OPERATING RISKS

12 Months Ended

Mar. 31, 2012

3.	OPERATING RISKS

(a)

Concentration of major customers and suppliers

	Years ended March 31,
	2012			2011
Major customers with revenues of more than 10% of the Company’s sales
Sales to major customers		US$28,293,000			US$146,209,000
Percentage of sales		25	%		60	%
Number		2			4

Major suppliers with purchases of more than 10% of the Company’s purchases
Purchases from major suppliers		US$53,867,000			US$108,281,000
Percentage of purchases		27	%		57	%
Number		1			3

Trade receivables related to the Company’s major customers comprised 80% and 94% of all account receivables as of March 31, 2012 and 2011, respectively.

Trade payables related to the Company’s major suppliers comprised 0% and 36% of all account payables as of March 31, 2012 and 2011, respectively.

Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arisen from financial economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The major concentrations of credit risk arise from the Company’s accounts receivable. Even though the Company has major concentrations, it does not consider itself exposed to significant risk with regard to the related receivables.

(b)

Country risks

The Company’s major subsidiary has operation conducted in the PRC. Accordingly, its business, financial condition and result of operation maybe influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC economy.

The operation in the PRC is subject to special considerations and significant risks not typically associated with companies in the United States. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange and remittance restrictions. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, inter alia. The management does not believe these risks to be significant. There can be no assurance, however, those changes in political and other conditions will not result in any adverse impact.

(c)

Cash and time deposits

The Company mainly maintains its cash balances with various banks located in the PRC. In common with local practice, such amounts are not insured or otherwise protected should the financial institutions be unable to meet their liabilities. There has been no history of credit losses. There are neither material commitment fees nor compensating balance requirements for any outstanding loans of the Company.