##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F



| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------------

OR



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------

For the fiscal year ended March 31, 2009

OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------

OR



| ̈ |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report:

For the transition period
from
 to

GLOBAL-TECH ADVANCED INNOVATIONS INC.

|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|(Exact Name of Registrant as Specified in its charter and Translation of Registrants Name into
English)



|                                                                                
|--------------------------------------------------------------------------------
|British Virgin Islands                                                          
|(Jurisdiction of incorporation or organization)                                 
|                                                                                
|12/F., Kin Teck Industrial Building, 26 Wong Chuk Hang Road, Aberdeen, Hong Kong
|(Address of principal executive offices)                                        

Securities registered or to be registered pursuant to Section 12(b) of the Act:



|                                         |  |  |  |                                           
|---------------------------------------- |  |  |  | ------------------------------------------
|Title of each class:                     |  |  |  | Name of each exchange on which registered:
|Common Shares, par value $0.04 per share |  |  |  | The NASDAQ Stock Market LLC               

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Not Applicable

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable



Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual report:

3,227,064 Common Shares, par value $0.04
per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.   ̈ Yes  x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.   ̈ Yes  x No

Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes   ̈ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ̈ Yes   ̈ No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                         
|-------------------------- |  | -------------------- |  | ------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:



|             |  |                                                       |  |         
|------------ |  | ----------------------------------------------------- |  | --------
|U.S. GAAP  x |  | International Financial Reporting Standards as issued |  | Other   ̈
|             |  | by the International Accounting Standards Board   ̈    |  |         

If Other has been checked in response to the previous question, indicate by check mark
which financial statement item that the registrant has elected to follow.   ̈ Item 17   ̈ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).   ̈ Yes  x No









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##### Table of Contents

TABLE OF CONTENTS



|                                                              |  |     
|------------------------------------------------------------- |  | ----
|                                                              |  | Page
|Item 1. Identity of Directors, Senior Management and Advisers |  | 1   
|A. Directors and senior management                            |  | 1   
|B. Advisers                                                   |  | 1   
|C. Auditors                                                   |  | 1   
|                                                              | 
|Item 2. Offer Statistics and Expected Timetable               |  | 1   
|A. Offer statistics                                           |  | 1   
|B. Method and expected timetable                              |  | 1   
|                                                              | 
|Item 3. Key Information                                       |  | 2   
|A. Selected financial data                                    |  | 2   
|B. Capitalization and indebtedness                            |  | 3   
|C. Reasons for the offer and use of proceeds                  |  | 3   
|D. Risk factors                                               |  | 3   
|                                                              | 
|Item 4. Information on the Company                            |  | 10  
|A. History and development of the Company                     |  | 10  
|B. Business overview                                          |  | 10  
|C. Organizational structure                                   |  | 21  
|D. Property, plant and equipment                              |  | 22  
|                                                              | 
|Item 4A. Unresolved Staff Comments                            |  | 22  
|                                                              | 
|Item 5. Operating and Financial Review and Prospects          |  | 23  
|A. Operating results                                          |  | 23  
|B. Liquidity and Capital Resources                            |  | 30  
|C. Research and development, patents and licenses, etc.       |  | 33  
|D. Trend information                                          |  | 33  
|E. Off-balance sheet arrangements                             |  | 33  
|F. Tabular Disclosure of Contractual Obligations              |  | 34  
|                                                              | 
|Item 6. Directors, Senior Management and Employees            |  | 34  
|A. Directors and senior management                            |  | 34  
|B. Compensation                                               |  | 35  
|C. Board practices                                            |  | 35  
|D. Employees                                                  |  | 36  
|E. Share ownership                                            |  | 37  
|                                                              | 
|Item 7. Majority Shareholders and Related Party Transactions  |  | 40  
|A. Major shareholders                                         |  | 40  
|B. Related party transactions                                 |  | 40  
|C. Interests of experts and counsel                           |  | 40  
|                                                              | 
|Item 8. Financial Information                                 |  | 41  
|A. Consolidated statements and other financial information    |  | 41  
|B. Significant changes                                        |  | 47  
|                                                              | 
|Item 9. The Offer and Listing                                 |  | 47  
|A. Offer and listing details                                  |  | 47  
|B. Plan of distribution                                       |  | 48  
|C. Markets                                                    |  | 48  
|D. Selling shareholders                                       |  | 48  



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|                                                                                      |  |    
|------------------------------------------------------------------------------------- |  | ---
|E. Dilution                                                                           |  | 48 
|F. Expenses of the issue                                                              |  | 48 
|                                                                                      | 
|Item 10. Additional Information                                                       |  | 48 
|A. Share capital                                                                      |  | 48 
|B. Memorandum and articles of association                                             |  | 48 
|C. Material contracts                                                                 |  | 51 
|D. Exchange controls                                                                  |  | 52 
|E. Taxation                                                                           |  | 52 
|F. Dividends and paying agents                                                        |  | 54 
|G. Statement by experts                                                               |  | 54 
|H. Documents on display                                                               |  | 54 
|I. Subsidiary information                                                             |  | 55 
|                                                                                      | 
|Item 11. Quantitative and Qualitative Disclosures about Market Risk                   |  | 55 
|                                                                                      | 
|Item 12. Description of Securities Other than Equity Securities                       |  | 56 
|A. Debt securities                                                                    |  | 56 
|B. Warrants and rights                                                                |  | 56 
|                                                                                      | 
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |  | 56 
|                                                                                      | 
|Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds |  | 56 
|                                                                                      | 
|Item 15. Controls and Procedures                                                      |  | 56 
|                                                                                      | 
|Item 16. [Reserved]                                                                   |  | 57 
|                                                                                      | 
|Item 16A. Audit Committee Financial Expert                                            |  | 57 
|                                                                                      | 
|Item 16B. Code of Ethics                                                              |  | 58 
|                                                                                      | 
|Item 16C. Principal Accountant Fees and Services                                      |  | 58 
|                                                                                      | 
|Item 16G. Corporate Governance                                                        |  | 58 
|                                                                                      | 
|Item 17. Financial Statements                                                         |  | 60 
|                                                                                      | 
|Item 18. Financial Statements                                                         |  | 60 
|                                                                                      | 
|Item 19. Exhibits                                                                     |  | 60 
|                                                                                      | 
|Index to Consolidated Financial Statements                                            |  | F-2
|Exhibit Index                                                                         |  | E-1



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##### Table of Contents

The terms Global-Tech, we, the Company, the Group,
us and our as used in this annual report on Form 20-F, or annual report, refer to Global-Tech Advanced Innovations Inc. (formerly known as Global-Tech Appliances Inc.), a British Virgin Islands corporation, and its
consolidated subsidiaries, except where the context requires otherwise. The terms China, Hong Kong and Macau as used in this annual report refer to the Peoples Republic of China, the Hong Kong Special
Administrative Region of China and the Macau Special Administrative Region of China, respectively.

References throughout this annual report
to a fiscal year refer to the fiscal year ended on March 31 of that year. Fiscal 2009, for example, refers to the fiscal year ended March 31, 2009.

Our financial statements are reported in U.S. dollars (see Note 3(o) of Notes to Consolidated Financial Statements) and in accordance with generally accepted accounting principles in the United States, or
U.S. GAAP. All references to dollars or $ in this annual report are to U.S. dollars. All references to HK$ are to Hong Kong dollars.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains
forward-looking statements that are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions and involve inherent risks and
uncertainties. We use words such as expect, anticipate, project, believe, plan, intend, seek, should, estimate, future, or
variations of such words and other similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results may differ materially from those anticipated in these
forward-looking statements. Factors that could contribute to differences include, but are not limited to, the following: the impact of competitive products and pricing; demand for new and existing products in our core business; the financial
condition of the Companys customers; product demand and market acceptance especially of our new products; the success of new product development and market acceptance especially in the area of cellular phone components and solutions and for
our more technologically complex products; reliance on material customers, suppliers and key strategic alliances; the terms and conditions of customer contracts and purchase orders; availability and cost of raw materials; the timely and proper
execution of certain business plans, including the plan to diversify and transform a portion of our manufacturing capacity to higher-value, technology-oriented products; currency fluctuations including, but not limited to, the revaluation of the
Chinese Renminbi; the imposition of Chinas trading partners of economic sanctions and/or protective tariffs on Chinese manufacturing goods; uncertainties associated with investments; the regulatory environment; the impact of changing global,
political and economic conditions; and other risks detailed in Item 3.DRisk Factors and elsewhere in this annual report. We do not undertake to update our forward-looking information, or any other information contained or
referenced in this annual report to reflect future events and circumstances.

PART I



|Item 1. | Identity of Directors, Senior Management and Advisers.
|------- | ------------------------------------------------------



|A. | Directors and senior management.
|-- | --------------------------------

Not applicable.



|B. | Advisers.
|-- | ---------

Not applicable.



|C. | Auditors.
|-- | ---------

Not applicable.



|Item 2. | Offer Statistics and Expected Timetable.
|------- | ----------------------------------------



|A. | Offer statistics.
|-- | -----------------

Not applicable.



|B. | Method and expected timetable.
|-- | ------------------------------

Not applicable.



1



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|Item 3. | Key Information.
|------- | ----------------



|A. | Selected financial data.
|-- | ------------------------

The selected consolidated statement of operations data for the fiscal years ended March 31, 2007, 2008 and 2009 and the selected consolidated balance sheets data as of March 31, 2008 and March 31, 2009 set forth below have
been prepared in accordance with U.S. GAAP and are derived from our consolidated financial statements and notes thereto included elsewhere in this annual report. The selected consolidated statement of operations data for the fiscal years ended
March 31, 2005 and 2006 and the selected consolidated balance sheets data as of March 31, 2005, March 31, 2006 and March 31, 2007 set forth below have been prepared in accordance with U.S. GAAP and are derived from our
consolidated financial statements and notes thereto not included elsewhere in this annual report. The selected consolidated financial data set forth below should be read in conjunction with Item 5Operating and Financial Review and
Prospects, the consolidated financial statements and the notes thereto and other financial information which appear elsewhere in this annual report.



|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------------------------------- |  | ----------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                       |  | Fiscal Year Ended March 31,               |        
|                                                                       |  | 2005 (1)                                  |         |   | 2006 |   |         | 2007 |  |   | 2008    |   |  | 2009 |        
|                                                                       |  | (In thousands, except for per share data) |        
|Statement of operations data:                                          |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                              |  | $                                         | 41,851  |   |      | $ | 73,812  |      |  | $ | 60,291  |   |  | $    | 105,543 |   |  | $ | 87,387  |  
|Cost of goods sold                                                     |  |                                           | (44,595 | ) |      |   | (69,817 | )    |  |   | (56,763 | ) |  |      | (94,976 | ) |  |   | (81,500 | )
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Gross profit (loss)                                                    |  |                                           | (2,744  | ) |      |   | 3,995   |      |  |   | 3,528   |   |  |      | 10,567  |   |  |   | 5,887   |  
|Selling, general and administrative expenses                           |  |                                           | (16,054 | ) |      |   | (18,011 | )    |  |   | (12,454 | ) |  |      | (12,803 | ) |  |   | (13,075 | )
|Other operating income (loss), net                                     |  |                                           | (810    | ) |      |   | 2,380   |      |  |   | 608     |   |  |      | (143    | ) |  |   | 1,674   |  
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating loss                                                         |  |                                           | (19,608 | ) |      |   | (11,636 | )    |  |   | (8,318  | ) |  |      | (2,379  | ) |  |   | (5,514  | )
|Interest income, net                                                   |  |                                           | 967     |   |      |   | 1,223   |      |  |   | 1,437   |   |  |      | 1,704   |   |  |   | 533     |  
|Other income (expenses), net                                           |  |                                           | 31      |   |      |   | (846    | )    |  |   | 1,728   |   |  |      | (1,809  | ) |  |   | 432     |  
|Loss on dissolution of a subsidiary                                    |  |                                           |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (1,029  | )
|Gain on disposal of subsidiaries                                       |  |                                           |        |   |      |   |        |      |  |   | 3,952   |   |  |      |        |   |  |   | 158     |  
|Share of losses of jointly-controlled entities                         |  |                                           |        |   |      |   |        |      |  |   | (187    | ) |  |      | (346    | ) |  |   |        |  
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Loss before income taxes                                               |  |                                           | (18,610 | ) |      |   | (11,259 | )    |  |   | (1,388  | ) |  |      | (2,830  | ) |  |   | (5,420  | )
|Benefit from (provision for) income taxes                              |  |                                           | (33     | ) |      |   | 23      |      |  |   | 144     |   |  |      | (1,597  | ) |  |   | (421    | )
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net loss before minority interests                                     |  |                                           | (18,643 | ) |      |   | (11,236 | )    |  |   | (1,244  | ) |  |      | (4,427  | ) |  |   | (5,841  | )
|Minority interests                                                     |  |                                           | 20      |   |      |   | 13      |      |  |   | 77      |   |  |      |        |   |  |   |        |  
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net loss                                                               |  | $                                         | (18,623 | ) |      | $ | (11,223 | )    |  | $ | (1,167  | ) |  | $    | (4,427  | ) |  | $ | (5,841  | )
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic and diluted loss per share of common stock                       |  | $                                         | (6.10   | ) |      | $ | (3.67   | )    |  | $ | (0.38   | ) |  | $    | (1.45   | ) |  | $ | (1.91   | )
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic and diluted weighted average number of shares of common stock(2) |  |                                           | 3,054   |   |      |   | 3,056   |      |  |   | 3,056   |   |  |      | 3,057   |   |  |   | 3,051   |  
|                                                                       |  |                                           |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  



|(1) | For fiscal 2005, other operating loss of $810,000 representing a contingent loss provision was reclassified from selling, general and administrative expenses to other
operating income (loss), net.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Company executed a 4-for-1 reverse stock split of its common stock effective from December 10, 2008. All numbers have been adjusted to reflect this reverse
stock split on a retroactive basis.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2



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|                     |  |                |         |      |   |        |  |      |         |      |   |         |  |   |        
|-------------------- |  | -------------- | ------- | ---- | - | ------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                     |  | At March 31,  
|                     |  | 2005           |         | 2006 |   | 2007   |  | 2008 |         | 2009
|                     |  | (In thousands)
|Balance sheet data:  |  |                |         |      |   |        |  |      |         |      |   |         |  |   |        
|Working capital1     |  | $              | 58,167  |      | $ | 53,071 |  | $    | 50,559  |      | $ | 43,995  |  | $ | 46,362 
|Total assets         |  |                | 104,013 |      |   | 98,080 |  |      | 100,281 |      |   | 108,725 |  |   | 103,914
|Net assets2          |  |                | 90,261  |      |   | 79,349 |  |      | 79,380  |      |   | 78,243  |  |   | 74,201 
|Total debt3          |  |                | 38      |      |   | 38     |  |      |        |      |   | 1,600   |  |   |       
|Shareholders equity |  |                | 90,261  |      |   | 79,349 |  |      | 79,380  |      |   | 78,243  |  |   | 74,201 





|1 | Working capital is the excess of current assets over current liabilities.
|- | -------------------------------------------------------------------------

|2 | Net assets are the excess of total assets over total liabilities and minority interests.
|- | ----------------------------------------------------------------------------------------

|3 | Total debt is the summation of short-term borrowings, current portion of long-term bank borrowings and non-current portion of long-term bank
borrowings.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Capitalization and indebtedness.
|-- | --------------------------------

Not applicable.



|C. | Reasons for the offer and use of proceeds.
|-- | ------------------------------------------

Not applicable.



|D. | Risk factors
|-- | ------------

Compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We are required under Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404) to include a managements report that provides an
assessment of the effectiveness of the Companys internal control over financial reporting. Further, Section 404 requires that the Companys external auditor report on the effectiveness of the Companys internal control over
financial reporting beginning with our annual report on Form 20-F for our fiscal year ending on or after December 15, 2009. Although we engaged an external consultant to review our internal control structure and procedures over financial
reporting to comply with the requirements of Section 404, there is no assurance that our external auditors will ultimately be satisfied with the effectiveness of internal control over our financial reporting. This could result in a decline of
our stock value due to the loss of investors confidence in the reliability of our financial statements, and the Company may be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require the
commitment of additional financial and management resources.

Inherent limitation on Internal Control. Internal
control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance
and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management decision. Because of such limitations, there is a risk that
material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it may be possible to
design into the process safeguards to reduce, though not eliminate, this risk.

Inherent uncertainty in preparation of
financial statements. The consolidated and condensed consolidated financial statements included in the periodic reports we file with the SEC are prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance
with U.S. GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets, liabilities and related reserves, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to changes in
the future, and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on our financial position and results of operations.

Disruptions in the financial and credit markets.Disruptions in the financial and credit markets may adversely
impact the availability and cost of credit and the spending of our customers as well as our ability to raise additional capital, which could adversely affect our business, results of operations and financial condition. As noted in the discussions of
other risks that we face, demand for our products and services depends in large part upon the expenditures by many of our customers. Decreased capital and customer spending, as well as our potentially limited access to additional funds, could have a
material adverse effect on the demand for our products and our business, results of operations and financial condition. Disruptions in the financial markets, including the bankruptcy or restructuring of certain financial institutions, may adversely
impact the availability of credit already arranged and the



3



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availability and cost of credit in the future. Our failure to obtain additional funds, if need be, to meet payment obligations and working capital requirements could have a material adverse
effect on our business. In addition, the disruptions in the financial markets may also have an adverse impact on regional economics or the world economy, which could negatively impact the capital and maintenance expenditures of our customers. There
can be no assurance that government responses to the disruptions of the financial markets will restore confidence, stabilize markets or increase liquidity and the availability of credit.

Our business could be materially and adversely affected by the effects of H1N1 flu (swine flu), avian flu, severe acute respiratory
syndrome or other epidemics or outbreaks. In April 2009, an outbreak of H1N1 flu (swine flu) first occurred in Mexico and quickly spread to other countries, including the U.S. and China. In the last decade, China has suffered health
epidemics related to the outbreak of avian influenza and severe acute respiratory syndrome. Any prolonged occurrence or recurrence H1N1 flu (swine flu), avian flu, severe acute respiratory syndrome or other adverse public health developments in
China or the U.S. may have a material adverse effect on our business and operations. These health epidemics could result in severe travel restrictions and closures that would restrict our ability to ship our products. Potential outbreaks in China
could also lead to temporary closure of our manufacturing facilities, our suppliers facilities and/or our end-user customers facilities, leading to reduced production, delayed or cancelled orders, and decrease in demand for our products.
Any future health epidemic or outbreaks that could disrupt our operations and/or restrict our shipping abilities may have a material adverse effect on our business and results of operations.

Unsecured cash, cash equivalents and short-term investments.We have cash and short-term cash equivalent instruments which are
invested with third party financial institutions that may not be insured or exceed the insurance limits of the Federal Deposit Insurance Corporation (FDIC) or other government insurance agencies. While we make an effort to monitor the
cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or become subject to other adverse conditions in the financial markets. To date,
we have experienced no loss or lack of access to cash in our operating accounts. We also invest excess cash in immediately available and short-term interest bearing cash equivalent instruments. If a commercial bank or financial institution in which
we have our funds deposited should become insolvent or be taken over by the FDIC or other governmental insurance agencies, we could have significant unrecoverable cash deposits. A loss in cash deposits would have an adverse impact on our business,
results of operations and financial condition.

Foreign sales, operations and assets. Substantially all of our
products are currently manufactured in China and over 95% of the net book value of our total long-lived assets is located there. We sell products to companies based principally in North America, China and Europe. Consequently, our international
operations and sales may be subject to the following risks, among others:



| |  |  | political and economic risks, including political instability, currency controls and exchange rate fluctuations;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | changes in import/export regulations;
| | - |  | -------------------------------------



| |  |  | changes in the rate of inflation;
| | - |  | ---------------------------------



| |  |  | changes in tariff and freight rates; and
| | - |  | ----------------------------------------



| |  |  | changes in tax rates.
| | - |  | ---------------------

In particular, changes in tariff structures or other trade policies could adversely affect our customers or suppliers or decrease our competitors costs of production.

Renminbi revaluation. We sell a significant portion of our products to North American customers FOB China. These sales are
generally denominated in U.S. dollars. The majority of our expenses, including salaries and wages and other production and administrative costs are denominated in Hong Kong dollars and Chinese Renminbi. Although certain raw materials, material
components and capital equipment are purchased using a variety of currencies, including the U.S. dollar, Chinese Renminbi, Japanese yen and EURO, the majority are purchased with Hong Kong dollars. The Hong Kong dollar is currently pegged to the U.S.
dollar at a rate of approximately HK$7.8 to US$1.0. Until 2006, in the aggregate, we were not significantly affected by exchange rate fluctuations and therefore have not hedged our positions.

From 1998 until 2005, the Peoples Bank of China (PBOC) kept the Renminbis exchange rate against the U.S. dollar
steady at approximately 8.3 Renminbi to the U.S. dollar. In March 2005, Chinas Premier introduced a number of conditions, including but not limited to, Chinese financial and economic stability that must be achieved before China could implement
greater exchange flexibility. At that time the Premier indicated that the Renminbi was likely to be revalued, but gave no timetable for such revaluation.

On July 21, 2005, the PBOC decided to abandon its policy of pegging the Renminbi to the U.S. dollar and instead decided to link the Renminbi to a basket of currencies. The PBOC also strengthened the
exchange rate of the Renminbi to 8.11 to the U.S. dollar from 8.28 as the Chinese government took its first step towards a floating currency. During our fiscal 2009 the Renminbi was allowed to appreciate to between 6.8286 and 7.0007 to the U.S.
dollar and subsequently it has appreciated to 6.817 as of September 25, 2009. This appreciation has made Chinese products more expensive for U.S. companies. To the extent our operations are based in China, we are exposed to foreign exchange
risk with respect to the Renminbi, which could adversely impact our financial position and results of operations.

Credit terms in the PRC.Some of the Companys major customers in the PRC are granted credit terms of up to 180 days. Most of the other customers are granted 60 days from the end of the month of shipment. The Company
obtains credit insurance when available but a default by any of its major customers in their obligation to pay us would have a material adverse effect on our financial position and results of operations.

Government regulation. Our operations and assets in China are subject to significant political, economic, legal and other
uncertainties. Any of the following could result from policy changes by the Chinese government and could have a material adverse effect on our business, results of operations and financial condition:



| |  |  | legal or regulatory changes, or changes in interpretation of current laws or regulations;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | new labor laws restricting flexibility in employment and added social security costs;
| | - |  | -------------------------------------------------------------------------------------



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| |  |  | confiscatory or increased taxation;
| | - |  | -----------------------------------



| |  |  | restrictions on currency conversion, imports and sources of supply;
| | - |  | -------------------------------------------------------------------



| |  |  | import duties;
| | - |  | --------------



| |  |  | currency devaluations; or
| | - |  | -------------------------



| |  |  | expropriation of private enterprise.
| | - |  | ------------------------------------

Under its current leadership, the Chinese government has been pursuing economic reform policies, including the encouragement of private economic activity and greater economic decentralization. In 2001,
China was admitted to the World Trade Organization (WTO), and is now entitled to the full trading rights afforded a WTO member country. There can be no assurance, however, that China will continue to pursue and implement favorable
economic reform policies, that such policies will be successful if pursued or that such policies will not be significantly altered from time to time without prior notice.

The municipal authorities in each township in China have a certain amount of discretion to impose or waive a large number of fees and taxes including value-added tax, stamp duty, licenses and permits. In
the Companys manufacturing location, it is subject to the laws and regulations of the township of Dongguan, Guangdong Province and the PRC. To the extent the government authorities decide to exercise their discretion to increase or impose new
fees, our operations could be materially affected.

Changes in the PRCs labor law. In June 2007, the
National Peoples Congress of the PRC enacted new labor legislation called the Labour Contract Law, which became effective on January 1, 2008. It formalizes workers rights concerning overtime hours, pensions, layoffs, employment
contracts and the role of trade unions. Considered one of the strictest labor laws in the world, among other things, this new law requires an employer to conclude an open-ended employment contract with any employee who either has worked
for the employer for 10 years or more or has had two consecutive fixed-term contracts. An open-ended employment contract is in effect a lifetime, permanent contract, which can only be terminated in specified circumstances, such as a
material breach of the employers rules and regulations, or for a serious dereliction of duty. Under the new law, downsizing by 20% or more may occur only under specified circumstances, such as a restructuring undertaken pursuant to
Chinas Enterprise Bankruptcy Law, or where a company suffers serious difficulties in production and/or business operations. If the Company faces future periods of decline in business activity generally or adverse economic periods specific to
the Companys business, the Company could incur material severance payments to employees under this new law. This new law can be expected to exacerbate the adverse effect of labor inflation on the Companys economic environment and its
results of operations and financial condition.

Cancellation or delays in purchase orders placed by our
customers. Sales to our customers are primarily based on purchase orders and forecasts we receive. We generally purchase and stock raw materials and components upon receiving orders; however, we will purchase the raw materials and components
for certain customers based on their rolling forecasts. When there is an acute shortage of raw materials and components such as plastic resins and metal, we are required to purchase such raw materials on an occasional or continuous basis in the
expectation of receiving purchase orders for products that use these raw materials and components. In the event the actual orders are delayed or cancelled, we would have increased inventory levels or possible write-downs of our raw material
inventory that could materially and adversely affect our business and results of operations.

Cost and availability of
labor. There is an emerging trend of a shortage of supply of migrant workers in China, particularly in Guangdong Province where our factory is located. Both in numbers and in skill, the labor force in China cannot keep up with the current
speed of economic development. We have adjusted salaries and fringe benefits in order to attract and retain an adequate labor force. This trend of labor shortages is expected to continue and will likely result in further increase in wages as
companies seek to retain their existing work force. In the coming year, we expect that both a potential shortage of labor and increasing costs will impact our manufacturing operations, which could adversely affect gross margins.

Change in taxation. The Company is subject to a lower overall effective tax rate than some U.S. domiciled
corporations because of the location of its business operations. We are incorporated in the British Virgin Islands and have subsidiaries incorporated in the British Virgin Islands, Hong Kong, China and the United States. Our executive and
administrative offices are located in Hong Kong and our manufacturing facilities are in China. Our customers are located primarily in the United States and China. Changes in tax laws could have a material adverse effect on our results of operations.
One of our subsidiaries in China, Dongguan Wing Shing Electrical Products Factory Company Limited (Dongguan Wing Shing), was subject to a preferential tax rate of 27% (24% reduced tax rate plus 3% local income tax rate) for the calendar
years ended December 31, 2007. Dongguan Wing Shing houses our manufacturing facilities that incur a significant portion of manufacturing overhead and the finished products manufactured at Dongguan Wing Shing are sold to our other subsidiaries.
The transfer pricing used could be challenged by the tax authorities which could subject us to material increases in taxation. In fiscal 2004, we established a new subsidiary, Dongguan Lite Array Company Limited (Dongguan Lite Array),
which is entitled to a tax concession period (Tax Holiday) whereby it is exempt from corporate income taxes for its first two profit-making years and is entitled to a 50% tax reduction for the succeeding three years. Dongguan Lite Array
started its first profit-making year under its Tax Holiday for its calendar year ended December 31, 2007. During the 5thSession of the 10thNational Peoples Congress of the PRC, which was concluded on March 16, 2007, a new PRC Corporate Income Tax
Law



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(the New CIT Law) was approved and became effective on January 1, 2008. The New CIT Law introduced a wide range of changes which included, but are not limited to, the unification
of the income tax rate for domesticinvested and foreigninvested enterprises at 25%. Our former subsidiary in Macau, Pentalpha Macau Commercial Offshore Limited, which was liquidated in July 2008, was not subject to taxation in Macau in
accordance with Macau tax regulations from inception through the year ended March 31, 2009.

In fiscal 2005, our U.S.
subsidiary, Lite Array, Inc, a Delaware corporation, engaged in the trading of raw materials for small molecule organic light emitting diode (OLED) technology for our other subsidiaries. The sales amount was immaterial and we
subsequently ceased trading OLED products. There should be no taxable income recognized as the sales amount was not sufficient to cover the expenses incurred during the period and there were tax losses carried forward from prior years. Lite Array,
Inc. has been inactive since fiscal 2006. At this stage, we do not believe that our current method of operations subjects us to U.S. taxes. There can be no assurance, however, that U.S. taxes could not be imposed on an additional portion of our
income. The imposition of material U.S. income taxes could have an adverse effect on our results of operations.

Dependence on major customers. Sales to five major customers accounted for 72.5%, 70.5% and 80.1% of our net sales during each of fiscal 2009, 2008 and 2007, respectively. The Electrolux Group, which was formerly known as The
Eureka Company (Electrolux) was our largest customer in fiscal 2009 and sales to Electrolux accounted for 47.8% of our net sales in fiscal 2009 compared to 43.3% of our net sales in fiscal 2008. Royal Appliance Manufacturing Company
(Royal), previously a major floor care company, was a major customer and sales to Techtronic Industries Limited (TTI) group, which includes Royal, accounted for 8.5% of our net sales in fiscal 2009 compared to 15.3% of our
net sales in fiscal 2008. Electrolux is not contractually obligated to purchase floor care products from us, and we only sell to them on the basis of individual purchase orders when received.

On December 17, 2002, TTI and Royal jointly announced that they had entered into a definitive agreement for TTI to acquire Royal.
Effective April 23, 2003, TTI announced a merger with Royal. Since completion of the merger, Royal is operating as a wholly-owned subsidiary of TTI. TTI, like the Company, is a vertically integrated electrical products manufacturer based in
Hong Kong and China. During fiscal 2008, the Company requested substantial price increases from TTI to compensate for cost increases we had incurred. TTI did not accept our price increases and thus when they replaced certain floor care models, we
were not asked to quote on the new models. Our business with TTI is now minimal.

Although the relative percentage of net
sales to each of our major customers changes each year, we expect to be dependent on between two to four major customers including major PRC cell phone manufacturers for the foreseeable future. Although we may enter into contracts with general terms
for the purchase of products with certain of our major customers, sales are generally made pursuant to purchase orders received by us from time to time. Therefore, there can be no assurance of the level of sales to any of these major customers in
the future. The loss of any one of our major customers, particularly Electrolux, could have a material adverse effect on our business, results of operations and financial condition.

Cost of raw materials. We are dependent upon outside suppliers for all of our raw material needs, including plastic resins,
and are subject to price increases in these raw materials. The plastic resins we use are derived from natural gas liquids, and prices of these plastic resins have fluctuated in line with the fluctuation in natural gas and crude oil prices, as well
as the relative capacity, supply and demand for the resin and petrochemical intermediates from which plastic resins are produced. During fiscal 2009, the price of plastic decreased 3.9% overall but subsequently has increased as a result of the
recovery in crude oil prices. We have no long-term supply contracts for the purchase of plastic resin, but we generally maintain a 30-day supply. We have limited ability to increase product prices in response to plastic resin or other material cost
increases. We closely monitor crude oil prices that normally affect the price of plastic resin and our inventory levels to ensure we can complete our orders on hand. If our reserves are not sufficient for our production requirements, we have to buy
plastic resin at potentially higher prices in order to meet our delivery schedules. There can be no assurance that we will be able to purchase the necessary quantities of plastic resin and other raw materials at reasonable prices. Any future
increase in the cost of plastic resins or other raw materials or our continuing inability to pass the increased cost of these or other raw materials onto our customers or to purchase sufficient quantities of plastic resins will have a material
adverse effect on our business, results of operations and financial condition.

Security of bank accounts in the
PRC. The Company has a number of bank accounts in the PRC to satisfy lines of credit, exchange regulations and banking facilities and to support its operations. None of these accounts are insured by the government. In the event there was a
credit crisis in the PRC or a run on the bank, our accounts would be vulnerable for loss and this would have a material adverse effect on our financial condition.

Change in global financial and credit markets. Global financial and credit markets have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have
been weak and could deteriorate further. The instability of the markets and weakness of the global economy has adversely affected, and could continue to effect adversely, the demand for our customers products, the amount, timing and stability
of their orders to us, the financial strength of our customers and suppliers, their ability or willingness to do business with us, our willingness to do business with them and/or our suppliers and customers ability to fulfill their
obligations to us and/or the ability of our customers, our suppliers or us to obtain credit. These factors have and could continue to affect our operations, earnings and financial condition adversely. This instability also could affect the prices at
which we could make any such sales, which also could adversely affect our earnings and financial condition.



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New product category. In 2005, we entered the consumer electronic products
business concentrating on display-oriented products. Our subsidiary, Global Display Limited (which subsequently changed its name to Global Household Products Limited) developed a range of consumer products incorporating high-definition flat panel
displays (FPDs) that utilized liquid crystal displays (LCDs), plasma display panels (PDPs), liquid crystal on silicon (LCOS), optical, and digital display technologies. Lite Array had been developing a
range of display modules utilizing proprietary OLED technology. Since we had no commercial success in these new product categories and there was no assurance that we would do so in the future, we were required to provide for impairment of our
long-lived assets since the carrying amount of our long-lived assets exceeded the sum of the undiscounted cash flows expected to result from the assets use and eventual disposition. In addition, we had to write-down the value of the related
inventories to market value. Any future impairment or write-down of inventory arising from a lack of commercial success in a new product category would have a negative impact on our business and results of operations.

New products and rapid technological change. The technology incorporated in many of our products, particularly consumer
electronics is characterized by rapid change in the marketplace. In addition, the emergence of new technologies can quickly render existing products obsolete or unmarketable. Our ability to anticipate changes in technology and industry standards or
consumer demand and successfully develop and introduce new or enhanced products that gain market acceptance will be a critical factor in our ability to grow and remain competitive. There can be no assurance that we will timely or successfully
complete the development of new or enhanced products or successfully manage the transition from one product release to the next, or that our future products will achieve market acceptance. The failure to realize such goals could have a material
adverse effect on our business, results of operations and financial condition.

Proprietary technology; patent
protection. We hold a number of patents registered in various jurisdictions, including the United States, the United Kingdom, Germany, France and China, and hold the exclusive rights with respect to certain technology included in our
products. We rely considerably upon a combination of trademark, copyright, know-how, trade secrets and contractual restrictions to protect our intellectual property rights. We believe that such measures afford only limited protection and,
accordingly, there can be no assurance that the steps taken by us to protect these proprietary rights will be adequate to prevent misappropriation of the technology or the independent development of similar technology by others. Despite our efforts
to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary.

Indemnification liability for patent infringement. In contracts relating to original design manufacture (ODM) products, we typically agree to indemnify customers for all
liabilities, costs, expenses or damages payable by our customers based upon a claim of patent infringement by an ODM product manufactured by us, whether such amount is awarded by a court or agreed to in settlement negotiations. The cost of any such
customer indemnity or of responding to any infringement assertion could be significant, regardless of whether the assertion is valid. On behalf of a former customer, we are currently appealing a patent infringement judgment relating to a deep fryer
model. See Item 8.AFinancial InformationLegal Proceedings. We have recognized a loss contingency arising from this lawsuit which represents our best estimate of the outcome. Based on legal precedent and opinion of counsel we
do not believe it is probable that enhanced damages and legal fees demanded by the plaintiff will prevail upon appeal. However, the ultimate outcome of the lawsuit may differ from our estimated loss. An adverse decision in any such legal proceeding
could have a material adverse effect on our business, results of operations and financial condition.

Product
liability. We may be subject to substantial product liability costs if claims arise out of problems associated with our products. We provide a warranty for limited manufacturing defects to certain of our customers. We do not provide
warranties, however, that extend to the ultimate consumers of the product. Nevertheless, there can be no assurance that we will not be subject to a suit by a consumer who uses one of our products if the product causes an injury to any person or does
not perform properly. We maintain product liability insurance in an amount we believe is sufficient. There can be no assurance, however, that our insurance coverage will be adequate or that all product liability claims will be covered by our current
product liability insurance. In addition, these policies must be renewed annually. To date, we have not been subject to any material product liability claim. While we have been able to obtain product liability insurance in the past, premiums
continue to increase in cost and may not be available in the future on terms acceptable to us, if at all. The failure to maintain insurance coverage, or a successful claim against us not covered by or in excess of the insurance coverage, could have
a material adverse effect on our business, results of operations and financial condition. In addition, product liability claims, regardless of their merit or eventual outcome, may have a material adverse effect on our business reputation.

Product safety. We are responsible for ensuring that our products are safe and satisfy all of the requirements
of the consumer products safety commission (CPSC) in the U.S. This may also apply to OEM products manufactured by us to customer specifications. In the event of a recall required by the CPSC, our customers may require us to provide
replacement conforming units at our cost, which could have a material adverse effect on our business, quality reputation and results of operations.



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Product safety; delays in regulatory approval. Our products include several
electrical components, which may cause fires if not properly installed. Although we have experienced no significant safety problems with our products in the past and believe that our products do not present safety risks, there can be no assurance
that safety problems will not occur in the future. Prior to the commercial introduction of our products into the market, we always obtain approval of our products by at least one of the organizations engaged in testing product safety. The
application process for securing these approvals requires a significant commitment of time and resources by our technical staff and could delay the introduction of our products. Our inability to obtain regulatory approval within the projected
timeframe for commercial introduction of our products or other product introduction delays could have a material adverse effect on our business, results of operations and financial condition.

Risks of manufacturing in China; property damage. All of our products are manufactured at our factory complex located in
China. In addition to the political and economic risks of operations in China, firefighting and disaster relief assistance in China is not as sophisticated as in Western countries. We currently maintain property damage insurance in the aggregate of
approximately $83.4 million which covers our inventory, furniture, equipment, machinery and buildings and also maintain business interruption insurance in the aggregate of approximately $21.5 million for losses relating to our factory. Material
damage to, or the loss of, our facilities due to fire, severe weather, flood or other act of God or cause, even if insured against, would have a material adverse effect on our business, results of operations and financial condition.

Impact of environmental regulations. We are subject to Chinese laws that regulate environmental quality, the utilization of
natural resources and the reduction of pollution. Environmental regulation in China is currently evolving and could become more stringent or more stringently enforced in the future, which could require us to make substantial additional capital
expenditures in the future to maintain compliance. As a manufacturer, we are subject to annual inspections by the local branch of the State Environment Protection Administration (SEPA). Although compliance with environmental regulations
has not had a material adverse effect on us in the past, failure to comply with these laws or to pass an inspection in the future could have a material adverse effect on our business, results of operations and financial condition.

Dependence on distributions from operating subsidiaries and currency fluctuation. We have no direct business operations, other
than our ownership of our subsidiaries. If we decide to pay dividends in the future, as a holding company, our ability to pay dividends and meet other obligations would depend upon the receipt of dividends or other payments from our operating
subsidiaries and our other holdings and investments. In addition, our operating subsidiaries may also be subject to restrictions on their ability to make distributions to us, including, among others, restrictive covenants in loan agreements,
restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. Since we do not engage in hedging or other similar transactions, extraordinary currency fluctuations could have a material
adverse effect on our business, results of operations and financial condition.

Concentration of ownership. Wing
Shing Holdings Company Limited, a British Virgin Islands company (Wing Shing Holdings) and family members of directors of the Company beneficially own approximately 61.8% of our outstanding common shares (issued net of treasury shares).
The share ownership of Wing Shing Holdings is held 44% by Kwong Ho Sham and 56% by John Sham, both of whom are directors. Voting control of Wing Shing Holdings is held approximately 34.3% by Kwong Ho Sham and approximately 65.7% by John Sham. As a
result, Wing Shing Holdings and its shareholders and family members are in a position to control our activities and policies, including possessing the voting power to elect our board of directors and approve all matters requiring shareholder
approval and the ability to generally direct our affairs.

Service and enforcement of legal process. We are
organized under the laws of the British Virgin Islands. All but one of our directors and executive officers reside outside the United States, and most of our assets are located outside the United States. As a result, it may be difficult or
impossible for investors to effect service of process on these persons within the United States or to enforce against these persons judgments obtained in U.S. courts, including judgments predicated on the civil liability provisions of the federal
securities laws of the United States. In particular, judgments of U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States may be difficult to enforce in British Virgin Islands courts and it is
uncertain whether British Virgin Islands courts will enter judgments in original actions brought in British Virgin Islands courts predicated solely upon the civil liability provisions of the federal securities laws of the United States.

British Virgin Islands company. Our corporate affairs are governed by our memorandum and articles of association and by the
International Business Companies Act of the British Virgin Islands. Principles of law relating to such matters as the validity of corporate procedures, the fiduciary duties of management and the rights of our shareholders may differ from those that
would apply if we were incorporated in the United States or another jurisdiction. The rights of shareholders under British Virgin Islands law are not as clearly established as are the rights of shareholders in many other jurisdictions. Thus, our
shareholders may have more relative difficulty protecting their interests against certain actions by our board of directors or principal shareholders than similarly situated shareholders of a corporation incorporated in another jurisdiction. Please
see details under Item 10Additional Information.



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Director actions without shareholder approval. Under our memorandum and
articles of association and the laws of the British Virgin Islands, our memorandum and articles of association may be amended by our board of directors without shareholder approval. This includes:



| |  |  | increasing or reducing our authorized capital;
| | - |  | ----------------------------------------------



| |  |  | authorizing the issuance of different classes of shares, including preference shares; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | increasing or reducing the par value of our shares.
| | - |  | ---------------------------------------------------

Our ability to amend our memorandum and articles of association by a resolution of directors or a resolution of members could have the effect of delaying, deterring or preventing a change in control of
the Company without any further action by the shareholders including, but not limited to, a tender offer to purchase our common shares at a premium over then current market prices.

Our status as a foreign private issuer. We are a foreign private issuer within the meaning of rules promulgated under the
Securities Exchange Act of 1934 as amended (the Exchange Act). As such, we are exempt from certain of the reporting requirements under the Exchange Act and corporate governance standards of Nasdaq Stock Market (Nasdaq).
Because of these exemptions, investors are not afforded the same protection or information generally available to investors holding shares in public companies organized in the United States or traded on the Nasdaq. However, the Nasdaq does not
exempt foreign private issuers from independent audit committee requirements and we are required to disclose any significant ways our current corporate governance practices differ from those followed by domestic companies under the Nasdaq listing
standards. In addition, our Chief Executive Officer must notify the Nasdaq if one of our executive officers becomes aware of any material non-compliance with any applicable Nasdaq corporate governance listing standards to the Nasdaq. Please see
Item 16G-Corporate Governance for more information.

Reciprocal enforcement of foreign judgments. No
treaty exists between Hong Kong and the United States providing for the reciprocal enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments predicated on the federal securities laws of the United States, whether
arising from actions brought in the United States or, if permitted, in Hong Kong.

Delisting of our common
shares. Our Common Stock is currently quoted on the Nasdaq Capital Market. The Company must satisfy certain minimum listing maintenance requirements to maintain such quotation, including a series of financial tests relating to shareholders
equity or net income or market value, public float, number of market makers and shareholders, market capitalization, and maintaining a minimum bid price of $1.00 per share for the Common Stock. If our Common Stock is delisted from the Nasdaq Capital
Market, then our Common Stock may trade on the Over-the-Counter-Bulletin Board, which is viewed by most investors as a less desirable and less liquid market place. Delisting from The Nasdaq Capital Market could make trading the Common Stock more
difficult and expensive for the Company to raise additional capital.



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|Item 4. | Information on the Company.
|------- | ---------------------------



|A. | History and development of the Company.
|-- | ---------------------------------------

Our legal name is Global-Tech Advanced Innovations Inc. (formerly known as Global-Tech Appliances Inc.), and we were organized as an international business company under the laws of the British Virgin
Islands on May 2, 1991 and became a publicly traded entity on April 7, 1998. The address of our registered office in the British Virgin Islands is TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands, and the
telephone number at that address is (284) 494-5296.

The address of our principal place of business, and the location of
our executive and administrative offices, is 12/F., Kin Teck Industrial Building, 26 Wong Chuk Hang Road, Aberdeen, Hong Kong, and the telephone number at that address is (852) 2814-0601. Our e-mail address is
investorrelations@global-webpage.com. Our website is located at http://www.global-webpage.com. The information contained on our website does not constitute a part of this annual report.



|B. | Business overview.
|-- | ------------------

Effective fiscal 2007, the Company operates in three business segments; home appliances, electronic components and others. Electronic Components and Others segments, which were previously grouped with home appliances
as a single segment in previous years became reportable segments during fiscal 2007, as the Company started to manage them separately and also due to the increase in the relative net sales of the electronic components business in fiscal 2007. The
Others segment comprises a number of immaterial product line/units and development programs that have not materialized to date into full product businesses, and none of these units has ever individually met the quantitative thresholds
for determining a reportable segment. The chief operating decision maker evaluates the results of each segment in assessing performance and allocating resources among the segments.

Home appliance business

Our core business for over thirty years
has been designing, manufacturing and selling small electrical household appliances to brand marketers in developed countries. While our products and product categories changed over time, the total market that we serve remains relatively stable. It
is our aim to offer reliable, high-quality Original Equipment Manufacturer (OEM) manufacturing as a partner to U.S. and other companies that need to procure finished products from the Far East for competitive reasons, but also need to
protect their brands reputations.

In our home appliance business, we historically categorized the appliances we
manufactured by function. Our current product categories are floor care products and kitchen appliance products. In both categories, and with respect to the individual products within the category, there are major brands and private label brands
competing for retail shelf space and consumer purchase. While our home appliance business, as a whole, has remained fairly stable in the developed countries, it is subject to significant shifts in demand for particular product categories and
individual products within such categories.



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Initially, we manufactured personal care products, the least complex category in small
electrical appliances. However, by 2001, we had become less competitive in this product category compared to other Chinese manufacturers that did not have a Hong Kong staff or development programs and we decided to de-emphasize this product category
and begin to redirect our efforts. At the same time, we expanded our electric motor expertise and entered the floor care product category. Floor care products require sophisticated and complex manufacturing equipment and processes and we made
significant investments to upgrade our facility to meet our customers requirements.

Our initial floor care customers
were Royal and Sharper Image. Subsequently, we started to manufacture extractors for Eureka (part of the Electrolux group). For competitive reasons we limited our customer base to the principal players, Royal and Eureka. Since both of these
customers were themselves also manufacturers, our opportunities were limited to stock keeping units (SKUs) that we could produce more cost effectively than they could.

One of our key strategies that historically aided our business success was our emphasis on Original Design Manufacturing (ODM)
as an alternative to contract manufacturing. We designed, engineered and tooled our own products and offered them for sale to well-known household appliances companies for sale under their own brand names. This was particularly effective with
kitchen appliances since brand marketers could introduce our products to the market with minimum upfront investment on their part and satisfy the retailers need for differentiation and novelty. However, in recent years, with the continuing
pricing pressures, maintaining an ODM infrastructure of designers and engineers became cost prohibitive. As a result, unless we know a customers particular need for a product, we can no longer afford to allocate the resources needed for
engineering, prototyping or tooling. Thus, in our home appliance business, we are now concentrating on being a high-quality OEM for one major floor care customer.

A significant portion of our home appliance sales are made in U.S. dollars. U.S. and European sales for our products accounted for 77.2% and 10.8%, respectively, of our net sales during fiscal 2009, as
compared to 82.0% and 9.4%, respectively, of our net sales during fiscal 2008 and 73.8% and 15.3%, respectively, of our net sales during fiscal 2007.

Small household appliances are sold through a variety of distribution channels, including mass merchandisers, specialty retailers, warehouse clubs, drug store chains, direct marketing organizations and
department stores. In the United States, mass merchandisers, such as Wal-Mart and Target, have become the dominant retailers of small household appliances and we believe that a similar trend has evolved in Western Europe. Generally, mass
merchandisers prefer to purchase from a limited number of well-known household appliance companies that can provide a variety of high quality, innovative, brand name products on a timely and cost-effective basis. Accordingly, household appliance
companies are focusing their resources on marketing and distribution, while increasingly outsourcing engineering and manufacturing.

Electronic Components

We continue to acquire new technologies in an effort to expand our capabilities
in manufacturing finished products and components. These transactions are part of our long-term business strategy to gradually diversify and transform a portion of our manufacturing facility into producing higher-value, technology-oriented products
that will allow us to leverage our existing research and development and technical management staff in Hong Kong, as well as our manufacturing infrastructure in China.

Initially we acquired Lite Array, Inc. a U.S. based technology company involved in thin film electroluminescent displays (TFEL) and OLED. We sold Lite Arrays TFEL factory in China in
2003, but maintained its OLED program.

Late in fiscal 2003, we began exploring opportunities in display-oriented products,
particularly those utilizing flat-panel liquid crystal displays (LCDs). We concluded that investing in the capital equipment to produce flat-panel modules was not as attractive as sourcing the panels, software, and other electronic
components while we focused on utilizing our manufacturing experience and capabilities to produce highquality, competitive products. In pursuit of this venture, we established a separate subsidiary, Global Display, to develop and market a wide
range of such display-oriented products with its own dedicated and experienced technical and marketing staff focused initially on developing flat-panel high definition televisions (HDTVs) incorporating plasma or thin film transistor
liquid crystal displays (TFT-LCDs).

As a result of a dramatic decline in prices for flat panel televisions in the
U.S. and Europe and our late entry into this venture, we were not successful in securing major customers for our consumer LCD televisions, resulting in our inventory devaluing on a monthly basis. Towards the end of fiscal 2005, we realized that a
change of strategy was needed and ceased our commercial efforts with respect to flat panel LCD televisions. During fiscal 2006, we liquidated our remaining flat panel display assets and reduced our workforce. Additionally, due to declining market
prices for OLED displays, we decided to revise our OLED strategy. Accordingly, we combined our efforts with Anwell Technologies Limited (Anwell), a public company in Singapore by establishing a jointly controlled entity to develop a more
cost effective process for producing OLED equipment rather than just marketing OLED displays.



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Between the cessation of the flat panel TV and the redirection of our OLED programs, we took
significant impairment charges but dramatically reduced our overhead and development costs, which reduced our fixed and SG&A costs by approximately $4.8 million per annum on an ongoing basis.

In late fiscal 2005, we established a new entity, Global Optics Limited, to produce and market CMOS (complementary metal oxide
semiconductor) camera modules (CCMs) to cell phone manufacturers in China and to develop household electronic products incorporating optical systems. In fiscal 2009 our net sales of CCMs were $34.5 million which represented a 13.0%
decrease over fiscal 2008 net sales of $39.0 million. The decline was primarily due to the economic downturn affecting cell phone sales in China and lower prices. In order to expand our business with our PRC based telecommunications customers, we
invested in late 2008 in equipment and assembly lines to perform Electronic Manufacturing Services (EMS) and assembly for them. Revenues from these activities in fiscal 2009 were $1.8 million which are included in the Others
segment. At present due to the capital intensity of this program, we will evaluate the program for a year before we determine whether to invest in any further expansion of these telecom services.

We believe the opportunity to sell CCMs and other electronic components to cellular phone and PDA manufacturers in the PRC is a promising
business for us albeit currently at commodity type margins. At present we source the sensors and lenses so that we can apply our resources to operate a top quality clean room in our manufacturing facility in the PRC for low-cost assembly and
concurrently concentrate on product enhancements and differentiation. We also are developing products that incorporate CCMs for non-telecom applications, our primary focus being on disposable medical instruments for the Chinese market, and security
products. All of our customers for electronic components are presently in the PRC or Hong Kong and we sell in U.S. dollars or Renminbi.

Business Strategy

It is our intention to de-emphasize unprofitable product categories with lower profit
margins that merely maintain sales volume and to expand into more technologically advanced product categories. Since fiscal 2001, we have endeavored to develop new business opportunities and plan to continue the process of seeking out business
opportunities that take advantage of our engineering and design expertise, top quality processes and low-cost manufacturing infrastructure.

Home Appliances

Our business strategy is to be the highest quality, efficient manufacturer of complex
small electrical appliances and a reliable partner for no more than two brand marketers. We have invested in a number of core competencies to support our strategy, as well as productivity improvements to try and attain adequate returns.

We are attempting to establish cooperative relationships with our principal customer to save them money and improve their
competitiveness. Since our largest customer is a manufacturer itself, we have to prove working with us gives them an economic benefit. We believe this can be done with a combination of the following:

Vertically-integrated, low-cost manufacturing. We maintain our principal production facility in Dongguan, China, which is set
up as a vertically-integrated manufacturing operation. We have made a significant investment in sophisticated machinery to create the tooling and components used in the manufacturing process. This machinery, along with the use of relatively
inexpensive labor, enables us to produce efficiently many of our components and to assemble these components to create finished products. We also invest where necessary in automation to offset increased labor costs. By locating our manufacturing
facilities in close proximity to Hong Kong, we are also able to leverage both the transportation resources and engineering and managerial expertise available in Hong Kong. We believe that our investment in manufacturing machinery, combined with the
strategic use of labor and management resources, allows us to provide customers with high-quality, cost effective products in an efficient and timely manner.

Commitment to quality. We are committed to manufacturing high-quality products and we achieve this goal by engaging in quality control testing at each stage of the manufacturing process. We
are able to assure the reliability and consistent performance of our products by testing both the individual components and the fully-assembled finished product. Our quality management system has been certified as conforming to the standards of the
International Organization for Standardization (ISO). The ISO, based in Geneva, Switzerland, publishes a series of standards for quality management and quality assurance with the goal of providing guidelines for consistent practices
worldwide. Our quality control system has been certified by Det Norske Veritas QA Ltd., an accredited unit of the ISO, as conforming to Quality System Standard ISO 9001 for the manufacture of electrical household appliances.

Expansion of manufacturing capabilities. We invest either directly or indirectly in all the equipment needed to manufacture
our products. When we entered the floor care business we added electric motor manufacturing to our processes six years ago. We also have built specialty life testing rigs and clean rooms as well as investing in major injection molding equipment to
allow us to make large parts.

Cost reduction engineering. We dedicate our limited engineering resources to
implementing our customers detailed designs and working on cost reduction programs concentrating on process efficiency, material substitution and weight reduction.



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Electronic Components

Our strategy for electronic components evolved from our efforts to sell OLED displays to cellular phone manufacturers in the PRC. Our
targeted second tier customers, however, were more interested in incorporating cameras and video using their existing STN-LCD screens than paying a premium for an OLED screen despite its better performance. We therefore diverted some of
our technical resources from our display group and hired experienced process engineers in the PRC to enter the CCM business. Our near term strategy is to produce other components for our existing PRC based CCM customers and to offer contract
manufacturing services for printed circuit boards and other cell phone components. Longer term we expect to expand our product line by using sensors in applications other than cell phones, starting with PDAs and then expanding into non telecom
applications such as home security and medical.

Partnership with vendors.The sensors and lenses
utilized in CMOS cameras are highly specialized and only available from a few vendors. We have established relationships with a major sensor company that views our PRC based operation as a good partner to access many of the PRC cellular phone
manufacturers and other opportunities in the PRC. Additionally we receive technical support from our lens and connector suppliers, which enables us to expand our product line.

Innovative product development.We research applications for CCMs either as a component or a critical feature of an electronic
product. Our main emphasis currently is in developing higher pixel count CCMs and a disposable medical device for the PRC market.

Superior quality PRC based manufacturing.Utilizing our clean room expertise initially learnt from OLED production, we have been able to produce CCMs with high quality standards, which allows some of our PRC-based customers to
purchase CCMs in the PRC rather than importing them from Korea or Taiwan.

Expansion of manufacturing capabilities.We have invested in all of the equipment needed to assemble modules in a Class 1,000 clean room. We have added precision mounting equipment and a full range of testing apparatus to support and maintain high quality. We expanded our facility
during fiscal 2008 as demand for CCMs continued to grow, we have sufficient capacity to support steady growth in this business.

Others

We have invested in automated surface mount technology (SMT) assembly and testing apparatus to offer
contract manufacturing services to our cell phone customers in the PRC. Our initial strategy was to secure one or two accounts to learn how to build a larger, more profitable operation and our initial efforts in fiscal 2009 produced mixed results,
primarily due to declining prices for such services. However with increased activity that we have experienced recently the business is expected to be profitable. However, the decision to expand our telecommunications EMS will not be made until there
is greater clarity on profitability in this business, particularly since investment in SMT machines is significant. The rest of others includes the remnants of businesses that are no longer core to the Companys future and the
results are not material to the consolidated financial statements.

Products

Home Appliances

In
our home appliance business, we primarily manufacture floor care products along with a few small electrical household appliance products. During fiscal 2009, 2008 and 2007, ODM products accounted for 1.5%, 10.9% and 24.5% respectively, of our net
sales in our core business excluding tooling income, with the balance of our net sales being from contract manufacturing performed according to product specifications provided by customers. In fiscal 2009, we produced approximately 2.6 million
appliance units.

The following table reflects our net sales for each significant product category in fiscal 2009, 2008 and
2007:



|                    |  |                              |        |      |   |        |  |   |       
|------------------- |  | ---------------------------- | ------ | ---- | - | ------ |  | - | ------
|                    |  | Fiscal Years Ended March 31,
|                    |  | 2009                         |        | 2008 |   | 2007  
|                    |  | (In thousands)              
|Product category:   |  |                              |        |      |   |        |  |   |       
|Floor care products |  | $                            | 45,410 |      | $ | 56,272 |  | $ | 35,906
|Kitchen appliances  |  |                              | 1,177  |      |   | 2,274  |  |   | 5,394 
|Others (1)          |  |                              | 4,219  |      |   | 6,825  |  |   | 5,532 
|                    |  |                              |        |      |   |        |  |   |       
|Total               |  | $                            | 50,806 |      | $ | 65,371 |  | $ | 46,832
|                    |  |                              |        |      |   |        |  |   |       



|(1) | Includes electric motors for floor care, garment care and travel products, environmental care products, personal and health care products and accessories for each of
our product categories as well as tooling income for procurement, design and manufacturing of tooling and molds.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Floor care products. We started manufacturing floor care products in fiscal
2000. Our floor care products include hand-held steam vacuum cleaners, upright vacuum cleaners and extractors. Floor care products represented 89.4% 86.1% and 76.7% of our net sales in our home appliance business in fiscal 2009, 2008 and 2007,
respectively. As a contract manufacturer, our sales in this category have been principally driven by our product quality, testing systems, sophisticated electric motor production, and our tooling and injection molding machinery for large plastic
parts which are already in place. We believe that we will continue contract manufacturing for our key customer for the next few years but will continue having difficulty improving margins.

Kitchen appliances. We began manufacturing kitchen appliances in fiscal 1992, and focused much of our ODM design and
development efforts in this area over the next ten years. We manufactured a broad line of kitchen appliances, including blenders, breadmakers, coffeemakers, electric knives, espresso machines, food choppers, food processors, food steamers, ice cream
makers, and indoor grills. Kitchen appliances represented 2.3%, 3.5% and 11.5% of our net sales in our home appliance business in fiscal 2009, 2008 and 2007, respectively.

Others. As part of our ongoing business relationship, we sold electric motors to TTI for incorporation in floor care products
they manufacture in-house and for those models we used to produce for them.

Electronic Components

We started manufacturing CCMs early in fiscal 2006 primarily utilizing 0.3 megapixel CMOS sensors. Sales in fiscal 2009, 2008 and 2007
were $34.5 million, $38.9 million and $12.3 million respectively. We have expanded our CCM business by introducing and offering 1.3, 2.0 and 3.0 megapixel models in fiscal 2009 and are developing an automatic focus feature and higher resolution
cameras modules to be introduced in fiscal 2010.

Others

We introduced the Intellicorder home security device utilizing our CCM technology in 2006 and sales to our customers in Europe
and the US were approximately $309,000, $313,000 and $734,000 in fiscal 2009, 2008 and 2007, respectively. We also developed after market car audio and video products in 2007 and sales were approximately $3,000 and $895,000 in fiscal 2009 and 2008,
respectively. We started our EMS business by providing surface mount technology (SMT) processing and assembly of cellular phones in fiscal 2009 generating manufacturing service income of $1.8 million. We discontinued selling car audio
and other display products in fiscal 2008.

Product Design and Development

Our core business has been designing, manufacturing and selling a wide range of electrical household appliances for brand marketers in
developed countries. We are, however, continuing to acquire new technologies in an effort to expand our capabilities in manufacturing finished products. It is our long-term strategy to gradually diversify and transform a portion of our manufacturing
facility located in Dongguan in PRC to produce higher-value, technology-oriented products that will allow us to leverage our existing research and development and technical management staff in Hong Kong. We have redirected our development programs
and increased the technical staff in China to streamline and refocus our efforts.

Home Appliances

We recently determined that our design and development efforts would be limited to supporting our existing customers programs. As the
business became more and more commoditized, we could no longer justify the investment needed to support any further independent design or product development efforts.

The customer technical support team includes mechanical, electrical and electronic engineers to perform detailed engineering and testing of our products. The team supports the products from customer input
and design through tooling, manufacturing and life testing. The typical cycle for contract manufacturing is eight to ten months after the concept and design for the product are provided by the customer. Contract manufacturing customers generally
bear the cost of tooling for their products but our engineers design and build or procure the necessary tools and debug them during the pilot manufacturing process. When tooling is completed and the appropriate agency listing, such as UL or TUV is
obtained, production begins.

Our expenditures for design and development of home appliance products were approximately $0.7
million in fiscal 2007, $0.5 million in fiscal 2008 and $0.2 million in fiscal 2009, and are expected to be at this level going forward.

Electronic Components

The development group for electronic components consists of a small team of
software and optical engineers in our office in Shenzhen supported by a large number of process, electronic and clean room engineers in our factory in Dongguan. We also rely extensively on our principle sensor supplier for new technology and
expanded features.



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Our expenditures for design and development of electronic components were $0.3 million, $0.3
million and $0.2 million in fiscal 2009, 2008 and 2007, respectively.

Others

The principle development work in others over the last two years has been on medical devices and some solar devices. Development
expenses for others were $183,000, $275,000 and $286,000 in fiscal 2009, 2008 and 2007, respectively.

Manufacturing

We maintain our principal production facility in the township of Dongguan, Guangdong Province, China, within a self-contained 207,300 square
meters vertically-integrated manufacturing complex. Vertical integration enables us to manufacture high-quality products cost effectively. It also allows us to emphasize quality control and provide the flexibility in the manufacturing process
necessary to better service our customers needs. We have made a significant investment in machinery to create the tooling and components used in the manufacturing process for many of our products. This machinery, along with the use of
relatively inexpensive labor, enables us to produce efficiently many of our components and assemble these components to create our finished products. We manufacture most of our motors and other components, including thermostats, plastic parts, metal
and die-casting parts, switches and circuit boards. We also have a multi-faceted coatings line and pad printing capability. We sub-contract the production of certain components either when they can be bought from other suppliers at lower prices or
if we do not have the specialized machinery to produce the component or when we can allocate our production capacity more efficiently to alternative tasks. For our home appliance business, we do not generally depend on other manufacturers to provide
key parts or accessories.

One of our buildings has been converted into a high-tech facility for our electronic component and
telecom manufacturing service business operated as Dongguan Lite Array Company Limited (DGLAD). Clean rooms of over 3,300 square meters have been constructed. DGLAD has separate management and a workforce experienced in technology
manufacturing.

Generally, our production schedule is based on purchase orders and forecasts received from our customers once
tooling is completed, typically covering a period of three to six months. The first 45 days of orders to be shipped pursuant to the forecasts are generally firm. Later shipments often vary from initial forecasts, depending on the needs of the
customer. There are no binding agreements for forecasted orders and thus forecasted orders may be canceled at any time without penalty to the customer or recourse to us. To the extent that a material percentage of forecasted orders from customers
are canceled, we could suffer a loss on long-lead item components.

Our physical space except for DGLADs clean rooms is
less than fully utilized and we have excess capacity available to meet any temporary surge in our requirements and also for future development. Excluding dormitories, cafeterias and recreation areas, roads and portions of land reserved for future
expansion, the completed production area is approximately 176,000 square meters. Currently on average we are utilizing approximately 60% of our manufacturing facilitys production capacity; however, at peak periods utilization is above 90% and
many of our larger injection molding machines and our electric motor line are operating at capacity. Specialized skills are generally not required for most of our manufacturing workforce and we believe that we will be able to acquire the necessary
labor when product demand increases. However, due to demand for labor in Guangdong Province exceeding supply, we expect the cost of labor to increase substantially. We therefore plan to invest in more automation to help hold down our cost of
production.

Since our CCM manufacturing capacity was constrained throughout fiscal 2008, we expanded our DGLAD clean rooms
four times in fiscal 2008 and added surface mount, assembly and testing equipment. We now have in place the capacity to produce up to 3 million CCMs a month and expect to be operating at close to capacity at certain peak demand periods in
fiscal 2010.

We ship our home appliance products primarily free on board (FOB) from ports in Hong Kong and China,
with customers generally liable for any losses resulting from the transportation of finished products from the port to their final destination. Title to the goods passes to the customer when the truck is unloaded and the container is accepted by the
carrier located in the ports of Hong Kong or China. Transportation of components and finished products between Dongguan, China and port is by truck. Component parts purchased from areas outside Guangdong Province are generally shipped by sea.

We ship our CCMs directly to our PRC customers, most of whom are located in Guangdong province or ship to export customers
from our warehouse in Hong Kong. Title in the PRC is transferred when the delivery note is acknowledged by the customer. Title for shipments from our warehouse passes when the customer takes physical delivery of the goods.

Quality Control

We are
committed to manufacturing products of the highest quality and we achieve this goal by engaging in quality control testing at each stage of the manufacturing process. All incoming raw materials and components are inspected by our quality control
personnel. During the production stage, our quality control personnel inspect all work-in-process at several points in the production



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process. We are able to test the reliability and consistent performance of our products by testing both individual components and the fully-assembled finished product. We provide access to our
manufacturing facility for representatives of our major customers to allow them to monitor production and to provide them with direct access to our manufacturing personnel.

Our quality control system has been certified by Det Norske Veritas QA Ltd., an accredited unit of the ISO, as conforming to Quality System
Standard ISO 9001 for the manufacture of electrical household appliances. Our receipt of ISO 9001 certification demonstrates that our manufacturing, installation and servicing of products have met specified requirements.

Suppliers

We obtain over
3,400 different component parts from approximately 400 major suppliers. We are not dependent upon any single supplier for any key component except for CMOS sensors used in our CCMs. Certain of our major component parts, such as plastic, metal sheets
and packaging, are purchased solely from outside suppliers. Others, such as motors and electrical and electronic parts, are either manufactured by us or purchased from outside suppliers, depending on the complexity of the component and the capacity
of our facilities at the time. We believe that we can obtain all of these components from alternate sources if necessary. Raw materials, electronic components and other parts are either sourced in China or from other countries, primarily the United
States, Japan and Germany. Raw materials from outside China are generally shipped through Hong Kong and then transported by truck to our factory in China. Transactions with our suppliers are based on purchase orders issued by us from time to time
and we have no other written agreements with our suppliers. Orders for components are based on actual orders and forecasts that we receive from our customers that reflect anticipated shipments during the production cycle for a particular model. Many
of the raw materials used in our products including plastics that are purchased outside China are subject to any applicable duties.

Since we are dependent upon outside suppliers for all of our raw material needs, including plastic resins, the results of our operations are subject to price fluctuations in these raw materials. The plastic resins used by us are derived
from natural gas liquids. Plastic resin prices may fluctuate as a result of changes in natural gas and crude oil prices, and the relative capacity, supply and demand for resin and petrochemical intermediates from which the resins are produced. We
have no long-term supply contracts for the purchase of plastic resin, although we do generally maintain a 30-day supply. We work closely with our customers and suppliers in order to minimize the amount of inventory of raw materials we keep on hand
and we are working on improving our automated inventory maintenance and control system to assist us in doing this. In order to expedite the production process and reduce the risk of delays caused by the non-delivery of supplies, it is our general
policy to source each component from two or more suppliers. This multi-source approach is intended to ensure the delivery of the components necessary in the manufacturing process should one supplier be unable to deliver. Historically, we have not
experienced any difficulty in obtaining component parts.

Major Customers

Sales to our major floor care customer Electrolux started in 2004 and represented 33.5%, 43.3% and 47.8% of our net sales in the three fiscal
years ended March 31, 2007 to 2009. Sales to Electrolux increased in dollars from $20.2 million or 33.5% of net sales in fiscal 2007 to $45.7 million or 43.3% of net sales in fiscal 2008, and decreased to $41.8 million or 47.8% of net sales in
fiscal 2009. Sales to TTI including Royal (which sells under the brand name Dirt Devil), amounted to 32.4%, 15.3% and 8.5% of net sales in the three fiscal years ended March 31, 2009. Sales of floor care products to, TTI and Royal decreased in
dollars from $19.5 million or 32.4% of net sales in fiscal 2007 to $16.2 million or 15.3% of net sales in fiscal 2008, and decreased to $7.4 million or 8.5% of net sales in fiscal 2009. On December 17, 2002, TTI and Royal, jointly announced
that they had entered into a definitive agreement for TTI to acquire Royal. Effective April 23, 2003, TTI announced its acquisition of Royal by way of merger. Following the completion of the merger, Royal has operated as a wholly owned
subsidiary of TTI. TTI, like the Company, is a full-line electrical products manufacturer based in Hong Kong and China. During fiscal 2008, the Company requested substantial price increases from TTI to compensate us for actual cost increases we had
incurred. This was not acceptable to TTI and thus when the two models we manufactured for them were replaced we were not asked to quote on the new models. Effectively our business with TTI is no longer significant.

Our largest CCM customer in fiscal 2009 was Shenzhen Fudi Technology Company Limited and sales to them amounted to $5.6 million or 6.4% of
net sales.

Although the relative percentage of sales to each of our major customers changes each year, we expect that in the
foreseeable future we will be dependent on one major customer in home appliances and two or three key telecom customers but as our electronic components business matures, we will expand our number of significant customers considerably. While we may
enter into contracts with general terms for the purchase of products with certain of our major customers, sales are generally made by purchase orders received by us from time to time without any firm commitment for sales levels over a long-term
period.



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Marketing

Our marketing for our home small appliance business has been relegated to a basic customer service function concentrating on schedule coordination, logistics and responding to customer requests.

For the electronic components and other products, marketing is designed to give exposure to our innovative, high-quality and
cost-effective product and production capabilities. Generally, we emphasize personal contact with our customers and potential customers in our facilities. While our customers rely on us for high-quality products, the ultimate consumers of the
products rely on the customers brand name and generally do not know the identity of the manufacturer. The primary concern of our customers in maintaining a relationship with us is buying better products at lower prices. We believe that
innovation is the key for both our customers and us in this regard.

Our CCM business is currently a commodity business with
price and production capacity being the main criteria in securing sales. However, if our development programs are successful and result in technical advances, we will be able to market our products to top tier consumer electronic brands in China and
improve our profit margins.

Competition

We believe that the markets for our home appliance products are mature and highly competitive and that competition is based upon several factors, primarily price, but also product features and
enhancements and new product introductions. We compete with established companies in Hong Kong and China, a number of which have substantially greater technical, financial and marketing resources than us. Competition for contract manufacturing
products is based primarily on unit price, product quality and availability and service. Except for opening price point products, we believe that we compete favorably in each of these areas, especially if the product is relatively sophisticated to
manufacture. In addition, while individual contract manufacturing customers may have preferences among their approved suppliers, management believes that no company dominates the market as contract manufacturing customers tend to order from several
different suppliers in order to lessen dependence on any one entity.

Competition in the electronic components market is
intense as productive capacity comes on line from many companies. However, since the market for cellular phone cameras has expanded in China and continues to grow, we believe we can sell as much as we can produce but not necessarily at attractive or
even adequate margins. As we become a more significant supplier to certain large PRC cell phone manufacturers and continue expanding our capacity, we are starting to gain a small competitive advantage which should improve our margins.

Intellectual Property Rights

We currently hold 89 patents, of which six were approved in fiscal 2009. Our patents are registered in various jurisdictions, including the United States, the United Kingdom, China and France. We hold the exclusive rights with respect to
certain technology included in our products. We rely primarily upon a combination of trademark, copyright, know-how, trade secrets and contractual restrictions to protect our intellectual property rights. We believe that such measures afford only
limited protection and, accordingly, there can be no assurance that the steps taken by us to protect these proprietary rights will be adequate to prevent misappropriation of the technology or the independent development of similar technology by
others. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary.

Significant and protracted litigation may be necessary to protect our intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement. We believe that our systems do not infringe any existing third-party proprietary rights. There can be no assurance, however, that third-party claims alleging infringement will
not be asserted against us in the future. If infringement is alleged, we could be required to



| |  |  | discontinue the use of certain software codes or processes,
| | - |  | -----------------------------------------------------------



| |  |  | cease the manufacture, use and sale of infringing products,
| | - |  | -----------------------------------------------------------



| |  |  | incur significant litigation damages, costs and expenses, and
| | - |  | -------------------------------------------------------------



| |  |  | develop non-infringing technology or obtain licenses to the alleged infringing technology.
| | - |  | ------------------------------------------------------------------------------------------

There can be no assurance that we would be able to develop any such alternative technologies or obtain any such licenses on terms
commercially acceptable to us. Any infringement claim or other litigation against us could have a material adverse affect on our business, operating results and financial condition. See Note 23Contingencies to Notes to Consolidated Financial
Statements.

Certain agreements with our ODM customers include indemnification provisions against patent infringement claims
relating to such products. Along with a customer, we are currently defending a patent infringement claim relating to one of our deep fryer models, a product line that represented 0.0%, 0.5% and 0.7% of our net sales in fiscal 2009, 2008 and 2007,
respectively. See Item 8.A -Financial Information - Legal Proceedings. No assurance can be given that this infringement claim will be resolved in our favor or the customer or that other parties will not assert infringement claims against
us in the future.



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At the time of Lite Arrays acquisition, we also acquired a license for small molecule
passive matrix (PM) OLED display technology. Under the license, we could use the patents and proprietary technology in our manufacturing and marketing of OLED products and it gave us the right to purchase from the licensor certain
patented materials for use in the manufacture of OLED products. However, the licensor did not secure its intellectual property in China which put us at a severe competitive disadvantage with other PRC-based producers. Since the minimum royalty was
onerous and our competitors could sell royalty free, we decided to discontinue the use of the licensed technology in fiscal 2006.

Foreign
Issuer Considerations

Because we are a foreign issuer incorporated in the British Virgin Islands and we conduct our
operations and own assets primarily in China and Hong Kong, our operations and assets are subject to significant political, economic, legal and other uncertainties in China, Hong Kong and, in some instances, the British Virgin Islands. These
uncertainties include the following.

Conditions in China. China is a socialist state which, since 1949, has
been controlled by the Communist Party of China. Changes in the top political leadership of the Chinese government may have a significant impact on policy and the political and economic environment in China. Moreover, economic reforms and growth in
China have been more successful in certain provinces than in others and the continuation or increase of such disparities could affect political or social stability. In December 2001, China was admitted to the WTO and was granted the full trading
rights of a WTO member country, but is still considered to be a high risk nation for business and investment in the Asian region. Although recently China has permitted greater provincial and local economic autonomy and private economic activities,
the government of China has exercised and continues to exercise substantial control over virtually every section of the Chinese economy through regulation and state ownership. Accordingly, government actions in the future, including any decision not
to continue to support the economic reform program that commenced in the late 1970s and possibly to return to the more centrally-planned economy that existed prior thereto, could have a significant effect on economic conditions in China and on our
operations. Also, the legal system of China relating to foreign investments is both new and continually evolving, and there can be no certainty as to the application of its laws and regulations in particular instances.

On June 29, 2003, HKSAR entered the CEPA, which was implemented on January 1, 2004. Under CEPA, Hong Kong companies can benefit
from liberalized measures beyond the scope of Chinas commitments in its WTO accession treaty. The arrangement covers three areas: trade in goods; trade in services and trade and investment facilitation. Under CEPA, 90% of Hong Kong domestic
exports to China can enjoy zero tariffs. CEPA also opens 18 service sectors to Hong Kong companies. In this respect, China has given Hong Kong an advantage under CEPA in that Hong Kong companies can enjoy more benefits under CEPA compared with the
provisions of the WTO. The Arrangement presently has limited direct positive impact on us since most of our products are shipped to overseas customers but it could possibly benefit our electronic components business in the future.

All of our products are currently manufactured in China and over 95% of the net book value of our total fixed assets is located in China. We
are a party to agreements with certain agencies of the government of China and we to sell products to entities based principally in North America and Europe as well as domestic sales in China of CCMs starting from fiscal 2007. International
operations and sales may be subject to political and economic risks, including political instability, currency controls and exchange rate fluctuations, and changes in import/export regulations, tariff and freight rates. In addition, various forms of
protectionist trade legislation have been proposed on occasion in the United States and certain European countries. Changes in tariff structures or other trade policies could adversely affect us.

Our location in Southern China offers us relatively low overhead and competitive (although higher than the Northern provinces in China)
labor rates. The location of our factory in the township of Dongguan, Guangdong Province provides us with the ability to manage factory operations from Hong Kong and facilitates transportation of our products to markets outside China.



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Chinese government regulation. Our operations and assets in China are subject
to significant political, economic, legal and other uncertainties. Changes in policies by the Chinese or local governments resulting in



| |  |  | changes in laws and regulations, or the interpretation and enforcement of existing laws and regulations,
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | confiscatory or increased taxation,
| | - |  | -----------------------------------



| |  |  | restrictions on currency conversion, imports and sources of supply,
| | - |  | -------------------------------------------------------------------



| |  |  | import duties,
| | - |  | --------------



| |  |  | currency revaluation, or
| | - |  | ------------------------



| |  |  | the expropriation of private enterprise
| | - |  | ---------------------------------------

could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies,
including the encouragement of private economic activity and greater economic decentralization. There can be no assurance, however, that the Chinese government will continue to pursue such policies, that such policies will be successful if pursued
or that such policies will not be significantly altered from time to time without notice. There also can be no assurance that business operations in China would not become subject to the risk of nationalization, which could result in the total loss
of investment in that country. Following the Chinese governments program of privatizing many state-owned enterprises, the government has attempted to augment its revenues through increased tax collection. Continued efforts to increase tax
revenues could result in increased taxation expense being incurred by us. Economic development may be limited as well by



| |  |  | the imposition of austerity measures intended to reduce inflation, increase taxes or reform unprofitable state owned enterprises,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | the inadequate development of infrastructure, and
| | - |  | -------------------------------------------------



| |  |  | the potential unavailability of adequate power and water supplies, transportation, communications and raw materials and parts.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

The Chinese government regulates the import into China of certain raw materials used by us in our
manufacturing process and taxes the importation of certain capital equipment. The approval of imports by the government is based to some extent on the lack of qualified domestically-produced products and strategic plans for the development of local
Chinese industry. There can be no assurance that the governments policies will continue to allow the raw materials we require to be imported into China. There also can be no assurance that the governments policies will not impose import
fees which raise the cost of raw materials or capital equipment. Imposing such fees could have a material adverse effect on our business, results of operations and financial condition.

Chinese legal system. Chinas legal system is a civil law system that is based on written statutes and in which decided
legal cases have little precedential value. China does not have a well-developed, consolidated body of laws governing foreign investment enterprises. As a result, the administration of laws and regulations by government agencies may be subject to
considerable discretion. As legal systems in China develop, foreign business entities may be adversely affected by new laws, changes to existing laws or interpretations of existing laws and preemption of provincial or local laws by national laws. In
circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the laws.

Chinese environmental law. Environmental protection in China is regulated in accordance with the Environmental Protection Law of the Peoples Republic of China, which became effective on December 26, 1989. The law
sets national standards for environmental quality and monitoring, as well as the utilization of natural resources and the reduction of pollution. As a manufacturer, we are subject to annual inspections by the local branch of the SEPA. We have passed
our most recent inspection and believe that we are in material compliance with all applicable environmental laws. There can be no assurance, however, that we will continue to pass future inspections or that we will continue to be in material
compliance with all applicable environmental laws in the future. Environmental regulation is evolving in China and the imposition of additional or more stringent environmental laws by China, or more stringent enforcement of existing laws, could
cause us to have to make substantial additional capital expenditures to maintain compliance in the future. The necessity to make such additional capital expenditures could have a material adverse effect upon our results of operations and financial
condition.



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Conditions in Hong Kong. Hong Kong, the jurisdiction of incorporation of nine
of our subsidiaries and the location of our headquarters, was restored to China on July 1, 1997. We conduct marketing, product design and development, administration and other activities in Hong Kong. Accordingly, we may be materially adversely
affected by factors affecting Hong Kongs political situation and its economy or its international political and economic relations.

As of July 1, 1997, Hong Kong became a Special Administrative Region, or SAR, of China, with certain autonomy from the Chinese government, including being a separate customs territory from China with
separate tariff rates and export control procedures and maintaining a separate intellectual property registration system. All land leases in effect at the time of the transfer of sovereignty were extended for a period of 50 years, except for those
leases without a renewal option expiring after June 30, 1997 and before June 30, 2047. Hong Kong continues to be a member of the WTO and the Hong Kong dollar continues to be legal tender, freely convertible into Renminbi, and not subject
to foreign exchange controls. The Hong Kong SAR government, as set up by China, has sole responsibility for tax policies. Notwithstanding the provisions of these international agreements, there can be no assurance as to the continued stability of
political, economic or commercial conditions in Hong Kong.

No treaty exists between Hong Kong and the United States providing
for the reciprocal enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments predicated on the federal securities laws of the United States, whether arising from actions brought in the United States or, if
permitted, in Hong Kong.

Conditions in Macau. Macau, the jurisdiction of incorporation of one of our former
subsidiary, but liquidated in fiscal 2009, was restored to China on December 19, 1999. We established an office in Macau on November 8, 2001, which was closed in fiscal 2007.



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|C. | Organizational structure.
|-- | -------------------------

The following table sets forth the significant subsidiaries owned, directly or indirectly, by us.



|                                                                |  |                                   |  |                        |  |                                 
|--------------------------------------------------------------- |  | --------------------------------- |  | ---------------------- |  | --------------------------------
|Name                                                            |  | Principal activities              |  | Place of incorporation |  | Percentageof equityinterest held
|SUBSIDIARIES:                                                   |  |                                   |  |                        |  |                                 
|Global Appliances Holdings Limited                              |  | Investment holding                |  | British Virgin Islands |  | 100.0%                          
|Global Display Holdings Limited                                 |  | Investment holding                |  | British Virgin Islands |  | 100.0                           
|Kwong Lee Shun Trading Company Limited                          |  | Management services               |  | Hong Kong              |  | 100.0                           
|Global Rich Innovation Limited                                  |  | Trading                           |  | Hong Kong              |  | 100.0                           
|Wing Shing Overseas Limited                                     |  | Trading                           |  | British Virgin Islands |  | 100.0                           
|GT Investment (BVI) Limited                                     |  | Investment holding                |  | British Virgin Islands |  | 100.0                           
|Consortium Investment (BVI) Limited                             |  | Investment holding                |  | British Virgin Islands |  | 100.0                           
|Global Optics Limited                                           |  | Trading                           |  | Hong Kong              |  | 100.0                           
|Dongguan Wing Shing Electrical Products Factory Company Limited |  | Manufacturing                     |  | China                  |  | 100.0                           
|Dongguan Lite Array Company Limited                             |  | Manufacturing                     |  | China                  |  | 100.0                           
|Global Auto Limited                                             |  | Inactive                          |  | Hong Kong              |  | 70.0                            
|Global Household Products Limited                               |  | Trading                           |  | Hong Kong              |  | 100.0                           
|Pentalpha Medical Limited                                       |  | Inactive                          |  | Hong Kong              |  | 100.0                           
|Pentalpha Hong Kong Limited                                     |  | Inactive                          |  | Hong Kong              |  | 100.0                           
|Global-Tech USA, Inc.                                           |  | Investor relations and consulting |  | United States          |  | 100.0                           
|Global Digital Imaging Limited                                  |  | Trading                           |  | British Virgin Islands |  | 100.0                           
|MasterWerke Limited                                             |  | Investment holding                |  | United States          |  | 100.0                           
|Wing Shing Products (BVI) Company Limited                       |  | Inactive                          |  | British Virgin Islands |  | 100.0                           
|Global Lite Array (BVI) Limited                                 |  | Investment holding                |  | British Virgin Islands |  | 76.75                           
|Lite Array OLED (BVI) Company Limited                           |  | Inactive                          |  | British Virgin Islands |  | 76.75                           
|Lite Array, Inc.                                                |  | Administrative                    |  | United States          |  | 76.75                           

Global-Tech is a holding company, which does not engage in daily business operations
other than owning subsidiaries and holding investments that design, manufacture and market consumer electrical products worldwide, including (but not limited to) floor care products and electrical components.

GT Investment (BVI) Limited is the immediate holding company of Wing Shing Overseas Limited, Pentalpha Hong Kong Limited, Pentalpha Medical
Limited, Global Rich Innovation Limited and Global Household Products Limited.

Consortium Investment (BVI) Limited
(CIBL) is the immediate holding company of Lite Array Holdings Limited (LAH) and Kwong Lee Shun Trading Company Limited. On March 17, 2006, CIBL entered into an agreement with Anwell, a publicly listed company in
Singapore, to form a joint venture company which Anwell invested in by purchasing a 70% interest in LAH. LAH is the holding company of Litewell Technology (HK) Limited and Dongguan Litewell (OLED) Technology Limited. LAH and its subsidiaries
fiscal year end is December 31, which is different from the Company.

Global Display Holdings Limited is the immediate
holding company of Global Optics Limited and Global Digital Imaging Limited. On August 1, 2006, Global Display Holdings Limited transferred its shareholding in Global Auto Limited to Global Appliances Holdings Limited. On the same day, 30% of
the shareholdings of Global Auto Limited were registered to an independent third party upon its contribution of capital to the company.

Global Lite Array (BVI) Limited is the immediate holding company of Lite Array OLED (BVI) Company Limited and Lite Array, Inc.

Global-Tech USA, Inc. is an immediate holding company of MasterWerke Ltd.

Pentalpha Macau Commercial Offshore Limited was dissolved in July 2008.

Winway Technology Development Limited was disposed of on October 2, 2008.

Dongguan Microview Medical Technology Company Limited was incorporated in China on June 18, 2009.



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|D. | Property, plant and equipment.
|-- | ------------------------------

China

Our manufacturing facility located in Dongguan, China has a land use
area of 207,300 square meters. We have the right to use such land, which we acquired from the Dongguan local government. Prior to March 31, 2006, we had obtained only four agreements for the purchase of land aggregating 175,790 square meters
but subsequently obtained the formal agreement for the remaining 45,208 square meters from the local authority. As part of the agreement, we have transferred a portion of this land (13,698 square meters), which was previously used as a recreational
area for the Dongguan local government. Additionally, the acquisition of rights to use the remaining portion of land (31,510 square meters), on which we had already built dormitories for workers, was confirmed and such rights will expire on
August 6, 2043.

The manufacturing complex includes 49 buildings, of which 16 buildings are dormitories with
accommodation for up to 4,500 employees and cafeterias and recreational areas. The remaining buildings house manufacturing, quality control, warehousing, product development and administrative functions. We own all of the 49 buildings on the site
and have freely transferable land use rights for a period of 50 years for the land upon which our buildings and facilities are located. Excluding dormitories, cafeterias and recreation areas, roads and a portion of land reserved for future
expansion, our completed production area is approximately 176,000 square meters. Currently, we have set up assembly and testing equipment for CCMs and a SMT production area in an approximately 3,300 square meter clean room. The land use rights lease
for the Dongguan facility between us and the Peoples Government of Qingxi Township, Dongguan City, Guangdong Province is for a term of 50 years ending August 7, 2043. During fiscal 2009, we paid $403,000 in total for land accelerated
fees, stamp duty and registration fees to the Dongguan Local Land Registration office but are still waiting to receive the respective land use rights certificates.

During fiscal 2006, the land use right certificate for a substantial portion of land with an aggregate area of 131,400 square meters was obtained and the related property ownership certificate of our
production premises is being processed by the government agencies in China.

The formal grant of lease rights is required
should we decide to sell this property or lease it to a third party. Although we presently have no intentions of pursuing either of these alternatives, the local government still has the right to demand additional transfer fees before the issuance
of the land use right certificate. Therefore, we decided to consummate the land transfer process by the end of 2009. Upon expiration of the 50-year lease term of the land, we have the right to extend the lease for a further 20 years upon payment of
a fee of $23.00 per square meter, or a total of $160,000 for the whole land use right extension.

We maintain an office in
Shenzhen, which is a sales office for the electronic components business which is managed totally in the PRC, and for an accounting department for our PRC subsidiaries. The lease agreement commenced April 30, 2008 and expires April 30,
2014 with a total area of 672 square meters leased at a monthly rent of approximately US$11,000.

Hong Kong

In April 2006, we entered into three renewal lease agreements with Wing Shing Products Company Limited, a company owned by two of our
directors and their families with a total area of 25,690 square feet of space leased for our executive offices, administrative group and warehouse at a rate of approximately $167,400 per annum. On April 18, 2008, we entered into a renewal lease
agreement with Wing Shing Products Company Limited to lease the same area of 25,690 square feet at an annual rent of approximately $172,600.

We believe that our administrative office space in Hong Kong and China will be adequate for the operation of our business for the foreseeable future. We believe that with further utilization of our
manufacturing facility in Dongguan, we have sufficient manufacturing capacity for at least the next several years. The factory is currently utilized at considerably less than full capacity except at peak periods. We anticipate that any further
expansion and diversification of our floor care product line or expansion of our CCM or Assembly business could increase utilization at the Dongguan facility and eventually require us to expand the infrastructure and purchase additional equipment.



|Item 4A. | Unresolved Staff Comments.
|-------- | --------------------------

Not applicable.



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|Item 5. | Operating and Financial Review and Prospects.
|------- | ---------------------------------------------

Except for statements of historical facts, this section contains forward-looking statements such as expect, anticipate, project, believe, plan,
intend, seek, should, estimate, future or variations of such words and other similar expressions to identify forward looking statements. You should not place undue reliance on these
forward-looking statements. Forward-looking statements are not a guarantee of our future performance or results and our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including those set forth under the sections of this Report entitled Item 3DRisk factors and Item 4BBusiness overview. This section should be read in conjunction with our Consolidated Financial
Statements included in Item 18 of this annual report.

Managements Discussion and Analysis of Financial
Condition and Results of Operations.



|A. | Operating Results.
|-- | ------------------

Fiscal Year Ended March 31, 2009 Compared with Fiscal Year Ended March 31, 2008

We continue to operate in three segments: Home Appliances, Electronic Components and Others. These segments are operated and managed as separate strategic business units that offer different products.
These segments are each managed separately because they manufacture and distribute products with different production processes.

Home
Appliances segment



|                                             |  |                              |    |  |       |   |  |       |   
|-------------------------------------------- |  | ---------------------------- | -- |  | ----- | - |  | ----- | --
|                                             |  | Fiscal Years Ended March 31, |   
|                                             |  | 2009                         |    |  | 2008  |   |  | 2007  |   
|Net sales                                    |  | 100.0                        | %  |  | 100.0 | % |  | 100.0 | % 
|Cost of goods sold                           |  | (91.3                        | )  |  | (89.9 | ) |  | (94.7 | ) 
|                                             |  |                              |    |  |       |   |  |       |   
|Gross profit                                 |  | 8.7                          |    |  | 10.1  |   |  | 5.3   |   
|Selling, general and administrative expenses |  | (9.1                         | )  |  | (7.3  | ) |  | (9.8  | ) 
|                                             |  |                              |    |  |       |   |  |       |   
|Operating income (loss)                      |  | (0.4                         | )% |  | 2.8   | % |  | (4.5  | )%
|                                             |  |                              |    |  |       |   |  |       |   

Net Sales. Our net sales include sales of finished goods, parts and
accessories, and tooling income from procuring, designing and manufacturing molds for certain products that our customers choose to own. Net sales consist of gross amounts invoiced less discounts. Revenues from product sales are recognized at the
time of shipment when title and risk of loss passes. Under the Companys standard terms and conditions of sale, which are mainly FOB shipment point, title and risk of loss transfer to the customer at the time product is delivered to the
customers freight forwarder, and revenue is recognized accordingly.

Net sales in fiscal 2009 were $50.8 million, down
22.3% from $65.4 million in fiscal 2008. Sales to our largest customer in fiscal 2009, Electrolux, decreased $3.9 million to $41.8 million and sales to the TTI group declined $8.8 million to $7.4 million. Sales of kitchen appliances in fiscal 2009
declined $1.1 million from the prior year to $1.2 million since we are no longer actively pursuing new business for these products.

The decrease in sales to Electrolux was primarily due to lower volumes as US retailers reduced their inventories in light of the current economic environment.

The TTI group would not accept price increases from us, therefore during the latter part of fiscal 2008 we ceased taking orders for their opening price point (OPP) bagged upright vacuum
cleaner due to our manufacturing margin being unacceptably low. In fiscal 2009 TTI decided to move their remaining products manufactured by us to their own factories and we expect minimal business with them going forward.

Gross profit. Gross profit consists of net sales less cost of goods sold, which includes the costs of raw materials, production
materials, labor, transportation, depreciation and factory overheads. Gross profit in fiscal 2009 was $4.4 million or 8.7% of net sales, as compared to a gross profit of $6.6 million or 10.1% of net sales in fiscal 2008. The decrease in gross margin
as a percentage of net sales was primarily due to production levels declining more than our costs, particularly labor and depreciation. We incurred significant material cost increases during the year, some of which were recovered from our customers
but this was also offset by our product mix improving significantly with the end of production of TTIs OPP bagged unit. Clearly our ability to raise selling prices is severely limited by the availability of other OEM suppliers in China and
Korea that are willing to work on lower margins or with lower quality standards than us. In fiscal 2009, our material cost as a percentage of net sales was 74.1% as compared to 74.4% in fiscal 2008. We believe that increases in raw material
commodity pricing will continue to accelerate in the second half of fiscal 2010 and we will make further attempts to get price increases from our customers.



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Direct labor and overhead expenses as a percentage of sales were 4.7% and 12.5% respectively
in fiscal 2009. Direct labor and overhead as a percentage of sales were 4.3% and 11.2% respectively in fiscal 2008. Included in overhead of $6.3 million in fiscal 2009 was depreciation of $2.3 million and utilities of $1.9 million. Overhead in
fiscal 2008 was $7.3 million, which included $2.2 million in depreciation charges and utilities of $2.4 million. Excluding depreciation, overhead decreased approximately 21.1% in fiscal 2009 from the prior year while production declined
approximately 22%.

Selling, general and administrative expenses. The primary components of our selling, general and
administrative (SG&A) expenses are related to transportation of finished goods, and salaries for our marketing and technical personnel. SG&A expenses in fiscal 2009 were $4.6 million or 9.1% of our net sales, as compared to $4.8
million or 7.3% of net sales in fiscal 2008. Shipping, handling or other costs that are incurred for the sales of products are classified as selling expenses. The shipping expense relates to inland freight from the factory to the port, where title
is passed to the customer. During the fiscal years ended March 31, 2009 and 2008, shipping costs charged to selling expenses were approximately $0.8 million and $1.0 million, respectively.

Due to the pressure on margins we were experiencing in our home appliance business in prior years, we determined that our SG&A needed to
be reduced. Steps were taken in fiscal 2007 to reduce the technical and marketing staff commensurate with our decision to drop our ODM program for the home appliance business. Additionally, we reduced our administrative costs by not replacing
managers and executives that had left the Company and by transferring many functions to China. Our personnel costs in 2009 were $2.1 million and we expect that to remain at a similar level going forward.

The primary components of design and development expenses included in SG&A include design and prototyping costs, patent fees, testing
charges, inspection fees and salaries for engineers and designers. In fiscal 2009, total product development expenses were approximately $0.2 million, as compared to $0.5 million in fiscal 2008.

Operating income (loss), net. In fiscal 2009, we incurred an operating loss of $0.2 million, as compared to an operating income of
$1.8 million in fiscal 2008.

Other income (expense), net.A loss on exchange of $243,000 occurred in fiscal 2009
compared to a gain of $19,000 in fiscal 2008. Other income (primarily sales of scrap, rental fees and management income) of $335,000 was generated in fiscal 2009, compared to $196,000 in fiscal 2008.

Segment income (loss). In fiscal 2009, we incurred a segment loss of approximately $0.1 million compared to a gain of $2 million in
fiscal 2008.

Electronic Components segment



|                                             |  |                              |    |  |       |   |  |       |   
|-------------------------------------------- |  | ---------------------------- | -- |  | ----- | - |  | ----- | --
|                                             |  | Fiscal Years Ended March 31, |   
|                                             |  | 2009                         |    |  | 2008  |   |  | 2007  |   
|Net sales                                    |  | 100.0                        | %  |  | 100.0 | % |  | 100.0 | % 
|Cost of goods sold                           |  | (94.3                        | )  |  | (89.4 | ) |  | (90.6 | ) 
|                                             |  |                              |    |  |       |   |  |       |   
|Gross profit                                 |  | 5.7                          |    |  | 10.6  |   |  | 9.4   |   
|Selling, general and administrative expenses |  | (7.5                         | )  |  | (5.5  | ) |  | (8.5  | ) 
|                                             |  |                              |    |  |       |   |  |       |   
|Operating income (loss)                      |  | (1.8                         | )% |  | 5.1   | % |  | (0.9  | )%
|                                             |  |                              |    |  |       |   |  |       |   

Net sales. Our net sales include sales of electronic components (primarily
CCMs) and tooling income for customer prototypes. Net sales consist of gross amounts invoiced less discounts and VAT, if applicable.

The CCM business which constitutes the bulk of our net sales of electronic components was established in mid fiscal 2006, and had expanded rapidly until the worldwide economic slowdown impacted business in the fall of 2008. Net sales in
fiscal 2009 decreased 11.5% to $34.5 million from net sales of $39.0 million in fiscal 2008. The bulk of the sales were 0.3 mega pixel camera modules sold to cell phone manufacturers based in China.

Gross profit.Gross profit in fiscal 2009 was $2.0 million or 5.7% of net sales compared to $4.1 million or 10.6% in fiscal
2008. The CCM and other electronic components businesses are increasingly competitive with the proprietary technology being maintained by the sensor and lens suppliers, thus margins reflect a commodity type business. Margins were also impacted by
falling prices occurring before component costs decreased. Direct labor and overhead in fiscal 2009 were 3.4% and 5.6% respectively of net sales compared to 3.2% and 5.5% respectively in fiscal 2008. Overhead included depreciation of $0.3 and $0.2
million in fiscal 2009 and 2008 respectively. Excluding depreciation overhead declined $0.3 million or 16.2% compared to a 12% reduction in production in fiscal 2009 compared to fiscal 2008. Material cost in fiscal 2009 was 85.3% of net sales, a
significant increase from 80.7% in the prior year due to prices declining faster than the inventory cost of components. We anticipate that material costs relative to net sales may continue to fluctuate in the future. In such a commodity type
environment, volume growth is critical to improving profitability.



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Selling, general and administrative expenses. SG&A expenses in fiscal 2009 were
$2.6 million or 7.5% of net sales compared to $2.1 million or 5.5% of net sales in fiscal 2008. The primary components of SG&A are personnel costs, occupancy costs for our PRC staff where the entire CCM operation is located, and development and
prototyping expense. We spent $0.3 million on development programs in fiscal 2009 and do not expect it to increase significantly in fiscal 2008.

Operating income (loss), net. Operating loss in fiscal 2009 was approximately $0.6 million or 1.7% of net sales compared to an operating income of approximately $2.0 million or 5.1% in fiscal 2008.

Other income (expenses), net. Other income (expense), net in fiscal 2009 was $48,000 compared to $126,000 in fiscal
2008.

Segment income (loss).Segment loss in fiscal 2009 was $547,000 compared to a segment profit of $2.1 million in
fiscal 2008.

Others segment

Net sales of other products in fiscal 2009 were $2.1 million or 2.4% of consolidated net sales which were primarily from sales of intellicorders and service income from SMT processing and assembly of
cellular phones. Net sales of other products in fiscal 2008, which were primarily sales of intellicorders, were approximately $1.2 million or 1.1% of consolidated net sales.

We incurred a gross loss of approximately of $489,000 in fiscal 2009 which reflected our start up costs in telecom manufacturing services,
compared to a $134,000 gross loss in fiscal 2008.

SG&A expense in fiscal 2009 was $2.5 million up from $1.2 million in
the prior year as the expansion of the newly set up EMS business and a new product group for medical products was established near the end of the fiscal year. The telecom services group SG&A in fiscal 2009 was $1.2 million compared to minimal
expenses in fiscal 2008. The remaining SG&A is for our marketing and development group for new product categories and technology including home security products. Included in SG&A in fiscal 2009 and 2008 was around $0.2 million and $0.3
million respectively in development expenses.

The operating loss in fiscal 2009 was $3.0 million, compared to $1.3 million in
fiscal 2008 and the segment loss in fiscal 2009 was $2.7 million, compared to $1.2 million in fiscal 2008.

Corporate

Selling, general and administrative expenses.Non allocable corporate expenses were $3.4 million in fiscal 2009
compared to $4.7 million in fiscal 2008. Expenses in fiscal 2009 included non cash stock compensation expense of approximately $42,000 compared to $56,000 in the prior year. The primary components of corporate expenses are audit fees, legal and
professional fees (approximately $1.0 million in fiscal 2009 as compared to approximately $1.2 million in fiscal 2008) and the cost of senior management and administrative staff of $1.5 million compared to $2.4 million in fiscal 2008. Corporate
expenses in fiscal 2009 declined primarily due to a change in allocation of senior management to operating segments and a reduction in administration personal.

Other operating income (expenses), net.Other operating income in fiscal 2009 of $1.7 million represents proceeds from a settlement of a lawsuit of $1.8 million offset by additional accruals for
loss contingencies.

Interest income, net, other income (expenses), net, loss on dissolution of a subsidiary, gain on
disposal of subsidiaries and share of losses in jointly-controlled entities. Minimal interest expense was incurred in fiscal 2009 and fiscal 2008 from utilizing our short term bank credit facilities. Interest expense in fiscal 2009 represents an
accrual for potential interest related to potential tax adjustments. Interest income from bank deposits and other short-terms investments in fiscal 2009 and fiscal 2008 was approximately $0.7 million and $1.6 million respectively. During fiscal 2009
there was a continuing decrease in interest rates on the funds invested in low risk financial instruments. In fiscal 2009, we had an average invested fund balance, which includes cash and cash equivalents, time deposits, restricted cash and
available-for-sale investments, of approximately $33.9 million, with an average rate of return of 2.1 % as compared to an average invested balance of approximately $38.2 million, with an average rate of return of 4.2% in fiscal 2008. Interest
income, net, in fiscal 2009 represents interest income of approximately $706,000 from banking institutions net of an approximately $171,000 accrual for potential tax adjustments in accordance with FIN48. Other income (expenses), net, loss on
dissolution of a subsidiary and gain on disposal of subsidiaries in fiscal 2009 was approximately a loss of $850,000, compared to a loss of $2.3 million in fiscal 2008. In fiscal 2009, the major components of the other income (expenses), net, loss
on dissolution of a subsidiary and gain on disposal of subsidiaries in corporate included foreign exchange gains of approximately $169,000, foreign exchange losses (non cash) on dissolution of subsidiary of approximately $1.03 million, and accruals
for potential penalties in relation to uncertain tax positions in compliance with FIN 48 of approximately $105,000. In fiscal 2008, the Company recorded foreign exchange losses of $1.2 million and accruals for potential penalties in relation to
uncertain tax positions in accordance with FIN 48 of $1.0 million. (See Note 19 - Other income (expenses), net of Notes to Consolidated Financial Statements for a detailed breakdown of the components of other income (expenses, net).



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Our loss in LAH and its subsidiaries, which are jointly-controlled entities of the Company,
in fiscal 2008 represents our 30% share of the development costs of the Litewell OLED venture. (See Note 15Interests in Jointly-Controlled Entities of Notes to Consolidated Financial Statements). LAH and its subsidiaries fiscal year end
is December 31, which is different from our fiscal year end and such date was used for purposes of preparing our consolidated financial statements. LAH was formed on April 3, 2006, as a result, the loss picked up by us represents only nine
months of the operating results of LAH for fiscal 2007 and a full year for fiscal 2008 and nil for fiscal 2009. We have discontinued the recognition of its share of losses of the jointly-controlled entities because the share of losses of the
jointly-controlled entities exceeded the Companys interests in the jointly-controlled entities.

Income tax. Our
financial statements include a provision for profits tax of approximately $0.4 million in fiscal 2009 and of $1.6 million in fiscal 2008. The significant provision in fiscal 2009 was due to an evaluation of uncertain tax positions relating to
transfer pricing in accordance with FIN 48 at certain of our subsidiaries. Since taxes are assessed at the individual subsidiary level, losses can only be carried forward or back at each subsidiary.

We are not subject to taxation in the British Virgin Islands in accordance with British Virgin Islands tax regulations. We are subject to
income tax in each jurisdiction where our subsidiaries do business. Certain of our income is earned in China, where the preferential tax rate is 25.0%, and in Hong Kong, where the corporate tax rate is 16.5% and 17.5% for fiscal 2009 and 2008
respectively, on income from operations but excluding interest, dividend income and capital gains. In Hong Kong, estimated taxes for each fiscal year are paid during the year based on the prior years taxable earnings from operations. An
adjustment in the form of additional taxes paid or refunds to us is then made in the following fiscal year based on actual taxable earnings. Therefore, in each fiscal year, our statement of operations reflects a provision for estimated taxes for the
current fiscal year and adjustments for over- or under-provision with respect to the prior fiscal year.

Our Chinese subsidiaries are subject to income tax based upon the taxable income as reported in the statutory financial statements prepared under Chinese accounting regulations. Our subsidiaries in China were entitled to a tax concession
period (Tax Holiday), whereby they are exempted from Corporate Income Tax (CIT) for their first two profit-making years and are entitled to a 50% tax reduction for the succeeding three years. Since January 1, 2004,
Dongguan Wing Shing had been subject to the full tax rate of 27.0%. This Chinese subsidiary is our manufacturing facility that incurs a significant portion of our manufacturing overhead. This subsidiary makes sales of finished goods to our other
subsidiaries and transfer pricing has to be within acceptable norms. In fiscal 2004, we established a new subsidiary in China, Dongguan Lite Array, which was also entitled to a Tax Holiday. Dongguan Lite Array has started its first profitable year
under the Tax Holiday for the calendar year ended December 31, 2007. During the 5thSession of the 10thNational Peoples Congress of the PRC, which was concluded on March 16, 2007, a new PRC CIT Law was approved and became effective on January 1, 2008. The New CIT Law introduces a wide range of changes which include, but are
not limited to, the unification of income tax rate for domestic-invested and foreign-invested enterprises at 25%. To the extent that we have income effectively connected with the conduct of a U.S. trade or business in any fiscal year, we would be
subject to U.S. taxes at an effective rate up to 55%. We do not believe that our current method of operations subjects us to U.S. taxes. We also established a subsidiary in Macau, China where we conducted sales, marketing, administration and other
activities but it has now been dissolved effective July 2008. Similar to our subsidiaries established in the British Virgin Islands, we are not subject to taxation in Macau although the Hong Kong Inland Revenue Department has challenged the tax
position taken by the Company and we may be subject to additional profits tax in Hong Kong. One of the Companys wholly-owned subsidiaries is currently under examination by the Hong Kong Inland Revenue Department (HKIRD). The final
outcome of this tax audit is not determinable at this time.

Net loss. Net loss for fiscal 2009 was $5.8 million, or
$1.91 per share, as compared to a net loss of $4.4 million, or $1.45 (adjusted to reflect the reverse stock split) per share for fiscal 2008.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

Fiscal Year Ended
March 31, 2008 Compared with Fiscal Year Ended March 31, 2007

We continue to operate in three segments:
Home Appliances, Electronic Components and Others. These segments are operated and managed as separate strategic business units that offer different products. These segments are each managed separately because they manufacture and distribute
products with different production processes.

Home Appliances segment



|                                             |  |                              |   |  |       |   |  |       |  
|-------------------------------------------- |  | ---------------------------- | - |  | ----- | - |  | ----- | -
|                                             |  | Fiscal Years Ended March 31, |  
|                                             |  | 2008                         |   |  | 2007  |   |  | 2006  |  
|Net sales                                    |  | 100.0                        | % |  | 100.0 | % |  | 100.0 | %
|Cost of goods sold                           |  | (89.9                        | ) |  | (94.7 | ) |  | (90.9 | )
|                                             |  |                              |   |  |       |   |  |       |  
|Gross profit                                 |  | 10.1                         |   |  | 5.3   |   |  | 9.1   |  
|Selling, general and administrative expenses |  | (7.3                         | ) |  | (9.8  | ) |  | (10.7 | )



|                        |  |                              |   |  |      |    |  |      |  
|----------------------- |  | ---------------------------- | - |  | ---- | -- |  | ---- | -
|                        |  | Fiscal Years Ended March 31, |  
|                        |  | 2008                         |   |  | 2007 |    |  | 2006 |  
|Other operating income  |  |                             |   |  |     |    |  | 3.6  |  
|                        |  |                              |   |  |      |    |  |      |  
|Operating income (loss) |  | 2.8                          | % |  | (4.5 | )% |  | 2.0  | %
|                        |  |                              |   |  |      |    |  |      |  



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Net Sales. Our net sales include sales of finished goods, parts and accessories, and
tooling income from procuring, designing and manufacturing molds for certain products that our customers choose to own. Net sales consist of gross amounts invoiced less discounts. Revenues from product sales are recognized at the time of shipment
when title and risk of loss passes. Under the Companys standard terms and conditions of sale, which are mainly FOB shipment point, title and risk of loss transfer to the customer at the time product is delivered to the customers freight
forwarder, and revenue is recognized accordingly.

Net sales in fiscal 2008 were $65.4 million up 39.6% from $46.8 million in
fiscal 2007. Sales to our largest customer in fiscal 2008, Electrolux, increased $25.5 million to $45.7 million more than offsetting the decline in sales to the TTI group of $3.4 million to $16.2 million. Sales of kitchen appliances in fiscal 2008
declined $3.1 million from the prior year since we are no longer actively pursuing new business for these products.

The
increase in sales to Electrolux was primarily due to the impact of a full years sales of a product line introduced in the middle of the previous year as well as modest price increases to offset part of our material cost increases.

The TTI group would not accept price increases from us, therefore during the latter part of fiscal 2008 we ceased taking orders for their
opening price point (OPP) bagged upright vacuum cleaner due to unacceptable margins.

Gross profit. Gross
profit consists of net sales less cost of goods sold, which includes the costs of raw materials, production materials, labor, transportation, depreciation and factory overhead. Gross profit in fiscal 2008 was $6.6 million or 10.1% of net sales, as
compared to a gross profit of $2.4 million or 5.2% of net sales in fiscal 2007. The increase in gross margin as a percentage of net sales was primarily due to higher production levels absorbing fixed overhead. We incurred significant material cost
increases during the year, some of which were recovered from our customers but also our product mix improved significantly with the reduction in the volume of TTIs OPP bagged unit and low margin kitchen appliances. Clearly our ability to raise
selling prices is severely limited by the availability of other OEM suppliers in China and Korea that are willing to work on lower margins or with lower quality standards than us. In fiscal 2008, our material cost as a percentage of net sales was
74.4% as compared to 78.2% in fiscal 2007. We believe that increases in raw material commodity pricing while significant in fiscal 2008 will continue accelerating in the first half of fiscal 2009 and we will make further attempts to get price
increases from our customers.

Direct labor and overhead expenses as a percentage of sales were 4.3% and 11.2% respectively in
fiscal 2008. Direct labor and overhead as a percentage of sales were 3.8% and 12.8% respectively in fiscal 2007. Wages rose over $1 million from the prior year both due to increased activity but also to significant wage rate increases. Included in
overhead of $7.3 million in fiscal 2008 was depreciation of $2.2 million. Overhead also reflected significant cost increases in fuel and electricity although the Company now only operates energy intensive equipment when electricity is available on
the grid (3  4 days) rather than self generated. Overhead in fiscal 2007 was $5.9 million but included $2.5 million in depreciation charges. Excluding depreciation, overhead increased approximately 27.6% in fiscal 2008 from the prior year
while production rose approximately 49%.

Selling, general and administrative expenses. The primary components of our
selling, general and administrative (SG&A) expenses are related to transportation of finished goods, and salaries for our marketing and technical personnel. SG&A expenses in fiscal 2008 were $4.8 million or 7.3% of our net sales,
as compared to $4.6 million, or 9.8% of net sales in fiscal 2007. Shipping, handling or other costs that are incurred for the sales of products are classified as selling expenses. The shipping expense relates to inland freight from the factory to
the port, where title is passed to the customer. During the fiscal years ended March 31, 2008 and 2007, shipping costs charged to selling expenses were approximately $1.2 million and $0.8 million, respectively.

Due to the pressure on margins we were experiencing in our home appliance business, we determined that our SG&A needed to be reduced.
Steps were taken in fiscal 2007 to reduce the technical and marketing staff commensurate with our decision to drop our ODM program for the home appliance business. Additionally, we reduced our administrative costs by not replacing managers and
executives that had left the Company and by transferring many functions to China. Our personnel costs in 2008 were $2.0 million and we expected that to remain at a similar level going forward.

The primary components of design and development expenses included in SG&A include design and prototyping costs, patent fees, testing
charges, inspection fees and salaries for engineers and designers. In fiscal 2008, total product development expenses were approximately $0.5 million, as compared to $0.7 million in fiscal 2007.



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Operating income (loss). In fiscal 2008, we generated an operating income of $2.0
million, as compared to an operating loss of $2.1 million in fiscal 2007. The loss in fiscal 2007 was mainly due to our gross profit being insufficient to support our SG&A, whereas business activity was sufficient to provide a modest positive
operating income in fiscal 2008. Further improvements in operating income, however, will require better gross profit margins.

Electronic Components segment



|                                             |  |                             |   |  |       |   |  |       |   
|-------------------------------------------- |  | --------------------------- | - |  | ----- | - |  | ----- | --
|                                             |  | Fiscal Year Ended March 31, |  
|                                             |  | 2008                        |   |  | 2007  |   |  | 2006  |   
|Net sales                                    |  | 100.0                       | % |  | 100.0 | % |  | 100.0 | % 
|Cost of goods sold                           |  | (89.4                       | ) |  | (90.6 | ) |  | (90.2 | ) 
|                                             |  |                             |   |  |       |   |  |       |   
|Gross profit                                 |  | 10.6                        |   |  | 9.4   |   |  | 9.8   |   
|Selling, general and administrative expenses |  | (5.5                        | ) |  | (8.5  | ) |  | (10.9 | ) 
|                                             |  |                             |   |  |       |   |  |       |   
|Operating income (loss)                      |  | 5.1                         | % |  | 0.9   | % |  | (1.1  | )%
|                                             |  |                             |   |  |       |   |  |       |   

Net sales. Our net sales include sales of electronic components (primarily
CCMs) and tooling income for customer prototypes. Net sales consist of gross amounts invoiced less discounts and VAT, if applicable.

The CCM business which constitutes the bulk of our net sales of electronic components was established in mid fiscal 2006, and has expanded rapidly since. Net sales in fiscal 2008 were $39.0 million up over 200% from net sales of $12.3
million in fiscal 2007. The bulk of the sales were 0.3 mega pixel camera modules going to cell phone manufacturers based in China.

Gross profit.Gross profit in fiscal 2008 was $4.1 million or 10.6% of net sales compared to $1.2 million or 9.4% in fiscal 2007. The CCMs and other electronic components businesses are highly competitive with the proprietary
technology being maintained by the sensor and lens suppliers thus margins reflect a commodity type business. Direct labor and overhead in fiscal 2008 were 3.2% and 5.3% respectively of net sales compared to 1.9% and 5.7% respectively in fiscal 2007.
Both the number of employees and wage rates of direct and indirect labor increased significantly in fiscal 2008 versus the prior year commensurate with the level of business and the need to keep up with prevailing wage rates in the area. Material
cost in fiscal 2008 was 80.9% of net sales, a slight decrease from 83.1% in the prior year. Since inception material cost has fluctuated around 80.0% of net sales as prices and sensor costs decrease, and depending on the type of connector required.
In such a commodity type environment, volume growth is critical to improving profitability.

Selling, general and
administrative expenses. SG&A expenses in fiscal 2008 were $2.1 million or 5.5% of net sales compared to $1.0 million or 8.5% of net sales in fiscal 2007. The primary components of SG&A are personnel costs, occupancy costs for our PRC
staff where the entire CCM operation is located, and development and prototyping expense. We spent $0.3 million on development programs in fiscal 2008 and do not expect it to increase significantly in fiscal 2009.

Operating income (loss). Operating income in fiscal 2008 was approximately $2.0 million or 5.1% of net sales compared to an operating
income of approximately $108,000, or 0.9% in fiscal 2007. The improvement in profitability was due to SG&A rising at a slower rate than sales and gross profit. We believe this trend should continue so long as sales volume continues to grow,
despite the commodity nature of the business.

Others segment

Net sales of other products in fiscal 2008 were $1.2 million or 1.1% of consolidated net sales. No item or product was significant. Net sales
of other products in fiscal 2007, which were primarily sales of the intellicorders, were approximately $0.7 million or 1.0% of consolidated net sales.

We incurred a small gross loss of approximately of $134,000 in fiscal 2008, compared to a $48,000 gross loss in fiscal 2007. SG&A expense in fiscal 2008 was $1.2 million up from $1.1 million in the
prior year as a new product group for medical products was established near the end of the fiscal year. The remaining SG&A is for our marketing and development group for new product categories and technology including home security and car audio
products. Included in SG&A in fiscal 2007 and 2008 was around $0.3 million and $0.3 million respectively in development expenses.

Corporate

Selling, general and administrative expenses.Non allocable corporate expenses were
$4.7 million in fiscal 2008 compared to $5.8 million in fiscal 2007. Expenses in fiscal 2008 included non cash stock compensation expense of approximately $58,000 compared to $1.1 million in the prior year. The primary components of corporate
expenses are legal and professional fees (approximately $1.2 million in fiscal 2008 as compared to approximately $710,000 in fiscal 2007) and the cost of senior management and administrative staff of $2.4 million, compared to $2.6 million in fiscal
2007. Corporate expenses in fiscal 2008 excluding non cash compensation were level with fiscal 2007 due to reducing our senior management cost, reductions in the administrative staff and lower occupancy costs, offsetting the increase in legal and
professional fees.



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Other operating income (expenses), net.Other operating expense in fiscal 2008 of
$143,000 mainly represents an increase in an accrual for loss contingencies related to legal cases. Other operating income of $608,000 in fiscal 2007 represents an adjustment to legal claims receivable resulting from a successful appeal on the
calculation of prejudgment interest.

Interest income, net, other income (expenses), net and share of losses in
jointly-controlled entities. Minimal interest expense was incurred in fiscal 2008 and fiscal 2007 from utilizing our short term bank credit facilities. Interest income from investments in fiscal 2008 and fiscal 2007 was approximately $1.6
million and $2.0 million respectively. During fiscal 2008 there was a slight decrease in interest rates on the funds invested in low risk financial instruments. In fiscal 2008, we had an average invested fund balance, which includes cash and cash
equivalents and short term investments, of approximately $38.2 million, with an average rate of return of 4.2% as compared to an average invested balance of approximately $45.0 million, with an average rate of return of 4.6% in fiscal 2007. Interest
income, net, in fiscal 2008 also reflected a $0.1 million reversal of an accrual for interest expenses on potential income taxes due originally recorded as a $0.6 million expense in fiscal 2007. Other income (expenses), net in fiscal 2008 was
approximately a loss of $1.8 million, compared to a gain of $1.7 million in fiscal 2007. In fiscal 2008, the Company incurred foreign exchange losses of $1.2 million and penalties in relation to uncertain tax position of $1.0 million. In
fiscal 2007, the Company recorded foreign exchange gains of $1.6 million. (See Note 19Other income (expenses), net of Notes to Consolidated Financial Statements for a detailed breakdown of the components of other income (expenses), net).

Our loss in LAH and its subsidiaries, jointly-controlled entities of the Company, in fiscal 2008 and 2007 represents our 30%
share of the development costs of the Litewell OLED venture. (See Note 15Interests in Jointly-Controlled Entities of Notes to Consolidated Financial Statements). LAH and its subsidiaries fiscal year end is December 31, which is
different from our fiscal year end and such date was used for purposes of preparing our consolidated financial statements. LAH was formed on April 3, 2006, as a result, the loss pick up by us represents only nine months of the operating results
of LAH for fiscal 2007 and a full year for fiscal 2008.

Income tax. Our financial statements include a provision for
profits tax of approximately $1.6 million in fiscal 2008 and a benefit from income taxes of $0.1 million in fiscal 2007. The significant provision in fiscal 2008 was required due to an evaluation of uncertain tax positions relating to transfer
pricing in accordance with FIN 48 at certain of our subsidiaries. Since taxes are assessed at the individual subsidiary level, losses can only be carried forward or back at each subsidiary.

During fiscal 2007, with reference to a circular issued by the State of Administration of Taxation of the PRC on February 28, 2007 and
other information available, that classified prior uncertainties related to income and expense allocation between the Companys subsidiaries, the Company reassessed its tax position and revised its accounting estimate for potential income tax
exposure related to its China subsidiaries. The change in accounting estimate resulted in an incremental increase in tax liabilities of approximately US$660,000.

We are not subject to taxation in the British Virgin Islands in accordance with British Virgin Islands tax regulations. We are subject to income tax in each jurisdiction where our subsidiaries do
business. Certain of our income incurred arising in China, where the effective tax rate is 27.0%, and in Hong Kong, where the corporate tax rate is 17.5%, on income from operations but excluding interest, dividend income and capital gains. In Hong
Kong, estimated taxes for each fiscal year are paid during the year based on the prior years taxable earnings from operations. An adjustment in the form of additional taxes paid or refunds to us is then made in the following fiscal year based
on actual taxable earnings. Therefore, in each fiscal year, our statement of operations reflects a provision for estimated taxes for the current fiscal year and adjustments for over- or under-provision with respect to the prior fiscal year.

Our Chinese subsidiaries are subject to income tax based upon the taxable income as reported in the statutory financial
statements prepared under Chinese accounting regulations. Our subsidiaries in China was exempted from income tax for two years starting from its first profitable year (after utilizing accumulated tax loss carry forwards or a lapse of five years)
followed by a 50% exemption for the next three years. Since January 1, 2004, Dongguan Wing Shing has been subject to the full tax rate of 27.0%. This Chinese subsidiary is our manufacturing facility that incurs a significant portion of our
manufacturing overhead. This subsidiary makes sales of finished goods to our other subsidiaries. For these reasons, we believe the full tax rate could have a significant impact on our financial condition or results of operations. In fiscal 2004, we
established a new subsidiary in China, Dongguan Lite Array, which is also exempted from income tax for a two-year period effective from its profitable year followed by a 50% exemption for the next three years. Dongguan Lite Array has attained its
first profitable year in its calendar fiscal year 2007. To the extent that we have income effectively connected with the conduct of a U.S. trade or business in any fiscal year, we would be subject to U.S. taxes at an effective rate up to 55%. We do
not believe that our current method of operations subjects us to U.S. taxes. We established a subsidiary in Macau, China where we conducted sales, marketing, administration and other activities but it has now been liquidated effective July 2008.
Similar to our subsidiaries established in the British Virgin Islands, we are not subject to taxation in Macau although the Hong Kong Inland Revenue Department may challenge the tax position taken by the Company and we may be subject to additional
profits tax in Hong Kong. One of the Companys wholly-owned subsidiaries is currently subject to an audit by the Hong Kong Inland Revenue Department (HKIRD). The final outcome of this tax audit is not determinable at this time.



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Minority interests. We recorded a share of loss by a minority interest of a
subsidiary of approximately $nil and $77,110 in fiscal 2008 and 2007, respectively

Net loss. Net loss for fiscal 2008
was $4.4 million, or $1.45 per share, as compared to a net loss of $1.2 million, or $0.38 per share for fiscal 2007 (adjusted to reflect the reverse stock split).



|B. | Liquidity and Capital Resources.
|-- | --------------------------------

Our primary source of financing historically has been cash generated from operating activities. During fiscal 2009, our net cash provided by operating activities was approximately $7.5 million as compared
to a net use of approximately $7.6 million in fiscal 2008. The improvement in cash flow from operations in fiscal 2009 over fiscal 2008 of $15.1 million is due primarily to a $3.9 million decrease in receivables and a $4.3 million decrease in
inventory in 2009 versus a $11.8 million increase in receivables and $2.6 million increase in inventory in 2008.

Working
capital as of March 31, 2009 was $46.4 million compared to $44.0 million as of March 31, 2008. Cash and cash equivalents, time deposits, restricted cash and short-term investments increased $4.4 million, inventories decreased $4.3 million
and accounts and bills receivable decreased $3.9 million from the prior year. All of our cash and related short term deposits and investments are in very short term safe securities.

Additionally, our convertible note became current in 2009 and was subsequently settled in full by cash in June 2009.

Accounts and bills receivable were $18.4 million at the end of fiscal 2009, compared to $22.1 million at the end of fiscal 2008. Receivables
at March 31, 2009 represented 77 days of sales compared to 76 days of sales at March 31, 2008, primarily due to the credit terms extended to our customers. Accounts and bills receivable for electronic components represented 95 days of
sales in fiscal 2009 compared to 63 days sales for home appliances. Sales to Electrolux represented 47.8% of sales in fiscal 2009. This major floor care customer enjoys 60 days credit terms and will continue to maintain such terms for the
foreseeable future. More importantly our large CCM customers in China are also granted credit terms and as is customary in the PRC, the bills they issue typically mature in excess of 90 days, therefore we expect our receivables to continue
increasing in fiscal 2010 as sales increase.

Our aggregate capital expenditures including payments for land use rights during
fiscal 2009 and 2008 were $2.8 million and $4.4 million, respectively. Capital expenditures in fiscal 2009 primarily included construction of additional clean room space and purchase of equipment and machinery, most of which was devoted to our CCM
and EMS programs. Our capital commitments as of March 31, 2009 and 2008 were approximately $18,524 and $1,273,325 for the purchase of equipment.

Our revolving credit facilities are with Standard Chartered Bank and China Construction Bank with an aggregate facilities limit of approximately $3.2 million and $4.4 million respectively as of
March 31, 2009. The banking facilities provided by Standard Chartered Bank bear interest at floating commercial bank lending rates in Hong Kong. The amounts payable each month on the revolving credit facilities varies depending upon the amounts
drawn at the time. Our outstanding borrowings traditionally vary according to our seasonal working capital requirements but as of March 31, 2009 we did not utilize any of the above facilities. (See Note 17 - Loan Payables and Banking Facilities
of Notes to Consolidated Financial Statements.)

We are in compliance with all of the covenants entered into with our banks in
connection with the revolving credit agreements and have been in compliance during all periods presented. In addition, we have not entered into any cross-default provision in our debt agreements with our banks. However, since the agreements are
subject to periodic review by our banks, which may result in changes of their terms and conditions, there can be no assurance that our agreements will not be subject to cross-default provisions in the future.

We anticipate that cash from operating activities and our quick assets should be adequate to satisfy our capital requirements for at least
the next two years.

Inflation. For the last five years inflation in Hong Kong has ranged from (0.4) to 4.3%
(approximately 4.3% during 2008 and 1.4% for the first four months of 2009). Currently inflation in Hong Kong has little effect on our operations as much of the costs are fixed and no wage increases have been given to senior management or
executives.

Along with the appreciation of the Renminbi, inflation in China has recently affected the Company significantly.
Electricity and labor had been increasing more than 10% per annum until the economic slowdown and along with the Renminbi appreciation, our labor costs have increased 3.9% and power costs have increased 7.2% in fiscal 2009 in US dollars terms.
Additionally worldwide commodity prices particularly for plastics, steel and packaging have significantly increased our cost of manufacturing home appliances.



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Currency and exchange rates. The functional currency of the Company is the
U.S. dollar. The functional currencies of our subsidiaries in the locations outside the U.S. are either the respective local currencies or the U.S. dollar. A majority of our sales are denominated in U.S. dollars but we also sell in Chinese Renminbi.
The majority of our expenses, including salaries and wages and other production and administrative costs are denominated in Hong Kong dollars and Chinese Renminbi. Certain raw materials and capital equipment are purchased using a variety of
currencies including the U.S. dollar, Chinese Renminbi, Japanese yen and EURO, but the majorities are purchased using Hong Kong dollars which is pegged to the U.S. dollar. In prior years, we have not been significantly affected by exchange rate
fluctuations and therefore have not needed to hedge our positions but with the Renminbi now appreciating versus the U.S. dollar we may need to reconsider whether hedging our positions is appropriate. See Note 3(o) of Notes to Consolidated Financial
Statements.

Application of Critical Accounting Policies.

The Company believes the following critical accounting policies and estimates used in the preparation of its consolidated financial
statements can affect its results of operations. The policies set forth below require managements most subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain.



| |  |  | Valuation of long-lived assets. The Company evaluates long-lived assets, such as property, plant and equipment or asset group, for impairment whenever
events or changes in circumstances (such as a significant adverse change to market conditions that will have impact on the future use of the assets) indicate that the carrying amount of an asset or a group of long-lived assets may not be recoverable
in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. When these events occur, the Company evaluates the impairment by comparing
the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets,
the Company would recognize an impairment loss based on the excess of the carrying amount of the assets over their recoverable amount. During the fiscal years ended March 31, 2009, 2008 and 2007, impairment losses of $200,407, nil and $17,174,
respectively related to property, plant and equipment were recognized in the consolidated statements of operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warranty cost. The Company estimates the warranty cost for defective products based on various factors including the likelihood of defects, an
evaluation of our quality controls over the manufacturing processes, technical analysis, industry information on comparable companies and our history. Based on the above criteria, the Company has accrued for warranty costs of $191,459, $235,315 and
nil as of March 31, 2009, 2008 and 2007, respectively. The basis and the amount of the warranty accrual are reviewed and adjusted to reflect actual experience.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred tax valuation allowance. The Company accounts for income taxes in accordance with SFAS No. 109 Accounting for Income Taxes,
using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the
year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax
assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. For financial reporting purposes, the Company established valuation allowances by tax
jurisdiction for deferred tax assets which management believes it is more likely than not that the deferred tax assets will not be realized in the foreseeable future. As of March 31, 2009 and 2008, the Company had tax losses, carried forward of
$22,906,477 and $21,022,654, respectively, which included tax losses of $4,238,322 and $2,604,007 respectively that are available indefinitely for offsetting future taxable income of companies in which these losses arose. Tax losses of $18,668,155
and $18,418,647 as at March 31, 2009 and 2008, respectively, may be carried back for 2 years or carried forward for 20 years from the year the tax losses arose. Since tax returns have to be filed for each subsidiary in the jurisdiction in which
it operates, management has to assess whether transfer pricing or expense allocations could be challenged by the authorities based on the technical merits of the tax positions taken and probable outcome of a tax assessment. Based on an evaluation of
these uncertain tax positions, we have to estimate the potential income tax expense and any related penalties and interest. This has resulted in significant income tax expense being accrued in loss years since not all subsidiaries are in a loss
position for tax purposes and there is no off setting allowed between subsidiaries in the PRC and Hong Kong.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inventory reserves. Inventories are stated at the lower of cost or market value. Cost, calculated on the weighted average basis, comprises direct
materials and, where applicable, direct labor and an appropriate proportion of production overheads. For the fiscal years ended March 31, 2009 and 2008, write-downs of inventories to fair market value of $688,020 and $1,253,352, respectively,
were recognized in the consolidated statements of operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Allowance for doubtful accounts. The Company maintain allowances for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. Whenever it is clear that the amounts are deemed to be uncollectible, receivables are written off against the allowance for doubtful accounts. In light of the recent economic downturn in the global economy, the
Companys estimates and judgments with respect to the collectibility of its receivables have been subject to greater uncertainty than in more stable periods.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Contingencies. The Company accounts for various uncertain events, or contingencies in accordance with SFAS No. 5, Accounting for
Contingencies. Under SFAS No. 5, contingent losses must be accrued if available information indicates it is probable that the loss has been or will be incurred given the likelihood of the uncertain event, and the amount of the loss can be
reasonably estimated. Management judgment is required in deciding the amount and timing of any accrual for a contingency. For example, legal proceedings are inherently uncertain, and in order to determine the amount of any reserves required, the
Company assesses the likelihood of any adverse judgment or outcomes in any litigation, as well as potential ranges of probable losses. However, the actual results may differ from such estimates and the difference may be material.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent issues in accounting standards



|(i) | In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)). The objective of SFAS
No. 141(R) is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. Under SFAS No. 141(R), an
entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized
separately from the acquisition and expensed as incurred, restructuring costs generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax
uncertainties after the measurement period impact income tax expense. In addition, acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life. SFAS No. 141(R) is effective for
the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141(R) will change the Companys accounting treatment for business combinations on a prospective basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 requires that a noncontrolling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity. Under SFAS No. 160, gains or
losses should not be recognized on sales of noncontrolling interests in subsidiaries. Differences between sales proceeds and the consolidated basis of outstanding noncontrolling interests should be accounted for as charges or credits to consolidated
paid-in-capital. SFAS No. 160 carries forward the provisions of Accounting Research Bulletin No. 51, Consolidated Financial Statements, related to consolidation purpose and policy, and certain consolidation procedure topics. SFAS
No. 160 is effective for the fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008. SFAS No. 160 requires the presentation and disclosure requirements for existing minority interests to be
applied retrospectively. All other requirements of SFAS 160 are to be applied prospectively. The Company is currently assessing the impact, if any, that this new standard will have on its consolidated financial statements.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) | In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
(SFAS No. 161).SFAS No. 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, (SFAS
133). This standard requires additional quantitative disclosures (provided in tabular form) and qualitative disclosures for derivative instruments. SFAS No. 161 requires entities to provide greater transparency about how and why they use
derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how derivative instruments and related hedged items affect financial position, results of
operations and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 161 to have any material
effect on its consolidated results of operations and financial condition.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165), which provides guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 also requires entities to disclose the date through which subsequent events
were evaluated as well as the reason for why that date was selected. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being
presented. SFAS 165 is effective for interim or annual periods ending after June 15, 2009 and is required to be adopted by the Company in the first quarter of fiscal year 2010. The Company is currently assessing the impact, if any, that this
new standard will have on its consolidated financial statements.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(v) | In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This statement is intended
to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position,
financial performance, and cash flows; and a transferors continuing involvement in transferred financial assets. This statement must be applied as of the beginning of each reporting entitys first annual reporting period that begins after
November 15, 2009, and is required to be adopted by the Company in the first quarter of fiscal year 2011. Earlier application is prohibited. This statement must be applied to transfers occurring on or after the effective date. The Company is
currently assessing the impact, if any, that this new standard will have on its consolidated financial statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(vi) | In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 changes the
approach to determining the primary beneficiary of a variable interest entity (VIE) and requires an entity to regularly assess whether it is the primary beneficiary of a VIE. SFAS No. 167 is effective for the first annual reporting
period that begins after November 15, 2009. The Company is currently evaluating what effect, if any, the adoption of SFAS No. 167 will have on the Companys future results of operations and financial condition.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(vii) | In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
 a replacement of SFAS No. 162. The FASB approved the FASB Accounting Standards Codification (the Codification) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The
Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard
documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The
Codification is effective for the Company in the second quarter of fiscal year 2010.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(viii) | In April 2009, the FASB issued FASB Staff Position (FSP) FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4), which provides additional guidance on measuring the fair value of financial instruments when markets become inactive and quoted
prices may reflect distressed transactions. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently in the process of assessing the impact, if any, that the adoption FSP 157-4 will
have on its consolidated financial statements.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ix) | In April 2009, the FASB issued FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment accounting guidance for debt securities. This FSP requires that other-than-temporary impairment be separated into the amount of the total impairment related to credit losses and the amount of the total impairment
related to all other factors. The amount of the total other-than-temporary impairment related to credit losses is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income (loss). This FSP is
effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company is currently in the process of assessing the impact, if any, that the
adoption of this FSP will have on its consolidated financial statements.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(x) | In November 2008, the FASB ratified EITF Issue No. 08-6, Equity Method Investment Accounting Considerations (EITF 08-6), which clarifies
the accounting for certain transactions and contingent consideration, and impairment considerations involving equity method investments. EITF 08-6 is effective for interim and annual reporting periods ending after December 15, 2008, with early
adoption prohibited. The Company is currently evaluating the impact, if any, that the adoption of EITF 08-6 will have on its consolidated financial statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|C. | Research and development, patents and licenses, etc.
|-- | ----------------------------------------------------

We spent approximately $0.7 million, $1.1 million and $1.1 million, respectively, on product design and development in each of fiscal 2009,
2008 and 2007. The expense was primarily attributable to the salaries and wages for the technical staff and prototyping and the cost of samples. For a more complete description of our research and development, patents and licenses, etc., see
Item 4.B Business OverviewProduct Design and Development and Intellectual Property Rights.



|D. | Trend information.
|-- | ------------------

See Item 5.AOperating and Financial Review and ProspectsOperating Results and Item 5.BOperating and Financial Review and ProspectsLiquidity and Capital
Resources for discussion of the most significant recent trends in our business since the last fiscal year.



|E. | Off-balance sheet arrangements.
|-- | -------------------------------

The Company has no off-balance-sheet arrangements such as guarantees, derivative securities, retained interests or variable interests that have, or are reasonably likely to have, a material effect on the
Companys financial condition, revenue and expenses, results of operations, liquidity, capital expenditures and capital resources.



33



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##### Table of Contents

|F. | Tabular Disclosure of Contractual Obligations:
|-- | ----------------------------------------------

The following is a schedule reflecting our aggregate financial commitments as of March 31, 2009:



|                                |  |       |            |                 |   |           |  |           |           |                  |   |         |  |   |          
|------------------------------- |  | ----- | ---------- | --------------- | - | --------- |  | --------- | --------- | ---------------- | - | ------- |  | - | ---------
|Contractual Obligations         |  | Total |            | Less than1 year |   | 1-3 years |  | 4-5 years |           | More than5
years
|Capital Commitments (1)         |  | $     | 18,524     |                 | $ | 18,524    |  |           |          |                  |   |        |  |   |         
|Operating Lease Commitments (2) |  | $     | 12,142,926 |                 | $ | 691,281   |  | $         | 1,092,628 |                  | $ | 952,710 |  | $ | 9,406,307
|Total Contractual Obligations   |  | $     | 12,161,450 |                 | $ | 709,805   |  | $         | 1,092,628 |                  | $ | 952,710 |  | $ | 9,406,307



|(1) | Our capital commitments are for the purchase of property, plant and equipment.
|--- | ------------------------------------------------------------------------------

|(2) | The Company has various operating lease agreements for parking lots, motor vehicles, equipment and real estate that extend through 2043.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Directors, Senior Management and Employees.
|------- | -------------------------------------------



|A. | Directors and senior management.
|-- | --------------------------------

Our directors and senior management at March 31, 2009 are set forth below:



|                         |  |     |  |                                                            
|------------------------ |  | --- |  | -----------------------------------------------------------
|Name                     |  | Age |  | Position                                                   
|Kwong Ho Sham            |  | 76  |  | Chairman of the Board of Directors                         
|John C.K. Sham (1)       |  | 46  |  | President, Chief Executive Officer and Director            
|Brian Yuen (1)(2)        |  | 53  |  | Chief Executive Officer, Global-Tech USA, Inc. and Director
|Patrick Po-On Hui (2)(3) |  | 51  |  | Director                                                   
|Ken Ying-Keung Wong (3)  |  | 60  |  | Director                                                   
|Barry J. Buttifant (3)   |  | 64  |  | Director                                                   
|Kin Shek Leung           |  | 45  |  | Acting Chief Financial Officer                             



|(1) | Member of the finance committee.
|--- | --------------------------------

|(2) | Member of the compensation committee.
|--- | -------------------------------------

|(3) | Member of the audit committee.
|--- | ------------------------------

Kwong Ho Sham is our founder and has been our Chairman of the Board of Directors since our inception in 1963. Mr. Sham has expertise in the area of production engineering and manufacturing. He serves as the Honorary
Chairman of the Hong Kong-Shantou Chamber of Commerce, Honorary Chairman of the Hong Kong Chiu Chou Plastics Business Association, and Honorary Chairman of the Overseas Chinese Association of Chiu Chou and was Honorary Chairman and Treasurer of the
Hong Kong-Guangdong Committee for the Celebration of the Reunification. Mr. Sham is the father of our President and Chief Executive Officer, Mr. John C.K. Sham.

John C.K. Sham has served as our President and Chief Executive Officer since June 1992 and has served as a director of Global-Tech since July 1991. Mr. Sham was our Chief Financial
Officer from June 1992 through January 2002. Mr. Sham joined us in 1984 as managing director of Kwong Lee Shun Trading Company Limited, a wholly owned subsidiary of ours. From 1982 to 1984, Mr. Sham served as President of Wesi Corp., a New
York corporation which specialized in the marketing and distribution of household goods. Mr. Sham is the son of our founder and Chairman, Mr. Kwong Ho Sham.

Brian Yuen joined us in January 1997, was elected to our Board of Directors in August 1997 and became the Chief Executive Officer of our subsidiary Global-Tech USA, Inc. in October 1997.
Mr. Yuen serves as the chairman of the finance committee of our Board of Directors and was a consultant to us from March 1994 to December 1996. Prior to joining us, Mr. Yuen served as purchasing manager of Magla Products, Inc., a
manufacturer, importer and distributor of household products, from December 1992 to December 1996.

Patrick Po-On
Hui has served as a director of Global-Tech since March 2000. Mr. Hui is a practicing attorney who, from June 1988 to 2008 was a consultant to, and then a partner of Robin Bridge & John Liu in 2008, a law firm based in Hong
Kong. Mr. Hui was an Associate Partner of the law firm of Johnson Stokes & Master from March 1996 to May 1998 and an Assistant Solicitor of that firm from September 1989 to February 1996.

Ken Ying-Keung Wonghas served as a director of Global-Tech since June 2001. Dr. Wong is a medical doctor who, since
1995, has maintained a medical practice in Hong Kong. Dr. Wong previously practiced family medicine in Canada from 1977 to 1995.



34



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##### Table of Contents

Barry John Buttifanthas served as a director of Global-Tech since November
2003. In February 2009, Mr. Buttifant joined KLC Kennic Lui & Company (KLC), a professional accounting firm, as a Principal of the firm and Managing Director of KLC Transactions Limited. Prior to joining KLC, Mr. Buttifant
was the Executive Director - Finance of Mission Hills Group (MHG) from February 2008 until he became a Consultant to the MHG in December 2008. Mr. Buttifant continues as a non-executive director of Hsin Chong Construction Group
(HCCG) and Synergis Holdings Limited (Synergis). Since December 2004, he was the managing director of Hsin Chong International Holdings Limited, a controlling shareholder of HCCG (which was acquired by MHG in November 2007)
and Synergis (which was acquired by HCCG in September 2008). Mr. Buttifant was also an alternate director to both public companies. Mr. Buttifant was an operating partner of Baring Private Equity Asia Limited. He was also the managing director
of Wo Kee Hong (Holdings) Limited (Wo Kee Hong) from 2001 to 2002 and was the Advisor to the board of directors of Wo Kee Hong from 2002 to April 2004. Prior to joining Wo Kee Hong, he was the managing director of IDT International
Limited for over eight years and had worked for Polly Peck Group and Sime Darby Hong Kong Limited for more than 11 years in capacity of finance director and managing director. He has over 30 years of experience in corporate and financial management.

Currently Mr. Buttifant is an independent non-executive director of Giordano International Limited and Daiwa Associates
Holdings Limited, both of which are publicly listed companies in Hong Kong. Mr Buttifant also serves as a non-executive director of a NYSE listed public company, China Nepstar China Drugstore Limited. Mr. Buttifant is a fellow member of the
Association of Chartered Certified Accountants; the Hong Kong Institute of Certified Public Accountants; the Chartered Management Institute; the Hong Kong Management Association and the Hong Kong Institute of Directors.

Kin Shek Leunghas been our Group Accounting Manager with overall responsibility for the group accounting and finance
functions since August 1994. In January 2002, he was appointed to the role of acting Chief Financial Officer.

No family
relationship exists among any of our directors and senior management, except for the following:



| |  |  | Kwong Ho Sham and John Sham are father and son.
| | - |  | -----------------------------------------------

No arrangement or understanding exists between any director or member of senior management and any other person pursuant to which any director or member of senior management was elected to such a position
with us.



|B. | Compensation.
|-- | -------------

The aggregate direct remuneration paid to all directors and senior management as a group (7 persons) during fiscal 2009 was approximately $1.5 million (including a housing allowance for two directors). This includes amounts set aside or
accrued to provide pension, retirement or similar benefits, but does not include amounts (including business travel, professional and business association dues and expenses) reimbursed to officers and other fringe benefits commonly reimbursed or
paid for by companies in Hong Kong.



|C. | Board practices.
|-- | ----------------

Our articles of association provide for a board of directors of not less than five or more than nine members. Each director is elected to serve until the next annual general meeting of shareholders and until his or her successor has been
elected unless a different term is specified. Currently, there are six directors of which three are independent directors, serving on the board of the Company. See Item 6A - Directors and senior management for the service time of
our directors.

Audit committee. The purpose of the audit committee is to fulfill the board of directors
oversight responsibility to the shareholders, potential shareholders and the investment community relating to the integrity of the Companys financial statements and the financial reporting process, the Companys compliance with legal and
regulatory requirements, the independent auditors qualification and independence, the performance of the Companys independent auditors and the annual independent audit of the Companys financial statements. In discharging its
oversight role, the audit committee is empowered by the Companys board of directors to investigate any matter brought to its attention. Such investigation can include but is not limited to full access to all books, records, facilities and
personnel of the Company and the authority to retain outside counsel or other experts for this purpose.

The Companys
audit committee is governed by a written charter. The functions of the audit committee as enumerated in its charter include:



| |  |  | assisting the board of directors oversight of (1) the integrity of the Companys financial statements and the financial reporting
process, (2) the companys compliance with legal and regulatory requirements, (3) the independent auditors qualifications and independence, (4) the performance of the Companys independent auditors, and (5) the
annual independent audit of the Companys financial statements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the direct responsibility for the appointment, compensation and retention of the independent auditors for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for the Company;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regularly reviewing with the independent auditors any audit problems or difficulties encountered during the course of the audit work, including any
restrictions on the scope of the independent auditors activities or access to requested information;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



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##### Table of Contents

| |  |  | meeting with the independent auditors to discuss the scope and plans of their audit engagement;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | meeting with our financial management and independent auditors together, and periodically separately, to review matters relating to internal accounting
controls over financial reporting;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing our critical accounting policies and practices and other matters relating to our financial condition including any significant written
communications between the independent auditors and management; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing with the full board of directors any issues that arise with respect to the quality or integrity of the companys financial statements,
compliance with legal or regulatory requirements and the performance and independence of the independent auditors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The audit committee is currently comprised of Barry J. Buttifant, Patrick Po-On Hui, and Ken Ying-Keung Wong. Mr. Barry J. Buttifant is the chairman of the audit committee.

Ernst & Young was reappointed as our independent auditor for the fiscal year ended March 31, 2009.

Compensation committee. Our Board of Directors also has a compensation committee. The compensation committee reviews and
determines compensation for officers, directors and consultants, as well as bonuses and other incentive programs for employees. As of March 31, 2009, the compensation committee was comprised of Patrick Po-On Hui and Brian Yuen. Mr. Brian
Yuen is considered not to be independent since he is also a member of management of the Company.

We do not have, and none of
our subsidiaries have, service contracts with any of our directors providing benefits upon termination of employment. We do have employment agreements with Kwong Ho Sham and John C.K. Sham that provide for substantially the same severance benefits
in certain circumstances. If either Kwong Ho Sham or John Sham resign as a result of certain material changes relating to their employment, the agreements entitle them to a lump sum payment equal to the aggregate amount of salary and performance
bonus that would have been payable to them through the end of the term of their agreements, continued receipt of other benefits under the agreements for the remainder of the term of their agreements and immediate vesting of their outstanding equity
awards. The agreements also generally entitle Messrs. Sham and Sham to the same severance benefits if either terminates their employment, or their employment is terminated by their employer, as a result of a change in control of Global-Tech. If a
liquidation plan for Global-Tech is approved by a court or agency of pertinent jurisdiction, Messrs. Sham and Sham also are entitled to a lump sum payment equal to the aggregate amount of salary and performance bonus that would have been payable to
them through the end of the term of their agreements.



|D. | Employees.
|-- | ----------

At March 31, 2009, 2008 and 2007, we employed 2,718, 3,482 and 2,173 persons, respectively, on a full-time basis. Of our employees at March 31, 2009, 45 were located in Hong Kong and, 2,673 in China. A breakdown of persons
employed by main category of activity is as follows:



|                               |  |      
|------------------------------ |  | -----
|Category                       |  | No.  
|Manufacturing                  |  | 2,037
|Production management          |  | 14   
|Finance and administration     |  | 194  
|Receiving and warehousing      |  | 84   
|Quality control                |  | 169  
|Production engineering         |  | 103  
|Product design and development |  | 48   
|Sales and marketing            |  | 62   
|Human resources                |  | 7    
|                               |  |      
|                               |  | 2,718
|                               |  |      

Since our production levels fluctuate, the number of employees varies from time to
time based on our production requirements. During peak production periods in fiscal 2009, we employed a maximum of approximately 3,212 people in our Dongguan factory. Our manufacturing personnel are paid a monthly salary and periodic incentive
bonuses and are provided with housing, medical care and subsidized meals in our dormitory complex adjacent to each factory. We have not experienced any significant labor stoppages and we believe that relations with our employees are satisfactory.

Our relationships with our employees in China are subject to the Labor Law of the Peoples Republic of China which went
into effect on January 1, 1995. The Labor Law regulates, among other things, the number of hours employees may work on a daily and weekly basis, provides allowances for legal holidays, regulates working conditions such as safety and hygiene and
provides for various social welfare and employment benefits. We believe that we are in compliance with such regulations. Availability of labor in the future may have a negative impact on our results of operations since demand in Guangdong Province
for unskilled manufacturing labor currently exceeds supply.



36



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##### Table of Contents

In June 2007, the National Peoples Congress of the PRC enacted new labor legislation
called the Labor Contract Law, which became effective on January 1, 2008. It formalizes workers rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions. Considered one of the strictest labor
laws in the world, among other things, this new law requires an employer to conclude an open-ended employment contract with any employee who either has worked for the employer for 10 years or more has had two consecutive fixed-term
contracts. An open-ended employment contract is in effect a lifetime, permanent contract, which can only be terminated in specified circumstances, such as a material breach of the employers rules and regulations, or for a serious
dereliction of duty. Under the new law, downsizing by 20% or more may occur only under specified circumstances, such as a restructuring undertaken pursuant to Chinas Enterprise Bankruptcy Law, or where a company suffers serious difficulties in
production and/or business operations. If the Company faces future periods of decline in business activity generally or adverse economic periods specific to the Companys business, this new law can be expected to exacerbate the adverse effect
on the Companys economic environment and its results of operations and financial condition.



|E. | Share ownership.(all numbers reflect reverse stock split)
|-- | ---------------------------------------------------------

The following table sets forth information regarding the share ownership in Global-Tech as of September 1, 2009 held by the directors
and senior management and options granted to them on our common shares:



|                                                     |  |                  |  |             |  
|---------------------------------------------------- |  | ---------------- |  | ----------- | -
|Name of Owner(1)                                     |  | Number of Shares |  | Percentage# |  
|Wing Shing Holdings Company Limited(2)               |  | 688,797          |  | 22.7        | %
|Kwong Ho Sham(3)                                     |  | 688,797          |  | 22.7        |  
|John C.K. Sham(4)                                    |  | 977,274          |  | 32.2        |  
|Brian Yuen(5)                                        |  | 128,459          |  | 4.2         |  
|Barry J. Buttifant(6)                                |  | 12,500           |  | *           |  
|Patrick Po-On Hui(6)                                 |  | 7,805            |  | *           |  
|Ken Ying-Keung Wong(6)                               |  | 4,250            |  | *           |  
|Kin Shek Leung(6)                                    |  | 1,450            |  | *           |  
|All officers and directors as a group (7 persons)(7) |  | 1,131,738        |  | 37.3        |  



|* | Less than 1%
|- | ------------

|# | In accordance with SEC rules, each beneficial owners holdings have been calculated assuming full exercise of outstanding options covering our common shares, if
any, exercisable by such owner within 60 days after September 1, 2009, but no exercise of options covering our common shares held by any other person.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Unless otherwise indicated, the persons named in the table above have sole voting and dispositive power with respect to all common shares beneficially owned by them.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on a schedule 13G/A filed with the SEC on March 22, 2007, Wing Shing Holdings Company Limited owned 1,888,797 of the issued and outstanding common shares.
The share ownership of Wing Shing Holdings Company Limited is held 44% by Kwong Ho Sham and 56% by John Sham. Voting control of Wing Shing Holdings Company Limited is held approximately 34.3% by Kwong Ho Sham and 65.7% by John Sham. Each of Kwong Ho
Sham and John Sham disclaim any beneficial ownership in any of the common shares of Global-Tech owned by Wing Shing Holdings Company Limited.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 688,797 shares owned by Wing Shing Holdings Company Limited.
|--- | ---------------------------------------------------------------------

|(4) | Includes 688,797 shares owned by Wing Shing Holdings Company Limited and 181,250 common shares issuable to John C.K. Sham within 60 days after September 1, 2009
upon exercise of options granted under our 1997 and 2005 stock option plans. Excludes 900,000 shares owned by the wife, mother and daughter of Mr. Sham who disclaims any beneficial ownership in such shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 81,251 common shares issuable to Brian Yuen within 60 days after September 1, 2009 upon exercise of options granted under our 1997 and 2005 stock option
plans. Excludes 1,975 shares owned by the wife and son of Mr. Yuen who disclaims any beneficial ownership in such shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Each of Barry J. Buttifant, Patrick Po-On Hui, Ken Ying-Keung Wong, and Kin Shek Leung own less than 1% of the issued and outstanding common shares as of
September 1, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 688,797 common shares owned by Wing Shing Holdings Company and 286,006 common shares beneficially owned by or issuable to various officers and directors within
60 days after September 1, 2009 upon exercise of options granted under our 1997 and 2005 stock option plans.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our directors
and senior management do not have different voting rights.



37



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##### Table of Contents

1997 stock option plan. Our 1997 stock option plan was adopted by our Board of
Directors in September 1997. The plan provides for the grant of:



| |  |  | options that are intended to qualify as incentive stock options, or ISOs, within the meaning of Section 422 of the U.S. Internal Revenue Code of
1986 to employees; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | options not intended to qualify as ISOs to employees and consultants.
| | - |  | ---------------------------------------------------------------------

The plan is administered by the Board of Directors, or a committee of directors appointed by the Board, which determines:



| |  |  | the terms of the options, including the exercise price;
| | - |  | -------------------------------------------------------



| |  |  | the number of common shares subject to the option; and
| | - |  | ------------------------------------------------------



| |  |  | the terms and conditions of exercise.
| | - |  | -------------------------------------

No option granted under the plan is transferable by the optionee other than by will or the laws of descent and distribution and each vested option is exercisable during the contractual life of the options
by such optionee. The exercise price of all ISOs granted under the plan must be at least equal to the fair market value of such common shares on the date of grant. With respect to any participant who owns (or is deemed to own) stock possessing more
than 10% of the voting rights of our outstanding capital stock, the exercise price of any ISO must be not less than 110% of the fair market value on the date of grant. The term of each option granted under the plan may be established by the Board of
Directors, or a committee of the board, in its sole discretion; provided, however, that the maximum term of each ISO granted under the plan is 10 years. With respect to any ISO granted to a participant who owns (or is deemed to own) stock possessing
more than 10% of the total combined voting power of all classes of our outstanding capital stock, the maximum term is 5 years.

During fiscal 2007, an aggregate of 31,550 options with exercise prices ranging from $15.60 to $33.28 were forfeited upon the resignation of the participants, including 7,500 options ranging from $22.00 to $33.28 to a former officer.

During fiscal 2008, 625 options were exercised with an exercise price of $15.60. An aggregate of 4,737 shares with exercise
prices ranging from $15.60 to $30.56 were forfeited upon the resignation of the relevant participants, and 8,175 shares with an exercise price of $25.00 expired.

During fiscal 2009, an aggregate of 9,324 options with exercise prices ranging from $13.20 to $30.56 per share were forfeited upon resignation of the relevant participants, 56,930 options with an exercise
price of $25.00 per share expired.

The 1997 stock option plan expired on September 17, 2008 and no further grants could
be made from this plan after that date.

2005 stock option plan. Our 2005 stock option plan was adopted by our
Board of Directors in October 2005. The plan provides for the grant of:



| |  |  | options that are intended to qualify as incentive stock options, or ISOs, within the meaning of Section 422 of the U.S. Internal Revenue Code of
1986 to employees; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | options not intended to qualify as ISOs to employees and consultants.
| | - |  | ---------------------------------------------------------------------

The plan is administered by the Board of Directors, or a committee of outside directors appointed by the board, which determines:



| |  |  | the terms of options, including the exercise price;
| | - |  | ---------------------------------------------------



| |  |  | the number of common shares subject to the option; and
| | - |  | ------------------------------------------------------



| |  |  | the terms and conditions of exercise.
| | - |  | -------------------------------------

No option granted under the plan is transferable by the optionee other than by will or the laws of descent and distribution and each option is exercisable during the lifetime of the optionee only by such
optionee. The exercise price of all ISOs granted under the plan must be at least equal to the fair market value of such common shares on the date of grant. With respect to any participant who owns (or is deemed to own) stock possessing more than 10%
of the voting rights of our outstanding capital stock, the exercise price of any ISO must be not less than 110% of the fair market value on the date of grant. The term of each option granted under the plan may be established by the Board of
Directors, or a committee of the board, in its sole discretion; provided, however, that the maximum term of each ISO granted under the plan is 10 years. With respect to any ISO granted to a participant who owns (or is deemed to own) stock possessing
more than 10% of the total combined voting power of all classes of our outstanding capital stock, the maximum term is 5 years.



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The total number of common shares available for options under the plan is 450,000 shares. We
have granted options to purchase on the dates, in the amounts and at the prices indicated below:



| |  |  | On March 31, 2006, 78,493 options were granted to two directors with an exercise price of $15.60;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | On March 31, 2007, 66,500 options were granted to four directors, 8,750 to a consultant and 750 to employees all at an exercise price of $13.20;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During fiscal 2008, 250 options with an exercise price of $13.20 were forfeited upon the resignation of the participant.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | During fiscal 2009 no options were granted and none were forfeited.
| | - |  | -------------------------------------------------------------------

1999 employee stock purchase plan. Our 1999 employee stock purchase plan was adopted by our Board of Directors in January
1999. The plan was approved by our stockholders at our annual meeting of stockholders in March 1999. The total number of common shares which may be granted under the plan is 45,000 common shares. Stock grants may be awarded under the plan to our
employees, including officers and directors, and our non-employee directors and consultants in consideration for their service to us. As of March 31, 2009, we have granted, in the aggregate, net of forfeiture, 15,938 common shares under the
plan, of which 750 were vested in fiscal 2009.

The plan is administered by our Board of Directors, or a committee of the
board, which determines:



| |  |  | the participants to be awarded stock grants;
| | - |  | --------------------------------------------



| |  |  | the number of shares subject to each stock grant, or the formula pursuant to which such number will be determined;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the date of award and the vesting; and
| | - |  | --------------------------------------



| |  |  | expiration terms applicable to each stock grant.
| | - |  | ------------------------------------------------

The award of stock grants may, but need not, be conditioned on the participant electing to forego his or her right to all or any part of his or her cash salary or cash bonus. Our Board of Directors may
provide that the common shares issued upon receipt of any stock grant shall be subject to such further conditions, restrictions or agreements as they in their discretion may specify prior to the receipt of such stock grant, including without
limitation, deferrals on issuance, conditions on vesting or transferability and forfeiture or repurchase provisions. Our Board of Directors may establish rules for the deferred delivery of common shares upon receipt of a stock grant.

Share compensation. Effective April 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123 (R)) and related interpretations in accounting for its employee stock-based compensation plans. Accordingly, stock compensation cost is measured on the date of grant, based on fair value
which is estimated using the Black-Scholes option pricing model. The compensation cost is amortized over the vesting period of the options using the straight-line method provided that the amount of compensation cost recognized at any date must at
least equal the portion of the grant-date value of the award that is vested at that date. Prior to the adoption of SFAS No. 123 (R), we applied the intrinsic-value basis prescribed in Accounting Principles Board (APB) opinion No,
25, Accounting for Stock Issued to Employees and related interpretations in accounting for employee stock options.

As permitted by SFAS No. 123 (R), the Company has elected to apply the modified prospective method for the transition, in which compensation cost is recognized beginning with the effective date based on the requirements of
SFAS No. 123 (R) (i) for all share-based payments granted after the effective date and (ii) for all awards granted to employees prior to the effective date of SFAS No. 123 (R) that remained unvested on the effective
date.

As of March 31, 2009 and 2008, there was an unrecognized share-based compensation cost of $5,907 and $49,737,
respectively, relating to options granted under our 1997 and 2005 stock option plans and shares granted under our 1999 stock purchase plan. The unrecognized compensation cost for options granted and stocks granted are expected to be recognized over
a weighted-average vesting period of two years and five years, respectively. To the extent that the actual forfeiture rate is different from the original estimate, actual share-based compensation relating to these awards may be different from the
expectations.

We also granted options to consultants and accounted for such options under the fair value method. We amortize
share-based compensation expense over the vesting periods of the related options.



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##### Table of Contents

|Item 7. | Major Shareholders and Related Party Transactions. (all numbers reflect reverse stock split)
|------- | --------------------------------------------------------------------------------------------



|A. | Major shareholders.
|-- | -------------------

The following table sets forth information regarding the share ownership in Global-Tech as of September 1, 2009 of shareholders that are beneficial owners of 5% or more of our outstanding common
shares:



|                                       |  |                  |  |            |  
|-------------------------------------- |  | ---------------- |  | ---------- | -
|Name of Owner                          |  | Number of Shares |  | Percentage |  
|Wing Shing Holdings Company Limited(1) |  | 688,797          |  | 22.7       | %
|Shun Chi Hui                           |  | 300,000          |  | 9.9        | %
|Estee M Y Sham                         |  | 300,000          |  | 9.9        | %
|Meng Chen Tsai                         |  | 300,000          |  | 9.9        | %
|Jianzhe Xu                             |  | 300,000          |  | 9.9        | %



|(1) | Based on a schedule 13G/A filed with the SEC on March 22, 2007, Wing Shing Holdings Company Limited owned 1,888,797 of the issued and outstanding common shares.
The share ownership of Wing Shing Holdings Company Limited is held 44% by Kwong Ho Sham and 56% by John Sham. Voting control of Wing Shing Holdings Company Limited is held approximately 34.3% by Kwong Ho Sham and 65.7% by John Sham. Each of Kwong Ho
Sham and John Sham disclaim any beneficial ownership in any of the common shares of Global-Tech owned by Wing Shing Holdings Company Limited. The numbers in the table above reflect ownership post-reverse split.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our major shareholders have the same voting rights as all holders of our common shares.

As of August 31, 2009, approximately 36.2%, of our outstanding common shares were held in the United States by 4 holders registered on
the books of our transfer agent.

To the best of our knowledge, and other than as disclosed in this annual report, we are not
directly or indirectly controlled or owned by any other corporation, foreign government or any other natural or legal person, and we are not subject to any arrangements the operation of which may at a subsequent date result in a change in control of
Global-Tech.



|B. | Related party transactions.
|-- | ---------------------------

Lease and Car Rental Agreements with Related Companies:



| |  |  | On April, 2008, we entered into renewal lease agreements with Wing Shing Products Company Limited, a company owned by the Sham family, for offices and
warehouses with a total area of 25,690 square feet occupied by our executive officers, administrative group and warehouse at a rate totaling approximately $172,600 per annum.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 1, 2004, we entered into an amendment of a lease agreement with Kenmore Assets Limited, a company owned by an officer and director,
for an executive apartment in Hong Kong at a monthly rate of approximately $5,100. The rent is at fair market for such a property, which is used to accommodate business visitors from overseas.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We rent a company car from Wing Shing Products Company Limited, a company owned by the Sham family. Monthly rental for the vehicle is approximately
$2,200, which is the estimated fair value of rental or lease rates in Hong Kong for such vehicle.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rental income and
management fee income:



| |  |  | Rental income of $50,812, $50,302 and $49,957 was earned from a jointly-controlled entity for the fiscal years ended March 31, 2009, 2008 and
2007. The rentals were charged on mutually agreed terms.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Management fee income of $106,677, $99,582 and $111,992 was earned for the fiscal years ended March 31, 2009, 2008 and 2007, from a
jointly-controlled entity. The management fees were charged with reference to the actual costs incurred.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
believe the leases are on terms no less favorable than could have been received from unaffiliated third parties.

Our Policy Concerning
Related Party Transactions

All transactions with our executive officers and directors must be approved by a majority of
our directors.



|C. | Interests of experts and counsel.
|-- | ---------------------------------

Not applicable.



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##### Table of Contents

|Item 8. | Financial Information.
|------- | ----------------------



|A. | Consolidated statements and other financial information.
|-- | --------------------------------------------------------

Our consolidated financial statements for fiscal 2009, 2008 and 2007 have been prepared in accordance with U.S. GAAP and audited by an
independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (United States). A consolidated balance sheet is presented for each of fiscal 2008 and 2009 along with a consolidated
statement of operations, statement of cash flows and statement of changes in shareholders equity which are presented for each of fiscal 2009, 2008 and 2007. See Item 18Financial Statements for detailed financial information.

Percentage of Export Sales

Export sales constitute approximately 52.8% of our total sales volume. For a breakdown of our export sales by market during the past three fiscal years, see Note 25(b) of Notes to Consolidated Financial
Statements. We did not conduct any activities nor make any sales in any regions or countries subject to U.S. economic sanctions.

Legal
Proceedings

Except as set forth below, Global-Tech and its subsidiaries are not a party in any material litigation or
arbitration, and know of no material litigation, arbitration or claim threatened against them or their properties.

Certain
agreements with ODM customers include an indemnification provision whereby the respective subsidiary undertakes to hold harmless and indemnify the respective customer from all suits that may be brought against the customer for infringement of any
patent or registered design in connection with the sale of the products purchased from the subsidiary.

SEB v. Sunbeam v. Pentalpha
Enterprises

On March 10, 1998, SEB, S.A. filed a patent infringement suit against Sunbeam Corporation and Sunbeam
Products, Inc. (collectively Sunbeam) in the U.S. District Court for the District of New Jersey. SEB later amended its complaint to add Global-Tech and one of its subsidiaries, Pentalpha Enterprises Limited, (name changed to Pentalpha
Medical Limited (Pentalpha)), as additional defendants in the case. SEB alleged that the defendants infringed a patent issued to SEB concerning a deep fryer model. SEB sought to recover unspecified monetary damages. In addition, Sunbeam
asserted a third-party claim and a cross-claim against Global-Tech and Pentalpha for breach of an alleged obligation to indemnify Sunbeam from SEBs patent infringement claims. Global-Tech and Pentalpha moved to dismiss the complaint of SEB for
lack of personal jurisdiction. By order dated July 16, 1999, the District Court granted the motion and dismissed the complaint against Global-Tech and Pentalpha. Sunbeam then paid SEB $2.0 million to settle its claim. Sunbeams third-party
complaint against Global-Tech and Pentalpha remained.

On December 15, 1999, Pentalpha asserted counterclaims against
Sunbeam in connection with a product supply agreement. In July 2002, after the case had been transferred to the U.S. District Court for the Southern District of Florida, Sunbeam moved for summary judgment on all claims. By memorandum decision dated
February 19, 2003, the District Court granted Sunbeams motion insofar as it related to the claim of Pentalpha for fraud in the inducement of the product supply agreement, but denied the motion with respect to the claims of Pentalpha for
breach of contract. In addition, the District Court granted Sunbeams motion for summary judgment on its claims for indemnity against Pentalpha as to liability, but ruled that a trial was necessary to determine the amount of damages that
Sunbeam was entitled to recover on its indemnity claim in addition to the $2.0 million Sunbeam previously paid to settle SEBs claims of patent infringement.

The trial on the claims of Sunbeam for indemnity and the claim of Pentalpha for breach of contract began on January 12, 2004. On January 16, 2004, the Jury returned a verdict in favor of
(i) Sunbeam on its claim for indemnity and awarded Sunbeam approximately $2.5 million against Pentalpha, and (ii) Pentalpha on its claim for breach of contract and awarded Pentalpha $6.6 million. The district court granted a final judgment
on February 11, 2004 to add prejudgment interest to the Jurys award, and awarded Sunbeam approximately $3.4 million and Pentalpha $6.6 million.

On August 12, 2005, the Court of Appeals for the Eleventh Circuit affirmed the judgment of the district court to the extent that Sunbeam appealed from it and to the extent Global-Tech and Pentalpha
appealed from it, except that the Court of Appeals remanded the case to the district court for a recalculation of Pentalphas prejudgment interest on its verdict for $6.6 million from June 30, 2001, the last date of the relevant product
supply agreement.

Pentalpha moved in the district court for an amended judgment to add the amount of interest to which it is
entitled. Sunbeam opposed the motion on the grounds that Pentalpha had not properly calculated the interest to which it is entitled. By amended judgment dated December 12, 2005, the district court awarded Pentalpha prejudgment interest from
June 30, 2001 to February 11, 2004, bringing the judgment entered in favor of Pentalpha as of February 11, 2004 to approximately $8.0 million, and leaving unchanged the judgment entered against Pentalpha in favor of Sunbeam.



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On December 23, 2005, Pentalpha filed a notice of appeal to the U.S. Court of Appeals
for the Eleventh Circuit. Pentalpha filed its brief on January 25, 2006, arguing that the district court erred in failing to award it prejudgment interest until the final amended judgment on December 12, 2005. Pentalpha sought
approximately $800,000 in additional interest. The Court of Appeals heard oral argument on October 18, 2006.

On
February 5, 2007, the Court of Appeals reversed the order of the district court and ruled that Pentalpha was entitled to prejudgment interest until December 12, 2005, and post-judgment interest thereafter. Sunbeam petitioned on
February 28, 2007 for panel rehearing, to clarify that Sunbeam was also entitled to prejudgment interest until December 12, 2005. The Court of Appeals denied its petition by order dated March 8, 2007.

The district court, on its own initiative, entered a second amended judgment on April 16, 2007 that awarded Pentalpha prejudgment
interest to December 12, 2005 at 7 percent interest. Pentalpha subsequently moved for the entry of a third final amended judgment on the ground that the 7 percent interest rate that the district court used was inconsistent with the applicable
rates under Florida law. Sunbeam opposed that motion and sought an order awarding it prejudgment interest until December 12, 2005 or offsetting the judgments as of December 12, 2005.

On June 4, 2007, the district court entered a third amended judgment that awarded Pentalphas prejudgment interests from
June 30, 2001 until the entry of the second amended judgment, on December 12, 2005, at the interest rates required by Florida law but also awarded Sunbeam pre-judgment interest until December 12, 2005. The post judgment interest for
both parties is calculated at 4.35% per annum from the date the amended judgment was entered, December 12, 2005, until paid. On June 16, 2007, Pentalpha filed a notice of appeal to the Court of Appeals to challenge the portion of the
judgment in favor of Sunbeam that extends the prejudgment interest until December 12, 2005.

On July 13, 2007,
Sunbeam wire transferred to the escrow account of Cooper & Dunham, the attorneys for SEB, $5.5 million. Cooper & Dunham has acknowledged receipt of that money and has agreed to hold it in an escrow account titled
Cooper & Dunham as escrow agent pursuant to Court order pursuant to the September 7, 2005 order in the action SEB S.A., v. Montgomery Ward pending in the United States District Court for the Southern District of New
York. Sunbeams payment of the funds into escrow eliminates its obligation to pay post-judgment interest on the amount that it paid into escrow.

SEB v. Montgomery Ward

On August 28, 1999, SEB commenced an action in the U.S. District Court for the
Southern District of New York against the Company, its subsidiary Pentalpha, and Montgomery Ward, then a customer, for infringement of SEBs patent relating to a deep fryer model. On December 15, 1999, the district court entered a
preliminary injunction against the sale of the deep fryer that was the subject of the case. This was affirmed on appeal. On August 3, 2000, SEB moved for a further preliminary injunction and a citation for contempt against the Company based
upon the sale of a modified deep fryer product. While that motion was pending, Montgomery Ward filed for bankruptcy protection. That filing stayed the action as against Montgomery Ward. On March 20, 2001, the district court found that the
modified deep fryer infringed the patent under the doctrine of equivalents. However, the district court denied SEBs application for a contempt citation.

The Company and Pentalpha moved on December 3, 2002, for summary judgment on liability on the ground that neither engaged in any conduct that infringed the patent because of the extra-territoriality
of their acts and for partial summary judgment on the claim of SEB for lost profits.

SEB also moved for an order
attaching the judgment in favor of the Company in the action SEB v. Sunbeam v. Pentalpha Enterprises. The parties resolved the motion by consenting to an order that required the Company, among other things, to give notice to SEB of any
attempt to collect the judgment against Sunbeam. On August 19, 2005, the Company notified SEB that it anticipated taking action to enforce the judgment against Sunbeam from the District of Florida. On August 24, 2005, SEB served a renewed
motion to attach the entire proceeds of the judgment. The district court attached the entire judgment by order dated September 7, 2005.

The district court conducted a trial beginning on April 17, 2006. On April 21, 2006, the jury returned a verdict finding that the Company and Pentalpha had infringed the SEB patent in violation
of 35 U.S.C. § 271 (a) and (b), with respect to both the original deep fryer and the modified deep fryer, that the infringement with respect to both deep fryers were willful and that SEB was entitled to a reasonable royalty in the total
amount of $4.65 million, representing $3.6 million for its sales to Sunbeam, $0.54 million for sales to Fingerhut and $0.51 million for sales to Montgomery Ward.



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Both sides have made post-trial motions. The Company and Pentalpha have moved for judgment
as a matter of law on a wide range of issues and for a new trial. SEB moved to enhance damages with the addition of treble damages, prejudgment interest and attorneys fees. The motions have been fully briefed. The district court heard oral
argument on April 11, 2007, and June 21, 2007. The Court also heard testimony from a SEB witness on July 19, 2007 with respect to Pentalphas motion for judgment as a matter of law on certain issues based upon SEBs failure
to produce certain documents during discovery.

In a memorandum opinion and decision dated October 9, 2007, the district
court denied all of the post-trial motions of the Company and Pentalpha, except that the court reduced the amount of the jury verdict by $2 million based upon SEBs receipt of that amount from Sunbeam. The district court also granted SEBs
motion for enhanced damages of $2.65 million, awarded SEB its attorneys fees of $0.9 million, and prejudgment interest at the prime interest rate. SEB has submitted a claim for $1.8 million in prejudgment interest and a supplemental claim for
$0.25 million in attorneys fees. The Company and Pentalpha has disputed the claim for attorneys fees, but not the calculation of prejudgment interest.

By motion filed November 24, 2007, the Company and Pentalpha moved for reconsideration of the award of enhanced damages and attorneys fees based upon a decision of the Court of Appeals on
August 20, 2007 that imposed additional requirements for a finding of willfulness that the Jury did not consider in this case.

On January 18, 2008, Pentalpha filed a request with the United States Patent and Trademark Office (PTO) to reexamine the SEB patent that is the subject of this action. By communication dated March 3, 2008, the PTO
issued a decision that it would reexamine the patent based upon four prior art references that the PTO had not considered in the initial examination or that were presented in a new light. SEB filed a patent owners statement on May 3,
2008, arguing that the PTO properly issued the patent.

By letter to the district court dated March 21, 2008, the Company
and Pentalpha requested a conference to request permission to move for an order staying the action pending a final determination of the PTO on the reexamination. In response to this request, the Court scheduled a conference on June 27, 2008.
Shortly after that conference, the district court stated that subject to reviewing certain precedent, it would not intend to grant the motion for a stay and that it did intend to enter judgment in the near future.

On October 2, 2008, the district court granted the motion of the Company and Pentalpha to vacate the award of enhanced damages and
entered an amended judgment in favor of SEB for $4.9 million. The Company and Pentalpha filed a notice of appeal on October 30, 2008. SEB cross-appealed from the denial of an award of enhanced damages. The parties have fully briefed the appeal.
Oral argument is set for October 6, 2009. The outcome of the appeal cannot be determined with certainty.

The Company and
Pentalpha thereafter sought to amend the order of attachment to release amounts beyond those necessary to provide security pending appeal. By order dated November 25, 2008, the district court granted that motion and released all amounts in
excess of $5.16 million. SEB moved in the Court of Appeals to stay the order of the district court. The Court of Appeals denied that motion by order dated March 4, 2009. Subsequently, the attorneys for SEB released $0.8 million of the amount in
escrow to Pentalpha.

On July 3, 2009 the PTO issued an office action rejecting all claims of the SEB patent on the
ground that they were obvious. SEB has 60 days from that office action to respond to it. On July 16, 2009, the Company and Pentalpha filed a motion in the Court of Appeals to stay the appeal pending the reexamination. The Court of Appeals
denied the motion for a stay.

By letter dated June 11, 2009, the Company and Pentalpha requested that the district court
replace Cooper & Dunham as trustee of the escrow account on the ground that it had a conflict of interest. Cooper & Dunham opposed the motion. The court held a conference on July 30, 2009 to address this issue. At that
conference, the court indicated that it would replace Cooper & Dunham as trustee and requested that the parties suggest by August 14, 2009 candidates for that position. The Court has not yet selected a new trustee.

Based on the understanding of the Company, on August 12, 2009, the PTO conducted an interview of SEB and on August 14, 2009, the
PTO issued a report of the meeting stating that an agreement had been reached that the PTO would provide favorable treatment to the claims of the patent provided that SEB filed a satisfactory memorandum with the PTO. SEB filed that response and the
PTO has not yet taken any further action in the re-examination proceeding.

We have accrued for a loss contingency in respect
of this litigation in our consolidated balance sheet as at March 31, 2009 in an amount of $5.16 million. An adverse decision in the above action relating to attorneys fees or enhanced damages would have a material adverse effect on our
results of operations and financial condition.



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Pentalpha v. Cooper & Dunham

On April 9, 2009, Pentalpha and Global-Tech brought an action against Cooper & Dunham LLP, Wendy E. Miller, Norman H. Zivin and
SEB S.A. in the Supreme Court of the State of New York, for fraud and related causes of action.

In the complaint, the Company
alleged that defendants had fraudulently misrepresented to the U.S. District Court of the District of New York on April 13, 2006 that SEB had produced all of its documents concerning the markings on SEBs deep fryers, when in fact SEB had
failed to do so.

On May 1, 2009, defendants removed the action to the United States District Court for the Southern
District of New York. On May 26, 2009, the Company filed a motion to remand the action to state court on the ground that the federal court lacks subject matter jurisdiction. The District Court has not yet ruled on the motion to remand.

On May 29, 2009, defendants moved to dismiss the action. Pentalpha and Global-Tech served a memorandum in opposition to
that motion. The defendants filed their reply on August 17, 2009. The Court has not yet ruled on defendants motion to dismiss.

Wing
Shing Products v. Simatelex

On February 9, 2001, Wing Shing Products (BVI) Company Limited (Wing Shing
Products), commenced an action in the United States District Court for the Southern District of New York against Simatelex Manufactory Corp. claiming infringement of U.S. Patent No. Des. 348,585. The Bankruptcy Court stayed this action by
order dated February 26, 2001. The U.S. District Court for the Southern District of New York reinstated the stay of the action originally ordered by the bankruptcy court by order dated February 24, 2004, based upon Sunbeams appeal
from the June 3, 2003 memorandum decision. By order dated June 30, 2004, the district court lifted the stay and directed the attorneys for the parties to appear at a conference on July 23, 2004. The Court at that time directed the
parties to conclude discovery by the end of 2004. Discovery was completed. Simatelex then moved for summary judgment on the grounds that it is not subject to the personal jurisdiction of the New York court and that it did not infringe the design
patent because its acts occurred in Asia. Wing Shing Products moved for summary judgment on the grounds that Simatelex had infringed the design patent. The district court again stayed the action by order dated April 18, 2005, pending the
resolution of the decision of the Court of Appeals for the Federal Circuit in the action Sunbeam v. Wing Shing.

Given the
August 24, 2005 decision of the Court of Appeals for the Federal Circuit, the District court by order dated September 14, 2005, lifted the stay and directed that discovery be completed by November 1, 2005.

On November 7, 2005, the parties filed cross-motions for summary judgment on the issue of liability for design patent infringement. The
district court heard oral arguments on October 24, 2006.

On March 29, 2007, the district court entered an order
denying the motions of Simatelex for summary judgment and granting the motion of Wing Shing Products for a summary judgment on its claim that Simatelex actively induced infringement in violation of 35 U.S.C. § 271(b). A trial on the issue of
the monetary recovery of Wing Shing Products was scheduled for October 24, 2007.

The Court adjourned the trial without
date, at the request of Simatelex, on the grounds that Sunbeam has claimed, in the action involving the AD Series coffeemaker described below, that Wing Shings design patent is invalid.

On May 30, 2008, Wing Shing Products and Simatelex entered into an agreement to settle this action. Pursuant to that settlement
agreement, Simatelex agreed (i) to pay Wing Shing Products $1.8 million, (ii) to consent to the entry of a final judgment and permanent injunction restraining further infringements of the design patent and admitting that the design patent
is valid and that the AD Series products Simatelex sold infringed it, (iii) to dismiss with prejudice the counterclaim and affirmative defenses concerning the validity and enforceability of the design patent in the action Wing Shing Products v.
Simatelex, and (iv) to exchange of release. Since the execution of that settlement agreement, Simatelex paid Wing Shing Products the $1.8 million in June 2008. The Court has entered the final judgment and permanent injunction and Wing Shing
Products has recognized such $1.8 million in the consolidated statement of operations in the fiscal year ended March 31, 2009.

Wing
Shing Products v. Sunbeam Products and Simatelex

On May 9, 2006, our subsidiary, Wing Shing Products (BVI) Company
Limited (Wing Shing Products), filed an action in the United States District Court for the Southern District of New York against Sunbeam Products, Inc. and Simatelex Manufactory Co. Ltd. for infringement of United States Patent Des.
No. 348,585 based upon their sale of the coffeemakers designated as the AR Series. Defendants have responded to the complaint and counterclaimed for a declaratory judgment that the patent is invalid. All discovery, including expert discovery,
is now complete. Sunbeam moved for summary judgment on numerous grounds, including that the design patent is invalid. The parties completed briefing on the summary judgment motion on November 19, 2007.



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Pursuant to the settlement agreement in the action Wing Shing Products v. Simatelex,
Simatelex on May 30, 2008 stipulated to dismiss with prejudice its affirmative defenses and counterclaim concerning the validity of the design patent and stipulated that the design patent was valid and enforceable. The Court so ordered that
stipulation on June 4, 2008.

The Court, in an order filed on September 18, 2008, denied defendants motions
without prejudice to renewal after the Court of Appeals decided a case which may affect its decision. After the Court of Appeals rendered a decision in that case, the defendants re-filed their motions for summary judgment. The parties are awaiting a
decision form the district court.

Best Hero Limited v. Pentalpha Hong Kong Ltd.

On October 11, 2004, Best Hero Limited (Best Hero) issued a Writ in the Court of First Instance of the High Court of Hong
Kong against our subsidiary Pentalpha Hong Kong Limited (Pentalpha Hong Kong) for payment of $4,250,400. The claim relates to two purchase orders issued by Pentalpha Hong Kong on May 31, 2004 and June 1, 2004, respectively, to
Best Hero for the purchase of LCD TV panels at a total purchase price of $4,620,000. However, the quality of the initial shipment of LCD panels which were paid for was determined to be unacceptable. Accordingly, further delivery of the remaining
orders was refused. Best Hero alleged that our subsidiary has repudiated the contract and instituted the present legal proceedings to claim for damages. We intend to defend the action on the grounds that we were justified in rejecting the goods for
breach of conditions as to descriptions and sample provided by Best Hero. A Defence and Counterclaim was filed by Pentalpha Hong Kong in the High Court on December 28, 2004. Best Hero filed a Reply and Defence to the Counterclaim on
January 11, 2005. The discovery of documents in this action has been concluded and the parties are now in the course of preparing their respective witness statements.

In accordance with SFAS No. 5 Accounting for Contingencies, the Company accrued for loss contingencies in connection with
this case of $0.92 million as of March 31, 2009, including a corresponding post-judgment interest charge of $0.22 million.



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Global Display Limited v. Mico Electric (Hong Kong) Limited

On September 9, 2005, Global Display Limited (Global Display) issued a Writ in the Court of First Instance of the High Court
of Hong Kong against Mico Electric (Hong Kong) Limited (Mico) for payment of $540,000. The claim relates to a purchase contract entered into between the parties on or about November 2004 (the Contract) under which Mico agreed
to purchase from Global Display 1,500 LCD TVs at a total purchase price of $540,000. Mico refused to accept delivery of the said 1,500 pieces and alleged that the LCD TVs did not comply with their requirements. It is the position of Global Display
that Micos refusal to accept delivery of the said LCD TVs constitutes a breach of the Contract and after taking legal advice, Global Display instituted the present legal proceedings to claim against Mico for the purchase price and/or
damages under the Contract. On August 12, 2008, a judgment was entered to award Global Display a total of $170,577 together with interest from date of writ until paid. The payment was received and was recognized in the consolidated statement of
operations as other operating income in fiscal 2009.

Unasserted Claims and Assessments

Eastman Kodak/Lite Array OLED License Agreement Dispute

By an agreement dated as of July 13, 2000 and a restatement and amendment to that agreement dated as of August 31, 2005, our subsidiary, Lite Array, Inc., entered into an OLED licensing
agreement with Eastman Kodak Company (Kodak). In essence, those license agreements licensed our subsidiary to use certain intellectual property rights of Kodak in exchange for the promise of Lite Array to, among other things, pay certain
royalties to Kodak. By letter dated September 20, 2005, Kodak served notice that it terminated the license agreement based upon the failure of Lite Array to pay certain minimum royalties, subject to the right of Lite Array to cure the claimed
default within 60 days. By letter dated November 14, 2005, Lite Array notified Kodak that it has rescinded the license agreement based upon misrepresentations that Kodak made to induce Lite Array to enter into the license agreement and demanded
the return of $3.85 million Lite Array has paid to Kodak under the license agreement. The outcome of any litigation seeking the return of that $3.85 million would be uncertain. The Company cannot eliminate the possibility that Kodak may claim that
the $0.5 million minimum royalty remains due. However, the Company disputes this. Additionally, because Kodak has terminated the License Agreement, the Company has no obligation to pay ongoing license fees. Neither party has filed any legal action
with respect to this dispute.

An adverse decision in any of these legal proceedings could have a material adverse effect on
our business, results of operations and financial condition.

Included in accrued expenses in our consolidated
balance sheets as of March 31, 2009, 2008 and 2007 were provisions for legal fees of approximately $113,500, $128,411 and $60,668, respectively in relation to certain of the above cases. Unless noted above, we have not included in our financial
statements any asset or liability resulting from litigation that has not resulted in a cash deposit into or payment from bank accounts of Global-Tech or its subsidiaries.



46



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Dividends

We are a holding company and have no business operations other than ownership of our subsidiaries. In the event that we should decide to pay cash dividends, as a holding company, our ability to pay
dividends and meet other obligations would depend upon the receipt of dividends or other payments from our operating subsidiaries and our other holdings and investments. In addition, our operating subsidiaries from time to time may be subject to
restrictions on their ability to make distributions to us as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions.
Restrictions on currency conversion may be in effect from time to time but have not had a material effect on us to date.



|B. | Significant changes.
|-- | --------------------

There have been no significant changes since the date of the financial statements included in this annual report.



|Item 9. | The Offer and Listing.
|------- | ----------------------



|A. | Offer and listing details.
|-- | --------------------------

Our common shares began trading on the New York Stock Exchange, or NYSE, under the symbol GAI on April 8, 1998. Effective December 10, 2008, Global-Techs common stock was no
longer traded on the NYSE and commenced trading on the Nasdaq Stock Market (Nasdaq). The following table lists the high and low market prices on the NYSE and Nasdaq for the periods indicated.



|               |  |           |  |                                                  |  |       |  |      
|-------------- |  | --------- |  | ------------------------------------------------ |  | ----- |  | -----
|               |  | Pre-split |  | Adjustment to reflect4-for-1 reverse stock split
|               |  | High      |  | Low                                              |  | High  |  | Low  
|Fiscal 2005:   |  |           |  |                                                  |  |       |  |      
|Annual         |  | 9.83      |  | 6.73                                             |  | 39.32 |  | 26.92
|               |  |           |  |                                                 
|Fiscal 2006:   |  |           |  |                                                  |  |       |  |      
|Annual         |  | 7.20      |  | 3.53                                             |  | 28.80 |  | 14.12
|               |  |           |  |                                                 
|Fiscal 2007:   |  |           |  |                                                  |  |       |  |      
|First Quarter  |  | 4.00      |  | 3.17                                             |  | 16.00 |  | 12.68
|Second Quarter |  | 3.27      |  | 2.40                                             |  | 13.08 |  | 9.60 
|Third Quarter  |  | 6.65      |  | 2.38                                             |  | 26.60 |  | 9.52 
|Fourth Quarter |  | 3.53      |  | 2.72                                             |  | 14.12 |  | 10.88
|Annual         |  | 6.65      |  | 2.38                                             |  | 26.60 |  | 9.52 
|               |  |           |  |                                                 
|Fiscal 2008:   |  |           |  |                                                  |  |       |  |      
|First Quarter  |  | 4.40      |  | 2.96                                             |  | 17.60 |  | 11.84
|Second Quarter |  | 3.43      |  | 2.57                                             |  | 13.72 |  | 10.28
|Third Quarter  |  | 5.85      |  | 2.71                                             |  | 23.40 |  | 10.84
|Fourth Quarter |  | 4.43      |  | 2.60                                             |  | 17.72 |  | 10.40
|Annual         |  | 5.85      |  | 2.57                                             |  | 23.40 |  | 10.28
|               |  |           |  |                                                 
|Fiscal 2009:   |  |           |  |                                                  |  |       |  |      
|First Quarter  |  | 4.02      |  | 2.42                                             |  | 16.08 |  | 9.68 
|Second Quarter |  | 3.88      |  | 2.29                                             |  | 15.52 |  | 9.16 
|Third Quarter  |  |          |  |                                                 |  | 12.00 |  | 6.00 
|Fourth Quarter |  |          |  |                                                 |  | 11.48 |  | 6.20 
|Annual         |  |          |  |                                                 |  | 16.08 |  | 6.00 
|               |  |           |  |                                                 
|Fiscal 2010:   |  |           |  |                                                  |  |       |  |      
|March 2009     |  |          |  |                                                 |  | 8.00  |  | 6.20 
|April 2009     |  |          |  |                                                 |  | 8.80  |  | 6.40 
|May 2009       |  |          |  |                                                 |  | 9.50  |  | 7.63 
|June 2009      |  |          |  |                                                 |  | 10.75 |  | 8.35 
|July 2009      |  |          |  |                                                 |  | 9.34  |  | 7.31 
|August 2009    |  |          |  |                                                 |  | 9.75  |  | 8.07 



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|B. | Plan of distribution.
|-- | ---------------------

Not applicable.



|C. | Markets.
|-- | --------

See Item 9.AThe Offer and ListingOffer and Listing Details above.



|D. | Selling shareholders.
|-- | ---------------------

Not applicable.



|E. | Dilution.
|-- | ---------

Not applicable.



|F. | Expenses of the issue.
|-- | ----------------------

Not applicable.



|Item 10. | Additional Information.
|-------- | -----------------------



|A. | Share capital.
|-- | --------------

Not applicable.



|B. | Memorandum and articles of association.
|-- | ---------------------------------------

Objects and Purposes

Our objects and purposes are described in
Clause 5 of our memorandum of association and generally allow us to engage in any act or activity that is not prohibited under British Virgin Islands law.

Directors

British Virgin Islands law and our articles of association
provide that no agreement or transaction between us and one or more of our directors or any entity in which any director has a financial interest or to which any director is related, including as a director of that other entity, is void or voidable
for this reason only or by reason only that the director is present at the meeting of directors or at the meeting of the committee of directors that approves the agreement or transaction or that the vote or consent of the director is counted for
that purpose if the material facts of the interest of each director in the agreement or transaction and his or her interest in or relationship to any other party to the agreement or transaction are disclosed in good faith or are known by the other
directors. In addition, a director who has an interest in any particular business to be considered at a meeting of directors or shareholders may be counted for the purposes of determining whether the meeting is duly constituted.

Our articles of association provide that the directors may, by a resolution of directors, fix the emoluments of directors with respect to
services to be rendered in any capacity to us.

British Virgin Islands law and our articles of association provide that our
business and affairs shall be managed by our directors, who in addition to the powers and authorities expressly conferred by our articles of association, may also exercise all such powers of the Company as are not by our memorandum, articles of
association or British Virgin Islands law required to be exercised by the shareholders.

British Virgin Islands law and our
articles of association do not contain an age limit requirement for our directors. Our articles of association do not contain a share qualification for directors.

Rights of Shareholders

Our memorandum authorizes the issuance of
12,500,000 ordinary shares of $0.04 each and 250,000 preference shares of $0.04 each. We do not have any preference shares currently outstanding. The preference shares may be issued by our directors, without further action by shareholders. Our
directors also have the right to fix by resolution of directors the designations, powers, preferences, rights, qualifications, limitations and restrictions of the preference shares, such as voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions.



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Dividend rights. Subject to the preferential and other dividend rights of any
outstanding series of preference shares, holders of our common shares will be entitled to equal dividends per share when, as and if declared by our board of directors. The board may declare interim dividends and recommend a final annual dividend
from retained earnings available for cash dividends as determined for statutory purposes at such times and in such amounts as they may determine. Dividends may only be declared and paid out of surplus. See Item 8.AConsolidated Statements
and Other Financial InformationDividend Policy. According to our articles of association, all dividends that remain unclaimed for a period of three years after their declaration may be forfeited by our board of directors for our benefit.

Voting rights. Holders of our common shares have one vote for each share held on all matters submitted to a
vote of shareholders. Our board of directors is not classified and therefore, all the directors stand for reelection at the same interval.

Liquidation rights. In the event we are liquidated or wound up, the holders of our common shares will be treated equally on a per share basis and will be entitled to receive all of our
remaining assets following distribution of the preferential and/or other amounts to be distributed to the holders of our preference shares.

Other provisions. We have no provisions in either our memorandum or articles of association for redemption or sinking fund provisions, or providing that any shareholder has a right to share
in our profits. Our common shares are not subject to further capital calls by us. We have no provisions in our memorandum or articles of association that discriminate against any existing or prospective holder of our common shares as a result of the
existing or prospective holders owning a substantial number of our common shares.

Changes to Rights of Shareholders

Under our memorandum and articles of association and British Virgin Islands law, our memorandum and articles of association may be amended
by a resolution of directors or a resolution of members. This includes amendments



| |  |  | increasing or reducing our authorized capital,
| | - |  | ----------------------------------------------



| |  |  | authorizing the issuance of different classes of shares, including preference shares, and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | increasing or reducing the par value of our shares.
| | - |  | ---------------------------------------------------

The directors may also increase our capital without shareholder approval by transferring a portion of our surplus to capital. Or the directors may reduce our capital without shareholder approval, subject
to the requirements of British Virgin Island law, by transferring a portion of our capital to surplus. Our memorandum and articles of association provide that differences which may rise between us and any of our shareholders, their executors,
administrators or assigns relating to our memorandum and articles of association shall, unless the parties agree to a single arbitrator, be referred to two arbitrators to be chosen by each of the differing parties. No amendment to our memorandum and
articles of association will be effective unless and until it is filed with the Companies Registry of the British Virgin Islands.

Annual,
General and Extraordinary Meetings of Shareholders

British Virgin Islands law and our articles of association do not
require us to hold an annual meeting. We do, however, typically hold an annual meeting of shareholders for the election of directors and for such other business as may come before the meeting.

Under British Virgin Islands law, unless otherwise provided by a companys memorandum or articles of association, the directors may
call meetings of shareholders at any time. Our articles of association require the directors to call meetings upon a written request from shareholders holding 30% or more of the outstanding voting shares.



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Our articles of association provide that notice of all meetings of shareholders shall be
given not fewer than seven days before the date of the proposed meeting to those persons whose names appear as a shareholder in our share register on the date notice is given and are entitled to vote at the meeting. A meeting of shareholders may be
called on shorter notice, however, if members holding, in general, at least 90% of the total number of shares entitled to vote on all matters to be considered at the meeting consent or all the shareholders holding shares entitled to vote on all
matters to be considered at the meeting waive the right of notice.

Limitations on Share Ownership

British Virgin Islands law and our memorandum and articles of association do not impose any limitations on the right of anyone to own, hold
or exercise voting rights to our common shares. British Virgin Islands law does not impose any limitation on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our common shares.

Indemnity and Insurance

Our articles of association provide that we may indemnify directors, officers, liquidators and other individuals who act on our behalf or upon our request for liabilities and expenses that they may incur as a result of their actions. We may
only indemnify a person who acted honestly and in good faith with a view to our best interests and, in the case of criminal proceedings, if the person had no reasonable cause to believe that his or her conduct was unlawful. The decision of the
directors as to whether a person acted honestly and in good faith is, in the absence of fraud, conclusive unless a question of law is involved. We also are entitled under our articles of association to purchase and maintain directors and officers
liability insurance.

Certain Anti-Takeover Matters

Under our memorandum and articles of association and the laws of the British Virgin Islands, our memorandum and articles of association may be amended by a resolution of directors or a resolution of
members. This includes amendments authorizing the creation of different classes of shares, including preference shares. Our ability to amend our memorandum and articles of association by a resolution of directors could have the effect of delaying,
deterring or preventing a change in control of us without any further action by our shareholders including but not limited to, a tender offer to purchase our common shares at a premium over then current market prices. In addition, the issuance of
preference shares without shareholder approval, on terms as the board of directors may determine, could adversely affect the voting power of the holders of our common shares, including the loss of voting control to others. Written consent or
resolution passed at a meeting of the holders of the relevant shares is required to vary class shareholders right.

Ownership
Information

British Virgin Islands law and our memorandum and articles of association do not provide that information
about our shareholders, even those owning significant percentages of our shares, must be disclosed.

Differences from United States Law

In general, the laws of the British Virgin Islands governing the provisions of our memorandum and articles of association
discussed above are not significantly different than the laws governing similar provisions in the charter documents of Delaware companies, other than with respect to the holding of an annual meeting for our shareholders and the amendment of our
memorandum and articles of association. We are not required by the laws of the British Virgin Islands to hold an annual meeting for our shareholders but we would be required to hold an annual meeting if we were incorporated under Delaware law. If we
choose not to hold an annual meeting, then the ability of our shareholders to submit and vote on proposals would be significantly less than that of shareholders in U.S. companies incorporated in Delaware. In addition, our board of directors may
amend our memorandum of association under certain circumstances without shareholder approval, whereas Delaware law requires shareholders to approve any amendments to a Delaware corporations certificate of incorporation.

We are a British Virgin Islands company and our affairs are governed by, among other things, the International Business Companies Act
(IBCA) of the British Virgin Islands. IBCA of British Virgin Islands differs from laws applicable to United States corporations and their shareholders. Since it is impractical and burdensome to list all the difference items, set forth
below is a brief description of identifiable differences between the provisions of IBCA applicable to us and those followed by domestic companies under the Nasdaq listing standards.

Board composition

Pursuant to section 42 of IBCA, the business and affairs
of a BVI company shall be managed by a board of directors that consists of one or more persons but it is silent on the requirement of having a majority of independent directors. In addition, there is no requirement to evaluate directors
independence from management.



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Scheduled independent director meeting

There is no requirement that non-management directors must meet at regularly scheduled executive meetings not attended by management. Under
Section 48(1) of IBCA, the directors may meet at such times and in such manner and places within or outside the British Virgin Islands as the directors may determine to be necessary or desirable.

Nominating/corporate governance committee

The Nasdaq listing standards require companies to have a nominating/corporate governance committee comprised of independent directors governed by a written charter establishing minimum requirements. There
is no such requirement under BVI rules.

Compensation committee

The Nasdaq listing standards require companies to have a compensation committee comprised entirely of independent directors governed by a
written charter establishing certain minimum requirements. There is no such requirement under the BVI rules.

Audit committee

The Nasdaq listing standards require companies to have an audit committee, consisting of a minimum of three independent
members of the board of directors governed by a written charter establishing the duties and responsibilities of the audit committee. There is no such requirement under BVI rules. However, we have an audit committee governed by a written charter
consisting of three independent directors as defined in Rule 10A-3 of the Exchange Act.

CEO Certification

The Chief Executive Officer must notify the Nasdaq in writing if an executive officer of the Company becomes aware of any material
non-compliance with the Nasdaq corporate governance listing requirements, notwithstanding our status as a foreign private issuer.

Code of
business conduct and ethics

The Nasdaq standards require that each listed company adopt and disclose a code of business
conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. We have such a Code adopted for senior financial officers including the Companys principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as is permitted for a foreign private issuer.

Indemnification

Pursuant to subsection 57(1) of IBCA, a company under its
Articles or Memorandum, may provide for indemnification for directors and officers, except where their actions are a violation of their fiduciary duties or are performed in a willfully negligent manner. It also provides for reimbursement of all
expenses including legal fees and indemnifications against civil fraud or the consequence of committing a crime. However, the SEC provides for reimbursement to the Company by chief executive officers and chief financial officers of bonuses, or other
incentive-based compensation and stock sale profits during the year following an accounting restatement due to material noncompliance or as a result of misconduct.

Inspection of books and records

Subsection 67(4) of IBCA allows a company
to refuse a request from shareholders or their attorneys to inspect the share register, the books and records and contracts kept by a company, if the Company, by resolution of its directors, determines that it is not the best interest of the Company
to do so. However, we are required to provide shareholders and the Nasdaq certain material information under Nasdaq rules.



|C. | Material contracts.
|-- | -------------------

On March 17, 2006, we contributed our OLED fixed assets (including a clean room and prototyping equipment) in Dongguan Lite Array Company Limited into Lite Array Holdings Limited (Lite
Array) and also transferred all of our know-how and personnel associated with our OLED development program into Lite Array.

Effective April 3, 2006, we sold 70% of Lite Array to Anwell for a $5.6 million convertible note. The transaction resulted in a net gain in fiscal 2007. The Company accounts for its interests in Lite Array and its subsidiaries (the
jointly-controlled entities), in which the company does not have unilateral control, but joint control, under the equity method. The Company has discontinued the recognition of its share of losses of the jointly-controlled entities
exceeded the Companys interests in the jointly-controlled entities.



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|D. | Exchange controls.
|-- | ------------------

General

There are currently no limitations either under British Virgin Islands or U.S. law or in our articles
of association to the rights of shareholders to hold or vote common shares, or to pay dividends, interest or other payments to nonresident shareholders. There are currently no restrictions in the British Virgin Islands regarding our export and
import of capital, including the availability of cash and cash equivalents for use by our affiliated companies.



|E. | Taxation.
|-- | ---------

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

General

This section summarizes the material U.S. federal income tax consequences to holders of our common shares as of the date of this annual
report. The summary applies to you only if you hold our common shares as a capital asset for tax purposes (that is, for investment purposes). The summary does not cover state, local or foreign law, or the possible application of U.S. federal estate,
gift or excise tax. In addition, this summary does not apply to you if you are a member of a class of holders subject to special rules, such as:



| |  |  | a dealer in securities or currencies;
| | - |  | -------------------------------------



| |  |  | a trader in securities that elects to use a mark to market method of accounting for your securities holdings;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | a financial institution or a bank;
| | - |  | ----------------------------------



| |  |  | an insurance company;
| | - |  | ---------------------



| |  |  | a tax-exempt organization;
| | - |  | --------------------------



| |  |  | a person that holds our common shares as part of a straddle or a hedging, integrated, constructive sale or conversion transaction for tax purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a person whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | a person liable for alternative minimum tax; or
| | - |  | -----------------------------------------------



| |  |  | a person that owns, or is treated as owning, 10% or more of our common shares.
| | - |  | ------------------------------------------------------------------------------



| |  |  | certain former U.S. citizens and residents who have expatriated; or
| | - |  | -------------------------------------------------------------------



| |  |  | a person who receives our shares pursuant to the exercise of employee stock options or otherwise as compensation.
| | - |  | -----------------------------------------------------------------------------------------------------------------

The discussion is based on current law. Changes in the law may alter your tax treatment of holding our common shares, possibly on a
retroactive basis.

The discussion does not cover tax consequences that depend upon your particular tax circumstances. We
recommend that you consult your tax advisor about the consequences of your holding our common shares in your particular situation.

For purposes of the discussion below, you are a U.S. holder if you are a beneficial owner of our common shares who or which is:



| |  |  | an individual U.S. citizen or resident alien (as specifically defined for tax purposes);
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | a corporation, or entity taxable as a corporation, that was created under U.S. law (federal or state);
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | an estate whose income is subject to U.S. federal income tax regardless of its source; or
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | a trust (a) if a U.S. court can exercise primary supervision over the trusts administration and one or more U.S. persons are authorized to
control all substantial decisions of the trust or (b) if it has a valid election in effect under applicable treasury regulations to be treated as a United States person.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If you are not a U.S. holder, you are a Non U.S. holder, and the discussion below titled Tax Consequences to Non U.S.
Holders will apply to you.

If a partnership holds our common shares, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the partnership. If you are a partner of a partnership holding common shares, you should consult your tax advisor.



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Tax Consequences to U.S. Holders

Distributions. We typically retain all earnings for use in the operation and expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future. If distributions are made, however, the gross amount of any such distribution (other than in liquidation) that you receive with respect to our common shares generally will be taxed to you as
dividend income to the extent such distribution does not exceed our current or accumulated earnings and profits, as calculated for U.S. federal income tax purposes. Such income will be includable in your gross income on the date of receipt and may
be treated as qualified dividend income, which is currently subject to taxation at a maximum rate of 15% in the case of individual taxpayers (subject generally, to a 60-day holding period requirement). In the event of such a
distribution, we will indicate its eligibility for treatment as qualified dividend income on the 1099-DIV form or other informational return that is furnished to recipients. To the extent any distribution exceeds our accumulated earnings
and profits, the distribution will first be treated as a tax free return of capital to the extent of your adjusted tax basis in our common shares and will be applied against and reduce such basis on a dollar-for-dollar basis (thereby increasing the
amount of gain and decreasing the amount of loss recognized on a subsequent disposition of such shares). To the extent that such distribution exceeds your adjusted tax basis, the distribution will be taxed as a gain recognized on a sale or exchange
of our common shares. See Sale or Other disposition of common shares below. Because we are not a U.S. corporation, no dividends received deduction will be allowed to corporations with respect to dividends paid by us. Dividends paid with
respect to our common shares will generally be treated as foreign source passive income or, in the case of certain types of financial institutions, financial services income, for purposes of computing allowable foreign tax
credits for U.S. foreign tax credit purposes.

Sale or other disposition of common shares. Generally speaking,
in connection with the sale or other taxable disposition of our common shares:



| |  |  | you will recognize a gain or loss equal to the difference (if any) between:
| | - |  | ---------------------------------------------------------------------------



| |  |  | the amount realized on such sale or other taxable disposition, and
| | - |  | ------------------------------------------------------------------



| |  |  | your adjusted tax basis in such common shares;
| | - |  | ----------------------------------------------



| |  |  | any gain or loss will be a capital gain or loss and will be long term capital gain or loss if your holding period for our common shares is more than
one year at the time of such sale or other disposition;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any gain or loss will generally be treated as having a U.S. source for U.S. foreign tax credit purposes; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | your ability to deduct capital losses is subject to limitations.
| | - |  | ----------------------------------------------------------------

Passive foreign investment company. U.S. holders generally would be subject to a special, adverse tax regime (that would
differ in certain respects from that described above) if we are or were to be classified as a passive foreign investment company for U.S. federal income tax purposes. Although the determination of whether a corporation is a passive foreign
investment company is made annually, and thus may be subject to change, we do not believe that we are, nor do we expect to become, a passive foreign investment company. Notwithstanding the foregoing, we urge you to consult your own U.S. tax advisor
regarding the adverse U.S. federal income tax consequences of owning the shares of a passive foreign investment company and of making certain elections designed to lessen those adverse consequences.

Tax Consequences to Non U.S. Holders

Distributions. If you are a Non U.S. holder, you generally will not be subject to U.S. federal income tax, including withholding tax, on distributions made on our common shares unless you
conduct a trade or business in the United States and the distributions are effectively connected with the conduct of that trade or business (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal
income tax on a net income basis in respect of income from our common shares, such distributions are attributable to a permanent establishment that you maintain in the United States).

If you fail the above test, you generally will be subject to tax in respect of such dividends in the same manner as a U.S. holder, as
described above. In addition, any effectively connected dividends received by a non U.S. corporation may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Sale or other disposition of common shares. If you are a Non U.S.
holder, you will not be subject to U.S. federal income tax, including withholding tax, in respect of gain recognized on a sale or other taxable disposition of our common shares unless:



| |  |  | your gain is effectively connected with a trade or business that you conduct in the United States (and, if an applicable income tax treaty so requires
as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of gain from the sale or other disposition of our common shares, such gain is attributable to a permanent establishment maintained by you in the United
States); or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | you are an individual Non U.S. holder and are present in the United States for at least 183 days in the taxable year of the sale or other disposition,
and certain other conditions exist.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

You will be subject to tax in respect of any gain effectively connected
with your conduct of a trade or business in the United States in the same manner as a U.S. holder, as described above. Effectively connected gains realized by a non U.S. corporation may also, under certain circumstances, be subject to an additional
branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.

Backup
Withholding and Information Reporting

Payments (or other taxable distributions) in respect of our common shares that are
made in the United States or by a U.S. related financial intermediary will be subject to U.S. information reporting rules. Unless we are notified by the IRS, you will not be subject to backup withholding of U.S. federal income tax
currently at a rate of 28% provided that:



| |  |  | you are a corporation or other exempt recipient; or
| | - |  | ---------------------------------------------------



| |  |  | you provide a taxpayer identification number (which, in the case of an individual, is his or her taxpayer identification number)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

and certify that no loss of exemption from backup withholding has occurred.

If you are not a U.S. person, you generally are not subject to information reporting and backup withholding, but you may be required to
provide a certification of your non U.S. status in order to establish that you are exempt.

Amounts withheld under the backup
withholding rules may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue
Service.

BRITISH VIRGIN ISLANDS TAX CONSEQUENCES

Under the IBCA of the British Virgin Islands as currently in effect, a holder of common equity, such as our common shares, who is not a
resident of the British Virgin Islands is exempt from British Virgin Islands income tax on dividends paid with respect to the common equity and all holders of common equity are not liable to the British Virgin Islands for income tax on gains
realized on sale or disposal of such shares. The British Virgin Islands does not impose a withholding tax on dividends paid by a company incorporated under the IBCA.

There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on companies incorporated under the IBCA. In addition, our common shares are not subject to transfer taxes, stamp
duties or similar charges.

There is no income tax treaty or convention currently in effect between the United States and the
British Virgin Islands.



|F. | Dividends and paying agents.
|-- | ----------------------------

Not Applicable.



|G. | Statement by experts.
|-- | ---------------------

Not Applicable.



|H. | Documents on display.
|-- | ---------------------

For further information with respect to us and our common shares, we refer you to the filings we have made with the SEC. Statements contained in this annual report concerning the contents of any contract
or any other documents are not necessarily complete. If a contract or document has been filed as an exhibit to any filing we have made with the SEC, we refer you to the copy of the contract or document that has been filed. Each statement in this
annual report relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. We are subject to certain of the informational requirements of the Exchange Act and, in accordance with the Exchange Act, file
reports and other information with the SEC. Our registration statements, including the exhibits and schedules thereto, and such reports and other information, can be inspected and copied at the following public reference facilities maintained by the
SEC:

Woolworth Building

233 Broadway

New York, New York 10279

175 W. Jackson Boulevard

Suite 900

Chicago, Illinois 60604



54



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Copies of these materials can also be obtained by mail at prescribed rates from the Public
Reference Section of the SEC, 100 F Street, NE, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains registration statements, reports and other information regarding registrants that file
electronically with the SEC at http://www.sec.gov.



|I. | Subsidiary information.
|-- | -----------------------

Not Applicable.



|Item 11. | Quantitative and Qualitative Disclosures about Market Risk.
|-------- | -----------------------------------------------------------

We are exposed to the impact of foreign currency fluctuations, interest rate changes and the potential increases in cost of plastic resins and metals. We have not entered into foreign currency hedges,
interest rate swaps or commodity futures for speculative purposes or otherwise.

We sell a majority of our products in U.S.
dollars and Chinese Renminbi and pay for our materials and components in U.S. dollars, Hong Kong dollars and Chinese Renminbi. We pay labor and overhead expenses in Renminbi, Hong Kong dollars and U.S dollars. The exchange rate of the Hong Kong
dollar to the U.S. dollar has been fixed by the Hong Kong Government since 1983 at approximately HK$7.80 to US$1.00 through the currency-issuing banks in Hong Kong. Consequently, the Company has not experienced any currency exchange risk exposure
relating to the Hong Kong dollar in the past. This could change in the future if those in Hong Kong who are proposing a floating currency system prevail in the ongoing debate over whether to continue to peg the Hong Kong dollar to the U.S. dollar.

Effective January 1, 1994, China adopted a floating currency system whereby the official exchange rate equals the market
rate. Since the market rate and official rates were unified, the value of the Renminbi against the Hong Kong dollar and U.S. dollar was stable until 2006. On July 21, 2005, the Peoples Bank of China (PBOC) decided to abandon
its policy of pegging the Renminbi to the U.S. dollar and link the Renminbi to a basket of currencies. The PBOC also strengthened the exchange rate of the Renminbi at that time to 8.11 to the U.S. dollar from 8.27. The Chinese authorities had
therefore taken their first step towards a floating currency. As of March 31, 2009, the exchange rate was 6.836 and as of September 16, 2009 the exchange rate was 6.826, a 1.5% appreciation since our fiscal year end. Any appreciation costs
U.S. companies more to buy Chinese products. Revaluation will have a different impact on different segments of our business but we believe our most significant foreign exchange risk results from our manufacturing operations in China. Labor and other
overhead expenses (excluding non-cash depreciation charges) in our Chinese factory incurred in Renminbi were approximately 10.1% and 12.6% of our net sales in fiscal 2008 and 2009, respectively. We believe any future appreciation of the Renminbi
would result in an increase in our operating costs in China and materially impact our financial results. A 1% appreciation in the Renminbi would increase our operating loss by approximately $68,000. Our foreign currency exposure in our assets and
liabilities were immaterial at March 31, 2009.

Since the Hong Kong dollar is pegged to the U.S. dollar, we might have to
bear higher interest expense for any future bank loans if U.S. interest rates were to increase. We currently do not hedge our exposure to floating interest rate risk and have no debt outstanding denominated in currencies other than the U.S. dollar.

We are dependent upon outside suppliers for all of our raw material needs, including plastic resins and various metals.
Consequently, the results of our operations are subject to price fluctuations in these raw materials. The plastic resins used by us are derived from natural gas liquids, which may fluctuate as a result of changes in natural gas and crude oil prices,
and the relative capacity, supply and demand for resin and petrochemical intermediates from which the resins are produced. We have no long-term supply contracts for the purchase of plastic resin, although we do generally maintain a 30-day supply. In
the past, we have had limited ability to increase prices to offset plastic resin price increases. Currently, plastic resin prices are increasing significantly due to the international supply and demand for oil and the political instability in the
Middle East. We expect that plastic resin prices will continue to increase in the near future and that it will be difficult for us to pass these cost increases on to our customers. Our total purchase of plastic resins in fiscal 2007, 2008 and 2009
were $8 million, $16 million and $9 million, respectively. If plastic resins prices in fiscal 2009 were to increase on an average of 10.0% from March 31, 2009 prices, and assuming we use the same amount of plastic resins as during
fiscal 2009, the additional annual expense to us in fiscal 2010 would be approximately $1.0 million. As of August 31, 2009, resin prices had already increased over 7.0% from their March 31, 2009 level and our customers have not to date to
compensated us in any way for the additional cost.

We also use significant quantities of stainless steel and copper wire.
Copper used primarily in our electric motors and wiring has been particularly volatile. The spot price in cent per pound has risen from $135.85 as of March 31, 2004 to $170.04 as of March 31, 2009. Since our year end copper increased by
64.4% to $279.61 as of August 31, 2009.



55



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##### Table of Contents

|Item 12. | Description of Securities Other than Equity Securities.
|-------- | -------------------------------------------------------



|A. | Debt securities.
|-- | ----------------

Not applicable.



|B. | Warrants and rights.
|-- | --------------------

Not applicable.

PART II



|Item 13. | Defaults, Dividend Arrearages and Delinquencies.
|-------- | ------------------------------------------------

We are not in material default of any of our obligations relating to indebtedness. We are not delinquent with respect to the payment of dividends.



|Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds.
|-------- | -----------------------------------------------------------------------------

During our last fiscal year, we have not materially modified any of the rights or instruments defining the rights of our security holders. We
do not have any registered securities that are secured by our assets. The trustees or paying agents for our securities have not changed during the last fiscal year.

Use of Proceeds

On April 7, 1998, the SEC declared effective our
Registration Statement on Form F-1, File No. 333-8462, for the registration of 4,830,000 common shares in our initial public offering. Net proceeds from the initial public offering were approximately $81.0 million. As of April 2003, we had
used the net proceeds of the offering as follows: approximately $16.5 million for a payment of a dividend; $9.8 million for the acquisition of a majority interest in Lite Array; $6.6 million for the expansion of the Dongguan facility and the
purchase of fuel energy saving equipment; $2.0 million for the purchase of machinery, tooling and equipment; and $10.4 million for the repayment of indebtedness as reported in prior filings. After our listing on the NYSE for five years, we no longer
keep track of the use of proceeds as there are continuous inflows and outflows of cash from operating and financing activities. We believe we can finance our existing business and new projects from the cash generated from our operating, financing
and investing activities and we are able to maintain an adequate level of funds for potential business development or acquisition. Most of our fund balance continues to remain in temporary investments, including short-term marketable securities,
U.S. dollar denominated interest-bearing savings accounts, a money market funds, and other cash-related instruments.



|Item 15. | Controls and Procedures
|-------- | -----------------------



|(a) | Disclosure controls and procedures
|--- | ----------------------------------

As of March 31, 2009, an evaluation was performed, under the supervision and with the participation of the Companys management including the Companys Chief Executive Officer and Acting
Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon this evaluation and for the reasons stated below, such
officers concluded that the Companys disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act (1) is recorded,
processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms and (2) is accumulated and communicated to the Companys management including the Chief Executive
Officer and Acting Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.



|(b) | Managements annual report on internal control over financial reporting
|--- | -----------------------------------------------------------------------

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting. The Companys internal control over financial reporting is a process
designed under the supervision of the Companys principal executive and financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Companys financial statements for
external reporting purposes in accordance with U.S. generally accepted accounting principles.



56



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The Companys internal control over financial reporting includes policies and
procedures that:



| |  |  | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that
could have a material effect on the Companys financial statements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management has assessed the
effectiveness of its internal control over financial reporting as of March 31, 2009 based on the framework established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this assessment, management has determined that the Companys internal control over financial reporting is not effective as of March 31, 2009. In making its assessment, management identified a potential
material weakness concerning the Companys internal accounting staffs understanding of complex accounting issues related to U.S. generally accepted accounting principles (GAAP), including accounting for income taxes. In
response, external consultants were engaged to perform a number of tasks to prepare specific accounting analysis and necessary corrections were made prior to any public announcements or filings with the SEC. Additionally, as part of its ongoing
efforts to address the potential weakness described above, the Company intends to retain external consultants and employees who have sufficient and appropriate technical skills to help the Company identify and resolve accounting and reporting
issues.



|(c) | Attestation report of the registered public accounting firm
|--- | -----------------------------------------------------------

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.



|(d) | Changes in Internal Control over financial reporting
|--- | ----------------------------------------------------

Except as indicated in section (b) above, there were no changes that incurred during the period covered by this Form 20-F, that materially affected, or are likely to affect our internal control over
financial reporting.



|Item 16. | [Reserved]
|-------- | ----------

Not
applicable.



|Item 16A. | Audit Committee Financial Expert
|--------- | --------------------------------

The audit committee is composed entirely of independent directors and is responsible for reviewing, and making recommendations to the Board of Directors regarding the Companys accounting policies, reporting practices, internal
controls, annual and quarterly financial statements and financial information included in the Companys reporting and disclosure documents with the SEC. The Committee also reviews significant audit findings, material litigation and claims
whether asserted or unasserted and any issues between management and the external auditors.

The audit committee closely
monitors the requirements of the Sarbanes-Oxley Act of 2002. Additionally, the audit committee assesses its mandate and performance at least annually.

The audit committee is currently comprised of three independent directors, Barry J. Buttifant, Patrick Po-On Hui and Ken Ying-Keung Wong. Mr. Buttifant is the chairman of the audit committee. The
board of directors has determined that Barry J. Buttifant meets or exceeds the training, knowledge and requirements for a financial expert and is thus designated as the Companys financial expert on the audit committee.

Mr. Buttifant is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified
Public Accountants. He is also a fellow member of the Chartered Management Institute; the Hong Kong Management Association and the Hong Kong Institute of Directors. See Item 6.ADirectors and senior management for his biography.



57



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|Item 16B. | Code of Ethics
|--------- | --------------

The
Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (See Exhibit 11.1)



|Item 16C. | Principal Accountant Fees and Services
|--------- | --------------------------------------

Ernst & Young became our independent auditors in fiscal 2003. Fees payable for the fiscal years ended March 31, 2009 and 2008 to Ernst & Young are detailed below:



|                   |  |                                 |         |                                 |   |        
|------------------ |  | ------------------------------- | ------- | ------------------------------- | - | -------
|                   |  | Fiscal Year EndedMarch 31, 2009 |         | Fiscal Year EndedMarch 31, 2008
|Audit fees         |  | $                               | 278,054 |                                 | $ | 276,283
|Audit-related fees |  |                                 | Nil     |                                 |   | Nil    
|Tax fees           |  |                                 | Nil     |                                 |   | Nil    
|All other fees     |  |                                 | Nil     |                                 |   | Nil    
|                   |  |                                 |         |                                 |   |        
|Total fees         |  | $                               | 278,054 |                                 | $ | 276,283
|                   |  |                                 |         |                                 |   |        

The nature of each category of fee is described below:

Audit Fees.The audit fees include fees for audit or review of the Companys financial reports plus fees for services that generally an
auditor can reasonably provide. The services include the statutory audit and review of documents filed with SEC.

Audit-Related Fees.We did not engage Ernst & Young for any other audited-related services arrangement.

Tax Fees.We did not
engage Ernst & Young for any other tax services arrangement.

All Other Fees.We did not engage Ernst & Young
for any other services arrangement.

Pre-Approval Polices and Procedures.The audit committee has determined that the provision
of services other than audit services should be provided by a firm other than the one that performs our audit. The audit committee, pursuant to its written charter, pre-approves all audit services provided by Ernst & Young. To the extent
Ernst & Young provides any non-audit services in the future the audit committee is empowered to also pre-approve such services. Currently, our independent auditor is Ernst & Young and we engage PricewaterhouseCoopers as our main
tax advisor.



|Item 16G. | Corporate Governance
|--------- | --------------------

The
Companys corporate governance practices are governed by applicable British Virgin Islands law, as well as by its Memorandum and Articles of Association. We have securities that are registered with the SEC and are listed on the Nasdaq, and are
therefore subject to corporate governance requirements applicable to foreign private issuers listed on the Nasdaq. Nasdaq Marketplace Rule 5615(a)(1)(3) provides that foreign private issuers listed on Nasdaq may elect to follow home country
corporate governance practices in lieu of certain of the corporate governance requirements set forth in the Rule 5400 series, Rule 5250(d), and Rules 5210(c) and 5255, with the exception that all such issuers shall: (i) comply with Rule 5625
(Notification of Material Noncompliance); (ii) have an audit committee that satisfies Rule 5605(c)(3) that consists of members that meet the criteria for independence referenced in Rule 5605(c)(2)(A)(ii); and (iii) comply with Rules
5210(c) and 5255 (Direct Registration Program) unless prohibited from complying by law or regulation in its home country. Furthermore, foreign private issuers electing to follow home country practice in lieu of a requirement of Rules 5600, 5250(d),
5210(c) or 5255 are required to submit to Nasdaq a written statement from an independent counsel in such issuers home country certifying that the issuers practices are not prohibited by the home countrys laws and, in the case of
Rules 5210(c) and 5255, certifying they a law or regulation in the home country prohibits compliance. The Company submitted the required certification in connection with its listing application on November 26, 2008.



|                                                                   |  |                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                        
|------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Rules                                                              |  | Requirements                                                                                                                                                                                                                                                                                                                                |  | Company Compliance                                                                                                                                     
|Rule 5605(b)(1) Majority Independent Board                         |  | A majority of the board of directors must be comprised of Independent directors as defined in Rule 5605(a)(2).                                                                                                                                                                                                                            |  | It is not mandatory for Global-Tech to comply with this provision. However, Global-Techs board consists of six members of which three are
independent.
|                                                                   |  |                                                                                                                                                                                                                                                                                                                                            
|Rule 5605(a)(2) and 5605(b)(1) Definition of Independent Directors |  | (a)    Independent director should be a person other than an officer or employee of the Company or its
subsidiaries or any other individual having a relationship, which, in the opinion of the Companys board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. |  | Global-Tech considers whether its board members meet the requirements of being independent.                                                          



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|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                            
|----------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Rules                                                                         |  | Requirements                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Company Compliance                                                                                                                                                                                         
|                                                                              |  | (b)    The following persons shall not be considered independent:                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                            
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                              |  | (i)     A director who is, or during the past three years was, employed by the Company;                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                            
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                              |  | (ii)    A director who accepts or who has a Family Member who accepts any payments from the Company in excess
of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than compensation for board service, compensation paid to a Family Member who is an employee of the Company,
benefits under a tax-qualified retirement plan, or non-discretionary compensation; |  |                                                                                                                                                                                                            
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                              |  | (iii)  A director who is a Family Member of an individual who is, or during the post three years was employed by the
Company as an executive officer;                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                            
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                              |  | (iv)   A director who is, or has a Family Member who is, a current partner of the Companys outside auditor,
or was a partner or employee of the Companys outside auditor who worked on the Companys audit at any time during any of the past three years;                                                                                                                                                                                       |  |                                                                                                                                                                                                            
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 5605(b)(2) Executive Sessions                                            |  | The board must have regularly scheduled (at least twice a year) meetings at which only independent directors are present.                                                                                                                                                                                                                                                                                                                          |  | The board does not hold regularly scheduled sessions of the independent directors.                                                                                                                         
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 5605(e)(1) Independent Director Oversight of Nominations of Directors    |  | Director nominees must be selected or recommended for the Boards selection by (a) a majority of independent directors on the board or (b) by a nominating committee comprised
solely of independent directors.                                                                                                                                                                                                                                    |  | Global-Tech is not required to have a nominating committee. However, any director nominees must be selected by a majority of independent directors.                                                        
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 5405(d) Independent Director Oversight of Executive Officer Compensation |  | Compensation of the chief executive and other executive officers must be determined or recommended to the board by majority vote of only Independent Directors or a compensation
committee comprised solely of Independent Directors. The chief executive officer may not be present during voting or deliberations regarding the determination of compensation of the chief executive officer.                                                    |  | Mr. Brian Yuen, one member of Global-Techs compensation committee, is not considered independent since he is a member of management of the Company.                                                       
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 5605(c)(1)Audit Committee Charter                                        |  | The Company has adopted a formal written Audit Committee Charter specifying the items enumerated in Rule 5605(c)(1), and that the Audit Committee will review and assess the adequacy
of the charter on an annual basis.                                                                                                                                                                                                                           |  | The Company has a formal charter that is reviewed annually.                                                                                                                                                
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 5610 Code of Conduct                                                     |  | Each Company must adopt a code of conduct applicable to all directors, officers and employees, which shall be publicly available.                                                                                                                                                                                                                                                                                                                  |  | Global-Tech has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions.



59



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PART III



|Item 17. | Financial Statements.
|-------- | ---------------------

Not applicable.



|Item 18. | Financial Statements.
|-------- | ---------------------

See pages F-1 through F-56 incorporated herein by reference.



|Item 19. | Exhibits.
|-------- | ---------

See
Exhibit Index on page E-1.



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

Date: September 30, 2009



GLOBAL-TECH ADVANCED INNOVATIONS INC.By:

/s/ John C.K. ShamJohn C.K. Sham President and Chief Executive Officer




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Audited Consolidated Financial Statements

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

(Incorporated in the British Virgin Islands with limited liability)



F - 1



---

##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONTENTS



|                                                                                                              |  |            
|------------------------------------------------------------------------------------------------------------- |  | -----------
|                                                                                                              |  | Pages      
|                                                                                                              | 
|Report of Independent Registered Public Accounting Firm                                                       |  | F-3        
|                                                                                                              | 
|Consolidated:                                                                                                 |  |            
|                                                                                                              | 
|Balance Sheets as of March 31, 2009 and 2008                                                                  |  | F-4        
|                                                                                                              | 
|Statements of Operations for each of the three years in the period ended March 31,
2009                       |  | F-5        
|                                                                                                              | 
|Statements of Changes in Shareholders Equity for each of the three years in the period ended March 31,
 2009 |  | F-6 - F-7  
|                                                                                                              | 
|Statements of Cash Flows for each of the three years in the period ended March 31,
2009                       |  | F-8 - F-9  
|                                                                                                              | 
|Notes to Consolidated Financial Statements                                                                    |  | F-10 - F-56



F - 2



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Global-Tech Advanced Innovations Inc.

(Formerly known as Global-Tech Appliances Inc.)

We have audited the accompanying consolidated balance sheets of Global-Tech Advanced Innovations Inc. and its subsidiaries as of March 31, 2009 and
2008, and the related consolidated statements of operations, changes in shareholders equity, and cash flows for each of the three years in the period ended March 31, 2009. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to
above present fairly, in all material respects, the consolidated financial position of Global-Tech Advanced Innovations Inc. and its subsidiaries at March 31, 2009 and 2008, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended March 31, 2009, in conformity with U.S. generally accepted accounting principles.

/s/
Ernst & Young

Hong Kong

September 26, 2009



F - 3



---

##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2009 and 2008



|                                                                                                                                               |  |        |  |             |   |  |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | ----------- | - |  | ----------- | -
|                                                                                                                                               |  | Notes  |  | 2009        |   |  | 2008        |  
|                                                                                                                                               |  |        |  | US$         |   |  | US$         |  
|ASSETS                                                                                                                                         |  |        |  |             |   |  |             |  
|Current assets:                                                                                                                                |  |        |  |             |   |  |             |  
|Cash and cash equivalents                                                                                                                      |  | 4      |  | 11,312,882  |   |  | 31,672,585  |  
|Time deposits                                                                                                                                  |  | 5      |  | 4,410,951   |   |  |            |  
|Restricted cash                                                                                                                                |  | 6      |  | 4,389,880   |   |  |            |  
|Available-for-sale investments                                                                                                                 |  | 7      |  | 15,985,288  |   |  | 4,419       |  
|Accounts and bills receivable, net                                                                                                             |  | 8      |  | 18,438,329  |   |  | 22,073,653  |  
|Inventories                                                                                                                                    |  | 9      |  | 8,448,398   |   |  | 12,540,999  |  
|Prepaid expenses                                                                                                                               |  |        |  | 264,147     |   |  | 212,482     |  
|Deposits and other assets                                                                                                                      |  |        |  | 1,492,514   |   |  | 2,205,087   |  
|Legal claims receivable                                                                                                                        |  | 23     |  | 5,100,246   |   |  | 5,614,897   |  
|Amount due from a related party                                                                                                                |  | 10     |  | 33,011      |   |  | 28,746      |  
|Amount due from a jointly-controlled entity                                                                                                    |  | 10     |  | 69,523      |   |  | 57,873      |  
|Convertible note                                                                                                                               |  | 14     |  | 5,598,487   |   |  |            |  
|Interest receivable                                                                                                                            |  |        |  | 504,000     |   |  |            |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total current assets                                                                                                                           |  |        |  | 76,047,656  |   |  | 74,410,741  |  
|                                                                                                                                               |  |        | 
|Interests in jointly-controlled entities                                                                                                       |  | 15     |  |            |   |  |            |  
|Property, plant and equipment, net                                                                                                             |  | 11     |  | 24,592,448  |   |  | 25,270,919  |  
|Land use rights, net                                                                                                                           |  | 12     |  | 3,073,105   |   |  | 2,674,177   |  
|Convertible note                                                                                                                               |  | 14     |  |            |   |  | 5,417,403   |  
|Deposits paid for purchase of property, plant and equipment                                                                                    |  |        |  | 200,696     |   |  | 615,460     |  
|Interest receivable                                                                                                                            |  |        |  |            |   |  | 336,000     |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total assets                                                                                                                                   |  |        |  | 103,913,905 |   |  | 108,724,700 |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                           |  |        |  |             |   |  |             |  
|Current liabilities:                                                                                                                           |  |        |  |             |   |  |             |  
|Accounts payable                                                                                                                               |  |        |  | 7,962,971   |   |  | 8,935,551   |  
|Loans payable                                                                                                                                  |  | 17     |  |            |   |  | 1,600,311   |  
|Customer deposits                                                                                                                              |  |        |  | 716,670     |   |  | 636,732     |  
|Accrued salaries, allowances and other employee benefits                                                                                       |  |        |  | 3,194,216   |   |  | 2,811,473   |  
|Accrual for loss contingencies                                                                                                                 |  | 23     |  | 6,076,640   |   |  | 6,010,044   |  
|Other accrued liabilities                                                                                                                      |  |        |  | 6,233,965   |   |  | 5,372,596   |  
|Income tax payable                                                                                                                             |  |        |  | 5,501,086   |   |  | 5,048,663   |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total current liabilities                                                                                                                      |  |        |  | 29,685,548  |   |  | 30,415,370  |  
|                                                                                                                                               |  |        | 
|Deferred tax liabilities                                                                                                                       |  | 20     |  | 27,344      |   |  | 66,492      |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total liabilities                                                                                                                              |  |        |  | 29,712,892  |   |  | 30,481,862  |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Commitments and contingencies                                                                                                                  |  | 22, 23 |  |             |   |  |             |  
|Shareholders equity:                                                                                                                          |  |        |  |             |   |  |             |  
|Common stock, par value US$0.04 per share; 12,500,000 shares authorized; 3,227,064 shares issued and outstanding as of
March 31, 2009 and 2008 |  | 18     |  | 129,083     |   |  | 129,083     |  
|Preferred stock, par value US$0.04 per share; 250,000 shares authorized; no shares issued                                                      |  |        |  |            |   |  |            |  
|Additional paid-in capital                                                                                                                     |  |        |  | 84,266,412  |   |  | 84,222,582  |  
|Accumulated deficit                                                                                                                            |  |        |  | (10,554,563 | ) |  | (4,714,141  | )
|Accumulated other comprehensive income                                                                                                         |  |        |  | 5,021,266   |   |  | 3,098,761   |  
|Less: Treasury stock, at cost, 189,387 and 169,787 shares as of March 31, 2009 and 2008                                                        |  |        |  | (4,661,185  | ) |  | (4,493,447  | )
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total shareholders equity                                                                                                                     |  |        |  | 74,201,013  |   |  | 78,242,838  |  
|                                                                                                                                               |  |        |  |             |   |  |             |  
|Total liabilities and shareholders equity                                                                                                     |  |        |  | 103,913,905 |   |  | 108,724,700 |  
|                                                                                                                                               |  |        |  |             |   |  |             |  

The accompanying notes are an integral part of the consolidated financial statements.



F - 4



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE FISCAL YEARS ENDED MARCH 31, 2009, 2008 AND 2007



|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|------------------------------------------------------------------------------------------------- |  | ----- | --- |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                                                                  |  | Notes |     |  | 2009        |   |  | 2008        |   |  | 2007        |  
|                                                                                                  |  |       |     |  | US$         |   |  | US$         |   |  | US$         |  
|Net sales                                                                                         |  |       |     |  | 87,387,372  |   |  | 105,543,089 |   |  | 60,290,794  |  
|Cost of goods sold                                                                                |  |       |     |  | (81,500,506 | ) |  | (94,975,910 | ) |  | (56,762,423 | )
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Gross profit                                                                                      |  |       |     |  | 5,886,866   |   |  | 10,567,179  |   |  | 3,528,371   |  
|Selling, general and administrative expenses                                                      |  |       |     |  | (13,074,795 | ) |  | (12,802,546 | ) |  | (12,454,368 | )
|Other operating income (loss), net                                                                |  |       |     |  | 1,674,332   |   |  | (142,844    | ) |  | 608,244     |  
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Operating loss                                                                                    |  |       |     |  | (5,513,597  | ) |  | (2,378,211  | ) |  | (8,317,753  | )
|Interest income, net                                                                              |  |       |     |  | 533,486     |   |  | 1,703,682   |   |  | 1,436,191   |  
|Other income (expenses), net                                                                      |  | 19    |     |  | 431,993     |   |  | (1,809,344  | ) |  | 1,728,337   |  
|Loss on dissolution of a subsidiary                                                               |  |       |     |  | (1,028,875  | ) |  |            |   |  |            |  
|Gain on disposal of subsidiaries                                                                  |  | 13    |     |  | 157,597     |   |  |            |   |  | 3,951,520   |  
|Share of losses of jointly-controlled entities                                                    |  |       |     |  |            |   |  | (346,183    | ) |  | (186,503    | )
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Loss before income taxes                                                                          |  |       |     |  | (5,419,396  | ) |  | (2,830,056  | ) |  | (1,388,208  | )
|Income tax benefit (expense)                                                                      |  | 20    |     |  | (421,026    | ) |  | (1,597,057  | ) |  | 144,397     |  
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Net loss before minority interests                                                                |  |       |     |  | (5,840,422  | ) |  | (4,427,113  | ) |  | (1,243,811  | )
|Minority interests                                                                                |  |       |     |  |            |   |  |            |   |  | 77,110      |  
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Net loss                                                                                          |  |       |     |  | (5,840,422  | ) |  | (4,427,113  | ) |  | (1,166,701  | )
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|Basic and diluted loss per share of common stock                                                  |  | 21    |     |  | (1.91       | ) |  | (1.45       | ) |  | (0.38       | )
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|                                                                                                  |  |       |     | 
|                                                                                                  |  |       |     |  | Number      |   |  | Number      |   |  | Number      |  
|                                                                                                  |  |       |     | 
|Basic and diluted weighted average number of shares of common stock                               |  | 21    |     |  | 3,051,216   |   |  | 3,056,448   |   |  | 3,055,902   |  
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  
|                                                                                                  |  |       |     | 
|                                                                                                  |  |       |     |  | US$         |   |  | US$         |   |  | US$         |  
|                                                                                                  |  |       |     | 
|Rental expense paid to related parties (included in selling, general and administrative expenses) |  | 10    | (a) |  | 738,697     |   |  | 752,232     |   |  | 753,919     |  
|Rental income earned from a related party (included in other income (expenses), net)              |  | 10    | (b) |  | 50,812      |   |  | 50,302      |   |  | 49,957      |  
|Management income earned from a related party (included in other income (expenses), net)          |  | 10    | (c) |  | 106,677     |   |  | 99,582      |   |  | 111,992     |  
|                                                                                                  |  |       |     |  |             |   |  |             |   |  |             |  

The accompanying notes are an integral part of the consolidated financial statements.



F - 5



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE FISCAL YEARS ENDED MARCH 31, 2009, 2008 AND 2007



|                                                                                                          |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|--------------------------------------------------------------------------------------------------------- |  | ---------------- |  | -------------- | ------- |  | ------------ |  | ------------------------ |  | ------------------------------------ | - |  | ------------- | - |  | --------------------------------------------- | - |  | ------------------------ | -
|                                                                                                          |  | Number of shares |  |                | Amounts | 
|                                                                                                          |  | Common stock     |  | Treasury stock |         |  | Common stock |  | Additionalpaid-incapital |  | Retainedearnings(accumulateddeficit) |   |  | Treasurystock |   |  | Accumulated othercomprehensiveincome (losses) |   |  | Totalshareholdersequity |  
|                                                                                                          |  |                  |  |                |         |  | US$          |  | US$                      |  | US$                                  |   |  | US$           |   |  | US$                                           |   |  | US$                      |  
|Balance as of March 31, 2006                                                                              |  | 3,225,689        |  | (169,787       | )       |  | 129,028      |  | 83,030,824               |  | 879,673                              |   |  | (4,493,447    | ) |  | (197,161                                      | ) |  | 79,348,917               |  
|Net loss for the year                                                                                     |  |                 |  |               |         |  |             |  |                         |  | (1,166,701                           | ) |  |              |   |  |                                              |   |  | (1,166,701               | )
|Other comprehensive income (losses):                                                                      |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|   share of other comprehensive income of jointly-controlled entities                                    |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 12,496                                        |   |  | 12,496                   |  
|   unrealized gain on available-for-sale investments, net of income tax of nil                           |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 117,614                                       |   |  | 117,614                  |  
|   foreign currency translation adjustments                                                              |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | (55,659                                       | ) |  | (55,659                  | )
|                                                                                                          |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|Total net comprehensive loss                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  | (1,092,250               | )
|Stock compensation expense                                                                                |  |                 |  |               |         |  |             |  | 1,123,577                |  |                                     |   |  |              |   |  |                                              |   |  | 1,123,577                |  
|                                                                                                          |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|Balance as of March 31, 2007                                                                              |  | 3,225,689        |  | (169,787       | )       |  | 129,028      |  | 84,154,401               |  | (287,028                             | ) |  | (4,493,447    | ) |  | (122,710                                      | ) |  | 79,380,244               |  
|Net loss for the year                                                                                     |  |                 |  |               |         |  |             |  |                         |  | (4,427,113                           | ) |  |              |   |  |                                              |   |  | (4,427,113               | )
|Other comprehensive income (losses):                                                                      |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|   share of other comprehensive income of jointly-controlled entities                                    |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 39,329                                        |   |  | 39,329                   |  
|   release of unrealized gain on available-for-sale investments, net of income tax of nil, upon disposal |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | (192,894                                      | ) |  | (192,894                 | )
|   unrealized loss on available-for-sale investments, net of income tax of nil                           |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | (183                                          | ) |  | (183                     | )
|   foreign currency translation adjustments                                                              |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 3,375,219                                     |   |  | 3,375,219                |  
|                                                                                                          |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|Total net comprehensive loss                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  | (1,205,642               | )
|Shares issued on exercise of options                                                                      |  | 625              |  |               |         |  | 25           |  | 9,725                    |  |                                     |   |  |              |   |  |                                              |   |  | 9,750                    |  
|Shares issued to an employee                                                                              |  | 750              |  |               |         |  | 30           |  | 1,969                    |  |                                     |   |  |              |   |  |                                              |   |  | 1,999                    |  
|Stock compensation expense                                                                                |  |                 |  |               |         |  |             |  | 56,487                   |  |                                     |   |  |              |   |  |                                              |   |  | 56,487                   |  
|                                                                                                          |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |   |  |                          |  
|Balance as of March 31, 2008                                                                              |  | 3,227,064        |  | (169,787       | )       |  | 129,083      |  | 84,222,582               |  | (4,714,141                           | ) |  | (4,493,447    | ) |  | 3,098,761                                     |   |  | 78,242,838               |  



F - 6



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY

FOR THE FISCAL YEARS ENDED MARCH 31, 2009, 2008 AND 2007



|                                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  |                          |  
|--------------------------------------------------------------------------------------------- |  | ---------------- |  | -------------- | ------- |  | ------------ |  | ------------------------ |  | ------------------------------------ | - |  | ------------- | - |  | --------------------------------------------- |  | ------------------------ | -
|                                                                                              |  | Number of shares |  |                | Amounts | 
|                                                                                              |  | Common stock     |  | Treasury stock |         |  | Common stock |  | Additionalpaid-incapital |  | Retainedearnings(accumulateddeficit) |   |  | Treasurystock |   |  | Accumulated othercomprehensiveincome (losses) |  | Totalshareholdersequity |  
|                                                                                              |  |                  |  |                |         |  | US$          |  | US$                      |  | US$                                  |   |  | US$           |   |  | US$                                           |  | US$                      |  
|Balance as of March 31, 2008                                                                  |  | 3,227,064        |  | (169,787       | )       |  | 129,083      |  | 84,222,582               |  | (4,714,141                           | ) |  | (4,493,447    | ) |  | 3,098,761                                     |  | 78,242,838               |  
|Net loss for the year                                                                         |  |                 |  |               |         |  |             |  |                         |  | (5,840,422                           | ) |  |              |   |  |                                              |  | (5,840,422               | )
|Other comprehensive income:                                                                   |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  |                          |  
|   unrealized gain on available-for-sale investments, net of income tax of nil               |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 10,064                                        |  | 10,064                   |  
|   release of realized foreign currency translation arising from dissolution of a subsidiary |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 1,028,875                                     |  | 1,028,875                |  
|   foreign currency translation adjustments                                                  |  |                 |  |               |         |  |             |  |                         |  |                                     |   |  |              |   |  | 883,566                                       |  | 883,566                  |  
|                                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  |                          |  
|Total net comprehensive loss                                                                  |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  | (3,917,917               | )
|Shares repurchased as treasury stock                                                          |  |                 |  | (19,600        | )       |  |             |  |                         |  |                                     |   |  | (167,738      | ) |  |                                              |  | (167,738                 | )
|Shares issued to an employee                                                                  |  |                 |  |               |         |  |             |  | 1,969                    |  |                                     |   |  |              |   |  |                                              |  | 1,969                    |  
|Stock compensation expense                                                                    |  |                 |  |               |         |  |             |  | 41,861                   |  |                                     |   |  |              |   |  |                                              |  | 41,861                   |  
|                                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  |                          |  
|Balance as of March 31, 2009                                                                  |  | 3,227,064        |  | (189,387       | )       |  | 129,083      |  | 84,266,412               |  | (10,554,563                          | ) |  | (4,661,185    | ) |  | 5,021,266                                     |  | 74,201,013               |  
|                                                                                              |  |                  |  |                |         |  |              |  |                          |  |                                      |   |  |               |   |  |                                               |  |                          |  

The accompanying notes are an integral part of the consolidated financial statements.



F - 7



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED MARCH 31, 2009, 2008 AND 2007



|                                                                                          |  |            |   |  |             |   |  |            |  
|----------------------------------------------------------------------------------------- |  | ---------- | - |  | ----------- | - |  | ---------- | -
|                                                                                          |  | 2009       |   |  | 2008        |   |  | 2007       |  
|                                                                                          |  | US$        |   |  | US$         |   |  | US$        |  
|Cash flows from operating activities:                                                     |  |            |   |  |             |   |  |            |  
|Net loss                                                                                  |  | (5,840,422 | ) |  | (4,427,113  | ) |  | (1,166,701 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |            |   |  |             |   |  |            |  
|Minority interests in losses of subsidiaries                                              |  |           |   |  |            |   |  | (77,110    | )
|Amortization                                                                              |  | 76,285     |   |  | 63,056      |   |  | 59,116     |  
|Depreciation                                                                              |  | 3,830,549  |   |  | 3,037,662   |   |  | 3,413,658  |  
|Accretion of a convertible note discount                                                  |  | (181,084   | ) |  | (175,698    | ) |  | (168,173   | )
|Gain on disposal of subsidiaries                                                          |  | (157,597   | ) |  |            |   |  | (3,951,520 | )
|Loss on dissolution of a subsidiary                                                       |  | 1,028,875  |   |  |            |   |  |           |  
|Share of losses of jointly-controlled entities                                            |  |           |   |  | 346,183     |   |  | 186,503    |  
|Loss on disposal of property, plant and equipment                                         |  | 39,645     |   |  | 17,386      |   |  | 97,997     |  
|Impairment of property, plant and equipment                                               |  | 200,407    |   |  |            |   |  | 17,174     |  
|Allowance for doubtful accounts                                                           |  |           |   |  | 81,889      |   |  | 3,173      |  
|Stock compensation expense                                                                |  | 41,861     |   |  | 56,487      |   |  | 1,123,577  |  
|Shares issued to an employee                                                              |  | 1,969      |   |  | 1,969       |   |  |           |  
|Deferred tax expense (benefit)                                                            |  | (39,319    | ) |  | (52,983     | ) |  | 80,967     |  
|Foreign exchange                                                                          |  | (168,485   | ) |  | 388,188     |   |  | 862,735    |  
|                                                                                          |  |            |  
|Changes in operating assets and liabilities:                                              |  |            |   |  |             |   |  |            |  
|Accounts and bills receivable, net                                                        |  | 3,915,827  |   |  | (11,766,542 | ) |  | (872,029   | )
|Prepaid expenses                                                                          |  | (48,200    | ) |  | (28,529     | ) |  | 84,594     |  
|Deposits and other assets                                                                 |  | 221,121    |   |  | 253,366     |   |  | (605,015   | )
|Legal claims receivable                                                                   |  | 522,312    |   |  | (219,552    | ) |  | (853,752   | )
|Amount due from a related party                                                           |  | (40,777    | ) |  | (28,746     | ) |  |           |  
|Amount due from a jointly-controlled entity                                               |  | 24,862     |   |  | 16,791      |   |  | 41,082     |  
|Inventories                                                                               |  | 4,342,192  |   |  | (2,582,189  | ) |  | 1,646,669  |  
|Interest receivable                                                                       |  | (168,000   | ) |  | (168,000    | ) |  | (168,000   | )
|Accounts payable                                                                          |  | (297,899   | ) |  | 2,341,377   |   |  | 1,079,664  |  
|Accrued salaries, allowances and other employee benefits                                  |  | 362,868    |   |  | 610,266     |   |  | 146,058    |  
|Other accrued liabilities                                                                 |  | (1,133,707 | ) |  | 1,675,475   |   |  | 223,970    |  
|Accrual for loss contingencies                                                            |  | 317,074    |   |  | 347,828     |   |  | 213,211    |  
|Amount due to a related party                                                             |  |           |   |  | (4,664      | ) |  | 4,664      |  
|Income tax payable                                                                        |  | 641,302    |   |  | 2,573,623   |   |  | 295,880    |  
|                                                                                          |  |            |   |  |             |   |  |            |  
|Net cash provided by (used in) operating activities                                       |  | 7,491,659  |   |  | (7,642,470  | ) |  | 1,718,392  |  
|                                                                                          |  |            |   |  |             |   |  |            |  

continued/



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)

FOR THE FISCAL YEARS ENDED MARCH 31, 2009, 2008 AND 2007



|                                                                                     |  |             |   |  |            |   |  |             |  
|------------------------------------------------------------------------------------ |  | ----------- | - |  | ---------- | - |  | ----------- | -
|                                                                                     |  | 2009        |   |  | 2008       |   |  | 2007        |  
|                                                                                     |  | US$         |   |  | US$        |   |  | US$         |  
|Cash flows from investing activities:                                                |  |             |   |  |            |   |  |             |  
|Proceeds from disposal of property, plant and equipment                              |  |            |   |  | 772        |   |  | 70,331      |  
|Deposits paid for purchase of property, plant and equipment                          |  | (200,696    | ) |  | (615,460   | ) |  | (33,507     | )
|Purchases of property, plant and equipment                                           |  | (2,174,170  | ) |  | (3,689,744 | ) |  | (560,110    | )
|Increase in land use rights                                                          |  | (403,243    | ) |  | (47,273    | ) |  | (205,300    | )
|Decrease (increase) in time deposits                                                 |  | (4,380,440  | ) |  | 67,688     |   |  | (67,688     | )
|Proceeds from disposal of available-for-sale investments                             |  | 9,979,200   |   |  | 14,672,506 |   |  | 37,973,452  |  
|Purchases of available-for-sale investments                                          |  | (25,949,992 | ) |  |           |   |  | (34,071,106 | )
|Proceeds from disposal of subsidiaries, net of cash and cash equivalents disposed of |  | (194        | ) |  |           |   |  |            |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Net cash provided by (used in) investing activities                                  |  | (23,129,535 | ) |  | 10,388,489 |   |  | 3,106,072   |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Cash flows from financing activities:                                                |  |             |   |  |            |   |  |             |  
|Capital contribution by minority shareholders                                        |  |            |   |  |           |   |  | 76,781      |  
|Increase in restricted cash                                                          |  | (4,374,697  | ) |  |           |   |  |            |  
|Repayment of short-term bank borrowings                                              |  |            |   |  |           |   |  | (37,595     | )
|Proceeds from stock options exercised                                                |  |            |   |  | 9,750      |   |  |            |  
|Purchases of treasury stock                                                          |  | (167,738    | ) |  |           |   |  |            |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Net cash provided by (used in) financing activities                                  |  | (4,542,435  | ) |  | 9,750      |   |  | 39,186      |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Effect of foreign exchange rate changes on cash                                      |  | (179,392    | ) |  | (908,098   | ) |  | (2,352,482  | )
|                                                                                     |  |             |   |  |            |   |  |             |  
|Net increase (decrease) in cash and cash equivalents                                 |  | (20,359,703 | ) |  | 1,847,671  |   |  | 2,511,168   |  
|Cash and cash equivalents at beginning of fiscal year                                |  | 31,672,585  |   |  | 29,824,914 |   |  | 27,313,746  |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Cash and cash equivalents at end of fiscal year                                      |  | 11,312,882  |   |  | 31,672,585 |   |  | 29,824,914  |  
|                                                                                     |  |             |   |  |            |   |  |             |  
|Supplemental disclosure information:                                                 |  |             |   |  |            |   |  |             |  
|Cash paid for interest expense                                                       |  | 1,563       |   |  | 24,158     |   |  | 317         |  
|Cash paid for tax expense                                                            |  | 92,415      |   |  | 19,868     |   |  | 103,655     |  
|Supplemental schedule of non-cash activities:                                        |  |             |   |  |            |   |  |             |  
|Disposal of subsidiaries in exchange for a convertible note                          |  |            |   |  |           |   |  | 5,073,532   |  
|Non-cash acquisition of property, plant and equipment                                |  |            |   |  | 1,600,311  |   |  |            |  
|                                                                                     |  |             |   |  |            |   |  |             |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. | ORGANIZATION AND PRINCIPAL ACTIVITIES
|-- | -------------------------------------

Global-Tech Advanced Innovations Inc. (Global-Tech) (formerly known as Global-Tech Appliances Inc.) is primarily an investment holding company, which was incorporated in the British Virgin Islands on May 2, 1991.
Global-Tech and its subsidiaries (hereinafter collectively referred to as the Company) is primarily a manufacturer of consumer electrical products, including, but not limited to, floor care products and small household appliances,
electronic and optical components, and is also involved in the assembly of cellular phones. The Companys manufacturing operation is located in Dongguan, the Peoples Republic of China (the PRC). The Companys products are
primarily sold to customers located in the United States of America (the U.S.A. or the U.S.), Europe and Mainland China.

Effective December 10, 2008, Global-Techs common stock was no longer traded on the New York Stock Exchange and commenced trading on the Nasdaq Capital Market (Nasdaq) under the
symbol GAI. Global-Tech also changed its name to Global-Tech Advanced Innovations Inc., effective as of the close of business on December 10, 2008.

To satisfy the minimum bid price requirement of Nasdaq, Global-Techs Board of Directors authorized an amendment to Global-Techs
Memorandum of Association to effect a 4-for-1 reverse stock split of the issued and outstanding shares of common stock of Global-Tech, effective as of the close of business on December 10, 2008 (the Effective Date). Global-Tech also
proportionally reduced the authorized number of its common and preferred stock by four to 12,500,000 and 250,000, respectively. These financial statements present common stock, preferred stock and share option information to reflect the
above-mentioned reverse stock split on a retroactive basis.



|2. | SUBSIDIARIES
|-- | ------------

Details of
Global-Techs subsidiaries as of March 31, 2009 were as follows:



|                                       |  |                                      |  |                                                        |  |                                                          
|-------------------------------------- |  | ------------------------------------ |  | ------------------------------------------------------ |  | ---------------------------------------------------------
|Name                                   |  | Place of incorporation/ registration |  | Percentage ofequity
interestattributable tothe Company |  | Principal activities                                     
|Global Appliances Holdings Limited     |  | British Virgin Islands               |  | 100                                                    |  | Investment holding                                       
|                                       |  |                                      | 
|Global Display Holdings Limited        |  | British Virgin Islands               |  | 100                                                    |  | Investment holding                                       
|                                       |  |                                      | 
|Kwong Lee Shun Trading Company Limited |  | Hong Kong                            |  | 100                                                    |  | Provision of management services                         
|                                       |  |                                      | 
|Global Rich Innovation Limited         |  | Hong Kong                            |  | 100                                                    |  | Trading of raw materials and household appliance products
|                                       |  |                                      | 
|Wing Shing Overseas Limited            |  | British Virgin Islands               |  | 100                                                    |  | Trading of raw materials and household appliance products



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|2. | SUBSIDIARIES (continued)
|-- | ------------------------



Details of Global-Techs subsidiaries as of March 31, 2009 were as follows:
(continued)



|                                                                        |  |                                      |  |                                                        |  |                                                                                                     
|----------------------------------------------------------------------- |  | ------------------------------------ |  | ------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------
|Name                                                                    |  | Place of incorporation/ registration |  | Percentage ofequity interestattributable tothe Company |  | Principal activities                                                                                
|GT Investments (BVI) Limited                                            |  | British Virgin Islands               |  | 100                                                    |  | Investment holding                                                                                  
|                                                                        |  |                                      | 
|Consortium Investment (BVI) Limited                                     |  | British Virgin Islands               |  | 100                                                    |  | Investment holding                                                                                  
|                                                                        |  |                                      | 
|Global Optics Limited                                                   |  | Hong Kong                            |  | 100                                                    |  | Trading of raw materials and electronic and optical components                                      
|                                                                        |  |                                      | 
|Dongguan Wing Shing Electrical Products Factory Company Limited (DWS) |  | PRC                                  |  | 100                                                    |  | Manufacturing of household appliance products                                                       
|                                                                        |  |                                      | 
|Dongguan Lite Array Company Limited (DGLAD)                           |  | PRC                                  |  | 100                                                    |  | Manufacturing of electronic and optical components and provision of cellular phone assembly services
|                                                                        |  |                                      | 
|Global Auto Limited                                                     |  | Hong Kong                            |  | 70                                                     |  | Inactive                                                                                            
|                                                                        |  |                                      | 
|Global Household Products Limited                                       |  | Hong Kong                            |  | 100                                                    |  | Trading of raw materials and household appliance products                                           
|                                                                        |  |                                      | 
|Pentalpha Medical Limited                                               |  | Hong Kong                            |  | 100                                                    |  | Inactive                                                                                            
|                                                                        |  |                                      | 
|Pentalpha Hong Kong Limited (Pentalpha)                               |  | Hong Kong                            |  | 100                                                    |  | Inactive                                                                                            



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|2. | SUBSIDIARIES (continued)
|-- | ------------------------



Details of Global-Techs subsidiaries as of March 31, 2009 were as follows:
(continued)



|                                          |  |                                      |  |                                                        |  |                                              
|----------------------------------------- |  | ------------------------------------ |  | ------------------------------------------------------ |  | ---------------------------------------------
|Name                                      |  | Place of incorporation/ registration |  | Percentage ofequity interestattributable tothe Company |  | Principal activities                         
|Global-Tech USA, Inc.                     |  | State of Delaware, U.S.A.            |  | 100                                                    |  | Provision of consultation services           
|                                          |  |                                      | 
|Global Digital Imaging Limited            |  | British Virgin Islands               |  | 100                                                    |  | Trading of raw materials and digital products
|                                          |  |                                      | 
|MasterWerke Limited                       |  | State of Delaware, U.S.A.            |  | 100                                                    |  | Investment holding                           
|                                          |  |                                      | 
|Wing Shing Products (BVI) Company Limited |  | British Virgin Islands               |  | 100                                                    |  | Inactive                                     
|                                          |  |                                      | 
|Global Lite Array (BVI) Limited           |  | British Virgin Islands               |  | 76.75                                                  |  | Investment holding                           
|                                          |  |                                      | 
|Lite Array OLED (BVI) Company Limited     |  | British Virgin Islands               |  | 76.75                                                  |  | Inactive                                     
|                                          |  |                                      | 
|Lite Array, Inc.                          |  | State of Delaware, U.S.A.            |  | 76.75                                                  |  | Provision of administrative services         

During the fiscal year ended March 31, 2009, the Company disposed of its entire
equity interest in Winway Technology Development Limited (Winway), a 83.33% owned subsidiary incorporated in Hong Kong, which was inactive at the date of the disposal, to the minority shareholder of Winway, for nil consideration, as
further detailed in note 13(b) to the financial statements.

During the fiscal year ended March 31, 2009, the Company
dissolved Pentalpha Macau Commercial Offshore Limited, a wholly-owned subsidiary incorporated in Macau, which was inactive at the date of the dissolution. The loss on dissolution amounted to approximately US$1 million which represented the
realization of foreign currency translation differences and was charged to the consolidated statement of operations.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



| | (a) | Basis of preparation
| | --- | --------------------

These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP).



| | (b) | Basis of consolidation
| | --- | ----------------------

The
consolidated financial statements include the financial statements of Global-Tech and its subsidiaries. The fiscal year end date of Lite Array Holdings Limited (Lite Array Holdings), a jointly-controlled entity of the Company, is
December 31. There have been no significant transactions in Lite Array Holdings and its subsidiaries, which would materially affect the Companys financial position and results of operations during each of the period from Lite Array
Holdings fiscal year end date to March 31, 2009, 2008 and 2007.

All significant intercompany balances and
transactions between group companies are eliminated on consolidation.



| | (c) | Use of estimates
| | --- | ----------------

The
preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the amounts that are reported in these financial statements
and accompanying disclosures. The most significant accounting estimates with regard to these consolidated financial statements that require the most significant and subjective judgments include, but are not limited to, valuation of investments and
determination of other-than-temporary impairments, useful lives of property, plant and equipment, recoverability of long-lived assets, determination of impairment losses, assessment of market value of inventories and provision for inventory
obsolescence, allowance for doubtful accounts, provision for employee benefits, provision for warranty, recognition and measurement of current and deferred income taxes (including income tax benefit (expense)), valuation allowance for deferred tax
assets, assumptions used for the valuation of options to purchase Global-Techs common stock, provision for loss contingencies, and measurement of fair values of financial instruments. Actual results could differ materially from those
estimates.



| | (d) | Cash and cash equivalents
| | --- | -------------------------

Cash
and cash equivalents consist of cash on hand and bank deposits, which are unrestricted to withdraw and use, and other investments that are readily convertible into cash with original maturities of three months or less.



| | (e) | Restricted cash
| | --- | ---------------

Restricted cash
consists of bank deposits, which may only be used to settle pre-arranged general banking facilities.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (f) | Investments
| | --- | -----------

Debt and equity
investments designated as available-for-sale investments are stated at fair value. Unrealized gains or losses, net of tax, on available-for-sale investments are included in accumulated other comprehensive income (losses), a separate component of
shareholders equity. Realized gains and losses and any declines in fair value judged to be other-than-temporary on available-for-sale investments are included in the consolidated statement of operations. Gains or losses on sale of investments
and amounts reclassified from accumulated other comprehensive income (losses) to earnings are computed based on the specific identification method. Interest or dividend income on securities classified as available-for-sale investments is included in
interest income or dividend income, respectively.

Non-derivative securities with fixed or determinable payments and fixed
maturities are classified as held-to-maturity investments if the Company has both the positive intention and ability to hold the financial assets to maturity. Investments intended to be held to maturity are measured at amortized cost. Interest on
securities classified as held-to-maturity investments is included in interest income.

When determining whether an impairment
of investments exists or a decline in value of an available-for-sale investment is other-than-temporary, the Company evaluates evidence to support a realizable value in excess of the current market price for the investment. Such information may
include the investments financial performance (including such factors as earnings trends, dividend payments, asset quality and specific events), the near term prospects of the investment, the current and expected financial conditions of the
investments issuer, and the Companys investment intent. A decline in the market value of a quoted security for an extended period of time (e.g. six months) is generally indicative of an other-than-temporary impairment.

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having
unilateral control over the economic activity of the jointly-controlled entity. The Companys investment in a jointly-controlled entity for which it, not being the unilateral controlling owner of the entity, but has the ability to exercise
joint control, is accounted for using the equity method. Under the equity method, the Companys proportionate share of the jointly-controlled entities net income or loss and amortization of any identifiable intangibles arising from the
investment is included in Share of income (losses) of jointly-controlled entities. The Company ceases to apply the equity method when its share of the jointly-controlled entities losses exceed the carrying value of its investment.

All other investments for which the Company does not have the ability to exercise joint control or significant influence
(generally, when the Company has an investment of less than 20% ownership and no representation on the investees board of directors) and for which there is not a readily determinable fair value, are accounted for using the cost method.
Dividends and other distributions of earnings from such investees, if any, are included in income when declared. The Company periodically evaluates the carrying value of its investments accounted for under the cost method for impairment with any
loss included in the consolidated statement of operations in the period when it is incurred.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (g) | Inventories
| | --- | -----------

Inventories are
stated at the lower of cost or market. Cost, calculated on the weighted average basis, comprises direct materials and, where applicable, direct labor and an appropriate proportion of overheads.



| | (h) | Property, plant and equipment
| | --- | -----------------------------

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price
and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after an item of property, plant and equipment has been put into operation, such as repairs and maintenance,
is normally charged to the consolidated statement of operations in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be
obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalized as an additional cost of that asset. Depreciation is calculated on the straight-line basis at
annual rates over the assets estimated useful life.

The principal annual rates used for this purpose are as follows:



|                                  |  |                                                                 
|--------------------------------- |  | ----------------------------------------------------------------
|                                  |  | Annual rate                                                     
|Leasehold improvements            |  | Over the shorter of the lease terms or the estimated useful life
|Buildings                         |  | 4.5%                                                            
|Plant                             |  | 4.5%                                                            
|Machinery                         |  | 10%                                                             
|Moulds                            |  | 20% - 33%                                                       
|Transportation equipment          |  | 15% - 20%                                                       
|Furniture, fixtures and equipment |  | 15%                                                             

An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on derecognition of an item of property, plant and equipment, calculated as the difference between the net disposal proceeds and the
carrying amount of the item, is included in the consolidated statement of operations in the period the item is derecognized.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (i) | Construction in progress
| | --- | ------------------------

Construction in progress represents property, plant and equipment under construction or installation and is stated at cost less any accumulated impairment losses, and is not depreciated. Cost comprises the direct costs of construction,
installation and other costs in making the asset ready for its intended use. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for its intended use.



| | (j) | Impairment of long-lived assets
| | --- | -------------------------------

The Company evaluates long-lived assets, such as property, plant and equipment, for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will have impact on the future use of
the assets) indicate that the carrying amount of an asset or a group of long-lived assets may not be recoverable in accordance with Statement of Financial Accounting Standards (SFAS or FAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. When these events occur, the Company evaluates the impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the excess of the carrying amount of the asset over their fair
value.

The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated
future cash flows using an appropriate discount rate. Considerable management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are
carried at the lower of their financial statement carrying amount or fair value less their costs to sell.



| | (k) | Revenue recognition
| | --- | -------------------

The Company
recognizes revenues in accordance with the Securities and Exchange Commission (the SEC) Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, which requires that four basic criteria must be met before
revenue can be recognized: (1) there is persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured.
Net sales represent the gross invoiced amount, net of discounts, and are recognized when goods are shipped and title has passed. To the extent products are required to meet customer specifications, such products are subject to technical and quality
tests that are designed to ensure compliance prior to shipment.

Under the Companys standard terms and conditions, which
are mainly Free On Board shipping point, title and risk of loss are transferred to the customer at the time the product is delivered to the customers freight forwarder.

Revenue related to the provision of assembly services is recognized upon the completion of such services and delivery of the related product
using the same criteria of SAB No. 104 stated above. Historically, revenue from assembly services has been insignificant.

Deposits or advance payments from customers prior to delivery and passage of title of merchandise are recorded as customer deposits.

In accordance with the relevant tax laws in the PRC, value-added tax is levied on the invoiced value of sales of goods and is payable by the purchaser. Revenue is recognized net of all value-added tax
imposed by governmental authorities and collected from customers concurrent with revenue-producing transactions.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (l) | Advertising costs
| | --- | -----------------

Advertising
costs represent costs relating to promotional activities intended to stimulate, directly or indirectly, a customers purchase of goods, and are charged to the consolidated statement of operations as incurred and are included in Selling,
general and administrative expenses (SG&A). Advertising expenses were US$8,438, US$22,572 and US$11,469 for the fiscal years ended March 31, 2009, 2008 and 2007, respectively.



| | (m) | Design and development costs
| | --- | ----------------------------

Design and development costs primarily relate to the cost of samples and prototypes and salaries of our engineers.

The Company expenses all design and development costs when incurred. Included in the SG&A expenses line item in the consolidated statement of operations were design and development costs of US$685,126, US$1,075,556 and US$1,125,817 for
the fiscal years ended March 31, 2009, 2008 and 2007, respectively.



| | (n) | Shipping and handling costs
| | --- | ---------------------------

In
accordance with Emerging Issues Task Force Issue (EITF) 00-10 Accounting for Shipping and Handling Fees and Costs, shipping and handling fees billed to customers are included in net sales in the consolidated statement of
operations. Any shipping and handling costs incurred by the Company associated with the sale of products are included in SG&A on the face of the consolidated statement of operations. During the fiscal years ended March 31, 2009, 2008 and
2007, shipping and handling costs charged to SG&A were US$802,664, US$1,159,569 and US$855,644, respectively.

Any inbound
freight charges, receiving, inspection, warehousing and internal transfer costs incurred by the Company are expensed as cost of goods sold. During the fiscal years ended March 31, 2009, 2008 and 2007, inbound freight costs charged to cost of
goods sold were US$128,325, US$340,938 and US$337,341, respectively. Other related costs are included in manufacturing overheads.



| | (o) | Foreign currencies
| | --- | ------------------

The
functional currency of Global-Tech is the United States dollar. Each subsidiary within the Company determines its own functional currency in accordance with SFAS No. 52 Foreign Currency Translation. Transactions denominated in
foreign currencies are translated using the exchange rates in effect at the dates of the transactions or the average rate of exchange for the period. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange
rates in effect at the balance sheet date (the closing rate) with any foreign exchange gains or losses included in the income or loss for the period.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (o) | Foreign currencies (continued)
| | --- | ------------------------------

On consolidation, the financial statements of the subsidiaries are translated into the reporting currency of Global-Tech, that is, the United States dollars, in accordance with SFAS No. 52, Foreign Currency Translation, at
the rate of exchange in effect at the balance sheet date for assets and liabilities, and at the average rates of exchange during the year for income and expense items. Translation differences arising therefrom are credited or charged to the
accumulated other comprehensive income (losses).



| | (p) | Income taxes
| | --- | ------------

The Company
accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial
reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the
weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.

On April 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxesan interpretation of SFAS No. 109 (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements. The interpretation prescribes
a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxation authorities. The amount recognized is measured as the largest amount of benefit that is more likely than not of being realized upon ultimate settlement. The Companys adoption of
FIN 48 did not result in any adjustment to the opening balance of the Companys accumulated deficit as of April 1, 2007.

The Company recorded its possible interest and penalties due to any potential underpayment of income taxes, if and when required, in interest expense and other expenses, respectively.

The Company did not provide for deferred income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries.
The Company intends to permanently reinvest foreign subsidiaries earnings.



| | (q) | Stock compensation expense
| | --- | --------------------------

Effective from April 1, 2006, the Company has applied the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)), and related interpretations in accounting for its employee
share-based payment transactions. Accordingly, stock compensation cost is measured at the date of grant, based on fair value which is estimated using the Black-Scholes option pricing model. Stocks issued to an employee as compensation are measured
fair value based on the grant date quoted market price. The compensation cost for share-based awards with service conditions is amortized over the vesting period of the awards using the straight-line method provided that the amount of compensation
cost recognized at any date must at least equal the portion of the grant date fair value of the award that is vested at that date.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (q) | Stock compensation expense (continued)
| | --- | --------------------------------------

The Company accounts for stock options granted to a counterparty other than an employee in accordance with Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services. Fair value of the equity instruments is recognized on the measurement date which is the earlier of (i) a commitment for performance by the counterparty to earn the equity
instruments being reached or (ii) the counterpartys performance being completed.

As permitted by SFAS
No. 123(R), the Company has elected to apply the modified prospective transition method, in which compensation cost is recognized beginning with the effective date based on the requirements of SFAS No. 123(R) (i) for all
share-based payments granted after the effective date and (ii) for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remained unvested on the effective date.



| | (r) | Retirement costs
| | --- | ----------------

Retirement
cost contributions relating to defined contribution plans are made based on a percentage of the relevant employees salaries and are included in the consolidated statement of operations as they become payable. The assumptions used in
calculating the obligation for retirement cost contributions depend on the local economic environment, interpretations and practices in respect thereof.



| | (s) | Operating leases
| | --- | ----------------

Leases where
substantially all the rewards and risks of ownership remain with the lessor are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lessors are charged to the consolidated statement of
operations on a straight-line basis over the period of the relevant leases.

Assets leased out under operating leases are
included in Property, plant and equipment in the consolidated balance sheet. They are depreciated over the expected useful lives on a basis consistent with similar owned items of property, plant and equipment. Rental income (net of any
incentives given to lessees) is recognized on a straight-line basis over the lease terms.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (t) | Earnings (loss) per share
| | --- | -------------------------

Earnings (loss) per share is computed in accordance with SFAS No. 128, Earnings Per Share. Under the provisions of SFAS No. 128, basic earnings or loss per share of common stock is computed by dividing the net income
or loss available to common shareholders for the year by the weighted average number of shares of common stock outstanding during the year. Diluted earnings or loss per share of common stock reflects the potential dilution that could occur if
securities or other contracts/arrangements to issue shares of common stock were exercised or converted into shares of common stock. Common equivalent shares, comprised of incremental shares of common stock issuable upon the exercise of stock
options, are included in diluted earnings or loss per share if they have a dilutive effect by application of the treasury stock method.



| | (u) | Accounts and bills receivable, net
| | --- | ----------------------------------

Accounts and bills receivable are presented net of an allowance for doubtful accounts, which is an estimate of amounts that may not be collectible. The Company does not charge interest on accounts receivable. The allowance for doubtful
accounts is estimated based on historical experience, receivable aging, current economic trends and specific identification of certain receivables that are at the risk of not being paid. The Company reviews the aged analysis of accounts and bills
receivable on a regular basis. Whenever it is clear that the amounts are deemed to be uncollectible, receivables are written off against the allowance for doubtful accounts. In light of the recent economic downturn in the global economy, the
Companys estimates and judgments with respect to the collectability of its receivables have been subject to greater uncertainty than in more stable periods.



| | (v) | Treasury stock
| | --- | --------------

The Company
accounts for the acquired shares of its own capital stock (treasury stock) in accordance with Accounting Research Bulletin (ARB) No. 43, Chapter 1B, and Accounting Principles Board Opinion No. 6, Status of
Accounting Research Bulletins. The cost of the acquired treasury stock is shown as a deduction from shareholders equity. Gains on sale of treasury stock not previously accounted for as constructively reissued are credited to additional
paid-in capital while losses are charged to additional paid-in capital to the extent that previous net gains from the sale or retirement of the same class of stock are included therein, otherwise the loss is charged to retained earnings/accumulated
deficit.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (w) | Comprehensive income (losses)
| | --- | -----------------------------

The Company applies SFAS No. 130, Reporting Comprehensive Income, which establishes guidance for the reporting and display of comprehensive income (loss) and its components. Comprehensive income (loss) is defined as the
change in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to the shareholders. Total net comprehensive income (loss) includes
net income or loss for the year as well as additional other comprehensive income (loss). The Companys other comprehensive income (loss) consists of the Companys share of other comprehensive income of jointly-controlled entities,
unrealized gains and losses on available-for-sale investments and foreign currency translation adjustments, all recorded net of tax.



| | (x) | Loss contingencies
| | --- | ------------------

The Company
makes provision related to loss contingencies when a loss is probable and the amount is reasonably estimable. Although management believes, after consultation with the Companys counsel, that adequate reserves have been provided for all known
loss contingencies, the ultimate result will depend on the resolution of the uncertainties. Therefore, actual results may differ from such estimates and the difference may be material.



| | (y) | Segment reporting
| | --- | -----------------

The Company
follows SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information for its segment reporting.

The Company operates and manages its business in three segments. The accounting policies used in its segment reporting are the same as those used in the preparation of its consolidated financial statements.



| | (z) | Warranty cost
| | --- | -------------

The Company
estimates its warranty provision for defective products based on various factors including the likelihood of defects, an evaluation of its quality controls, technical analysis, industry information on comparable companies and its own experience.
Based on the above consideration, the Company has accrued for warranty costs of US$191,459 for the year ended March 31, 2009 (2008: US$235,315 and 2007: nil). The basis and the amount of the warranty accrual will be reviewed and adjusted
periodically based on actual experience.



F - 21



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



Recent accounting pronouncements



| | (i) | In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)). The objective of SFAS
No. 141(R) is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. Under SFAS No. 141(R), an
entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized
separately from the acquisition and expensed as incurred, restructuring costs generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax
uncertainties after the measurement period impact income tax expense. In addition, acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life. SFAS No. 141(R) is effective for
the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141(R) will change the Companys accounting treatment for business combinations on a prospective basis.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160 requires that a noncontrolling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity. Under SFAS No. 160,
gains or losses should not be recognized on sales of noncontrolling interests in subsidiaries. Differences between sales proceeds and the consolidated basis of outstanding noncontrolling interests should be accounted for as charges or credits to
consolidated paid-in-capital. SFAS No. 160 carries forward the provisions of Accounting Research Bulletin No. 51, Consolidated Financial Statements, related to consolidation purpose and policy, and certain consolidation
procedure topics. SFAS No. 160 is effective for the fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS No. 160 requires the presentation and disclosure requirements for existing
minority interests to be applied retrospectively. All other requirements of SFAS No. 160 are to be applied prospectively. The Company is currently assessing the impact, if any, of this new standard will have on its consolidated financial
statements.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133 (SFAS No. 161).SFAS No. 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133). This standard requires additional quantitative disclosures (provided in tabular form) and qualitative disclosures for derivative instruments. SFAS No. 161 requires entities to provide greater
transparency about how and why they use derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how derivative instruments and related hedged items
affect their financial position, results of operations and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the
adoption of SFAS No. 161 to have any material effect on its consolidated results of operations and financial condition.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165), which provides guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 also requires entities to disclose the date on which subsequent events were
evaluated as well as the reason why that date was selected. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. SFAS
No. 165 is effective for interim or annual periods ending after June 15, 2009 and is required to be adopted by the Company in the first quarter of the fiscal year 2010. The Company is currently assessing the impact, if any, of this new
standard will have on its consolidated financial statements.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



Recent accounting pronouncements (continued)



| | (v) | In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This statement
is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferors continuing involvement in transferred financial assets. This statement must be applied as of the beginning of each reporting entitys first annual reporting period that
begins after November 15, 2009, and is required to be adopted by the Company in the first quarter of the fiscal year 2011. Earlier application is prohibited. This statement must be applied to transfers of financial assets occurring on or after
the effective date. The Company is currently assessing the impact, if any, of this new standard will have on its consolidated financial statements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 changes
the approach to determining the primary beneficiary of a variable interest entity (VIE) and requires an entity to regularly assess whether it is the primary beneficiary of a VIE. SFAS No. 167 is effective for the first annual
reporting period that begins after November 15, 2009. The Company is currently evaluating what effects, if any, the adoption of SFAS No. 167 will have on the Companys future results of operations and financial condition.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
 a replacement of SFAS No. 162. The FASB approved the FASB Accounting Standards Codification (the Codification) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The
Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard
documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The
Codification is effective for the Company in the second quarter of the fiscal year 2010.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | In April 2009, the FASB issued FASB Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4), which provides additional guidance on measuring the fair value of financial instruments when markets become inactive and quoted
prices may reflect distressed transactions. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently in the process of assessing the impact, if any, of the adoption FSP 157-4 will have
on its consolidated financial statements.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment accounting guidance for debt securities. This FSP requires that other-than-temporary impairment be separated into the amount of the total impairment related to credit losses and the amount of the total impairment
related to all other factors. The amount of the total other-than-temporary impairment related to credit losses is recognized in earnings and the amount related to all other factors is recognized in other comprehensive income (loss). This FSP is
effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company is currently in the process of assessing the impact, if any, of the adoption
of this FSP will have on its consolidated financial statements.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



Recent accounting pronouncements (continued)



| | (x) | In November 2008, the FASB ratified EITF Issue No. 08-6, Equity Method Investment Accounting Considerations (EITF 08-6), which clarifies
the accounting for certain transactions and contingent consideration, and impairment considerations involving equity method investments. EITF 08-6 is effective for interim and annual reporting periods ending after September 15, 2009, with early
adoption prohibited. The Company is currently evaluating the impact, if any, of the adoption of EITF 08-6 will have on its consolidated financial statements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | CASH AND CASH EQUIVALENTS
|-- | -------------------------



|                                |  |               |  |              
|------------------------------- |  | ------------- |  | -------------
|                                |  | March 31,2009 |  | March 31,2008
|                                |  | US$           |  | US$          
|Cash on hand and at banks       |  | 11,045,550    |  | 19,218,474   
|Money market funds              |  | 267,332       |  | 12,454,111   
|                                |  |               |  |              
|Total cash and cash equivalents |  | 11,312,882    |  | 31,672,585   
|                                |  |               |  |              

The cash on hand and at banks of the Company denominated in Renminbi
(RMB) amounted to RMB9,125,514 (equivalent to US$1,335,330) and RMB41,655,715 (equivalent to US$5,939,947) as of March 31, 2009 and 2008, respectively. RMB is not freely convertible into other currencies, however, under Mainland
Chinas Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Company is permitted to exchange RMB for other currencies through banks authorized to conduct foreign exchange
business.



|5. | TIME DEPOSITS
|-- | -------------

As of
March 31, 2009, time deposits of RMB30,144,000 (equivalent to US$4,410,951) were deposited with a creditworthy bank with an original maturity more than three months when acquired. The time deposits bear interest ranging from 1.71% to
3.25% per annum and will mature in May 2009.



|6. | RESTRICTED CASH
|-- | ---------------

As of
March 31, 2009, time deposits of RMB30,000,000 (equivalent to US$4,389,880) (March 31, 2008: nil) were deposited with and pledged to a bank to secure general banking facilities granted to the Company, including a RMB30,000,000 line of credit.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|7. | AVAILABLE-FOR-SALE INVESTMENTS
|-- | ------------------------------



The following is a summary of available-for-sale debt and equity securities, which are
all non-restricted, as of March 31, 2009 and 2008:



|                         |  |            |  |                              |  |             |   |  |         |  |            |  |        
|------------------------ |  | ---------- |  | ---------------------------- |  | ----------- | - |  | ------- |  | ---------- |  | -------
|                         |  | Costs      |  | Net unrealizedgains (losses) |  | Fair values
|                         |  | 2009US$    |  | 2008US$                      |  | 2009US$     |   |  | 2008US$ |  | 2009US$    |  | 2008US$
|U.S. treasury bills      |  | 15,970,792 |  |                             |  | 12,498      |   |  |        |  | 15,983,290 |  |       
|Listed equity securities |  | 3,143      |  | 3,130                        |  | (1,145      | ) |  | 1,289   |  | 1,998      |  | 4,419  
|                         |  |            |  |                              |  |             |   |  |         |  |            |  |        
|                         |  | 15,973,935 |  | 3,130                        |  | 11,353      |   |  | 1,289   |  | 15,985,288 |  | 4,419  
|                         |  |            |  |                              |  |             |   |  |         |  |            |  |        

The Companys U.S. treasury bills as of March 31, 2009 were held with
contractual maturities of less than six months. As of March 31, 2009, certain available-for-sale investments of the Company with investment cost totaling US$2,387 (March 31, 2008: Nil) were in unrealized loss positions of US$2,206 (March 31,
2008: Nil). During the fiscal years ended March 31, 2009, 2008 and 2007, no gain or loss was recognized on the disposal of the Companys available-for-sale debt securities.

The fair values of listed equity securities are based on quoted market prices at the balance sheet date.

The net unrealized gains consisted of gross unrealized gains for the fiscal years ended March 31, 2009, 2008 and 2007 of US$13,559,
US$1,289 and US$194,366, respectively, and gross unrealized losses for the fiscal years ended March 31, 2009, 2008 and 2007 of US$2,206, nil and nil, respectively.

The proceeds from the disposal of available-for-sale investments for the fiscal years ended March 31, 2009, 2008 and 2007 were US$9,979,200, US$14,672,506 and US$37,973,452, respectively.



F - 25



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|8. | ACCOUNTS AND BILLS RECEIVABLE, NET
|-- | ----------------------------------



|                                      |  |               |   |  |               |  
|------------------------------------- |  | ------------- | - |  | ------------- | -
|                                      |  | March 31,2009 |   |  | March 31,2008 |  
|                                      |  | US$           |   |  | US$           |  
|Accounts receivable                   |  | 12,716,823    |   |  | 11,989,577    |  
|Less: Allowance for doubtful accounts |  | (65,308       | ) |  | (65,308       | )
|                                      |  |               |   |  |               |  
|Accounts receivable, net              |  | 12,651,515    |   |  | 11,924,269    |  
|Bills receivable                      |  | 5,786,814     |   |  | 10,149,384    |  
|                                      |  |               |   |  |               |  
|Accounts and bills receivable, net    |  | 18,438,329    |   |  | 22,073,653    |  
|                                      |  |               |   |  |               |  



|                                                           |  |                    |  |               |   |  |               |  
|---------------------------------------------------------- |  | ------------------ |  | ------------- | - |  | ------------- | -
|                                                           |  | Fiscal years ended | 
|                                                           |  | March 31,2009      |  | March 31,2008 |   |  | March 31,2007 |  
|                                                           |  | US$                |  | US$           |   |  | US$           |  
|Allowance for doubtful accounts:                           |  |                    |  |               |   |  |               |  
|Balance at beginning of fiscal year                        |  | 65,308             |  | 12,171        |   |  | 48,715        |  
|Additions                                                  |  |                   |  | 81,889        |   |  | 3,173         |  
|Amount written-off as uncollectible during the fiscal year |  |                   |  | (28,686       | ) |  | (39,618       | )
|Exchange realignment                                       |  |                   |  | (66           | ) |  | (99           | )
|                                                           |  |                    |  |               |   |  |               |  
|Balance at end of fiscal year                              |  | 65,308             |  | 65,308        |   |  | 12,171        |  
|                                                           |  |                    |  |               |   |  |               |  



|9. | INVENTORIES
|-- | -----------



|                 |  |               |  |              
|---------------- |  | ------------- |  | -------------
|                 |  | March 31,2009 |  | March 31,2008
|                 |  | US$           |  | US$          
|Raw materials    |  | 3,544,915     |  | 7,158,303    
|Work in progress |  | 2,292,871     |  | 2,840,708    
|Finished goods   |  | 2,610,612     |  | 2,541,988    
|                 |  |               |  |              
|                 |  | 8,448,398     |  | 12,540,999   
|                 |  |               |  |              

For the fiscal years ended March 31, 2009, 2008 and 2007, a write-down of
inventories to market of US$688,020, US$1,253,352 and nil, respectively, was recognized in the consolidated statement of operations.



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|10. | RELATED PARTY TRANSACTIONS
|--- | --------------------------



A related party is any party that controls, jointly controls or can significantly
influence the management or operating policies of the Company. Such parties would also include affiliates, investments accounted for by the equity method, principal shareholders, management, directors and the immediate family members of principal
shareholders, management or directors.

In addition to the transactions and balances detailed elsewhere in the consolidated
financial statements for the fiscal years ended March 31, 2009, 2008 and 2007, the Company had the following material transactions with related parties during those years:



| | (a) | The Company incurred annual real estate rental expenses for the fiscal years ended March 31, 2009, 2008 and 2007 of approximately US$738,697, US$752,232 and
US$753,919, respectively, payable to two directors of Global-Tech and certain related companies of which certain of their directors are also the directors of Global-Tech. Included in the aforesaid annual real estate rental expenses were amounts of
US$478,211, US$476,933 and US$478,082 paid to two directors of Global-Tech during the fiscal years ended March 31, 2009, 2008 and 2007, respectively, which were included in their remuneration for the respective fiscal years as housing
allowances.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Rental income of US$50,812, US$50,302 and US$49,957 was earned for the fiscal years ended March 31, 2009, 2008 and 2007, respectively, from a jointly-controlled
entity. The rentals were charged on mutually agreed terms.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Management fee income of US$106,677, US$99,582 and US$111,992 was earned for the fiscal years ended March 31, 2009, 2008 and 2007, respectively, from a
jointly-controlled entity, which was charged with reference to the actual costs incurred.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The amount due from a
jointly-controlled entity is unsecured, interest-free and has no fixed terms of repayment. The amount due from a related party, of which two of the directors of Global-Tech are shareholders, is unsecured, interest-free and has no fixed terms of
repayment.



|11. | PROPERTY, PLANT AND EQUIPMENT, NET
|--- | ----------------------------------



|                                     |  |               |   |  |               |  
|------------------------------------ |  | ------------- | - |  | ------------- | -
|                                     |  | March 31,2009 |   |  | March 31,2008 |  
|                                     |  | US$           |   |  | US$           |  
|Leasehold improvements and buildings |  | 25,676,292    |   |  | 24,983,527    |  
|Plant and machinery                  |  | 30,819,342    |   |  | 27,978,994    |  
|Moulds                               |  | 10,321,761    |   |  | 10,299,740    |  
|Transportation equipment             |  | 1,655,049     |   |  | 1,540,623     |  
|Furniture, fixtures and equipment    |  | 5,939,026     |   |  | 5,709,600     |  
|Construction in progress             |  | 23,618        |   |  |              |  
|                                     |  |               |   |  |               |  
|                                     |  | 74,435,088    |   |  | 70,512,484    |  
|                                     |  |              
|Less: Accumulated depreciation       |  | (49,842,640   | ) |  | (45,241,565   | )
|                                     |  |               |   |  |               |  
|Property, plant and equipment, net   |  | 24,592,448    |   |  | 25,270,919    |  
|                                     |  |               |   |  |               |  



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|11. | PROPERTY, PLANT AND EQUIPMENT, NET (continued)
|--- | ----------------------------------------------



| | (a) | During the fiscal years ended March 31, 2009, 2008 and 2007, impairment losses relating to property, plant and equipment of US$200,407, nil and US$17,174,
respectively, were recognized in the consolidated statement of operations for certain moulds, plant and machinery, and furniture, fixtures and equipment which are no longer used in the operations of the Company. The impairment losses recognized
during the fiscal years ended March 31, 2009, 2008 and 2007 were included in Cost of goods sold and SG&A on the face of the consolidated statement of operations in the amounts of US$128,911, nil and nil,
respectively, and US$71,496, nil and US$17,174, respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | As of March 31, 2009 and 2008, buildings with aggregate net book values of approximately US$101,687 and US$104,002, respectively, were situated in Hong Kong and
manufacturing facilities with aggregate net book values of approximately US$13,282,856 and US$14,020,515, respectively, were situated in Mainland China. The land where the manufacturing facilities were situated is held under certain land use rights
that will expire in 2043. Up to March 31, 2009, the Company has obtained a sizable portion of the property ownership certificates for its buildings (14 out of a total of 34 properties). The application for the remaining property ownership
certificates will commence only after the land use right certificates for the relevant pieces of land have been obtained.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | The amounts of depreciation charged for the fiscal years ended March 31, 2009, 2008 and 2007 were US$3,830,549, US$3,037,662 and US$3,413,658, respectively.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | The loss on disposal of property, plant and equipment recognized during the fiscal years ended March 31, 2009, 2008 and 2007 amounted to US$39,645, US$17,386 and
US$97,997, respectively.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | The amounts of plant and machinery held under operating leases as of March 31, 2009 and 2008 were US$1,163,979 and US$2,822,699, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



|12. | LAND USE RIGHTS, NET
|--- | --------------------

Land use
rights represent prepayments under operating leases for land use for a predetermined time period. They are charged to the consolidated statement of operations over the lease periods on a straight-line basis. The Company has the rights to use certain
pieces of land located in Mainland China and has obtained or is in the process of obtaining the land use rights certificates covering a substantial portion of such lands. On August 26, 2006, the Company entered into a supplementary agreement
with the Dongguan local government regarding the use of a piece of land with a total area of 45,208 square meters which the Company had occupied. Pursuant to the supplementary agreement, the Company has moved out from a portion of this land (13,698
square meters in aggregate), which was previously used as a recreational area, and has arranged to use the remaining portion of the land (31,510 square meters) until August 6, 2043. However, the Company had to pay monthly fees of RMB59,248
(approximately US$8,610) to the local government for the period from January 1, 2008 to December 31, 2008 and RMB193,048 (approximately US$28,053) for January 1, 2009 onwards till August 6, 2043. Up to March 31, 2009, the
Company has obtained a sizable portion of its land use rights certificates covering 131,400 square meters out of a total area of 207,300 square meters. The application of certain property ownership certificates as further detailed in note 11 to the
financial statements will commence only after the land use rights certificates for the relevant pieces of land have been obtained. The Company is in the process of obtaining the remaining land use rights and property ownership certificates and
expects to obtain those certificates in the near future.



F - 28



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|13. | DISPOSAL OF SUBSIDIARIES
|--- | ------------------------



| | (a) | On March 17, 2006, Consortium Investment (BVI) Limited (CIBL), a wholly-owned subsidiary of the Company, entered into a Share Sale and Purchase
Agreement with Anwell Technologies Limited (Anwell), a publicly listed company in Singapore, to form a joint venture company in Mainland China to exploit the opportunity in the development and manufacturing of organic light emitting
diode (OLED) equipment. Pursuant to the Share Sale and Purchase Agreement, CIBL agreed to sell 5,600,000 common stock of US$1 each in the capital of Lite Array Holdings, the then wholly-owned subsidiary of CIBL, to Anwell, representing a
70% equity interest in Lite Array Holdings, in exchange for a convertible note (the Convertible Note) issued by Anwell to CIBL with a nominal value of US$5,600,000 on April 3, 2006. Lite Array Holdings and its subsidiaries are
primary engaged in developing OLED process technology and equipment. The disposal was completed on April 3, 2006. The Company still retains a 30% interest in Lite Array Holdings and its subsidiaries after the disposal and they have been
accounted for as jointly-controlled entities of the Company thereafter as further detailed in note 15 to the financial statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Details of the net assets disposed of are as follows:



|                                  |  |           |  
|--------------------------------- |  | --------- | -
|                                  |  | US$       |  
|Cash and cash equivalents         |  | 2,334     |  
|Prepayments and other assets      |  | 6,747     |  
|Machinery and equipment           |  | 1,613,232 |  
|Amounts due to group companies    |  | (19,439   | )
|                                  |  |           |  
|                                  |  | 1,602,874 |  
|                                  |  |           |  
|70% of the net assets disposed of |  | 1,122,012 |  
|Gain on disposal of subsidiaries  |  | 3,951,520 |  
|                                  |  |           |  
|Consideration                     |  | 5,073,532 |  
|                                  |  |           |  
|Satisfied by:                     |  |           |  
|Convertible Note                  |  | 5,073,532 |  
|                                  |  |           |  

An analysis of the net cash outflow of cash and cash equivalents in respect of the
disposal of the above subsidiaries for the fiscal year ended March 31, 2007 is as follows:



|                                                                                                      |  |                          |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------ | -
|                                                                                                      |  | Year endedMarch 31, 2007 |  
|                                                                                                      |  | US$                      |  
|Cash and cash equivalents disposed of and net cash outflow in respect of the disposal of subsidiaries |  | (2,334                   | )
|                                                                                                      |  |                          |  



F - 29



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|13. | DISPOSAL OF SUBSIDIARIES (continued)
|--- | ------------------------------------



| | (b) | On October 2, 2008, the Company disposed of its entire equity interest in Winway to Winways minority shareholder for nil consideration.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

Details of the liabilities disposed are as follows:



|                                 |  |          |  
|-------------------------------- |  | -------- | -
|                                 |  | US$      |  
|Cash and cash equivalents        |  | 194      |  
|Deposits and other assets        |  | 25,879   |  
|Accrual for loss contingencies   |  | (155,722 | )
|Other accrued liabilities        |  | (27,948  | )
|                                 |  |          |  
|Net liabilities disposed of      |  | (157,597 | )
|Gain on disposal of a subsidiary |  | 157,597  |  
|                                 |  |          |  
|Consideration                    |  |         |  
|                                 |  |          |  

An analysis of the net cash outflow of cash and cash equivalents in respect of the
disposal of the above subsidiary for the fiscal year ended March 31, 2009 is as follows:



|                                                                                                      |  |                         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | -
|                                                                                                      |  | Year endedMarch 31,2009 |  
|                                                                                                      |  | US$                     |  
|Cash and cash equivalents disposed of and net cash outflow in respect of the disposal of a subsidiary |  | (194                    | )
|                                                                                                      |  |                         |  



|14. | CONVERTIBLE NOTE
|--- | ----------------



|                 |  |                |  |              
|---------------- |  | -------------- |  | -------------
|                 |  | Amortized cost
|                 |  | March 31,2009  |  | March 31,2008
|                 |  | US$            |  | US$          
|Convertible Note |  | 5,598,487      |  | 5,417,403    
|                 |  |                |  |              

The Convertible Note was issued by Anwell in exchange for a 70% equity interest in
Lite Array Holdings. The nominal value of the Convertible Note is US$5,600,000. The Convertible Note carries interest at a rate of 3% per annum, which is payable in full on April 3, 2009 (the Payment Date). In the event that
during the six months prior to the Payment Date the stock of Anwell, traded on The Singapore Exchange Securities Trading Limited, are at all times not less than Singapore Dollar (S$) 0.38 per share, the Convertible Note and all
accrued and unpaid interest thereon will automatically be converted, at a price of S$0.38 per share, into duly authorized, validly issued, fully paid and unencumbered common stocks of Anwell on the Payment Date. The Company intended to hold the
Convertible Note until maturity.

The amounts of interest receivable from Anwell in respect of the Convertible Note as of
March 31, 2009 and 2008 were US$504,000 and US$336,000, respectively. The Convertible Note together with the interest receivable from Anwell was subsequently settled in full by cash in June 2009.



F - 30



---

##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|15. | INTERESTS IN JOINTLY-CONTROLLED ENTITIES
|--- | ----------------------------------------



During the fiscal year ended March 31, 2007, Consortium Investment (BVI) Limited
(CIBL) effectively disposed of 70% of its equity interest in Lite Array Holdings to Anwell as part of an arrangement to set up a joint venture in Mainland China to exploit the opportunity in the development and manufacturing of OLED
equipment. Subsequent to the completion of the disposal, the Company still retains 2,400,000 common stock of Lite Array Holdings, representing a 30% equity interest in Lite Array Holdings through CIBL. The Company accounts for its interest in Lite
Array Holdings and its subsidiaries (the jointly-controlled entities), in which the Company does not have unilateral control, but joint control, under the equity method.

Particulars of the jointly-controlled entities are as follows:



|                                             |  |                                      |  |                                                            |  |                                                
|-------------------------------------------- |  | ------------------------------------ |  | ---------------------------------------------------------- |  | -----------------------------------------------
|Name                                         |  | Place of incorporation/ registration |  | Percentage of ownershipinterest attributable tothe Company |  | Principal activities                           
|                                             |  |                                      | 
|Lite Array Holdings Limited                  |  | British Virgin Islands               |  | 30                                                         |  | Investment holding                             
|                                             |  |                                      | 
|Dongguan Litewell (OLED) Technology Limited* |  | PRC                                  |  | 30                                                         |  | Research and development of OLED equipment     
|                                             |  |                                      | 
|Litewell Technology (HK) Limited*            |  | Hong Kong                            |  | 30                                                         |  | Design and trading of OLED production equipment



|* | Wholly-owned subsidiaries of Lite Array Holdings Limited
|- | --------------------------------------------------------

The Company has discontinued the recognition of its share of losses of the jointly-controlled entities because the share of losses of the jointly-controlled entities exceeded the Companys interests
in the jointly-controlled entities.

The following table illustrates the summarized financial information of the Companys
jointly-controlled entities:

As of or for the years ended December 31*



|                    |  |            |   |  |            |  
|------------------- |  | ---------- | - |  | ---------- | -
|                    |  | 2008       |   |  | 2007       |  
|                    |  | US$        |   |  | US$        |  
|Current assets      |  | 289,898    |   |  | 211,397    |  
|Non-current assets  |  | 1,971,115  |   |  | 1,406,158  |  
|Current liabilities |  | (2,509,156 | ) |  | (1,611,845 | )
|Revenue             |  |           |   |  |           |  
|Operating expenses  |  | (1,418,107 | ) |  | (1,148,806 | )
|Net loss            |  | (347,404   | ) |  | (1,148,241 | )
|                    |  |            |   |  |            |  



|* | The financial year end date of Lite Array Holdings Limited
|- | ----------------------------------------------------------



|16. | WARRANTY PROVISION
|--- | ------------------

Included in
other accrued liabilities are warranty provisions of US$191,459 and US$235,315 as of March 31, 2009 and 2008, respectively. The Companys warranty activity during the fiscal years ended March 31, 2009 and 2008 is summarized below:



|                                    |  |                    |   |  |              
|----------------------------------- |  | ------------------ | - |  | -------------
|                                    |  | Fiscal years ended
|                                    |  | March 31,2009      |   |  | March 31,2008
|                                    |  | US$                |   |  | US$          
|Balance at beginning of fiscal year |  | 235,315            |   |  |             
|Additional provision                |  | 47,215             |   |  | 235,315      
|Reversal of unutilized amounts      |  | (91,071            | ) |  |             
|                                    |  |                    |   |  |              
|Balance at end of fiscal year       |  | 191,459            |   |  | 235,315      
|                                    |  |                    |   |  |              



F - 31



---

##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|17. | LOANS PAYABLE AND BANKING FACILITIES
|--- | ------------------------------------



The Companys loans payable as at March 31, 2008 represented short-term import
loans from a bank under certain banking facilities as further detailed below, which were subject to interest at a rate of appropriately 4% per annum.

Global-Tech has provided a bank with: (i) an unlimited corporate guarantee for general banking facilities granted to certain subsidiaries of the Company; and (ii) an undertaking not to pledge,
mortgage or charge any of the assets of the Company in Hong Kong or Mainland China for general banking facilities granted to a subsidiary of the Company without obtaining written consent of the bank.

The Company had banking facilities denominated in Hong Kong dollars of HK$25,000,000 and in RMB of RMB30,000,000 (equivalent to US$7,612,749
in total) as of March 31, 2009, and in Hong Kong dollars of HK$35,000,000 (equivalent to US$4,497,212) as of March 31, 2008. As of March 31, 2009 and 2008, such banking facilities were utilized to the extent of nil and US$1,600,311,
respectively.



|18. | SHARE CAPITAL
|--- | -------------

Holders of common
stock of Global-Tech have one vote for each stock held on all matters submitted to vote at a shareholders meeting of Global-Tech. Subject to the rights of the holders of stock with preferential or other special rights which may be authorized
in the future, holders of common stock of Global-Tech are entitled to receive dividends pro rataout of assets legally available therefore and, in the event of the winding up of Global-Tech, to share ratably in all assets remaining after
payment of liabilities of Global-Tech. The Board of Directors of Global-Tech may declare interim dividends and recommend a final annual dividend from retained earnings available for cash dividends as determined for statutory purposes at such times
and in such amounts as they may determine. Dividends may only be declared and paid out of surplus.

During the fiscal year
ended March 31, 2009, the Board of Directors of Global-Tech authorized an amendment to Global-Techs Memorandum of Association to effect a 4-for-1 reverse stock split (the Reverse Stock Split) of the issued and outstanding
common stock of Global-Tech, effective from December 10, 2008 (the Effective Date). During the fiscal year ended March 31, 2009, Global-Tech also proportionally reduced the authorized number of shares of its common and
preferred stock to 12,500,000 and 250,000, respectively. On the Effective Date, every four shares of common stock of Global-Tech issued and outstanding as of the Effective Date were consolidated into one share of post-reverse split common stock.



|19. | OTHER INCOME (EXPENSES), NET
|--- | ----------------------------



|                                                  |  |          |   |  |            |   |  |           |  
|------------------------------------------------- |  | -------- | - |  | ---------- | - |  | --------- | -
|                                                  |  | 2009     |   |  | 2008       |   |  | 2007      |  
|                                                  |  | US$      |   |  | US$        |   |  | US$       |  
|Foreign exchange gains (losses), net              |  | (93,073  | ) |  | (1,239,501 | ) |  | 1,588,565 |  
|Loss on disposal of property, plant and equipment |  | (39,645  | ) |  | (17,386    | ) |  | (97,997   | )
|Rental income from a related party                |  | 50,812   |   |  | 50,302     |   |  | 49,957    |  
|Rental income from other third parties            |  | 151,188  |   |  | 153,832    |   |  |          |  
|Management fee received from a related party      |  | 106,677  |   |  | 99,582     |   |  | 111,992   |  
|Management fee received from other third party    |  | 57,218   |   |  | 79,116     |   |  |          |  
|Accrual for potential tax surcharge               |  | (104,806 | ) |  | (1,042,482 | ) |  |          |  
|Others                                            |  | 303,622  |   |  | 107,193    |   |  | 75,820    |  
|                                                  |  |          |   |  |            |   |  |           |  
|                                                  |  | 431,993  |   |  | (1,809,344 | ) |  | 1,728,337 |  
|                                                  |  |          |   |  |            |   |  |           |  



F - 32



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|20. | INCOME TAXES
|--- | ------------



Global-Tech and its subsidiaries are subject to income taxes on an entity basis on the
taxable income arising in or derived from the respective tax jurisdictions in which they are domiciled or deemed to operate. Global-Tech and its investment holding subsidiaries incorporated in the British Virgin Islands (BVI) are not
subject to tax in the BVI in accordance with the BVI tax regulations. The Company conducts substantially all of its businesses and operations through its subsidiaries located in Hong Kong, Macau and Mainland China. The subsidiary located in Macau
was dissolved on July 2, 2008.

The Companys operating subsidiaries are subject to various statutory tax rates,
according to the respective jurisdictions in which they operate. The Companys subsidiaries in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5%, 17.5% and 17.5% on their assessable income arising in Hong Kong during the fiscal
years ended March 31, 2009, 2008 and 2007, respectively. The Companys former subsidiary in Macau was exempted from Macau Complementary Tax.

The Companys subsidiaries registered in the PRC, including DWS and DGLAD, are subject to PRC corporate income tax (CIT) on income as reported in their PRC statutory accounts, adjusted in
accordance with relevant PRC income tax laws and regulations. DWS and DGLAD are located in a coastal open economic zone in Mainland China and, accordingly, are entitled to a preferential tax rate of 27% (24% reduced tax rate and 3% local income tax
rate) for their CIT for calendar years ended prior to December 31, 2008. During the 5thSession of the 10thNational Peoples Congress of the PRC, which was concluded on March 16, 2007, a new PRC Corporate Income Tax Law (the New CIT Law) was approved and became effective on January 1, 2008. The New CIT Law introduces
a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. DGLAD is entitled to a tax concession period (Tax Holiday), whereby it
is exempted from CIT for its first two profit-making years and is entitled to a 50% tax reduction for the succeeding three years. DGLAD started its first profit-making year under the Tax Holiday for the calendar year ended December 31, 2007.

During the fiscal year ended March 31, 2007, with reference to a circular issued by the State of Administration of
Taxation of the PRC on February 28, 2007 and other information available that clarified prior uncertainties relating to certain income and expense allocations between the Companys subsidiaries, the Company revised its accounting estimate
for potential income tax exposure relating to its Mainland China subsidiaries and reassessed its tax position. The change in accounting estimate resulted in an accrual of additional tax liabilities of approximately US$660,405, which was included in
current income tax expense for the fiscal year ended March 31, 2007.

Income tax expense (benefit) consists of:



|                                   |  |         |   |  |           |   |  |          |  
|---------------------------------- |  | ------- | - |  | --------- | - |  | -------- | -
|                                   |  | 2009    |   |  | 2008      |   |  | 2007     |  
|                                   |  | US$     |   |  | US$       |   |  | US$      |  
|Income tax expense (benefit):      |  |         |   |  |           |   |  |          |  
|Current                            |  | 460,345 |   |  | 1,650,040 |   |  | (225,364 | )
|Deferred                           |  | (39,319 | ) |  | (52,983   | ) |  | 80,967   |  
|                                   |  |         |   |  |           |   |  |          |  
|Total income tax expense (benefit) |  | 421,026 |   |  | 1,597,057 |   |  | (144,397 | )
|                                   |  |         |   |  |           |   |  |          |  



F - 33



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|20. | INCOME TAXES (continued)
|--- | ------------------------



The reconciliation of income tax expense (benefit) computed at the Hong Kong statutory
income tax rate to loss before income taxes as stated in the consolidated statement of operations of the Company at the effective income tax rate is as follows:



|                                                                              |  |           |    |  |           |    |  |           |  
|----------------------------------------------------------------------------- |  | --------- | -- |  | --------- | -- |  | --------- | -
|                                                                              |  | 2009      |    |  | 2008      |    |  | 2007      |  
|                                                                              |  | US$       |    |  | US$       |    |  | US$       |  
|Income tax benefit at the Hong Kong statutory income tax rate                 |  | (894,200  | )  |  | (495,260  | )  |  | (242,936  | )
|Foreign rate differential                                                     |  | 26,140    |    |  | 298,583   |    |  | (748,380  | )
|Non-taxable other income                                                      |  | (558,829  | )  |  | (167,326  | )  |  | (199,112  | )
|Non-tax deductible expenses                                                   |  | 1,056,179 |    |  | 578,606   |    |  | 1,085,630 |  
|Under (over) provision of tax in prior periods                                |  | 52,596    |    |  | 36,657    |    |  | (307,834  | )
|Unrecognized tax benefits                                                     |  | 402,496   |    |  | 1,545,922 |    |  | 33,347    |  
|Changes in valuation allowance                                                |  | 336,644   |    |  | (200,125  | )  |  | 234,888   |  
|                                                                              |  |           |    |  |           |    |  |           |  
|Total income tax expense (benefit) at the Companys effective income tax rate |  | 421,026   |    |  | 1,597,057 |    |  | (144,397  | )
|                                                                              |  |           |    |  |           |    |  |           |  
|Hong Kong statutory income tax rate                                           |  | 16.5      | %  |  | 17.5      | %  |  | 17.5      | %
|Effective income tax rate                                                     |  | (7.8      | )% |  | (56.4     | )% |  | 10.4      | %
|                                                                              |  |           |    |  |           |    |  |           |  

Deferred tax assets and liabilities as of March 31, 2009 and 2008 comprise the
following:



|                                                            |  |                |   |  |                |  
|----------------------------------------------------------- |  | -------------- | - |  | -------------- | -
|                                                            |  | March 31, 2009 |   |  | March 31, 2008 |  
|                                                            |  | US$            |   |  | US$            |  
|Deferred tax assets:                                        |  |                |   |  |                |  
|Impairment of property, plant and equipment                 |  | 138,583        |   |  | 135,243        |  
|Provision for inventories                                   |  | 461,237        |   |  | 449,290        |  
|Provision for warranty                                      |  | 49,321         |   |  | 63,535         |  
|Operating losses carried forward                            |  | 3,501,967      |   |  | 3,217,679      |  
|Accruals                                                    |  | 352,465        |   |  | 281,369        |  
|                                                            |  |                |   |  |                |  
|Gross deferred tax assets                                   |  | 4,503,573      |   |  | 4,147,116      |  
|Less: Valuation allowance for deferred tax assets           |  | (4,503,573     | ) |  | (4,147,116     | )
|                                                            |  |                |   |  |                |  
|Net deferred tax assets                                     |  |               |   |  |               |  
|Deferred tax liabilities:                                   |  |                |   |  |                |  
|Other temporary differences                                 |  |               |   |  | (36,734        | )
|Tax over book depreciation of property, plant and equipment |  | (27,344        | ) |  | (29,758        | )
|                                                            |  |                |   |  |                |  
|Total deferred tax liabilities                              |  | (27,344        | ) |  | (66,492        | )
|                                                            |  |                |   |  |                |  
|Net deferred tax liabilities                                |  | (27,344        | ) |  | (66,492        | )
|                                                            |  |                |   |  |                |  



F - 34



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|20. | INCOME TAXES (continued)
|--- | ------------------------



|                                    |  |                    |   |  |               |   |  |              
|----------------------------------- |  | ------------------ | - |  | ------------- | - |  | -------------
|                                    |  | Fiscal years ended
|                                    |  | March 31,2009      |   |  | March 31,2008 |   |  | March 31,2007
|                                    |  | US$                |   |  | US$           |   |  | US$          
|Valuation allowance:                |  |                    |   |  |               |   |  |              
|Balance at beginning of fiscal year |  | 4,147,116          |   |  | 4,347,650     |   |  | 4,059,151    
|Additions (reversal)                |  | 470,357            |   |  | (200,125      | ) |  | 234,888      
|Effect of change in tax rate        |  | (23,551            | ) |  |              |   |  |             
|Disposal of a subsidiary            |  | (110,162           | ) |  |              |   |  |             
|Exchange realignment                |  | 19,813             |   |  | (409          | ) |  | 53,611       
|                                    |  |                    |   |  |               |   |  |              
|Balance at end of fiscal year       |  | 4,503,573          |   |  | 4,147,116     |   |  | 4,347,650    
|                                    |  |                    |   |  |               |   |  |              

For financial reporting purposes, the Company has established valuation allowances by
tax jurisdiction for deferred tax assets, which management believes is more likely than not that the deferred tax assets will not be realized in the foreseeable future. As of March 31, 2009 and 2008, the Company had tax losses carried forward
of US$22,906,477 and US$21,022,654, respectively, which included tax losses of US$4,238,322 and US$2,604,007 respectively that are available indefinitely for offsetting against future taxable income of the companies in which these losses arose. Tax
losses of US$18,668,155 and US$18,418,647 as at March 31, 2009 and 2008, respectively, may be carried back for 2 years or carried forward for 20 years from the year the tax losses arose.

The impact of the adoption of FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which
clarifies the accounting and disclosures for uncertainty in tax positions, as defined in that interpretation. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. This interpretation also provides guidance on the derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

The Company adopted
the provision of FIN 48 on April 1, 2007 and the Company has made its assessment of its uncertain tax positions (including potential interest and penalties) in accordance with the requirements of FIN 48 based on the technical merits and has
determined that there was no material adjustments required to its opening shareholders equity as a result of the adoption of FIN 48.

A reconciliation of the movements of unrecognized tax benefits under FIN 48 during the fiscal years ended March 31, 2009 and 2008, exclusive of related interest and penalties, is as follows:



|                                                             |  |                    |   |  |               |  
|------------------------------------------------------------ |  | ------------------ | - |  | ------------- | -
|                                                             |  | Fiscal years ended |  
|                                                             |  | March 31,2009      |   |  | March 31,2008 |  
|                                                             |  | US$                |   |  | US$           |  
|Balance at beginning of fiscal year                          |  | 6,379,032          |   |  | 5,024,531     |  
|Additions based on tax positions related to the current year |  | 903,399            |   |  | 1,240,381     |  
|Additions based on tax positions related to the prior year   |  |                   |   |  | 471,014       |  
|Reduction for tax positions related to prior year            |  | (67,889            | ) |  | (377,442      | )
|Disposal of a subsidiary                                     |  | (9,863             | ) |  |              |  
|Exchange realignment                                         |  | 83,948             |   |  | 20,548        |  
|                                                             |  |                    |   |  |               |  
|Balance at end of fiscal year                                |  | 7,288,627          |   |  | 6,379,032     |  
|                                                             |  |                    |   |  |               |  



F - 35



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|20. | INCOME TAXES (continued)
|--- | ------------------------



The Companys unrecognized tax benefits under FIN 48 are presented in the
consolidated balance sheets within income tax payable.

If the unrecognized tax benefits under FIN 48 as of March 31, 2009
were realized in a future period, it would result in a tax benefit of US$5,373,238 (March 31, 2008: US$4,886,794) and a reduction of the Companys effective tax rate.

For all the years presented and in accordance with FIN 48, the Company classified interest and potential penalties relating to any underpayment of income taxes and uncertain tax positions, if and when
required, as interest expense and other expenses, respectively. For the fiscal years ended March 31, 2009 and 2008, the Company recognized in its consolidated statement of operations total interest and potential penalties relating to certain
uncertain tax positions amounting to US$279,880 and US$929,922, respectively. As of March 31, 2009 and 2008, the Company had accrued interest and potential penalties relating to certain uncertain tax positions amounting to US$1,836,860 and
US$1,556,980, respectively.

One of the Companys wholly-owned subsidiaries is currently under examination by the Hong
Kong tax authority. The tax period open for examination by the tax authority includes the fiscal years ended March 31, 2003 through 2009. While it is difficult to predict the timing and settlement of the final outcome of the examination, the
Company does not anticipate a significant change in its unrecognized tax benefits within the next 12 months; however, actual developments could differ from those currently expected.

Based on existing tax regulations in the Companys various operating jurisdictions, tax years 1999-2009 remain open to possible tax
examination by relevant tax authorities.

The Company has not provided for possible income taxes on the undistributed earnings
of foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the unrecognized deferred tax liability for temporary differences related to these earnings is not practicable.



|21. | BASIC AND DILUTED LOSS PER SHARE (all numbers have been adjusted to reflect the Reverse Stock Split)
|--- | ----------------------------------------------------------------------------------------------------

Basic and diluted loss per share of common stock of the Company for the fiscal years ended March 31, 2009, 2008 and 2007 is computed in
accordance with SFAS No. 128, Earnings Per Share, by dividing the net loss for each fiscal year attributable to common stockholders by the weighted average number of shares of common stock outstanding during that fiscal year.

The following table sets forth the computation of basic and diluted loss per share:



|                                                  |  |            |   |  |            |   |  |            |  
|------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                  |  | 2009       |   |  | 2008       |   |  | 2007       |  
|                                                  |  | US$        |   |  | US$        |   |  | US$        |  
|Numerator for basic and diluted loss per share:   |  |            |   |  |            |   |  |            |  
|Loss attributable to common stockholders          |  | (5,840,422 | ) |  | (4,427,113 | ) |  | (1,166,701 | )
|                                                  |  |            |   |  |            |   |  |            |  
|                                                  |  |            |  
|                                                  |  | Number     |   |  | Number     |   |  | Number     |  
|Denominator for basic and diluted loss per share: |  |            |   |  |            |   |  |            |  
|Weighted average number of shares of common stock |  | 3,051,216  |   |  | 3,056,448  |   |  | 3,055,902  |  
|                                                  |  |            |   |  |            |   |  |            |  
|                                                  |  |            |  
|                                                  |  | US$        |   |  | US$        |   |  | US$        |  
|Basic and diluted loss per share of common stock  |  | (1.91      | ) |  | (1.45      | ) |  | (0.38      | )
|                                                  |  |            |   |  |            |   |  |            |  



F - 36



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|21. | BASIC AND DILUTED LOSS PER SHARE (all numbers have been adjusted to reflect the Reverse Stock Split) (continued)
|--- | ----------------------------------------------------------------------------------------------------------------



356,448, 412,535 and 416,406 stock options of Global-Tech were excluded from the
computation of diluted loss per share for the fiscal years ended March 31, 2009, 2008 and 2007, respectively, because their inclusion would have been anti-dilutive.



|22. | COMMITMENTS
|--- | -----------



| | (a) | Capital commitments
| | --- | -------------------

As of
March 31, 2009 and 2008, the Company had capital commitments contracted but not provided for of US$18,524 and US$1,273,325, respectively, for the purchase of property, plant and equipment.



| | (b) | Operating lease commitments
| | --- | ---------------------------

In
addition to the land use rights described in note 12 to the financial statements, the Company has entered into various operating lease arrangements for parking lots, motor vehicles, equipment, lands and office premises. The Company recorded rental
expenses, excluding the land use rights payments described in note 12 to the financial statements, for the fiscal years ended March 31, 2009, 2008 and 2007 of US$424,194, US$397,820 and US$410,754, respectively, and recorded lease rental income
of US$202,000, US$204,134 and US$49,957 for the fiscal years ended March 31, 2009, 2008 and 2007, respectively. Future minimum lease payments under non-cancelable operating leases as of March 31, 2009 and 2008 were as follows:



|                                              |  |               |  |              
|--------------------------------------------- |  | ------------- |  | -------------
|                                              |  | March 31,2009 |  | March 31,2008
|                                              |  | US$           |  | US$          
|Payable:                                      |  |               |  |              
|Within one year                               |  | 691,281       |  | 290,644      
|Over one year but not exceeding two years     |  | 629,348       |  | 462,700      
|Over two years but not exceeding three years  |  | 463,280       |  | 462,700      
|Over three years but not exceeding four years |  | 471,839       |  | 462,700      
|Over four years but not exceeding five years  |  | 480,871       |  | 462,700      
|Over five years                               |  | 9,406,307     |  | 10,021,316   
|                                              |  |               |  |              
|                                              |  | 12,142,926    |  | 12,162,760   
|                                              |  |               |  |              



F - 37



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|23. | CONTINGENCIES
|--- | -------------



| | (a) | Global-Tech and Pentalpha Medical Limited (formerly known as Pentalpha Enterprises Limited (Pentalpha Enterprises)), a subsidiary of Global-Tech, were
involved in certain breach of contract litigation with Sunbeam Corporation and Sunbeam Products, Inc. (collectively Sunbeam), with both parties claiming and counter-claiming. The trial on the claims of Sunbeam for indemnity and the claim
of Pentalpha Enterprises for breach of contract began on January 12, 2004. On January 16, 2004, the jury (the Jury) returned a verdict in favor of (i) Sunbeam on its claim for indemnity and awarded Sunbeam approximately
US$2.5 million against Pentalpha Enterprises; and (ii) Pentalpha Enterprises on its claim for breach of contract and awarded Pentalpha Enterprises US$6.6 million. The United States District Court for the Southern District of Florida (the
District Court) granted a final judgment on February 11, 2004 to add pre-judgment interest to the Jurys award, and awarded Sunbeam approximately US$3.4 million and Pentalpha Enterprises US$6.6 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

After an appeal, by an amended judgment dated December 12, 2005, the District Court awarded Pentalpha
Enterprises pre-judgment interest from June 30, 2001 to February 11, 2004, bringing the judgment entered in favor of Pentalpha Enterprises as of February 11, 2004 to approximately US$8 million, and leaving unchanged the judgment
entered against Pentalpha Enterprises in favor of Sunbeam.

After an appeal, the District Court, on its own initiative, entered
a second amended judgment on April 16, 2007 and on June 4, 2007 entered a third amended judgment that awarded Pentalpha Enterprises pre-judgment interest from June 30, 2001 until the entry of the second amended judgment on
December 12, 2005, at the interest rates required by Florida law and awarded Sunbeams pre-judgment interest until December 12, 2005. The post-judgment interest for both parties is calculated at 4.35% per annum from the date the
amended judgment was entered on December 12, 2005 until paid. On June 16, 2007, Pentalpha Enterprises filed a notice of appeal to the United States Court of Appeals (Court of Appeals) to challenge the portion of the judgment in
favor of Sunbeam that extends the pre-judgment interest until December 12, 2005.

Sunbeam posted a bond in the amount of
approximately US$5.2 million, which was attached pursuant to the September 7, 2005 order of the United States District Court for the Southern District of New York (the Court Order) in the action SEB S.A., (SEB) v.
Montgomery Ward, Pentalpha Enterprises and Global-Tech, pending in the district court, as further detailed in note 23(b) below. On July 13, 2007, Sunbeam wire transferred an amount of approximately US$5.5 million to an escrow account of
SEBs attorney. SEBs attorney is holding that money in trust in an escrow account pursuant to the Court Order for Pentalpha Enterprises. Sunbeams payment of the funds into escrow eliminated its obligation to pay post-judgment
interest on the amount that it paid into escrow.



F - 38



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|23. | CONTINGENCIES (continued)
|--- | -------------------------



| | (a) | (continued)
| | --- | -----------

On
December 10, 2008, the Court of Appeals reversed the judgment of the District Court and remanded to the District Court the elimination of the award of pre-judgment interest to Sunbeam after February 11, 2004. On or about February 5,
2009, Sunbeam and Pentalpha Enterprises reached an agreement with respect to the satisfaction of the Fourth Amended Final Judgment entered on January 28, 2009. On February 10, 2009, accordingly, Sunbeam wire transferred approximately
US$279,000 to the escrow account of SEBs attorney provided a satisfaction of judgment to Sunbeam. The matter has now concluded.

Accordingly, the Company recognized a gain of approximately US$8.0 million from its claim against Sunbeam for breach of contract and a loss of approximately US$3.4 million on the claims of Sunbeam for indemnity in its consolidated statement
of operations for the fiscal year 2006. Pentalpha Enterprises recognized pre-judgment interest and gains of approximately US$279,000, US$220,000 and US$818,000 in its consolidated statement of operations for the fiscal years 2009, 2008 and 2007,
respectively.



| | (b) | SEB commenced an action in 1999 in the United States District Court for the Southern District of New York for patent infringement against Global-Tech, Pentalpha
Enterprises and Montgomery Ward, a then customer of Pentalpha Enterprises. The Court ordered Pentalpha Enterprises, among other things, to give notice to SEB of any attempt to collect the judgment against Sunbeam. The district court attached the
entire judgment by order dated September 7, 2005. The district court conducted a trial beginning on April 17, 2006. On April 21, 2006, the jury returned a verdict finding that Pentalpha Enterprises had infringed the SEB patent, that
the infringement was willful and that SEB was entitled to a reasonable royalty in a total amount of US$4.65 million.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Both sides have made post-trial motions. Global-Tech and Pentalpha Enterprises have moved for judgment as a matter of law on a wide range of issues, and for a new trial. SEB has moved to enhance damages with the addition of treble damages,
pre-judgment interest and attorneys fees. The motions have been fully briefed. The district court heard oral arguments on April 11, 2007 and June 21, 2007. The district court also heard testimony from a SEB witness on July 19,
2007 with respect to Pentalpha Enterprises motion for judgment as a matter of certain issues based upon SEBs failure to produce certain documents during the discovery.

In a memorandum decision and order dated October 9, 2007, the district court denied all of Pentalpha Enterprises post-trial
motions, except that the court reduced the amount of the jury verdict by US$2 million based upon SEBs receipt of that amount from Sunbeam. The district court also granted SEBs motion for enhanced damages of US$2.65 million, awarded SEB
its attorneys fees of approximately US$0.9 million, and pre-judgment interest at the prime interest rate. SEB has submitted a claim for approximately US$1.8 million in pre-judgment interest and a supplemental claim for approximately US$0.25
million in attorneys fees and expenses. Pentalpha Enterprises disputed the claim for attorneys fees on the grounds that they resulted from the misconduct of SEB in concealing documents, but not the calculation of pre-judgment interest.



F - 39



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|23. | CONTINGENCIES (continued)
|--- | -------------------------



| | (b) | (continued)
| | --- | -----------

By motion filed on
November 24, 2007, Pentalpha Enterprises moved for reconsideration of the award of enhanced damages and attorneys fees, including any supplemental attorneys fees, in the district courts October 9, 2007 opinion based upon
a decision of the Court of Appeals in a different case, on August 20, 2007 that imposed additional requirements for a finding of willfulness that the jury did not consider in this case.

On October 2, 2008, the district court granted the motion of Pentalpha Enterprises to vacate the award of enhanced damages and entered
into an amended judgment in favor of SEB for enhanced damages of US$2.65 million and corresponding pre-judgment interests of approximately US$2.23 million. Pentalpha Enterprises filed a notice of appeal on October 30, 2008. SEB cross-appealed
from the denial of an award of enhanced damages. Oral argument is set for October 6, 2009. The outcome of the appeal cannot be determined with certainty.

Pentalpha Enterprises thereafter sought to amend the order of attachment to release amounts beyond those necessary to provide security pending appeal. By an order dated November 25, 2008, the
district court granted that motion and released all amounts in excess of US$5.1 million. SEB moved in the Court of Appeals to stay that order of the district court. The Court of Appeals denied SEBs motion by an order dated March 4, 2009.

On January 18, 2008, Pentalpha Enterprises filed a request with the United States Patent and Trademark Office
(PTO) to re-examine the SEB patent that is the subject of this action. On July 3, 2009, the PTO issued an office action rejecting all claims of the SEB patent on the grounds that they were obvious. SEB has 60 days from that office
action to respond to it. On July 16, 2009, Pentalpha Enterprises filed a motion in the Court of Appeals to stay the appeal pending the re-examination. The Court of Appeals denied the motion for a stay.

Based on the understanding of the Company, on August 12, 2009, the PTO conducted an interview of SEB and on August 14, 2009, the
PTO issued a report of the meeting stating that an agreement had been reached that the PTO would provide favorable treatment to the claims of the patent provided that SEB filed a satisfactory memorandum with the PTO. SEB filed that response and the
PTO has not yet taken any further action in the re-examination proceeding.

In accordance with SFAS No. 5 Accounting
for Contingencies, the Company accrued for loss contingencies in connection with this case of approximately US$5.16 million as of March 31, 2009, including a corresponding post-judgment interest charge of US$219,950 in the consolidated
statement of operations for the fiscal year ended March 31, 2009.



| | (c) | On October 11, 2004, Best Hero Limited (Best Hero) issued a writ in the Court of First Instance of the High Court of Hong Kong (the High
Court) against a subsidiary of the Company for a claim of US$4,250,400. The claim relates to two purchase orders issued by the subsidiary on May 31, 2004 and June 1, 2004, respectively, to Best Hero for the purchase of LCD television
panels for a total purchase price of US$4,620,000. However, the LCD television panels which were paid for in the initial shipment were determined to be unacceptable to the subsidiary. Accordingly, further delivery of the remaining orders was
refused. Best Hero alleged that the subsidiary had repudiated the contract, and therefore Best Hero instituted legal proceedings to claim for damages. The subsidiary intends to defend the action on the grounds that it is justified in rejecting the
goods for breach of conditions as to descriptions and the sample provided to the subsidiary by Best Hero. A defence and counter-claim was filed by the subsidiary in the High Court on December 28, 2004. Best Hero filed a Reply and Defence to
Counterclaim on January 11, 2005. The discovery of documents in this action has been concluded and the parties are still in the course of preparing their respective witness statements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F - 40



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|23. | CONTINGENCIES (continued)
|--- | -------------------------



| | (c) | (continued)
| | --- | -----------

In accordance with
SFAS No. 5, the Company determined that it is probable that a loss will be incurred and accordingly, it recognized a contingent loss of approximately US$0.8 million for the fiscal year ended March 31, 2005, and accrued corresponding
interest of approximately US$0.12 million through March 31, 2009, representing its best estimate of the likely loss that it will incur.



| | (d) | On February 9, 2001, Wing Shing Products (BVI) Company Limited (Wing Shing Products), a subsidiary of the Company, commenced an action in the United
States District Court for the Southern District of New York against Simatelex Manufactory Corporation, claiming patent infringement.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On May 30, 2008, Wing Shing Products and Simatelex entered into an agreement to settle this action. Pursuant to the settlement agreement, Simatelex agreed (i) to pay Wing Shing Products US$1.8
million; (ii) to consent to the entry of a final judgment and a permanent injunction restraining further infringements of the design patent and admitting that the design patent is valid, and that the AD Series products Simatelex sold infringed
it; (iii) to dismiss with prejudice its counterclaim and affirmative defenses concerning the validity and enforceability of the design patent in the action Wing Shing Products v. Simatelex; and (iv) to exchange for release. Since the
execution of that settlement agreement, Simatelex paid Wing Shing Products US$1.8 million in June 2008. On June 8, 2008, a final judgment was passed by the Court and the Company recognized US$1.8 million in the consolidated statement of
operations as other operating income in the fiscal year ended March 31, 2009.



| | (e) | As of March 31, 2009, the Company recognized US$5,373,238 of liabilities for unrecognized tax benefits and, in addition, US$1,836,860 of related interest and
penalties. The unrecognized tax benefits relate mainly to potential transfer pricing arrangements reflected in the Hong Kong and PRC income tax returns of certain subsidiaries of the Company. The final outcome of these tax uncertainties is dependent
upon various matters including tax examinations, legal proceedings, certain authority proceedings, changes in regulatory tax laws and interpretations of those tax laws, or expiration of statues of limitation. However, based on the number of
jurisdictions, the uncertainties associated with litigation, and the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, which could include formal legal proceedings, there is a high degree of
uncertainty regarding the future cash outflows associated with these tax uncertainties. As of March 31, 2009, the Company classified US$5,373,238 of its liabilities for unrecognized tax benefits and US$1,836,860 of interest and penalties as
current liabilities.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|24. | EMPLOYEE BENEFITS
|--- | -----------------

The Company
operates a Mandatory Provident Fund (MPF) scheme and an Occupational Retirement Schemes Ordinance (ORSO) scheme for all its qualified employees in Hong Kong. Both the MPF and the ORSO schemes are defined contribution schemes
and are administered by independently administered funds.

MPF is available to all employees aged 18 to 64 and with at least 60
days of service as an employee of the Company in Hong Kong. Under the MPF scheme, both the Company and each of the qualified employee contribute the lower of 5% of the employees basic salary and HK$1,000 (approximately US$129), subject to a
cap of a monthly basic salary of HK$20,000 (approximately US$2,581). Qualified employees are entitled to 100% of the Companys contributions together with accrued returns irrespective of their length of services with the Company, but the
benefits are required by law to be preserved until the retirement age of 65.



F - 41



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|24. | EMPLOYEE BENEFITS (continued)
|--- | -----------------------------



Certain full-time employees in Hong Kong who joined the Company before December 2000 are
eligible to participate in the ORSO scheme immediately following the date on which they have completed their probationary period. Under the ORSO scheme, both the Company and each of the eligible employee contribute 5% of the employees basic
salary.

The costs of these schemes recognized during the fiscal years ended March 31, 2009, 2008 and 2007 were US$78,745,
US$94,906 and US$117,787, respectively.

According to the relevant laws and regulations in the PRC, the Company is required to
contribute 10% of the stipulated salary set by the local government of Dongguan, the PRC to certain retirement benefit schemes to fund the benefits for certain of its employees. No forfeited contributions may be used by the employer to reduce the
existing level of contributions. The Company also provides housing, medical care and subsidized meals to all existing factory employees. The aggregate amounts incurred by the Company for all such benefits were US$814,728, US$911,985 and US$579,157
during the fiscal years ended March 31, 2009, 2008 and 2007, respectively.



|25. | SEGMENT INFORMATION
|--- | -------------------

SFAS
No. 131, Disclosures about Segment of an Enterprise and Related Information, establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating
segments in financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise for which
separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance.

The Company operates in three segments: Home Appliances, Electronic Components and Others. These segments are operated and managed as
separate strategic business units that offer different products/services. These segments are each managed separately because they manufacture and distribute products with different production processes or are engaged in the provision of assembly
services. The Companys Home Appliances segment historically has been the core business of the Company and primarily involves the manufacturing of electrical household appliances for branded marketers in North America and Europe.
The Companys Electronic Components segment produces complementary metal oxide semiconductor (CMOS) camera modules (CCMs) for sale to cellular phone manufacturers in Mainland China. The Companys
Others segment comprises a number of immaterial product lines and development programs that have not materialized to date into full product businesses. None of these units has ever individually met the quantitative thresholds for
determining reportable segments. The chief operating decision maker evaluates the results of each segment in assessing performance and allocating resources among the segments.

There were no material intersegment sales or transfers during the fiscal years ended March 31, 2009, 2008 and 2007.



F - 42



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|25. | SEGMENT INFORMATION (continued)
|--- | -------------------------------



| | (a) | The following table provides operating financial information for the three reportable segments:
| | --- | -----------------------------------------------------------------------------------------------



|                                                                                                                         |  |                |   |  |                      |   |  |            |   |  |            |    |  |              |  
|------------------------------------------------------------------------------------------------------------------------ |  | -------------- | - |  | -------------------- | - |  | ---------- | - |  | ---------- | -- |  | ------------ | -
|                                                                                                                         |  | HomeAppliances |   |  | ElectronicComponents |   |  | Others     |   |  | Corporate  |    |  | Consolidated |  
|                                                                                                                         |  | US$            |   |  | US$                  |   |  | US$        |   |  | US$        |    |  | US$          |  
|As of or for the fiscal year ended March 31, 2009                                                                        |  |                |   | 
|                                                                                                                         |  |                |   |  |                     
|Revenues from external customers                                                                                         |  | 50,805,661     |   |  | 34,466,153           |   |  | 2,115,558  |   |  |           |    |  | 87,387,372   |  
|                                                                                                                         |  |                |   |  |                      |   |  |            |   |  |            |    |  |              |  
|Interest income                                                                                                          |  |               |   |  |                     |   |  |           |   |  | 705,922    |    |  | 705,922      |  
|Interest expense                                                                                                         |  | (1,511         | ) |  | (52                  | ) |  |           |   |  | (170,873   | )  |  | (172,436     | )
|Depreciation and amortization                                                                                            |  | (2,395,692     | ) |  | (513,402             | ) |  | (827,168   | ) |  | (170,572   | )  |  | (3,906,834   | )
|Segment profit (loss)                                                                                                    |  | (121,515       | ) |  | (546,720             | ) |  | (2,715,824 | ) |  | (2,456,363 | )# |  | (5,840,422   | )
|Total assets                                                                                                             |  | 17,710,936     |   |  | 15,522,132           |   |  | 6,603,598  |   |  | 64,077,239 |    |  | 103,913,905  |  
|#  Including a gain on disposal of a subsidiary of US$157,597 and a loss on dissolution of a subsidiary of US$1,028,875. | 
|                                                                                                                         |  |                |  
|As of or for the fiscal year ended March 31, 2008                                                                        |  |                |   |  |                      |   |  |            |   | 
|Revenues from external customers                                                                                         |  | 65,371,010     |   |  | 38,961,753           |   |  | 1,210,326  |   |  |           |    |  | 105,543,089  |  
|                                                                                                                         |  |                |   |  |                      |   |  |            |   |  |            |    |  |              |  
|Interest income                                                                                                          |  |               |   |  |                     |   |  |           |   |  | 1,615,278  |    |  | 1,615,278    |  
|Interest expense                                                                                                         |  | (23,797        | ) |  | (335                 | ) |  | (26        | ) |  | 112,562    |    |  | 88,404       |  
|Depreciation and amortization                                                                                            |  | (2,221,247     | ) |  | (342,904             | ) |  | (277,191   | ) |  | (259,376   | )  |  | (3,100,718   | )
|Segment profit (loss)                                                                                                    |  | 2,002,841      |   |  | 2,104,366            |   |  | (1,165,552 | ) |  | (7,368,768 | )  |  | (4,427,113   | )
|Total assets                                                                                                             |  | 22,647,513     |   |  | 24,639,014           |   |  | 1,279,460  |   |  | 60,158,713 |    |  | 108,724,700  |  
|                                                                                                                         |  |                |  
|As of or for the fiscal year ended March 31, 2007                                                                        |  |                |   |  |                      |   |  |            |   | 
|Revenues from external customers                                                                                         |  | 46,831,503     |   |  | 12,264,440           |   |  | 1,194,851  |   |  |           |    |  | 60,290,794   |  
|                                                                                                                         |  |                |   |  |                      |   |  |            |   |  |            |    |  |              |  
|Interest income                                                                                                          |  |               |   |  |                     |   |  |           |   |  | 2,063,566  |    |  | 2,063,566    |  
|Interest expense                                                                                                         |  | (299           | ) |  |                     |   |  | (18        | ) |  | (627,058   | )  |  | (627,375     | )
|Depreciation and amortization                                                                                            |  | (2,543,773     | ) |  | (157,329             | ) |  | (327,211   | ) |  | (444,461   | )  |  | (3,472,774   | )
|Segment profit (loss)                                                                                                    |  | (2,110,397     | ) |  | 130,383              |   |  | 2,741,687^ |   |  | (1,928,374 | )  |  | (1,166,701   | )
|Total assets                                                                                                             |  | 34,097,999     |   |  | 6,081,149            |   |  | 1,455,948  |   |  | 58,646,255 |    |  | 100,281,351  |  
|^   Including a gain on disposal of subsidiaries of US$3,951,520.                                                        | 



F - 43



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|25. | SEGMENT INFORMATION (continued)
|--- | -------------------------------



| | (b) | Net sales by geographic area based on the location of customers are as follows:
| | --- | -------------------------------------------------------------------------------



|              |  |            |  |             |  |           
|------------- |  | ---------- |  | ----------- |  | ----------
|              |  | 2009       |  | 2008        |  | 2007      
|              |  | US$        |  | US$         |  | US$       
|Australia     |  | 572,326    |  | 633,155     |  | 496,166   
|Europe        |  | 5,616,397  |  | 6,258,491   |  | 7,728,412 
|North America |  | 39,333,008 |  | 53,644,116  |  | 34,689,223
|Asia          |  | 41,216,419 |  | 44,911,592  |  | 16,812,264
|Other regions |  | 649,222    |  | 95,735      |  | 564,729   
|              |  |            |  |             |  |           
|              |  | 87,387,372 |  | 105,543,089 |  | 60,290,794
|              |  |            |  |             |  |           



| | (c) | Net sales by product/service type
| | --- | ---------------------------------



|                                 |  |            |  |             |  |           
|-------------------------------- |  | ---------- |  | ----------- |  | ----------
|                                 |  | 2009       |  | 2008        |  | 2007      
|                                 |  | US$        |  | US$         |  | US$       
|Floor care products              |  | 46,603,666 |  | 59,694,981  |  | 39,905,755
|Kitchen appliances               |  | 1,176,585  |  | 2,274,175   |  | 5,394,259 
|CCMs                             |  | 33,340,887 |  | 38,902,642  |  | 12,232,428
|Cellular phone assembly services |  | 1,802,771  |  |            |  |          
|Others                           |  | 4,463,463  |  | 4,671,291   |  | 2,758,352 
|                                 |  |            |  |             |  |           
|                                 |  | 87,387,372 |  | 105,543,089 |  | 60,290,794
|                                 |  |            |  |             |  |           



| | (d) | Long-lived assets*
| | --- | ------------------



|               |  |               |  |              
|-------------- |  | ------------- |  | -------------
|               |  | March 31,2009 |  | March 31,2008
|               |  | US$           |  | US$          
|Hong Kong      |  | 453,365       |  | 582,706      
|Mainland China |  | 27,212,188    |  | 27,362,390   
|               |  |               |  |              
|               |  | 27,665,553    |  | 27,945,096   
|               |  |               |  |              

| | 
| | 

| | * | Long-lived assets represent land use rights and property, plant and equipment.
| | - | ------------------------------------------------------------------------------



| | (e) | Impairment of property, plant and equipment
| | --- | -------------------------------------------

The impairment losses of property, plant and equipment for the fiscal years ended March 31, 2009, 2008 and 2007, amounting to US$200,407, nil and US$17,174, respectively. The impairment losses
amounted to US$42,379 (fiscal years ended March 31, 2008 and 2007: Nil) and US$158,028 (fiscal years ended March 31, 2008: Nil and March 31, 2007: US$17,174) for the fiscal year ended March 31, 2009 are attributable to the
Home appliances and Others segments, respectively.



F - 44



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|25. | SEGMENT INFORMATION (continued)
|--- | -------------------------------



| | (f) | Major customers
| | --- | ---------------

Customers
accounting for 10% or more of the Companys net sales are as follows:



|                                                                                                         |  |            |  |            |  |           
|-------------------------------------------------------------------------------------------------------- |  | ---------- |  | ---------- |  | ----------
|                                                                                                         |  | 2009       |  | 2008       |  | 2007      
|                                                                                                         |  | US$        |  | US$        |  | US$       
|Electrolux S.A. and subsidiaries (Electrolux)                                                          |  | 41,760,515 |  | 45,651,213 |  | 20,180,930
|Techtronic Industries Company Limited, including Royal Appliance Manufacturing Company Limited
(Royal) |  | 7,423,103  |  | 16,184,868 |  | 19,540,674
|                                                                                                         |  |            |  |            |  |           

During the fiscal years ended March 31, 2009, 2008 and 2007, 47.8%, 43.3% and
33.5%, respectively, of the Companys total net sales were made to Electrolux, which is an unrelated customer. As of March 31, 2009, 2008 and 2007, 36.7%, 22.7% and 30.7%, respectively, of the Companys total accounts and bills
receivable were from Electrolux.

During the fiscal years ended March 31, 2009, 2008 and 2007, 8.5%, 15.3% and 32.4%,
respectively, of the Companys total net sales were made to Royal, which is an unrelated customer. As of March 31, 2009, 2008 and 2007, 9.8%, 16.0% and 25.9%, respectively, of the Companys total accounts and bills receivable were
from Royal.

The Company is a contract manufacturer of floor care products that are marketed by Royal and Electrolux under
their respective brand names.



|26. | CONCENTRATION OF RISKS
|--- | ----------------------

Concentration of credit risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk primarily consist of cash and cash equivalents, time deposits, restricted cash, amounts due from a jointly-controlled entity and a related party, a convertible note, interest receivable, available-for-sale investments,
financial assets included in deposits and other assets and accounts and bills receivable.

Substantially all of the
Companys cash and cash equivalents, time deposits, restricted cash, amounts due from a jointly-controlled entity and a related party, convertible note, interest receivable, and available-for-sale investments were financial assets that
management believes are of high credit quality.

The Company conducts credit evaluations of its customers but does not require
collateral or other security from its customers. The Company makes allowance for doubtful accounts primarily based on the age of receivables and factors surrounding the customers credit risk.



F - 45



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|26. | CONCENTRATION OF RISKS (continued)
|--- | ----------------------------------



Concentration of customers

The Company currently sells a substantial portion of its floor care products to a limited number of customers. As a percentage of revenues,
the top two customers accounted for 56.3%, 58.6% and 65.9% of consolidated net sales for the fiscal years ended March 31, 2009, 2008 and 2007, respectively. Sales to customers are mostly made through non-exclusive, short-term arrangements. The
loss of either of these major customers if not replaced by new electronic components customers could have a material adverse effect on the Companys business, results of operations and financial condition.

Current vulnerability due to certain concentrations

The Companys operations are mainly conducted in Hong Kong and Mainland China with majority sales to the U.S. and Asia. As a result, the Companys businesses, financial condition, results of
operations and cash flows may be influenced by the political, economic and legal environments in the U.S., Hong Kong and Mainland China, and by the general state of the U.S., Hong Kong and Mainland China economies.

The Companys operations may be adversely affected by significant political, economic and social uncertainties in Mainland China.
Although the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially
in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting its political, economic and social conditions. There is also no guarantee that the PRC governments pursuit of economic reforms will be
consistent or effective.

A significant portion of the Companys businesses are transacted in RMB, which is not freely
convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the Peoples Bank of China. However, the unification of the exchange
rates does not imply the convertibility of RMB into United States dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the Peoples Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rates quoted by the Peoples Bank of China. Approval of foreign currency payments by the Peoples Bank of China or other institutions generally requires submitting a payment application form together with
suppliers invoices, shipping documents signed contracts and/or other documents, as appropriate.

A significant portion of
the Companys sales are made to the U.S. and the Company is responsible for ensuring that its products are safe and satisfy all of the requirements of the consumer products safety commission (CPSC) in the U.S. This may also apply to
OEM products manufactured by the Group to customer specifications. In the event of a recall required by the CPSC, the customers may require the Group to provide replacement conforming units at our cost, which could have a material adverse effect on
its business, quality reputation and results of operations.



F - 46



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|27. | FINANCIAL INSTRUMENTS
|--- | ---------------------



The Companys financial instruments that are subject to credit risks are limited to
its cash and cash equivalents, time deposits, restricted cash, available-for-sale investments, accounts and bills receivable, financial assets included in deposits and other assets, amounts due from a jointly-controlled entity and a related party,
interest receivable and convertible note.

The Companys financial assets and liabilities are recognized initially at cost
which is the fair value of the consideration given (in the case of assets) or received (in the case of liabilities). Transaction costs are included in the initial measurement of all financial assets and liabilities. Subsequent to initial
recognition, assets and liabilities are either valued at cost, amortized cost using the effective interest rate method or fair value, depending on classification.

The following table sets forth the carrying values and estimated fair values of the Companys financial assets and liabilities recognized as of March 31, 2009 and 2008. There were no material
unrecognized financial assets and liabilities as of March 31, 2009 and 2008.



|                                                       |  |                |  |            |  |            |  |           
|------------------------------------------------------ |  | -------------- |  | ---------- |  | ---------- |  | ----------
|                                                       |  | Carrying value |  | Fair value
|                                                       |  | 2009           |  | 2008       |  | 2009       |  | 2008      
|                                                       |  | US$            |  | US$        |  | US$        |  | US$       
|Current financial assets:                              |  |                |  |            |  |            |  |           
|Cash and cash equivalents                              |  | 11,312,882     |  | 31,672,585 |  | 11,312,882 |  | 31,672,585
|Time deposits                                          |  | 4,410,951      |  |           |  | 4,410,951  |  |          
|Restricted cash                                        |  | 4,389,880      |  |           |  | 4,389,880  |  |          
|Available-for-sale investments                         |  | 15,985,288     |  | 4,419      |  | 15,985,288 |  | 4,419     
|Accounts and bills receivable, net                     |  | 18,438,329     |  | 22,073,653 |  | 18,438,329 |  | 22,073,653
|Financial assets included in deposits and other assets |  | 759,383        |  | 769,128    |  | 759,383    |  | 769,128   
|Amount due from a related party                        |  | 33,011         |  | 28,746     |  | 33,011     |  | 28,746    
|Amount due from a jointly-controlled entity            |  | 69,523         |  | 57,873     |  | 69,523     |  | 57,873    
|Convertible note                                       |  | 5,598,487      |  |           |  | 5,600,000  |  |          
|Interest receivable                                    |  | 504,000        |  |           |  | 504,000    |  |          
|                                                       |  |                |  |            |  |            |  |           
|                                                       |  | 61,501,734     |  | 54,606,404 |  | 61,503,247 |  | 54,606,404
|                                                       |  |                |  |           
|Non-current financial assets:                          |  |                |  |            |  |            |  |           
|Convertible note                                       |  |               |  | 5,417,403  |  |           |  | 5,835,007 
|Interest receivable                                    |  |               |  | 336,000    |  |           |  | 336,000   
|                                                       |  |                |  |            |  |            |  |           
|Total financial assets                                 |  | 61,501,734     |  | 60,359,807 |  | 61,503,247 |  | 60,777,411
|                                                       |  |                |  |            |  |            |  |           
|                                                       |  |               
|                                                       |  | Carrying value |  | Fair value
|                                                       |  | 2009           |  | 2008       |  | 2009       |  | 2008      
|                                                       |  | US$            |  | US$        |  | US$        |  | US$       
|Current financial liabilities:                         |  |                |  |            |  |            |  |           
|Accounts payable                                       |  | 7,962,971      |  | 8,935,551  |  | 7,962,971  |  | 8,935,551 
|Loans payable                                          |  |               |  | 1,600,311  |  |           |  | 1,600,311 
|                                                       |  |                |  |            |  |            |  |           
|Total financial liabilities                            |  | 7,962,971      |  | 10,535,862 |  | 7,962,971  |  | 10,535,862
|                                                       |  |                |  |            |  |            |  |           



F - 47



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|27. | FINANCIAL INSTRUMENTS (continued)
|--- | ---------------------------------



The carrying amounts of the Companys cash and cash equivalents, restricted cash,
time deposits, accounts and bills receivable, financial assets included in deposits and other assets, amounts due from a jointly-controlled entity and a related party, convertible note, interest receivable, accounts payable and loans payable
approximate to their fair values because of their short maturities. The available-for-sale investments are stated at quoted market price. For the fiscal year ended March 31, 2008, the estimated fair value of the convertible note is based on the
discounted value of future cash flows using U.S. Treasury yields adjusted for other risks such as credit risk and country risk premium for bonds traded on The Singapore Exchange Securities Trading Limited for similar type of instruments.

The Companys cash and cash equivalents, restricted cash, and time deposits are placed primarily with banking institutions with high
credit ratings. The Company performs periodic credit standing evaluation of those banking institutions to limit the Companys exposure to any significant credit risks.

The Companys accounts and bills receivable largely represent amounts due from the Companys principal customers. Receivable
balances are monitored on an ongoing basis and the Companys exposure to bad debts is not significant. The Company does not require collateral or other credit enhancement for any of its financial assets.

If the counterparties to the above financial assets fail to perform completely under the terms of their contract/arrangement, the maximum
loss, based on the gross fair value of the financial instruments, due to this credit risk would be US$61,503,247 and US$60,777,411 as at March 31, 2009 and 2008, respectively.



|28. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

Effective April 1, 2008, the Company adopted SFAS No. 157 and in October 2008, the Company adopted FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, except as it
applies to the non-financial assets and non-financial liabilities subject to FSP 157-2, Effective Date of FASB Statement No. 157. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in
pricing an asset or a liability, such as inherent risk, transfer restrictions and risk of non-performance. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in
the valuation methodologies in measuring fair value:

Level 1  Observable inputs that reflect quoted prices (unadjusted)
for identical assets or liabilities in active markets.

Level 2  Include other inputs that are directly or indirectly
observable in the marketplace.

Level 3  Unobservable inputs which are supported by little or no market activity.



F - 48



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|28. | FAIR VALUE MEASUREMENTS (continued)
|--- | -----------------------------------



SFAS 157 describes three main approaches to measuring the fair value of assets and
liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the
amount that would currently be required to replace an asset. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Companys financial assets carried at fair value on a recurring basis are detailed in the table below. The fair values of such
financial assets are measured in accordance with SFAS No. 157 using Level 1 inputs, including quoted market prices.

Assets measured at fair value on a recurring basis as of March 31, 2009 are summarized below:



|                                              |  |                                                    
|--------------------------------------------- |  | ---------------------------------------------------
|                                              |  | Fair Value Measurementsat March 31, 2009           
|                                              |  | Quoted prices in activemarkets for identical assets
|                                              |  | Level 1                                            
|                                              |  | US$                                                
|Assets                                        |  |                                                    
|Available-for-sale investments:               |  |                                                    
|U.S. dollar treasury bills                    |  | 15,983,290                                         
|Listed equity securities                      |  | 1,998                                              
|                                              |  |                                                    
|Total financial assets measured at fair value |  | 15,985,288                                         
|                                              |  |                                                    



F - 49



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|29. | STOCK COMPENSATION (all numbers have been adjusted to reflect the Reverse Stock Split)
|--- | --------------------------------------------------------------------------------------



In September 1997, the Board of Directors of Global-Tech adopted Global-Techs 1997
Stock Option Plan (as amended, the 1997 Plan). The 1997 Plan provides for the grant of (i) options that are intended to qualify as incentive stock options (Incentive Stock Options) within the meaning of Section 422
of the U.S. Internal Revenue Code of 1986, as amended (the Code) to employees and (ii) options not intended to qualify as Incentive Stock Options to employees and consultants. The total number of shares of common stock of
Global-Tech for which options may be granted under the 1997 Plan is 400,000 shares. The 1997 plan expired on September 17, 2008 and no further grants can be made from this plan after that date. In October 2005, the Board of Directors of
Global-Tech adopted Global-Techs 2005 Stock Option Plan (the 2005 Plan).

The 2005 Plan provides for the
grant of (i) incentive stock options (ISOs) within the meaning of Section 422 of the Code; (ii) non-qualified stock options that do not qualify as ISOs (NQSOs); and (iii) stock appreciation
rights. The total number of shares of common stock of Global-Tech for which options may be granted under the 2005 Plan is 450,000 shares.

The 1997 Plan and the 2005 Plan (the Plans) are administered by the Board of Directors of Global-Tech or a committee appointed by the Board of Directors of Global-Tech, who determines the
terms of options, including the exercise price, the number of stock subject to the options and the terms and conditions of exercise. No option granted under the Plans is transferable by the optionee other than by will or the laws of descent and
distribution and each vested option is exercisable within the contractual period of the option. With respect to any participant who owns (or is deemed to own) stock possessing more than 10% of the voting rights of Global-Techs outstanding
capital stock, the exercise price of any ISO must not be less than 110% of the fair market value of the stock on the date of grant. The term of each option granted pursuant to the Plans may be established by the Board of Directors of Global-Tech, or
a committee of the Board of Directors of Global-Tech, in its sole discretion; provided, however, that the maximum term of each ISO granted pursuant to both the 1997 Plan and the 2005 Plan is 10 years. With respect to any ISO granted to a participant
who owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of all classes of Global-Techs outstanding capital stock, the maximum term is five years. Shares of common stock distributed under the 1997 Plan
and the 2005 Plan will be from authorized, but unissued stock or common stock held in the treasury of the Company.

Every
option granted shall vest and become exercisable in accordance with the terms of the applicable option agreement. Options can be exercised for a period not exceeding 10 years from the date of grant.

Under the 1997 Plan and the 2005 Plan, which expire in 10 years, options granted generally vest 25% after the first year of service and
ratably each month over the remaining 36-month period.

The expected life of the options is based on the historical data and is
not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcomes. The risk-free
rate for periods within the expected life of the options is based on the U.S. Treasury yield curve with maturity equal to the expected life of the options in effect at the time of grant.

For the fiscal year ended March 31, 2007, Global-Tech granted options to purchase 750 shares, 66,500 shares and 8,750 shares to three
employees, five directors and a consultant, respectively, with an exercise price of US$13.20 per share under the 2005 Plan. During the fiscal year ended March 31, 2007, 31,550 options with exercise prices ranging from US$15.60 to US$33.28 per
share were forfeited upon resignation of the relevant participants.

For the fiscal year ended March 31, 2008, no new
options were granted. An aggregate of 4,987 options with exercise prices ranging from US$13.20 to US$30.56 per share were forfeited upon resignation of the relevant participants. 8,175 options with an exercise price of US$25.00 per share expired,
and an aggregate of 625 options with an exercise price of US$15.60 per share were exercised.

For the fiscal year ended
March 31, 2009, no new options were granted. An aggregate of 9,324 options with exercise prices ranging from US$13.20 to US$30.56 per share were forfeited upon resignation of the relevant participants. 56,930 options with an exercise price of
US$25.00 per share expired.

The total compensation expense recognized in the SG&A line item in the consolidated statement
of operations for the fiscal years ended March 31, 2009, 2008 and 2007 amounted to US$41,861, US$56,487 and US$1,123,577, respectively.



F - 50



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|29. | STOCK COMPENSATION (all numbers have been adjusted to reflect the Reverse Stock Split) (continued)
|--- | --------------------------------------------------------------------------------------------------



Changes in outstanding options under both the 1997 Plan and the 2005 Plan during the
fiscal years ended March 31, 2009, 2008 and 2007 are as follows:



|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|-------------------------------------------------- |  | ---------------- | - |  | --------------------- |  | ---------------------------- |  | ---------------------------------------------- |  | -----------------------
|                                                   |  | 2009            
|                                                   |  | Number ofoptions |   |  | Range ofexerciseprice |  | Weightedaverageexerciseprice |  | Weightedaverageremainingcontractualterm(years) |  | Aggregateintrinsicvalue
|                                                   |  |                  |   |  | US$ (per share)       |  | US$ (per share)              |  |                                                |  | US$                    
|Outstanding, at beginning of fiscal year           |  | 488,202          |   |  | 13.20-30.56           |  | 19.40                        |  | 5.82                                           |  |                       
|Granted                                            |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Cancelled                                          |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Expired                                            |  | (56,930          | ) |  | 25.00                 |  | 25.00                        |  |                                                |  |                        
|Exercised                                          |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Forfeited                                          |  | (9,324           | ) |  | 13.20-30.56           |  | 22.42                        |  |                                                |  |                        
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Outstanding, at end of fiscal year                 |  | 421,948          |   |  | 13.20-30.56           |  | 18.59                        |  | 5.55                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Vested and expected to be vested at March 31, 2009 |  | 421,948          |   |  | 13.20-30.56           |  | 18.59                        |  | 5.55                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Exercisable, at end of fiscal year                 |  | 356,448          |   |  | 13.20-30.40           |  | 16.39                        |  | 5.70                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|                                                   | 
|                                                   |  | 2008            
|                                                   |  | Number ofoptions |   |  | Range ofexerciseprice |  | Weightedaverageexerciseprice |  | Weightedaverageremainingcontractualterm(years) |  | Aggregateintrinsicvalue
|                                                   |  |                  |   |  | US$ (per share)       |  | US$ (per share)              |  |                                                |  | US$                    
|Outstanding, at beginning of fiscal year           |  | 501,989          |   |  | 13.20-30.56           |  | 19.52                        |  | 6.71                                           |  |                       
|Granted                                            |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Cancelled                                          |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Expired                                            |  | (8,175           | ) |  | 25.00                 |  | 25.00                        |  |                                                |  |                        
|Exercised                                          |  | (625             | ) |  | 15.60                 |  | 15.60                        |  |                                                |  | 750                    
|Forfeited                                          |  | (4,987           | ) |  | 13.20-30.56           |  | 21.88                        |  |                                                |  |                        
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Outstanding, at end of fiscal year                 |  | 488,202          |   |  | 13.20-30.56           |  | 19.40                        |  | 5.82                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Vested and expected to be vested at March 31, 2008 |  | 488,202          |   |  | 13.20-30.56           |  | 19.40                        |  | 5.82                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Exercisable, at end of fiscal year                 |  | 412,535          |   |  | 13.20-30.40           |  | 17.92                        |  | 5.80                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        



F - 51



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|29. | STOCK COMPENSATION (all numbers have been adjusted to reflect the Reverse Stock Split) (continued)
|--- | --------------------------------------------------------------------------------------------------



|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|-------------------------------------------------- |  | ---------------- | - |  | --------------------- |  | ---------------------------- |  | ---------------------------------------------- |  | -----------------------
|                                                   |  | 2007            
|                                                   |  | Number ofoptions |   |  | Range ofexerciseprice |  | Weightedaverageexerciseprice |  | Weightedaverageremainingcontractualterm(years) |  | Aggregateintrinsicvalue
|                                                   |  |                  |   |  | US$ (per share)       |  | US$ (per share)              |  |                                                |  | US$                    
|Outstanding, at beginning of fiscal year           |  | 457,539          |   |  | 15.60-33.28           |  | 21.00                        |  | 7.3                                            |  |                       
|Granted                                            |  | 76,000           |   |  | 13.20                 |  | 13.20                        |  |                                                |  |                        
|Cancelled                                          |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Expired                                            |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Exercised                                          |  |                 |   |  |                      |  |                             |  |                                                |  |                        
|Forfeited                                          |  | (31,550          | ) |  | 15.60-33.28           |  | 25.76                        |  |                                                |  |                        
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Outstanding, at end of fiscal year                 |  | 501,989          |   |  | 13.20-30.56           |  | 19.52                        |  | 6.71                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Vested and expected to be vested at March 31, 2007 |  | 501,989          |   |  | 13.20-30.56           |  | 19.52                        |  | 6.71                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        
|Exercisable, at end of fiscal year                 |  | 416,406          |   |  | 13.20-30.40           |  | 17.76                        |  | 6.63                                           |  |                       
|                                                   |  |                  |   |  |                       |  |                              |  |                                                |  |                        

In January 1999, the Board of Directors of Global-Tech adopted an employee stock
purchase plan. The plan was approved by shareholders at the annual meeting of shareholders in March 1999. The total number of shares of common stock which may be granted under the plan is 45,000 shares. Stock grants may be awarded under the plan to
employees, including officers and directors, and non-employee directors and consultants in consideration for their services to the Group.

During the fiscal year ended March 31, 2007, Global-Tech granted an aggregate of 3,750 shares of common stock of Global-Tech to an employee with an effective grant date of November 6, 2006. 750
shares of such common stock will vest and be issued on the first anniversary of the date of the stock grant and 750 shares of such common stock will vest and be issued on the second, third, fourth, and fifth anniversaries of the date of the stock
grant, respectively.

Changes in stock grants during the fiscal years ended March 31, 2009, 2008 and 2007 are as follows:



|                                        |  |       |   |      |                                     |      |       |   |  |                                     |  |       |  |                                    
|--------------------------------------- |  | ----- | - | ---- | ----------------------------------- | ---- | ----- | - |  | ----------------------------------- |  | ----- |  | -----------------------------------
|                                        |  | 2009  |   | 2008 |                                     | 2007
|                                        |  | Stock |   |      | Weightedaveragegrant-datefair value |      | Stock |   |  | Weightedaveragegrant-datefair value |  | Stock |  | Weightedaveragegrant-datefair value
|                                        |  |       |   |      | US$                                 |      |       |   |  | US$                                 |  |       |  | US$                                
|Non-vested, at beginning of fiscal year |  | 3,000 |   |      | 41,520                              |      | 3,750 |   |  | 51,900                              |  |      |  |                                   
|Granted                                 |  |      |   |      |                                    |      |      |   |  |                                    |  | 3,750 |  | 51,900                             
|Vested                                  |  | (750  | ) |      | 10,380                              |      | (750  | ) |  | 10,380                              |  |      |  |                                   
|                                        |  |       |   |      |                                     |      |       |   |  |                                     |  |       |  |                                    
|Non-vested, at end of fiscal year       |  | 2,250 |   |      | 31,140                              |      | 3,000 |   |  | 41,520                              |  | 3,750 |  | 51,900                             
|                                        |  |       |   |      |                                     |      |       |   |  |                                     |  |       |  |                                    

The total fair value of the 750 shares of common stock vested during the fiscal years
ended March 31, 2009 and 2008 is US$5,528 and US$9,300, respectively.



F - 52



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|29. | STOCK COMPENSATION (all numbers have been adjusted to reflect the Reverse Stock Split) (continued)
|--- | --------------------------------------------------------------------------------------------------



Further details relating to the options granted under the 1997 Plan and the 2005 Plan that are
outstanding as of March 31, 2009 are as follows:



|                  |  |                                          |  |                                                  |  |                                          |  |                   |  |                                         
|----------------- |  | ---------------------------------------- |  | ------------------------------------------------ |  | ---------------------------------------- |  | ----------------- |  | ----------------------------------------
|                  |  | Options outstanding as of March 31, 2009 |  | Options exercisableas of March 31, 2009         
|Number of options |  | Range ofexercise price peroption         |  | Weighted averageremainingcontractual life(years) |  | Weighted averageexercise price peroption |  | Number of options |  | Weighted averageexercise price peroption
|                  |  | US$ (per share)                          |  |                                                  |  | US$ (per share)                          |  |                   |  | US$ (per share)                         
|250,751           |  | 13.20 -15.60                             |  | 7.29                                             |  | 14.87                                    |  | 250,751           |  | 14.87                                   
|102,697           |  | 19.00 -25.00                             |  | 1.87                                             |  | 19.67                                    |  | 102,697           |  | 19.67                                   
|68,500            |  | 30.00 -30.56                             |  | 4.71                                             |  | 30.55                                    |  | 3,000             |  | 30.40                                   
|                  |  |                                          |  |                                                  |  |                                          |  |                   |  |                                         
|421,948           |  | 13.20 -30.56                             |  | 5.55                                             |  | 18.58                                    |  | 356,448           |  | 16.39                                   
|                  |  |                                          |  |                                                  |  |                                          |  |                   |  |                                         

As of March 31, 2009 and 2008, there was an unrecognized share-based compensation
cost of US$5,907 and US$49,737, respectively, relating to options granted under the 1997 Plan and the 2005 Plan and stock granted to an employee under the 1999 Employee Stock Purchase Plan. The unrecognized compensation cost for options granted and
stocks granted are expected to be recognized over a weighted-average vesting period of two years and five years, respectively. To the extent that the actual forfeiture rate is different from the original estimate, actual share-based compensation
relating to these awards may be different from the expectations.

The fair value per option granted during the fiscal year
ended March 31, 2007 was estimated on the date of grant using the Black-Scholes option pricing model and which amounted to US$0.9671 to US$2.09, on a weighted-average basis. The fair values of the options granted were estimated on the date of
grant using the following assumptions:



|                                |  |       |  |       |  |                |  
|------------------------------- |  | ----- |  | ----- |  | -------------- | -
|                                |  | 2009* |  | 2008* |  | 2007           |  
|Risk-free interest rate         |  |      |  |      |  | 4.51% - 4.54   | %
|Expected dividend yield         |  |      |  |      |  | 0              | %
|Expected option life            |  |      |  |      |  | 5 -7 years     |  
|Expected stock price volatility |  |      |  |      |  | 37.71% - 38.47 | %

| | 
| | 

| | * | No options were granted during the fiscal years ended March 31, 2009 and 2008
| | - | -----------------------------------------------------------------------------

The expected option life is determined by considering the past exercising history. The weighted average grant date fair value of the options
granted during the fiscal year ended March 31, 2007 was US$1.32.



F - 53



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|30. | CONDENSED FINANCIAL INFORMATION OF GLOBAL-TECH
|--- | ----------------------------------------------



Under the relevant PRC laws and regulations, the Companys PRC subsidiaries (the
PRC Subsidiaries) are restricted in their ability to transfer certain of their net assets to Global-Tech in the form of dividend payments, loans, or advances. The amounts restricted include net assets of the PRC Subsidiaries, as
determined pursuant to PRC generally accepted accounting principles, totaling RMB278,292,816 (approximately US$40,722,401) as of March 31, 2009.

The following is the condensed financial information of Global-Tech on a stand-alone basis:

Balance sheets



|                                                                                                                                               |  |               |   |  |               |  
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | - |  | ------------- | -
|                                                                                                                                               |  | March 31,2009 |   |  | March 31,2008 |  
|                                                                                                                                               |  | US$           |   |  | US$           |  
|ASSETS                                                                                                                                         |  |               |   |  |               |  
|Current assets:                                                                                                                                |  |               |   |  |               |  
|Cash and cash equivalents                                                                                                                      |  | 4,816,379     |   |  | 14,837,564    |  
|Available-for-sale investments                                                                                                                 |  | 15,983,290    |   |  |              |  
|Prepaid expenses                                                                                                                               |  | 37,618        |   |  | 36,274        |  
|Deposits and other assets                                                                                                                      |  | 31,050        |   |  | 33,198        |  
|                                                                                                                                               |  |               |   |  |               |  
|Total current assets                                                                                                                           |  | 20,868,337    |   |  | 14,907,036    |  
|                                                                                                                                               |  |              
|Interests in subsidiaries                                                                                                                      |  | 53,577,139    |   |  | 63,566,252    |  
|                                                                                                                                               |  |               |   |  |               |  
|Total assets                                                                                                                                   |  | 74,445,476    |   |  | 78,473,288    |  
|                                                                                                                                               |  |               |   |  |               |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                           |  |               |   |  |               |  
|Current liabilities:                                                                                                                           |  |               |   |  |               |  
|Other accrued liabilities                                                                                                                      |  | 244,463       |   |  | 230,450       |  
|                                                                                                                                               |  |               |   |  |               |  
|Total liabilities                                                                                                                              |  | 244,463       |   |  | 230,450       |  
|                                                                                                                                               |  |               |   |  |               |  
|Shareholders equity:                                                                                                                          |  |               |   |  |               |  
|Common stock, par value US$0.04 per share; 12,500,000 shares authorized; 3,227,064 shares issued and outstanding as of
March 31, 2009 and 2008 |  | 129,083       |   |  | 129,083       |  
|Preferred stock, par value US$0.04 per share; 250,000 shares authorized; no shares issued                                                      |  |              |   |  |              |  
|Additional paid-in capital                                                                                                                     |  | 84,266,412    |   |  | 84,222,582    |  
|Accumulated deficit                                                                                                                            |  | (10,554,563   | ) |  | (4,714,141    | )
|Accumulated other comprehensive income                                                                                                         |  | 5,021,266     |   |  | 3,098,761     |  
|Less: Treasury stock, at cost, 189,387 and 169,787 shares as of March 31, 2009 and 2008                                                        |  | (4,661,185    | ) |  | (4,493,447    | )
|                                                                                                                                               |  |               |   |  |               |  
|Total shareholders equity                                                                                                                     |  | 74,201,013    |   |  | 78,242,838    |  
|                                                                                                                                               |  |               |   |  |               |  
|Total liabilities and shareholders equity                                                                                                     |  | 74,445,476    |   |  | 78,473,288    |  
|                                                                                                                                               |  |               |   |  |               |  



F - 54



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|30. | CONDENSED FINANCIAL INFORMATION OF GLOBAL-TECH (continued)
|--- | ----------------------------------------------------------



Statements of operations



|                                             |  |                              |   |  |            |   |  |            |  
|-------------------------------------------- |  | ---------------------------- | - |  | ---------- | - |  | ---------- | -
|                                             |  | Fiscal years ended March 31, |  
|                                             |  | 2009                         |   |  | 2008       |   |  | 2007       |  
|                                             |  | US$                          |   |  | US$        |   |  | US$        |  
|Net sales                                    |  |                             |   |  |           |   |  |           |  
|Cost of goods sold                           |  |                             |   |  |           |   |  |           |  
|                                             |  |                              |   |  |            |   |  |            |  
|Gross profit                                 |  |                             |   |  |           |   |  |           |  
|Selling, general and administrative expenses |  | (919,168                     | ) |  | (739,742   | ) |  | (1,978,827 | )
|                                             |  |                              |   |  |            |   |  |            |  
|Operating loss                               |  | (919,168                     | ) |  | (739,742   | ) |  | (1,978,827 | )
|Interest income, net                         |  | 194,161                      |   |  | 1,175,121  |   |  | 2,683,384  |  
|Equity in losses of subsidiaries             |  | (6,021,844                   | ) |  | (6,458,631 | ) |  | (1,775,469 | )
|Other income (expenses), net                 |  | 906,429                      |   |  | 1,596,139  |   |  | (95,789    | )
|                                             |  |                              |   |  |            |   |  |            |  
|Net loss                                     |  | (5,840,422                   | ) |  | (4,427,113 | ) |  | (1,166,701 | )
|                                             |  |                              |   |  |            |   |  |            |  



F - 55



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##### Table of Contents

GLOBAL-TECH ADVANCED INNOVATIONS INC.

(Formerly known as Global-Tech Appliances Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|30. | CONDENSED FINANCIAL INFORMATION OF GLOBAL-TECH (continued)
|--- | ----------------------------------------------------------



Statements of cash flows



|                                                                                |  |                              |   |  |             |   |  |             |  
|------------------------------------------------------------------------------- |  | ---------------------------- | - |  | ----------- | - |  | ----------- | -
|                                                                                |  | Fiscal years ended March 31, |  
|                                                                                |  | 2009                         |   |  | 2008        |   |  | 2007        |  
|                                                                                |  | US$                          |   |  | US$         |   |  | US$         |  
|Cash flows from operating activities:                                           |  |                              |   |  |             |   |  |             |  
|Net loss                                                                        |  | (5,840,422                   | ) |  | (4,427,113  | ) |  | (1,166,701  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                              |   |  |             |   |  |             |  
|Stock compensation expense                                                      |  | 41,861                       |   |  | 56,487      |   |  | 1,123,577   |  
|Shares issued to an employee                                                    |  | 1,969                        |   |  | 1,969       |   |  |            |  
|Equity in losses of subsidiaries                                                |  | 6,021,844                    |   |  | 6,458,631   |   |  | 1,775,469   |  
|Changes in operating assets and liabilities:                                    |  |                              |   |  |             |   |  |             |  
|Prepaid expenses                                                                |  | (1,344                       | ) |  | (327        | ) |  | 9,195       |  
|Deposits and other assets                                                       |  | 2,148                        |   |  | 228,061     |   |  | (157,760    | )
|Other accrued liabilities                                                       |  | 14,013                       |   |  | (121,796    | ) |  | 25,005      |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Net cash provided by operating activities                                       |  | 240,069                      |   |  | 2,195,912   |   |  | 1,608,785   |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Cash flows from investing activities:                                           |  |                              |   |  |             |   |  |             |  
|Purchases of available-for-sale investments                                     |  | (25,949,992                  | ) |  |            |   |  | (34,071,106 | )
|Proceeds from disposal of available-for-sale investments                        |  | 9,979,200                    |   |  | 14,672,506  |   |  | 37,973,452  |  
|Repayment of amounts due from (advances to) subsidiaries, net                   |  | 5,877,276                    |   |  | (21,942,192 | ) |  | 570,366     |  
|Capital injection into subsidiaries                                             |  |                             |   |  | (1,858,699  | ) |  |            |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Net cash provided by (used in) investing activities                             |  | (10,093,516                  | ) |  | (9,128,385  | ) |  | 4,472,712   |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Cash flows from financing activities:                                           |  |                              |   |  |             |   |  |             |  
|Proceeds from stock options exercised                                           |  |                             |   |  | 9,750       |   |  |            |  
|Purchase of treasury stock                                                      |  | (167,738                     | ) |  |            |   |  |            |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Net cash provided by (used in) financing activities                             |  | (167,738                     | ) |  | 9,750       |   |  |            |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Net increase (decrease) in cash and cash equivalents                            |  | (10,021,185                  | ) |  | (6,922,723  | ) |  | 6,081,497   |  
|Cash and cash equivalents at beginning of fiscal year                           |  | 14,837,564                   |   |  | 21,760,287  |   |  | 15,678,790  |  
|                                                                                |  |                              |   |  |             |   |  |             |  
|Cash and cash equivalents at end of fiscal year                                 |  | 4,816,379                    |   |  | 14,837,564  |   |  | 21,760,287  |  
|                                                                                |  |                              |   |  |             |   |  |             |  



| | (a) | Basis of preparation
| | --- | --------------------

For the
purposes of the preparation of the parent company only condensed financial information, the Company records its interests in direct and indirect subsidiaries under the equity method of accounting as prescribed in Accounting Principles Board Opinion
No.18, The Equity Method of Accounting for Investments in Common Stock. Such interests, together with the advances to subsidiaries, are presented as Interests in subsidiaries on the balance sheets and share of the
subsidiaries income and losses is presented as Equity in losses of subsidiaries on the statements of operations.



| | (b) | Commitments
| | --- | -----------

Global-Tech has
provided a letter of support to certain of its subsidiaries indicating its commitment to provide continuing financial support to those subsidiaries.



F - 56



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                        
|1.1           |  | Memorandum of Association of Global-Tech, as amended. (Incorporated herein by reference to Exhibit 3.1 to Global-Techs Registration Statement on Form F-1, SEC File No.
333-8462 (the Registration Statement)                                               
|              | 
|1.2           |  | Articles of Association of Global-Tech, as amended (Incorporated herein by reference to Exhibit 1.2 to Global-Techs annual report on Form 20-F for the fiscal year ended March
31, 2005)                                                                      
|              | 
|1.3           |  | Resolution of the Board of Directors authorizing an amendment to the Articles of Association of Global-Tech, as amended. (Incorporated herein by reference to Exhibit 1.3 to
Global-Techs annual report on Form 20-F for the fiscal year ended March 31, 2005)
|              | 
|1.4           |  | Memorandum of Association of Global-Tech, as amended. *                                                                                                                                                                                                        
|              | 
|4.1           |  | Commission Agreement between Global-Tech and Eyal Lior. (Incorporated herein by reference to Exhibit 10.1 to the Registration Statement.)                                                                                                                      
|              | 
|4.2           |  | Employment Agreement between Global-Tech and Kwong Ho Sham. (Incorporated herein by reference to Exhibit 10.2 to the Registration Statement.)                                                                                                                  
|              | 
|4.3           |  | Employment Agreement between Global-Tech and John C.K. Sham. (Incorporated herein by reference to Exhibit 10.3 to the Registration Statement.)                                                                                                                 
|              | 
|4.4           |  | Supply Agreement between Global-Tech and Sunbeam Products, Inc. (Incorporated herein by reference to Exhibit 10.4 to the Registration Statement.)                                                                                                              
|              | 
|4.5           |  | Lease Agreement between Global-Tech and the Peoples Government of Qingxi Town, Dongguan City, Guangdong Province, together with the English language translation thereof.
(Incorporated herein by reference to Exhibit 10.5 to the Registration Statement.)   
|              | 
|4.6           |  | License Agreement between Global-Tech and the Buji Economic Development Company, together with the English language translation thereof. (Incorporated herein by reference to Exhibit
10.6 to the Registration Statement.)                                     
|              | 
|4.7           |  | Lease Agreement between Global-Tech and Wing Shing Products Company Limited. (Incorporated herein by reference to Exhibit 10.7 to Global-Techs Annual Report on Form 20-F for
the fiscal year ended March 31, 1999.)                                          
|              | 
|4.8           |  | Amendment to Tenancy Agreement dated April 17, 2002. (Incorporated herein by reference to Exhibit 4.8 to Global-Techs Annual Report on Form 20-F for the fiscal year ended
March 31, 2002.)                                                                   
|              | 
|4.9           |  | Amended and Restated 1997 Stock Option Plan of Global-Tech. (Incorporated herein by reference to Exhibit 10.8 to the Registration Statement.)                                                                                                                  
|              | 
|4.10          |  | 1999 Employee Stock Purchase Plan of Global-Tech. (Incorporated herein by reference to Exhibit 1 to Global-Techs Report on Form 6-K for the month of February
1999.)                                                                                          
|              | 
|4.11          |  | Credit Facility Agreement between Global-Tech and Standard Chartered Bank. (Incorporated herein by reference to Exhibit 10.11 to the Registration Statement.)                                                                                                  
|              | 
|4.12          |  | Supplemental advice letter dated April 26, 1999 from Standard Chartered Bank. (Incorporated herein by reference to Exhibit 10.10 to Global-Techs Annual Report on Form 20-F for
the fiscal year ended March 31, 1999.)                                        



E-1



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                     
|4.14          |  | Supplemental advice letter dated July 10, 2000 from Standard Chartered Bank. (Incorporated herein by reference to Exhibit 4.13 to Global-Techs Annual Report on Form 20-F for
the fiscal year ended March 31, 2001.)                                       
|              | 
|4.15          |  | Credit Facility Agreement with HongkongBank. (Incorporated herein by reference to Exhibit 10.12 to the Registration Statement.)                                                                                                                             
|              | 
|4.16          |  | Supplemental advice letter dated September 30, 2000 from HongkongBank. (Incorporated herein by reference to Exhibit 4.15 to Global-Techs Annual Report on Form 20-F for the
fiscal year ended March 31, 2001.)                                             
|              | 
|4.17          |  | Credit Facility Agreement dated April 7, 2000 with Citibank, N.A. (Incorporated herein by reference to Exhibit 4.16 to Global-Techs Annual Report on Form 20-F for the fiscal
year ended March 31, 2001.)                                                  
|              | 
|4.18          |  | Supplemental advice letter dated February 1, 2001 from Citibank, N.A. (Incorporated herein by reference to Exhibit 4.17 to Global-Techs Annual Report on Form 20-F for the
fiscal year ended March 31, 2001.)                                              
|              | 
|4.19          |  | Lease Agreement dated July 29, 2002 between Goman Limited and Pentalpha Hong Kong Limited. (Incorporated herein by reference to Exhibit 4.19 to Global-Techs Annual Report on
Form 20-F for the fiscal year ended March 31, 2002.)                         
|              | 
|4.20          |  | Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Pentalpha HK Ltd. (Incorporated herein by reference to Exhibit 4.20 to Global-Techs Annual
Report on Form 20-F for the fiscal year ended March 31, 2003.)                 
|              | 
|4.21          |  | Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Wing Shing Products (BVI) Co, Ltd. (Incorporated herein by reference to Exhibit 4.21 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)
|              | 
|4.22          |  | Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.22 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)   
|              | 
|4.23          |  | Credit Facility Agreement dated December 5, 2002 with Citibank, N.A. (Incorporated herein by reference to Exhibit 4.23 to Global-Techs Annual Report on Form 20-F for the
fiscal year ended March 31, 2003.)                                               
|              | 
|4.24          |  | Credit Facility Agreement dated June 20, 2002 between Pentalpha Macau Commercial Offshore Ltd. with HongkongBank. (Incorporated herein by reference to Exhibit 4.24 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)  
|              | 
|4.25          |  | Credit Facility Agreement dated March 26, 2003 between Pentalpha Hong Kong Ltd. with HongkongBank (Incorporated herein by reference to Exhibit 4.25 to Global-Techs Annual
Report on Form 20-F for the fiscal year ended March 31, 2004.)                  
|              | 
|4.26          |  | Banking facilities letter dated November 4, 2003 between Pentalpha Macau Commercial Offshore Ltd. and HongkongBank. (Incorporated herein by reference to Exhibit 4.26 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                                                        
|4.27          |  | Credit Facility Agreement dated November 3, 2003 between Pentalpha Hong Kong Ltd. with HongkongBank. (Incorporated herein by reference to Exhibit 4.27 to Global-Techs
Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)                                                                  
|              | 
|4.28          |  | Credit Facility Agreement dated September 24, 2003 between Standard Chartered Bank and Pentalpha Hong Kong Ltd. (Incorporated herein by reference to Exhibit 4.28 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)                                                       
|              | 
|4.29          |  | Credit Facility Agreement dated July 28, 2003 between Standard Chartered Bank and Pentalpha Macau Commercial Offshore Ltd. (Incorporated herein by reference to Exhibit 4.29 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)                                            
|              | 
|4.30          |  | Credit Facility Agreement dated September 24, 2003 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.30 to
Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)                                                
|              | 
|4.31          |  | Credit Facility Letter dated September 22, 2004 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.31 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2005.)                                                   
|              | 
|4.32          |  | Credit Facility Letter dated September 22, 2004 between Standard Chartered Bank and Pentalpha Hong Kong Ltd. (Incorporated herein by reference to Exhibit 4.31 to Global-Techs
Annual Report in Form 20-F for the fiscal year ended March 31, 2005.)                                                          
|              | 
|4.33          |  | Credit Facilities Agreement dated January 26, 2006 between Standard Chartered Bank and Pentalpha Hong Kong Ltd. (Incorporated herein by reference to Exhibit 4.35 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                                       
|              | 
|4.34          |  | Credit Facilities Agreement dated November 18, 2005 between Standard Chartered Bank and Pentalpha Macau Commercial Offshore Limited. (Incorporated herein by reference to Exhibit
4.36 to Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                  
|              | 
|4.35          |  | Credit Facilities Agreement dated January 26, 2006 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.37 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                                
|              | 
|4.36          |  | Credit Facilities Agreement dated March 21, 2006 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.38 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                                  
|              | 
|4.37          |  | Credit Facilities Agreement dated January 26, 2006 between Standard Chartered Bank and Global Rich Innovation Ltd. (Incorporated herein by reference to Exhibit 4.39 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                                    
|              | 
|4.38          |  | 2005 Stock Option Plan of Global-Tech. (Incorporated herein by reference to Exhibit 4.40 to Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)                                                                                                                                
|              | 
|4.39          |  | Shareholders Agreement and Share Sale and Purchase Agreement, each dated March 17, 2006, between Anwell Technologies Limited and Consortium Investment (BVI) Limited.
(Incorporated herein by reference to Exhibit 4.41 to Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2006.)
|              | 
|4.40          |  | Banking Facility Letter dated November 30, 2006 between Standard Chartered Bank and Kwong Lee Shun Trading Co Ltd. (Incorporated herein by reference to Exhibit 4.42 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2007.)                                                    
|              | 
|4.41          |  | Banking Facility Letter dated September 20, 2006 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.43 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2007.)                                                  
|              | 
|4.42          |  | Banking Facility Letter dated November 30, 2006 between Standard Chartered Bank and Global Rich Innovation Ltd. (Incorporated herein by reference to Exhibit 4.44 to
Global-Techs Annual Report in Form 20-F for the fiscal year ended March 31, 2007.)                                                       



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##### Table of Contents

|              |  |                                                                                                                                                  
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                          
|4.43          |  | Banking Facility Letter dated January 13, 2009 between Standard Chartered Bank and Global Optics Limited. *                                      
|              | 
|4.44          |  | Banking Facility Letter dated January 13, 2009 between Standard Chartered Bank and Global Household Products Limited. *                          
|              | 
|4.45          |  | Banking Facility Letter dated January 13, 2009 between Standard Chartered Bank and Kwong Lee Shun Trading Co. Ltd. *                             
|              | 
|8.1           |  | List of Subsidiaries. *                                                                                                                          
|              | 
|11.1          |  | Code of Ethics. (Incorporated by reference to Exhibit 14.1 to Global-Techs Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)
|              | 
|12.1          |  | Rule 13a-14(a) Certification by Chief Executive Officer. *                                                                                       
|              | 
|12.2          |  | Rule 13a-14(a) Certification by Acting Chief Financial Officer. *                                                                                
|              | 
|13.1          |  | Certification by Chief Executive Officer. *                                                                                                      
|              | 
|13.2          |  | Certification by Acting Chief Financial Officer. *                                                                                               
|              | 
|15.1          |  | Consent of Independent Registered Public Accounting Firm *                                                                                       



|* | Filed Herewith
|- | --------------



E-4