GREEN DRAGON WOOD PRODUCTS, INC. | 2013 | FY | 3

4.   LIFE INSURANCE

The Company has purchased insurance on the life of a key executive officer, Mr. Kwok Leung Lee, the stockholder and director of the Company. As beneficiary, the Company receives the cash surrender value if the policy is terminated and, upon death of the insured, receives all benefits payable. Cash value of this life insurance is presented in the accompanying financial statement, net of policy loans. The loans carry interest at an effective rate of 1% per annum over 1 or 3 months Hong Kong Interbank Offered Rate (“HIBOR”), payable monthly and mature in July 2018, which are secured by the cash value of the life insurance policy.

A summary of net cash value of life insurance as of March 31, 2013 is reported as below:

Cash surrender value of life insurance
  $ 648,935  
Less: policy loans balances outstanding
    (417,100 )
Cash value of life insurance, net
  $ 231,835  

As of March 31, 2013, the maturities of the policy loans for the next five years and thereafter are as follows:

Years ending March 31:
     
2014
  $ 78,206  
2015
    78,206  
2016
    78,206  
2017
    78,206  
2018
    78,206  
Thereafter
    26,070  
Total policy loans balances
  $ 417,100  

For the years ended March 31, 2013 and 2012, the HIBOR was 0.85% per annum and 0.84% per annum, respectively. .

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