MIRA INFORM REPORT

Report Date :

13.12.2014

IDENTIFICATION DETAILS

Name :	ANQIU LU’AN PHARMACEUTICAL CO., LTD.

Registered Office :	No. 35 Weixu North Road, Anqiu City, Shandong Province 262100 PR

Country :	China

Financials (as on) :	31.12.2013

Date of Incorporation :	07.12.1998

Com. Reg. No.:	370784228000989

Legal Form :	Limited Liabilities Co.

Line of Business :	Subject is mainly engaged in manufacturing and selling all kinds of medicines.

No of Employees :	1,318

RATING & COMMENTS

MIRA’s Rating :

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 – September 30, 2014

Country Name

Previous Rating

(30.06.2014)

Current Rating

(30.09.2014)

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, growth of the private sector, development of stock markets and a modern banking system, 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 considered important to "economic security," explicitly looking to foster globally competitive industries. After keeping its currency tightly linked to the US dollar for years, in July 2005 China 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 and expanded the daily trading band within which the RMB is permitted to fluctuate. 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 2013 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 consumption; (b) facilitating higher-wage job opportunities for the aspiring middle class, including rural migrants and increasing numbers of college graduates; (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. Several factors are converging to slow China's growth, including debt overhang from its credit-fueled stimulus program, industrial overcapacity, inefficient allocation of capital by state-owned banks, and the slow recovery of China's trading partners. The government's 12th Five-Year Plan, adopted in March 2011 and reiterated at the Communist Party's "Third Plenum" meeting in November 2013, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent in the future on fixed investments, exports, and heavy industry. However, China has made only marginal progress toward these rebalancing goals. The new government of President XI Jinping has signaled a greater willingness to undertake reforms that focus on China's long-term economic health, including giving the market a more decisive role in allocating resources.

Source : CIA

COMPANY NAME & ADDRESS

ANQIU LU’AN PHARMACEUTICAL CO., LTD.

NO. 35 WEIXU NORTH ROAD, ANQIU CITY

SHANDONG PROVINCE 262100 PR CHINA

TEL: 86 (0) 536-4382798

FAX: 86 (0) 536-4390238

EXECUTIVE SUMMARY

INCORPORATION DATE : DEC. 7, 1998

REGISTRATION NO. : 370784228000989

REGISTERED LEGAL FORM : LIMITED LIABILITIES CO.

CHIEF EXECUTIVE : MR. WANG JUN (LEGAL REPRESENTATIVE)

STAFF STRENGTH : 1,318

REGISTERED CAPITAL : CNY 50,000,109.5

BUSINESS LINE : MANUFACTURING

TURNOVER : CNY 476,766,000 (AS OF DEC. 31, 2013)

EQUITIES : CNY 122,132,000 (AS OF DEC. 31, 2013)

PAYMENT : NO COMPLAINTS

MARKET CONDITION : COMPETITIVE

FINANCIAL CONDITION : FAIRLY STABLE

OPERATIONAL TREND : FAIRLY STEADY

GENERAL REPUTATION : AVERAGE

EXCHANGE RATE : CNY 6.1364 = 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 Dec. 7, 1998.

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 manufacture, sales: tablets, hard capsules, large capacity injection, raw material drug (acetaminophen, hydrotalcite) (Medicine production license is valid until December 31, 2015) (the valid term is subject to the license). Manufacture, sales: white emulsion, sodium acetate; sales: paper; import and export of goods and technology (excluding those limited or prohibited by the state; if needed with permit).

SC is mainly engaged in manufacturing and selling various medicines.

Mr. Wang Jun has been chairman and legal representative of SC since 1998.

SC is known to have approx. 1,318 employees at present.

SC is currently operating at the above stated address, and this address houses its operating office and factory in the industrial zone of Anqiu. Our checks reveal that SC rents the total premise.

http://www.luanpharm.com The design is professional and the content is well organized. At present the web is both in Chinese and English versions.

E-mail: luan@luanpharm.com

See below for SC as executive party (defendant).

Executed Party	SC
Court	Anqiu City People's Court
Date of Case	2010-6-8
Case Number	(2010) 00832
Claim Amount	RMB 214,030.2
Case Status	Completed

Executed Party	SC
Court	Anqiu City People's Court
Date of Case	2008-2-25
Case Number	(2008) 00427
Claim Amount	RMB 24,086.96
Case Status	Completed

Executed Party	SC
Court	Anqiu City People's Court
Date of Case	2007-3-12
Case Number	(2007) 00632
Claim Amount	RMB 1,136
Case Status	Completed

Executed Party	SC
Court	Anqiu City People's Court
Date of Case	2006-11-29
Case Number	(2006) 03385
Claim Amount	RMB 24,086.96
Case Status	Completed

Remark: Due to the lack of information, we are unable to provide the cause of action, judgment or other information.

SC (Former: Weifang No.4 Pharmaceutical Factory) is one of the leading bulk pharmaceutical enterprises specializing in manufacturing and exporting Paracetamol (Acetaminophen).

SC’s former registered number was 3707842800098, and its former registered capital was CNY 30,000,109.

Subject passed the annual inspection of 2012 with Administration for Industry & Commerce.

Organization Code: 165647304

MAIN SHAREHOLDERS:

Name Amount (CNY) % of Shareholding

Anqiu Lu’An Pharmaceutical Co., Ltd. Labor Union 32,249,186.69 64.50

Wang Jun 10,439,901.76 20.88

Zhao Shutao 1,306,022.02 2.61

Zang Baolian 909,909.56 1.82

Yu Jingqing 909,909.56 1.82

Zhao Fenggang 686,064.68 1.37

Other 29 individuals 3,499,115.23 7.00

l Chairman and Legal Representative:

Mr. Wang Jun, born in 1960, with university education. He is currently responsible for the overall management of SC.

Working Experience(s):

From 1998 to present Working in SC as chairman and legal representative.

Also working in Weifang Lu’an Import & Export Co., Ltd. as legal representative.

l Director:

Zhao Fenggang

Sun Xijun

Yu Jingqing

Etc.

l Supervisor:

Zang Baolian

Zhou Shubin

Li Fukui

SC is mainly engaged in manufacturing and selling all kinds of medicines.

SC’s products mainly include: Paracetamol (Acetaminophen), Paracetamol DC and Sodium Acetate

SC’s brand is “Lu’an”.

SC sources its materials 90% from domestic market, and 10% from overseas market. SC sells 20% of its products in domestic market, and 80% to overseas market, mainly America, Canada, and Germany.

The buying terms of SC include Check, T/T, L/C and Credit of 30-60 days. The payment terms of SC include Check, T/T, L/C and Credit of 15-30 days.

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

TRADEMARKS & PATENTS

Registration No.: 4490473

Registration Date: 2008-4-21

Trademark Design:

Registration No.: 4498852

Registration Date: 2008-4-28

Trademark Design:

Registration No.: 11030947

Registration Date: 2013-10-14

Trademark Design:

SC is known to invest in the following company:

Weifang Lu’an Import & Export Co., Ltd.

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

Reg. No.: 370784200000830

Legal representative: Wang Jun

Registered capital: CNY 1,000,000

Incorporation date: March 19, 2008

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.

SC’s management declined to release its bank information, and we could not find SC’s bank information from outside sources. Therefore, bank reference is not available.

Balance Sheet

Unit: CNY’000

	As of Dec. 31, 2012	As of Dec. 31, 2013
Cash & bank	178,731	23,520
Inventory	196,085	225,950
Accounts receivable	99,862	104,262
Short-term investment	3,053	3,053
Prepaid expenses	2,407	4,782
Other receivables	904,612	962,549
	------------------	------------------
Current assets	1,384,750	1,324,116
Fixed assets net value	620,800	606,613
Long term investment	17,608	18,769
Projects under construction	45,647	160,354
Intangible assets	31,192	34,203
	------------------	------------------
Total assets	2,099,997	2,144,055
	===========	===========
Short loan	1,453	8,277
Accounts payable	38,925	80,218
Note payable	880,430	1,007,470
Taxes payable	-43,402	-42,459
Other accounts payable	74,288	17,737
Other levies payable	-1	-52
	------------------	------------------
Current liabilities	951,693	1,071,191
Long term liabilities	1,031,475	950,732
Deferred tax credit	1,750	0
	------------------	------------------
Total liabilities	1,984,918	2,021,923
Equities	115,079	122,132
	------------------	------------------
Total liabilities & equities	2,099,997	2,144,055
	===========	===========

Income Statement

Unit: CNY’000

	As of Dec. 31, 2012	As of Dec. 31, 2013
Turnover	528,740	476,766
Cost of goods sold	444,186	390,819
Taxes and additional of main operation	358	123
Sales expense	5,453	5,789
Management expense	35,239	35,781
Finance expense	42,608	46,954
Other business profit	4,746	3,733
Investment income	750	1,620
Non-operating income	2,614	2,053
Non-operating expense	94	38
Profit before tax	8,912	4,668
Less: profit tax	2,193	1,168
Profits	6,719	3,500

Important Ratios

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

	As of Dec. 31, 2012	As of Dec. 31, 2013
*Current ratio	1.46	1.24
*Quick ratio	1.25	1.03
*Liabilities to assets	0.95	0.94
*Net profit margin (%)	1.27	0.73
*Return on total assets (%)	0.32	0.16
*Inventory /Turnover ×365	136 days	173 days
*Accounts receivable/Turnover ×365	69 days	80 days
*Turnover/Total assets	0.25	0.22
* Cost of goods sold/Turnover	0.84	0.82

PROFITABILITY: AVERAGE

l The turnover of SC appears fairly good in its line.

l SC’s net profit margin is average.

l SC’s return on total assets is average.

l SC’s cost of goods sold is average.

LIQUIDITY: AVERAGE

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

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

l The inventory of SC appears fairly large.

l The accounts receivable of SC is maintained in an average level.

l SC’s short loans are average.

l SC’s turnover is in a poor 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 average.

Overall financial condition of the SC: Fairly stable.

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

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.62.44
UK Pound	1	Rs.98.15
Euro	1	Rs.77.38

INFORMATION DETAILS

Analysis Done by :	SUM

Report Prepared by :	SMN

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.