MIRA INFORM REPORT

Report Date :

03.09.2013

IDENTIFICATION DETAILS

Correct Name :	ZALE CANADA, INC.
Registered Office :	900-1959 Upper Water Street, Halifax, Nova Scotia B3J 2X2
Country :	Canada
Date of Incorporation :	15.04.1999
Legal Form :	Corporation – Profit
Line of Business :	Subject is a retailer of traditional jewelry items
No. of Employees :	1000+

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 :	Unknown
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 – March 31^st 2013

Country Name	Previous Rating (31.12.2012)	Current Rating (31.03.2013)
Canada	A1	A1

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

canada - ECONOMIC OVERVIEW

As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the US its principal trading partner. Canada enjoys a substantial trade surplus with the US, which absorbs about three-fourths of Canadian exports each year. Canada is the US's largest foreign supplier of energy, including oil, gas, uranium, and electric power. Given its great natural resources, highly skilled labor force, and modern capital plant, Canada enjoyed solid economic growth from 1993 through 2007. Buffeted by the global economic crisis, the economy dropped into a sharp recession in the final months of 2008, and Ottawa posted its first fiscal deficit in 2009 after 12 years of surplus. Canada''s major banks, however, emerged from the financial crisis of 2008-09 among the strongest in the world, owing to the financial sector''s tradition of conservative lending practices and strong capitalization. Canada achieved marginal growth in 2010 and 2011 and plans to balance the budget by 2015. In addition, the country''s petroleum sector is rapidly becoming an even larger economic driver with Alberta''s oil sands significantly boosting Canada''s proven oil reserves, ranking the country third in the world behind Saudi Arabia and Venezuela.

Source : CIA

Company name & address

The correct name is:

Company name: ZALE CANADA, INC.

Address: 1440 Don Mills Road, North York, Ontario M3B 3M1 - Canada

Reg. address: 900-1959 Upper Water Street, Halifax, Nova Scotia B3J 2X2

Canada

Telephone: +1 416-391-7739

Fax: +1 416-391-7870

Website: www.zalecorp.com

Company summary

Corporate ID#: 3265471

State: Nova Scotia

Judicial form: Corporation – Profit

Date incorporated: August 2, 2012

Date founded: April 15, 1999

Stock: -

Value: -

Name of manager: Theophlius KILLION

ACTIVITIES & OPERATIONS

History:

ZALE CANADA, INC. is issued from the merger of:

- ZALE CANADA DIAMOND SOURCING, INC.

- ZALE CANADA FINCO 1, INC.

- ZALE CANADA FINCO 2, INC.

- ZALE CANADA INC.

IST

Business:

Zale Canada Co. is a retailer of traditional jewelry items and operates 206 stores in 9 provinces.

The Canadian operations consist of two brands:

- Peoples Jewellers, and

- Mappins Jewellers

Zale Canada Co. is based in North York, Canada.

Staff: 1,000+

Operations & branches:

At the headquarters, we find the corporate office.

The Company maintains 206 stores in Canada, including a distribution center and store located:

61 McPherson Street

Markham, Ontario L3R 3L3

SHAREHOLDERS & MANAGERS

Shareholders:

ZALE CANADA HOLDING LP

1000-44 Chipman Hill, CP 7289

St John, New Brunswich E2L 4S6

Canada

Which is a wholly owned subsidiary of:

ZALE CORPORATION

901 West Walnut Hill Lane, Irving, TX 75038

Incorporated in Delaware on 04-26-1991

ID# 2261333

The Company is listed with the NYSE under symbol ZLC.

Management:

Mary E. BURTON is the President, non Director

Theophlius KILLION is Director and CEO

Other Directors include Matthew W. APPEL and Gil HOLLANDER.

Subsidiaries And partnership:

None

FINANCIALS

In Canada, privately held corporations are not required to publish any financials.

On a direct call, a financial assistant controlled the present report but deferred any financials.

We sent a fax but no answer received.

However, sales estimate for year 2012 is in excess of CAD 10,000,000+

The business is profitable.

Banks: Royal Bank of Canada

LEGAL FILINGS

Legal filings & complaints:

As of today date, there is no legal filing pending with the Courts.

Secured debts summary: None

COMPANY CREDIT HISTORY

Trade references:

Date reported: February 2013

High credit: CAD 30,000

Now owing: 0

Past due: 0

Last purchase: January 2013

Line of business: Office supply

Paying status: 10 days terms

Date reported: February 2013

High credit: USD 1,600,000+

Now owing: 0

Past due: 0

Last purchase: January 2013

Line of business: Payroll

Paying status: As agreed

Date reported: February 2013

High credit: CAD 20,000+

Now owing: 0

Past due: 0

Last purchase: January 2013

Line of business: Telecommunications

Paying status: 8 days beyond terms

Domestic credit history:

Domestic credit history appears as follow:

Monthly Payment Trends - Recent Activity

Date	Balance	Current	Up to 30 DBT	31-60 DBT	61-90 DBT	>90 DBT
08/12	$240,000	88%	12%	0%	0%	0%
09/12	$227,000	86%	14%	0%	0%	0%
10/12	$224,000	87%	13%	0%	0%	0%
11/12	$230,000	88%	12%	0%	0%	0%
12/12	$201,000	86%	14%	0%	0%	0%
01/13	$199,000	86%	14%	0%	0%	0%

National Credit Bureaus gave a medium credit rating.

According to our credit analysts, during the last 6 months, domestic payments were made with an average of 8 days beyond terms.

International credit history:

Payments of imports are currently made with an average of 2 to 5 days beyond terms.

The Company is improving its payments, but the cash remains low, due to high inventories and bad conditions of the market.

Other comments:

The bank confirmed late payments.

The Company is in good standing.

This means that all local and federal taxes were paid on due date.

The risk is medium.

Our opinion:

A business connection may be conducted but we suggest you to check regularly the way of payments.

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.

- 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 –

- Gem & Jewellery Export Promotion Council in its statistical data has shown the export of polished diamonds to have increase by 28 % in February 2013. Compared to $ 1.4 bn worth of polished diamond export in February, 2012, India exported $ 1.84 billion worth of polished diamonds in February 2013. A senior executive of GJEPC said, “Export of cut and polished diamonds started falling month-wise after the imposition of 2 % of import duty on the polished diamonds. But February, 2013 has given a new ray of hope to the industry as the export of polished diamonds has actually increased by 28 %. It means the industry  is on the track of recovery and round tripping of diamonds has stopped completely.” Demand has started coming from the US, the UK, Japan and China. India’s polished diamond export is expected to cross $ 21 bn in 2013-14.

- The banking sector has started exercising restraint while following prudent risk management norms when lending money to gems and jewellery sector. This follows the implementation of Basel III accord – a global voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.65.86
UK Pound	1	Rs.102.52
Euro	1	Rs.87.06

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%)

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