<PAGE>

================================================================================
                                                     Commission File No. 1-14812

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  ------------

                                    FORM 20-F
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended March 31, 2002

                                ----------------

                           GLOBAL-TECH APPLIANCES 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)

       21/F., Citicorp Centre, 18 Whitfield Road, Causeway Bay, 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:
                    Common Shares, $0.01 par value per share

                   Name of each exchange on which registered:
                           The New York Stock Exchange

                                ----------------

             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:

               12,140,853 Common Shares, par value $0.01 per share

     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.

                                 Yes [X] No [_]

     Indicate by check mark which financial statement item the registrant has
elected to follow.

                             Item 17 [_] Item 18 [X]

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
<S>                                                                                      <C>
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 ............................................   4
          C. Reasons for the offer and use of proceeds ..................................   4
          D. Risk factors ...............................................................   4
Item 4.   Information on the Company ....................................................   8
          A. History and development of the company .....................................   8
          B. Business overview ..........................................................   9
          C. Organizational structure ...................................................  21
          D. Property, plants and equipment .............................................  21
Item 5.   Operating and Financial Review and Prospects ..................................  22
          A. Operating results ..........................................................  22
          B. Liquidity and capital resources ............................................  28
          C. Research and development, patents and licenses, etc. .......................  30
          D. Trend information ..........................................................  30
          E. The application of critical accounting policies ............................  30
Item 6.   Directors, Senior Management and Employees ....................................  31
          A. Directors and senior management ............................................  31
          B. Compensation ...............................................................  32
          C. Board practices ............................................................  32
          D. Employees ..................................................................  33
          E. Share ownership ............................................................  34
Item 7.   Majority Shareholders and Related Party Transactions ..........................  36
          A. Major shareholders .........................................................  36
          B. Related party transactions .................................................  37
          C. Interests of experts and counsel ...........................................  38
Item 8.   Financial Information .........................................................  38
          A. Consolidated statements and other financial information ....................  38
          B. Significant changes ........................................................  40
Item 9.   The Offer and Listing .........................................................  40
          A. Offer and listing details ..................................................  40
          B. Plan of distribution .......................................................  41
          C. Markets ....................................................................  41
          D. Selling shareholders .......................................................  41
          E. Dilution ...................................................................  41
          F. Expenses of the issue ......................................................  41
Item 10.  Additional Information ........................................................  41
          A. Share capital ..............................................................  41
          B. Memorandum and articles of association .....................................  41
          C. Material contracts .........................................................  44
          D. Exchange controls ..........................................................  44
          E. Taxation ...................................................................  44
          F. Dividends and paying agents ................................................  47
          G. Statement by experts .......................................................  48
          H. Documents on display .......................................................  48
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                           <C>
          I. Subsidiary information ........................................................   48
Item 11.  Quantitative and Qualitative Disclosures About Market Risk .......................   48
Item 12.  Description of Securities Other than Equity Securities ...........................   48
          A. Debt securities ...............................................................   48
          B. Warrants and rights ...........................................................   48
Item 13.  Defaults, Dividend Arrearages and Delinquencies ..................................   49
Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds .....   49
Item 15.  Controls and Procedures ..........................................................   49
Item 16.  [Reserved] .......................................................................   49
Item 17.  Financial Statements .............................................................   49
Item 18.  Financial Statements .............................................................   49
Item 19.  Exhibits .........................................................................   49

          Index to Consolidated Financial Statements .......................................  F-1
          Exhibit Index ....................................................................  E-1
</TABLE>

                                       iii

<PAGE>

         The terms "Global-Tech," "we," "us" and "our" as used in this annual
report on Form 20-F, or annual report, refer to Global-Tech Appliances Inc., a
British Virgin Islands corporation, and its consolidated subsidiaries, except
where the context requires otherwise. The terms "China" and "Hong Kong" as used
in this annual report refer to the People's Republic of China and the Hong Kong
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 2002," for example, refers
to the fiscal year ended March 31, 2002.

         Our financial statements are prepared 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," "estimate,"
"future" 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; product demand and market acceptance; new product
development; reliance on key strategic alliances; 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 manufacturing capacity to
higher-value, technology-oriented products; currency fluctuations; uncertainties
associated with investments; the regulatory environment; fluctuations in
operating results; and other risks detailed in "Item 3.D--Risk Factors" and
elsewhere in this annual report.

         You should rely only on the information contained in this annual report
when making a decision about whether to invest in our common shares. The
information contained in this annual report is accurate only as of the date of
this annual report.

                                     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

<PAGE>

Item 3.  Key Information.

A.       Selected financial data.

         The selected consolidated income statement data for the fiscal years
ended March 31, 2000, 2001 and 2002 and the selected consolidated balance sheet
data as of March 31, 2001 and March 31, 2002 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 income statement data for the fiscal years ended March 31,
1998 and 1999 and the selected consolidated balance sheet data as of March 31,
1998, March 31, 1999 and March 31, 2000 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.

                                       2

<PAGE>

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended March 31,
                                                  -------------------------------------------------------------------
                                                     1998           1999          2000          2001           2002
                                                  ---------      ---------     ---------     ---------      ---------
                                                               (In thousands, except for per share data)
<S>                                               <C>            <C>           <C>           <C>            <C>
Statement of income data:

Net sales ....................................... $ 118,336      $  84,070     $  92,357     $ 108,379      $  85,560

Cost of goods sold ..............................    86,521         63,033        70,647        85,563         65,479
                                                  ---------      ---------     ---------     ---------      ---------
Gross profit ....................................    31,815         21,037        21,710        22,816         20,081

Selling, general and administrative expenses ....    15,476(1)      15,650(1)     15,948(1)     15,927(1)      16,361(1)
Legal and professional fees on potential
  acquisitions ..................................        --             --           500            --             --
Write-off of inventory and tooling ..............        --             --            --         4,992             --
Loss on cessation of a product line .............        --             --            --         2,523             --
Impairment of property, plant and equipment .....        --             --            --            --            258
Share of loss in a joint venture ................        --             --            --            --          5,237
Amortization of good will .......................        --             --            --            --            328
Write-off of good will ..........................        --             --            --            --          3,612
                                                  ---------      ---------     ---------     ---------      ---------
Operating income (loss) .........................    16,339          5,387         5,262          (626)        (5,715)
Interest expense ................................     1,398            805           217           269            125
Interest income .................................        56          3,392         3,461         3,729          2,017
Other income, net ...............................       164            343           451           448            647
                                                  ---------      ---------     ---------     ---------      ---------
Income (loss) before income taxes ...............    15,161          8,317         8,957         3,282         (3,176)
Provision for income taxes ......................     1,453            420           225           513          1,417
                                                  ---------      ---------     ---------     ---------      ---------
Income (loss) before minority interests .........    13,708          7,897         8,732         2,770         (4,593)
Minority interests ..............................        --             --            --            --          1,570
                                                  ---------      ---------     ---------     ---------      ---------
Net income (loss) ............................... $  13,708      $   7,897     $   8,732     $   2,770      $  (3,023)
                                                  =========      =========     =========     =========      =========
Other comprehensive income (loss)--
  Unrealized gain (loss) on marketable
   securities, net of tax:
    Unrealized holding loss arising
      during the period .........................        --             --            36          (186)          (179)
    Less: reclassification adjustment for
      loss included in net income ...............        --             --            --            --            532
                                                  ---------      ---------     ---------     ---------      ---------
Total comprehensive income (loss) ............... $  13,708      $   7,897     $   8,768     $   2,582      $  (2,670)
                                                  =========      =========     =========     =========      =========
Basic and diluted earnings (loss) per
   common share ................................. $    1.71      $    0.65     $    0.72     $    0.23      $   (0.25)
                                                  =========      =========     =========     =========      =========
Dividend declared and paid per share ............        --             --            --     $    1.35             --
                                                  =========      =========     =========     =========      =========
Basic and diluted weighted average number
   of shares outstanding ........................     8,000         12,235        12,109        12,135         12,140
                                                  =========      =========     =========     =========      =========
</TABLE>

__________________

(1)      Includes provisions of $511,000 and $233,000, respectively, against
         advances to a former minority shareholder of a subsidiary and his
         affiliates in fiscal 1998 and 2000. Also includes provisions of
         $102,000, $103,000, $19,000 and $274,000, respectively, against a
         related party loan and the related interest receivable in fiscal 1999,
         2000, 2001 and 2002.

                                        3

<PAGE>

<TABLE>
<CAPTION>
                                                              At March 31,
                                    ----------------------------------------------------------------
                                       1998          1999         2000         2001         2002
                                    ----------    ----------   ----------   ----------   ----------
                                                             (In thousands)
 <S>                                <C>           <C>          <C>          <C>          <C>
 Balance sheet data:
 Working capital ................   $     (984)   $   80,554   $   87,213   $   70,113   $   64,931
 Total assets ...................       60,268       132,371      139,717      132,048      123,273
 Net assets .....................       29,980       113,963      122,906      109,059      106,500
 Total debt .....................       14,494         3,658        2,472        2,046        1,062
 Shareholders' equity ...........       29,980       113,963      122,906      109,059      106,500
</TABLE>


B.       Capitalization and indebtedness.

         Not applicable.

C.       Reasons for the offer and use of proceeds.

         Not applicable.

D.       Risk factors.

         Foreign sales, operations and assets. Substantially all of our products
are currently manufactured in China and approximately 95% of the net book value
of our total fixed assets are located there. We sell products to companies based
principally in North America, Europe and Australia. 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; and

         .    changes in tariff and freight 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.

         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;

         .    confiscatory or increased taxation;

         .    restrictions on currency conversion, imports and sources of
              supply;

         .    import duties;

         .    currency devaluations; or

         .    expropriation of private enterprise.

                                        4

<PAGE>

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, or WTO, ending 15 years of negotiations and entitling China
to the full trading rights of a WTO member country. There can be no assurance,
however, that the Chinese government will continue to pursue 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 notice.

         Increase in effective tax rates. The location of our business
operations results in an overall effective tax rate that may be less than that
of U.S. corporations. We are incorporated in the British Virgin Islands and have
subsidiaries incorporated in the British Virgin Islands, Hong Kong, Macau, China
and the United States. Our executive and administrative offices are located in
Hong Kong and Macau and our manufacturing facilities are located in China. We
sell our products to customers located primarily in the United States and
Europe. Changes in tax laws could have a material adverse effect on our results
of operations. In addition, the exemption of our subsidiary in China from income
taxes in China will expire two years after the subsidiary records profits to the
extent the profits are not offset by losses in a prior year, which event has not
yet occurred. Losses from operations in China in any year can only be used to
offset future income from operations in China for a period of five years. We do
not believe that our current method of operations would subject us to material
U.S. taxes. There can be no assurance, however, that U.S. taxes will not be
imposed on an additional portion of our income. The imposition of U.S. income
taxes could have a material adverse effect on our results of operations.

         Dependence on major customers. Sales to seven major customers accounted
for 51.7%, 73.2% and 79.0% of our net sales during fiscal 2000, 2001 and 2002,
respectively. The significant increase in the percentage of net sales to our
major customers in fiscal 2002 is attributed to increased sales of floor care
products to Royal Appliance Manufacturing Company. Sales to Royal Appliance
accounted for approximately 42.2% of our net sales in fiscal 2002, as compared
to 22.9% in fiscal 2001. In an effort to attract and retain Royal Appliance as a
customer, we have granted them extended payment terms, which is primarily the
reason why receivables represented a higher number of days of sales as of March
31, 2002 as compared to as of March 31, 2001. Although the relative percentage
of net sales to each of our major customers changes each year, we expect that in
the foreseeable future we will be dependent on between four and six major
customers during each fiscal year. 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.
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 these major customers could have
a material adverse effect on our business, results of operations and financial
condition. See "Item 4.B--Business Overview--Major Customers" for information
related to Moulinex S.A., a former major customer of ours.

         Increases in cost of raw materials. We are dependent upon outside
suppliers for all of our raw material needs, including plastic resins, and we
are subject to price increases 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 natural gas and crude oil prices, and the relative capacity and
supply and demand for the resin and petrochemical intermediates from which
plastic resins are produced. We have no long-term supply contracts for the
purchase of plastic resin, although we generally maintain a 90-day supply. In
the past, we have had limited ability to increase product pricing in response to
plastic resin price increases. There can be no assurance that we will be able to
purchase 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 inability to pass the increased cost of these or other raw
materials onto our customers or to purchase sufficient quantities of plastic
resins could have a material adverse effect on our business, results of
operations and financial condition.

         New products and rapid technological change. The technology
incorporated in many of our products, particularly kitchen appliances, is
characterized by rapid change. In addition, the emergence of new technologies
can rapidly render existing products obsolete or unmarketable. See "Item
4.B--Business Overview" for information related to our TFEL flat-panel display
business. Our ability to anticipate changes in technology and industry standards
and successfully develop and introduce new and 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

                                        5

<PAGE>

successfully complete the development of new or enhanced products or
successfully manage the transitions 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. We are the licensee of proprietary small
molecule, passive matrix, organic light emitting diode, or OLED, display
technology and we reflect the value of this license as an intangible asset.
Should our plans to develop and produce OLED displays not come to fruition, this
asset would become impaired.

         Strategic acquisitions. Historically, our core business has been
designing, manufacturing and selling small electrical household appliances to
brand marketers in developed countries. More recently, however, we have sought
to diversify and transform a portion of our business to developing,
manufacturing and selling higher-value, technology-oriented products by pursuing
select acquisitions that fit this long-term business strategy. Our ability to
conduct such acquisitions is limited by our ability to identify potential
acquisition candidates. In the event we are unable to identify and take
advantage of these opportunities, we may experience difficulties in growing our
business, given the fact that our small household appliance business has been
relatively static. If we make strategic acquisitions, we could have difficulty
assimilating or retaining the acquired companies' personnel or integrating their
operations, equipment or services into our organization. These difficulties
could disrupt our ongoing business, distract our management and employees and
increase our expenses. Moreover, our profitability may suffer because of
acquisition-related costs or amortization of acquired goodwill and other
intangible assets. See "Item 4.B-Business Overview" for information related to
the write-off of assets associated with our TFEL flat-panel display business.

         Proprietary technology; patent protection. We hold a number of patents
registered in various jurisdictions, including the United States, the United
Kingdom, Germany and France, and 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.


         Diversification into technology-oriented products. We are embarking on
a long-term diversification strategy of developing technology-oriented products
(e.g., OLED displays and Stirling, or heat, engine technology). Since we are
currently only in the research and development phase of development, products
incorporating these new technologies may never be commercially produced and if
commercially produced may never achieve market acceptance. Our inability to
commercially produce products utilizing these technologies or the failure of the
market to accept such products if they are commercially produced could have a
materially adverse impact on our business, financial condition and results of
operations.

         Indemnification liability for patent infringement. In contracts
relating to our original design manufacturing, or ODM, products, we typically
have agreed 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. Along with a customer, we are currently
defending a patent infringement claim relating to our deep fryers, a product
line which represented 9.2%, 2.0% and 0.5% of our net sales in fiscal 2000, 2001
and 2002, respectively. See Item 8.A -- Financial Information -- Legal
Proceedings. No assurance can be given that this current infringement claim will
be resolved in our favor or that other parties will not assert infringement
claims against us in the future. An adverse decision in any such legal
proceeding could have a material adverse effect on our business, results of
operations and financial condition. After considering all facts known to us and
based on the advice of legal counsel, however, we do not believe that any
currently pending actions will have such a material adverse effect and the
likelihood of a negative effect on our operating results is remote. Still, the
cost of any such indemnity or of responding to any such assertion could be
significant, regardless of whether the assertion is valid.


         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 should the product cause
injury to any person or not perform properly. We maintain product liability
insurance in an amount that we believe is sufficient. There can be no assurance,
however, that the coverage limits of our insurance will be adequate or that all
such claims will be covered by 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 liability insurance in the
past, such insurance varies 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 reputation.

         Product safety; delays in regulatory approval. Our products include
several electric components which may cause fires if not properly handled.
Although our products have experienced no significant safety problems in the
past and we 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 general market, we obtained
approval of our products by one or more of the organizations engaged in testing
product safety. Such approvals require significant time and resources of 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. Most of our products
are manufactured at our factory complex located in the Guangdong province of
China in the County of Dongguan. 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 aggregating approximately $51.3 million covering our inventory,
furniture, equipment, machinery and buildings and business interruption
insurance in the

                                        6

<PAGE>

aggregate of approximately $28.7 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. Although compliance with environmental
regulations has not had a material adverse effect on us in the past, the failure
in the future to comply with these laws or to pass such an inspection could have
a material adverse effect on our business, results of operations and financial
condition.

         Dependence on distributions from operating subsidiaries. We have no
direct business operations, other than our ownership of our subsidiaries. Should
we decide to pay 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, including 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. As 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.

         Competition. We believe that the markets for our products are mature
and highly competitive and that competition is based upon several factors,
including price, product features and enhancements and timing of new product
introductions. We compete with established companies, a number of which have
substantially greater technical, financial and marketing resources than us.
Competition is generally based on unit price, product quality and availability
and service, as well as product variety, uniqueness of product features,
combination of features offered and brand name identification. There can be no
assurance that we will be able to compete successfully against current and
future sources of competition or that the competitive pressures faced by us will
not have a material adverse effect on our business, results of operations and
financial condition.

         Dependence on key personnel. We depend to a large extent on the
abilities and continued participation of our management personnel, and
principally on Kwong Ho Sham, our Chairman of the Board, and John C.K. Sham, our
President and Chief Executive Officer, who directs our day-to-day manufacturing
and marketing operations from executive offices in Hong Kong. We have employment
agreements with Kwong Ho Sham and John Sham. We maintain a key man life
insurance policy of $1 million for John Sham. There can be no assurance that
proceeds of such insurance would be sufficient to compensate us for his loss.
The loss of John Sham or others among our key personnel would have a material
adverse effect on our business, results of operations and financial condition if
a suitable replacement or replacements could not be promptly found.

         Seasonality; fluctuations in quarterly results. Our business is
seasonal, with a greater portion of our sales and earnings generated in the
second and third quarters of each fiscal year (June through December). These
fluctuations are based on customers' increased stocking of our products in
anticipation of heavy demand during the Christmas holiday season. In addition,
our sales can vary from quarter to quarter based on the timing of the
introduction of new products and may be affected in the future by the timing of
any acquisition completed by us. We believe that quarterly comparisons of the
results of our operations during any fiscal year are not necessarily meaningful
and that results for any one fiscal quarter should not be relied upon as an
indication of future performance.

         Concentration of ownership. Wing Shing Holdings Company Limited, a
British Virgin Islands company, beneficially owns approximately 62.2% of our
outstanding common shares. The share ownership of Wing Shing Holdings is held
50% by Kwong Ho Sham, 20% by John Sham and 15% by each of Shun Chi Hui and Wai
Chun Hui, each of whom are directors. Voting control of Wing Shing Holdings is
held approximately 36% by Kwong Ho Sham, approximately 43% by John Sham and
approximately 11% by each of Shun Chi Hui and Wai Chun Hui. As a result, Wing
Shing Holdings and its shareholders 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.

                                        7

<PAGE>

         Service and enforcement of legal process. We are organized under the
laws of the British Virgin Islands. The majority 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 there is doubt as to
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 difficulty protecting their interests in the face
of actions by our board of directors or our principal shareholders than
shareholders would have as shareholders of a corporation incorporated in another
jurisdiction.

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

         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 us 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.

Item 4.  Information on the Company.

A.       History and development of the company.

         Our legal name is 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 went public 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.

         Effective September 10, 2002, the address of our principal place of
business, and the location of our executive and administrative offices, is
21/F., Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong, and the
telephone number at that address is (852) 2814-0601. Our e-mail address is
welcome@pentalpha.com.hk. Our website is located at
www.businesswire.com/cnn/gai.shtml.

                                        8

<PAGE>

Capital Expenditures

         For a description of the company's principal capital expenditures since
the beginning of the company's last three financial years, see "Item
5B--Operating and Financial Review and Prospects--Liquidity and Capital
Resources."

B.       Business overview.

         Our core business is designing, manufacturing and selling a wide range
of small electrical household appliances for brand marketers in developed
countries. While the type of products we sell and their product categories have
changed over time, and they will continue to change in the future, our core
business remains relatively strong. We offer reliable, high-quality
manufacturing for partnering with U.S. and European companies that need to
procure completed products from the Far East for competitive reasons, but also
need to protect their brands' reputations. We also concentrate our resources on
developing creative and proprietary features for existing products that allow
both our customers and us to achieve better margins in today's retail markets
that demand lower prices. Moreover, we provide our customers opportunities to
expand their businesses with considerably lower upfront investment than they
would have to make in their own markets.

         In our core business, we have traditionally categorized the appliances
we manufacture by function. Our current product categories are kitchen
appliances, garment care products, travel products and accessories and floor
care products. In each category, 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 attention. While the business as a whole has
remained fairly stable in the developed countries, it is subject to significant
swings in demand for particular product categories and individual products
within the categories.

         We had originally manufactured personal care products, the least
complex of product categories. But by 2001, we were no longer competitive in
this product category compared to Chinese manufacturers that did not have a Hong
Kong staff or development programs and we decided to exit this category. At the
same time, we built up our electronic motor expertise and entered the floor care
products category. Floor care products are more complex and our capabilities are
more critical to their manufacture. We expect to continue developing this
business for at least the next few years.

         Our revenues have fluctuated significantly when particular products
have been in high demand. The sale of breadmakers, for example, constituted a
significant portion of our revenues in fiscal 1997 and 1998. It is our goal,
however, to attempt to make product development decisions and work with
particular partners based on the opportunity for consistently profitable sales.
We do not take on loss leaders or continue manufacturing certain products in
order to keep capacity utilization at a certain level. Rather, since our factory
equipment has been fully paid for and our fixed charges are not significant, we
concentrate our resources only on opportunities that we believe will provide us
with an acceptable return on investment.

         One of our key strategies that supported our growth was to emphasize
original design manufacturing as an alternative to contract manufacturing. We
have 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. Our ODM strategy is most effective, however, when we are
well-established in a category. For example, we are only now introducing ODM
floor care products after successfully contract manufacturing these products for
two years. Thus, in the aggregate, our percentage of net sales of ODM products
has decreased from 77.6% to 48.4% over the last three fiscal years, but we
expect to continue to emphasize our ODM strategy to the greatest extent possible
in the future, as ODM products generally have higher profit margins.

         U.S. and European sales for our products accounted for 73.2% and 21.9%,
respectively, of our net sales during fiscal 2002, as compared to 62.6% and
32.3%, respectively, in fiscal 2001, and 55.2% and 35.1%, respectively, in
fiscal 2000. The percentage decrease in European sales in fiscal 2002 was
primarily due to the bankruptcy of Moulinex S.A., sales to which accounted for
$14.9 million, or 13.7% of net sales, in fiscal 2001 as compared to $2.3
million, or 2.7% of net sales, in fiscal 2002. The weakening of the Euro in
relation to the U.S. dollar also contributed to the percentage decrease in
European sales. All of our sales are made in U.S. dollars.

         Small household appliances are sold through a variety of distribution
channels, including mass merchandisers, specialty retailers, warehouse clubs,

                                        9

<PAGE>

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. We believe that a similar
trend is emerging in Western Europe. Generally, mass merchandisers prefer to
purchase from a limited number of well-known household appliance companies that
provide a variety of high-quality, innovative, brand-name products on a timely
and cost-effective basis. Accordingly, household appliance companies are
focusing on their primary strengths of marketing and distribution, while
increasingly outsourcing product development and manufacturing.

         We are continuing to acquire new technologies in an effort to expand
our capabilities in manufacturing finished products. These transactions are part
of our long-term business strategy to gradually diversify and transform a
portion of our manufacturing facility into 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. We have no interest in being a component manufacturer
in the long-term, as value-added opportunities are not often available.

         Our acquisition of Lite Array, Inc. was completed in May 2001. The
acquisition was accomplished through a newly-formed subsidiary, Global Lite
Array (BVI) Limited, into which we contributed our convertible bond investment
in Lite Array plus $3.8 million of cash. In turn, the former common shareholders
of Lite Array contributed their Lite Array shares into Global Lite Array in
exchange for 9.2% of the outstanding shares of Global Lite Array, and the
holders of Lite Array debt exchanged $4.0 million in Lite Array debt in exchange
for 14.0% of the outstanding shares of Global Lite Array. Lite Array, a
California-based company, is a marketer, developer and producer of solid state
flat-panel displays. The light source for these displays are either inorganic
phosphors or small molecule organic fluorescents. The inorganic thin film
electroluminescent, or TFEL, display business is a mature business with
specialized applications where temperature extremes, excessive vibration and
long life cannot be met by liquid crystal technology. The two largest suppliers
of TFEL displays are Sharp in Japan and Planar Systems in Oregon, United States.
Lite Array operates a joint venture in Jiangmen, China to produce 1/4 VGA or
smaller monochrome TFEL displays. Lite Array also is a licensee of a proprietary
small molecule system for passive matrix organic light emitting diode displays,
or PM-OLEDs. We had decided to buy a controlling interest in Lite Array for the
following reasons:

         .    We believed that no other electronic display matched the TFEL
              display's performance with respect to viewing angle, temperature
              extremes, life and durability;

         .    We believed that low production yields in the joint venture
              factory were due to inadequate quality controls, systems and
              procedures, which were problems that our engineers had extensive
              experience in resolving;

         .    We believed that higher production yields and throughput would
              dramatically reduce per unit costs and expand the market
              opportunities for TFEL displays;

         .    The OLED display technology, even though only in the research and
              development stage, was attracting significant capital investment
              from both financial and industrial sources;

         .    We believed that control of Lite Array could be achieved with
              modest initial capital and we anticipated having to finance Lite
              Array's operations for only one year before it would at least
              break even; and

         .    We anticipated that Lite Array's management would execute a plan
              that was premised on the assumption that after no more than two
              years, the profits from the TFEL display business would be
              sufficient to fully fund the OLED display technology's
              development.

         Despite our initial expectations for the TFEL display business, by
March 31, 2002, we had concluded that the long-term prospects for the business
might be limited. From our analysis, the performance gap between TFEL technology
and existing liquid crystal display, or LCD, technologies (with billions of
dollars already invested in production capacity) had narrowed and the price
premium for TFEL displays had risen as LCD prices have fallen. We believed that
the market opportunity for TFEL displays was diminishing, especially since such
displays are only available in monochrome whereas the market has changed to
demand more full color products. Furthermore, not long after we made the
acquisition, we began to question many of the material marketing assumptions
upon which the acquisition was based. We determined that we would be required to
finance Lite Array's operations for significantly longer than one year before
breakeven would be reached. It also became clear that Lite Array's TFEL business
would not attain sufficient profitability within two years to fully fund the
OLED display development. Our board of directors determined that Global-Tech was
not prepared to support three years of significant losses. Consequently, Global
Lite Array's board of directors decided at a June 10, 2002 board meeting to
discontinue production of TFEL displays and cease funding the joint venture in
China as of September 30, 2002. A presentation was made to our board of
directors containing the above information on June 30, 2002 and a decision was
made to write off the value of Lite Array's investment in the joint venture, the
goodwill associated with the TFEL display business and certain TFEL production
equipment owned by us.

         As required by U.S. GAAP, we performed an evaluation of impairment of
goodwill, interest in a joint venture and property, plant and equipment as of
March 31, 2002. This evaluation was completed by June 3, 2002 and accordingly a
write-down of such assets was taken as of March 31, 2002. In fiscal 2002, Lite
Array had a net loss of $11.7 million after the write off, which had a major
impact on our operating results. Subsequently, a decision was made to dispose of
or liquidate Lite Array's TFEL display business. We do not believe that any such
disposition or liquidation will have a material affect on our business, results
of operations or financial condition. Lite Array's OLED display business is
still in the research and development phase but we believe the business shows
promise and from mid-fiscal 2003, all of Lite Array's resources are being
dedicated to this effort.

                                       10

<PAGE>

         On March 1, 2002, we announced the acquisition of a technology that is
used to develop and manufacture Stirling, or heat, engines, which we believe are
more efficient and cost effective than certain other types of small electric or
gasoline engines. A heat engine is a quiet, light-weight, low-pollutant,
fuel-efficient and low-cost external combustion engine that can utilize multiple
types of fuel to convert heat into mechanical power. In addition, when
mechanical power is supplied to the heat engine, it could become a cooling
device that does not use a compressor or chlorofluorocarbons. We believe that
the heat engine can be a viable alternative to certain other engines and heating
or cooling devices that are currently being used in a broad range of products or
applications, such as lawn mowers, chain saws, electrical generators, heat
pumps, air-conditioners and refrigeration systems. We plan to deploy a team of
engineers and consultants to accelerate and facilitate the development of this
advanced heat engine.

Business Strategy

         Our business strategy is to achieve growth by expanding the number of
consumer products we manufacture that can be offered to consumers by effective
brand marketers. In order to carry out this strategy, we regularly evaluate what
product categories fit well with our capabilities. For example, we have recently
been focusing on whether to manufacture a number of hardware categories, such as
lawn and garden, sporting goods and outdoor appliances, as well as doing
preliminary research on the manufacture of certain consumer electronic products.
The key elements of our business strategy are the following:

         Market research into new categories and products. We initially examine
existing products and determine if our manufacturing them could provide
potential customers a benefit as a result of our innovation which would make
outsourcing desirable. Our particular emphasis on innovation is centered around
convenience, health and safety and cost reduction. We also target for research
those product categories in which products are still primarily manufactured in
the domestic market and will need to be outsourced to meet competitive pressures
and retail pricing demands.


         Expansion of manufacturing capabilities. We invest either directly or
indirectly in all the equipment needed to manufacture our products. In recent
years, we have added die casting and electric motor manufacturing to our
processes and plan to use our Lite Array subsidiary to develop our OLED display
capabilities and, eventually, our newly-acquired heat engine technology to
develop environmentally-friendly motors.

         Innovative product development. Based on our research, we develop new
products that may range from minor design changes in existing products to
significant new functions or features. In creating new products, we concentrate
on developing concepts, functions and features that are not offered by existing
products and can be produced at a reasonable cost. We seek to reinforce the
proprietary nature of our new products by obtaining patent protection when
possible, and retaining ownership of the tooling required to manufacture them.
We believe that the flexibility of our design and manufacturing process allows
us to introduce new products with shorter development cycles than if our
customers attempted to manufacture these products themselves.

         Vertically-integrated, low-cost manufacturing. We maintain one major
facility in China dedicated to vertically-integrated manufacturing. We have made
a significant investment, and continue to invest, in sophisticated machinery for
creating the tooling and components used in the manufacturing process. This
machinery, along with the use of inexpensive labor, enables us to efficiently
produce many of our components and to assemble these components to create
finished products. By locating our manufacturing facilities in close proximity
to Hong Kong, we also are 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,
low-cost products in an efficient and timely manner.

         Commitment to quality. 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. 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

                                       11

<PAGE>

of the International Organization for Standardization, or ISO. The ISO is a
Geneva, Switzerland-based organization that 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 9002 for the manufacture of electrical
household appliances.

         Focus on sales to brand name customers. Our ability and commitment to
develop new and innovative, high-quality products at a low-cost has allowed us
to benefit from the increased outsourcing of product development and
manufacturing by our customers. We intend to enter into collaborative
arrangements whenever possible with our customers to support their offshore
procurement efforts.

         Pursue selected acquisitions. We believe that the continuing trend
among retailers to consolidate their vendors, including suppliers of small
household appliances, will provide us with cooperative manufacturing and
acquisition opportunities. We will continue to pursue select acquisitions that
fit our long-term business strategy to gradually diversify and transform a
portion of our manufacturing capacity to 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 existing
manufacturing infrastructure in China.


         On March 1, 2002, we announced the acquisition of a technology that is
used to develop and manufacture Stirling, or heat, engines, which we believe are
more efficient and cost effective than certain other types of small electric or
gasoline engines. The acquisition of this new technology further supports our
strategy of continuing to transform Global-Tech into a manufacturer of
technology-oriented products. We plan to deploy a team of engineers and
consultants both from within and outside our company to accelerate and
facilitate the development of this advanced heat engine.


         We also have considered other potential complementary acquisitions.
Although we have not reached an agreement for any such acquisitions, we plan to
continue to pursue selected acquisitions of complementary businesses. There can
be no assurance that any of these acquisitions will be consummated or, if
consummated, such acquisitions will be successfully integrated into our
operations.

Products


         Currently, we design and manufacture a wide range of small household
appliances. During fiscal 2000, 2001 and 2002, ODM products accounted for 77.6%,
63.2% and 48.4%, respectively, of our net sales, with the balance of our net
sales being from contract manufacturing performed according to product
specifications provided by customers. In fiscal 2002, we produced approximately
5.2 million units.


         The following table sets forth the net sales for each product category
in fiscal 2000, 2001 and 2002:


<TABLE>
<CAPTION>
                                                                 Fiscal Year Ended March 31,
                                                       ----------------------------------------------
                                                           2000            2001              2002
                                                       ------------    ------------      ------------
Product category:                                                     (In thousands)
<S>                                                     <C>             <C>               <C>
Kitchen appliances ..................................   $   60,589      $   58,366        $   36,087
Personal, beauty and health care products(1) ........        8,495           4,414             2,582
Garment care products ...............................       14,485          11,985             6,534
Travel products and accessories .....................        4,562           4,912             1,317
Floor care products .................................        2,289          26,898            37,214
Flat-panel displays(2) ..............................           --              --               195
Other(3) ............................................        1,937           1,804             1,631
                                                       ------------    ------------      ------------
   Total ............................................   $   92,357      $  108,379        $   85,560
                                                       ============    ============      ============
</TABLE>


-------------

(1)      We ceased manufacturing most of these types of products at the end of
         fiscal 2001.
(2)      Includes the TFEL display products sold by Lite Array.
(3)      Includes environmental care products and accessories for each of our
         product categories.

         Kitchen appliances. We began manufacturing kitchen appliances in 1992,
and we had focused much of our ODM design and development efforts in this area
over the last ten years. We manufacture a broad line of kitchen appliances,
including blenders, breadmakers, coffeemakers, deep fryers, electric knives,
espresso machines,

                                       12

<PAGE>

food choppers, food processors, food steamers, ice cream makers, indoor grills
and rice cookers. Kitchen appliances represented 65.6%, 53.9% and 42.2% of our
net sales in fiscal 2000, 2001 and 2002, respectively.

         During 2001, a number of changes occurred in the kitchen appliance
business that convinced us that, the market for many of the kitchen products we
manufacture had changed and that such changes would cease to reward us for
innovation and development work with respect to these products. Accordingly, we
have since decided to concentrate our efforts on manufacturing a smaller number
of kitchen appliance products with respect to which innovation (particularly
with respect to healthy cooking) is still important and gradually cease
manufacturing other kitchen appliance products. Our most significant reduction
in manufacturing has been in breadmakers, where retail prices on these products
have dropped from $200 to $30 per unit in five years. In addition, the
bankruptcies of two of our former major customers, Sunbeam Corporation and
Moulinex S.A., the consolidation in the industry and the continued insistence by
mass merchandisers for lower-priced appliance products has led us to accelerate
our diversification strategy and reduce our development efforts of most kitchen
appliance products.

         Personal, beauty and health care products. We originally started
producing personal, beauty and health care products in 1969, primarily as a
contract manufacturer. Such products included a variety of curling irons, hair
crimpers, hair dryers, hair setters, hot-air brushes and make-up mirrors. We
decided to exit this product category at the end of fiscal 2001 due to the
eroding profit margins caused by dramatic price erosion. We will, however,
continue to manufacture certain products of the personal, beauty and health care
product line for one long-standing customer. We believe that sales to this
customer will not be material. Personal, beauty and health care products
represented 9.2%, 4.1% and 3.0% of our net sales in fiscal 2000, 2001 and 2002,
respectively.

         Garment care products. We began manufacturing garment care products in
1985. Our garment care products include a variety of steam and dry irons and
clothes steam brushes. Garment care products represented 15.7%, 11.1% and 7.6%
of our net sales in fiscal 2000, 2001 and 2002, respectively. The decrease in
sales in this product category in Europe has been significant, as we decided not
to reduce prices and further reduce our margins on these products.

         Travel products. Travel products we manufacture include travel steam
and dry irons, travel hair dryers, travel hair roller sets and voltage
convertors/adaptors. Travel products represented 4.9%, 4.5% and 1.5% of our net
sales in fiscal 2000, 2001 and 2002, respectively.

         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 2.5%,
24.8% and 43.5% of our net sales in fiscal 2000, 2001 and 2002, respectively. As
a contract manufacturer, our growth in this category has been principally driven
by our quality, testing systems and sophisticated electric motor production and
the fact that our tooling and injection molding machinery for large plastic
parts is already in place. We are now concentrating on introducing ODM floor
care products to the market in an effort to reduce our reliance on contract
manufacturing for such a significant portion of our business and increase our
profit margins.

Product Design and Development

         We dedicate significant resources to the development of new products
that may range from minor design changes in features of existing products to
innovative new products with significant new functions or features. In creating
new products, we concentrate on developing concepts, functions and features that
are not available in existing products, are simple to incorporate and can be
produced at a reasonable cost. We seek to reinforce the proprietary nature of
our products by obtaining patents when possible and retaining ownership of the
tooling required to manufacture them. We believe that the flexibility of our
design and manufacturing process allows us to introduce new products with
shorter development cycles than most of our customers could if they manufactured
these products themselves. In fiscal 1999, we established a testing facility
under the Client Interactive Program of Underwriters Laboratories Inc., or UL,
in order to achieve UL and Canadian UL certification of our products faster and
with less expense.

         We established our own design and development department in 1998. It is
currently comprised of 54 engineers and technical staff responsible for
conducting feasibility analyses of new product ideas, testing of new products,
detailed design and tooling engineering and overseeing the initial production
runs for these new products.

                                       13

<PAGE>

This is done in close collaboration with the sales and marketing department.
Together, both groups evaluate competitive products, monitor changes in consumer
buying behavior and plan new products or the improvement of existing products.
Since its inception, the product design and development team has contributed to
the development of over 200 products.

         Our design and development team guides products from conception through
manufacturing. A typical cycle for a product to be manufactured and sold to an
ODM customer is nine to 12 months from conception through design, tooling and
production. The typical cycle for contract manufacturing is eight to 10 months,
as the concept and design for the product is supplied by the customer. Contract
manufacturing customers generally bear the cost of retooling for our
manufacturing facility, while we absorb such costs in the ODM process. When
tooling is completed and the appropriate agency listing, such as UL or TUV
(Technischer Uberwachungs Verein, the European standard for safety) is obtained,
production begins.

         We employ industrial design, mechanical, electrical and electronic
engineers to design, develop and test our products. Employee, customer and
retailer feedback is used to verify the viability of potential new products and
product enhancements. Once targeted for possible production, product and
enhancement concepts are conveyed to industrial, and then mechanical, designers,
who use computerized design and other leading design and engineering
technologies. These engineering technologies include CAD systems, an advanced
3-D solid modeling system and state-of-the-art stereo lithography equipment to
design and engineer new products. We believe that these new technologies and
equipment have improved the speed and efficiency of the design process and the
quality of our finished products. Our expenditures for design and development of
products were approximately $2.0 million in fiscal 2000, $1.8 million in fiscal
2001 and $2.2 million in fiscal 2002. Our expenditures for design and
development in fiscal 2002 included approximately $172,000 for Lite Array.

Manufacturing

         We maintain one facility in China located in Dongguan, Guangdong
province, which is a self-contained 1.85 million square foot
vertically-integrated manufacturing complex. Vertical integration enables us to
manufacture high-quality products at a low cost, emphasize quality control and
provide the flexibility in the manufacturing process necessary to better service
our customers' needs. We have made a significant investment, and continue to
invest, in machinery for creating the tooling and components used in the
manufacturing process. This machinery, along with the use of inexpensive labor,
enables us to efficiently produce 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, switches, circuit
boards, deep-draw breadmaker buckets and spray coatings at our factory facility.
We established a new die-casting facility during fiscal 2001. We sub-contract
certain components when they can be bought from other suppliers at lower prices,
if we do not have the specialized machinery to produce the component or when we
can more efficiently allocate our production capacity to other components.
Currently, we sub-contract components such as phenolic iron skirts and indoor
grill bases, as well as various small moldings to various suppliers. We do not
have any agreement with these suppliers and order the components as needed using
purchase orders. Although three of the component suppliers are currently the
sole source of the components they supply, we do not consider any of these
suppliers to be material to our business as there are numerous alternate
suppliers of equivalent quality. We do not generally depend on other
manufacturers to provide key parts or accessories.

         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. The relation of
actual shipments to forecasted orders is based on industry custom rather than on
binding agreements, 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.

         The seasonal nature of our business requires increased production in
the second and third quarters of each fiscal year (June through December) in
order to meet the demand for holiday sales. Since our physical space of 1.85
million square feet is less than fully utilized, excess capacity is available to
meet our requirements during peak production periods. In addition, the
utilization of manufacturing capacity declined significantly in the second half
of fiscal 2002 as a result of lower demand for our products and as a
consequence, we reduced our workforce by approximately one-third. As specialized
skills are not required for our manufacturing workforce and there is an ample
supply of labor in China, we believe that we will be able to acquire the
necessary labor when product demand picks up.

                                       14

<PAGE>

         We ship our products primarily 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 our 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.

         A subsidiary of ours, Lite Array, operates a joint venture in Jiangmen,
China to produce 1/4 VGA or smaller monochrome TFEL displays. As we had
explained under "Item 4.B--Business Overview," Global Lite Array's board of
directors decided to discontinue production of TFEL displays and cease funding
the joint venture in China as of September 30, 2002. A presentation was made
regarding this matter to our board of directors on June 30, 2002 and a decision
was made to write off the value of Lite Array's investment in the joint venture,
the goodwill associated with the TFEL display business and certain TFEL
production equipment owned by us.

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 checked by
our quality control personnel. During the production stage, our quality control
personnel check all work-in-process at several points in the production process.
We are able to assure the reliability and consistent performance of our products
by testing both individual components and the fully-assembled finished product.
We provide access to our Dongguan, China manufacturing facility for
representatives of our major customers to permit 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 9002 for the manufacture of electrical household appliances. Our receipt of
ISO 9002 certification demonstrates that our manufacturing, installation and
servicing of products have met specified requirements.

         We provide a 12-month limited warranty for limited manufacturing
defects to certain of our customers and carry a product liability insurance
policy that provides for other warranties. No warranty is given for defective
products for up to 2.0% of the number of products sold to each customer. Over
the 2.0% threshold, we warrant only manufacturing defects and, if there is such
a defect, we will replace the items or give the customer a credit towards the
purchase of future goods. To date, claims under our warranty program have been
minimal.

Suppliers

         We obtain over 6,000 different component parts from more than 280 major
suppliers. We are not dependent upon any single supplier for any key component.
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 in other countries,
such as 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 where finished products are manufactured and assembled.
Transactions with our suppliers are based on purchase orders issued by us from
time to time and, except for these purchase orders, we have no 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. See "Product
Design and Development." Many of the raw materials used in our products, such as
plastics, are purchased outside China and are subject to any applicable duties
on international trade. See "Foreign Issuer Considerations."

         We are dependent upon outside suppliers for all of our raw material
needs, including plastic resins. 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. 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 90-day supply. In the
past, we have had limited ability to increase product

                                       15

<PAGE>


pricing in order to respond to plastic resin price increases. Since plastic
resin is a by-product of petroleum, the price is subject to many factors, such
as the international supply and demand and political stability 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 price increases on to
our customers.


         We work closely with our customers and suppliers in order to minimize
the amount of inventory on hand. We are currently in the process of improving
our automated inventory maintenance and control system. 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 the required supplies. We have not experienced any difficulty in
obtaining component parts.

Major Customers


         Sales to seven major customers, Royal Appliance Manufacturing Company
(which sells under the brand name Dirt Devil (R)), Morphy Richards Limited
(which sells under the brand name Morphy Richard(R)), Global Marketing Corp.
(which sells primarily under the brand name Gevalia(R)), Hamilton
Beach/Proctor-Silex, Helen of Troy Limited (which sells under the brand names
Vidal Sassoon(R) and Revlon(R)), Moulinex S.A. (which sells under the brand
names Moulinex(R) and Krups(R)) and Sunbeam Corporation (which also sells under
the brand names Oster(R) and Mr. Coffee(R)), accounted for 51.7%, 73.2% and
79.0% of our net sales during fiscal 2000, 2001 and 2002, respectively. During
each of these periods, sales to the following customers accounted for more than
10% of our total net sales:

                                             Fiscal Year Ended March 31,
                                      ------------------------------------------
                                          2000           2001           2002
                                      -------------   ------------ -------------
     Royal Appliance Mfg. Co. ........        -           22.9%         42.2%
     Morphy Richards Limited .........     14.4           16.9          12.2
     Moulinex S.A. ...................     12.9           13.7           2.7
     Global Marketing Corp ...........      5.0            7.9          13.8
     Sunbeam Corporation(1) ..........     16.6            5.6           2.7

     ------------

     (1) Includes sales to Signature Brands USA, Inc., which Sunbeam acquired in
         1998.

         The increase in percentage sales to major customers from 73.2% in
fiscal 2001 to 79.0% in fiscal 2002 is attributed to increased sales of floor
care products in fiscal 2002 to Royal Appliance Manufacturing Company. Sales to
this customer were $36.1 million, or 42.2% of net sales, in fiscal 2002 compared
to approximately $24.9 million, or 22.9% of net sales, in fiscal 2001. We
granted extended payment terms to Royal Appliance in an effort to attract and
retain their business. We anticipate that sales of floor care products to Royal
Appliance will be a significant revenue driver in the near future until our
expanded development efforts generate revenue in other areas. There is no
assurance, however, that Royal Appliance will continue to purchase floor care
products from us. Also, in the long term, sales to Royal Appliance may decline
as a percentage of net sales as product innovation becomes less important with
respect to their floor care product business.

         On September 7, 2001, Moulinex announced that it was seeking protection
from its creditors with the Naterre Commercial Court in France. Subsequently,
the assets of Moulinex were acquired by Groupe SEB of Lyons, France. Groupe SEB
has sufficient available capacity in its own factories to absorb the majority of
Moulinex's product supply requirements, which has resulted in the loss of sales
to Moulinex being more pronounced than we had earlier estimated, as we had
initially believed we would still make future sales to this customer. Instead,
sales to this customer declined $12.6 million in fiscal 2002 to $2.3 million and
Moulinex will cease to be a customer of ours going forward. As of May 2002, we
had successfully recovered 100% of accounts receivable due from Moulinex.


         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 between four and six major customers during each fiscal year. While
we may enter into contracts with general terms for the purchase of products with
certain of our major

                                       16

<PAGE>

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.

Marketing

         Our worldwide sales and marketing activities are managed by a team of
executives based in Hong Kong and Macau who maintain frequent contact with our
customers. We maintain relationships with our customers by employing senior
marketing personnel who understand the culture of our customers' local market
and share the same language with the employees of our customers who make
purchasing decisions. For a breakdown by geographical markets of our net sales
during the past three fiscal years, see Note 27(a) of Notes to Consolidated
Financial Statements.

         Our marketing programs are designed to create an awareness of our
comprehensive selection of innovative, high-quality and cost-effective
merchandise. Generally, we emphasize personal contact with our customers and
potential customers in our facilities and frequently at their home base. 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 the company
maintaining acceptable profit margins. In that vein, replacing old products with
new products at the same retail price is a winning strategy for retailers and
brand marketers. It is our responsibility to see that this is achieved without
diminishing our margins.

         One of the most important parts of the marketing process is
communication with the customer. The marketing group maintains contact with the
customer after the sale is made, serving as their liaison with us for the
manufacturing and delivery process. These relationships and methods have been
cultivated over years and we believe that we have a stable relationship with our
major customers. Many of our customers, including most of our largest customers,
have purchased goods from us for many years. Long-standing relationships,
innovation, quality and our reputation in the industry remain the essential
elements of our marketing program.

Seasonality

         Our business is seasonal, with a greater portion of our sales and
earnings generated in the second and third quarters of each fiscal year (June
through December). These fluctuations are based on our customers' increased
stocking of our products in anticipation of heavy demand during the Christmas
holiday season. In addition, our sales can vary from quarter to quarter based on
the timing of the introduction of new products and may be affected in the future
by the timing of any acquisition that we complete. We believe that quarterly
comparisons of the results of operations during any fiscal year are not
necessarily meaningful and that results for any one fiscal quarter should not be
relied upon as an indication of future performance.

Competition

         We believe that the markets for our products are mature and highly
competitive and that competition is based upon several factors, including price,
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. For
ODM products, competition is based on uniqueness of features, combination of
features offered and brand name, as well as unit price, product quality and
availability and service. Competition for contract manufacturing products is
based primarily on unit price, product quality and availability and service. We
believe that we compete favorably in each of these areas, especially if the
product is relatively sophisticated to manufacture. We believe that we possess a
competitive advantage in our ability to sell innovative products based on our
proven design and development capabilities and our ability to introduce them at
competitive prices. 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.

                                       17

<PAGE>

Intellectual Property Rights

         We hold over 53 patents, of which three were approved in fiscal 2002.
We also have over five patent applications pending for approval. Our patents are
registered in various jurisdictions, including the United States, the United
Kingdom 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. After
considering all the facts known to us and based on the advice of legal counsel,
however, we do not believe that any currently pending actions will have such a
material adverse effect and the likelihood of a negative effect on our operating
results is remote.

         Certain of the our agreements with our ODM customers may include
indemnification provisions against patent infringement claims relating to the
our ODM products. Along with a customer, we are currently defending a patent
infringement claim relating to our deep fryers, a product line which represented
9.2%, 2.0% and 0.5% of our net sales in fiscal 2000, 2001 and 2002,
respectively. See "Item 8.A--Financial Information--Legal Proceedings." No
assurance can be given that this current infringement claim will be resolved in
favor of us or the customer or that other parties will not assert infringement
claims against us in the future.


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 Hong Kong, China 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 World Trade
Organization after 15 years of negotiations and was granted the full trading
rights of a WTO member country.

         China is 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

                                       18

<PAGE>

any decision not to continue to support the economic reform program that
commenced in the late 1970's 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. China's economic
reform plan was designed to bring in foreign investment capital and
technological skills. The result has been a move towards a more mixed economy
and away from the previous centrally-planned economy. The process of devolving
responsibility for all aspects of enterprise to local management and authorities
continues even though the system of socialism with Chinese characteristics
involves considerable influence by the central government on production and
marketing.

         All of our products are currently manufactured in China and
approximately 95% of the net book value of our total fixed assets are located in
China. We are a party to agreements with certain agencies of the government of
China and we sell products to entities based principally in the United States
and Europe. 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.

         China offers us low overhead and competitive labor rates. The location
of our factory in Dongguan, China provides us with the ability to manage factory
operations from Hong Kong and facilitates transportation of our products to
markets outside China. Political developments in China could have a material
adverse effect on our business and assets. 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.

         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 government 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 devaluations, 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 expenses 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

                                       19

<PAGE>

         .    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,
including plans for expanding the Dongguan factory.

         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. 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.

         Conditions in Hong Kong. Hong Kong, the jurisdiction of incorporation
of three of our subsidiaries and the location of our headquarters, was restored
to China on July 1, 1997. We conduct sales, 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 subsidiaries, was restored to China on December 19, 1999. We established an
office in Macau on November 8, 2001. We conduct sales, marketing, administration
and other activities in Macau.

                                       20

<PAGE>

         Macau was founded by the Portuguese in 1557. It lies only 40 miles west
of Hong Kong and has a population of approximately of 500,000. Portugal signed
the Sino-Portuguese Joint Declaration with China on April 13, 1987 providing the
return to Chinese administration. In the Sino-Portuguese Joint Declaration,
China has promised to respect Macau's existing social and economic systems and
lifestyle for 50 years. Similar to Hong Kong, Macau has been set up as a SAR
with its own legal and economic systems. Notwithstanding the provision of these
international agreement, there can be no assurance as to the continual stability
of political, economic or commercial condition in Macau.

C.       Organizational structure.

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


<TABLE>
<CAPTION>
                         Name                                      Country                Ownership
-----------------------------------------------------  --------------------------------  ------------
<S>                                                    <C>                               <C>
Wing Shing Products (BVI) Company Limited............  British Virgin Islands               100.0%
Wing Shing Overseas Limited..........................  British Virgin Islands               100.0
Pentalpha Enterprises Limited........................  Hong Kong                            100.0
Pentalpha Hong Kong Limited..........................  Hong Kong                            100.0
Kwong Lee Shun Trading Company Limited...............  Hong Kong                            100.0
Dongguan Wing Shing Electrical Products Factory
    Company Limited..................................  China                                100.0
Global-Tech USA, Inc.................................  United States                        100.0
Pentalpha Macau Commercial Offshore Limited..........  Macau                                100.0
Global Lite Array (BVI) Limited......................  British Virgin Islands                76.8
Lite Array (BVI) Company Limited.....................  British Virgin Islands                76.8
Lite Array, Inc......................................  United States                         76.8
</TABLE>



         Global-Tech Appliances Inc. is a holding company of the above
subsidiaries. It does not engage in daily business operations. Wing Shing
Products (BVI) Company Limited is primarily engaged in selling finished goods to
our customers. Wing Shing Overseas Limited, Pentalpha Enterprises Limited and
Pentalpha Hong Kong Limited are primarily engaged in buying raw materials and
selling finished goods to our customers. Kwong Lee Shun Trading Company Limited
is a service company that provides management services to us. Dongguan Wing
Shing Electrical Products Factory Company limited is our manufacturing facility
located in Dongguan, China. Global-Tech USA, Inc. provides investor relations
and consulting services to us. Pentalpha Macau Commercial Offshore Limited is a
newly incorporated subsidiary primarily engaged in selling finished goods to our
customers. Global Lite Array (BVI) Limited is an investment holding company.
Lite Array (BVI) Company Limited is a newly incorporated subsidiary of Global
Lite Array (BVI) Limited primarily engaged in buying raw materials and selling
organic and inorganic solid state flat-panel displays to our customers. Lite
Array, Inc. is primarily engaged in research and development of organic and
inorganic solid state flat-panel displays.


D.       Property, plant and equipment.

China

         Our manufacturing facility is located in Dongguan, China, which has
been expanded to 1.85 million square feet. The manufacturing complex includes 49
buildings, of which 16 buildings are dormitories with accommodations for up to
4,500 employees and cafeterias and recreational areas. The remaining buildings
house manufacturing, quality control, warehouse, 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.

         The land use rights lease for the Dongguan facility between us and the
People's Government of Qingxi Town, Dongguan City, Guangdong Province is for a
term of 50 years beginning August 7, 1993 and ending August 7, 2043. As of March
31, 2002, we had paid $2.0 million for the entire term of the lease and owed
approximately $275,000 in transfer fees with respect to this transaction. We
will not receive a formal grant of lease rights until the transfer fees are paid
and the appropriate documents are 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.

                                       21

<PAGE>

We have no present intention to pursue either of these alternatives. Upon
expiration of the 50-year lease term of the land, we have the right to extend
the lease for 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.

         We believe that our administrative office space in Hong Kong, Shenzhen,
China and Macau will be adequate for the operation of our business for the
foreseeable future. We believe that with expansion of our manufacturing facility
in Dongguan, we have sufficient manufacturing capabilities for the next several
years. This factory is currently utilized at less than full capacity. We
anticipate that further expanding and diversifying our floor care product line
will increase utilization of the Donnguan facility's existing capacity which
will require us to fit out more of the infrastructure and purchase additional
equipment. The increases in leasehold improvements and plant and machinery
reflected on our balance sheet as of March 31, 2002 relate to the infrastructure
of the Dongguan facility.

         A subsidiary of ours, Lite Array, operates a joint venture in Jiangmen,
China to produce 1/4 VGA or smaller monochrome TFEL displays. As we had
explained under "Item 4.B-- Business Overview," Global Life Array's board of
directors decided to discontinue production of TFEL displays and cease funding
the joint venture in China as of September 30, 2002. A presentation was made
regarding this matter to our board of directors on June 30, 2002 and a decision
was made to write off the value of Lite Array's investment in the joint venture,
the goodwill associated with the TFEL display business and certain TFEL
production equipment owned by us.

Hong Kong


         On April 17, 2002, we renewed our lease with our affiliate Wing Shing
Products Company Ltd. (see "Item 7.B--Related Party Transactions"), for office
space located in the Kin Teck Industrial Building in Aberdeen, Hong Kong. From
inception to September 10, 2002, we had operated our administrative offices and
sales and marketing, purchasing, accounting and finance, product design and
development and limited warehousing out of this office space. Pursuant to the
lease, we had paid monthly rent of approximately $14,924. The lease will expire
on March 31, 2005.

         On July 29, 2002, we entered into a lease of 77 months for office space
located in 21/F., Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong.
The total office space is approximately 13,961 square feet. We relocated our
administrative office to this space effective September 10, 2002 and ceased
paying rent on the office portion of the lease in the Kin Teck Industrial
Building effective September 30, 2002. Annual rent for this new office space is
approximately $248,000. Our Hong Kong staff also operates from time to time out
of our sales office in Macau and our engineering office in Shenzhen, China.


Item 5.  Operating and Financial Review and Prospects.

A.       Operating results.


<TABLE>
<CAPTION>
                                                                          Fiscal Year Ended March 31,
                                                                  ---------------------------------------------
                                                                     2000              2001             2002
                                                                  ----------        ----------       ----------
<S>                                                               <C>               <C>              <C>
Net sales....................................................        100.0%            100.0%           100.0%
Cost of goods sold...........................................         76.5              78.9             76.6
                                                                  --------          --------         --------
Gross profit.................................................         23.5              21.1             23.4
Selling, general administrative expenses.....................         17.3              14.7             19.1
Legal and professional fees on potential acquisitions........          0.5                --               --
Write-off of inventory and tooling...........................           --               4.6               --
Loss on cessation of a product line..........................           --               2.3               --
Impairment of property, plant and equipment..................           --                --              0.3
Share of loss in a joint venture.............................           --                --              6.1
Amortization and write-off of goodwill.......................           --                --              4.6
                                                                  --------          --------         --------
Operating income (loss)......................................          5.7              (0.5)            (6.7)
Interest expense.............................................          0.2               0.2              0.1
Interest income..............................................          3.7               3.4              2.3
Other income, net............................................          0.5               0.4              0.8
                                                                  --------          --------         --------
Income (loss) before income taxes............................          9.7               3.1             (3.7)
Provision for income taxes...................................          0.2               0.5              1.6
                                                                  --------          --------         --------
Income (loss) before minority interests......................          9.5               2.6             (5.3)
Minority interests...........................................           --                --              1.8
                                                                  --------          --------         --------
Net income (loss)............................................          9.5               2.6             (3.5)
                                                                  ========          ========         ========
</TABLE>


                                       22

<PAGE>

Fiscal Year Ended March 31, 2002 Compared with Fiscal Year Ended March 31, 2001

         Net sales. Our net sales consist of our gross amounts invoiced less
discounts and returns. Net sales in fiscal 2002 decreased approximately 21% to
$85.6 million from $108.4 million in fiscal 2001. There were three primary
reasons for the decline. In fiscal 2001, we decided to exit the personal, beauty
and health care product category and ceased manufacturing certain kitchen
appliances primarily due to our competitors' pricing pressure. It is estimated
these actions reduced fiscal 2002 net sales by approximately $15.0 million. In
fiscal 2002, one of our major customers, Moulinex S.A., entered bankruptcy and
was subsequently acquired by Groupe SEB. We suffered a $12.0 million loss of
annual business as a result of Moulinex's reorganization. Our loss of sales to
Moulinex has been more pronounced than we had earlier estimated due to the fact
that the company that subsequently acquired Moulinex, Groupe SEB, has its own
factories in Europe, America and the Far East that can meet the majority of
Moulinex's product supply requirements. Consequently, we have had no opportunity
to make future sales to the reorganized entity. As of May 2002, we had
successfully recovered 100% of the accounts receivable due from Moulinex. In
addition, we experienced a loss of business in Europe as the Euro weakened in
relation to the U.S. dollar and we maintained our policy of selling in U.S.
dollars. Net sales of Lite Array display units were approximately $195,000.

         Due to the decrease as a percentage of net sales of ODM products, which
generally have higher profit margins, it became even more important for us in
fiscal 2002 to develop new products and attract new customers. This decrease in
ODM sales as a percentage of net sales is a trend that is expected to continue
into fiscal 2003. In the aggregate, contract manufacturing sales of floor care
products were $37.2 million, or 43.5% of net sales, in fiscal 2002. We
anticipate that sales of floor care products will continue to be a significant
revenue driver for us and will increase as a percentage of net sales in the
short term until this business suffers from the same over-capacity issues that
are plaguing other small household appliance manufacturers. Despite the impact
of the recession in North America, sales of floor care products increased
approximately 38.3% in fiscal 2002 over fiscal 2001 and now this product
category is as large as our remaining kitchen appliance business, which was
$36.1 million, or 42.2% of net sales, in fiscal 2002. There is no assurance,
however, that our major floor care customer will continue to purchase floor care
products from us. Also, in the long term, sales of floor care products may
decline as a percentage of net sales as innovation becomes less important with
respect to these products. While we have managed to successfully secure new
customers for our floor care products during the first quarter of fiscal 2003,
overall, however, we are currently experiencing a slowdown in orders for kitchen
appliances and other products and are noticing an acceleration in price cutting
on these products at the retail level. These trends are expected to affect our
net sales throughout the balance of fiscal 2003.

         We anticipate reallocating all of Lite Array's resources in fiscal 2003
to accelerate our OLED display development program. We intend initially to build
a prototype line in our Dongguan facility and produce a prototype to validate
the production process and achieve market acceptances before further expanding
our production capacity.

         Net sales are comprised primarily of sales in our four major product
categories: kitchen appliances; garment care products; travel products and
accessories; and floor care products. Sales in each major category for fiscal
2002 as compared to fiscal 2001 were as follows:

         .  sales of kitchen appliances decreased to $36.1 million, or 42.2% of
            net sales, from $58.4 million, or 53.9% of net sales, primarily due
            to the decrease in sales of breadmakers, food steamers, indoor
            grills, deep fryers and food processors;

         .  sales of garment care products decreased to $6.5 million, or 7.6% of
            net sales, from $12.0 million, or 11.1% of net sales, primarily due
            to the decrease in sales of steam irons;

         .  sales of travel products and accessories decreased to $1.3 million,
            or 1.5% of net sales, from $4.9 million, or 4.5% of net sales,
            primarily due to the decrease in sales of travel irons; and

                                       23

<PAGE>

         .  floor care products sales increased to $37.2 million, or 43.5% of
            net sales, from $26.9 million, or 24.8% of net sales, primarily due
            to the increase in sales of existing floor care products and a new
            floor care product model contracted for by a customer.


         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. Generally, gross profit
margins are higher for our ODM products compared to contract manufactured
products. We are dependent upon outside suppliers for all of our raw material
needs, including plastic resin, and we are subject to price increases in these
raw materials. Plastic resin prices may fluctuate as a result of natural gas and
crude oil prices. The bankruptcies of Sunbeam and Moulinex, the consolidation in
the industry and the continued insistence on lower prices by mass merchandisers
have deterred us from passing the increase in costs of raw materials on to our
customers. 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 price increases
on to our customers. Gross profit in fiscal 2002 was $20.1 million, or 23.5% of
net sales, as compared to $22.8 million, or 21.1% of net sales, in fiscal 2001.
While efficiencies were realized in manufacturing, the primary reason for the
lower cost of sales was management's decision to exit lower-margin businesses in
certain personal care and kitchen appliance products. In addition, control of
overhead expenses and the impact of lower capital expenditures offset the impact
of a higher overhead absorption rate. It is anticipated that the cost structure
in our Dongguan factory can be maintained at current rates even if production
volume increases significantly due to the fact that the factory is currently
operating at less than full capacity and because of the equipment put in place
over the previous three years.


         Selling, general and administrative expenses. The primary components of
our selling, general and administrative, or SG&A, expenses include expenses
related to advertising and promotion, product design and development,
transportation of finished goods, salaries for marketing and administrative
personnel, professional fees and utilities. SG&A expenses in fiscal 2002 were
$16.4 million, or 19.1% of net sales, as compared to $15.9 million, or 14.7% of
net sales, in fiscal 2001. SG&A expenses increased by 3.0% from fiscal 2001
primarily due to the $2.2 million in expenses incurred by Lite Array's
operations. Concerted efforts in controlling costs resulted in a 10% reduction
in SG&A expenses from fiscal 2001 in the appliance business and management is
continuing to take steps to maintain SG&A expenses at 15% of sales, which we
believe to be an appropriate rate for this business. During fiscal 2002, we
restructured our research and development department to improve
cost-effectiveness and senior management, including the Chairman and Chief
Executive Officer, reduced their monthly remuneration in efforts to control SG&A
expenses. The number of employees employed by us in fiscal 2002 fell
significantly compared to fiscal 2001, which resulted in reduced expenses for
salaries and wages during fiscal 2002.

         The primary components of design and development expenses included in
SG&A expenses include expenses related to sample design, patent fees, testing
charges, inspection fees and salaries for engineers and designers. Development
expenses were $1.8 million and $2.2 million in fiscal 2001 and 2002,
respectively.

         Write-off of inventory and tooling. In the fourth quarter of fiscal
2001, we determined that a number of products specifically dedicated for sale to
Sunbeam Corporation and certain other customers would no longer be offered for
sale to, or be purchased by, these customers primarily due to reorganizations by
these customers. Accordingly, approximately $5.0 million of specific tooling and
dedicated raw material inventory (primarily packaging and unique components) for
these products was written-off.

         Loss on cessation of a product line. We decided during fiscal 2001 to
cease manufacturing our personal, beauty and health care product category that
had become totally commoditized in recent years, and to reallocate our resources
to other product categories, including the Lite Array flat-panel display
business. As a result, we incurred a loss in respect of inventory associated
with the personal, beauty and health care product category in the amount of
approximately $2.5 million.

         Impairment of property, plant and equipment. The impairment of
property, plant and equipment resulted from our decision to write off the
production assets associated with Lite Array's TFEL display business due largely
to the declining market for TFEL displays. A small portion of such production
assets are owned by Lite Array as compared to its manufacturing joint venture
and accordingly are reflected separately on our financial statements.


         Share of loss in joint venture. The share of loss in joint venture in
fiscal 2002 was approximately $5.2 million. The loss represented, through Lite
Array, our share of costs of operating a production


                                       24

<PAGE>


facility for TFEL displays in Jiangmen, China. As part of an analysis of the
potential of the TFEL display business and the joint venture, we determined that
certain fixed assets had no further useful life and accordingly wrote them down
to disposal value. Going forward, Lite Array plans to concentrate on OLED
displays, which will be produced by different equipment elsewhere. We expect the
financial impact from our Lite Array operation to be reduced to just OLED
display research and development in fiscal 2003.

         Amortization and write-off of goodwill. As a result of our analysis of
the future of Lite Array's TFEL display business, we determined that the
unamortized goodwill arising from the acquisition of Lite Array of $3.6 million
was permanently impaired and accordingly was written-off. From the time of
acquisition, we had amortized goodwill over 10 years. It was management's
subsequent decision to de-emphasize production of TFEL displays that led to the
impairment of goodwill at year end.

         Also at the time of Lite Array's acquisition, the fair market value of
the company's license for small molecule PM-OLED display technology was recorded
as an intangible asset of $4.9 million. This asset is being amortized over eight
years and is not currently impaired. Valuation of this intangible asset will be
performed annually. There is no assurance that there will not be additional
impairment in the future if our OLED display plans are not realized.

         Operating income (loss). The operating loss in fiscal 2002 increased to
$5.7 million compared to $0.6 million in fiscal 2001. During fiscal 2002, the
impact of Lite Array on operating income included $2.2 million in SG&A expenses,
$0.3 million in impairment of property, plant and equipment, $5.2 million in
share of loss in joint venture, $0.3 million in amortization of goodwill and
$3.6 million in write-off of goodwill.

         Interest expense, interest income and other income, net. Interest
expense consists of interest on our short- and long-term bank credit facilities.
Interest expense was approximately $125,000 in fiscal 2002 as compared to
$269,000 in fiscal 2001. The decrease in interest expense was due to the pay off
in fiscal 2002 of a loan for injection machines acquired during fiscal 2001 and
a lower effective rate of interest on our loan borrowings. Interest income in
fiscal 2002 declined $1.7 million as a result of a decline in interest rates on
cash invested by the company. Other income, net includes tooling income and
non-recurring income. Other income, net was approximately $647,000 in fiscal
2002 as compared to $448,000 in fiscal 2001. The increase in fiscal 2002 was due
to higher tooling income.

         Income (loss) before taxes. Loss before taxes was $3.2 million in
fiscal 2002 compared to income before taxes of $3.3 million in fiscal 2001.

         Income tax. We are not subject to taxation in the British Virgin
Islands in accordance with British Virgin Island tax regulations. We are subject
to income taxation in each jurisdiction in which our subsidiaries do business.
Certain of our profits accrue in areas of China, where the effective tax rate is
27.0%, and in Hong Kong, where the corporate tax rate is 16.0%. In Hong Kong,
estimated taxes for each fiscal year are paid during the fiscal year based on
our prior year's earnings derived from operations in Hong Kong. An adjustment in
the form of additional taxes paid or refunds to us is then made in the following
fiscal year based on actual earnings. Therefore, in each fiscal year, our
statement of income reflects a provision for estimated taxes for the current
fiscal year and adjustments for over- or under-provisions with respect to the
prior fiscal year. Due to our activities in a special economic region of China,
our subsidiary in China is exempt from income taxation for the first two years
in which it records profits to the extent the profits are not offset by losses
in a prior year, which event has not yet occurred. We have a 50.0% tax reduction
for the next three years thereafter. Losses in any one-year can only be used to
offset future income for a period of five years. 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 of up to
55.0%. We do not believe

                                       25

<PAGE>

that our current method of operations would subject us to material U.S. taxes
because we should not be considered to have significant income effectively
connected with a trade or business in the United States.

         We had taxable income in Hong Kong in both fiscal 2001 and 2002. The
financial statements include provisions for Hong Kong profit tax of
approximately $513,000 and $1.4 million in fiscal 2001 and 2002, respectively.
The provision for fiscal 2002 includes $849,000 in penalties, interest and taxes
on an insurance settlement we had received six years ago as a result of a flood
at our former factory. Our tax position was disputed by the Inland Revenue
Department of Hong Kong in their audit of certain subsidiaries for the period
1993-2001. We determined that a settlement was appropriate and paid a total of
$1.2 million to settle outstanding issues with the Inland Revenue Department in
May 2002. We do not believe that our current method of income is effectively
connected with a trade or business in the United States. No income tax was
payable by us in China during this period because our Chinese subsidiary had
accumulated tax losses during this period. Notwithstanding the recent tax audit,
we continue to believe that our provision for taxes and tax accruals is
adequate.

         Minority interests. Lite Array's minority shareholder's share of the
loss in Lite Array has been credited to the income statement up to the total
minority interest. All further losses incurred at Lite Array will accrue to us
since the minority interest was exhausted in fiscal 2002. Subsequent to
September 30, 2002, we plan to continue to finance the OLED technology research
and development at Lite Array at a rate of approximately $500,000 per quarter.

         Net income (loss). In fiscal 2002, net loss was approximately $3.0
million as compared to a net income of $2.8 million in fiscal 2001.


Fiscal Year Ended March 31, 2001 Compared with Fiscal Year Ended March 31, 2000

         Net sales. Net sales in fiscal 2001 increased approximately 17.4% to
$108.4 million from $92.4 million in fiscal 2000. The increase in net sales for
the fiscal year reflected our successful efforts in expanding our customer base
and increasing sales of new products. In this regard, new sales of vacuum
cleaners to Royal Appliance Mfg. Co. and grind-and-brew coffee makers were
approximately $24.9 million and $4.3 million, respectively, in fiscal 2001.
These sales offset lower unit sales of personal, beauty and healthcare products
and kitchen appliances.

         We exited the personal, beauty and health care product category at the
end of fiscal 2001. Sales in each major category for fiscal 2001 as compared to
fiscal 2000 were as follows:

         .  sales of kitchen appliances decreased to $58.4 million, or 53.9% of
            net sales, from $60.6 million, or 65.6% of net sales, primarily due
            to lower deep fryer and food steamer sales;

         .  sales of personal, beauty and health care products decreased to $4.4
            million, or 4.1% of net sales, from $8.5 million, or 9.2% of net
            sales, primarily due to lower hair dryer and hair setter sales;

         .  sales of garment care products decreased to $11.9 million, or 11.1%
            of net sales, from $14.5 million, or 15.7% of net sales, primarily
            due to lower steam irons sales;


         .  sales of travel products and accessories increased to $4.9 million,
            or 4.5% of net sales, from $4.6 million, or 4.9% of net sales; and


         .  floor care products sales increased to $26.9 million, or 24.8% of
            net sales, from $2.3 million, or 2.5% of net sales.

         Gross profit. Gross profit in fiscal 2001 was $22.8 million, or 21.1%
of net sales, as compared to $21.7 million, or 23.5% of net sales, in fiscal
2000. Gross profit as a percentage of net sales decreased in fiscal 2001
mainly due to higher charges for depreciation, fuel and repair and
maintenance, as well as for certain materials. The

                                       26

<PAGE>

consolidation among retailers and our branded customers resulted in our having
to bear all of the significant price increases in plastic and packaging that
occurred in fiscal 2001.

         Selling, general and administrative expenses. SG&A expenses in fiscal
2001 were $15.9 million, or 14.7% of net sales, as compared to $15.9 million, or
17.3% of net sales, in fiscal 2000. During fiscal 2001, we incurred higher
transportation expenses due to higher sales levels, which were offset by a
decrease in certain administrative expenses. SG&A expenses as a percentage of
net sales declined in fiscal 2001 due to our spreading our fixed costs over a
higher level of net sales.

         Development expenses were $2.0 million and $1.8 million in fiscal 2000
and 2001, respectively.

         Write-off of inventory and tooling. In the fourth quarter of fiscal
2001, we determined that a number of products specifically dedicated for sale to
Sunbeam Corporation and certain other customers would no longer be offered for
sale to, or be purchased by, these customers primarily due to reorganizations by
these customers. Accordingly, approximately $5.0 million of specific tooling and
dedicated raw material inventory (primarily packaging and unique components) for
these products was written-off.

         Loss on cessation of a product line. We decided during fiscal 2001 to
cease manufacturing our personal, beauty and health care product category that
had become totally commoditized in recent years, and to reallocate our resources
to other product categories, including the Lite Array flat-panel display
business. As a result, we incurred a loss in respect of inventory associated
with the personal, beauty and health care product category in the amount of
approximately $2.5 million.

         Interest expense, interest income and other income, net. Interest
expense was approximately $269,000 in fiscal 2001 as compared to $217,000 in
fiscal 2000. The increase in interest expense was due to bank loan interest on a
new loan for injection machines acquired during fiscal 2001. Interest income in
fiscal 2001 and 2000 were approximately $3.7 million and $3.5 million,
respectively. The increase in interest income in fiscal 2001 was primarily due
to better yields from investments in U.S. government securities. Other income,
net was approximately $450,000 in each fiscal year.

         Income tax. We had taxable income in Hong Kong in both fiscal 2000 and
2001. The financial statements include provisions for Hong Kong profit tax of
approximately $225,000 and $513,000 in fiscal 2000 and 2001, respectively. We do
not believe that our current method of income is effectively connected with a
trade or business in the United States. No income tax was payable by us in China
during this period because our Chinese subsidiary had accumulated tax losses
during this period.


                                       27

<PAGE>
Seasonality

         Our business is seasonal, with a greater portion of our sales and
earnings generated in the second and third quarters of each fiscal year (June
through December). These fluctuations are based on customers' increased stocking
of our products in anticipation of heavy demand during the Christmas holiday
season. In addition, our sales can vary from quarter to quarter based on the
timing of the introduction of new products and may be affected in the future by
the timing of any acquisition completed by us. We believe that quarterly
comparisons of the results of our operations during any fiscal year are not
necessarily meaningful and that results for any one fiscal quarter should not be
relied upon as an indication of future performance.

B.       Liquidity and capital resources.

         Our primary source of financing has been cash generated from operating
activities and borrowings under credit agreements with various banks. During
fiscal 2001 and 2002, we generated approximately $9.8 million and $4.1 million,
respectively, in cash from operating activities. Cash generated from operating
activities decreased in 2002 due primarily to losses incurred by our Lite Array
operations and lower returns on our invested cash.

         At March 31, 2002, accounts receivable were $12.3 million compared to
$9.4 million at March 31, 2001. Receivables at March 31, 2002 represented 62
days of sales compared to 33 days of sales at March 31, 2001. The number of days
of sales increased in fiscal 2002 primarily due to our extending payment term
for one of our largest customers, Royal Appliance. Sales to this customer
represented 42.2% of total net sales during fiscal 2002. We had extended the
payment terms for Royal Appliance in order to attract and retain its business
and we expect to continue to extend payment terms for this customer in fiscal
2003. At March 31, 2002, inventories were $9.6 million compared to $14.9 million
at March 31, 2001. Our inventories consist primarily of raw materials needed to
produce finished products. The decrease in inventories is primarily attributable
to the reduced level of business and better supply chain management.


         At March 31, 2002, accounts payable were approximately $6.2 million as
compared to $14.0 million at March 31, 2001. The decrease was mainly due to
decreased raw material requirements as a result of decreased sales in fiscal
2002. Working capital fell from $70.1 million at March 31, 2001 to $64.9 million
at March 31, 2002 due primarily to accruals related to Lite Array, an increase
in the provision for taxes and losses incurred during the fiscal year.


         In October 1998, we made a loan to a start-up U.S. corporation wholly
owned by the spouse of an executive of ours in the original principal amount of
$1.0 million, bearing interest at a fixed annual rate of 7.0% and payable in
quarterly installments of approximately $81,000 commencing October 28, 2003,
with any remaining balance due in full on October 28, 2008. As of March 31,
2002, accrued interest on the loan was approximately $273,000. We have reserved
fully against the interest due. As this company continues to be in a development
stage, there can be no assurance that the loan will be repaid on a timely basis,
if at all. See "Item 7.B--Related Party Transactions."

         In October 1999, we made a loan to a director for the purchase of a
residence. The loan is in the original principal amount of $460,000, bearing
interest at a fixed annual rate of 6.02%, and is secured by a mortgage on the
property. The loan is payable in six years with annual installments of
approximately $77,000 of principal together with interest on the unpaid
principal balance, commencing October 21, 2000. Payments on the loan will be
forgiven

                                       28

<PAGE>

in arrears, however, on each payment due date in consideration for the
director's continued service to us. See "Item 7.B--Related Party Transactions."

         Our aggregate capital expenditures during fiscal 2001 and 2002 were
$7.2 and $2.0 million, respectively. Capital expenditures decreased in fiscal
2002 primarily due to our existing physical plant and equipment being adequate
to support the current level of business. Our outstanding capital commitments as
of March 31, 2002 were approximately $935,000 primarily for the acquisition of
tooling and purchase of machinery and equipment. We expect to incur an aggregate
of approximately $1.4 million in capital expenses for expansion of the Dongguan
facility in fiscal 2003 to exploit our OLED display opportunity. We plan to
implement the initial phase of the expansion, involving building a prototype
assembly line incorporating one evaporator and using samples from this line to
determine whether there is sufficient market interest to support building a full
pilot line.

         We continue to finance our operations and capital expenditures
primarily from cash flow from operations and borrowings. Our long-term debt
consists of five term loans with an aggregate outstanding amount of $986,000 as
of March 31, 2002 (including the current portion of long-term debt), provided by
various banks to finance the purchase of machinery, equipment and motor
vehicles. These loans bear interest at rates per annum currently ranging from
2.75% to 8.5% and mature on various dates through the year 2004. All of such
loans are payable in monthly installments which were approximately $89,000 as of
March 31, 2002.

         Our revolving credit facilities were with Standard Chartered Bank,
Citibank, N.A. and Hongkong Bank with an aggregate facilities limit of
approximately $35.7 million as of March 31, 2002, bearing interest at floating
commercial bank lending rates in Hong Kong, which ranged from 7.4% to 14.0% per
annum as of March 31, 2002. The amounts payable each month on the revolving
credit facilities varies depending upon the amounts drawn at the time and were
approximately $68,000 in March 2002. Our outstanding borrowings vary according
to our seasonal working capital requirements. As of March 31, 2002, the amount
utilized under our bank facilities including letters of credit was $4.2 million.


         We anticipate that cash from operating activities should be adequate to
satisfy our capital requirements for 18 to 24 months. We have over the past
several months considered potential acquisitions of complimentary businesses.
Although we have not reached an agreement for such an acquisition, we plan to
continue to pursue selected acquisitions of complementary businesses. In the
event that we should consummate such an acquisition, our capital requirements
could increase.

         Pursuant to a resolution dated May 10, 2000, our board of directors
declared a dividend of $1.35 per common share that was paid on June 16, 2000 to
our shareholders of record at the close of business on June 5, 2000.


         Our acquisition of Lite Array, Inc. was completed in May 2001. The
acquisition was accomplished through a newly-formed subsidiary, Global Lite
Array (BVI) Limited, into which we contributed our convertible bond investment
in Lite Array plus $3.8 million in cash. In turn, the former common shareholders
of Lite Array contributed their Lite Array shares into Global Lite Array in
exchange for 9.2% of the oustanding shares of Global Lite Array, and the holders
of Lite Array debt exchanged $4.0 million in Lite Array debt in exchange for
14.0% of the oustanding shares of Global Lite Array. Lite Array is a
California-based company involved extensively in the research, development and
pre-production of inorganic and organic solid state flat-panel displays. Lite
Array also operates a joint venture manufacturing plant in Jiangmen, China.
Total consideration for our investment in Lite Array was approximately $9.6
million, of which approximately $3.8 million was settled in cash and we took
responsibility for paying for the balance due on a license of $1.8 million. The
remaining portion of the consideration was satisfied in exchange of convertible
notes issued by Lite Array in fiscal 2001.

         As part of our analysis of the potential for Lite Array's TFEL display
business and the joint venture, we determined that the long-term prospects might
be limited. From our analysis, the performance gap between TFEL technology and
existing liquid crystal display, or LCD, technologies (with billions of dollars
already invested in production capacity) had narrowed and the price premium for
TFEL displays had risen as LCD prices have fallen. We believed that the market
opportunity for TFEL displays was diminishing, especially since such displays
are only available in monochrome whereas the market had demanded more full color
products. Because of these reasons and the fact that we had determined that it
is unlikely the joint venture will be profitable even if production and yields
are stabilized at much higher levels than are currently being achieved, Global
Lite Array's board of directors decided at a June 10, 2002 board meeting to
discontinue production of TFEL displays and cease funding the joint venture in
China as of September 30, 2002. A presentation was made regarding this matter to
our board of directors on June 30, 2002 and a decision was made to write off the
value of Lite Array's investment in the joint venture, the goodwill associated
with the TFEL display business and certain TFEL production equipment owned by
us.

         A balance due on the small molecule PM-OLED license we assumed as a
result of our acquisition of Lite Array remained unpaid as of March 31, 2002.
This payment will be made in fiscal 2003. Pursuant to the license arrangement,
Lite Array must pay royalties of a fixed percentage of the net sales of OLED
display products that are produced by using the licensed know-how and sold by
Lite Array and its subsidiaries before January 1, 2004. Lite Array also must pay
royalties of the greater of a fixed amount or a fixed percentage of the net
sales of OLED display products that are produced by using the licensed know-how
and sold by Lite Array and its subsidiaries after January 1, 2004. The license
expires in 2023 and may be terminated at any time after January 1, 2004. As of
March 31, 2002, production of OLED display products has not yet commenced.

         Inflation. From 1996 through 2001, the rate of inflation in Hong Kong
has ranged from approximately -5.3% to 9.0% per year (approximately -1.6% during
2001) and the average rate of inflation in China ranged from approximately -2.1%
to 17.0% per year (approximately -0.4% during 2001). As a general matter, the
effect of this inflation on us is primarily limited to labor costs, which
represent a small component of our total expenses. As we purchase most of our
raw materials outside China, inflation in China does not have a significant
effect on our overall costs.

                                       29

<PAGE>

          Currency and exchange rates. Our functional currency is the U.S.
dollar. Nearly all of our sales are denominated in U.S. dollars. The majority of
our expenses, including wages and other production and administrative costs are
denominated in Hong Kong dollars and Chinese Renminbi. Certain raw materials and
other expenses are purchased using a variety of currencies including the U.S.
dollar, Chinese Renminbi, Japanese yen and German mark. The majority of raw
materials are purchased using Hong Kong dollars. The Hong Kong dollar is pegged
to the U.S. dollar. We have not been significantly affected by exchange rate
fluctuations and therefore have not needed to hedge our positions. See Note 3(o)
of Notes to Consolidated Financial Statements.

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

          We spent approximately $2.2 million, $1.8 million and $2.0 million,
respectively, on product design and development in each of fiscal 2002, 2001 and
2000. As a result of our acquisition of Lite Array, we incurred approximately
$200,000 in design and development expenses in fiscal 2002. Over the next two
fiscal years, we expect design and development expenses to increase to
approximately $3.0 million per fiscal year, including approximately $2.0 million
per fiscal year for Lite Array. The main reasons for this anticipated increase
in design and development expenses include our plans to exploit our small
molecule PM-OLED license to progress towards commercial production of OLED
displays, development work on our new heat engine technology and product design
work for potential new product categories, such as lawn and garden products.
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 latest fiscal year.

E.       The application of critical accounting policies.

         In connection with our acquisition of Lite Array and the subsequent
write down of the assets associated with its TFEL display business, a number of
significant management estimates were required, which included the following:

         .  Property, plant and equipment. An appraisal of the fair market value
            of the property, plant and equipment including the amount within
            the joint venture was performed by an independent appraisal company.
            Having used these values in our purchase accounting, we then
            reevaluated the values based upon management's subsequent findings
            that actual results of operations for fiscal 2002 were significantly
            below management's projected results on the date of acquisition.
            This reevaluation indicated that all the property, plant and
            equipment used to produce TFEL displays had no value since the cost
            of producing the displays was higher than the market price.

         .  Intangible assets. An appraisal of the fair market value of the
            license for small molecule PM-OLED technology was performed by an
            independent appraisal company and this ammount was used in our
            purchase accounting. Based upon the license value and our evaluation
            of the life of the technology before it is superceded, we determined
            that the license would be amortized over eight years. Each year we
            will evaluate whether there is any impairment in the carrying value
            based on an analysis of the business plan for the OLED display
            business and an undiscounted cash flow analysis.

         .  Deferred taxes. We account for income taxes under the provisions of
            SFAS No. 109. Deferred tax assets are recognized for losses carried
            forward but we provide a valuation allowance since we believe that
            these loss carryforwards will probably go unrealized.

         .  Income taxes. We provide for income taxes on the assumption that
            half of the group operating income before any losses in Lite Array
            will be subject to Hong Kong taxes. Interest income is not taxable
            in Hong Kong. We do not provide for taxes for other jurisdictions.
            In the event that this assumed tax position must change, there could
            be a material impact on our financial results.

                                       30

<PAGE>

Item 6.  Directors, Senior Management and Employees.

A.       Directors and senior management.

         Our directors and senior management at March 31, 2002 are set forth
below:

<TABLE>
<CAPTION>
                    Name                       Age                          Position
-------------------------------------------  -------   ----------------------------------------------------
<S>                                          <C>       <C>
Kwong Ho Sham..............................     69     Chairman of the Board of Directors
John C.K. Sham(1)(2).......................     39     President, Chief Executive Officer and Director
Brian Yuen(1)(2)...........................     46     Chief Executive Officer, Global-Tech USA, Inc. and
                                                          Director
Peter C. McC. Howell(3)....................     52     Director
Wing-On Lo.................................     45     Director of Manufacturing Operations
Shun Chi Hui...............................     61     Director
Wai Chun Hui...............................     55     Director
Patrick Po-On Hui(3).......................     44     Director
Ken Ying-Keung Wong(3).....................     53     Director
Kin Shek Leung.............................     39     Acting Chief Financial Officer
</TABLE>

--------------

(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 Chairman of the Hong
Kong-Shantou Chamber of Commerce, Vice Chairman of the Hong Kong Chiu Chou
Plastics Business Association, and 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.

         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 also president of
Wing Shing Property Development Ltd. and Jiulongshan Real Estate Development Co.

         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.

         Peter C. McC. Howell has served as a director of Global-Tech since May
1998. Mr. Howell was Chairman and Chief Executive Officer of Signature Brands
USA, Inc., a publicly-traded manufacturing company of consumer and professional
products, from August 1994 to August 1997. From October 1988 to August 1994, Mr.
Howell was affiliated with Mr. Coffee, Inc., a publicly-traded manufacturing
company, where he served as Chief Financial Officer from October 1988 to April
1989 and as President and Chief Executive Officer from April 1989 to August 1994
when Mr. Coffee was acquired by Signature Brands. Mr. Howell has been a director
of Libbey, Inc., a glass manufacturing company, since 1993.

         Wing-On Lo has been our Director of Manufacturing Operations with
overall responsibility for the Dongguan manufacturing complex since September
1994. From 1990 to 1994, Mr. Lo served as Director of Operations for Eastern
Mall Ltd., a manufacturing company of cameras and electronic products.

                                       31

<PAGE>

         Shun Chi Hui has served as a director of Global-Tech since November
1982. Ms. Hui is active in a variety of charitable activities in Hong Kong and
China.

         Wai Chun Hui has served as a director of Global-Tech since December
1971. Ms. Hui participates in certain administrative oversight of us and also is
active in a variety of charitable activities in Hong Kong and China.

         Patrick Po-On Hui has served as a director of Global-Tech since March
2000. Mr. Hui is a practicing attorney who, since June 1988, has been a
consultant to Robin Bridge & John Liu, 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 Wong has served as a director of Global-Tech since June
2001. Dr. Wong is a medical doctor who, since 1985, has maintained a medical
practice in Hong Kong. Dr. Wong previously practiced family medicine in Canada
from 1977 to 1985.

         Kin Shek Leung has 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;

         .  Shun Chi Hui and John Sham are mother and son; and

         .  Kwong Ho Sham and Wai Chun Hui are husband and wife.

         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 (ten persons) during fiscal 2002 was approximately $2.1
million. This includes amounts set aside or accrued to provide pension,
retirement or similar benefits, but does not include amounts expended by us
(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 one 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.

                                       32

<PAGE>

         Audit committee. In connection with the initial public offering of our
common shares in April 1998, the board of directors formed an audit committee.
The functions of the audit committee include

         .  the nomination of independent auditors for appointment by the board,

         .  meeting with our independent auditors to review and approve the
            scope of their audit engagement,

         .  meeting with our financial management and independent auditors to
            review matters relating to internal accounting controls,

         .  review of our accounting practices and procedures and other matters
            relating to our financial condition, and

         .  to report to the board periodically with respect to such matters.

The audit committee is currently comprised of Patrick Po-On Hui, Peter C. McC.
Howell and Ken Ying-Keung Wong.

         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. The compensation committee is currently comprised of
John C.K. Sham and Brian Yuen.


         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, 2000, 2001 and 2002, we employed, 4,538, 4,484 and 2,955
persons, respectively, on a full-time basis. The significant decrease in total
number of employees at March 31, 2002 was primarily due to natural attrition of
staff in our Hong Kong office and decreased utilization of direct and indirect
labor in our factory due to decreased sales during fiscal 2002. Of our employees
at March 31, 2002, 62 were located in Hong Kong and 2,893 in China. A breakdown
of persons employed by main category of activity is as follows:

                             Category                            No.
         ------------------------------------------------- ---------------
         Manufacturing.................................         2,084
         Production management.........................           291
         Finance and administration....................           248
         Receiving and warehousing.....................            79
         Quality control...............................           125
         Production engineering........................            56
         Product design and development................            54
         Sales and marketing...........................            11
         Humans resources                                           7
                                                            ---------
                                                                2,955
                                                            =========


                                       33

<PAGE>

Since our business is seasonal, the number of employees varies from time to time
based on our needs. During peak production periods in fiscal 2002, we employed a
maximum of approximately 4,500 persons. 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 material
compliance with such regulations.

E.       Share ownership.

         The following table sets forth information regarding the share
ownership in Global-Tech as of August 31, 2002 held by the directors and senior
management and options granted to them on our common shares:

<TABLE>
<CAPTION>
                           Name of Owner(1)                                Number of Shares        Percentage
------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                     <C>
Wing Shing Holdings Company Limited(2).............................             7,555,189             62.2%
Kwong Ho Sham(3)...................................................               151,899              1.3
John C.K. Sham(3)(4)...............................................               441,933              3.6
Shun Chi Hui(3)....................................................                57,722               *
Wai Chun Hui(3)....................................................                57,722               *
Brian Yuen(5)......................................................               388,841              3.2
Peter C. McC. Howell(6)............................................               219,010              1.8
All officers and directors as a group (10 persons)(7)..............             8,895,625             73.2%
</TABLE>

-------------

*        Less than 1%.

(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)      Wing Shing Holdings owns 7,555,189 of the issued and outstanding common
         shares. The share ownership of Wing Shing Holdings is held 50% by Kwong
         Ho Sham, 20% by John Sham and 15% by each of Shun Chi Hui and Wai Chun
         Hui. Voting control of Wing Shing Holdings is held approximately 36% by
         Kwong Ho Sham, approximately 43% by John Sham and approximately 11% by
         each of Shun Chi Hui and Wai Chun Hui.

(3)      Does not include common shares owned by Wing Shing Holdings. See Note 2
         above.

(4)      Includes 339,971 common shares issuable to John C.K. Sham within 60
         days after August 31, 2002 upon exercise of options granted under our
         1997 stock option plan.


(5)      Includes 327,235 common shares issuable to Brian Yuen within 60 days
         after August 31, 2002 upon exercise of options granted under our 1997
         stock option plan.

(6)      Includes 200,010 common shares issuable to Peter C. McC. Howell within
         60 days after August 31, 2002 upon exercise of options granted under
         our 1997 stock option plan.


(7)      Includes 7,555,189 common shares owned by Wing Shing Holdings Company
         and 886,325 common shares beneficially owned by or issuable to various
         officers and directors within 60 days after August 31, 2002 upon
         exercise of options granted under our 1997 stock option plan. Each of
         Wing-On Lo, Patrick Po-On Hui, Ken Ying-Keung Wong and Kin Shek Leung
         own less than 1% of the issued and outstanding common shares.

                                       34

<PAGE>

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

         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 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 five years.

         The total number of common shares available for options under the plan
is 1.6 million shares. We have granted options to purchase on the dates, in the
amounts and at the prices indicated below:

         .  In September 1997, 322,000 common shares to employees and a
            consultant with an exercise price of $14.50 per share;

         .  In March 1998, 283,800 common shares to employees and consultants
            with an exercise price of $19.00 per share;

         .  In August 1998, 250,000 common shares to two directors with an
            exercise price of $8.31 per share;

         .  In July and December 1998, 18,000 common shares to two officers with
            an exercise price of $19.00 per share;

         .  In April 1999, 50,000 common shares to a consultant, with 15,000
            common shares with an exercise price of $4.75 per share and 35,000
            common shares with an exercise price per share equal to the
            prevailing market price at the time of vesting;

         .  In October 1999, 50,000 common shares to an officer with an exercise
            price of $5.00 per share;

         .  In March 2000, 208,100 common shares to directors, employees and a
            consultant with an exercise prices ranging from $5.00 to $19.00 per
            share;

         .  In October 2000, 2,500 common shares to a consultant with an
            exercise price of $5.75 per share;

                                       35

<PAGE>

         .  In April 2000 and March 2001, 12,700 common shares to 10 employees
            with an exercise price of $6.25 per share;

         .  In May 2001, 300,000 common shares to three directors with an
            exercise price of $4.75 per share; and

         .  In June 2001, 12,000 common shares to one new director with an
            exercise price of $6.25 per share.

The options vest over varying periods of up to five years and are all
exercisable for a period of 10 years from the date of grant.

         On May 10, 2000, due to our stock price being significantly below the
option exercise prices and the corresponding lack of incentive that the options
were intended to provide, our board of directors authorized a voluntary exchange
program for holders of options with an exercise price greater than $6.25. This
exchange program allows holders to surrender their original options for
cancellation by us in return for a reduced number of options with an exercise
price of $6.25 providing for a similar aggregate value as calculated under the
Black Scholes method. Under the offer, all other terms of the original options,
including expiration and vesting dates, remained unchanged. During fiscal 2001,
as part of the exchange program, options to purchase 911,100 common shares under
both the 1997 and 1999 plan at an exercise price higher than $6.25 per share
were exchanged for options to purchase 708,175 shares at an exercise price of
$6.25 per share.

         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
180,000 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, 2002, we
have granted, in the aggregate, net of forfeiture, 50,833 common shares under
the plan.

         The plan is administered by our board of directors, or a committee of
our board of directors, 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.

         Lite Array stock plan. In conjunction with the acquisition of Lite
Array on May 31, 2001, our subsidiary, Global Lite Array, established a stock
option plan on the date of acquisition. The shares issued under this plan are
based on the shares of a subsidiary Global Lite Array and not of the company.
Under this plan, the following options to purchase shares were granted on May
31, 2001:

         .  465,000 options in Global Lite Array at an exercise price of $1.50
            per share, issued in exchange for equivalent Lite Array options held
            by former employees of Lite Array, Inc. These options have a vesting
            period of three to four years beginning from the date of grant by
            Lite Array and expire five years from the date of grant by Lite
            Array;

         .  1,295,000 options in Global Lite Array at an exercise price of $0.20
            per share, issued to the president of Global Lite Array as
            consideration for entering into an employment contract. These
            options vest on May 31, 2003 and expire on May 31, 2006;

         .  2,432,003 options in Global Lite Array at an exercise price of $0.20
            per share, issued to employees of Global Lite Array, including the
            president. These options vest upon Global Lite Array achieving
            certain goals, which have not been met to date, and expire on May
            31, 2006;

         .  800,000 options in Global Lite Array at an exercise price of $0.34
            per share, issued to four directors. These options have a vesting
            period of three years and expire ten years from the date of grant;
            and

         .  2,000,000 options in Global Lite Array at an exercise price of $0.34
            per share, issued to the president of Global Lite Array. These
            options would only vest upon achieving certain specific goals at the
            company's joint venture. Such goals were not achieved and the
            options expired as of November 30, 2001.

         Of the options granted by Global Lite Array above, 120,000 at an
exercise price of $1.50 and 80,000 at an exercise price of $0.20 have been
forfeited as of March 31, 2002.

Item 7. Majority Shareholders and Related Party Transactions.

A.       Major shareholders.

         The following table sets forth information regarding the share
ownership in Global-Tech as of August 31, 2002 of shareholders that are
beneficial owners of 5% or more of our outstanding common shares:

                                       36

<PAGE>

<TABLE>
<CAPTION>
                            Name of Owner                                  Number of Shares        Percentage
-----------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                     <C>
Wing Shing Holdings Company Limited(1)..............................           7,555,189             62.2%
Heartland Advisors, Inc.(2).........................................           1,607,300             13.2
</TABLE>

-------------

(1)      Wing Shing Holdings owns 7,555,189 of the issued and outstanding common
         shares. The common share ownership of Wing Shing Holdings is held 50%
         by Kwong Ho Sham, 20% by John Sham and 15% by each of Shun Chi Hui and
         Wai Chun Hui. Voting control of Wing Shing Holdings is held
         approximately 36% by Kwong Ho Sham, approximately 43% by John Sham and
         approximately 11% by each of Shun Chi Hui and Wai Chun Hui.

(2)      Based on a Schedule 13G/A, dated January 16, 2002, filed by Heartland
         Advisors, Inc. with the SEC. Heartland Advisors reported holding sole
         voting power over 359,100 shares and sole dispositive power over
         1,607,300 shares.

         In the last three years, none of the major shareholders listed in the
table above has significantly changed its respective percentage ownership,
except that Heartland Advisors, Inc. purchased a 10.6% beneficial ownership
interest in us in September 2000. Also, a major shareholder disclosed in this
table in our annual report for fiscal 2001, The Baupost Group, L.L.C., is no
longer a shareholder. Our major shareholders do not have different voting
rights.

         As of August 31, 2002, approximately 33.0% of our outstanding common
shares were held in the United States by 10 holders registered on the books of
our transfer agent.

         To the best of our knowledge, 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 Agreement with Wing Shing Products Company

         We had leased approximately 26,500 square feet of space for our former
executive offices from Wing Shing Products Company Limited, a company owned by
the Sham family. The lease expired on March 31, 2002 and was renewed on April
17, 2002. The lease as renewed expires on March 31, 2005 and is terminable by
Wing Shing Products upon not less than six months' notice to us in the event
that Wing Shing Products enters into a contract for the sale of the premises or
decides to redevelop, demolish or rebuild the premises. Under the lease, we paid
monthly rent of approximately $14,924. We believe the lease is on terms no less
favorable than could have been received from unaffiliated third parties.

         Effective from September 10, 2002, we relocated our executive offices
to 21/F., Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong.
Accordingly, the rent for the office space leased from Wing Shing Products
Company Limited was reduced to $8,528 per month, as we are continuing to lease
certain portions of the building for use as a warehouse and research and
development laboratory.




                                      37

<PAGE>

Loan to Spouse of an Executive Employee

         In October 1998, we extended an unsecured loan of $1.0 million to a
U.S. corporation wholly owned by the spouse of an executive employee of ours.
The loan bears interest at a fixed annual rate of 7.0% and is payable in
quarterly installments of approximately $81,000 commencing October 28, 2003,
with any remaining balance due in full on October 28, 2008. The loan plus
accrued interest was approximately $1.2 million and $1.3 million, respectively,
as of March 31, 2001 and 2002. We provided a reserve of approximately $224,000
and approximately $498,000, respectively, against the loan and the related
interest receivable as of March 31, 2001 and 2002. The net amount of the loan
was included in promissory note receivable on our consolidated balance sheet.
There can be no assurance that the loan will be repaid on a timely basis, if at
all.

Loan to a Director

         In October 1999, we made a loan to a director for the purchase of a
residence. The loan is in the original principal amount of $460,000, bearing
interest at a fixed annual rate of 6.02%, and is secured by a mortgage on the
property. The loan is payable in six years with annual installments of
approximately $77,000 of principal together with interest on the unpaid
principal balance, commencing October 21, 2000. Such loan payments are forgiven
in arrears, however, on each payment due date in consideration for the
director's continued service to us.

Our Policy Concerning Certain Transactions

         In the past, certain related party transactions were not negotiated on
an arm's length basis. Since our initial public offering, our policy has been
that all transactions between us and our executive officers and directors must
be approved by a majority of our directors who are neither our officers nor
employees. Furthermore, in order to comply with the Sarbanes-Oxley Act of 2002
recently enacted by the United States Congress, we will not enter into any
further loan agreements with any director or executive officer or their
respective affiliates or renew or modify any existing loan agreements with
directors or executive officers or their respective affiliates.

C.       Interests of experts and counsel.

         Not applicable.

Item 8.  Financial Information.

A.       Consolidated statements and other financial information.

         Our consolidated financial statements have been audited by independent
auditors in accordance with the auditing standards generally accepted in the
United States. A consolidated balance sheet is presented for fiscal 2002 and
2001 along with a consolidated statement of income, statement of cash flow and
statement of change in shareholders' equity which are presented for fiscal 2000,
2001 and 2002. See "Item 18--Financial Statements" for detailed financial
information.

Percentage of Export Sales

         Export sales constitutes all of our total sales volume. For a breakdown
of our export sales by market during the past three fiscal years, see Note 27(a)
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, we are not a party to any material
litigation or arbitration and no material litigation or claim is known to us to
be pending or threatened against us or with respect to any of our properties.

         On October 13, 1998, Kenwood Painted Metals, Inc. filed a claim against
one of our subsidiaries in the High Court of the Hong Kong Special
Administrative Region alleging that the subsidiary had not settled the
outstanding balance of approximately $509,000 relating to certain goods
purchased from Kenwood. The subsidiary filed a counter claim against Kenwood for
loss and damages suffered as a result of the defects found in the goods
delivered by Kenwood. The subsidiary finally reached a settlement with Kenwood
on this court case by entering

                                       38

<PAGE>

into a Tomlin Order dated March 24, 2001, under which Kenwood will process and
ship new goods to us to replace certain defective goods in return for the
subsidiary agreeing to pay Kenwood a total sum of $300,000 in full and final
settlement of any and all claims that each party shall have against the other.
All replacement goods shipped by Kenwood have been received by the subsidiary
and it paid the full sum of $300,000 to Kenwood in June 2001. Accordingly, this
court case has been fully settled.

         Certain of our agreements with our ODM customers include an
indemnification provision whereby our respective subsidiary undertakes to hold
harmless and indemnify the respective customer from all suits that may be
brought against them for infringement of any patents or registered designs in
connection with the sale of the products manufactured by us.

         On March 10, 1998, SEB, S.A. filed suit against Sunbeam Corporation in
the U.S. District Court of New Jersey for patent infringement. SEB later amended
its complaint to add us and one of our subsidiaries as additional defendants in
the case. SEB alleged that the defendants infringed a patent issued to SEB,
which covers certain features of deep fryers. SEB sought to recover unspecified
monetary damages. In addition, Sunbeam asserted a third-party claim and a
cross-claim against us and our subsidiary for breach of our alleged obligation
to indemnify Sunbeam against SEB's patent infringement claims. We and our
subsidiary moved to dismiss the complaints for lack of personal jurisdiction.
The claim of SEB has been settled with Sunbeam, and dismissed against us and the
subsidiary on jurisdictional grounds.

         After dismissal of the action in New Jersey, SEB commenced an action on
August 28, 1999 in the United States District Court for the Southern District of
New York against us, one of our subsidiaries and Montgomery Ward, a customer,
for infringement of SEB's patent relating to a deep fryer. 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 based upon the sale of a modified deep fryer product by us. While that
motion was pending, Montgomery Ward filed for protection under the Bankruptcy
Act. The action has therefore been stayed 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. On June 12, 2001, the District Court
denied SEB's application for a contempt citation. After the completion of
discovery, SEB moved to amend its complaint to add us and certain of our other
subsidiaries and John C.K. Sham as additional defendants. The subsidiary opposed
the motion. The District Court, in an opinion dated September 30, 2002, denied
SEB's motion to amend to add additional defendants and denied our motion to
dismiss for lack of personal jurisdiction.

         On December 15, 1999, a subsidiary of ours asserted counterclaims
against Sunbeam in connection with a product supply agreement. Sunbeam moved
to dismiss certain claims and the subsidiary opposed the motion. The Court did
not resolve the motion. The parties began taking discovery. Sunbeam also
moved before the Judicial Panel on Multi-District Litigation to consolidate the
action with a group of securities-related actions asserted against Sunbeam
pending in the Southern District of Florida. The subsidiary opposed the motion.
The Panel denied Sunbeam's motion. This case had been stayed as a result of the
bankruptcy filing of Sunbeam on February 6, 2001. The Bankruptcy Court
subsequently lifted the stay and allowed the action to continue. Sunbeam then
moved to transfer the action and for summary judgment. By court order dated
May 23, 2002, Sunbeam's transfer motion was granted and the action was
transferred to the District Court for the Southern District of Florida. The
Court also denied our motion to dismiss for lack of personal jurisdiction. The
Court did not resolve Sunbeam's motion for summary judgment. Sunbeam renewed its
motion for summary judgment in the District Court. The District Court has not
yet ruled on the motion. Oral argument is scheduled for October 29, 2002.

         On February 9, 2001, a subsidiary of ours commenced an action in the
United States District Court for the Southern District of New York against
Simatelex Manufactory Corp. for infringement of U.S. Patent No. Des. 348,585. On
February 23, 2001, Sunbeam commenced an adversary proceeding against the
subsidiary in the United States Bankruptcy Court for the Southern District of
New York asserting that it owned the Design Patent or had a permanent license
for it. Upon the application of Sunbeam, by order dated February 26, 2001, the
Bankruptcy Court extended the automatic stay resulting from Sunbeam's filing to
prevent the subsidiary from continuing its claim against Simatelex pending
further order of the Bankruptcy Court. On March 12, 2001, the subsidiary
asserted a counterclaim against Sunbeam for infringement of the Design Patent.
The parties have engaged in discovery. The parties concluded a bench trial in
the Bankruptcy Court on January 31, 2002. The Bankruptcy Court has not yet
rendered a decision.

                                       39

<PAGE>

         An adverse decision in any of these legal proceedings could have a
material adverse effect on our business, results of operations and financial
condition. After considering all facts known to us and based on the advice of
legal counsel, however, we do not believe that these actions will have such a
material adverse effect and the likelihood of a negative effect on our operating
results as a result of these claims is remote.

         Included in "accrued expenses" in our consolidated balance sheets as of
March 31, 2001 and 2002 were provision for legal fees of approximately $703,000
and $150,000 in relation to certain of the above cases.


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 in the past.

         Pursuant to a resolution dated May 10, 2000, our board of directors
declared a dividend of $1.35 per common share which was paid on June 16, 2000 to
our shareholders of record at the close of business on June 5, 2000. There can
be no assurance that we will declare such a dividend again in the future.

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. The following table lists the
high and low market prices on the NYSE for the periods indicated.

                                                              High       Low
                                                           ---------- ---------

                    Fiscal 1999:
                    Annual (since April 8, 1998).........    $21.63      $3.88

                    Fiscal 2000:
                    Annual...............................      7.06       3.88

                    Fiscal 2001:
                    First Quarter........................      6.88       4.75
                    Second Quarter.......................      5.56       4.50
                    Third Quarter........................      5.13       3.25
                    Fourth Quarter.......................      4.88       3.88
                    Annual...............................      6.88       3.25

                    Fiscal 2002:
                    First Quarter........................      5.20       4.60
                    Second Quarter.......................      6.35       4.60
                    Third Quarter........................      5.49       4.59
                    Fourth Quarter.......................      5.20       4.55
                    Annual...............................      6.35       4.55

                                       40

<PAGE>

                  Month Ended:
                  March 28, 2002 ....................    5.06         4.76
                  April 30, 2002 ....................    4.95         4.60
                  May 31, 2002 ......................    4.99         4.61
                  June 28, 2002 .....................    5.00         4.80
                  July 31, 2002 .....................    4.93         4.60
                  August 30, 2002 ...................    4.70         4.40

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 4 of our memorandum of
association and are generally 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.

                                       41

<PAGE>

         Our articles of association provide that with the prior or subsequent
approval by a resolution of shareholders, 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 50,000,000 common shares and
1,000,000 preference shares. 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.


         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.

                                       42

<PAGE>

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 10% or more of
the outstanding voting shares.

         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 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 to 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.

                                       43

<PAGE>

Certain Anti-Takeover Matters

         Under our memorandum and articles of association and the laws of
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.


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 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.


C.       Material contracts.

         Not applicable.

D.       Exchange controls.

         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:

                                       44

<PAGE>

         .  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 bank;

         .  a life 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 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.

         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.

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

                                       45

<PAGE>

includable in your gross income as ordinary income on the date of receipt. 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 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 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 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 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:

                                       46

<PAGE>

         .  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

         .  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 at a rate of 31% 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 International Business Companies Act 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 International Business Companies Act.

         There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands on companies incorporated under the International
Business Companies Act. 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.

                                       47

<PAGE>

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 document 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 Securities Exchange Act of 1934 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:


<TABLE>
     <S>                         <C>                             <C>
         Judiciary Plaza             Woolworth Building           175 W. Jackson Boulevard
            Room 1024                   233 Broadway                    Suite 900
     450 Fifth Street, N.W.       New York, New York 10279        Chicago, Illinois 60604
      Washington, DC 20549
</TABLE>

         Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
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 interest rate changes and foreign
currency fluctuations. We have not entered into interest rate or foreign
currency transactions for speculative purposes or otherwise. Our foreign
currency exposure was immaterial at March 31, 2002.

         Our primary interest rate risk exposure results from floating rate
debt. At March 31, 2002, all of our long-term debt consisted of floating rate
debt. If interest rates were to increase 100 basis points (1%) from March 31,
2002 rates, and assuming no changes in long-term debt from the March 31, 2002
levels, the additional annual expense to us would be immaterial to our results
of operations. We currently do not hedge our exposure to floating interest rate
risk.

         We are dependent upon outside suppliers for all of our raw material
needs, including plastic resins. 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. 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 90-day supply. In the
past, we have had limited ability to increase product pricing in order to
respond to plastic resin price increases. Since plastic resin is a by-product of
petroleum, the price is subject to many factors, such as the international
supply and demand and political stability 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 price increases on to our customers. If
plastic resin prices in fiscal 2003 were to increase on an average of 10.0% from
March 31, 2002 prices, and assuming we use the same amount of plastic resins as
during fiscal 2002, the additional annual expense to us in fiscal 2003 would be
approximately $920,000, as our total purchase of plastic resins in fiscal 2002
was approximately $9.2 million.

Item 12.   Description of Securities Other than Equity Securities.

A.       Debt securities.

         Not applicable.

B.       Warrants and rights.

         Not applicable.

                                       48

<PAGE>

                                     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 September 2002, 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. The
remaining balance continues to remain in temporary investments, including
short-term marketable securities, U.S. dollar denominated interest-bearing
savings accounts and a money market fund.

Item 15.   Controls and Procedures

           There were no significant changes in our internal controls or in
other factors that could significantly affect these controls during fiscal 2002.

Item 16.   [Reserved]

         Not applicable.

                                    PART III

Item 17.   Financial Statements.

         Not applicable.

Item 18.   Financial Statements.

         See pages F-1 through F-35 incorporated herein by reference.

Item 19.   Exhibits.

         See "Exhibit Index" on page E-1.

                                       49

<PAGE>

                                   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:    October 15, 2002


                              GLOBAL-TECH APPLIANCES INC.

                              By:              /s/ John C.K. Sham
                                  ----------------------------------------------
                                                  John C.K. Sham
                                      President and Chief Executive Officer

                                       50

<PAGE>

                                 CERTIFICATIONS

I, John C.K. Sham, certify that:

1.       I have reviewed this annual report on Form 20-F of Global-Tech
Appliances Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3.       Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date:    October 15, 2002


                              By:              /s/ John C.K. Sham
                                  ----------------------------------------------
                                                  John C.K. Sham
                                      President and Chief Executive Officer


I, Kin Shek Leung, certify that:

1.       I have reviewed this annual report on Form 20-F of Global-Tech
Appliances Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3.       Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date:    October 15, 2002


                              By:               /s/  Kin Shek Leung
                                  ----------------------------------------------
                                                  Kin Shek Leung
                                              Chief Financial Officer

                                       51

<PAGE>

                  GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
         <S>                                                                                                 <C>
         Reports of Independent Public Accountants.......................................................     F-2
         Consolidated Statements of Income and Comprehensive Income for the years ended
              March 31, 2000, 2001 and 2002..............................................................     F-4
         Consolidated Balance Sheets as of March 31, 2001 and March 31, 2002.............................     F-5
         Consolidated Statements of Changes in Shareholders' Equity for the years ended
              March 31, 2000, 2001 and 2002..............................................................     F-6
         Consolidated Statements of Cash Flows for the years ended March 31, 2000, 2001 and 2002.........     F-7
         Notes to the Consolidated Financial Statements..................................................     F-9
</TABLE>

                                      F-1

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Global-Tech Appliances Inc.:

We have audited the accompanying consolidated balance sheets of Global-Tech
Appliances Inc. (a company incorporated in the British Virgin Islands;
"Global-Tech") and Subsidiaries ("the Company") as of 31st March 2002, and the
related consolidated statements of income and comprehensive income, changes in
shareholders' equity and cash flows for the year ended 31st March 2002. These
accounts are the responsibility of the Company's management. Our responsibility
is to express an opinion on these accounts based on our audit. The financial
statements of the Company as of 31st March 2001 and for each of the two years in
the period ended 31st March 2001 were audited by other independent accountants
who have ceased operations. Those independent accountants expressed an
unqualified opinion on those financial statements in their report dated 17th
July 2001.

We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the accounts are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global-Tech
Appliances Inc. and Subsidiaries as of 31st March 2002, and the result of their
operations and their cash flows for the year ended 31st March 2002, in
conformity with generally accepted accounting principles in the United States of
America.

PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
31st August 2002

                                      F-2

<PAGE>

[This report is a copy of a previously issued report and that the report has not
been reissued by Arthur Andersen & Co.]

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Global-Tech Appliances Inc.:

We have audited the accompanying consolidated balance sheets of Global-Tech
Appliances Inc. (a company incorporated in the British Virgin Islands;
"Global-Tech") and Subsidiaries ("the Company") as of March 31, 2000 and 2001,
and the related consolidated statements of income and comprehensive income,
changes in shareholders' equity and cash flows for the years ended March 31,
1999, 2000 and 2001. 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 generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global-Tech
Appliances Inc. and Subsidiaries as of March 31, 2000 and 2001, and the results
of their operations and their cash flows for the years ended March 31, 1999,
2000 and 2001, in conformity with generally accepted accounting principles in
the United States of America.

ARTHUR ANDERSEN & CO
Certified Public Accountants
Hong Kong
July 17, 2001.

                                      F-3

<PAGE>

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31st MARCH 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                    2000               2001               2002
                                                                     US$                US$                US$
<S>                                                        <C>                <C>                <C>
Net sales (Note 27)                                           92,356,993        108,378,912         85,559,976

Cost of goods sold                                           (70,646,639)       (85,563,357)       (65,479,097)
                                                           -------------      -------------      -------------
  Gross profit                                                21,710,354         22,815,555         20,080,879

Selling, general and administrative expenses                 (15,947,514)       (15,927,158)       (16,361,059)

Legal and professional fees on potential acquisitions
  (Note 20)                                                     (500,484)                 -                  -
Write-off of inventory and tooling (Note 21)                           -         (4,991,407)                 -
Loss on cessation of a product line (Note 22)                          -         (2,523,293)                 -
Impairment of property, plant and equipment (Note 11)                  -                  -           (258,233)
Share of loss of a joint venture (Note 14)                             -                  -         (5,236,684)
Amortization of goodwill (Note 16)                                     -                  -           (328,316)
Write-off of goodwill (Note 16)                                        -                  -         (3,611,472)
                                                           -------------      -------------      -------------
  Operating income (loss)                                      5,262,356           (626,303)        (5,714,885)

Interest expense                                                (216,894)          (269,297)          (125,272)

Interest income                                                3,461,098          3,729,455          2,017,115

Other income, net                                                450,901            448,618            646,868
                                                           -------------      -------------      -------------
         Income (loss) before income taxes                     8,957,461          3,282,473         (3,176,174)

Provision for income taxes (Note 19)                            (224,890)          (513,147)        (1,416,716)
                                                           -------------      -------------      -------------
         Income (loss) before minority interests               8,732,571          2,769,326         (4,592,890)

Minority interests                                                     -                  -          1,570,273
                                                           -------------      -------------      -------------
         Net income (loss)                                     8,732,571          2,769,326         (3,022,617)

Other comprehensive income (loss) -
    Unrealized gain (loss) on marketable securities, net
       of tax
         Unrealized holding loss arising during the
             period                                               35,675           (186,523)          (178,918)
         Less: reclassification adjustment for loss
             included in net income                                    -                  -            532,150
                                                           -------------      -------------      -------------
         Total comprehensive income (loss)                     8,768,246          2,582,803         (2,669,385)
                                                           =============      =============      =============
Basic and diluted earnings (loss) per common share                  0.72               0.23              (0.25)
                                                           =============      =============      =============
Basic and diluted weighted average number of shares
    outstanding                                               12,109,136         12,134,846         12,139,564
                                                           =============      =============      =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF 31ST MARCH 2001 AND 2002

<TABLE>
<CAPTION>
                                                                                          2001            2002
                                                                                           US$             US$
<S>                                                                                 <C>             <C>
ASSETS
------

Current assets:
  Cash and cash equivalents (Notes 5 & 29)                                          28,489,112      48,589,117
  Short-term investments (Note 6)                                                   31,220,932       8,678,356
  Accounts receivable, net (Notes 7 & 29)                                            9,389,632      12,318,211
  Deposits, prepayments and other assets (Notes 8 & 9)                               8,197,171       2,157,819
  Inventories (Note 10)                                                             14,898,127       9,646,333
                                                                                  ------------    ------------
   Total current assets                                                             92,194,974      81,389,836

Loan to a director (Note 8)                                                            384,114         305,653
Property, plant and equipment (Note 11)                                             36,456,068      34,198,452
Land use rights (Note 12)                                                            2,036,977       2,002,137
License (Note 13)                                                                            -       4,317,001
Patents (Note 15)                                                                       13,168         285,618
Promissory note receivable (Note 8)                                                    963,000         774,602
                                                                                  ------------    ------------
   Total assets                                                                    132,048,301     123,273,299
                                                                                  ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current liabilities:
  Short-term bank borrowings (Note 17)                                                       -          75,533
  Current portion of long-term bank loans (Notes 18 & 29)                            1,138,505         714,643
  Accounts payable                                                                  14,007,213       6,237,968
  Amount due to a director (Note 8)                                                          -         180,000
  Fees payable for license                                                                   -       1,800,000
  Fees payable for land use rights                                                     257,888         274,871
  Salaries and allowances payable                                                      928,193         541,822
  Advance payments from customers                                                      184,408          43,273
  Accrued expenses                                                                   2,551,376       1,960,617
  Investment in a joint venture (Note 14)                                                    -         246,198
  Income tax payable                                                                 3,013,901       4,384,289
                                                                                  ------------    ------------
   Total current liabilities                                                        22,081,484      16,459,214

Long-term bank loans (Notes 18 & 29)                                                   907,753         271,539
Deferred tax liabilities, net                                                                -          42,810
                                                                                  ------------    ------------
                                                                                       907,753         314,349
                                                                                  ------------    ------------
   Total liabilities                                                                22,989,237      16,773,563
                                                                                  ------------    ------------
Shareholders' equity:
  Preferred stock, par value $0.01; 1,000,000 shares authorized; no shares
   issued (Note 24)                                                                          -               -
  Common stock, par value $0.01; 50,000,000 shares authorized; 12,830,000
   issued as of 31st March 2001 and 31st March 2002 (Note 24)                          128,300         128,300
  Additional paid-in capital (Notes 24 & 29)                                        81,661,840      81,753,145
  Retained earnings                                                                 32,456,646      29,415,443
  Accumulated other comprehensive deficit                                             (550,257)       (197,025)
  Less: Treasury stock, at cost, 692,647 as of 31st March 2001 and
       689,147 shares as of 31st March 2002 (Note 24)                               (4,637,465)     (4,600,127)
                                                                                  ------------    ------------
   Total shareholders' equity                                                      109,059,064     106,499,736
                                                                                  ------------    ------------
   Total liabilities and shareholders' equity                                      132,048,301     123,273,299
                                                                                  ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-5

<PAGE>

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED 31ST MARCH 2000, 2001 and 2002

<TABLE>
<CAPTION>
                              Number of shares                                    Amounts
                        ---------------------------- ---------------------------------------------------------------


                                                                          Additional     Retained
                        Common stock  Treasury stock   Common stock  paid-in capital     earnings   Treasury stock
                        ------------  --------------   ------------  ---------------     --------   --------------
                                                                US$              US$          US$              US$
<S>                     <C>           <C>              <C>           <C>               <C>          <C>
Balance as of 31st
  March 1999              12,830,000        (739,900)       128,300       81,661,840   37,797,736       (5,225,804)

Issuance of treasury
  stock                            -          36,001              -                -            -          468,302

Other comprehensive
  income -
  unrealized gain on
  marketable
  securities, net of
  tax                              -               -              -                -            -                -

Loss on issuance of
  treasury stock                   -               -              -                -     (292,964)               -

Net income                         -               -              -                -    8,732,571                -
                         -----------     -----------    -----------      -----------  -----------      -----------
Balance as of 31st
  March 2000              12,830,000        (703,899)       128,300       81,661,840   46,237,343       (4,757,502)

Issuance of treasury
  stock                            -          11,252              -                -            -          120,037

Other comprehensive
  income -
  unrealized loss on
  marketable
  securities, net of
  tax                              -               -              -                -            -                -

Loss on issuance of
  treasury stock                   -               -              -                -      (54,605)               -

Dividend declared
  and paid                         -               -              -                -  (16,495,418)               -

Net income                         -               -              -                -    2,769,326                -
                         -----------     -----------    -----------      -----------  -----------      -----------
Balance as of 31st
  March 2001              12,830,000        (692,647)       128,300       81,661,840   32,456,646       (4,637,465)

Issuance of treasury
  stock                            -           3,500              -                -            -           37,338

Issuance of stock
  options to counter
  party other than
  employees                        -               -              -           91,305            -                -

Other comprehensive
  income -
  unrealized loss on
  marketable
  securities, net of
  tax                              -               -              -                -            -                -

Reclassification
  adjustment for
  loss included in
  net income                       -               -              -                -            -                -

Loss on issuance of
  treasury stock                   -               -              -                -      (18,586)               -

Net loss                           -               -              -                -   (3,022,617)               -
                         -----------     -----------    -----------      -----------  -----------      -----------
Balance as of 31st
  March 2002              12,830,000        (689,147)       128,300       81,753,145   29,415,443       (4,600,127)
                         ===========     ===========    ===========      ===========  ===========      ===========
<CAPTION>

                       -----------------------------
                         Accumulated
                               other           Total
                       comprehensive   shareholders'
                             deficit          equity
                             -------          ------
                                 US$             US$
<S>                    <C>             <C>
Balance as of 31st
  March 1999                (399,409)    113,962,663

Issuance of treasury
  stock                            -         468,302

Other comprehensive
  income -
  unrealized gain on
  marketable
  securities, net of
  tax                         35,675          35,675

Loss on issuance of
  treasury stock                   -        (292,964)

Net income                         -       8,732,571
                         -----------     -----------
Balance as of 31st
  March 2000                (363,734)    122,906,247

Issuance of treasury
  stock                            -         120,037

Other comprehensive
  income -
  unrealized loss on
  marketable
  securities, net of
  tax                       (186,523)       (186,523)

Loss on issuance of
  treasury stock                   -         (54,605)

Dividend declared
  and paid                         -     (16,495,418)

Net income                         -       2,769,326
                         -----------     -----------
Balance as of 31st
  March 2001                (550,257)    109,059,064

Issuance of treasury
  stock                            -          37,338

Issuance of stock
  options to counter
  party other than
  employees                        -          91,305

Other comprehensive
  income -
  unrealized loss on
  marketable
  securities, net of
  tax                       (178,918)       (178,918)

Reclassification
  adjustment for
  loss included in
  net income                 532,150         532,150

Loss on issuance of
  treasury stock                   -         (18,586)

Net loss                           -      (3,022,617)
                         -----------     -----------
Balance as of 31st
  March 2002                (197,025)    106,499,736
                         ===========     ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       F-6

<PAGE>

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31ST MARCH 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                       2000            2001            2002
                                                                        US$             US$             US$
<S>                                                               <C>             <C>            <C>
Cash flows from operating activities:
-------------------------------------

Net income (loss) before minority interests                       8,732,571       2,769,326      (4,592,890)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Amortization                                                      116,133         116,133         963,943
  Depreciation                                                    3,706,115       4,323,028       4,541,452
  Loss on disposal of property, plant and equipment                       -         733,193               -
  Share of loss of a joint venture                                        -               -       5,236,684
  Realized gain on disposal of short term investments                     -         (12,738)        (88,679)
  Provision for impairment of property, plant and
   equipment                                                              -               -         258,233
  Provision for promissory note receivable                          103,179          18,931         274,000
  Write-off of goodwill                                                   -               -       3,611,472
  Issuance of stock options in lieu of consultancy fee                    -               -          91,305
  Provision for income taxes                                        204,234         513,147       1,416,716
Change in operating assets and liabilities:
  Accounts receivable, net                                          915,367      (2,222,164)     (2,928,579)
  Deposits, prepayments and other assets                           (755,919)     (5,731,017)        396,758
  Inventories                                                     1,912,224       3,261,821       5,251,794
  Promissory note receivable                                        (74,800)        (83,615)        (85,602)
  Accounts payable                                                 (227,270)      5,280,913      (7,769,245)
  Salaries and allowances payable                                  (314,706)        468,844        (386,371)
  Advance payments from customers                                   (51,836)        113,828        (141,135)
  Fee payable for land use rights                                  (134,740)       (120,230)         16,983
  Accrued expenses                                                   92,767         351,803      (1,952,856)
  Income tax payable                                                 20,656          (4,378)         (3,518)
                                                                -----------     -----------     -----------
Net cash provided by operating activities                        14,243,975       9,776,825       4,110,465
                                                                -----------     -----------     -----------
</TABLE>

                                                               (To be continued)

                                      F-7

<PAGE>

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31ST MARCH 2000, 2001 AND 2002 (continued)

<TABLE>
<CAPTION>
                                                                          2000            2001             2002
                                                                           US$             US$              US$
<S>                                                                <C>             <C>               <C>
Cash flows from investing activities:
-------------------------------------

Proceeds from disposal of property, plant and
  equipment                                                                  -         180,092                -
Proceeds from disposal of short-term investments                             -      51,277,779       33,918,955
Purchase of license                                                          -               -         (800,000)
Purchase of patents                                                          -               -         (271,300)
Purchase of short-term investments                                  (9,700,886)    (62,394,272)     (10,934,468)
Loans granted to Lite Array prior to acquisition                             -               -       (2,000,000)
Purchases of property, plant and equipment                          (4,716,928)     (5,535,837)      (1,991,086)
Additions to construction-in-progress                               (1,221,664)     (1,683,714)               -
(Decrease) increase in loan to a director                             (461,217)         77,103           78,461
Increase in amount due to a director                                         -               -          180,000
Increase in loans to a joint venture                                         -               -       (1,483,495)
Net cash inflow in respect of the acquisition of
  subsidiaries (Note 4)                                                      -               -        1,150,269
                                                                   -----------     -----------      -----------
Net cash (used in) provided by investing activities                (16,100,695)    (18,078,849)      17,847,336
                                                                   -----------     -----------      -----------

Cash flows from financing activities:
-------------------------------------

Issuance of treasury stock to consultants                              175,338          65,432           18,752
Repayment of short-term bank borrowings                             (1,714,618)         (1,895)        (816,472)
Increase in long-term bank loans                                     1,377,466         645,977                -
Repayment of long-term bank loans                                     (848,393)     (1,070,256)      (1,060,076)
Dividend paid                                                                -     (16,495,418)               -
                                                                   -----------     -----------      -----------
Net cash used in financing activities                               (1,010,207)    (16,856,160)      (1,857,796)
                                                                   -----------     -----------      -----------
Net (decrease) increase in cash and cash equivalents                (2,866,927)    (25,158,184)      20,100,005

Cash and cash equivalents at beginning of year                      56,514,223      53,647,296       28,489,112
                                                                   -----------     -----------      -----------
Cash and cash equivalents at end of year                            53,647,296      28,489,112       48,589,117
                                                                   ===========     ===========      ===========
Supplemental disclosure information:
  Cash paid for interest expense                                       216,894         269,297          125,272
  Cash (refund) paid for tax expense                                   (20,656)          4,378            3,518
                                                                   ===========     ===========      ===========
</TABLE>

                                      F-8

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1    Organization and principal activities

     Global-Tech Appliances Inc. ("Global-Tech"), was incorporated in the
     British Virgin Islands and is a holding company. Global-Tech and its
     subsidiaries are collectively referred to as the "Company". The Company is
     a designer and manufacturer of a wide range of small household appliances.
     The Company's manufacturing operation is located in Dongguan, the People's
     Republic of China ("China"). The Company's products are sold to the
     customers primarily in the United States of America and Europe.

     The common stock of Global-Tech is listed on the New York Stock Exchange
     under the symbol "GAI".

2    Subsidiaries

     Details of Global-Tech's principal subsidiaries as of 31st March 2002 were
     as follows:

<TABLE>
<CAPTION>
                                                                           Percentage of
                                                                         equity interest
                        Name of subsidiary      Place of incorporation              held                       Principal activities

<S>                                          <C>                            <C>            <C>
     Pentalpha Enterprises Limited ("PEL")   Hong Kong                        100%         Trading of raw materials and
                                                                                             household appliances products

     Kwong Lee Shun Trading Company          Hong Kong                        100%         Provision of management services
        Limited ("KLS")

     Pentalpha Hong Kong Limited ("PHK")     Hong Kong                        100%         Trading of raw materials and
                                                                                             household appliances products

     Dongguan Wing Shing Electrical          China                            100%         Manufacturing of household
        Products Factory Company Limited                                                     appliances products
        ("DWS")

     Wing Shing Products (BVI) Company       British Virgin Islands           100%         Trading of household appliances products
        Limited ("WSPBVI")

     Wing Shing Overseas Limited ("WSO")     British Virgin Islands           100%         Trading of raw materials and
                                                                                             household appliances products

     Global-Tech USA, Inc. ("GTU")           United States of America         100%         Provision of investment - related
                                                                                             services

     Pentalpha Macau Commercial Offshore     Macau                            100%         Trading of household appliances
        Limited ("PMA") **                                                                   products

     Global Lite Array (BVI) Limited         British Virgin Islands         76.75%         Investment holding
        ("GLA") *

     Lite Array (BVI) Company Limited        British Virgin Islands         76.75%         Trading of raw materials and
        ("LA (BVI)") *                                                                       organic and inorganic solid state
                                                                                             flat-panel displays

     Lite Array, Inc. ("LA") *               United States of America       76.75%         Research and development of
                                                                                             organic and inorganic solid state
                                                                                             flat-panel displays
</TABLE>

     *    GLA and LA are newly acquired subsidiaries by the Company. LA (BVI) is
          a newly incorporated subsidiary of GLA. Please refer to note 4 to the
          financial statements - Acquisition of subsidiaries.

     **   PMA is a new subsidiary incorporated during the year ended 31st March
          2002.

                                      F-9

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies

(a)  Basis of consolidation

     The consolidated financial statements include the financial statements of
     Global-Tech and its subsidiaries. All intercompany balances and
     transactions have been eliminated on consolidation.

(b)  Subsidiaries

     Subsidiaries include those majority-owned and controlled domestic and
     foreign subsidiaries. Majority-ownership represents more than 50% of the
     issued voting capital.

(c)  Joint venture

     A joint venture is an entity established between the Company and one or
     more other parties, with the rights and obligations to the joint venture
     partners governed by a contract. The joint venture is accounted for under
     the equity method of accounting.

(d)  Use of estimates

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions. These estimates and assumptions affect the reported amounts of
     assets and liabilities and disclosures of contingent assets and liabilities
     at the date of the financial statements and the reported amounts of
     revenues and expenses during the reporting period. Actual results could
     differ from those estimates.

(e)  Cash and cash equivalents

     Cash equivalents consist of commercial paper and other investments that are
     readily convertible into cash and have original maturities of three months
     or less.

(f)  Short-term investments

     Investments with maturities greater than three months and less than one
     year are classified as short-term investments. Investments with maturities
     greater than one year are classified as long-term investments.

     The Company accounts for investments in accordance with SFAS No. 115:
     "Accounting for Certain Investments in Debt and Equity Securities." All of
     the Company's marketable debt and equity investments are classified as
     available-for-sale as of the balance sheet date and are reported at fair
     value, with unrealized gains and losses, recorded in shareholders' equity
     as a component of other comprehensive income/loss. The cost of securities
     sold is based on the specific identification method. Realized gains or
     losses and other-than-temporary declines in value, if any, are reported in
     the current period in the statements of income and comprehensive income.

(g)  Inventories

     Inventories are stated at the lower of cost and net realizable value. Cost,
     calculated on the first-in first-out basis, comprises materials and, where
     applicable, direct labor and an appropriate proportion of production
     overhead expenditure. Net realizable value is determined on the basis of
     estimated selling prices, less further costs expected to be incurred to
     completion and direct selling and distribution expenses.

                                      F-10

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies (continued)

(h)  Property, plant and equipment

     Property, plant and equipment are stated at cost less accumulated
     depreciation and amortization. Gains or losses on disposal are reflected in
     current operations. Depreciation is calculated on the straight-line or
     reducing balance basis at annual rates estimated to write off the cost of
     each asset over its expected useful life. The annual rates are as follows:

<TABLE>
<CAPTION>
                                                               Annual rate                        Method
                                                   -------------------------------------   ---------------------
<S>                                                <C>                                     <C>
     Leasehold improvements and buildings          Over the remaining lease term           Straight-line
     Plant                                         4.5%                                    Straight-line
     Machinery                                     15%                                     Reducing balance
     Moulds                                        20%                                     Straight-line
     Transportation equipment                      15%-20%                                 Straight-line
     Furniture, fixtures and equipment             15%                                     Straight-line
</TABLE>

     The Company assesses impairment periodically for property, plant and
     equipment when events indicate that future operations will not produce
     sufficient revenue to cover the related future costs. Impairment losses are
     recognized when the sum of expected future net cash flow (undiscounted and
     without interest charges) are less than the carrying amount of the assets.
     Measurement of the impairment loss is based on the fair value of the
     assets.

(i)  Land use rights

     Land use rights are stated at cost less accumulated amortization.
     Amortization is calculated on the straight-line basis over the lease
     period.

(j)  Goodwill

     Goodwill, being the excess of cost over the fair value of the Company's
     share of net assets of subsidiaries acquired, was amortized on a
     straight-line basis using an estimated economic life of 10 years. The
     Company periodically evaluates the existence of goodwill impairment in
     accordance with SFAS No. 121: "Accounting for the impairment of long-lived
     assets and for long-lived assets to be disposed of".

(k)  License

     The license for Organic Light Emitting Diode ("OLED") technology (see Note
     13) was recorded at fair value upon acquisition of LA. The license is being
     amortized on a straight-line basis over the expected future economic life
     of 8 years starting from the date of acquisition.

(l)  Patents

     Patents are stated at the historical cost and are amortized on a
     straight-line basis over the expected future economic lives ranging from 11
     to 20 years.

                                      F-11

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies (continued)

(m)  Sales and revenue recognition

     The Company recognizes revenues in accordance with the Securities and
     Exchange Commission Staff Accounting Bulletin ("SAB") No. 101: "Revenue
     Recognition" which requires that four basic criteria must be met before
     revenue can be recognized: (1) persuasive evidence of an arrangement
     exists; (2) delivery has occurred or services rendered; (3) the fee is
     fixed and determinable; and (4) collectibility is reasonably assured. Sales
     represent the gross invoiced sales, net of discounts and returns, and are
     recognised when goods are shipped and title has passed.

     Deposits or advance payments from customers prior to delivery and passage
     of title of merchandise are recorded as a receipt in advance.

(n)  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 expense as incurred.

(o)  Foreign currencies

     The Company considers the U.S. dollar as its functional currency, as most
     of the Company's business activities are denominated in U.S. dollars.

     Individual subsidiaries maintain their books and records in their
     respective currencies (either in Hong Kong dollars or U.S. dollars). In the
     financial statements of the individual companies, transactions in other
     currencies during the year are translated into the respective currencies at
     exchange rates in effect at the time of the transactions. Monetary assets
     and liabilities denominated in other currencies at any balance sheet date
     are remeasured into the respective currencies at the rates of exchange in
     effect at such balance sheet date. Non-monetary assets and liabilities,
     income and expenses denominated in other currencies are remeasured into the
     respective currencies at the rates of exchange in effect at the time of the
     transactions. Aggregate exchange gains and losses were included in the
     results of operations.

     On consolidation, the financial statements of the subsidiaries are
     translated into U.S. dollars at rates 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 deficit account.

(p)  Operating leases

     Leases where substantially all the rewards and risks of ownership remain
     with the lessor are accounted for as operating leases. Rental payments
     under operating leases are charged to the statement of income on a
     straight-line basis over the period of the relevant leases.

                                      F-12

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies (continued)

(q)  Income taxes

     The Company accounts for income taxes under the provisions of SFAS No. 109:
     "Accounting for Income Taxes" which requires recognition of deferred tax
     assets and liabilities for the expected future tax consequences of events
     that have been included in the financial statements or tax returns.
     Deferred income taxes are provided using the liability method. Under the
     liability method, deferred income taxes are recognized for all temporary
     differences between the tax and financial statement bases of assets and
     liabilities. Deferred tax assets are also recognized for losses carry
     forward. Valuation allowances are established to the extent that deferred
     assets will more likely than not go unrealized.

(r)  Stock-based compensation

     The Company accounts for employee stock options in accordance with
     Accounting Principles Board ("APB") Opinion No. 25: "Accounting for Stock
     Issued to Employees." Compensation expense related to employee stock
     options is recorded only if the fair value of the underlying stock exceeds
     the exercise price on the date of grant. Also, the Company has adopted the
     disclosure-only requirements of SFAS No. 123: "Accounting for Stock-Based
     Compensation," which allows entities to continue to apply the provisions of
     APB Opinion No. 25 for transactions with employees and provide pro-forma
     net income and pro-forma earnings per share disclosures for employee stock
     grants as if the fair-value-based method of accounting as prescribed in
     SFAS No. 123 had been applied to these transactions.

     The Company accounts for stock options granted to a counter party other
     than an employee in accordance with EITF 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 recognised on the measurement date. Measurement date is the
     date at which (i) a commitment for performance by the counterpart to earn
     the equity instruments is reached or (ii) the counter party's performance
     is complete.

(s)  Treasury stock

     The Company accounts for the acquired shares of its own capital stock
     ("treasury stock") in accordance with ARB 43, Chapter 1B and APB Opinion 6.
     The cost of the acquired treasury stock is shown as a deduction from
     capital. When the treasury stock is reissued, an excess of purchase price
     over par or stated value is allocated between additional paid-in capital
     and retained earnings. Gains on sales 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 sales or retirements of the same class
     of stock are included therein, otherwise to retained earnings.

(t)  Comprehensive income

     The Company has adopted SFAS No. 130: "Reporting Comprehensive Income"
     which establishes guidance for the reporting and display of comprehensive
     income and its components. The purpose of reporting comprehensive income is
     to report a measure of all changes in equity that resulted from recognized
     transactions and other economic events of the period other than
     transactions with shareholders. The accumulated other comprehensive deficit
     included in the consolidated balance sheets consists of unrealized loss on
     marketable securities as of the end of each year.

                                      F-13

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies (continued)

(u)  Loss contingencies

     The Company provides for costs related to contingencies when a loss is
     probable and the amount is reasonably estimable. Although management
     believes, after consultation with general counsel, that adequate reserves
     have been provided for all known contingencies, the ultimate cost will
     depend on the resolution of the uncertainties. Therefore, it is possible
     that additional reserves could be required in the future.

(v)  New Statements of Financial Accounting Standards

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 141: "Business combinations" and SFAS No. 142: "Goodwill and Other
     Intangible Assets," effective for fiscal years beginning after 15th
     December 2001. SFAS No. 141 requires that the purchase method of accounting
     be used for all business combinations completed after 30th June 2001. The
     adoption of SFAS No. 141 is not expected to have a material impact on the
     Company's financial statements. SFAS No. 142 requires, among other
     provisions, companies to assess the possible impairment of goodwill
     existing at the date of adoption and perform subsequent impairment tests on
     an annual basis. Additionally, existing goodwill and intangible assets must
     be reassessed and classified consistently in accordance with the
     Statement's criteria. Under this new statement, the Company will no longer
     amortize goodwill but will instead assess goodwill impairment using
     specialized independent advisors.

     Furthermore, under this new Statement, intangible assets with determinable
     useful lives will continue to be amortized over their estimated useful
     lives, which, if supportable, may be a period that exceeds the current
     maximum period of 40 years. Intangible assets with indeterminable useful
     lives will not be amortized but rather, will be assessed for impairment in
     accordance with SFAS No. 144: "Accounting for the Impairment or Disposal of
     Long-Lived Assets". The Company is required to and will adopt SFAS No. 142
     on 1st April 2002. The Company has made a preliminary assessment of
     goodwill and other intangible assets in accordance with the provisions of
     this new Statement, and believes that adoption of SFAS No. 142 will not
     have a material impact on the Company's financial statements.

     In August 2001, FASB issued SFAS No. 143: "Accounting for Asset Retirement
     Obligations". This Statement requires, among other provisions, retirement
     obligations to be recognized when they are incurred and displayed as
     liabilities, with a corresponding amount capitalized as part of the related
     long-lived asset. The capitalized element is required to be expensed using
     a systematic and rational method over its useful life. The Company is
     required to and will adopt SFAS No. 143 on 1st April 2003. The adoption of
     SFAS No. 143 is not expected to have a material impact on the Company's
     financial statements.

                                      F-14

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3    Summary of significant accounting policies (continued)

(v)  New Statements of Financial Accounting Standards (continued)

     In October 2001, FASB issued SFAS No. 144: "Accounting for the Impairment
     or Disposal of Long-Lived Assets". The Statement supersedes SFAS No. 121:
     "Accounting for the Impairment of Long-lived Assets and for Long-Lived
     Assets to be Disposed Of" and modifies APB Opinion No. 30: "Reporting the
     Results of Operations - Reporting the Effects of Disposal of a Segment of a
     Business, and Extraordinary, Unusual and Infrequently Occurring Events."
     For long-lived assets to be held and used, the Statement retains the
     requirements of SFAS No. 121, whereby an impairment loss is recognized if
     the carrying value of the asset is not recoverable from its undiscounted
     cash flows and an impairment loss is measured as the difference between
     fair values and carrying values of the asset. The new Statement requires
     long-lived assets to be disposed of other than by sale to be considered
     held and used until it is disposed of. The Statement also broadens the
     scope of APB 30 provisions for the presentation of discontinued operations
     separately from continuing operations to include a component of an entity
     that either has been disposed of or is classified as held for sale. In
     addition, discontinued operations are no longer measured on a net
     realizable value basis, and expected future operating losses must be
     reflected in the periods incurred, rather than at the measurement date as
     previously required by APB 30. The Company is required to and will adopt
     SFAS No. 144 on 1st April 2002. The adoption of SFAS No. 144 is not
     expected to have a material impact on the Company's financial statements.

     In April 2002, FASB issued SFAS No. 145: "Rescission of FASB Statements No.
     4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
     Corrections". This statement made revisions to the accounting for gains and
     losses from the extinguishment of debt, rescinded Statement No. 44, and
     required certain lease modifications that have economic effects similar to
     sale-leaseback transactions be accounted for in the same manner as
     sale-leaseback transactions. The Company is required to and will adopt SFAS
     No. 145 on 1st April 2003. The adoption of SFAS No. 145 is not expected to
     have a material impact on the Company's financial statements.

     In June 2002, FASB issued SFAS No. 146: "Accounting for Costs Associated
     with Exit or Disposal Activities". The new Statement requires that a
     liability for a cost associated with an exit or disposal activity be
     recognized and measured initially at its fair value in the period in which
     the liability is incurred. The Company is required to and will adopt SFAS
     No. 146 for exit or disposal activities that are initiated after 31st
     December 2002. The Company is in the process of evaluating the effect the
     adoption of this Standard or will have on the consolidated results of
     operations, financial position and cash flows, if any.

(w)  Comparative figures

     Certain balances in the prior period presentation have been reclassified to
     conform with the classification in the current year.

                                      F-15

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4    Acquisition of subsidiaries

     In May of 2001, Global-Tech established a subsidiary, GLA. In one
simultaneously completed transaction (i) the Company contributed approximately
$3,848,000 of cash and approximately $5,653,000 of the convertible notes of LA
into GLA, (ii) GLA invested approximately $3,848,000 directly into LA, (iii) GLA
acquired 100% of the outstanding stock from former shareholders of LA in
exchange for 9.2% of the outstanding shares of GLA, (iv) third party holders of
LA debts exchanged $4.0 million in LA debts for 14% of the outstanding shares of
GLA, and (v) GLA converted all of the convertible notes of LA into LA common
shares. The deemed fair value per share of $0.23 (which was determined by
reference to the per share price of the incremental shares obtained by the
Company in exchange for the $3,848,000 of cash) was ascribed to the 6.7 million
minority interest shares, resulting in a deemed purchase price of approximately
$1.6 million.

     Details of the assets acquired and liabilities assumed are as follows:

<TABLE>
<CAPTION>
                                                                                              US$
     <S>                                                                            <C>
     Net assets acquired:

      Cash and bank equivalents                                                         4,998,155
      Deposits, prepayments and other assets                                               10,058
      Property, plant and equipment                                                       567,478
      License                                                                           4,900,001
      Patents                                                                               2,441
      Interest in a joint venture                                                       3,506,991
      Fees payable for license                                                         (2,600,000)
      Accrued expenses                                                                 (1,362,096)
      Loan from holding company                                                        (2,000,000)
      Short-term bank borrowings                                                         (892,005)
      Goodwill arising on acquisition of LA                                             3,939,788
      Minority interests                                                               (1,570,273)
                                                                                    -------------
                                                                                        9,500,538
                                                                                    -------------

     Satisfied by:
      Conversion of convertible notes                                                   5,652,652
      Cash consideration                                                                3,847,886
                                                                                    -------------
                                                                                        9,500,538
                                                                                    =============
     Net cash inflow from acquisition of subsidiaries:

     Consideration                                                                      9,500,538
     Cash and bank equivalents acquired                                                (4,998,155)
     Conversion of convertible notes                                                   (5,652,652)
                                                                                    -------------
     Net cash inflow in respect of the acquisition of subsidiaries                     (1,150,269)
                                                                                    =============
</TABLE>

                                      F-16

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4    Acquisition of subsidiaries (continued)

     Had the results of operations for the Company included GLA as at 1st April
     2000, the Company's pro forma revenue, net loss and net loss per common
     share would have been as follows:

<TABLE>
<CAPTION>
                                                                                    (Unaudited)
                                                                                 2001             2002
                                                                                  US$              US$
     <S>                                                                 <C>              <C>
     Pro-forma net sales                                                  108,403,257       85,587,836
                                                                         ============     ============

     Pro-forma net profit/(loss)                                              844,455       (3,527,228)
                                                                         ============     ============

     Pro-forma net profit/(loss) per common share                                0.07            (0.29)
                                                                         ============     ============
</TABLE>

5    Cash and cash equivalents

<TABLE>
<S>                                                                      <C>              <C>
                                                                                 2001             2002
                                                                                  US$              US$

     Cash on hand and in bank                                              17,204,322       11,291,873

     Money market fund                                                     11,284,790       37,297,244
                                                                         ------------     ------------
                                                                           28,489,112       48,589,117
                                                                         ============     ============
</TABLE>

6    Short-term investments

     The following is a summary of investment securities as of 31st March 2001
     and 2002:

<TABLE>
<CAPTION>
                                                                                  Net
                                                             Amortized     Unrealized
                                                                  Cost         Losses       Fair Value
                                                                   US$            US$              US$
     <S>                                                    <C>            <C>              <C>
     31st March 2001
     Available-for-sale securities:

     Treasury bills                                         26,692,190              -       26,692,190

     Listed securities                                       1,057,702       (490,758)         566,944

     Other debt securities                                   4,021,297        (59,499)       3,961,798
                                                           -----------    -----------      -----------

                                                            31,771,189       (550,257)      31,220,932
                                                           -----------    -----------      -----------
</TABLE>

                                      F-17

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6    Short-term investments (continued)

<TABLE>
<CAPTION>
                                                                                       Net
                                                             Amortized          Unrealized
                                                                  Cost              Losses         Fair Value
                                                                   US$                 US$                US$
     <S>                                                   <C>                 <C>                <C>
     31st March 2002
     Available-for-sale securities:

     Treasury bills                                                  -                   -                  -

     Listed securities                                           3,145                   -              3,145

     Other debt securities                                   8,872,236            (197,025)         8,675,211
                                                          ------------        ------------       ------------
                                                             8,875,381            (197,025)         8,678,356
                                                          ------------        ------------       ------------
</TABLE>

     The amortized cost and estimated fair value of the debt securities as at
     31st March 2002, by contractual maturity, are shown below.

<TABLE>
<CAPTION>
                                                                                      Cost         Fair value
                                                                                       US$                US$
     <S>                                                                      <C>                <C>
     Due in one year or less                                                     3,072,560          3,081,478

     Due after one year through five years                                       3,773,620          3,565,994

     Due after five years through ten years                                      2,026,056          2,027,739
                                                                              ------------       ------------
                                                                                 8,872,236          8,675,211
                                                                              ============       ============
</TABLE>

7    Accounts receivable, net

<TABLE>
<CAPTION>
                                                                                      2001               2002
                                                                                       US$                US$
     <S>                                                                      <C>                <C>
     Trade receivables                                                           9,396,874         12,364,066

     Less: Allowance for doubtful accounts                                          (7,242)           (45,855)
                                                                              ------------       ------------
                                                                                 9,389,632         12,318,211
                                                                              ============       ============
</TABLE>

     During the year ended 31st March 2002, no trade receivables (2000 - $2,823
     and 2001 - Nil) were written off against the allowance for doubtful
     accounts.

                                      F-18

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8    Related party transactions

     A related party is any party that controls or can significantly influence
     management or operating policies of the Company to the extent that the
     Company may be prevented from fully pursuing its own interests. Such
     parties would include affiliates, investors accounted for by the equity
     method, trusts for the benefit of employees, principal shareholders,
     management, and immediate family members of shareholders or management.

     The Company had the following transactions and balances with related
     parties:

(a)  As of 31st March 2000, 2001 and 2002, the Company incurred annual real
     estate rental expenses of approximately $223,000, $223,000 and $223,000,
     respectively, payable to a related company with a common director.

(b)  In October 1998, the Company extended an unsecured loan of $1,000,000 to a
     U.S. corporation wholly owned by the spouse of an executive employee of the
     Company. The loan was granted to finance its start up costs and working
     capital. The loan bears interest at a fixed annual rate of 7.0% and is
     payable in quarterly installments of approximately $81,000 commencing 28th
     October 2003, with any remaining balance due in full on 28th October 2008.
     The loan plus accrued interest was approximately $1,187,000 and $1,272,000
     as of 31st March 2001 and 2002. The Company provided a reserve of
     approximately $224,000 and approximately $498,000 against the loan and the
     related interest receivable as of 31st March 2001 and 2002. The net amount
     of the loan was included in promissory note receivable on the accompanying
     balance sheet.

(c)  In October 1999, the Company made a loan to an executive employee for the
     purchase of a residence. The loan is in the original principal amount of
     $460,000, bearing interest at a fixed annual rate of 6.02% and is secured
     by a mortgage on the property. As of 31st March 2001 and 2002, the loan
     balance was approximately $384,000 and $306,000 respectively. The loan is
     payable in six years with an annual installment of approximately $77,000 of
     principal together with interest on the unpaid principal balance,
     commencing October 2000; however, such annual payments are forgiven in
     arrears on each payment due date in consideration for the executive
     employee's continued employment by the Company.

(d)  Amount due to a director was non-interest bearing and subsequently paid
     after 31st March 2002.

9    Deposits, prepayments and other assets

     As of 31st March 2001, the amount included the convertible notes of $5
     million plus accrued interest issued by LA, which was exchangeable for the
     common stock of the company. The convertible notes were unsecured, bore
     interest at 8% per annum and were to have matured at various dates on 30th
     June 2003, 2004 and 2005. The conversion right under the convertible notes
     was exercised and converted to the equity shares of LA by GLA, during the
     year ended 31st March 2002 as described in Note 4.

10   Inventories

                                                       2001           2002
                                                        US$            US$

     Raw materials                                8,730,373      5,408,984
     Work-in-progress                             4,297,842      2,777,612
     Finished goods                               1,869,912      1,459,737
                                                 ----------     ----------
                                                 14,898,127      9,646,333
                                                 ==========     ==========

                                      F-19

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11   Property, plant and equipment

                                                          2001             2002
                                                           US$              US$

     Leasehold improvements and buildings           21,159,378       21,456,231
     Plant and machinery                            19,156,055       20,075,499
     Moulds                                          8,117,922        8,950,456
     Transportation equipment                          441,346          416,767
     Furniture, fixtures and equipment               3,177,319        3,400,173
                                                   -----------      -----------
                                                    52,052,020       54,299,126

     Less: Accumulated depreciation                (15,595,952)     (20,100,674)
                                                   -----------      -----------
                                                    36,456,068       34,198,452
                                                   ===========      ===========

     In the current year, an impairment loss of $258,233 (2000 and 2001 : Nil)
     was recognized in the statement of income related to the TFEL business
     (Note 16).

     As of 31st March 2001 and 2002, buildings with a net book value of
     approximately $164,000 and $150,000, respectively, were situated in Hong
     Kong and were held under leases expiring in 2044, and plants with a net
     book value of approximately $18,462,000 and $17,808,000, respectively were
     situated in China and were held under the land use rights of 50 years until
     2043.

     The amount of depreciation charged for the years ended 31st March 2000,
     2001 and 2002 was $3,706,115, $4,323,028 and $4,541,452 respectively.

12   Land use rights

                                                          2001             2002
                                                           US$              US$

     At cost                                         2,802,289        2,818,785

     Less: Accumulated amortization                   (765,312)        (816,648)
                                                   -----------      -----------
                                                     2,036,977        2,002,137
                                                   ===========      ===========

                                      F-20

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13   License

                                                          2001             2002
                                                           US$              US$

     At cost                                                 -        4,900,001

     Less: Accumulated amortization                          -         (583,000)
                                                    ----------       ----------
                                                             -        4,317,001
                                                    ==========       ==========

     The "cost" of the license represents the appraised fair value of the
     license on the date of acquisition of LA. A balance due to the licensor
     remained unpaid as at 31st March 2002. Pursuant to the license arrangement,
     LA shall pay royalties of (i) a fixed percentage of the net sales of
     products which are produced by using the licensed know-how sold by LA and
     its subsidiaries before 1st January 2004, and (ii) the greater of a fixed
     amount or a fixed percentage of the net sales of products, which are
     produced by using the licensed know-how, sold by LA and its subsidiaries
     after 1st January 2004. The subsidiary may terminate the license agreement
     at any time commencing 1st January 2004 before its expiration in 2023. As
     of 31st March 2002, production of licensed products has not commenced.

14   Investment in a joint venture

                                                          2001             2002
                                                           US$              US$

     Share of net liabilities of a joint venture             -         (246,198)
                                                    ----------       ----------

     Details of the joint venture as of 31st March 2002 were as follows:

<TABLE>
<CAPTION>
                                                             Percentage of
                                                             -------------
                                                                  indirect
                                                                  --------
                                 Place of establishment      interest held               Principal activities
                                 ----------------------      -------------               --------------------
<S>                              <C>                         <C>             <C>
     Jiangmen Lite Array (USA)                    China                50%       Manufacturing of organic and
         Electronics Co., Ltd.                                               inorganic solid state flat-panel
                                                                                                     displays
</TABLE>

     Jiangmen Lite Array (USA) Electronics Co., Ltd. is the manufacturing plant
     of the TFEL products and was acquired as part of the acquisition as
     described in Note 4. This joint venture was intended to be the facility for
     manufacturing organic and inorganic solid state flat-panel displays. As
     explained in Note 16, the carrying amount of the identified goodwill in
     connection with the TFEL business was written off in full and the impaired
     long-lived assets were written down to their fair values. The Company also
     shared all of the net liabilities of Jiangmen Lite Array (USA) Electronics
     Co., Ltd., which was held by LA, except for the advances of approximately
     US$2,968,000 granted by the other joint venture partner. As a result, the
     Company shared more than 50% of the net liabilities of Jiangmen Lite Array
     at the end of the year as the Company intended to continue to finance the
     joint venture and would take up all liabilities of the joint venture except
     for the capital and advances contributed by other joint venture partner.
     The Company does not believe that the other joint venture partner will make
     any further financial contribution.

     Summarised condensed balance sheet information for the joint venture are as
     follows:

                                                                            2002
                                                                             US$

     Current assets                                                       63,000

                                      F-21

<PAGE>

     Current liabilities                                            (10,285,000)

     Shareholders' deficit                                           10,222,000

                                      F-22

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14   Investment in a joint venture (continued)

     Included in current liabilities of the joint venture are advances from two
     joint venture partners of approximately US$9,976,000, out of which
     approximately US$7,008,000 was advanced by LA and approximately
     US$2,968,000 was advanced by the other joint venture partner. Consequently,
     the "share of net liabilities of a joint venture" of $246,198 represents
     the excess of the shareholders' deficits over the aggregate advances of
     $9,976,000. The Company has fully written off its advance of $7,008,000.

     Summarised condensed income statement and cash flow information for the
     joint venture are as follows:

                                                                  From 31st May
                                                                  2001 (date of
                                                                acquisition) to
                                                                     31st March
                                                                           2002
                                                                            US$

     Net sales                                                          221,000

     Gross loss                                                      (4,598,000)

     Net loss                                                       (18,534,000)

     Cash outflow from operating activities                          (1,127,000)

     In purchase accounting for the acquisition of LA, the Company's allocation
     of purchase price to the investments in joint venture was approximately
     $6,173,000 lower than the Company's proportionate (50%) shown in the
     historical book value of the net assets of the joint venture due to an
     excess of the historical book value of certain fixed assets in the joint
     venture over their fair value at the date of the Company's acquisition of
     LA. Consequently, when the joint venture wrote down these fixed assets at
     the end of the year, the Company's proportionate interest in the write-down
     was reduced by the approximately $6,173,000 outside basis difference in the
     joint venture resulting from the purchase price allocation. A
     reconciliation is set out as follows:

     50% of net loss                                               $ 9,267,000
     Less-reversal of outside basis difference                      (6,173,000)
     Plus-excess of 50% of shareholders' deficit over the joint
       venture partner advance                                       2,143,000
                                                                   -----------
     Share of loss of a joint venture                              $ 5,237,000
                                                                   ===========
15   Patents

                                                          2001             2002
                                                           US$              US$

     Cost                                               19,364          293,106

     Less: Accumulated amortization                     (6,196)          (7,488)
                                                    ----------      -----------
                                                        13,168          285,618
                                                    ==========      ===========

16   Goodwill

     The goodwill arose from the acquisition of the entire interests in LA in
     May 2001. Goodwill consisted of:

                                                          2001             2002
                                                           US$              US$

     Goodwill                                                -        3,939,788
     Less: Amortization                                      -         (328,316)
            Write-off                                        -       (3,611,472)
                                                    ----------      -----------
                                                             -                -
                                                    ==========      ===========

                                      F-23

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16   Goodwill (continued)

     Goodwill, being the excess of cost over the fair value of LA (see Note 4),
     was amortized during fiscal 2002 on a straight-line basis using an
     estimated economic life of 10 years. At the date of acquisition, the only
     operating business of LA was the manufacturing of Thin Film
     Electroluminescent ("TFEL") products in the manufacturing facility of the
     joint venture (Note 14). Consequently management concluded that the full
     amount of the goodwill arising out of the LA acquisition was attributable
     to the TFEL business. The Company anticipated the TFEL business would be
     profitable at the time of acquisition which was supported by the sales
     forecast and market research and therefore, an additional cash injection of
     approximately $3,848,000 was made. During fiscal year 2002, given that the
     sales expectations of the products had not been met, management revised
     their views on the prospects of the TFEL business and considered that
     certain of its assets were impaired. In assessing for impairment, the
     goodwill was included as part of the TFEL assets using an undiscounted cash
     flow method. Because the undiscounted cash flow method indicated an
     impairment loss, the carrying amount of the identified goodwill was written
     off in full and the impaired long-lived assets were written down to their
     fair values.

17   Short-term bank borrowings

                                                            2001            2002
                                                             US$             US$

     Bank overdrafts                                           -          50,298
     Short-term bank loans                                     -          25,235
                                                     -----------    ------------
                                                               -          75,533
                                                     ===========    ============

     Short-term bank borrowings are denominated in United States dollars and
     bear interest at the range from 7.38% to 13.99% per annum as of 31st March
     2002. They are drawn for working capital purposes.


     As of 31st March 2001 and 2002, certain subsidiaries had banking facilities
     of approximately HK$248,000,000 (equivalent to approximately $31,983,000)
     and HK$277,000,000 (equivalent to approximately $35,707,000), respectively,
     for overdrafts, bank loans, guarantees and letters of credit, of which
     approximately HK$60,992,000 (equivalent to approximately $7,874,000) and
     HK$31,952,000 (equivalent to approximately $4,125,000), respectively, had
     been utilized as follows:



                                                            2001           2002
                                                             US$            US$

     Letters of credit and shipping guarantees         1,539,000      2,378,000
     Bills payable                                       396,000         87,000
     Trust receipt loans                               3,893,000        674,000
     Bank loans                                        2,046,000      1,062,000
                                                     -----------    -----------
                                                       7,874,000      4,201,000
                                                     ===========    ===========


     The banking facilities are denominated in Hong Kong dollars except for a
     fixed loan facility of approximately EUR760,000 and bank overdrafts and
     short-term bank loans of approximately US$50,000 and US$25,000,
     respectively.

                                      F-24

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18   Long-term bank loans

<TABLE>
<CAPTION>
                                                                                      2001                2002
                                                                                       US$                 US$
<S>                                                                            <C>                 <C>
     Bank loans                                                                  2,046,258             986,182
     Less: Amount due within one year included under current liabilities        (1,138,505)           (714,643)
                                                                               -----------         -----------
                                                                                   907,753             271,539
                                                                               ===========         ===========
     Weighted average interest rate at the end of year                                7.31%               3.73%
                                                                               ===========         ===========

     Aggregate maturities of long-term bank loans are as follows:

     Payable during the following periods:

                                                                                                          2002
                                                                                                           US$

     Within one year                                                                                   714,643
     Over one year but not exceeding two years                                                         253,591
     Over two years but not exceeding three years                                                       17,948
                                                                                                   -----------
                                                                                                       986,182
                                                                                                   ===========
</TABLE>

19   Income taxes

     Global-Tech and its subsidiaries are subject to income taxes on an entity
     basis on income arising in or derived from the tax jurisdictions in which
     they are domiciled or deemed to operate.

     Entities subject to Hong Kong profits tax are taxed at a rate of 16% on
     their assessable income.

     The subsidiary established in China (DWS) is subject to income tax at a
     rate of 27% (24% reduced tax rate and 3% local income tax rate, in the open
     coastal areas of China). Current income tax is computed based on the
     taxable income as reported in the statutory financial statements prepared
     under China accounting regulations. DWS is exempt from income tax for two
     years starting from the first profitable year (after utilizing accumulated
     tax loss carry forwards) followed by a 50% exemption for the next three
     years. For tax purposes, DWS has not recognized its first profitable year.

                                      F-25

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19   Income taxes (continued)

<TABLE>
<CAPTION>
                                                                  2000               2001                2002
                                                                   US$                US$                 US$
     <S>                                                   <C>                <C>                 <C>
     Income taxes                                              224,890            513,147           1,373,906
     Deferred income taxes                                           -                  -              42,810
                                                           -----------        -----------         -----------
     Provision for income taxes                                224,890            513,147           1,416,716
                                                           ===========        ===========         ===========
</TABLE>

     The reconciliation of the Hong Kong income tax rate to the effective
     income tax rate based on income (loss) before income taxes stated in
     the consolidated statement of income is as follows:

<TABLE>
<CAPTION>
                                                                  2000               2001                2002
     <S>                                                   <C>                <C>                 <C>
     Hong Kong income tax rate                                    16.0%              16.0%               16.0%
     Non-taxable income arising from offshore
       activities                                                 (5.4%)             (2.2%)              32.0%
     Non-taxable interest income                                  (6.2%)            (18.2%)              10.2%
     Increase in valuation allowance                                 -               20.0%              (27.2%)
     Non-tax deductible expenses
       - Share of loss of a joint venture                            -                  -               (26.4%)
       - Write-off of goodwill                                       -                  -               (18.2%)
       - Others                                                      -                  -                (3.0%)
     Additional tax charge including penalty                         -                  -               (26.7%)
     Deferred taxes                                                  -                  -                (1.3%)
     Others                                                       (1.9%)                -                   -
                                                           -----------        -----------         -----------
     Effective income tax rate                                     2.5%              15.6%              (44.6%)
                                                           ===========        ===========         ===========
</TABLE>

     Deferred income taxes as of 31st March 2001 and 2002 comprised the
     following timing differences:

<TABLE>
<CAPTION>
                                                                                     2001                2002
                                                                                      US$                 US$
     <S>                                                                      <C>                 <C>
     License                                                                            -            (610,000)
     Depreciation on fixed assets                                                 (78,000)           (104,000)
     Operating losses carried forward                                           1,283,000           2,826,000
                                                                              -----------         -----------
                                                                                1,205,000           2,112,000

     Less: valuation allowances                                                (1,205,000)         (2,069,000)
                                                                              -----------         -----------
                                                                                        -              43,000
                                                                              ===========         ===========
</TABLE>

     The Company provided deferred tax liabilities of approximately $43,000
     (2001 - Nil) in the current year which arose from the temporary
     difference on depreciation of fixed assets.

                                      F-26

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19   Income taxes (continued)

     Valuation allowances have been established for net deferred tax assets.
     Management believes that the net deferred tax assets related to DWS are
     more likely than not to go unrealized because DWS has not yet
     recognized its first profitable year. The operating loss carryforward
     of DWS, totaling approximately $911,000, will expire in the next five
     years while for other subsidiaries under Hong Kong tax jurisdiction,
     operating losses of approximately $1,988,000 can be carried forward
     indefinitely.

     In the prior year, the Inland Revenue Department in Hong Kong conducted
     an audit of the tax returns for the tax periods 94/95 to 00/01 of
     certain subsidiaries of the Company. As of 31st March 2002, the tax
     audit was closed with the Company agreeing to pay additional taxes of
     approximately $203,000 and a compound penalty of approximately
     $646,000. The additional tax and penalty were included as part of the
     income tax provision for the year. Subsequent to year end, the full
     amount was settled.

20   Legal and professional fees on potential acquisitions

     The Company incurred approximately $500,000 in legal and professional
     fees in the fiscal year end 2000 in connection with certain activities
     related to potential acquisitions. Although the Company has ceased
     negotiations with respect to those particular transactions, it
     continues to explore the acquisition of other complementary business.
     There can be no assurance that any of these acquisitions will be
     consummated.

21   Write-off of inventory and tooling

     In the fourth quarter of fiscal 2001, the Company determined that a
     number of products specifically dedicated for sale to certain customers
     would no longer be offered for sale to or be purchased by these
     customers primarily due to reorganizations by these customers.
     Accordingly, the specific tooling and dedicated raw material inventory
     (primarily packaging and unique components) for these products were
     written off to the extent of approximately $4,991,000.

22   Loss on cessation of a product line

     The Company ceased manufacturing the personal health care product line
     during the fiscal year 2001. As a result, the Company incurred a loss
     in respect of inventories and tooling write-off of approximately
     $2,523,000.

23   Design and development costs

     Included in selling, general and administrative expenses were design
     and development costs of approximately $1,973,000, $1,845,416 and
     $2,210,886 for the years ended 31st March 2000, 2001 and 2002,
     respectively.

                                      F-27

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24   Share capital

     During the year ended 31st March 2000, Global-Tech reissued (i) 5,001
     shares of treasury stock to three independent consultants in April
     1999, (ii) 30,000 shares to two directors in October 1999 and (iii)
     1,000 shares to another consultant in February 2000.

     During the year ended 31st March 2001, Global-Tech reissued (i) 10,002
     shares of treasury stock to an independent consultant in May 2000, and
     (ii) 1,250 shares to another consultant in December 2000.

     During the year ended 31st March 2002, Global-Tech reissued (i) 1,250
     and 1,250 shares of treasury stock to an independent consultant in June
     2001 and October 2001, respectively and (ii) 1,000 shares to another
     consultant in August 2001.


25   Commitments

 (a) Capital Commitments

     As of 31st March 2002, the Company had capital commitments of
     approximately $935,000 in respect of purchase of fixed assets.

 (b) Operating Lease Commitments

     The Company has various operating lease agreements for parking lots,
     motor vehicles, equipment and real estate which extend through 2007.
     Rental expenses for the years ended 31st March 2000, 2001 and 2002 were
     approximately $505,000, $640,000 and $538,000, respectively. Future
     minimum rental payments as of 31st March 2002 are as follows:

                                                                         2002
                                                                          US$
       Payable during the following periods:

       Within one year                                                501,708
       Over one year but not exceeding two years                      448,890
       Over two years but not exceeding three years                   309,828
       Over three years but not exceeding four years                   22,988
                                                                  -----------
                                                                    1,283,414
                                                                  ===========

 (c) License commitments

     As disclosed in Note 13, a subsidiary of the Company shall pay an
     annual minimum royalty of a fixed amount beginning on 1st January 2004
     and each succeeding 1st January during the license period until the
     license agreement expires. The subsidiary may terminate the license
     agreement at any time commencing January 1, 2004 before its expiration
     in 2023.

                                      F-28

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

26   Employee benefits

 (a) Retirement Fund

     The Company has arranged a defined contribution retirement plan for all
     eligible employees under which the Company and the employees each
     contribute the lower of 5% of the employees' basic salary or HK$1,000.
     The plan is administered and funded by an independent trustee. Salaried
     employees are eligible to participate on the first day of the month
     coincident with or immediately following the date on which they have
     completed the probationary period, provided they are employed on a
     full-time basis. Part-time employees are not eligible for the plan. The
     cost of this plan recognized during the years ended 31st March 2000,
     2001 and 2002 were approximately $147,000, $162,000 and $173,000
     respectively. The Company has no other post-retirement or
     post-employment benefit plans.

 (b) Other Benefits

     The Company provides housing, medical care and subsidized meals to all
     factory employees. The aggregate amounts incurred by the Company for
     such benefits were approximately $525,000, $546,000 and $468,000 during
     the years ended 31st March 2000, 2001 and 2002, respectively.

27   Segment information

     The Company is principally engaged in one reportable segment of
     manufacturing and trading of small household appliances.

 (a) Net sales by geographic areas

                                             2000           2001           2002
                                              US$            US$            US$


      Australia                         5,542,000      1,878,000        706,000
      Europe                           32,429,000     34,957,000     18,753,000
      North America                    51,027,000     67,852,000     62,616,000
      Asia                              2,963,000      2,542,000      2,823,000
      Other Regions                       396,000      1,150,000        662,000
                                    -------------   ------------   ------------
                                       92,357,000    108,379,000     85,560,000
                                    =============   ============   ============

                                      F-29

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

27   Segment information (continued)

(b)  Net sales by product types


<TABLE>
<CAPTION>
                                                               2000            2001            2002
                                                                US$             US$             US$
<S>                                                       <C>            <C>             <C>
     Floor care products                                  2,289,000      26,898,000      37,214,000
     Kitchen appliances                                  60,589,000      58,366,000      36,087,000
     Garment care products                               14,485,000      11,985,000       6,534,000
     Personal, beauty and health care products            8,495,000       4,414,000       2,582,000
     Travel products                                      4,562,000       4,912,000       1,317,000
     Parts and accessories                                  401,000       1,440,000         631,000
     Environmental care products                            332,000         364,000         468,000
     Others                                               1,204,000               -         727,000
                                                        -----------     -----------     -----------
                                                         92,357,000     108,379,000      85,560,000
                                                        ===========     ===========     ===========
</TABLE>


(c)  Long-lived assets*

<TABLE>
<CAPTION>
                                                               2000            2001            2002
                                                                US$             US$             US$
<S>                                                       <C>             <C>             <C>
     Hong Kong and Macau                                  2,038,000       2,239,000       1,932,000
     China                                               27,266,000      36,254,000      33,939,000
     United States of America                                 1,000               -         330,000
                                                        -----------     -----------     -----------
                                                         29,305,000      38,493,000      36,201,000
                                                        ===========     ===========     ===========
</TABLE>

     *    Long-lived assets represent land use rights, property, plant and
          equipment.

(d)  Major customers

     Customers accounting for 10% or more of the Company's sales are as follows:


<TABLE>
<CAPTION>
                                                               2000            2001            2002
                                                                US$             US$             US$
<S>                                                      <C>             <C>             <C>
     Royal Appliance Manufacturing Company                        -      24,866,000      36,119,000
     Morphy Richards Limited                             13,269,000      18,303,000      10,422,000
     Moulinex (Far East) Limited                         11,938,000      14,882,000       2,300,000
     Global Marketing Corp.                               4,589,000       8,525,000      11,831,000
     Sunbeam Corporation                                 15,331,262       6,108,000       2,271,000
                                                        ===========     ===========     ===========
</TABLE>


                                      F-30

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

27   Segment information (continued)

     During the year, the Company recorded 42% (2001: 23%) of total net sales
     and 62% (2001: 27%) of total accounts receivable from Royal Appliance
     Manufacturing Company Limited ("Royal Appliance"). Royal Appliance is an
     unrelated customer. The Company is a contract manufacturer of vacuum
     cleaners which are marketed by Royal Appliance under its brand names. Royal
     Appliance has no purchase commitment to the Company for continuous
     manufacturing of the products.

28   Risk Considerations

     The Company's operations are conducted in Hong Kong and China. As a result,
     the Company's business, financial condition and results of operations may
     be influenced by the political, economic and legal environments in Hong
     Kong and China, and by the general state of the Hong Kong and China
     economies.

     As substantially all of the Company's manufacturing operations are
     conducted in China, the Company is subject to different considerations and
     other risks not typically associated with companies in North America and
     Western Europe. These include risks associated with, among others, the
     political, economic and legal environments and foreign currency exchange.
     The Company's results may be adversely affected by changes in the political
     and social conditions in China, and by changes in governmental policies
     with respect to laws and regulations, anti-inflationary measures, currency
     conversion and remittance abroad, and rates and methods of taxation, among
     other things.

29   Financial instruments

     The carrying amounts of the Company's cash and cash equivalents and
     accounts receivable approximate their fair values because of the short
     maturity of those instruments. The carrying amounts of the bank loans
     approximate their fair values based on borrowing rates currently available
     for bank loans with similar terms and maturities.

30   Stock options

     In September 1996, the Board of Directors adopted Global-Tech's 1996 Stock
     Option Plan (as amended, the "Plan"). The 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 for
     which options may be granted under the Plan is 1,600,000 shares. The
     options vest over varying periods of up to five years and are all
     exercisable for a period of ten years from the date of grant.

     For the year ended 31st March 2000, Global-Tech granted options to purchase
     (i) 50,000 shares of common stock to a consultant with 15,000 shares with
     an exercise price and fair value of $4.75 and $2.11 per share respectively
     and 35,000 shares with an exercise price per share equal to the prevailing
     market price at the time of vesting in April 1999; (ii) 50,000 shares to an
     officer with an exercise price of $5.00 per share in October 1999 and (iii)
     208,100 shares to directors, employees and a consultant in March 2000.
     During the year, an aggregate total of 61,900 shares were forfeited upon
     the resignation of the participants, including 10,000 shares at an exercise
     price of $14.50 and 51,900 shares at an exercise price of $19.00.

                                      F-31

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30   Stock options (continued)

     For the year ended 31st March 2001, Global-Tech granted options to purchase
     (i) 2,500 shares of common stock to a consultant with an exercise price and
     fair value of $5.75 and $2.05 per share respectively in October 2001 and
     (ii) 12,700 shares to ten employees with an exercise price of $6.25 per
     share during the period of April 2000 and March 2001.

     On 10th May 2000, Global-Tech offered employees a voluntary program to
     cancel up to approximately 1,120,000 shares of old options and replaced
     with new options at a lower exercise price of $6.25. For every 100 old
     options with an exercise prices ranging from $5 to $19, the employees may
     surrender for cancellation and will receive 60 new options of replacement
     at an exercise price of $6.25. The vesting schedule and life for these
     exchanged stock options remain unchanged. As of 31st March 2001, 911,100
     old options with an exercise price ranging from $5 to $19 were cancelled
     and 708,175 new options with an exercise price of $6.25 were granted on
     exchange. As a result of this repricing, 866,975 options are subject to
     variable accounting prospectively. In addition, no incremental compensation
     cost was recognised at the date of the repricing or for the year ended 31st
     March 2001 or 2002 under variable accounting as the exercise prices are
     above fair market value.

     During the fiscal 2001, an aggregate total of 65,300 shares were forfeited
     upon the resignation of the participants, including 27,800 shares at an
     exercise price of $19 and 37,500 shares at an exercise price of $6.25.

     For the year ended 31st March 2002, Global-Tech granted options to purchase
     (i) 50,000 shares of common stock to a consultant with an exercise price
     and fair value of $4.75 and $1.51 per share respectively in May 2001; (ii)
     12,000 shares to a new director with an exercise price of $6.25 per share
     during the period of June 2001 and 300,000 shares to 3 directors with an
     exercise price of $4.75 per share in May 2001. During the year, an
     aggregate total of 88,187 shares were forfeited upon the resignation of the
     participants,including 17,520 shares at an exercise price of $6.25; 16,667
     shares at an exercise price of $4.75; 50,000 shares of an exercise price of
     $19.375 and 4,000 shares at an exercise price of $19.


     The Plan is administered by the Board of Directors or a committee of
     outside directors appointed by the Board of Directors, which will determine
     the terms of options, including the exercise price, the number of 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. 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 Incentive Stock Option must be not less than 110% of
     the fair market value on the date of grant. The term of each option granted
     pursuant to the Plan may be established by the Board of Directors, or a
     committee of the Board of Directors, in its sole discretion; provided,
     however, that the maximum term of each Incentive Stock Option granted
     pursuant to the Plan is 10 years. With respect to any Incentive Stock
     Option 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.

                                      F-32

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30   Stock options (continued)

     In conjunction with the acquisition of LA on 31st May 2001 (see Note 4),
     GLA has established a stock option plan on the date of acquisition. The
     shares issued under this plan are based on the shares of the GLA subsidiary
     and not of the Company. Under this plan, the following options to purchase
     shares were granted on 31st May 2001.

     465,000 options in GLA at an exercise price of $1.50 per share, issued in
     exchange for equivalent LA options held by former employees of LA. These
     options have a vesting period of three to four years beginning from the
     date of grant by LA and expire five years from the date of grant by LA.

     1,295,000 options in GLA at an exercise price of $0.20 per share, issued to
     the president of GLA as consideration for entering into an employment
     contract. These options vest on 31st May 2003 and expire on 31st May 2006.

     2,432,003 options in GLA at an exercise price of $0.20 per share, issued to
     employees of GLA, including the president. These options vest upon GLA
     achieving certain goals, which have not been met to date, and expire on
     31st May 2006.

     800,000 options in GLA at an exercise price of $0.34 per share, issued to
     four directors. These options have a vesting period of three years and
     expire ten years from the date of grant.

     2,000,000 options in GLA at an exercise price of $0.34 per share, issued to
     the president of GLA. These options will only vest upon achieving certain
     specific goals at the company's joint venture. Such goals were not achieved
     and the options expired as of 30th November 2001.

     Of the options granted by GLA above, 120,000 at an exercise price of $1.50
     and 80,000 at an exercise price of $0.20 have been forfeited as of 31st
     March 2002.

                                      F-33

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30   Stock options (continued)

     Changes in outstanding options under the plan during the year ended 31st
     March 2002 are as follows:

<TABLE>
<CAPTION>
                                                       2000                                              2001
                                                                         Weighted-                                       Weighted-
                                                  Exercise price           average                  Exercise price         average
                                         Options           range   excercise price        Options            range  exercise price
                                                              US$               US$                             US$             US$
     <S>                               <C>        <C>              <C>                  <C>         <C>             <C>
     Outstanding, beginning of year      873,800    8.31 - 19.00             14.28      1,120,000     4.75 - 19.00           12.16

     Granted                             308,100    4.75 - 19.00              7.35        723,375     5.75 -  6.25            6.24

     Cancelled on exchange                     -         -                       -       (911,100)    5.00 - 19.00           12.92

     Exercised                                 -         -                       -             -           -                  -

     Forfeited                           (61,900)  14.50 - 19.00             18.27        (65,300)    6.25 - 19.00           15.58
                                   -------------   -------------     -------------  -------------    -------------   -------------
     Outstanding, end of year          1,120,000    4.75 - 19.00             12.16        866,975     4.75 - 19.00            6.16
                                   =============   =============     =============  =============    =============   =============
     Exercisable, end of year            557,005    4.75 - 19.00             13.60        576,238     4.75 - 19.00            6.30
                                   =============   =============     =============  =============    =============   =============
<CAPTION>
                                                        2002
                                                                         Weighted-
                                                   Exercise price          average
                                         Options            range   exercise price
                                                               US$              US$
     <S>                               <C>         <C>              <C>
     Outstanding, beginning of year      866,975     4.75 - 19.00             6.16

     Granted                             362,000     4.75 -  6.25             4.14

     Cancelled on exchange                     -          -                      -

     Exercised                                 -          -                      -

     Forfeited                           (88,187)    4.75 - 19.38            13.99
                                   -------------    -------------    -------------
     Outstanding, end of year          1,140,788     4.75 - 19.00             5.84
                                   =============    =============    =============
     Exercisable, end of year          1,030,698     4.75 - 19.00             5.73
                                   =============    =============    =============
</TABLE>

<TABLE>
<CAPTION>
                 Option Outstanding as of 31st March 2002                            Option Exercisable as of 31st March 2002
                                              Weighted-Average
                                                     Remaining      Weighted-Average                          Weighted-Average
                         Range of Exercise    Contractual Life    Exercise Price per                        Exercise Price per
               Options    Price per Option             (years)                Option            Options                 Option
        <S>              <C>                  <C>                 <C>                    <C>                <C>
             1,139,788         4.75 -  6.25               7.22                  5.76          1,029,698                   5.72
                 1,000                19.00               6.00                 19.00              1,000                  19.00
        --------------      ---------------      -------------        --------------     --------------         --------------
             1,140,788        4.75  - 19.00               7.22                  5.77          1,030,698                   5.73
        --------------      ---------------      -------------        --------------     --------------         --------------
</TABLE>

     The Company accounts for stock-based compensation using the intrinsic value
     method prescribed by Accounting Principles Board ("APB") Opinion No. 25,
     under which no compensation cost for stock options is recognized for stock
     option awards granted to employees with an exercise price at or above fair
     market value. No employee compensation cost is recognized in accordance
     with APB Opinion No. 25 as at 31st March 2001 and 2002 as the exercise
     prices are above the fair market value. However, expense for options issued
     to a consultant was recorded at the fair value of the options, measured
     using the Black-Scholes option-pricing model in accordance with SFAS No.
     123. Had employee compensation expense for the Company's stock-based
     compensation plan been determined based upon fair values at the grant dates
     in accordance with SFAS No. 123, the Company's pro forma net income and net
     income per common share would have been as follows.

<TABLE>
<CAPTION>
                                                                  2000              2001              2002
                                                                   US$               US$               US$
     <S>                                                 <C>               <C>               <C>
     Net income (loss)                                       8,732,571         2,769,326        (3,002,617)
                                                         =============     =============     =============

     Pro-forma net income (loss)                             7,684,000           603,564        (3,021,344)
                                                         =============     =============     =============

     Net income (loss) per common share                           0.72              0.23             (0.25)
                                                         =============     =============     =============

     Pro-forma net income (loss) per common share                 0.63              0.05             (0.25)
                                                         =============     =============     =============

     Weighted average number of shares outstanding          12,109,136        12,134,846        12,139,564
                                                         =============     =============     =============
</TABLE>

                                      F-34

<PAGE>

     GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30   Stock options (continued)

     The fair value per option granted during the year ended 31st March 2000,
     2001 and 2002 is estimated on the date of grant using the Black-Scholes
     option-pricing model to be $5.063, $2.588 and $2.143, respectively, on
     weighted average basis. The fair value of the options granted is estimated
     on the date of grant using the following assumptions:


<TABLE>
<CAPTION>
                                                         2000          2001           2002
     <S>                                              <C>            <C>            <C>
     Risk-free interest rate                            6.01%          4.92%          4.67%
     Expected dividend yield                               0%             0%             0%
     Expected option life                             8 years        7 years        7 years
     Expected stock price volatility                    55.9%          53.9%         30.38%
</TABLE>

31   Contingent liabilities

     The Company is engaged in patent infringement litigation over the designs
     of certain of its products. Management with the advice of legal counsel
     believes that the likelihood of a negative effect on the Company's
     operating results is remote.

32   Net earnings (loss) per common share

     Earnings or loss per common share is computed in accordance with SFAS No.
     128: "Earnings Per Share," by dividing the net income or loss by the
     weighted average number of common shares outstanding during the year.

                                      F-35

<PAGE>

                                  EXHIBIT INDEX

  Exhibit
   Number                          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 3.2 to the Registration
                  Statement.)

    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.*

    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.)

    4.13       Supplemental advice letter dated June 1, 2000 from Standard
                  Chartered Bank. (Incorporated herein by reference to Exhibit
                  4.12 to Global-Tech's Annual Report on Form 20-F for the
                  fiscal year ended March 31, 2001.)

    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.)

                                      E-1

<PAGE>

    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.*

    8.1        Subsidiaries of the Company.*

-------------

*     Filed herewith.

                                      E-2