS & LOANS (ACTIVE BALANCE)

8,599,802

Bank credits, on short term (within 1year)

8,434,630

Other financial loans & afferent interests, on medium term (over 1year)

165,172

BALANCE CLAIMS-DEBTS

negative

Total claims

13,549,433

clients & trade debtors

12,565,009

Total debts

39,849,481

- Short term

39,684,309

suppliers & trade creditors

18,172,906

bank credits

8,434,630

to the Social Insurance

837,626

to the State Budget

220,585

other debts

1,431

- Medium term

165,172

other financial loans & afferent interests

165,172

PAYMENTS BEHAVIOR

Correct, no delays reported

PAYMENTS INCIDENTS, as

officially recorded with the Payment Incident Bureau

No incidents recorded in the period 23.04.2012 – 23.04.2013

	2007	2008	2009	2010	2011	30.06.2012
	Deteriorated up to a very low level; poor
Liquidity analysis
- current ratio	2.10	2.59	3.03	1.33	0.70	0.73
- quick ratio	1.46	1.13	1.35	0.53	0.32	0.34
Solvability analysis	Improved significantly in 2010 up to a very good condition, following a share-capital increase; depreciated further, but still satisfactory
- the borrowing ratio (total debts/net worth)	-3.30	-8.16	-6.34	0.86	1.67	1.81
Profitability analysis (%)	Unsatisfactory – consecutive losses for more than 5 years
- return on capital	loss	loss	loss	loss	loss	loss
- return on assets	loss	loss	loss	loss	loss	loss
- gross profit margin	loss	loss	loss	loss	loss	loss
Activity analysis	Settlements mostly within normal limits
- debtor’s days	122	49	78	91	90	81
- creditor’s days	124	38	58	53	47	n/a
Stocks turnover, times/period	6.63	5.64	3.38	2.61	3.48	1.94

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.54.17
UK Pound	1	Rs.82.99
Euro	1	Rs.70.62

INFORMATION DETAILS

Report Prepared by :

MNL

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.