MIRA INFORM REPORT

Report Date :

07.06.2014

IDENTIFICATION DETAILS

Name :	GAP (SHANGHAI) COMMERCIAL CO., LTD.
Registered Office :	4/F, Building 6, No. 800 Changde Road, Jing’an District, Shanghai, 200041 PR
Country :	China
Financials (as on) :	31.12.2013
Date of Incorporation :	10.06.2010
Com. Reg. No.:	310000400623552
Legal Form :	Wholly Foreign-Owned Enterprise
Line of Business :	Subject includes clothing, apparel, footwear, perfume, cosmetics, hosiery, luggage, home decor, jewelry, toys, children's supplies, baby stroller, daily necessities, stationery, tableware, household cleaning supplies, furniture, pet products retail, wholesale, commission agency (excluding auction), import, export and ancillary services; the above commodity-related consulting, product design, maintenance service, business management consulting, investment consulting
No. of Employees	1,000

RATING & COMMENTS

MIRA’s Rating :

Ca

RATING		STATUS	PROPOSED CREDIT LINE
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

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 – March 31, 2014

Country Name	Previous Rating (31.12.2013)	Current Rating (31.03.2014)
China	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low Risk	A2
Moderate Low Risk	B1
Moderate Risk	B2
Moderate High Risk	C1
High Risk	C2
Very High Risk	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 and address

GAP (SHANGHAI) COMMERCIAL CO., LTD.

4/F, BUILDING 6, NO. 800 CHANGDE ROAD, JING’AN DISTRICT,

SHANGHAI, 200041 PR CHINA

TEL: 86 (0) 21-60934300/22199584

FAX: 86 (0) 21-60934311

EXECUTIVE SUMMARY

INCORPORATION DATE : JUNE 10, 2010

REGISTRATION NO. : 310000400623552

REGISTERED LEGAL FORM : WHOLLY FOREIGN-OWNED ENTERPRISE

CHIEF EXECUTIVE : MR. YANG DEMING (CHAIRMAN)

STAFF STRENGTH : 1,000 (INCLUDING BRANCHES)

REGISTERED CAPITAL : USD 76,000,000

BUSINESS LINE : TRADING

TURNOVER : CNY 1,053,130,000 (UNAUDITED, AS OF DEC. 31, 2013)

EQUITIES : CNY -274,680,000 (UNAUDITED, AS OF DEC. 31, 2013)

PAYMENT : AVERAGE

MARKET CONDITION : AVERAGE

FINANCIAL CONDITION : FAIR

OPERATIONAL TREND : FAIR

GENERAL REPUTATION : WELL-KNOWN

EXCHANGE RATE : CNY 6.2537 = USD

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 wholly foreign-owned enterprise at local Administration for industry & commerce (AIC - the official body of issuing and renewing business license) on June 10, 2010.

Company Status: Wholly foreign-owned enterprise

This form of business in PR China is defined as a legal person. It is a limited co. established within the territories of PR China with capital provided totally by the foreign investors. More than one foreign investor may jointly invest in a wholly foreign-owned enterprise. The investing party/parties solely exercise management, reap profit and bear risks and liabilities by themselves. This form of companies usually have a limited duration is extendible upon approval of Examination and Approval Authorities.

SC’s registered business scope includes clothing, apparel, footwear, perfume, cosmetics, hosiery, luggage, home decor, jewelry, toys, children's supplies, baby stroller, daily necessities, stationery, tableware, household cleaning supplies, furniture, pet products retail, wholesale, commission agency (excluding auction), import, export and ancillary services; the above commodity-related consulting, product design, maintenance service, business management consulting, investment consulting. (with permit if needed)

SC is mainly engaged in selling clothing, apparel and so on.

Mr. Yang Deming has been the legal representative and chairman of SC since 2010.

SC is known to have approx. 1,000 employees, including the ones in branches at present.

SC is currently operating at the above stated address, and this address houses its operating office in the commercial zone of Shanghai. SC’s management declined to release the detailed information of the premise.

http://www.gapinc.com/ The web belongs to Gap Inc. The design is professional and the content is well organized. At present it is in English version.

Changes of its registered information are as follows:

Date of change	Item	Before the change	After the change
2011-3	Registered capital	USD 12,000,000	USD 19,000,000
Unknown	Registered capital	USD 19,000,000	Present amount

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

Organization Code: 55597727X

For the past two years there is no record of litigation.

MAIN SHAREHOLDERS:

Name % of Shareholding

The Gap, Inc. (U.S.A.) 100

Website: http://www.gapinc.com/

Add.: 2 Folsom St. San Francisco, CA 94105

Tel.: 650-952-4400

Legal Representative & Chairman:

Mr. Yang Deming is currently responsible for the overall management of SC.

Working Experience(s):

From 2010 to present Working in SC as legal representative and chairman

Also working in Gap (Beijing) Commercial Co., Ltd. as legal representative

Directors:

Aina Engalla Konold

Thomas Joseph Lima

Supervisor:

Michelle Anne Banks

SC is mainly engaged in selling clothing, apparel and so on.

SC’s products mainly include clothing, apparel, footwear, etc.

SC sources its materials and products 20% from domestic market, and 80% from overseas market, mainly America. SC sells 95% of its products in domestic market, and 5% to overseas market.

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 30-60 days.

Major supplier:

…………………

Gap International Sourcing Inc.

Major client:

……………..

Gap (Beijing) Commercial Co., Ltd.

Gap (Beijing) Commercial Co., Ltd.

Branches:

=======

Gap (Shanghai) Commercial Co., Ltd. Hongkou Branch

Gap (Shanghai) Commercial Co., Ltd. Hongyi International Plaza Branch

Gap (Shanghai) Commercial Co., Ltd. Huashan Road Branch

Gap (Shanghai) Commercial Co., Ltd. Jing’an Branch

Gap (Shanghai) Commercial Co., Ltd. Luwan Branch

Etc.

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’s suppliers declined to make any comments.

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.

The bank information is not found in local AIC.

Balance Sheet

Unit: CNY’000	as of Dec. 31, 2013
Cash & bank	206,920
Inventory	319,500
Accounts receivable	77,370
Advances to suppliers	21,320
Other accounts receivable	27,430
Other current assets	0
	------------------
Current assets	652,540
Fixed assets net value	524,970
Projects under construction	9,670
Long term investment	0
Other non-current assets	0
	------------------
Total assets	1,187,180
	=============
Short loans	0
Accounts payable	160,580
Advances from clients	4,870
Other accounts payable	321,290
Salaries payable	26,880
Accrued expenses	117,820
Tax payable	25,790
Other current liabilities	40
	------------------
Current liabilities	657,270
Long term liabilities	804,590
	------------------
Total liabilities	1,461,860
Equities	-274,680
	------------------
Total liabilities & equities	1,187,180
	=============

Income Statement

Unit: CNY’000	as of Dec. 31, 2013
Turnover	1,053,130
Cost of goods sold	595,510
Taxes and additional of main operation	4,770
Sales expense	407,340
Management expense	351,700
Finance expense	-8,750
Other income	5,120
Non-operating expenses	13,420
Profit before tax	-305,740
Less: profit tax	0
Profits	-305,740

Note: the above financial statements have not been audited.

Important Ratios

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

	as of Dec. 31, 2013
*Current ratio	0.99
*Quick ratio	0.51
*Liabilities to assets	1.23
*Net profit margin (%)	-29.03
*Return on total assets (%)	-25.75
*Inventory /Turnover ×365	111 days
*Accounts receivable/Turnover ×365	27 days
*Turnover/Total assets	0.89
* Cost of goods sold/Turnover	0.57

PROFITABILITY: FAIR

The turnover of SC appears good.

SC’s net profit margin is poor.

SC’s return on total assets is poor.

SC’s cost of goods sold is average, comparing with its turnover.

LIQUIDITY: FAIR

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

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

The inventory of SC appears large in 2013.

The accounts receivable of SC appears average in 2013.

SC has no short-term loan in 2013.

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

LEVERAGE: POOR

The debt ratio of SC is too high.

The risk for SC to go bankrupt is fairly high.

Overall financial condition of the SC: Fair.

SC is considered large-sized in its line with fair financial conditions. The large amount of inventory could be a threat to SC’s financial condition. Great caution is required in providing credit to SC & C.O.D. is recommended.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.59.20
UK Pound	1	Rs.99.52
Euro	1	Rs.80.83

INFORMATION DETAILS

Analysis Done by :	KAR
Report Prepared by :	NIS

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.