SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 December 31, 2002

                           Commission File No. 1-14742









                          JINPAN INTERNATIONAL LIMITED

      (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)

                   C/O HAINAN JINPAN SPECIAL TRANSFORMER WORKS
                                   SECTION D-2
                             NO. 100 INDUSTRY AVENUE
                             JINPAN DEVELOPMENT AREA
                               HAIKOU, HAINAN PRC
                    (Address of principal executive offices)


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

                         COMMON STOCK, $0.018 PAR VALUE
                                (Title of Class)

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

                                      None.

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

                                      None.

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

                                3,149,389 SHARES

         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|


<PAGE>



                                TABLE OF CONTENTS
                                -----------------

                                                                           Page
                                                                           ----


Item 1.  Identity of Directors, Senior Management and Advisors               3
Item 2.  Offer Statistics and Expected Timetable                             3
Item 3.  Key Information                                                     3
Item 4.  Information on the Company                                          13
Item 5.  Operating Financial Review and Prospects - Management's
         Discussion and Analysis                                             26
Item 6.  Directors, Senior Management and Employees                          33
Item 7.  Major Shareholders and Related Party Transactions                   36
Item 8.  Financial Information                                               37
Item 9.  Offer and Listing                                                   37
Item 10. Additional Information                                              38
Item 11. Quantitative and Qualitative Disclosure About Market Risk           41
Item 12. Description of Securities Other than Equity Securities              41
Item 13. Defaults, Dividend Arrearages and Delinquencies                     41
Item 14. Material Modifications to the Rights of Security Holders
         and Use of Proceeds                                                 42
Item 15. Controls and Procedures                                             42
Item 16.          [Reserved]                                                 42
Item 17. Financial Statements                                                42
Item 18. Financial Statements                                                42
Item 19. Exhibits                                                            42






<PAGE>


                                     PART I

CURRENCY TRANSLATION
--------------------

         We, Jinpan International Limited, together with our 85% owned
subsidiary Hainan Jinpan Special Transformer Works, a Sino-foreign cooperative
joint venture, and Hainan Jinpan's predecessor, Haikou Jinpan Special
Transformer Works, are referred to in this annual report collectively as "we",
unless Jinpan International, Hainan Jinpan or Haikou Jinpan are specifically
referenced. We prepare our financial statements in accordance with U.S. GAAP. We
publish our financial statements in Renminbi Yuan, which are referred to in the
financial statements as "RMB" or "Renminbi", the lawful currency of the People's
Republic of China. For the reader's convenience, some financial information has
been translated from Renminbi to the U.S. Dollar, referred to herein as "U.S.$"
using the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York on December 31, 2002, of RMB 8.28 = U.S.$1.00. The dollar amounts reflected
in these convenience translations should not be construed as representing
amounts that actually can be received or paid in dollars or convertible into
dollars (unless otherwise indicated), nor do such convenience translations means
that the Remnibi amounts (i) actually represent the corresponding dollar amounts
stated, or (ii) could be converted into dollars at the assumed rate.


ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Information not required in Annual Report on Form 20-F.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Information not required in Annual Report on Form 20-F.

ITEM 3.  KEY INFORMATION

SELECTED FINANCIAL DATA
-----------------------

         The following selected financial data should be read in conjunction
with Item 5, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and notes
included in this annual report.

         Set forth below is selected consolidated financial data with respect to
our statements of operations for the years ended 2002, 2001, 2000, 1999 and
1998. Year-end data for the years ended 1999 and 1998 was derived from our
Consolidated Financial Statements audited by Arthur Andersen & Co., Hong Kong,
independent public accountants. Year-end data for the years ended 2002, 2001 and
2000 was derived from our Consolidated Financial Statements audited by Ernst &
Young, Hong Kong, independent public accountants, whose report for the years
ended December 31, 2002, December 31, 2001 and December 31, 2000, is included
elsewhere in this report.



                                      -3-
<PAGE>


<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                 ---------------------------------------------------------------------------------------------

                                     1998           1999            2000             2001          2002
                                 ------------   ------------     ------------    ------------    -----------     -------------
                                     RMB            RMB              RMB             RMB            RMB            U.S.$(1)
                                 ------------   ------------     ------------    ------------    -----------     -------------
                                                    (Amounts in thousands, except net income per share data)

Income Statement Data:
<S>                                  <C>             <C>                <C>        <C>             <C>                <C>
   Sales                             81,993          106,800            141,264    184,480         229,421            27,720
   Costs of goods sold              (46,954)         (56,691)           (73,869)  (104,686)       (128,770)          (15,557)
   Gross profit                      35,039           50,109             67,395     79,794         100,651            12,163

   Selling and
   administrative  expenses         (25,575)         (38,497)           (50,744)   (57,396)        (81,325)           (9,828)

   Interest Expenses                   (612)            (385)              (925)      (600)           (541)              (65)

   Other income                       6,881            7,849              7,824      8,413          14,186             1,715

   Income before taxation            15,733           19,076             23,550     30,211         32,971               3,985


   Income Tax                           361           (1,285)            (2,385)    (2,911)         (3,116)             (377)
   Income before Minority            16,094           17,791             21,165     27,300          29,855             3,608
   Interest
   Minority interest                 (2,933)          (3,608)            (4,427)    (4,229)         (4,972)             (601)
   Net income                        13,161           14,183             16,738     23,071          24,883             3,007

   Earnings (loss) per share:

   basic                               4.41             4.51               5.31       7.33            7.92              0.96
   fully diluted                       4.37             4.48               5.29       7.29            7.89              0.95
   Number of shares outstanding:
   basic                          2,982,409        3,142,567          3,149,389  3,149,389       3,139,933         3,139,933
   fully diluted                  3,011,623        3,163,178          3,163,178  3,163,178       3,153,722         3,153,722



                                      December        December       December       December         December
                                      31, 1998        31, 1999       31, 2000       31, 2001         31, 2002
                                    ------------    ------------   ------------   ------------   -------------------

                                        RMB             RMB             RMB             RMB       RMB        U.S.$(1)
Balance Sheet Data:
   Cash and cash equivalents            19,251          41,556         36,560          44,510     63,800      7,710
   Total assets                        129,571         145,685        168,142         203,711    267,261     32,291
   Minority interest                     4,916           5,224         11,506           7,028     10,899      1,317
   Equity                              106,994         121,555        137,412         160,464    184,604     22,303

</TABLE>
--------------------
(1) For your convenience, translation of amounts from Renminbi into U.S. dollar
has been made at the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve Bank
of New York on December 31, 2002 of RMB8.28 = U.S.$1.00. No representation is
made that the Renminbi amounts could have been, or could be, converted into U.S.
dollar at that rate or at any other established rate.





                                      -4-
<PAGE>


FORWARD LOOKING STATEMENTS
--------------------------

         This annual report contains some forward-looking statements, which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified by the use of forward-looking words like "may",
"will", "except", "anticipate", "intend", "estimate", "continue", "believe" or
other similar words. Similarly, statements that describe our future
expectations, objectives and goals or contain projections of our future results
of operations or financial condition are also forward-looking statements. Our
future results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors described herein.

RISK FACTORS
------------

         RISKS RELATED TO OUR BUSINESS

         THE CONTINUED EXISTENCE OF OUR JOINT VENTURE IS CONTINGENT ON CERTAIN
FACTORS. We were established for an initial term of 50 years, which may be
extended by the mutual consent of the parties to the joint venture agreement,
subject to the approval of the relevant Chinese Government authorities. In the
event that our term is not extended, the joint venture will be dissolved and
liquidated pursuant to the provisions of applicable law and the joint venture
agreement. In addition, we may be terminated prior to the expiration of the
joint venture agreement upon the occurrence of certain events, including,
without limitation, the inability of the enterprise to conduct its business due
to financial losses or a breach of the joint venture agreement by one of the
parties thereto.

         BECAUSE A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM SALES OF
OUR CAST RESIN TRANSFORMERS, ANY DECREASE IN SALES COULD HARM OUR OPERATING
RESULTS. Sales generated by cast resin transformers will continue to account for
virtually all of our revenues. Accordingly, our business and results of
operations are dependent on the demand for this single product and any decrease
in the demand for such product, whether as a result of competition,
technological changes, economic conditions in China or other factors, or
restrictions on our ability to market this product for any reason, would have a
material adverse effect on our business, financial condition and results of
operations.

         ACCIDENTS INVOLVING THE USE OF OUR TRANSFORMERS COULD RESULT IN INJURY
TO OUR CUSTOMERS, EXPOSE US TO FINANCIAL LIABILITY AND ADVERSELY AFFECT OUR
MARKETING ABILITY. Although we have never experienced a significant accident
such as a fire or an explosion resulting from the operation of our transformers
and we generally believe that our transformers are safe and do not pose a
significant risk of combustion, fire or explosion, there can be no assurance
that an accident will not occur, which may cause injury or damage to the users
of our transformers, exposing us to potential claims or liabilities or which may
damage our reputation among potential customers, resulting in a potential
adverse effect on our ability to market our products.

         CHANGES IN CHINA'S PRESENT POLICY OF ECONOMIC REFORM AND ITS PRESENT
MECHANICS OF ECONOMIC PROTECTION FOR FOREIGN INVESTMENT ENTERPRISES COULD HARM
OUR OPERATING RESULTS.. As part of its economic reform, China has designated
certain areas, including Hainan Province, where we maintain our offices and
manufacturing facilities, as Special Economic Zones ("SEZs"). Foreign investment
enterprises in these areas generally benefit from greater economic autonomy and
more favorable tax treatment in China. Although we are not aware of any pending
or proposed changes in the policies or laws governing SEZs, which could have a
material adverse effect on our business, financial condition and results of
operations, there can be no assurance that such a change will not occur.



                                      -5-
<PAGE>

         IF ANY OF OUR CURRENT SUPPLIERS DELAY, INTERRUPT OR HALT SUPPLY WE
COULD BE FORCED TO OBTAIN OUR RAW MATERIALS AT AN INCREASED COST FROM AN
ALTERNATIVE SOURCE. The principal raw materials we require in our business are
cast resin used to coat the copper coils of our transformers, silicon steel
which comprises the cores of our transformers and copper foil for our copper
foil windings. We obtain all of our requirements for cast resin from Bakelite, a
German corporation, silicon steel from Nippon Steel and Kawasaki Steel, both
Japanese companies and UGO, a European company, and copper foil from Mansfelder
Kupfer and Messign GmbH ("MKM") and KM Europe Metals ("KME"), both German
companies and Luoyang Copper (Group) Co. Ltd. in China. Although we usually have
a two to three month supply of these raw materials in our inventory and we
believe that we are able to obtain our cast resin, silicon steel or copper foil
materials from several other companies besides our current suppliers, if we were
to experience significant delays, interruptions or reductions in the supply of
cast resin, silicon steel or copper foil, we could be faced with increased costs
and our results of operations could be materially adversely affected.

         Other raw materials we require for the manufacture of our products
include copper wire, glass fiber and quartz powder. We maintain at least two
suppliers for each of our major raw materials other than cast resin in order to
allow enhancement of our ability to obtain an adequate supply of high quality,
competitively-priced raw materials. We purchase copper wire, glass fiber and
quartz powder from local suppliers in nearby regions and believe that these
materials are readily available. We have never experienced any disruption in the
supply of any raw material that has had a material impact on our operations
although we cannot be certain that a disruption in supply by our raw material
supplies will not occur in the future. If such disruption shall occur and we
were to experience significant delay in the supply of these materials, our
results of operations could be materially adversely affected.

         COMPETITION WITH OTHER LARGE AND SMALL TRANSFORMER MANUFACTURERS COULD
RESULT IN DOWNWARD PRESSURE ON PRICES AND LOSS OF MARKET SHARE. WE MAY ALSO FACE
COMPETITION FROM FOREIGN COMPANIES. The market for cast resin transformers in
China is highly competitive and we expect competition to increase in the future.
We believe that we primarily compete with several large transformer
manufacturers as well as a number of small transformer manufacturers. Most of
our competitors are government-owned entities. A number of our competitors have
greater name recognition and more extensive engineering, manufacturing and
marketing capabilities than we do. Our future success will largely depend on our
marketing efforts and ability to expand production capacity. Although price has
not historically been a major factor in competing against other cast resin
transformer manufacturers, it does remain a factor in competing against
oil-filled transformer manufacturers and other more traditional, less expensive
transformer devices. Increased competition could result in price reductions or
loss of market share, which would adversely affect our business, results of
operations or financial condition. Foreign companies do not currently compete
against us in the transformer market in China due to high production costs.
There can be no assurance, however, that foreign manufacturers will not enter
into such joint venture arrangements or establish such wholly foreign-owned
enterprises, which would subject us to increased competition with foreign
companies and adversely affect our operations. We believe that the principal
competitive factors affecting the market in China include, in order of
significance, product reputation, product performance and safety, product
quality, marketing expertise and product price. There can be no assurance that
we will be able to compete successfully in the future with existing or new
competitors. Following entry into the WTO, we may have additional competitors,
in China such as ABB, Siemens and Alstom.

         WE MAY FACE PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN COSTLY
LITIGATION AND DIVERT THE ATTENTION OF OUR MANAGEMENT. Our business exposes us
to potential liability risks that are inherent in the manufacturing and
marketing of potentially dangerous electrical equipment. We do not currently
maintain



                                      -6-
<PAGE>

product liability insurance in respect of our products, consistent with industry
practice in China. There can be no assurance that a product liability claim
would not adversely affect our business, operating results or financial
condition.

         IF WE ARE UNABLE TO MAINTAIN OUR EXPERTISE IN MANUFACTURING PROCESSES
AND IDENTIFY NEW TECHNOLOGIES AS THEY ARISE WE WILL BE UNABLE TO COMPETE
SUCCESSFULLY. The electrical transformer industry may be subject to changing
technology, evolving industry standards, emerging competition and innovative
product introductions. Although we are not presently aware of a more advanced
technology than we currently possess, there can be no assurance that we can
successfully identify new technologies as they arise and develop and bring new
products and services to the market in a timely manner or that products,
services or technologies developed by others will not render our products,
services or technologies noncompetitive, obsolete or less marketable.

         WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS BY THIRD PARTIES THAT COULD
SUBJECT US TO FINANCIAL LIABILITY OR LIMIT OUR PRODUCT OFFERINGS AND OUR
COMPETITIVE POSITION COULD BE HARMED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY. We own the rights to the trademark "JST", which is
registered with the Trademark Bureau of the State Administration of Industry and
Commerce of China. We believe that this trademark has significant value and is
important to our marketing and expansion efforts. However, with regard to our
trademark, any other future trademarks or printed materials, we cannot be sure
that any one or all of the following scenarios has not occurred or will not
occur, any one of which could have a material adverse effect upon us:

         o        we will not be able to register other names or service marks
                  we may consider important;

         o        our currently registered trademark, any future trademark or
                  printed materials currently does or will violate the
                  proprietary rights of others;

         o        our trademarks would not be upheld by the Chinese government
                  or its judicial system if challenged;

         o        we will be prevented from using our trademarks or other
                  printed materials; or due to the fact that enforcement of our
                  proprietary rights or the defense against the proprietary
                  claims of others could be extremely costly, we may not have
                  the financial resources necessary to enforce or defend our
                  trademarks.

         IF WE LOSE OUR KEY PERSONNEL, OUR ABILITY TO OPERATE OUR COMPANY AND
OUR RESULTS OF OPERATIONS MAY SUFFER. Our success is largely dependent upon our
ability to hire and retain additional marketing personnel. We employ highly
qualified employees but competition for qualified personnel is intense, and
there can be no assurance that we will be able to hire or retain additional
qualified marketing personnel. Any inability to attract and retain qualified
marketing personnel will have a material adverse effect on us.

         OUR GROWTH MAY BE SLOW IF THE DEMAND FOR ELECTRIC POWER IN CHINA DOES
NOT CONTINUE. Demand for our products is linked closely to increased demand for
electric power in China. While such demand has experienced tremendous growth
over the past several years, there can be no assurance that such growth will
continue. Any material decline in the use of electricity in China is likely to
have an adverse impact on our business.

         BRITISH VIRGIN ISLANDS LAW IS LESS DEFINED THAN THE LAWS GOVERNING
CORPORATIONS ORGANIZED IN THE UNITED STATES AND MAY PROVIDE LESS PROTECTION FOR
SHAREHOLDERS. Our corporate affairs are governed by



                                      -7-
<PAGE>

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 our
management, directors and controlling shareholders and the rights of our
shareholders differ from those that would apply if we were incorporated in a
jurisdiction within the United States. Further, the rights of shareholders under
British Virgin Islands law are not as clearly established as the rights of
shareholders under legislation or judicial precedent in existence in most United
States jurisdictions. Thus, our public shareholders may have more difficulty in
protecting their interests in the face of actions by our management, directors
or controlling shareholders than they might have as shareholders of a
corporation incorporated in a United States jurisdiction.

         BRITISH VIRGIN ISLANDS LAW DOES NOT PROVIDE FOR DIRECTORS TO HAVE
FIDUCIARY DUTIES TO THE CORPORATION AND ITS SHAREHOLDERS RATHER, A DIRECTOR'S
LIABILITY IS GENERALLY LIMITED TO CASES OF WILLFUL MALFEASANCE IN THE
PERFORMANCE OF A DIRECTOR'S DUTIES. Under the laws of most jurisdictions in the
United States, majority and controlling shareholders generally have certain
"fiduciary" responsibilities to the minority shareholders. Shareholder action
must be taken in good faith and actions by controlling shareholders, which are
obviously unreasonable may be declared null and void. British Virgin Islands law
protecting the interests of minority shareholders may not be as protective in
all circumstances as the law protecting minority shareholders in United States
jurisdictions. In addition, in most United States jurisdictions, directors owe a
fiduciary duty to the corporation and its shareholders, including a duty of
care, pursuant to which directors must properly apprise themselves of all
reasonably available information, and a duty of loyalty, pursuant to which they
must protect the interests of the corporation and refrain from conduct that
injures the corporation or its shareholders or that deprives the corporation or
its shareholders of any profit or advantage. Under British Virgin Islands law,
liability of a corporate director to the corporation is basically limited to
cases of willful malfeasance in the performance of his duties or to cases where
the director has not acted honestly and in good faith and with a view to the
best interests of the corporation.

         DIRECTORS OF BRITISH VIRGIN ISLANDS COMPANIES MAY ACT WITHOUT
SHAREHOLDER APPROVAL TO IMPLEMENT REORGANIZATIONS, CERTAIN MERGERS OR
CONSOLIDATIONS, ASSET SALES OR TRANSFERS AND THE DISSOLUTION OF A COMPANY. The
directors of a British Virgin Islands company, subject to court approval but
without shareholder approval, may, among other things, implement a
reorganization, certain mergers or consolidations, the sale, transfer, exchange
or disposition of any assets, property, part of the business, or securities of
the company, the winding-up or dissolution of the company, or any combination
thereof, if they determine it is in the best interests of the company, its
creditors, or its stockholders.

         BRITISH VIRGIN ISLANDS COURTS MAY NOT ENFORCE JUDGMENTS RENDERED BY
UNITED STATES COURTS. There is doubt that the courts of the British Virgin
Islands would enforce, either in an original action or an action for enforcement
of judgments of United States courts liabilities which are predicated upon the
securities laws of the United States.

         RISKS RELATED TO OUR CHINESE OPERATIONS

         WE MAY BE SUBJECT TO THE POLITICAL, ECONOMIC, LEGAL AND OTHER
UNCERTAINTIES OF CHINA, WHICH IS A SOCIALIST STATE CONTROLLED BY THE COMMUNIST
PARTY OF 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. Furthermore, because economic
reforms and growth in China have been more successful



                                      -8-
<PAGE>

in some provinces than in others, the continuation or increase of these economic
disparities could affect political or social stability.

         China is considered to be a high risk nation for business and
investment in the Asian region. Although China recently has permitted greater
provincial and local economic autonomy and private economic activity, the
government of China has exercised and continues to exercise substantial control
over virtually every aspect of the Chinese economy through regulation and state
ownership. Therefore, government action in the future, including any decision by
the Chinese government not to continue to support the economic reform program
that it commenced in the late 1970's and the possible return of China to the
more centrally-planned economy that existed prior to the economic reforms, could
have a significant effect on economic conditions in China and on our operations.
China's economic reform plan was designed to bring into China foreign investment
capital and technological advancements. The result of these reforms has been a
move towards a more mixed economy and away from a more centrally-planned
economy. The process of shifting more of the responsibility for various aspects
of economic enterprise to local management and regional authorities continues,
even though the system of Chinese socialism still involves considerable
influence by the central government in regard to the economic areas of
production and marketing.

         Because we are a foreign company conducting our operations and owning
assets primarily in China, our operations and assets are subject to the
following uncertainties which affect companies operating in China:

         o        political,

         o        economic,

         o        legal, and

         o        other uncertainties.

         The economy of China differs from the economics of most countries
belonging to the Organization for Economic Co-operation and Development
("OECD"), in such respects as structure, government involvement, level of
development, growth rate, capital reinvestment, allocation of resources, rate of
inflation and balance of payments position. China's economy is managed in part
through a series of five-year economic and social development plans, each a
"Five-Year Plan" formulated by the State Council and approved by the National
People's Congress. Each Five-Year Plan sets overall agricultural, industrial,
financial and other economic and social development targets. In implementing
each Five-Year Plan, the State Planning Commission, a commission directly under
the State Council, establishes annual production and development targets,
formulates and supervises the implementation of annual plans designed to achieve
those targets and approves major economic projects. Although the majority of
productive assets in China are still owned by the Chinese Government, in the
past several years the Chinese Government has implemented economic reform
measures that emphasize decentralization, the utilization of market forces in
the development of the Chinese economy and the encouragement of private economic
activity. Such economic reform measures may be inconsistent or ineffectual and
we may not be able to capitalize on all such reforms. Further, there can be no
assurance that the Chinese Government will continue to pursue such policies,
that such policies will be successful if pursued, that such policies will not be
significantly altered from time to time or that business operations in China
would not become subject to the risk of nationalization, which could result in
the total loss of investments in that country.



                                      -9-
<PAGE>

         Since 1978, the Chinese Government has been reforming its economic
systems. Many of the reforms are unprecedented or experimental and are expected
to be refined and improved. Other political, economic and social factors, such
as political changes, changes in the rates of economic growth, unemployment or
inflation, or in the disparities in per capita wealth between regions within
China, could also lead to further readjustment of the reform measures. This
refining and readjustment process may not always have a positive effect on our
operations. Although reforms to China's economic system have not adversely
impacted our operations in the past and are not expected to adversely impact our
operations in the foreseeable future, there can be no assurance that the reforms
to China's economic system will continue or that we will not be adversely
affected by changes in the China's political, economic and social conditions and
by changes in policies of the Chinese Government, such as changes in laws and
regulations (or the interpretation thereof), measures which may be introduced to
control inflation, changes in the rate or method of taxation, imposition of
additional restrictions on currency conversion and remittance abroad and
reduction in tariff protection and other import restrictions. Our operating
results may also be significantly affected by the inadequate development of an
infrastructure and the potential unavailability of adequate power and water
supplies, transportation, satisfactory roads and communications and raw
materials and parts.

         The Chinese economy has experienced significant growth in recent years,
but such growth has been uneven among various geographical regions and among
various sectors of the economy. The Chinese Government has implemented various
policies from time to time, such as during 1989 to 1991 and again commencing in
1993, to restrain the rate of such economic growth and control inflation and
otherwise regulate economic expansion. Although we do not expect such policies
to impact our operations, we might benefit from these types of policies or, on
the other hand, more severe measures or other actions by the Chinese Government
not currently expected could decrease demand for our products or otherwise
significantly adversely affect our earnings.

         WE ARE SUBJECT TO GOVERNMENT REGULATION AND OUR OPERATING RESULTS COULD
BE AFFECTED BY CHANGES IN THOSE REGULATIONS. Our operations and assets in China
are subject to significant political uncertainty. Our business, results of
operations and financial condition could be adversely affected by changes in
policies by the Chinese government to any of the following:

         o        laws and regulations, or their interpretation and enforcement,

         o        confiscatory or increased taxation,

         o        restrictions on currency conversion and currency devaluations,

         o        imports, import duties and sources of supply, or

         o        the expropriation of private enterprise.

         Under its current governmental leadership, China has been pursuing
economic reform policies, including the encouragement of private economic
activity and greater economic decentralization. We can provide no assurance,
however, that the Chinese government will continue to pursue these policies,
that these policies will be successful if pursued or will not be significantly
altered without notice, or that business operations would not become subject to
the risk of nationalization, which could result in the total loss of investment
in China. Under the Chinese government's program of privatizing many state owned
enterprises, the Chinese government has attempted to increase its revenues by
increased tax collection. If these efforts to increase tax revenues continue, we
could incur increased taxation expenses which may impact our profitability.
Economic development in China may be limited as well by the following:



                                      -10-
<PAGE>

         o        governmental imposition of restrictive measures intended to
                  reduce inflation, increase taxes or reform unprofitable
                  state-owned enterprises,

         o        the inadequate development of the Chinese infrastructure,

         o        the unavailability of adequate power, water supplies, raw
                  materials and parts, and

         o        limited transportation and communications capabilities.

         The Chinese government regulates the import into China of various raw
materials and also taxes the importation of some types of capital equipment,
which may affect our operations. The approval of imports by the Chinese
government is based to some extent on the lack of qualified
domestically-produced products and also on its strategic plans for the
development of local Chinese industries. We can provide no assurance that
China's policies will continue to allow raw materials needed by operations to be
imported into China or will not impose import fees, which may raise the cost of
raw materials or capital equipment used in our operations. The imposition of any
of these costs could have a material adverse effect on our business, results of
operations and financial condition.

         CHINA'S ENTRANCE IN THE WORLD TRADE ORGANIZATION MAY RESULT IN
INCREASED COMPETITION FROM INTERNATIONAL COMPANIES. At present, a significant
portion of the economic activity in China is export-driven and, therefore, is
affected by developments in the economies of China's principal trading partners,
including the U.S.

         On November 11, 2001, China signed an agreement to become a member of
the World Trade Organization (the "WTO"), the international body that sets most
trade rules, further integrating China into the global economy and significantly
reducing the barriers to international commerce. China's membership in the WTO
became effective on December 11, 2001. China has agreed upon its accession to
the WTO to reduce tariffs and non-tariff barriers, remove investment
restrictions, provide trading and distribution rights for foreign firms and open
various service sectors to foreign competition. China's accession to the WTO may
favorably affect our business in that reduced market barriers and a more
transparent investment environment will facilitate increased investment
opportunities in China, while tariff rate reductions and other enhancements will
enable us to develop better investment strategies and attract investment
capital. In addition, the WTO's dispute settlement mechanism provides a credible
and effective tool to enforce member's commercial rights. Also, with China's
entry into the WTO, it is believed that the relevant laws on foreign investment
in China will be amplified and will follow common practices.

         DESPITE CONTINUED ECONOMIC REFORMS, THE ECONOMIC CONDITIONS IN CHINA
MAY ADVERSELY AFFECT OUR OPERATIONS. China has operated a centrally-planned
economy since 1949. Since 1978, China has implemented a series of economic
reform programs in an effort to revitalize its economy and improve living
standards, including the implementation of policies designed to attract foreign
investment and technology.

         China achieved an economic output of U.S. $1.23 trillion, export of
U.S. $325.57 billion and import of U.S. $295.22billion in the year 2002.
According to China's official statistics, China's economy grew by 8% in 2002 and
it is expected to maintain a 7% growth in 2003. The global economic slowdown is
having an impact on China. The consumer price index fell 0.8% in December 2002
compared with the same month the year before. The Chinese government continued
to expand consumption as an important part of its proactive fiscal policy.
Retail sales of consumer goods in China totaled 4.09 trillion



                                      -11-
<PAGE>

RMB(U.S.$494 billion), 8.8% over the figure for 2001. New growth areas emerged
as the focus of consumer spending, including housing, communications, tourism,
education and automobiles.

         China's industrial output grew by 12.6% in 2002 over the previous year
to reach RMB 3.1 trillion (U.S. $380 billion), according to the National Bureau
of Statistics. Seven industries including electronic and telecommunication
products, transportation equipment manufacturing, chemical products, fabric and
textile, machinery and metallurgical sectors, constituted 58.8% of the
industrial growth as a whole.

         DESPITE RECENT REFORMS, WE MAY BE ADVERSELY AFFECTED BY CHINA'S
UNSOPHISTICATED LEGAL SYSTEM AND IT MAY BE DIFFICULT TO OBTAIN ENFORCEMENT OF
OUR LEGAL RIGHTS UNDER CHINESE LAW. China's legal system is a civil law system,
which is based on written statutes with decided legal cases having 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 in individual cases. As legal systems in China develop, we, like
other foreign business entities, may be adversely affected by new laws, changes
to existing laws (or new interpretations of the laws) and preemption of
provincial or local laws by national laws. In addition, in circumstances where
adequate laws do exist, it still may not be possible for us to obtain swift and
equitable enforcement of those legal rights under Chinese law.

         OUR FACILITIES ARE SUBJECT TO CHINESE ENVIRONMENTAL REGULATIONS THAT
EXPOSES US TO POTENTIAL FINANCIAL LIABILITY. 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. This law sets
national standards for environmental quality and monitoring as well as for 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 applicable
environmental laws. We have, however, in September 2000, obtained ISO 14001
certification from the Environmental Management Certification Center for the
Machinery Industry.

         THE RECENT OUTBREAK OF SEVERE ACUTE RESPIRATORY SYNDROME IN CHINA MAY
ADVERSELY AFFECT OUR REVENUES. There has been a recent outbreak of severe acute
respiratory syndrome ("SARS") in China, however, there has been no documented
SARS case in the island of Haikuo where our operations are located. To date, we
are not aware of any of our employees having contracted this illness and have
had no plant shutdowns due to workers being suspected of infection with SARS.
For the personal safety of our employees, we have directed our employees to
minimize business travel and we have distributed respiratory masks to our sales
employees who are located in mainland China. We will continue to monitor the
possible implications of the SARS outbreak as it appears to be slowing overall
business activities, which could impact our future revenues.

         THE EXPANSION OF OUR OPERATIONS INTERNATIONALLY MAY BE ADVERSELY
AFFECTED BY CHINESE ECONOMIC, POLITICAL, LEGAL AND OTHER UNCERTAINTIES. Although
we sell products to customers based principally in China, we are doing business
in the U.S. and seek to do business in other countries as well. In the future,
our international operations and sales may be affected by the following risks,
which may adversely affect Chinese companies doing business internationally:

         o        political and economic risks, including political instability,

         o        currency controls and exchange rate fluctuations,

         o        changes in import/export regulations, tariff and freight
                  rates, and



                                      -12-
<PAGE>

         o        various forms of protectionist trade legislation which
                  currently exist, or have been proposed, in some foreign
                  countries.

         WE RECEIVE OUR REVENUES IN RENMINBI, WHICH EXPERIENCES VOLATILITY AND
DEVALUATION IN THE EXCHANGE RATE TO UNITED STATES DOLLARS AND MAY ADVERSELY
AFFECT OUR FINANCIAL PERFORMANCE. We receive almost all of our revenues in
Renminbi, which is not freely convertible into foreign exchange. However, we
require foreign currency to meet foreign currency obligations, such as for
future purchases of certain equipment and raw materials. The Chinese government
imposes control over our foreign currency reserves in part through direct
regulation of the conversion of Renminbi into foreign exchange and through
restrictions on foreign imports. Effective January 1, 1994, pursuant to the
Notice of the People's Bank of China Concerning Further Reform of the Foreign
Currency Control System ("PBOC Notice"), the conversion of Renminbi into Hong
Kong and United States dollars must be based on rates set by the PBOC, which
rates are set daily based on the previous day's Chinese interbank foreign
exchange market rate with reference to current exchange rates on the world
financial markets, or the "PBOC Rate". Effective as of December 1, 1996,
Renminbi has become fully convertible for all current account transactions.
Foreign exchange, which is required for current account transactions, can be
bought freely at authorized Chinese banks so long as the procedural requirements
prescribed by law are met. Payment of dividends to foreign investors holding
equity interests in Chinese companies, including Foreign Investment Enterprises,
is considered a current account transaction. At the same time, Chinese companies
are also required to sell their foreign exchange earnings to authorized Chinese
banks. Purchase of foreign exchange for capital account transactions still
requires prior approval of the State Administration for Foreign Exchange. During
the last five years, the value of the Renminbi generally has experienced
volatility in the exchange rate of Renminbi to United States dollars, and there
was a significant devaluation in the exchange rate of January 1, 1994, in
connection with the abolition of the official exchange rate and implementation
of the new unitary rate exchange system. Although the Renminbi / United States
dollar exchange rate has been relatively stable since January 1, 1994, there can
be no assurance that the exchange rate will not again become volatile or that
the Renminbi will not devalue further against the United States dollar. Exchange
rate fluctuations may adversely affect our financial performance because of our
foreign currency denominated liabilities and may materially adversely affect the
value, translated or converted as applicable into United States dollars, of our
net fixed assets, our earnings and our declared dividends. We currently do not
engage in any hedging activities in order to minimize the effect of exchange
rate risks.


ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT
-----------------------

         Jinpan International Limited was incorporated as an International
Business Company under the laws of the British Virgin Islands on April 3, 1997.
We own 85% of Hainan Jinpan Special Transformer Works ("Hainan Jinpan"). Our
principal executive offices are located at c/o Hainan Jinpan Special Transformer
Works, Section D-2, No. 100 Industry Avenue, Jinpan Development Area, Haikou,
Hainan China.

         Hainan Jinpan was established in June 1997 as a Sino-foreign
cooperative joint venture between Haikou Jinpan and Jinpan International. It is
located in Hainan Province in southern China and is principally involved in the
design, manufacture and sale of cast resin transformers. Until June 30, 1997,
Hainan Jinpan's operations were wholly-owned and conducted by Haikou Jinpan,
which has, since its



                                      -13-
<PAGE>

establishment in August 1993, sold in excess of 7,226 cast resin transformers in
China and has produced aggregate revenues of approximately RMB 887.22 million
(U.S.$107.18 million) as of December 31, 2002. Pursuant to the terms of the
joint venture contract between Haikou Jinpan and Jinpan International, Haikou
Jinpan received a 15% equity interest in Hainan Jinpan in exchange for the
capital contribution of its building, equipment and other production and related
facilities, while we received an 85% equity interest in Hainan Jinpan in return
for our commitment to contribute capital of U.S.$2.1 million. Hainan Jinpan has
purchased all remaining assets and liabilities of Haikou Jinpan in exchange for
U.S.$2.1 million.

BUSINESS OVERVIEW
-----------------

         GENERAL OVERVIEW

         Through our joint venture interest in Hainan Jinpan, we design,
manufacture and sell cast resin transformers for voltage distribution equipment
in China. Our cast resin transformers allow high voltage transmissions of
electricity to be distributed to various locations in lower, more usable
voltages. We are one of the largest manufacturers and distributors of cast resin
transformers in China, using the aggregate capacity of the transformers as
measured in kilovolt-amperes ("KVA") as a basis for comparison. In 2002, Hainan
Jinpan had total sales of RMB229.3 million (U.S.$27.7 million) based upon sales
of our transformers having a total capacity of 1.37 million KVA. Hainan Jinpan
obtained an ISO9001 certification of its cast resin transformers in April 1997,
which has been renewed for an additional period of three years expiring in 2003.
Hainan Jinpan also gained an ISO14001 certification from the Environmental
Management Certification Center for the Machinery Industry in September 2000,
making it one of only a few Chinese transformer manufacturers to have been so
certified by the International Standardizing Organization. Equipment
manufactured by Hainan Jinpan has gone through complete type testing and has
been certified by KEMA High Power Laboratory in September 1999. In addition,
Hainan Jinpan's transformers have been certified by the Chinese Ministry of
Machinery and Ministry of Electric Power, indicating that Hainan Jinpan has
satisfied the required national standards related to its:

         o        product quality;

         o        manufacturing process;

         o        equipment; and

         o        personnel.

         We have begun the process of obtaining our core and coil "UL"
certification. Such certification requires compliance with UL's Standards for
Safety. Product samples are tested and evaluated to applicable safety
requirements. UL Standards for Safety provide for certain technical
requirements, which products must meet in order to become eligible to bear a UL
mark. Once a product meets these requirements, authorization is given by UL to
apply the appropriate UL mark to the products.

         Our cast resin transformers are used to distribute electricity from the
end of electric transmission lines to points of electricity usage within various
types of facilities, including residential, commercial, industrial and some
other types of facilities. In order to more efficiently transmit electricity
over long distances, electrical voltage is typically increased or "stepped up"
by a power generating facility. Our cast resin transformers "step down" or
decrease voltage to a level that can be generally used. Most step down
transformers in China use oil to disperse the heat created when high voltage is
transformed to low voltage.



                                      -14-
<PAGE>

Although oil-filled transformers are effective and less expensive to purchase,
relative to some other types of transformers, oil-filled transformers require
maintenance, produce leakage and pollution and experience a higher incidence of
combustion than do, for example, the cast resin transformers that we produce. We
believe that problems associated with oil-filled transformers have resulted in
demand for safer and more efficient alternatives like our cast resin
transformers, especially in urban areas.

         We manufacture three main types of cast resin transformers, which are
distinguished by their insulation systems. The insulation systems used are: 155
degree Celsius {Class "F" per IEC60076 (International Electrotechnical
Commission) for the Chinese market} and 150 and 185 degree Celsius per ANSI
(American National Standard Institute), IEEE (Institute of Electrical and
Electronics Engineers) & NEMA (National Electrical Manufacturers Associations)
standards for the U.S. and North American markets. In some transformers the high
and low voltage coils are cast in epoxy resin under vacuum conditions. In
others, the high voltage coils are cast in epoxy resin under vacuum conditions
and the low voltage coils are encapsulated. Since our coils are either cast or
encapsulated, they can use ambient air to cool the transformers instead of
requiring a liquid, like oil, to absorb the heat produced. The Chinese Ministry
of Machinery has published guidelines requiring, to the extent possible, the use
of cast resin transformers in buildings containing transformers and in
factories, which are subject to a high risk of fire.

    OUR ELECTRIC TRANSFORMING PRODUCTS

         We manufacture and sell primarily three types of cast resin
transformers. For the Chinese market we make 155 degree Celsius insulation
(class F and class H). We manufacture and sell 14 standard sizes of transformers
with KVA capacities ranging between 160 to 3150 KVA. For transformers with KVA
of 400 and under, the high and low voltage coils are cast in epoxy resin under
vacuum condition. Above 400 KVA the high voltage are cast in epoxy resin under
vacuum conditions and the low voltage are encapsulated. For the U.S. and North
American markets we use two temperature systems: 150 degree Celsius and 185
degree Celsius per ANSI, IEEE & NEMA standards . For each insulation system we
manufacture 9 standard sizes with KVA capacities ranging from 300 KVA to 3750
KVA. Our current maximum transformer KVA range both for the Chinese and the U.S.
and North American markets is 16,000KVA.

         In the event that none of our standard size cast resin transformers
meets a customer's requirements or a customer seeks to purchase a transformer
with a capacity in excess of the maximum KVA capacities of our transformers, we
offer design engineering services which enable us to manufacture a custom made
transformer to fulfill a customer's particular needs. In order to customize our
transformers, we employ seventeen (17) design engineers who utilize 3D design
system, Mechanic Desk Top software ("MDT") to design custom made transformers.
For example, our engineers designed and we installed a custom made transformer
with a capacity of 10,000 KVA for use in the Beijing subway system. The pricing
of our transformers is based upon capacity as measured in KVA. The price of our
transformers is typically increased by an additional 5% in the event that any
design engineering services are performed, regardless of the extent of services
performed.

         We believe that the main advantages of our cast resin transformers as
compared to other electric transformers are that ours:

         o        are manufactured with fire resistant components;

         o        do not use a potentially environmentally harmful cooling
                  liquid that may leak;

         o        produce less power or energy loss than other available
                  transformers;



                                      -15-
<PAGE>

         o        require little maintenance;

         o        are resistant to short circuit shocks;

         o        have greater emergency overload capability;

         o        have greater reliability; and

         o        have smaller dimensions and are less noisy than other
                  transformers.

         How electricity transformers generally work. Transformers are used to
step up and step down voltages to transport electric energy over long distances.
A large transformer is commonly used at a generating facility to increase
voltage and decrease current needs in order to transport electric energy across
transmission lines. At the point the electric energy reaches the end user, a
step down transformer is required to reduce voltage and increase current for
general use. The process of transforming high voltage to low voltage results in
some energy loss which produces heat. Therefore, electric transformers used to
step down voltages, like our cast resin transformers, must contain an effective
cooling system. Oil-filled transformers, which are widely used in China,
circulate oil through their coils to help disperse the heat to the surrounding
environment. Although oil-filled transformers are less expensive to purchase
than other types of transformers, including cast resin transformers, and work
effectively, the oil-filled transformers have the following problems, including:

         o        the need for periodic maintenance;

         o        the risk of combustion or explosion; and

         o        the possibility of leakage, which creates potential
                  environmental problems.

         In light of these problems with oil-filled transformers, other types of
transformers, including cast resin transformers, have been increasingly used in
China.

         How cast resin transformers generally work. Cast resin transformers
were developed in Germany in the 1960s as an alternative to oil-filled
transformers. In contrast to oil-filled transformers, which have their coils
immersed in oil to absorb and disperse heat, coils in a cast resin transformer
are coated with a dry epoxy resin which is able to withstand temperatures as
high as 155 degrees Celsius. This dry epoxy resin coating serves as the
insulation medium between coils. To ensure effective insulation, appropriate
precautions must be maintained to ensure that any moisture or condensation has
been removed when the epoxy resin is cast. Rather than requiring a liquid like
oil to absorb the heat produced, cast resin transformers release the heat
produced into the ambient air in the form of hot air.

BUSINESS STRATEGY

         Our current business strategy is to continue strengthening our position
as one of the leading manufacturers of cast resin transformers in China by
implementing the following measures:

         Develop new products

         Over the past 3 years, our engineers at Hainan Jinpan have been
developing a filled resin cast coil transformer, which requires highly advanced
production technology. Compared to other types of cast coil



                                      -16-
<PAGE>

transformers, this new product has superior performance in terms of heat
dissipation , resistance to fire,lower loss and lower temperature rise. In
August 2002, the SCB10 H serial filled transformer with "H Grade" insulation
degree passed the test by Shenyang Transformer Institute, which is a national
test center on transformer quality, and the certificate will be issued in 2003.
In 2003, we will continue committing to develop and improve the SCB10 H serial
filled transformer for serving the Chinese and the U.S. markets. We believe
these new products will greatly enhance our competitiveness in China and abroad.
We started the unit substation business in 1999 and now it has matured. Unit
substation is a kind of whole set power substation equipment composed of HV
switchgear, transformer, LV switchgear, power measure and power factor
compensation device and interconnected with cable or generatrix. Unit substation
is especially applicable to construction and reconstruction of the city power
network with its advantages in smaller dimension, improving power supply
quality, lower loss, flexible installation location, easy installation and safe
operation.

         Further strengthen and expand the Chinese and U.S. markets; targeting
         advanced markets

         Our 20 sales offices and 22 independent sales agents covering all major
provinces and industrial cities throughout China help us consolidate our leading
position in the cast coil transformer industry in China.

         We have carried out many effective measures to further develop and
strengthen our existing sales network in China and the U.S., including
formulating sales policies adapted to the different market environments,
employing consultants familiar with the U.S. market, regularly conducting senior
sales meetings and adjusting the sales strategies to market conditions. In 2002,
there was a breakthrough in our unit substation business as the market is being
opened up gradually. We now sell the majority of our unit substations in
Beijing, Wuhan, Xiamen, Nanjing and the southwest of China. Our ability to
design unit substations according to specifically meet our customers' needs will
earn us a broader market. We have completed a new brochure so that our
customers' may better understand this product. In 2001, we commenced an assembly
and service operation in the U.S. for direct sales and service to U.S.
customers. The initial location in Vermont was closed in 2002 and we intend to
perform the function of this operation in another location within the eastern
seaboard of the U.S. This is in addition to continuing to strengthen our
relationship with partners who purchase our cores and coils for their
transformer production and sales.

         We are adopting measures in order to increase our U.S. sales volume,
gain access to a new line of customers, including efforts to obtain UL
certification needed for serving customers who require such certification. We
have taken steps to broaden U.S. industry recognition by promoting superior
product quality, competitive prices and service. We are continuing to develop
our marketing strategies to leverage customer access to our products through the
worldwide web. Our web site, jstusa.net, provides in depth perspective on our
company and products, and makes it possible for customers to download our U.S.
market brochure. We displayed our transformers at major U.S. industry shows in
2001 and 2002 and will continue to do so in the future.

         We continue working on becoming a major player in the large original
equipment manufacturer market ("OEM"). UL certification will enhance the
attractiveness of our products to this market.

         Focus efforts on ensuring competitive standards

         We continue to focus our attention on ensuring competitive delivery
response. Our engineers in the U.S. office and Haikou Headquarters work closely
to ensure fast delivery of core and coils from Haikou.



                                      -17-
<PAGE>

         BACKGROUND INFORMATION RELATING TO THE ELECTRIC TRANSFORMER INDUSTRY IN
         CHINA

         From 1998 to 2002 the GDP of China grew 38.2% as adjusted for
inflation, which represented an average annual rate of increase of 7.64%. During
the same period in China, annual urban household per capita income increased
41.9% as adjusted for inflation, which represented an average annual rate of
increase of 8.38%. The electricity production of China increased 41.7%, which
represents an average annual increase of 8.34%. In 2001, China ranked second
worldwide with the total electricity output amounting 1478 billion KWH. We
believe that the fast growing Chinese economy has been the main reason for the
significant increase in demand for many consumer products requiring electric
power for their operations. Furthermore, China's major cities, such as Beijing,
Shanghai and Guangzhou, have been requiring a greater capacity to provide
electrical power than in the past because of the significant population
increases in the major cities caused by the large influx of rural migrants in
recent years.

         According to the Chinese Association of Transformers, production and
sales of cast resin transformers in China have increased significantly since
1991. In 1991, the aggregate production output of installed cast resin
transformers was .43 million KVA. Since 1993, installations of cast resin
transformers have risen dramatically as shown in the table below:

        Total KVA Capacity of Cast
        Year (in millions)                 Resin Transformers Installed
        ------------------                 ----------------------------

        1993                                 2.64
        1994                                 3.97
        1995                                 6.19
        1996                                 6.48
        1997                                 6.14
        1998                                 8.76
        1999                                 9.88
        2000                                11.98
        2001                                14.40
        2002                                15.78

          From 1998 through 2002, the production and sales of cast resin
transformers in China was 60.8 million KVA, translating to an average production
and sales per year of 12.16 million KVA, which is an increase of 12.7% per year
in transformers sales in China. According to the power supply part of the
Chinese government's Five Year Plan, as modified, from 2003 to 2005, the power
generating capacity in China should be increased by 25 million KW per year and
should amount to 430 million KW by 2005. Market demands for transformers is
closely related to power generating equipment and, calculating in the proportion
of 1:11, there should be a transformer demand of 27.5 million KVA by 2005. The
Chinese government's Five Year Plan also calls for environmental protection and
energy saving, which are advantages of our cast resin transformer. In 2002, the
integrated profit index of Jinpan ranked third among the transformer industry of
China, and now we are committing to improving our core competitiveness by
reducing costs and perfecting our enterprise culture.

         The table below sets forth our consolidated sales, by geographic
region, for the years ended December 31, 2000, 2001 and 2002:



                                      -18-
<PAGE>




                                                   YEAR ENDED DECEMBER 31,
                                                   -----------------------
                                            2000            2001            2002
                                            ----            ----            ----
                                                 (U.S. DOLLARS IN MILLIONS)
Beijing                                5.9             5.7             5.9
Guangdong                              3.6             3.9             4.9
Wuhan                                  1.4             1.5             1.7
Chongqing                              1.3             --              0.4
Yunnan, Guizhou                        1.2             --              1.0
Chengdu                                --              1.3             1.8
Dongbei                                --              2.2             3.0
Other                                  3.7             7.7             9.0

                                       -----------------------------------------
                               Total:  17.1            22.3            27.7

         THE RAW MATERIALS USED IN OUR CAST RESIN TRANSFORMERS AND THEIR SOURCES
         OF SUPPLY

         The principal raw materials we require for our business are cast resin
used to coat the copper coils of our transformers, silicon steel, which
comprises the cores of our transformers and copper foil for our copper foil
windings. We obtain all of our requirements of cast resin from Bakelite, a
German corporation, silicon steel from Nippon Steel, Kawasaki Steel, both
Japanese companies and UGO, a European company, and copper foil from Mansfelder
Kupfer and Messign GmbH and KM Europe Metals, both German companies and from
Luoyang Copper (Group) Co. Ltd. in China.

         Other raw materials we require to produce our products include copper
wire, glass fiber and quartz powder. We maintain at least two suppliers for each
of our major raw materials other than cast resin in order for us to enhance our
ability to obtain an adequate supply of high quality, competitively-priced raw
materials. We purchase copper wire, glass fiber and quartz powder from local
suppliers in nearby regions and believe that these materials are readily
available.

         OUR SALES AND MARKETING NETWORK

         We sell our cast resin transformers through our sales network, which
consists of the use of twenty regional sales offices in various cities in China,
including Beijing, Shanghai and Chongqing. We employ 38 sales representatives,
24 of whom are based in our regional sales offices,14 are based at our
headquarters in Haikou. All of our sales representatives are salaried employees.
We also sell our products through 22 independent sales agents who receive
commissions based on sales. We sell the majority of our transformers in Beijing,
Guangdong, Chengdu and the northeast of China.

         OUR SIGNIFICANT CUSTOMERS

         Sales to our five largest customers aggregated approximately 17%, 15%
and 14.9% of our total sales during the fiscal years ended December 31, 2000,
2001 and 2002, respectively, and sales to our largest customer for those same
periods accounted for approximately 5%, 5% and 4%, respectively, of our total
sales. There can be no assurance that any of our principal customers will
maintain their volume of business with us or that a similar volume of business
would be forthcoming from new or existing customers to replace any lost
business. The loss of one or more of these existing principal customers without
replacement by a customer of similar volume could have a material adverse effect
on our business and financial condition.



                                      -19-
<PAGE>

         OUR TRADEMARK, "JST"

         We own the rights to the trademark "JST", which is registered with the
Trademark Bureau of the State Administration of Industry and Commerce of China.
We believe that this trademark has significant value and is important to our
marketing and expansion efforts. However, in regard to our trademark, any other
future trademarks or printed materials, we cannot be sure that any one or all of
the following scenarios has not occurred or will not occur, any one of which
could have a material adverse effect upon us: o we will not be able to register
other names or service marks we may consider important;

         o        our currently registered trademark, any future trademark or
                  printed materials currently does or will violate the
                  proprietary rights of others;

         o        our trademarks would not be upheld by the Chinese government
                  or its judicial system if challenged;

         o        we will be prevented from using our trademarks or other
                  printed materials; or

         o        due to the fact that enforcement of our proprietary rights or
                  the defense against the proprietary claims of others could be
                  extremely costly, we may not have the financial resources
                  necessary to enforce or defend our trademarks.

         HOW OUR CAST RESIN TRANSFORMERS ARE MANUFACTURED

         The essential components of our cast resin transformers are their
windings and cores. Under our current manufacturing process, we use nine copper
coil winding machines to wind copper wire into the high and low voltage coils
contained in our traditional and copper foil cast resin transformers and one
copper foil winding machine to produce the low voltage copper foil coils used in
our copper foil cast resin transformers. Our copper coils are insulated with
fiberglass mats or quartz powder and are then cast with an epoxy resin in an
automated vacuum casting machine to provide further insulation. The vacuum
casting machine removes all moisture and condensation between the copper wire
and the resin coating. We implement such procedures to ensure that our copper
coils are properly insulated for safety. We use the materials described above so
that none of our windings crack when heat is produced in the transformer since
the expansion coefficient of copper is similar to the expansion coefficient of
epoxy resin and fiberglass.

         The high and low voltage windings are then wrapped around a silicon
steel core. The core is composed of several rolls of silicon steel, which have
been cut on an automated steel cutting machine. The rolls of silicon steel are
assembled and stacked by one of our two assembly table machines to form the core
of a transformer. As one of the most important components of a transformer, the
core is used as a transforming medium of electric energy during the transforming
process. Our use of high quality material, advanced cutting machines and the
design of our products, have resulted in efficiently minimizing the energy loss
and noise produced during the operation of the transformer. We test and inspect
our transformers in accordance with Chinese national standards and will not
deliver a transformer to a customer unless each required test has been passed.
The standard testing procedure is comprised of the following 12 procedures:

         o        measurement of winding resistance;

         o        measurement of voltage ratio;



                                      -20-
<PAGE>

         o        measurement of impedance voltage;

         o        measurement of current;

         o        source voltage withstand test;

         o        induced overvoltage withstand test;

         o        measurement of winding insulation resistance;

         o        measurement of partial discharge;

         o        lightning impulse test;

         o        temperature raise test;

         o        measurement of sound level; and

         o        short-circuit test.

         OUR COMPETITORS IN THE ELECTRIC TRANSFORMER BUSINESS

         We believe that there are in excess of 40 manufacturers of cast resin
transformers in China, most of which are small scale manufacturers. We primarily
compete in the cast resin transformer market with two large transformer
manufacturers but also with a large number of small transformer manufacturers.
Most of our competitors are government-owned entities. We believe that in 2002,
only 11 Chinese cast resin transformer manufacturers had an annual electricity
production in excess of 300,000 KVA per year.

         Although a few of our competitors entered the transformer market
earlier and have achieved greater product recognition than we did and have, we
believe that our growing name recognition, the quality and efficiency of how we
manufacture our products allow us to compete with our competitors. We believe
that we operate more efficiently than our government-owned competitors because,
as a non-government-owned company, Hainan Jinpan's operations are not subject to
the time-consuming governmental approvals and regulatory processes to the same
extent as are government-owned entities. We believe that these factors in
particular result in lower production costs and greater flexibility.
Furthermore, since none of our transformers have been returned to us or, to our
knowledge, have been the cause of an accident, we believe that our competitors
do not manufacture a transformer that is safer or of a higher quality than the
transformers we manufacture.

         In addition, we believe that foreign cast resin transformer
manufacturers presently do not pose a significant competitive threat to us
because of their relatively high production costs. There can be no assurance
that entry into the WTO and the consequent reduction of tariff imports will not
increase competition or that foreign manufacturers, many of which have greater
financial, personnel, technical and other resources than we have, will not enter
into meaningful joint venture arrangements or establish wholly foreign-owned
enterprises to manufacture transformers within China, either of which scenario
could have an adverse effect upon our business.



                                      -21-
<PAGE>



         GOVERNMENT REGULATION

         General 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. Furthermore, because
economic reforms and growth in China have been more successful in some provinces
than in others, the continuation or increase of these economic disparities could
affect political or social stability.

         China is considered to be a high risk nation for business and
investment in the Asian region. Although China recently has permitted greater
provincial and local economic autonomy and private economic activity, the
government of China has exercised and continues to exercise substantial control
over virtually every aspect of the Chinese economy through regulation and state
ownership. Therefore, government action in the future, including any decision by
the Chinese government not to continue to support the economic reform program
that it commenced in the late 1970's and the possible return of China to the
more centrally-planned economy that existed prior to the economic reforms, could
have a significant effect on economic conditions in China and on our operations.
China's economic reform plan was designed to bring into China foreign investment
capital and technological advancements. The result of these reforms has been a
move towards a more mixed economy and away from a more centrally-planned
economy. The process of shifting more of the responsibility for various aspects
of economic enterprise to local management and regional authorities continues,
even though the system of Chinese socialism still involves considerable
influence by the central government in regard to the economic areas of
production and marketing.

         Because we are a foreign company conducting our operations and owning
assets primarily in China, our operations and assets are subject to the
following uncertainties which affect companies operating in China:

         o        political,

         o        economic,

         o        legal, and

         o        other uncertainties.

         Government regulation in China. Our operations and assets in China are
subject to significant political uncertainty. Our business, results of
operations and financial condition could be adversely affected by changes in
policies by the Chinese government to any of the following:

         o        laws and regulations, or their interpretation and enforcement,

         o        confiscatory or increased taxation,

         o        restrictions on currency conversion and currency devaluations,

         o        imports, import duties and sources of supply, or

         o        the expropriation of private enterprise.



                                      -22-
<PAGE>

         Under its current governmental leadership, China has been pursuing
economic reform policies, including the encouragement of private economic
activity and greater economic decentralization. We can provide no assurance,
however, that the Chinese government will continue to pursue these policies,
that these policies will be successful if pursued or will not be significantly
altered without notice, or that business operations would not become subject to
the risk of nationalization, which could result in the total loss of investment
in China. Under the Chinese government's program of privatizing many state owned
enterprises, the Chinese government has attempted to increase its revenues by
increased tax collection. If these efforts to increase tax revenues continue, we
could incur increased taxation expenses which may impact our profitability.
Economic development in China may be limited as well by the following:

         o        governmental imposition of restrictive measures intended to
                  reduce inflation, increase taxes or reform unprofitable
                  state-owned enterprises,

         o        the inadequate development of the Chinese infrastructure,

         o        the unavailability of adequate power, water supplies, raw
                  materials and parts, and

         o        limited transportation and communications capabilities.

         The Chinese government regulates the import into China of various raw
materials and also taxes the importation of some types of capital equipment,
which may affect our operations. The approval of imports by the Chinese
government is based to some extent on the lack of qualified
domestically-produced products and also on its strategic plans for the
development of local Chinese industries. We can provide no assurance that
China's policies will continue to allow raw materials needed by operations to be
imported into China or will not impose import fees which may raise the cost of
raw materials or capital equipment used in our operations. The imposition of any
of these costs could have a material adverse effect on our business, results of
operations and financial condition.

         International trade in China. At present, a significant portion of the
economic activity in China is export-driven and, therefore, is affected by
developments in the economies of China's principal trading partners, including
the U.S.

         China's entrance into the WTO on December 11, 2001 will result in
important development opportunities for its economic construction as well as
many challenges. The "Most Favored Nation" status and the national treatment
that China will gain from other WTO members will be helpful in increasing the
country's export volume. China's State Council announced that from the beginning
of January 1, 2002, the tariff decreased to 12% from 15.3% and it will be
reduced further to a level of 10% in 2005. This tariff reduction will allow more
foreign goods into the domestic market at lower prices and may put pressure on
China enterprises. China's machinery industry is expected to be impacted by
China's entrance into the WTO.

         China will become more involved in international economic cooperation
and competition. The transitional period for China after in enters the WTO is
expected to last three to five years. China will gradually open up a wide range
of sectors such as financial services, insurance, telecommunications, trade,
commerce, transportation, construction, tourism and intermediary services. In
accordance with the WTO agreement, China will work to adopt transparent and
equitable trade and investment policies, continue to improve the investment and
business conditions, encourage fair competition, accord national treatment where
needed and further strengthen the protecting of intellectual property rights and
all the legitimate rights and interests of overseas investors. The central
government is speeding up the drafting of



                                      -23-
<PAGE>

amendments and the abolishment of obsolete laws, rules and regulations in line
with China's WTO commitment.

         According to the General Administration of Customs ("GAC"), China had a
trade surplus of U.S. $30.35 billion in 2002. The total volume of foreign trade
amounted to U.S. $620.79 billion, an increase of 22% compared with the previous
year. Total exports increased by 22.3% to U.S. $325.57 billion and imports grew
by 21.2% to U.S. $295.22 billion. Machinery and electronic products led the
growth in exports. Imports and exports of collectively owned and private
companies, which have been able to trade overseas after China's entry to the WTO
in 2001, increased 57.1% to U.S. $ 53.22 billion. China's foreign trade with
Japan, its largest trading partner, reached U.S. $101.91 billion in 2002. The
United States and European Union ranked second and third in terms of total trade
with China, exporting and importing U.S. $97.18 billion and U.S. $ 86.76
billion, respectively.

         Foreign direct investment in China during the year 2002 amounted to
U.S.$52.7 billion, 12.5% greater than in 2001, as approximately 400 of the
world's top 500 businesses commenced operations in China in 2001.

         According to Chinese customs statistics released on May 12, 2003, the
total volume of foreign trade for the first 4 months of 2003 amounted to US
$243.96 billion, an increase of 39.8% compared with the same period of 2002.
Exports increased 33.5% to US $122.03 billion and imports increased 46.8% to US
$121.93 billion. Between January and April 2003, China's foreign trade with
Japan and the United States reached US $40.28 billion, an increase of 36.4% and
US$36.26 billion, an increase of 35.5%, respectively. The growth rate of total
trade volume for the European Union, ASEAN and South Korea collectively totaled
40% during the same period. The impact of SARS's on China's foreign trade will
likely be seen in the second and third quarters and China's foreign trade this
year may decrease an estimated US$7 billion, or 0.5% of GDP, according to
experts.

         According to the statistics of Ministry of Commerce in China, released
on May 13,2003, from January to April 2003 overseas investments worth US$17.823
billion flowed into China, an increase of 51.03% from last year. During the same
period, the government approved 12,198 foreign-funded companies, an increase of
34.19% from the same period last year. Contractual foreign investment totaled
U.S. $30.53 billion.
         While China's entry into the WTO and related relaxation of trade
restrictions may lead to increased foreign investment, it may also lead to
increased competition in China's markets from international companies.

         ECONOMIC CONDITIONS IN CHINA AND HOW THEY AFFECT US. China achieved an
economic output of U.S. $1.23 trillion, exports of U.S. $325.57 billion and
import of U.S. $295.22 billion in the year 2002. According to China's official
statistics, China's economy grew by 8% in 2002 and it is expected to maintain a
7% growth in 2003. The global economic slowdown is having an impact on China.
The consumer price index fell 0.8% in December 2002 compared with the same month
the year before. The Chinese government continued to expand consumption as an
important part of its proactive fiscal policy. Retail sales of consumer goods in
China totaled 4.09 trillion RMB (U.S.$494 billion), 8.8% over the figure for
2001. New growth areas emerged as the focus of consumer spending, including
housing, communications, tourism, education and automobiles.

         China's industrial output grew by 12.6% over the previous year to reach
RMB3.1 trillion (U.S. $380 billion), according to the National Bureau of
Statistics. Seven industries including electronic and



                                      -24-
<PAGE>

telecommunication products, transportation equipment manufacturing, chemical
products, fabric and textiles, machinery and metallurgical sectors, made up
58.8% of the industrial growth as a whole.

         China's Corporate Income Tax. The income tax rate for domestic
companies in China is 33% while it is 17% for foreign funded companies. This
differing treatment is unfair to Chinese enterprises due in part to China's
entry into the WTO. China is therefore considering implementing a unified income
tax policy to end tax favors that foreign-funded companies currently enjoy, in
order to create an equally competitive environment for foreign and domestic
companies. The possible income tax rate may be set around 25%.

         China's legal system and how it affects us. China's legal system is a
civil law system which is based on written statutes with decided legal cases
having 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 in individual cases. As legal systems in China
develop, we, like other foreign business entities, may be adversely affected by
new laws, changes to existing laws (or new interpretations of the laws) and
preemption of provincial or local laws by national laws. In addition, in
circumstances where adequate laws do exist, it still may not be possible for us
to obtain swift and equitable enforcement of those legal rights under Chinese
law.

         China's environmental law and how it affects us. 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. This law sets national standards for environmental quality and monitoring
as well as for 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 applicable environmental laws.

PROPERTY, PLANTS AND EQUIPMENT
------------------------------

         Our production facilities are located in Haikou City, Hainan Province
in southern China. We operate six Chinese-made copper coil winding machines, one
German-made low voltage copper foil winding machine, two German-made high
voltage winding machines, one German-made steel cutting machine, which was
recently acquired to upgrade our older steel cutting machine, German-made
assembly table machines and one German-made vacuum casting machine. In February
2001, Hainan Jinpan purchased a new German-made vacuum casting machine. Whereas
in the past coils were cast with epoxy under vacuum conditions, the use of new
machine allows for coils to be cast with a mixture of epoxy and quartz powder
under vacuum conditions. This machine is being used for the production of new
products such as the filled resin cast coil transformers. We believe that the
vacuum casting machine, represents one of the most technologically advanced
machines of its kind currently in operation in China. Our belief is based on a
comparison of the attributes of its casting system manufactured by Hubers
against those of another vacuum casting machine manufactured by Hedrich Vacuum
Systems Gmbh, which we believe to be widely used in China. Using the equipment
we currently use and maintain, our annual production capacity is approximately
1.8 million KVA per year. Increasing our plant utilization rate does not differ
with respect to the different areas of our manufacturing process. The coil
winding machines, copper foil winding machine, steel cutting machine and vacuum
casting machine are all fully utilized.

         We believe that our facilities, including our machinery and equipment,
currently are, and in the foreseeable future will be, generally in good
condition, well-maintained and suitable for their intended



                                      -25-
<PAGE>

uses. We also believe that our product assembly and sales and service facilities
have adequate capacity to accommodate our present needs and foreseeable business
growth.

         Our principal properties are described below.

         Our headquarters and administrative and manufacturing facilities are
located at 100 D-2 Industry Avenue, Haikou, Hainan Province, China, and
encompass approximately 3976 square meters. The premises were previously
purchased by Haikou Jinpan and were contributed to Hainan Jinpan. Our warehouse
is located at 168 Industry Avenue, No. 6 Factory Building, West F District,
Haikou Bonded Zone, Haikou, Hainan Province, China. The premise encompasses
approximately 3906 square meters and is subject to a lease, which expires in
February 2007. This lease provides for rent of approximately RMB35,000 per
month. In 2000, the production area of Hainan Jinpan increased by 1,134 square
meters to accommodate a new production equipment subject to a five year lease
expiring 2005 and a monthly rent of approximately RMB11,000. Our subsidiary,
Jinpan International (U.S.A) Ltd., has administration offices in Englewood
Cliffs, New Jersey, which encompass approximately 130 square meters and are
subject to a lease with a third party expiring in March 2004. This lease
provides for rent in the approximate amount of $2,887 per month.

          We lease 20 sales offices in China located in Beijing, Shanghai,
Hefei, Nanning, Anshan, Changsha, Hangzhou, Kunming, Tianjin, Wuhan, Chongqing,
Chengdu, Suzhou, Taiyuan, Shenyang, Xian, Guangzhou, Lanzhou, Shenzhen and
Dalian, which are subject to leases that provide for monthly rents ranging from
RMB1,200 to RMB7,227 per month. These sales offices range in size from 50 square
meters to approximately 165 square meters. We also use office space in the sales
offices of three of our independent sales agents, whereby instead of paying rent
for the use of the office space, we pay additional commissions to our
independent sales agents who work from these offices.


ITEM 5.    OPERATING FINANCIAL REVIEW AND PROSPECTS -
           MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following discussion and analysis should be read together with our
audited consolidated financial statements and notes appearing in Item 18 below.

CRITICAL ACCOUNTING POLICIES
----------------------------

         Our discussion and analysis of financial conditions and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in United
States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. We base our estimate on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following
critical accounting policies reflect the more significant estimates and
assumptions used in the preparation of our consolidated financial statements.

         Provision for Doubtful Accounts. We reserve provision for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition



                                      -26-
<PAGE>

of our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required. While the bad
debts have historically been within the provision established, we cannot
guarantee that we will continue to experience the same bad debt rate that we
have in the past.

              Inventories Obsolescence. We write down the value of inventory for
obsolete and unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based on assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected, additional inventory write-downs may be required.

         Deferred Tax Valuation Allowance. We record a valuation allowance to
reduce our deferred tax assets to the amount that is more likely than not to be
realized. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would not be able to
realize all or part of our net deferred tax asset in the future, an adjustment
to the deferred tax asset would be charged to income in the period such
determination was made. Likewise, should we determine that we would be able to
realize our deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made.

            Revenue Recognition. Revenue is recognized when persuasive evidence
of an arrangement exists, delivery occurs, the sales price is fixed or
determinable and collectibility is reasonably assured. The following policies
apply to our revenue transactions: (i) on the sale of goods, when the
significant risks and rewards of ownership have been transferred to the buyer
upon delivery, provided that we maintain neither managerial involvement to the
degree usually associated with ownership, nor effective control over the goods
sold; (ii) interest income from bank deposits, on a time proportion basis on the
principal outstanding and at the applicable interest rate; and (iii) retained
VAT income, on the granting of annual approval from the PRC Tax Bureau.


OPERATING RESULTS

         SUMMARY OF FINANCIAL RESULTS

         The following table presents selected statement of operations data
expressed as a percentage of net sales for the years ended December 31, 2000,
2001 and 2002.

<TABLE>
<CAPTION>
                                                                    Year ended December 31
                                                                    ----------------------
                                                               2000            2001           2002
                                                               ----            ----           ----
<S>                                                               <C>               <C>           <C>
Net sales                                                         100.0%            100%          100%

Cost of goods sold                                               (52.3%)         (56.8%)       (56.1%)
Gross profit                                                       47.7%           43.3%         43.9%
Selling, general and administrative expenses                       35.9%          31.11%         35.4%
Other income                                                        5.9%           4.23%          6.2%
Income tax provision                                              (1.7%)          (1.6%)        (1.4%)
Income before minority interest                                    14.9%           14.8%         13.0%
Minority interest                                                 (3.1%)          (2.3%)        (2.2%)
Net income                                                        11.84%           12.5%         10.8%

</TABLE>


                                      -27-
<PAGE>

         Year ended December 31, 2002 compared with the year ended
         December 31, 2001

         Sales. Net sales increased RMB45 million or approximately 24.4% from
RMB184.5 million in the year ended December 31, 2001 to RMB229.4 million in the
year ended December 31, 2002. The increase in sales was primarily due to the
continuing expansion of our customer base. Our products' high quality is also
gaining more and more recognition within both the Chinese and the U.S. markets.
Jinpan U.S.A contributed RMB7.4 million to our total sales for the year 2002.

         Cost of goods sold. Cost of goods sold increased RMB24.1 million or
approximately 23.0% from RMB104.7 million in the year ended December 31, 2001 to
RMB128.8 million in the year ended December 31, 2002. Cost of goods sold as a
percentage of sales decreased by 0.7% in the year ended December 31, 2002, from
56.8% in the year ended December 31, 2001, to 56.1% in the year ended December
31, 2002. This was primarily the result of cost control measures.

         Gross Profit. Gross profit increased RMB20.9 million or approximately
26.1% to RMB100.6 million in the year ended December 31, 2002 from RMB79.8
million in the year ended December 31, 2001. As a percentage of sales, gross
profit increase from 43.3 % in the year ended December 31, 2001, to 43.9% in the
year ended December 31, 2002, which was primarily the result of cost control
measures.

         Selling and administrative expenses. Selling and Administrative
expenses, including the provision of doubtful debt, increased RMB23.9 million or
approximately 41.7% from RMB57.4 million in the year ended December 31, 2001, to
RMB81.3 million in the year ended December 31, 2002. As a percentage of sales,
selling and administrative expenses increased from 31.1% in the year 2001, to
35.7% in the year ended December 31, 2002. This was primarily the result of an
increase in U.S. marketing expenses.

         Net Income. Net income increased RMB1.8 million or approximately 8%
from RMB23 million in the year ended December 31, 2001, to RMB24.9 million in
the year ended December 31, 2002. As a percentage of sales, net income decreased
from 12.5% in the year ended December 31, 2001, to 10.8% in the year ended
December 31, 2002, primarily as a result of the reasons described above.

         Basic Earnings Per Share. Basic earnings per share increased RMB0.59 or
approximately 8% from RMB 7.33 in the year ended December 31, 2001 to RMB7.92 in
the year ended December 31, 2002.

         Year ended December 31, 2001 compared with the year ended
         December 31, 2000

         Sales. Net sales increased RMB43.2 million or approximately 30.5% from
RMB141.3 million in the year ended December 31, 2000, to RMB184.5 million in the
year ended December 31, 2001. The increase in sales was the result of the
expansion of our customer base, the quality of our product, improvement of our
service. The high quality of our products is also gaining more and more
recognition within both Chinese and U.S. markets. Jinpan U.S.A contributed
RMB7.0 million to our total sales for the year 2001.

         Cost of goods sold. Cost of goods sold increased RMB30.8 million or
approximately 41.7% from RMB73.9 million in the year ended December 31, 2000, to
RMB104.7 million in the year ended December 31, 2001. Cost of goods sold as a
percentage of sales increased by 4.4% in the year ended December 31, 2001, from
52.3% in the year ended December 31, 2000, to 56.8% in the year ended December
31, 2001. This was principally the result of increase in the price of raw
materials

         Gross Profit. Gross profit increased RMB12.4 million or approximately
18.3% to RMB79.8 million in the year ended December 31, 2001, from
RMB67.4million in the year ended December 31,



                                      -28-
<PAGE>

2000. As a percentage of sales, gross profit decreased from 47.7 % in the year
ended December 31, 2000, to 43.3% in the year ended December 31, 2001, which was
due primarily to the increase price of raw material, and slightly adjusted sales
price.

         Selling and administrative expenses. Selling and Administrative
expenses increased RMB6.7 million or approximately 13.1% from RMB50.7 million in
the year ended December 31, 2000, to RMB57.4 million in the year ended December
31, 2001. As a percentage of sales, selling and administrative expenses
decreased from 35.9% in the year 2000, to 31.11% in the year ended December 31,
2001. This was primarily the result of increase in sales and improved control of
expenses.

         Net Income. Net income increased RMB6.3 million or approximately 37.8%
from RMB16.7 million in the year ended December 31, 2000, to RMB23 million in
the year ended December 31, 2001. As a percentage of sales, net income increased
from 11.8% in the year ended December 31, 2000, to 12.5% in the year ended
December 31, 2001, primarily as a result of the reasons described above.

         We do not believe that inflation or changing prices over the past three
years have had a material impact on our revenues or operating results.

         Any depreciation of the Renminbi may have an adverse effect on our
financial performance. We do not currently engage in any hedging activities in
order to minimize the effect of exchange rate risks.

         Foreign Currency Fluctuations. We receive almost all of our revenues in
Renminbi which is not freely convertible into foreign exchange. However, we
require foreign currency to meet foreign currency obligations, such as for
future purchases of certain equipment and raw materials. The Chinese government
imposes control over our foreign currency reserves in part through direct
regulation of the conversion of Renminbi into foreign exchange and through
restrictions on foreign imports. Effective January 1, 1994, pursuant to the PBOC
Notice, the conversion of Renminbi into Hong Kong and United States dollars must
be based on the PBOC Rate. Effective as of December 1, 1996, Renminbi has become
fully convertible for all current account transactions. Foreign exchange which
is required for current account transactions can be bought freely at authorized
Chinese banks so long as the procedural requirements prescribed by law are met.
Payment of dividends to foreign investors holding equity interests in Chinese
companies, including Foreign Investment Enterprises, is considered a current
account transaction. At the same time, Chinese companies are also required to
sell their foreign exchange earnings to authorized Chinese banks. Purchase of
foreign exchange for capital account transactions still requires prior approval
of the State Administration for Foreign Exchange. Although the Renminbi/United
States dollar exchange rate has been relatively stable since January 1, 1994,
there can be no assurance that the exchange rate will not again become volatile
or that the Renminbi will not devalue further against the United States dollar.
Exchange rate fluctuations may adversely affect our financial performance
because of our foreign currency denominated liabilities and may materially
adversely affect the value, translated or converted as applicable into United
States dollars, of our net fixed assets, our earnings and our declared dividends

         Political, Military and Economic Risks. Our operations in China are
subject to several potential political, military and economic risks. See above -
Item 3. Key Information - Risk Factors - Risks Related to our Chinese
Operations.

         Trade Agreements. China's entrance into the WTO on December 11, 2001
will result in development opportunities for its economic construction as well
as many challenges. The "Most Favored Nation" status and the national treatment
that China will gain from other WTO members will be helpful in increasing the
country's export volume. China's State Council announced that from the beginning
of January 1, 2002, the tariff is down to 12% from 15.3%, and it will be reduced
further to a level of 10% in



                                      -29-
<PAGE>

2005. This tariff reduction will allow more foreign goods into the domestic
market at lower prices and this will pose pressure on China enterprises. China's
machinery industry is expected to be impacted by China's entrance into the WTO.

         China will become more involved in international economic cooperation
and competition. The transitional period for China after in enters the WTO is
expected to last three to five years. China will gradually open up a wide range
of sectors such as financial services, insurance, telecommunications, trade,
commerce, transportation, construction, tourism and intermediary services. In
accordance with the WTO agreement, China will work to adopt transparent and
equitable trade and investment policies, continue to improve the investment and
business conditions, encourage fair competition, accord national treatment where
needed and further strengthen the protecting of intellectual property rights and
all the legitimate rights and interests of overseas investors. The central
government is speeding up the drafting of amendments and the abolishment of
obsolete laws, rules and regulations in line with China's WTO commitment.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         Historically, we have financed our operations principally through cash
 generated from our operations and bank borrowings and raising funds through
 securities offerings.

         At December 31, 2002, we had working capital of RMB165.24 million
compared to RMB136.21 million at December 31, 2001. This increase is due to an
increase in cash and accounts receivable. At December 31, 2002, we had
approximately RMB63.8 million in cash and cash equivalents as compared to
RMB44.5 million at December 31, 2001. At December 31, 2002, we had accounts
receivable of RMB111.6 million as compared to RMB92.5 million at December 31,
2001. The increase in accounts receivable is primarily attributable to the
growth of sales and the extension of credit terms applicable to large orders. We
believe that our working capital is sufficient for our present requirements.

         For the year ended December 31, 2002, we had net cash flow from
operating activities of RMB23.6 million and for the year ended December 31,
2001, net cash flow from operating activities was RMB25 million.

         We have a credit facility of RMB12.41 million with the Nan Yan
Commercial Bank. The letter of credit under this credit facility is unsecured,
bearing interest at a weighted average rate of 5.625% per annum for the year
ended December 31, 2002. We also have an additional letter of credit facility of
RMB 33.10 million with Construction Bank of China, bearing interest at a
weighted average rate of 5.25%. At the end of December 2002, we borrowed a total
of RMB3.66 million for the purchase of raw materials from overseas. We had a
short-term bank loan of RMB20,000,000 which was secured by time deposit of
RMB20,000,000 and carried a weighted average rate of 6.04%. This was repaid on
January 15, 2003.

         We anticipate, based on management's internal forecasts and assumptions
relating to our operations, that our existing cash and funds generated from our
operations, together with our existing financing agreements, will be sufficient
to meet our working capital and capital expenditure requirements for the next 12
months. In the event that our plans change, our assumptions change or prove
inaccurate, or other capital resources and projected cash flow otherwise prove
to be insufficient to fund our operations (due to, for example, unanticipated
expenses, technical problems or otherwise), we could be required to seek
additional financing sooner than currently anticipated. We have no current
arrangements with respect to sources of additional financing and there can be no
assurance that we would be able to obtain additional financing on terms
acceptable to us, or at all.




                                      -30-
<PAGE>

         AGGREGATE CONTRACTUAL OBLIGATIONS
         ---------------------------------

                  Apart from operating lease commitments disclosed in note 12 to
the audited financial statements, we had no other contractual obligations. As at
date December 31, 2002, the Group had the following known contractual
obligations:


<TABLE>
<CAPTION>
                                    Payments due by period (RMB in thousands)

Contractual Obligations            Total        Less than    1-3 Years      3-5 years         More than 5 years
                                                1 year

<S>                                <C>          <C>          <C>            <C>               <C>
Operating Lease Obligations        2,689        884          1,266          539               0

Total                              2,689        884          1,266          539               0

</TABLE>

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
----------------------------------------------------

         As one of the leading manufacturers of cast coil transformers in China,
we continually invest in technology research and development. Our research and
development policy focuses on realization of technology innovation and product
superiority by consistently working with the most advanced related technologies
available in the industry, to develop products with superior quality and
performance required by the markets we serve.

         Our recent research and development activities include:

         Research latest developments in the industry.

         We concentrate on the latest developments in the industry and actively
participate in international technology conferences, seminars and exhibits. Our
personnel are well informed in the latest transformer industry technologies and
gain detailed information regarding equipment and raw materials by attending
major industrial fairs such as the Industrial Fair in Hanover, Germany, the
International Electri-technical Exhibition in Beijing, China, and the IEEE show
in the U.S. Our personnel recently participated in all of these major shows and
held technical discussions with major equipment and material suppliers and
manufacturers.

         Through extensive contact and cooperation with partners, we gained
in-depth knowledge and understanding of the latest developments and trends of
the global transformer industry. In 1998, we entered into a consulting agreement
with PC Project Consult GmbH, a German company, and have since made great
progress in the development of filled resin transformers. Since 1999, we also
began working closely with our U.S. partner - FPT and senior consultants in the
U.S. Frequent meetings, together with effective communications systems, have
made it possible to achieve excellent performance in serving all aspects of the
U.S. market, including meeting all design and testing standards as well as
service logistics.

         Maintain highly qualified technical personnel and upgrade facilities.



                                      -31-
<PAGE>

         We place high priority on the importance of highly qualified technical
personnel and upgrading of technological facilities and equipment. Each year, we
recruit graduates from top-level universities and provide them with
comprehensive training for a period of approximately one year in electromagnetic
design, technical drawing, manufacture process and quality test. Our research
and development personnel represent approximately 22% of our employees.

         In 2000, we adopted the Investor, the most powerful and advanced 3D
software available. Our design system with the function of the 3D solid
modeling, automatic assembly checking, joint design on line, and automatic
output of the 2D drawings operating at the work station, greatly shortens the
lead time, and significantly improves the quality and efficiency of technical
design. In late 2001, we commissioned the most advanced, automated vacuum
casting system from Hubers, used for filled resin cast coil transformers.

         Actively develop new products.

         We actively develop new products to answer the latest specific
standards of technology and materials of the market. In serving the U.S. market,
our engineers developed transformers per ANSI, IEEE and NEMA standards. We
answer the needs of the U.S. market by manufacturing encapsulated and cast coil
transformers with 150(Degree)C insulation and 80(degree)C temperature rise, as
well as cast coil transformers with 185(Degree)C insulation and 80(degree)C or
115(degree)C temperature.

         We have successfully developed the filled resin cast coil transformer,
manufactured with new advanced materials, which have proven higher performance
with respect to resistance to fire and heat dissipation ratings. We believe this
development will significantly enhance our competitiveness worldwide.

         In addition, we have made significant progress in our development of
new products, which will enable us to obtain UL certification. UL certification
is a very rigorous testing process, requiring our products to pass Transient
Voltage Analysis, Insulation Thermal Aging, and Complete Transformer Product
Tests. Certification will significantly enhance our product appeal in the U.S.
market.

         Our future research and development objectives.

         We will continue to focus our attention on further development of
superior products, which will advance energy efficiency and lower total life
cycle owning costs. Our research and development will also focus on improving
the performance of transformers serving special purposes and applications, such
as the rectifier, shipboard and K-factor transformers. We will also continue to
search for ways to apply our transformer expertise and quality for serving a
broader application and customer base.

TRENDS
------

         We foresee that sales will continue to grow this year, however, the
outbreak of the SARS virus appears to be slowing overall business and
uncertainty remains as to whether the growth rate will match or exceed the rate
realized. With the majority of our materials being purchased from European
suppliers, the recent increase of the Euro is likely to have an impact on costs
during 2003.



                                      -32-
<PAGE>



ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------

         Our directors and executive officers are as follows:

NAME                       AGE     POSITION
----                       ---     --------

Li Zhiyuan                 49      Chairman of the Board of Directors, President
                                   and Chief Executive Officer
Ling Xiangsheng            52      Vice Chairman of the Board and Vice President
Jing Yuqing                40      Director and Secretary
William D. Nagel           67      Director
David W. Clarke            54      Director

Donald S. Burris           59      Director
Mark Du                    42      Principal Financial Officer

         LI ZHIYUAN has served as our Chairman of the Board of Directors,
President and Chief Executive Officer since April 1997, and of our predecessor,
Haikou Jinpan, since August 1993, and as Chairman of the Board of Directors and
Chief Executive Officer of Jinpan Hainan since June 1997. From October 1991 to
present, Mr. Li served as General Manager of Haikou Rongda Enterprise Company
and Director of Hainan's KaDa Manufacturing Company, a Sino-Japanese
joint-venture. From August 1988 to October 1991, Mr. Li served as General
Manager of Hainan Jindao Yacht Company. From August 1982 to October 1988, Mr. Li
was employed as an engineer at Guangxi Electric Power Institute. Mr. Li is
responsible for the overall management of our operations. He is married to Jing
Yuqing.

         LING XIANGSHENG has served as our Vice Chairman of the Board of
Directors and Vice President since May 1997, and of our predecessor, Haikou
Jinpan, since August 1993 and is responsible for the design, manufacture and
development of our cast resin transformers. He has also served as the Vice
President of Jinpan Hainan since June 1997. From June 1990 to December 1992, Mr.
Ling operated as a chief consultant for the Danycast Company in Thailand where
he was responsible for the entire production process of its cast resin
transformer line. From January 1980 to June 1990, Mr. Ling was employed by the
Beijing Transformer Company ultimately serving as Chief Engineer and General
Manager for its cast resin transformer plant. Between October 1985 and February
1986, Mr. Ling attended Fuji Electric Company in Japan to study vacuum cast
resin insulated transformer manufacturing technology. Mr. Ling was responsible
for designing China's first cast resin transformer.

         JING YUQING has served as one of our directors and a director of our
predecessor, Haikou Jinpan, since August 1993. She also has served as a director
of Jinpan Hainan since June 1997. From October 1988 to December 1992, Ms. Jing
was employed by the Hainan Electric Bureau Electric Planning Department as
manager of the electrical engineering department. From September 1984 to October
1988, Ms. Jing performed designing services for the Liaoning Electric Designing
Institute. Ms. Jing is the wife of Li Zhiyuan.

         WILLIAM D. NAGEL has served as one of our directors since January 2000.
From 1971 to 1997, Mr. Nagel was employed by General Electric Company where he
held various positions including Manager of Strategic Planning and Development
as well as management positions in General Electric's transformer business.
While at General Electric, Mr. Nagel helped to establish offshore partnerships
and develop



                                      -33-
<PAGE>

licensee arrangements using General Electric's advanced transformer
technologies. Most of Mr. Nagel's work with General Electric was performed in
China, Japan, Australia, Europe, Korea and Taiwan.

         DAVID W. CLARKE has served as one of our directors since February 1998.
He is engaged as a private consultant in the communications field. From November
1994 to December 1998, he was the Chairman and Chief executive Officer of Apollo
International of Delaware, Inc, which is engaged in manufacturing and
distributing electric relay. Prior to founding that company, Mr. Clarke was a
sales representative for GF Electro, a power utility industry representative,
from April 1994 to November 1994. From April 1992 to April 1994, Mr. Clarke
co-founded and was employed by WHR Corporation, a high technology firm
specializing in data communications for multimedia firms. From 1991 to 1992, Mr.
Clarke co-founded and was director and Executive Vice President of Sales and
Marketing for WatchHill Research, a high technology manufacturing firm
specializing in high speed data links. From 1984 to 1990, Mr. Clarke co-founded
and served as Executive Vice President of Sequel Data Communications, a high
tech data switching manufacturer.

         DONALD S. BURRIS was elected to our board of directors in June 2001.
Mr. Burris is the senior principal in the firm of Burris & Hairrell, LLP, an
AV-rated West Coast based law firm with a national and international practice.
Mr. Burris served as editor-in-chief of the Georgetown Law Journal and as a law
clerk to the Honorable James R. Browning of the United States Court of Appeals
for the Ninth Circuit and has taught at the Georgetown Law Center, Loyola
University School of Law and the International Law Institute in Washington, DC.
Mr. Burris also served with distinction as a Special Counsel for the United
States Senate Watergate Committee. Mr. Burris brings to the Company thirty-one
years of experience as a successful business and business litigation attorney
who has counseled clients from both a business and legal perspective.

         MARK DU has served as our financial controller since September 2002.
Since January 1993, Mr. Du has been Controller of PC Warehouse Investment, Inc.,
a worldwide company headquartered in New Jersey, with 24 subsidiaries companies
located throughout the United States. From September 1987 to December 1992, Mr.
Du served in different accounting positions in various accounting firms and
companies. Mr. Du received his Masters in Business Administration in Accounting
from Pace University in 1987 and is a CPA.


COMPENSATION OF DIRECTORS AND OFFICERS.
---------------------------------------

         The total compensation paid to our directors and officers during the
last fiscal year was RMB3,795,789 comprised of salaries in the amount of
RMB2,455,770 and bonuses in the amount of RMB1,141,299. The aggregate amount set
aside by Hainan Jinpan during its last fiscal year to provide pension,
retirement or similar benefits for directors and officers was RMB113,080

         Pursuant to our 1997 Stock Option Plan (the "Plan"), we have granted,
and there are currently outstanding, to certain of our directors, officers and
consultants, stock options immediately exercisable at $4.25 per share to
purchase 200,000 shares of our common stock, exercisable until July 31, 2003. In
addition, we had granted to certain of our directors stock options immediately
exercisable at $4.375 per share to purchase 130,000 shares of our common stock
which were exercisable until February 11, 2003. Such options have expired and
were added back into the pool of options eligible for future grant under the
1997 Plan. Furthermore, we agreed to grant to one of our directors stock options
at $4.375 per share to purchase 100,000 shares of our common stock, exercisable
until three years from the time of grant. We



                                      -34-
<PAGE>

amended this stock option agreement. The amended agreement provides that the
director has been granted options to purchase 50,000 shares of our common stock
in lieu of the options previously granted.

         In February 2001, the Company entered into stock option contracts with
five of its directors and Chief Financial Officer, to purchase 60,000 shares of
common stock of the Company. Options granted are exercisable at $2.70 per share
and, subject to termination of employment, expire 8 years from the date of
grant. The options are not transferable other than on death.

BOARD PRACTICES
---------------

         All of our directors hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified. Our
officers are elected by the Board of Directors at the first Board of Directors'
meeting after each annual meeting of shareholders and hold office until their
death, until they resign or until they have been removed from office.

         None of our directors have service contracts with us providing for
benefits upon termination of their employment.

         Our audit committee consists of Donald S. Burris, David Clarke and
William D. Nagel all of whom are independent directors. The Audit Committee
oversees our auditing procedures, receives and accepts the reports of our
independent certified public accountants, oversees our internal systems of
accounting and management controls and make recommendations to the Board of
Directors as to the selection and appointment of our auditors and it is governed
by the terms of the Charter of the Audit Committee of the Board of Directors.

         Our compensation committee consists of Donald S. Burris, David Clarke
and William D. Nagel. The function of the Compensation Committee is to
administer the 1997 Plan and to have authority over the salaries, bonuses and
other compensation arrangements of our executive officers.

EMPLOYEES
---------

         As of December 31, 2002, we had approximately 194 employees in China,
including 33 engineers or technicians, 31 management and administrative
personnel, 43 marketing and sales personnel, 75factory personnel and 12 trainees
and 5 employees in the United States, including 2 management and administrative
personnel and 3 marketing and sales personnel. All of our employees are contract
employees and have entered into renewable employment contracts with us. Terms of
our employment agreements with management, engineers, sales persons and
technicians range from two to three years and terms of our employment agreements
with support personnel range from six months to one year.

         Our employees are not currently members of a trade union. We have not
experienced any strikes or other labor disputes that have interfered with our
operations and we believe that our relations with our employees are good.





                                      -35-
<PAGE>



ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

MAJOR SHAREHOLDERS

         The following table sets forth specific information as of June 25,
2003, to the best of our knowledge, concerning the beneficial ownership of (i)
persons or entities who, to our knowledge, beneficially own more than 5% of our
outstanding ordinary shares, (ii) each of our directors, and (ii) the number of
our ordinary shares beneficially owned by all officers and directors as a group.



<TABLE>
<CAPTION>
       Title of Class          Name of Beneficial Owner                 Amount Owned(1)        Percent of Class
       --------------          ------------------------                 -------------          ----------------

<S>                            <C>                                      <C>                        <C>
        Common Stock           Li Zhiyuan (2)                              1,214,537                  37.4%

        Common Stock           Jing Yuqing (3)                             1,214,537                  37.4%

        Common Stock           Ling Xiangsheng (4)                           611,773                  19.0%

        Common Stock           Laurence W. Lytton (5)                        290,150                   9.2%

        Common Stock           First Wilshire Securities                     235,600                   7.5%
                               Management, Inc. (6)

        Common Stock           William D. Nagel  (7)                          35,000                   1.1%

        Common Stock           David W. Clarke (8)                            25,000                    *

        Common Stock           Donald S. Burris                                 --                      --

        Common Stock           All officers and directors as a             1,855,754                  55.5 %
                               group (7 persons) (9)
</TABLE>

*     Represents share ownership of less than one percent (1%).

(1)   We believe that all persons named in the table have sole investment power
      with respect to all shares of common stock beneficially owned by them,
      unless otherwise noted in these footnotes.
(2)   Includes 633,333 shares of common stock and 60,000 shares of common stock
      issuable upon exercise of currently exercisable stock options. Includes
      also 521,204 shares of common stock beneficially owned by Jinq Yuqing, the
      wife of Mr. Li and one of our directors, as to which Mr. Li disclaims
      beneficial ownership.
(3)   Includes 481,204 shares of common stock, an aggregate of 219,471 shares of
      common stock are beneficially owned pursuant to various declarations of
      trust, dated July 21, 1997. Includes also 40,000 shares of common stock
      issuable upon exercise of currently exercisable stock options. Includes
      also 693,333 shares of common stock beneficially owned by Li Zhiyuan, the
      husband of Ms. Jing and our Chairman of the Board, Chief Executive Officer
      and President, as to which Ms. Jing disclaims beneficial ownership.
(4)   Includes 546,217 shares of common stock and 60,000 shares of common stock
      issuable upon exercise of currently exercisable stock options. Includes
      also 5,556 shares of common stock beneficially owned by Wei Chang-E, the
      wife of Mr. Ling, as to which Mr. Ling disclaims beneficial ownership.
(5)   Based on information disclosed in a Schedule 13G/A filed on March 8, 2003.
(6)   Based on information disclosed in a Schedule 13G filed on February 22,
      2002.



                                      -36-
<PAGE>

(7)   Includes 10,000 shares of common stock issuable upon exercise of currently
      exercisable stock options.
(8)   Represents 25,000 shares of common stock issuable upon exercise of
      currently exercisable stock options.
(9)   Includes 195,000 shares of common stock issuable upon exercise of
      currently exercisable stock options issued to all directors and executive
      officers.

         To the best of our knowledge, as of June 5, 2003, 1,441,328 shares of
common stock or 45.8% of all shares of common stock outstanding were held by 5
record holders in the United States.

RELATED PARTY TRANSACTIONS
--------------------------

         None were entered into in fiscal year 2002.

ITEM 8.  FINANCIAL INFORMATION.

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
-------------------------------------------------------

         See Consolidated Financial Statements attached to this Form 20-F

         Neither we nor any one of our subsidiaries is a party to, nor is any of
our or its property the subject of, any material pending legal or arbitration
proceeding.

         Any future payment of dividends is within the discretion of our board
of directors and will be dependent upon, among other things, our earnings,
capital requirements, financing agreement covenants, our financial condition and
applicable laws. In May 2003, our board declared a cash dividend of $0.05 per
share, payable in August 2003. Our board may or may not declare additional
dividends in the foreseeable future, however, to the extent that the board may
decide to pay cash dividends in the future, these dividends will be declared
from the retained earnings, i.e., surplus, as determined by resolution of the
board. As we are a holding company, the amount of our retained earnings will be
limited by the amount of dividends which can be declared by our subsidiaries
under applicable law as discussed directly below.

         Applicable Chinese laws and regulations require that before a
Sino-foreign equity joint venture enterprise, such as Hainan Jinpan, distributes
profits to its joint venture partners, in our case Jinpan International and
Haikou Jinpan, it must first do the following:

         o        satisfy all of its tax liabilities;

         o        provide for any losses still unpaid from previous years; and

         o        make allocations, in the proportions as determined by the
                  discretion of the board, to a capital reserve fund and a
                  public welfare fund.

         Furthermore, if there is to be any distribution of profits, it is
required to be in the proportion of each party's investment in the joint
venture.



                                      -37-
<PAGE>

ITEM 9.  THE OFFER AND LISTING.

SHARE LISTINGS AND TRADING PRICES
---------------------------------

         The following table sets forth the high and low sales prices for our
common stock for: (i) the five most recent full financial years since our common
stock began being publicly traded on the American Stock Exchange ("AMEX"), (ii)
the two most recent full financial years for each full financial quarter and the
first subsequent quarter since our common stock began being publicly traded on
the AMEX, and (iii) for each month, during the six months of November 2002
through May 2003.

          Year Ended                   High                Low
          ----------                   ----                ---

1998                                   8.750              1.625
1999                                   6.000              1.125
2000                                   3.750              1.250
2001                                   3.000              1.100
2002                                   4.150              2.000

                                            Common Stock
                                            ------------

         Quarter Ended                 High                Low
         -------------                 ----                ---

March 31, 2001                         1.820              1.100
June 30, 2001                          3.000              1.150
September 30, 2001                     2.500              1.400
December 31, 2001                      2.500              1.650
March 30, 2002                         3.800              2.000
June 30, 2002                          4.150              2.000
September 30, 2002                     3.300              2.000
December 31, 2002                      3.650              2.000
March 30, 2003                         3.550              3.200

          Six Months                   High                Low
          ----------                   ----                ---

November, 2002                         3.150              3.050
December, 2002                         3.650              3.150
January, 2003                          3.460              3.40
February, 2003                         3.500              3.250
March, 2003                            3.550              3.200
April, 2003                            4.000              3.400
May, 2003                              4.450              3.790

         Our common stock was included for quotation on the AMEX on February 8,
1998 under the symbol "JST" and has been quoted on that exchange ever since that
date.

ITEM 10.  ADDITIONAL INFORMATION.

MEMORANDUM AND ARTICLES OF ASSOCIATION
--------------------------------------

         Our registered office is located at the offices of Offshore
Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town,
Tortola, British Virgin Islands. Our purpose, as stated in Article 4 of our
Memorandum of Association, is to engage in any lawful act, not prohibited under
any law of the British Virgin Islands. We may not, however: (i) engage in
business with British Virgin Islands



                                      -38-
<PAGE>

residents, (ii) own an interest in real property situated in the British Virgin
Islands, (iii) carry on banking or trust business, unless licensed to do so
under the Banks and Trust Companies Act of 1990, (iv) carry on business as an
insurance or reinsurance company, insurance agent or insurance broker, unless
licensed to do so under an enactment authorizing us to carry on that business,
(v) carry on business of company management, unless licensed under the Company
Management Act of 1990, or (vii) carry on the business of providing the
registered office or the registered agent for companies incorporated in the
British Virgin Islands.

         According to our Articles of Association, our directors can vote on a
proposal, arrangement or contract in which they are materially interested and
such transaction is not void or voidable so long as such director's interest in
the transaction is disclosed in good faith or is known by the other directors.
Our directors are empowered to cause us to borrow money, to mortgage or charge
our undertakings and property and to issue debentures, debenture stock or other
securities when money is borrowed. Under our Articles of Association, a director
shall not require a share qualification. Our Articles of Association do not
state whether in the absence of an independent quorum, a director has, or does
not have, the power to vote compensation to himself or another director. There
is no age limit requirement causing retirement of any director.

         Holders of our common stock are entitled to receive dividends if and
when declared by our Board of Directors out of funds legally available under
British Virgin Islands law. All shares of common stock are equal to each other
with respect to liquidation and dividend rights. In the event of our
liquidation, all assets available for distribution to the holders of common
stock are distributable among them according to their respective share holdings.
Holders of our common stock are entitled to one vote for each share held of
record on all matters to be voted upon by the shareholders, including the
election of directors. Holders of our common stock do not have cumulative voting
rights in the election of our directors. The Company's convertible preferred
stock (the "Preferred Stock") is convertible at any time to shares of common
stock and each share of Preferred Stock entitles its holder to the same number
of votes as a share of common stock. Holders of our convertible preferred stock
are entitled to receive a preferred per share dividend (6% per annum) payable in
kind, compounded quarterly. All accrued and unpaid dividends on the convertible
preferred stock are to be cancelled upon conversion of such convertible
preferred stock into common stock. In the event of our liquidation, dissolution
or winding up, the holders of our convertible preferred stock are entitled to a
preference over the holders of our common stock in the distribution of our
assets in an amount equal to the sum of: (i) $4.375 per share, and (ii) an
amount equal to declared but unpaid dividends on each such share. After payment
of the full amount of the liquidation distributions to which the holders of our
convertible preferred stock are entitled, holders of our convertible preferred
stock and holders of our common stock will be entitled to any further
distributions of our assets on a pari passu basis. Each share of convertible
preferred stock entitles its holder to the same number of votes as a share of
common stock with respect to any vote of our shareholders. Holders of our
convertible preferred stock are entitled, at any time, to convert their
convertible preferred stock into shares of common stock, subject to the
anti-dilution adjustments described below. Holders of our convertible preferred
stock have certain anti-dilution protection upon the occurrence of certain
events including stock dividends, stock splits, reclassifications, mergers and
issuances of shares of our common stock.

         The rights attached to any class or series of our stock may be varied
with the written consent of the holders of not less than three-fourths of the
issued shares of that class or series and the written consent of the holders of
not less than three-fourths of the issued shares of any other class or series
which may be affected by such variation.



                                      -39-
<PAGE>

         Our directors may convene shareholder meetings as they deem necessary.
The directors must convene a meeting upon the written request of members holding
10% or more of our outstanding voting shares. The directors must give at least 7
days notice of any meeting to members whose names appear as members in our share
register and are entitled to vote as of the date such notice is given. A meeting
may be called on short notice if: (i) members holding not less than 90% of the
total number of shares entitled to vote on the matters to be considered at the
meeting, or 90% of the votes of each class or series of shares where members are
entitled to vote thereon as a class or series, together with not less than a 90%
majority of the remaining votes, have agreed to short notice of the meeting, or
(ii) all members holding shares entitled to vote on all or any matters to be
considered at the meeting have waived notice of the meeting, presence at such
meeting being indicative of such waiver.

         Our Memorandum of Association and Articles of Association have no
limitations on the rights to own securities.

         Our Memorandum of Association and Articles of Association do not have
any provisions, which would effectively delay, defer or prevent a change of
control of our company.

         Our Memorandum of Association and Articles of Association do not have
any provisions governing the ownership threshold above which shareholder
ownership must be disclosed.

MATERIAL CONTRACTS
------------------

         None.

EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
------------------------------------------------------------------

         There are no exchange control restrictions on payment of dividends on
our common stock in the British Virgin Islands, where we are incorporated. Other
jurisdictions in which we conduct operations may have various exchange controls.
Dividend distribution and repatriation by Hainan Jinpan is regulated by China's
laws and regulations. To date, these controls have not had and are not expected
to have a material impact on our financial results. There are no material
British Virgin Islands laws which impose foreign exchange controls on us or that
affect the payment of dividends, interest, or other payments to nonresident
holders of our common stock. British Virgin Islands law and our Memorandum and
Articles of Association impose no limitations on the right of nonresident or
foreign owners to hold or vote our common stock.

TAXATION
--------

         The following discussion is a summary of all material anticipated
British Virgin Islands and Chinese tax consequences of an investment in our
common stock for security holders located in the United States. The discussion
does not deal with all possible tax consequences relating to an investment in
our common stock and does not purport to deal with the tax consequences
applicable to all categories of investors, some of which (such as dealers in
securities, insurance companies and tax-exempt entities) may be subject to
special rules. In particular, the discussion does not address the tax
consequences under state, local and other national (e.g., non-Chinese and
non-British Virgin Islands) tax laws. Accordingly, each investor should consult
his own tax advisor regarding the particular tax consequences to him of an
investment in our common stock. The following discussion is based upon laws and
relevant interpretations relating to our common stock currently in effect, all
of which are subject to change.



                                      -40-
<PAGE>

         BRITISH VIRGIN ISLANDS TAXATION POLICY. Under the International
Business Companies Act of the British Virgin Islands as currently in effect, a
holder of common stock who is not a resident of the British Virgin Islands is
exempt from British Virgin Islands income tax on dividends paid with respect to
common stock and all holders of common stock are not liable to British Virgin
Islands income tax on gains realized during the year on sale or disposal of any
shares of common stock. 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, the common stock of these companies is not
subject to transfer taxes, stamp duties or similar charges.

         Presently, there is no income tax treaty, convention or reciprocal tax
treaty regarding withholdings currently in effect between the United States and
the British Virgin Islands.

         CHINESE TAXATION POLICY. There are no material Chinese tax consequences
to holders of common stock solely as a result of the purchase, ownership and
disposition of common stock or receipt of dividends, if declared.

DOCUMENTS ON DISPLAY
--------------------

         We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the Securities and Exchange Commission (the
"Commission"). These materials, including this annual report on Form 20-F and
its exhibits, may be inspected and copied at the Commission's Public Reference
Room at 450 Fifth Street, NW, Washington, D.C. 20549 and at the Commission's
regional office at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the materials may be obtained from the Public Reference Room of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates.
The public may obtain information on the operation of the Commission's Public
Reference Room by calling the Commission in the United States at 1-800-SEC-0330.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK.

         We do not invest in derivative financial instruments or other market
risk sensitive instruments, except for short-term government securities.
Accordingly, we do not believe that we are exposed to any material market risk
with regard to such instruments.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not applicable.

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

         None.



                                      -41-
<PAGE>

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS.

         None.

ITEM 15.  CONTROLS AND PROCEDURES.

         Our Chief Executive Officer and Principal Financial Officer, based on
their evaluation within 90 days prior to the date of this report of our
disclosure controls and procedures (as defined in Exchange Act Rule 13a--14(c)),
have concluded that our disclosure controls and procedures are adequate and
effective for purposes of Rule 13a--14(c) in timely alerting them to material
information relating to us required to be included in our filings with the
Commission under the Securities Exchange Act of 1934, as amended.

         There were no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation.

ITEM 16.  [RESERVED]

ITEM 17.  FINANCIAL STATEMENTS.

         Not applicable.

ITEM 18.  FINANCIAL STATEMENTS.

         See Item 19 below for consolidated financial statements filed as a part
of this annual report.

ITEM 19.  EXHIBITS.

         (a) Index to Financial Statements                      Page
                                                                ----

Independent Auditors' Report                                      1
Consolidated Financial Statements:
Consolidated Balance Sheets                                       2
Consolidated Statements of Income                                 3
Consolidated Statements of Shareholders Equity                    4
Consolidated Statements of Cash Flows                             5
Notes to Consolidated Financial Statements:                       6




                                      -42-


<PAGE>

         (b)      Exhibits

     1.1      Memorandum of Association and Articles of Association of
              Jinpan International Limited.*

     1.2      Amendments to the Memorandum of Association and Articles of
              Association.*

     23.1     Consent of Ernst & Young, Hong Kong.

     99.1     Certification Pursuant to Section 906 of the Sarbanes-Oxley
              Act of 2002.

---------------------------
*   Filed as an exhibit to Jinpan International Limited's Registration Statement
    on Form F-1 (File No. 333-8198), filed with the Securities and Exchange
    Commission on November 22, 1997, and incorporated herein by reference.





                                      -43-
<PAGE>




                                   SIGNATURES

         Pursuant to the requirement of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                  Jinpan International Limited


                                  By: /s/ Li Zhiyuan
                                      ------------------------------------------
                                      Name:  Li Zhiyuan
                                      Title: Chief Executive Officer,
                                             Chairman of the Board and President



Dated: June 26, 2003




<PAGE>


                302 CERTIFICATION FOR ANNUAL REPORT ON FORM 20-F
                ------------------------------------------------

I, Li Zhiyuan, certify that:

1.   I have reviewed this annual report on Form 20-F of Jinpan International
     Limited;

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;

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;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   Designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

b)   Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

c)   Presented in this annual report our conclusions about the effectiveness of
     the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

a)   All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: June 26, 2003                                   /s/ Li Zhiyuan
                                                      --------------
                                                      Li Zhiyuan
                                                      Chief Executive Officer


<PAGE>


                302 CERTIFICATION FOR ANNUAL REPORT ON FORM 20-F
                ------------------------------------------------

I, Mark Du, certify that:

1.   I have reviewed this annual report on Form 20-F of Jinpan International
     Limited;

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;

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;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   Designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

b)   Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

c)   Presented in this annual report our conclusions about the effectiveness of
     the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

a)   All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: June 26, 2003                             /s/ Mark Du
                                                -----------
                                                Mark Du
                                                Principal Financial Officer










<PAGE>












Financial Statements

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

Years ended December 31, 2002, 2001 and 2000
with
Report of Independent Auditors






















<PAGE>


                          INDEX TO FINANCIAL STATEMENTS



                                                                           Pages

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES:

    Report of Independent Auditors                                           1

    Consolidated Balance Sheets as of December 31, 2002 and 2001             2

    Consolidated Statements of Income
       for the years ended December 31, 2002, 2001 and 2000                  3

    Consolidated Statements of Shareholders' Equity
       for the years ended December 31, 2002, 2001 and 2000                  4

    Consolidated Statements of Cash Flows
       for the years ended December 31, 2002, 2001 and 2000                  5

    Notes to Consolidated Financial Statements                            6 - 24




<PAGE>







REPORT OF INDEPENDENT AUDITORS


Shareholders and Board of Directors
Jinpan International Limited


We  have  audited  the  accompanying   consolidated  balance  sheets  of  Jinpan
International  Limited and subsidiaries as of December 31, 2002 and 2001 and the
related consolidated statements of income,  shareholders' equity, and cash flows
for each of the  three  years in the  period  ended  December  31,  2002.  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 auditing standards generally accepted
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 financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial   position  of  Jinpan
International  Limited and  subsidiaries  at December 31, 2002 and 2001, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.












/s/ Ernst & Young

Hong Kong
April 4, 2003

                                       1
<PAGE>


JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                      2002           2002          2001
                                                                             -------------------------------------------
                                                                      Notes            US$            RMB           RMB
                                                                                       ---            ---           ---
                                                            (In thousands, except number of shares and per share data)
Assets

Current assets:

<S>                                                                     <C>        <C>            <C>            <C>
    Cash and cash equivalents                                                       7,710          63,800        44,510
    Restricted time deposit                                             4           2,415          20,000             -
    Accounts receivable, net                                            5          13,483         111,594        92,552
    Inventories                                                         6           3,556          29,433        33,433
    Prepaid expenses                                                                1,398          11,577         1,757
    Other receivables                                                                  72             593           182
                                                                             -------------    -----------    ----------
Total current assets                                                               28,634         236,997       172,434

Property, plant and equipment, net                                      7           3,533          29,238        26,410

Construction in progress                                                                -               -         3,915

Deferred tax assets                                                     8             124           1,026           952
                                                                             -------------    -----------    ----------
Total assets                                                                       32,291         267,261       203,711
                                                                             =============    ===========    ==========
Liabilities and Shareholders' Equity

Current liabilities:

   Short term bank loans                                                9           2,860          23,667         1,996
   Accounts payable                                                                   658           5,447        11,110
   Income tax                                                           8             101             833            49
   Value added tax                                                                    405           3,355         1,852
   Advance from customers                                                             452           3,738         3,786
   Commission payable                                                               2,305          19,073         7,949
   Management bonus                                                                   326           2,700         2,410
   Accruals                                                                           808           6,685         1,024
   Government grant                                                    10             580           4,804         4,429
   Other liabilities                                                                  176           1,456         1,614
                                                                             -------------    -----------    ----------
Total current liabilities                                                           8,671          71,758        36,219

Minority interest                                                                   1,317          10,899         7,028

Commitments                                                            12               -               -             -

Shareholders' equity:

    Common stock, US$0.018 par value:
       Authorized shares - 20,000,000
       Issued and outstanding shares - 3,149,389 in 2002 and 2001      18              57             469           469
    Convertible preferred stock, US$0.018 par value:
       Authorized shares - 1,000,000
       Issued and outstanding shares - 13,789 in 2002 and 2001, 6%     18               -               2             2
       p.a.
    Additional paid-in capital                                                      9,322          77,157        77,157
    Reserves                                                           18           1,802          14,922        10,806
    Retained earnings                                                              11,198          92,680        71,913
    Accumulated other comprehensive income                                             14             116           117
                                                                             -------------    -----------    ----------
                                                                                    22,393        185,346       160,464
    Less: Treasure shares at cost,
          Common stock - 29,577 in 2002                                               (90)           (742)            -
                                                                             -------------    -----------    ----------
Total shareholders' equity                                                         22,303         184,604       160,464
                                                                             -------------    -----------    ----------

Total liabilities and shareholders' equity                                         32,291         267,261       203,711
                                                                             =============    ===========    ==========
</TABLE>

                The accompanying notes form an integral part of
                    these consolidated financial statements.


                                       2
<PAGE>


JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                               2002            2002             2001                2000
                                                      ------------------------------------------------------------------
                                              Notes             US$             RMB              RMB                 RMB
                                                                ---             ---              ---                 ---
                                                                          (In thousands, except per share data)

<S>                                             <C>          <C>            <C>              <C>                <C>
Net sales                                       17           27,720         229,421          184,480            141,264
Other income                                                  1,715          14,186            8,413              7,824
                                                      -------------    -------------     ------------     --------------
                                                             29,435         243,607          192,893            149,088
Costs and expenses:
    Cost of products sold                                   (15,557)       (128,770)      (  104,686)         (  73,869)
    Provision for doubtful debts                               (334)         (2,764)      (    1,600)         (   1,125)
    Selling and administrative                               (9,494)        (78,561)      (   55,796)         (  49,619)
    Interest expenses                                           (65)           (541)      (      600)         (     925)

                                                      -------------    -------------     ------------     --------------
                                                            (25,450)       (210,636)      (  162,682)         ( 125,538)
                                                      -------------    -------------     ------------     --------------

Income before income taxes                                    3,985          32,971           30,211             23,550

Income taxes                                    8              (377)         (3,116)      (    2,911)         (   2,385)
                                                      -------------    -------------     ------------     --------------

Income before minority interest                               3,608          29,855           27,300             21,165

Minority interest                                              (601)         (4,972)      (    4,229)         (   4,427)
                                                      -------------    -------------     ------------     --------------

Net income                                                    3,007          24,883           23,071             16,738
                                                      =============    =============     ============     ==============

Earnings per share

    -Basic                                                  US$0.96         RMB7.92          RMB7.33            RMB5.31
                                                      =============    =============     ============     ==============

    -Diluted                                                US$0.95         RMB7.89          RMB7.29            RMB5.29
                                                      =============    =============     ============     ==============

Weighted average number of shares

    -Basic                                                3,139,933       3,139,933        3,149,389          3,149,389

    -Diluted                                              3,153,722       3,153,722        3,163,178         3,163,178


</TABLE>








                  The accompanying notes form an integral part
                  of these consolidated financial statements.



                                       3
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                                          Convertible   Additional
                                Treasury     Number of   Number of   Treasury      Common   preferred      paid-in
                                   stock        common   preferred      stock       stock       stock      capital      Reserves
                                  shares        shares      shares        RMB         RMB         RMB          RMB           RMB
                                                                         (In thousands, except for number of shares)
<S>                              <C>        <C>            <C>         <C>          <C>           <C>     <C>           <C>
Balance at January 1, 2000             -     3,149,389      13,789          -         469           2       78,037        10,806

Net income                             -             -           -          -           -           -            -             -
Cancellation of stock option           -             -           -          -           -           -         (880)            -
Currency translation
adjustments                            -             -           -          -           -           -            -             -
                                --------     ---------   ---------   --------      ------   ---------      -------      ---------

Balance at December 31, 2000           -     3,149,389      13,789          -         469           2       77,157        10,806
Net income                             -             -           -          -           -           -            -             -

Currency translation
adjustments                            -             -           -          -           -           -            -             -
                                --------     ---------   ---------   --------      ------   ---------      -------      ---------

Balance at December 31, 2001           -     3,149,389      13,789          -         469           2       77,157        10,806
160,464

Net income                             -             -           -          -           -           -            -             -
Transfer to reserves                   -             -           -          -           -           -            -         4,116
Reacquired shares                (29,577)            -           -       (742)          -           -            -             -
Currency translation
adjustments                          -               -           -          -           -           -            -             -
                                --------     ---------   ---------   --------      ------   ---------      -------      ---------

Balance at December 31, 2002     (29,577)    3,149,389      13,789       (742)        469           2       77,157        14,922
                                ========     =========   =========   ========      ======   =========      =======      =========

                                          Accumulated
                                            other com-       Compre-
                                 Retained   prehensive       hensive
                                 earnings       income        income    Total
                                      RMB          RMB           RMB      RMB

Balance at January 1, 2000         32,104          137             -     121,555

Net income                         16,738            -        16,738      16,738
Cancellation of stock option            -            -             -        (880)
Currency translation
adjustments                             -           (1)           (1)         (1)
                                 --------   ----------       -------   ---------
                                                              16,737
                                                             =======

Balance at December 31, 2000       48,842          136            -      137,412

Net income                         23,071            -       23,071       23,071
Currency translation
adjustments                             -          (19)         (19)         (19)
                                 --------   ----------       -------   ---------
                                                             23,052
                                                             ======

Balance at December 31, 2001       71,913          117            -      160,464

Net income                         24,883            -       24,883       24,883
Transfer to reserves               (4,116)           -            -            -
Reacquired shares                       -            -            -         (742)
Currency translation
adjustments                             -           (1)         (1)           (1)
                                 --------   ----------       -------   ---------

Balance at December 31, 2002       92,680          116        24,882     184,604
                                 ========   ==========       =======   =========
</TABLE>

                    The accompanying notes form an integral
                part of these consolidated financial statements.


                                       4
<PAGE>


JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                        2002         2002        2001        2000
                                                                         US$          RMB         RMB         RMB
                                                                         ---          ---         ---         ---
                                                                                      (In thousands)
<S>                                                                     <C>            <C>         <C>        <C>
Operating activities
    Net income                                                          3,006          24,883      23,071     16,738
    Adjustments to reconcile net income to
        net cash provided by operating activities:
        Depreciation                                                      629           5,206       4,494      5,094
        Deferred income taxes                                          (    9)        (    74)    (    80)         -
        Provision for doubtful debts                                      334           2,764       1,336        591
        Loss on disposal of fixed assets                                    3              22           -        360
        Minority interest                                                 601           4,972       4,229      4,427
        Stock based compensation cost                                       -               -           -    (   880)
    Changes in operating assets and liabilities
       Accounts receivable                                             (2,635)        (21,806)    (23,346)   (23,101)
       Inventories                                                        483           4,000     ( 8,651)   ( 2,716)
       Prepaid expenses                                                (1,186)        ( 9,820)      4,791    ( 4,353)
       Other receivables                                               (   50)        (   411)      1,505        232
       Accounts payable                                                (  684)        ( 5,663)      5,266    ( 1,328)
       Income tax                                                          95             784     (     5)   (   439)
       Value added tax                                                    182           1,503     (   246)
                                                                                                                 924
       Advance from customers                                          (    6)        (    48)      2,328    (   979)
       Commission payable                                               1,344          11,124       2,558      5,391
       Management bonus                                                    35             290       2,410          -
       Accruals                                                           684           5,661         724    ( 1,447)
       Government grant                                                    45             375       4,429          -
       Other liabilities                                               (   19)        (   158)        198    (   287)
                                                                     ---------      --------- -----  ---    --------
Net cash provided by (used in) operating activities                     2,852          23,604      25,011    ( 1,773)
Investing activities
     Increase in restricted time deposit                               (2,415)        (20,000)          -          -
     Purchases of property, plant and equipment                        (  505)        ( 4,178)    ( 4,212)   ( 3,101)
     Proceeds from sales of property, plant and equipment                   4              37           -          -
     Payment for construction in progress                                   -               -     ( 2,690)   (   459)
                                                                  ----------        ---------     ---------- ----------
Net cash used in investing activities                                  (2,916)        (24,141)    ( 6,902)   ( 3,560)
Financing activities
     Proceeds from bank loan                                            9,532          78,892       1,996      3,429
     Repayment of bank loan                                            (6,914)        (57,221)    ( 3,429)   ( 4,946)
    Acquisition of treasury stock                                      (   90)        (   742)          -          -
    Net increase (decrease) in amounts due to minority
         shareholders                                                  (  133)        ( 1,101)    ( 8,707)     1,855
                                                                  ------------       ---------    ------- --   -----
Net cash provided by (used in) financing activities                     2,396          19,828     (10,140)       338
Effect of exchange rate changes on cash                                     -         (     1)    (    19)   (     1)
                                                                  ------------     -----------  ---------
Net increase (decrease) in cash and cash equivalents                    2,332          19,290       7,950    ( 4,996)
Cash and cash equivalents at beginning of year                          5,378          44,510      36,560     41,556
                                                                  -----------          ------      ------     ------
Cash and cash equivalents at end of year                                7,710          63,800      44,510     36,560
                                                                  ===========          ======      ======     ======
Interest paid                                                              65             541         600        925
Income taxes paid                                                         189           1,563       1,122      2,260

</TABLE>


                    The accompanying notes form an integral
                part of these consolidated financial statements.



                                       5
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

     Jinpan  International  Limited (the "Company") was  incorporated  under the
     laws of the British Virgin Islands on April 3, 1997.

     As of December 31, 2002, the Company had direct  interests in the following
     subsidiaries:

<TABLE>
<CAPTION>
                                                    Percentage of
                                                      equity
                                 Date of       interest attributable
         Name of entity       establishment             to              Paid-up capital       Principal activities
                                                    the Company
     -------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                <C>              <C>
        Hainan Jinpan            June 3, 1997             85%             RMB21,520,000       Manufacturing and sale of
          Special                                                                              cast resin transformers
     Transformers Works
       ("Jinpan JV" )

      Jinpan International     February 18, 1998         100%            US$10,000            Marketing of cast resin
        (USA) Limited                                                                               transformers
       ("Jinpan USA")
</TABLE>

     The Company, Jinpan JV and Jinpan USA are hereinafter collectively referred
     to as the "Group".

     The principal activity of the Company is investment holding.  Substantially
     all of the Group's  operations  are conducted in the PRC, and its principal
     market  is in the  PRC.  The  term of  Jinpan  JV is 50  years,  ending  on
     September  3, 2047,  and can be extended  with mutual  consent of the joint
     venture  parties,  subject to the approval of the  relevant PRC  government
     authorities.  Income and losses  and the net assets on  termination  of the
     co-operative joint venture are shared on the basis of percentage ownership.
     The  co-operative  joint  venture  can be  terminated  upon  the  unanimous
     agreement of the Board of Directors of Jinpan JV.

     The Group is subject to special  considerations  and significant  risks not
     typically associated with investments in equity securities of North America
     and Western European companies.  These include risks associated with, among
     others, the political,  economic and legal  environments,  foreign currency
     exchange and the transformer  manufacturing  industry in the PRC. These are
     described further in the following paragraphs:


                                       6
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

     a) Political environment

     All of the Group's manufacturing  facilities are located in the PRC and, as
     a result,  the Group's  operations  and assets are  subject to  significant
     political, economic, legal and other uncertainties.  The economy of the PRC
     differs from the economies of most countries  belonging to the Organization
     for Economic  Co-operation and Development (the "OECD") in such respects as
     structure,  government  involvement,  level of  development,  growth  rate,
     capital  reinvestment,  allocation  of  resources,  rate of  inflation  and
     balance of payments  position.  For almost 40 years, the economy of the PRC
     has been a planned  economy  typically  subject to five-year  plans ("State
     Plans") adopted by central PRC government  authorities and implemented to a
     large extent by provincial and local authorities,  which set out production
     and development targets.  Although the majority of productive assets in the
     PRC are still owned by the PRC  government,  in the past several  years the
     PRC  government has  implemented  economic  reform  measures that emphasize
     decentralization,  the  utilization of market forces in the  development of
     the PRC economy and the  encouragement of private economic  activity.  Such
     economic  reform  measures may be inconsistent or ineffectual and the Group
     may not be able to capitalize on all such reforms. Further, there can be no
     assurance  that the PRC  government  will continue to pursue such policies,
     that policies will be successful if pursued,  the such policies will not be
     significantly  altered from time to time or that business operations in the
     PRC would not become  subject to the risk of  nationalization,  which could
     result in the total loss of investment in that country.

     b) Economic environment

     During the past two decades,  the PRC  government has been reforming and is
     expected to continue to reform its economic and political systems.  Many of
     the  reforms  are  unprecedented  or  experimental  and are  expected to be
     refined  and  improved  over time.  Other  political,  economic  and social
     factors  could also lead to further  readjustment  of the reform  measures.
     This  refining  and  readjustment  process  may not always  have a positive
     effect on the operations of the Group.

     Accordingly,  the Group's  operating  results may be adversely  affected by
     changes in the PRC's political,  economic and social conditions and changes
     in policies of the PRC government,  such as changes in laws and regulations
     (or the  interpretation  thereof),  measures  which  may be  introduced  to
     control inflation, changes in the rate or method of taxation, imposition of
     additional  restrictions on currency  conversion and remittance  abroad and
     reduction  in  tariff  protection  and  other  import   restrictions.   The
     inadequate   development   of   an   infrastructure   and   the   potential
     unavailability  of  adequate  power  and  water  supplies,  transportation,
     satisfactory  roads and communications and raw materials and parts may also
     significantly affect the Group's operating results.

     The PRC economy has  experienced  significant  growth in recent years,  but
     such growth has been uneven among  various  geographical  regions and among
     various sectors of the economy.  The PRC government has implemented various
     policies  from  time to  time,  such as  during  1989  to  1991  and  again
     commencing  in 1993,  to  restrain  the rate of such  economic  growth  and
     control inflation and otherwise regulate economic  expansion.  Although the
     Group might benefit from these types of policies,  more severe  measures or
     other actions by the PRC government  could decrease  demand for the Group's
     products or otherwise significantly adversely affect the Group's earnings.

     c) Legal environment

     The legal system of the PRC relating to foreign investments is both new and
     continually  evolving,  and  currently  there can be no certainty as to the
     application  of  its  laws  and   regulations   in  particular   instances.
     Enforcement   of  existing   laws  or   agreements   may  be  sporadic  and
     implementation or interpretation of laws inconsistent.  The PRC's judiciary
     is relatively  inexperienced in enforcing the laws that exist, leading to a
     higher  than  usual  degree  of  uncertainty  as  to  the  outcome  of  any
     litigation.  Even  when  adequate  law  exists  in the  PRC,  it may not be
     possible to obtain swift and equitable enforcement of the law.


                                       7
<PAGE>

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

     d) Foreign currency exchange

     The Group  receives  almost all of its revenues in  Renminbi,  which is not
     freely convertible into foreign exchange.  However,  the Group will require
     foreign currency to meet foreign currency obligations,  such as for further
     purchases of certain equipment and raw materials, and payment of dividends.
     The PRC government  imposes control over its foreign  currency  reserves in
     part through  direct  regulation of the conversion of Renminbi into foreign
     exchange and through  restriction on foreign imports.  Effective January 1,
     1994,  the  conversion of Renminbi into United States Dollars must be based
     on rates set by the People's  Bank of China ( the "PBOC"),  which rates are
     set daily based on the previous day's PRC interbank foreign exchange market
     rate with  reference  to  current  exchange  rates on the  world  financial
     markets (the "PBOC  Rate").  Although  the  Renminbi/United  States  Dollar
     exchange rate has been relatively  stable since January 1, 1994,  there can
     be no assurance  that the exchange  rate will not again become  volatile or
     that the  Renminbi  will not  devalue  further  against  the United  States
     Dollar.  Exchange  rate  fluctuations  may  adversely  affect  the  Group's
     financial   performance   because  of  its  foreign  currency   denominated
     liabilities and may materially  adversely  affect the value,  translated or
     converted as  applicable  into United  States  Dollars,  of the Group's net
     assets, earnings and dividends.

     The Group  currently does not engage in any hedging  activities to minimize
     the effect of exchange rate risks.

     No  assurance  can be given  that the  Group  will  continue  to be able to
     acquire  sufficient  amounts  of  foreign  currencies  in the  PRC  foreign
     exchange markets in the future for payment of dividends.


2.   BASIS OF PRESENTATION

     The consolidated  financial  statements include the accounts of the Company
     and its subsidiaries.  Significant  intercompany  accounts and transactions
     have been eliminated in consolidation.

     The  consolidated  financial  statements  were prepared in accordance  with
     accounting  principles  generally  accepted in the United States of America
     ("US  GAAP").  This  basis of  accounting  differs  from  that  used in the
     statutory  financial  statements  of Jinpan  JV,  which  were  prepared  in
     accordance   with  the  accounting   principles   and  relevant   financial
     regulations  applicable to foreign investment enterprises as established by
     the Ministry of Finance of China.

     The functional  currency of the Company is Renminbi  ("RMB"),  the national
     currency of China.  Solely for the convenience of the reader, the financial
     statements  have been  translated  into United States dollars ("US$") using
     PBOC rate of RMB8.28 to US$1, the prevailing  rate on December 31, 2002. No
     representation  is made that the Renminbi amounts could have been, or could
     be, converted into United States dollars at this rate or any other.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  Cash and Cash equivalents

          The Company considers all highly liquid investments with a maturity of
          three months or less when purchased to be cash equivalents.


                                       8
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     (b)  Inventories

          Inventories  are  priced  at the  lower  of  cost or  market.  Cost is
          determined using the weighted average cost method.

     (c)  Property, Plant and Equipment

          Property,  plant and  equipment  is stated at cost,  less  accumulated
          depreciation.  Depreciation is computed using the straight-line method
          over the estimated useful life of the asset, after taking into account
          the  estimated  residual  value of 10% of the cost.  Estimated  useful
          lives are as follows:

          Buildings                                           10 - 20 years
          Machinery and equipment                              6 - 10 years
          Motor vehicles                                            6 years
          Furniture, fixtures and office equipment                  5 years

          Maintenance  and  repair  costs of a routine  nature are  expensed  as
          incurred. Expenditures for major renewals and improvements that extend
          the life of an asset are capitalized.

     (d)  Construction in Progress

          Construction  in progress is stated at cost which includes the cost of
          construction and other direct costs  attributable to the construction.
          No provision  for  depreciation  is made on  construction  in progress
          until such time as the relevant assets are completed and put into use.
          Construction  in progress at December 31, 2001  represented  machinery
          under installation.

     (e)  Income Taxes

          The Company  uses the asset and  liability  method of  accounting  for
          income taxes in accordance  with Financial  Accounting  Standard Board
          ("FASB")  Statement No. 109,  Accounting  for Income Taxes.  Under the
          asset and liability  method,  deferred tax assets and  liabilities are
          recognized for the estimated future tax  consequences  attributable to
          differences  between  the  financial  statement  carrying  amounts  of
          existing assets and liabilities and their  respective tax bases.  This
          method also  requires the  recognition  of future tax benefits such as
          net operating loss carry forwards,  to the extent that  realization of
          such  benefits  is more  likely  than not.  Deferred  tax  assets  and
          liabilities  are measured using enacted tax rates expected to apply to
          taxable income in the years in which those  temporary  differences are
          expected to be recovered or settled.

     (f)  Value Added Tax

          In the PRC, Jinpan JV is subject to Value Added Tax ("VAT") payable at
          17% on purchases of raw materials or semi-finished  goods,  except for
          certain  limited types of goods,  which can be offset  against the VAT
          payable on sales.  However,  Jinpan JV is also  entitled to retain VAT
          collected for sales to enterprises  incorporated  in Hainan  Province,
          net of the related  input VAT.  Such  retained VAT was  recognized  as
          other  income  in the  consolidated  statements  of  income  upon  the
          granting of annual approval from the PRC Tax Bureau.


                                       9
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     (g)  Foreign Currency Translation

          The  functional  currency of the Group is the Renminbi.  The financial
          statements of foreign  subsidiaries  having functional  currency other
          than Renminbi have been  translated  into Renminbi in accordance  with
          FASB Statement No. 52, Foreign Currency Translation. All balance sheet
          accounts have been  translated  using the exchange  rates in effect at
          the balance sheet date.  Income statement amounts have been translated
          using the  average  exchange  rate for the year.  The gains and losses
          resulting  from the changes in  exchange  rates from year to year have
          been  reported  in  other  comprehensive  income.  The  effect  on the
          consolidated  statements of income of transaction  gains and losses is
          insignificant for all years presented.

     (h)  Operating Leases

          Leases where  substantially  all the rewards and risks of ownership of
          assets remain with the leasing  company are accounted for as operating
          leases. Rentals applicable to such operating leases are charged to the
          statement of income on the  straight-line  basis over the lease terms.
          The  operating  lease  rental  incurred by the Group  during the years
          ended  December  31,  2002,  2001 and 2000  amounted to  RMB1,204,000,
          RMB922,000 and RMB837,000, respectively.

     (i)  Revenue Recognition

          Revenue is  recognized  when  persuasive  evidence  of an  arrangement
          exists,  delivery occurs, the sales price is fixed or determinable and
          collectibility is reasonably assured.  The following policies apply to
          the Company's revenue transactions:

         (i)   on the sale of goods,  when the significant  risks and rewards of
               ownership  have  been  transferred  to the buyer  upon  delivery,
               provided   that  the   Company   maintains   neither   managerial
               involvement to the degree usually associated with ownership,  nor
               effective control over the goods sold;

         (ii)  interest income from bank deposits, on a time proportion basis on
               the principal  outstanding  and at the applicable  interest rate;
               and

         (iii) retained VAT income,  on the granting of annual approval from the
                PRC Tax Bureau.

     (j)  Use of Estimates

          The preparation of the consolidated financial statements in conformity
          with US GAAP  requires  management to make  estimates and  assumptions
          that  affect  amounts   reported  in  the  financial   statements  and
          accompanying notes. Actual results could differ from those estimates.

     (k)  Earnings Per Common and Common Equivalent Share

          Basic earnings per share for the years ended  December 31, 2002,  2001
          and 2000 have been  computed by dividing net income of  RMB24,883,000,
          RMB23,071,000  and  RMB16,738,000  by the weighted  average  number of
          3,139,933, 3,149,489 and 3,149,489 shares of common stock outstanding,
          respectively.


                                       10
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     (k)  Earnings Per Common and Common Equivalent Share (continued)

          Diluted earnings per share for the years ended December 31, 2002, 2001
          and 2000 have been  computed by dividing net income of  RMB24,883,000,
          RMB23,071,000and  RMB16,738,000  by the  weighted  average  number  of
          3,153,722, 3,163,178 and 3,163,178 shares of common stock outstanding,
          respectively. Reconciliation of for the denominator is as follows:

<TABLE>
<CAPTION>
                                                                           2002               2001                2000
                                                                 ---------------    ---------------    ----------------
<S>                                                                   <C>                <C>                 <C>
           Denominator   for  basic  earnings  per  share  -
              weighted average shares                                 3,139,933          3,149,389           3,149,389

              Effect of dilutive securities:
                Convertible preferred stock                              13,789             13,789              13,789
                                                                 ---------------    ---------------    ----------------

           Denominator  for  diluted  earnings  per  share -
              adjusted weighted average shares and
                   assumed conversions                                3,153,722          3,163,178           3,163,178
                                                                 ===============    ===============    ================
</TABLE>


     (l)  Research and Development Costs

          Research and development costs consist of expenditures incurred during
          the  course  of  planned  research  and  investigation  aimed  at  the
          discovery of knowledge which will be useful in developing new products
          or  processes,   or  significantly   enhancing  existing  products  or
          production  processes,  and  implementation  of such  through  design,
          testing of product  alternatives or  construction  of prototypes.  The
          group  expenses all research and  development  costs as incurred.  The
          research and development  costs incurred by the Group during the years
          ended  December  31,  2002,  2001 and 2000  amounted to  RMB1,390,000,
          RMB544,000 and RMB1,310,000, respectively.

     (m)  Advertising Expense

          The cost of advertising is expensed as incurred.  The Company incurred
          RMB566,000,  RMB738,000  and  RMB845,000 in  advertising  costs during
          2002, 2001 and 2000, respectively.

     (n)  Shipping and Handling Expenses

          The cost of shipping and handling is expensed as incurred. The Company
          incurred RMB8.1 million, RMB7.8 million and RMB5.3 million in shipping
          and handling costs during 2002, 2001 and 2000, respectively.

     (o)  Stock Based Compensation

          The Company has adopted the disclosure-only provision of FAS Statement
          No. 123,  Accounting  for Stock Based  Compensation  ("SFAS  123") and
          applies  Accounting  Principles  Board Opinion No. 25,  Accounting for
          Stock Issued to Employees,  ("APB 25") and related  interpretations in
          accounting for its employee stock-based compensation plans.


                                       11
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     (o)  Stock Based Compensation (continued)

          At  December  31,  2002,  the  Company  has one  stock-based  employee
          compensation  plan, which is described more fully in Note 18 the "1997
          Stock Option Plan".

          The following table  illustrates the effect on net income and earnings
          per  share if the  Company  had  applied  the fair  value  recognition
          provisions of SFAS123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                                       2002           2001            2000
                                                               -------------    -----------    ------------
                                                                        RMB            RMB             RMB
                                                                   (In thousands, except per share data)
<S>                                                                  <C>            <C>             <C>
          Net income, as reported                                    24,883         23,071          16,738

          Deduct:     Total    stock-based    employee
          compensation  expense  determined under fair
          value based  method for all  awards,  net of
          related tax effects                                             -           (104)           (145)

          Pro forma net income                                       24,883         22,967          16,593

          Earnings per common share (cents):
          Basic - as reported                                          7.92           7.33            5.31
          Basic - pro forma                                            7.92           7.29            5.27

          Diluted - as reported                                        7.89           7.29            5.29
          Diluted - pro forma                                          7.89           7.26            5.25

</TABLE>
     (p)  Product Warranty

          The Company  provides a basic limited  warranty,  including  parts and
          labor, for all products for one year. The Company incurred RMB163,000,
          RMB108,000  and  RMB131,000 in product  warranty  expense during 2002,
          2001 and 2000, respectively.


4.   RESTRICTED TIME DEPOSIT

     As at December 31, 2002, time deposit of RMB20,000,000  was pledged for the
     short-term  loan of  RMB20,000,000  borrowed from Industrial and Commercial
     Bank of China.  The time deposit became  unrestricted  in January 2003 when
     the loan was repaid on January 15, 2003. The reclassification is determined
     based on the term of the collateral requirement and not the maturity of the
     underlying securities.



                                       12
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   ACCOUNTS RECEIVABLE, NET

     Accounts receivable comprised:

<TABLE>
<CAPTION>
                                                                  2002           2001            2000
                                                          --------------------------------------------
                                                                 US$             RMB            RMB
                                                                 ---             ---            ---
                                                                        (In thousands)
<S>                                                           <C>            <C>            <C>
     Accounts receivable - trade                              14,833         122,771        100,965
     Less: provision for doubtful debts                       (1,350)        (11,177)       ( 8,413)
                                                              -------        --------        -------

     Accounts receivable, net                                 13,483         111,594         92,522
                                                              ======          ======         ======

                                                                2002            2002           2001            2000
                                                          ----------------------------------------------------------
                                                                 US$             RMB            RMB             RMB
                                                                                (In thousands)
     Movement of provision for doubtful debts
     Balance as at January 1                                  (1,016)       (  8,413)      (  7,077)       (  6,486)
     Provided during the year                                   (334)       (  2,764)      (  1,600)       (  1,125)
     Less: Written off during the year                             -               -            264             534
                                                          ------------    ------------   ----------      ----------

     Balance as at December 31                                (1,350)        (11,177)      (  8,413)         (7,077)
                                                              ======          ======         ======          ======
</TABLE>

6.   INVENTORIES

<TABLE>
<CAPTION>
     Inventories comprised:                                   2002         2002              2001
                                                        -----------------------------------------
                                                               US$          RMB               RMB
                                                               ---          ---               ---
                                                                      (In thousands)
<S>                                                           <C>          <C>               <C>
     Finished products                                        1,574         13,028           12,310
     Products in process                                        512          4,241            5,263
     Raw materials                                            1,470         12,164           14,830
     Supplies                                                     -              -            1,030
                                                             --------     ----------        --------

     Inventories                                              3,556         29,433           33,433
                                                             ======         ======           ======
</TABLE>

7.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                              2002         2002              2001
                                                       ------------------------------------------
                                                               US$          RMB               RMB
                                                               ---          ---               ---
                                                                      (In thousands)
<S>                                                            <C>        <C>               <C>
     Buildings                                                 861        7,123             6,971
     Machinery and equipment                                 5,070       41,963            37,111
     Motor vehicles                                            901        7,460             5,248
     Furniture, fixtures and office equipment                  510        4,221             3,907
                                                          --------      -------          --------

                                                             7,342       60,767            53,237

     Less: accumulated depreciation                       (  3,809)    ( 31,529)         ( 26,827)
                                                           -------      -------           -------

                                                             3,533       29,238            26,410
                                                            ======       ======            ======
</TABLE>

     The  Group's  buildings  are  located  in the PRC and the land on which the
     Group's buildings are situated is State-owned.


                                       12
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   INCOME TAXES

     The Company was  incorporated  in the British Virgin Islands and, under the
     current laws of the British Virgin Islands, is not subject to tax on income
     or on capital gains.

     Jinpan USA, a wholly-owned  subsidiary of the Company,  is  incorporated in
     the United States of America.  Jinpan USA has suffered  operating losses in
     the current year and previous years, accordingly no income tax is provided.

     Jinpan JV, a cooperative  joint venture  registered in the PRC in which the
     Company  has  an 85%  interest,  is  subject  to PRC  income  taxes  at the
     applicable  tax  rate of 15% for  Sino-foreign  joint  venture  enterprises
     registered in Hainan Province, the PRC. In addition, in accordance with the
     relevant  PRC income tax laws  applicable  to  Sino-foreign  joint  venture
     enterprises,  Jinpan JV is exempt from  corporate  income tax for two years
     commencing from the first year with  assessable  profit after deducting the
     tax losses brought forward,  and is entitled to a 50% tax exemption for the
     next three years.  The first  profitable year of Jinpan JV was 1997 and the
     tax  holiday  was  to  expire  on  December  31,  2001.  However,  being  a
     technically  advanced  enterprise,  as defined by  Ministry  of Science and
     Technology,  Jinpan JV is  entitled  to a 50% tax  exemption  after the tax
     holiday for three further years commencing from January 1, 2002 as approved
     by the relevant government authorities.


     Total  dollar  and per share  effect of tax  holidays  of Jinpan JV for the
     years ended December 31, 2002, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                                      2002            2002         2001        2000
                                                    -----------------------------------------------
                                                       US$             RMB          RMB         RMB
                                                       ---             ---          ---         ---
                                                        (In thousands, except for per share data)
<S>                                                    <C>           <C>          <C>         <C>
     Effect on net income of the year                  377           3,116        2,911       2,385
                                                     =====           =====        =====       =====
     Effect on basic earnings per share               0.12            0.99         0.92        0.76
                                                     =====           =====        =====       =====
     Effect on diluted earnings per share             0.12            0.99         0.92        0.75
                                                     =====           =====        =====       =====
</TABLE>

     Pretax  income for the years ended  December  31,  2002,  2001 and 2000 was
     taxed in the following jurisdictions:

<TABLE>
<CAPTION>
                                                          2002           2002          2001          2000
                                                     ----------------------------------------------------
                                                           US$            RMB           RMB           RMB
                                                           ---            ---           ---           ---
                                                                       (In thousands)
<S>                                                      <C>          <C>           <C>           <C>
     British Virgin Islands                               (380)        (3,144)       (2,815)       (2,264)
     United States of America                             (514)        (4,261)       (1,970)       (2,277)
     The People's Republic of China                      4,879         40,376        34,996        28,091
                                                     ---------    -----------     ---------    ----------
                                                         3,985         32,971        30,211        23,550
                                                     =========    ===========     =========    ==========

</TABLE>


                                       13
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   INCOME TAXES (CONTINUED)

     Significant  components of the provision for income taxes  attributable  to
     income before income taxes are as follows:

<TABLE>
<CAPTION>
                                                          2002           2002         2001          2000
                                                     ---------------------------------------------------
                                                           US$            RMB          RMB           RMB
                                                           ---            ---          ---           ---
                                                                       (In thousands)
<S>                                                       <C>          <C>          <C>           <C>
     Current                                              (386)        (3,190)      (2,991)       (2,385)
     Deferred                                                9             74           80             -
                                                     ----------     ----------    ---------    ----------
                                                          (377)        (3,116)      (2,911)       (2,385)
                                                     ==========     ==========    =========    ==========
</TABLE>


     Deferred tax assets comprised the following at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                            2002         2002          2001
                                                        -----------------------------------
                                                             US$          RMB           RMB
                                                             ---          ---           ---
                                                                  (In thousands)
<S>                                                           <C>         <C>           <C>
     Provision for doubtful debts                             98          811           952
     Deferred income                                          26          215             -
     Net operating loss of Jinpan USA carry forward          646        5,349         3,645
                                                        ---------    ---------    ----------
     Total deferred tax assets                               770        6,375         4,597
     Valuation allowance for deferred tax assets            (646)      (5,349)       (3,645)
                                                        ---------    ---------    ----------
     Net deferred tax assets                                 124        1,026           952
                                                        =========    =========    ==========
</TABLE>

     Management  of the  Group  does  not  believe  that  sufficient  objective,
     positive evidence  currently exists to conclude that  recoverability of net
     operating  loss of Jinpan USA is more  likely than not.  Consequently,  the
     Group has provided a RMB5,349,000  (2001:RMB3,645,000)  valuation allowance
     covering  100% of net  operating  loss of  Jinpan  USA.  The  change in the
     valuation allowance for the current year is RMB1,704,000 (2001:RMB788,000).
     At  December  31,  2002,  the Group has  available  net  operating  loss of
     RMB13,374,000  (2001:RMB9,112,000),  which will expire in the years 2017 to
     2022.

     There were no deferred tax liabilities as at December 31, 2002 and 2001.

     The  reconciliation  of income tax computed at the PRC statutory income tax
     rate of 15% (2000:15% and 1999:15%) in Hainan  Province,  the PRC to income
     before minority interests is as follows :

<TABLE>
<CAPTION>
                                                                     2002            2002         2001        2000
                                                                  ------------------------------------------------
                                                                      US$             RMB          RMB         RMB
                                                                                       (In thousands)
<S>                                                                   <C>           <C>          <C>         <C>
     Computed expected income taxes                                   598           4,945        4,532       3,533
     Impact of tax holiday of Jinpan JV                              (386)         (3,190)      (2,991)     (2,385)
     Non-deductible losses                                             57             472          422         340
     Effect of difference between the PRC and USA tax rate           (129)         (1,065)      (  493)     (  569)
     Change in valuation allowance                                    206           1,704          788         911
     Others                                                            31             250          653      (  555)
                                                                  --------        --------     --------      -------

                                                                     377            3,116        2,911       2,385
                                                                    =====           =====        =====       =====
</TABLE>


                                       14
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.   BANK LOANS

     Bank loans comprised:
<TABLE>
<CAPTION>
                                                2002           2002              2001
                                             -----------------------------------------
                                                 US$            RMB              RMB
                                                 ---            ---              ---
                                                          (In thousands)
<S>                                              <C>             <C>              <C>
     Short term bank loan                      2,417            20,000               -
     Letters of credit                           443             3,667            1,996
     Less: current portion                    (2,860)          (23,667)         ( 1,996)
                                              ------           -------          -------
                                                   -                 -                -
                                              ======           =======          =======
</TABLE>

     The bank loan is secured by time  deposit of  RMB20,000,000  in the name of
     Jinpan JV, which carries a weighted  average interest rate of 6.04% and was
     repaid on January 15, 2003.

     Letters of credit are unsecured,  bear interest at a weighted  average rate
     of 5.25% and 7.88% per annum  for the years  ended  December  31,  2002 and
     2001,  respectively,  and are repayable within 90 days. The Group has total
     credit facilities of RMB45,485,000 (US $5,500,000) as of December 31, 2002,
     of which  RMB41,848,000  (US  $5,057,000)  is  unused.  Of the totl  credit
     facilities, RMB33,080,000 (US $4,000,000) will be expired in July 2003, and
     the others have no fixed terms of realization.

10.  GOVERNMENT GRANT

     Since  1998,  Jinpan  JV  received  grants-in-advance  from  the PRC  local
     government for its past business performance.  The Group recognizes revenue
     in  the  statement  of  income  upon  receipt  of  the  approval  from  the
     government.   The  Group  recognized   income  of  RMB1,280,000,   nil  and
     RMB1,354,000 in 2002, 2001 and 2000 respectively.  As of December 31, 2002,
     Jinpan JV received  RMB4,804,000 for which relevant approval documents from
     the  government  were not  received.  As  management  of the Group does not
     believe that sufficient  objective,  positive evidence  currently exists to
     conclude  that approval of the grant from the  government is probable,  the
     receipt has not been  recognized  in the statement of income as of December
     31, 2002.

11.  DISTRIBUTION OF INCOME

     According  to the  Articles  of  Association  of  Jinpan  JV,  Jinpan JV is
     required to maintain  reserves  which include a statutory  reserve fund, an
     enterprise  expansion  fund and a staff welfare and bonus fund based on the
     net income as reported in the  statutory  accounts  prepared in  accordance
     with PRC GAAP.  The amount of retained  earnings of Jinpan JV available for
     distribution under PRC GAAP was approximately  RMB37 million as of December
     31, 2002 and 2001.

     The statutory reserve fund, enterprise expansion fund and the staff welfare
     and bonus fund represent  appropriations made at the sole discretion of the
     board of  directors.  The  enterprise  expansion  fund is used  for  future
     expansion.  The staff  welfare  and bonus  fund is used for the  collective
     welfare of the staff and workers of Jinpan JV.

     During the years ended  December 31, 2002,  2001 and 2000, the directors of
     Jinpan JV proposed the following appropriations to reserves.

<TABLE>
<CAPTION>
                                                  2002            2002         2001        2000
                                               ------------------------------------------------
                                                   US$             RMB          RMB         RMB
                                                   ---             ---          ---         ---
                                                                    (In thousands)
<S>                                                <C>           <C>          <C>           <C>
     Statutory reserve fund                        272           2,253            -            -
     Enterprise expansion fund                     225           1,863            -            -
     Staff welfare and bonus fund                   -                -            -            -
                                                ------         -------        -------      ------
                                                   497           4,116            -            -
                                                 =====         =======        =======      ======
</TABLE>
     No dividends were declared  during the years ended December 31, 2002,  2001
     and 2000.
                                       15
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.  COMMITMENTS

     The Company leases certain  buildings and apartments  under  non-cancelable
     lease arrangements.  These operating leases expire in various years through
     2007.  These  leases may be renewed  for  periods  ranging  from one to two
     years.

     Future minimum payments under non-cancelable  operating leases with initial
     terms of one year or more consisted of the following at December 31, 2002:

                                                         US$           RMB
                                                     (In thousands)
     2003                                                107           884
     2004                                                 81           669
     2005                                                 72           597
     2006                                                 56           462
     2007                                                  9            77
                                               -------------    ----------
     Total minimum lease payments                        325         2,689
                                               =============    ==========


13.  RELATED PARTY TRANSACTIONS

     During  the  years  ended   December  31,  2002  and  2001,   the  minority
     shareholders  borrowed  RMB888,000 and RMB728,000  respectively from Jinpan
     JV, which was interest  free and repayable  within one year.  The amount of
     RMB728,000 was repaid in February 2002 and the remaining repaid in December
     2002.


14.  FINANCIAL INSTRUMENTS

     Concentrations of credit risk

     Financial  instruments  that  potentially  subject the Group to significant
     concentrations  of  credit  risk  consist  principally  of  cash  and  cash
     equivalents and accounts receivable.

     The  Group  maintains  cash  and  cash  equivalents  with  Bank  of  China,
     Industrial and Commercial Bank of China,  China  Construction  Bank and Nan
     Yang Commercial Bank in the PRC and Citibank, N.A. in the United States.

     Concentrations  of credit  risk with  respect to  accounts  receivable  are
     limited due to the large number of entities comprising the Group's customer
     base.  The Group  performs  ongoing  credit  evaluations  of its customers'
     financial   conditions  and  does  not  require   collateral  for  accounts
     receivable.

     The provision for doubtful  accounts the Group  maintains is based upon the
     expected collectibility of all accounts receivable. Losses have been within
     management's expectations.

     Fair Value

     Cash and cash  equivalents:  The  carrying  amount  reported in the balance
     sheet for cash and cash equivalents approximates its fair value.



                                       16
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  FINANCIAL INSTRUMENTS (CONTINUED)

     Accounts  receivable,  other  receivables,  accounts payable,  advance from
     customers, accruals, other liabilities and bank loans: The carrying amounts
     reported in the balance sheet for these items approximate their fair value.
     The fair values of receivables and loans and borrowings are estimated using
     discounted cash flow analysis,  based on current  incremental lending rates
     for similar types of lending and borrowing arrangements.


15.  CONCENTRATION OF RISK

     During 2002,  the Company was  dependent on two major  suppliers of silicon
     steel and electrical  magnetic wires,  Thyssenkrupp  Electrical Street GmbH
     and Hainan Qiongshan Dayou Machinery  Manufacture Co. Ltd., which accounted
     for approximately 33% and 29% of total purchases, respectively.


16.  PENSION AND OTHER POSTRETIREMENT BENEFITS

     The Company and Jinpan USA do not have any retirement plans while Jinpan JV
     has a defined contribution retirement plan for its employees. As stipulated
     by the PRC  government  regulations,  Jinpan JV  participates  in a defined
     contribution   retirement  plan  organized  by  the  government  of  Hainan
     Province,  the PRC.  All  permanent  employees  are  entitled  to an annual
     pension which is equal to a fixed proportion of their final basic salary at
     their  retirement  date.  Jinpan JV and its  employees are required to make
     contributions  to  the  retirement  plan  at  rates  of  20%  and 5% of the
     employees' basic salary, respectively. Payment is made, on a monthly basis,
     to a PRC  insurance  company  organized  by the  PRC  government  which  is
     responsible  for the  payments of pension  benefits  to retired  employees.
     Jinpan JV has no  obligations  for the pension  benefits  beyond the annual
     contributions as described above. The pension costs recognized by Jinpan JV
     during  the years  ended  December  31,  2002,  2001 and 2000  amounted  to
     RMB493,000(US$59,561), RMB287,000and RMB228,000, respectively.


17.  OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA

     Description of products by segment

     Cast resin transformers is the only reportable segment of the Group.

     Geographic area data

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                   2002             2002             2001            2000
                                              ----------------------------------------------------------------
                                                   US$               RMB             RMB              RMB
                                                                       (In thousands)
     Revenues from external customers:
<S>                                                      <C>           <C>              <C>             <C>
     United States                                       896           7,413            6,965           2,335
     PRC                                              26,824         222,008          177,515         138,929
                                              ---------------    ------------    -------------    ------------
                                                      27,720         229,421          184,480         141,264
                                              ===============    ============    =============    ============
     Long lived assets by area:
     United States                                         6              50               49
     PRC                                               3,527          29,188           30,276
                                              --------------     ------------    -------------
                                                      3,533           29,238           30,325
                                              ==============     ============    =============

</TABLE>


                                       17
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  EQUITY

     Pursuant to the board resolution of the Company dated January 21, 2002, the
     officers of the Company were  authorized and empowered,  in the name and on
     behalf of the Company,  to purchase up to 320,000  shares of the  Company's
     common  stock from time to time in the open market and  through  privately,
     negotiated  transactions;  such  repurchase  program is to be financed from
     internally  generated  corporate  fund,  with  the  acquired  stock  to  be
     available for use under the Company's stock option plan for other corporate
     purpose.  As of December 31, 2002,  29,577 shares of the  Company's  common
     stock were  transferred  back into treasury at an aggregate cost of $89,606
     (approximately RMB742,000).

     The  Company's   convertible   preferred  stock   ("preferred   stock")  is
     convertible  at any time to  shares  of  common  stock  and  each  share of
     preferred  stock entitles its holder to the same number of votes as a share
     of common  stock.  Holders of  preferred  stock are  entitled  to receive a
     preferred  per share  dividend (6% per annum)  payable in kind,  compounded
     quarterly.  All accrued and unpaid dividends  (approximately RMB5,800 as at
     December  31,  2002)  on  the  preferred  stock  are to be  cancelled  upon
     conversion  into common stock.  In the event of the Company's  liquidation,
     dissolution or winding up, the holders of preferred stock are entitled to a
     preference  over the holders of common stock in the  distribution of assets
     in an amount equal to the sum of: (i) $4.375 per share,  and (ii) an amount
     equal to declared but unpaid dividends on each such share.

     (a)  1997 stock option plan

          A total of  500,000  shares of Common  Stock  have been  reserved  for
          issuance under the Company's 1997 Stock Option Plan (the "Stock Option
          Plan").  The Stock  Option Plan  provides  for  options to  employees,
          officers,  directors and consultants of the Company.  The Stock Option
          Plan,  which was  established in October 1997, is  administered by the
          board of  directors  or a  committee  appointed  by the  board,  which
          determines the terms of options granted, including the exercise price,
          the  number  of  shares   subject  to  the  option  and  the  option's
          exercisability.  The exercise  price of all options  granted under the
          Stock  Option Plan must be at least equal to the fair market  value of
          each  share on the date of grant.  Options  shall be fully  vested and
          become  exercisable at the date of grant.  The maximum term of options
          granted under the Stock Option Plan is 10 years.

          In 1998, the Company granted options to purchase 300,000 shares of the
          Company's  outstanding common stock under the Stock Option Plan to Dr.
          Xinming Mu, then a director and employee of the Company. Pursuant to a
          Mutual Release and Settlement  Agreement between the Group and Dr. Mu,
          signed in October  2000,  Dr. Mu consented and agreed to forfeit these
          options. The forfeiture of the shares did not result in any additional
          compensation costs.

     (b)  Stock option agreement

          In January 1998, the Company  entered into an agreement with Dr. Mu to
          grant to Dr. Mu in April 1999,  options to purchase  100,000 shares of
          common stock of the Company at an exercise price of US$4.375 per share
          provided  that Dr. Mu served as a director of the  Company  during the
          period  commencing from January 1, 1999 and ending March 31, 1999. The
          term of this option was to be three years commencing  immediately upon
          the grant thereof.

          The  Company  accounted  for  this  plan  under  APB  25  and  related
          interpretations  under which aggregate  compensation of  approximately
          RMB1,759,000  related to this option was charged to the  statement  of
          income over the period from  February  1998 to March 1999.  During the
          year ended December 31, 1999, compensation of approximately RMB377,000
          related to this option was charged to the  consolidated  statement  of
          income.


                                       18
<PAGE>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  EQUITY (CONTINUED)

     (b)  Stock option agreement (continued)

          Dr. Mu terminated his  relationship  with the Company in January 2000.
          This agreement was amended in February 2000 to reduce the option grant
          to 50,000  shares  and to  permit  Dr. Mu to  retain  the  option.  No
          compensation cost was incurred as a result of this agreement.

          No options were exercised in relation to this agreement in 2002,  2001
          and 2000.

     (c)  2001 stock option contracts

          In February 2001, the Company entered into stock option contracts with
          five of its directors and Chief Financial Officer,  to purchase 60,000
          shares of common stock of the Company. Options granted are exercisable
          at the price of US$2.7  per share and  subject to  expiration  8 years
          from the date of grant, are not transferable  other than on death, and
          are exercisable from the date of grant.

          The  Company   accounts  for  this  plan  under  APB  25  and  related
          interpretations and no compensation cost was recognized.

          Mr. Cherry Li and Ms. Grace Zhu, who were  nominated as a director and
          Chief  Financial  Officer  of  the  Company,   each  terminated  their
          relationships with the Company in June and August 2002,  respectively.
          The board of directors,  in its  discretion,  permitted Mr. Li and Ms.
          Zhu to retain the option.  The forfeiture of the shares did not result
          in any additional compensation costs.

          No options were exercised in 2002 or 2001.

     (d)  Warrants granted to non-employees

          According to a  conditional  agreement  dated  October 28,  1998,  the
          Company  agreed  to grant  to  Minson  Group  and Mr.  Simon M.  Lorne
          five-year  warrants,  exercisable  at the closing market price for the
          Company's  common stock on the American  Stock Exchange on the date of
          the  agreement,  to purchase  an  aggregate  of 100,000  shares of the
          Company's  common stock.  These warrants were used as an incentive for
          Minson  Group  and  Mr.  Lorne  to  provide  consulting  services  and
          successfully find a merger or acquisition  opportunity.  However,  the
          Company  did not have  authorized  options  sufficient  to satisfy the
          obligations  under this agreement because these options are subject to
          authorization by its Board and approval from  shareholders.  According
          to the agreement, if such options are not authorized for any reason on
          or before  the  earlier  of (a)  shareholder  approval  of a  proposed
          acquisition  as  described  above,  or (b) July 1, 1999,  the  Company
          agreed  to make  cash  payments  equal to the value at the time of the
          options that would otherwise have been granted under the terms of this
          agreement.  However, pursuant to the Board Resolution dated August 19,
          1999, the above  consulting  agreement with Minson Group and Mr. Simon
          M. Lorne was canceled.

          On  January  18,  2000,  Minson  Group and Mr.  Lorne  filed a lawsuit
          alleging that, under the above consulting  agreement,  the Company was
          obligated  to issue them  warrants to purchase  100,000  shares of the
          Company's  common  stock at an  exercise  price  equal to the  closing
          market   price  on  the   date  of  the   consulting   agreement,   or
          alternatively,   to  pay  to  them  an  amount  equal  to   US$150,000
          (RMB1,242,000).  Pursuant to a Mutual Release and Settlement Agreement
          signed  between the Group and the  Plaintiffs in September  2000,  the
          Group  paid  the  Plaintiffs  the sum of  US$50,000  (RMB415,000).  In
          return,  the Plaintiffs  dismissed their claims in 2000. There were no
          warrants to  non-employees  outstanding as at December 31, 2002,  2001
          and 2000.


                                       19
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  EQUITY (CONTINUED)

     (e)  Number of common stock reserved for issuance upon exercise of warrants
          and stock options

                                                   2002              2001
                                          --------------      ------------

          Warrants                              115,050           115,050
          Stock options                         440,000           440,000
                                          --------------      ------------

          Total                                 555,050           555,050
                                          ==============      ============

          In February 1999, warrants to purchase 115,050 shares of the Company's
          common  stock  were  issued  by the  Company  in  connection  with the
          issuance  and  sale  of  common  stock  by the  Company  in a  private
          placement to accredited  investors. The exercise price of the warrants
          is US$4.00 each. The warrants expired unexercised in February 2003.

     (f)  Disclosure of information pursuant to FAS 123

          Pro forma  information  regarding net income and earnings per share is
          required  by FAS 123,  and has been  determined  as if the Company had
          accounted  for its stock  options  under the fair value method of that
          statement.  As the Company had no new grants of options in the current
          year  and all of the  440,000  outstanding  options  were  vested  and
          exercisable at the date of grant,  there is no pro forma impact on net
          income under SFAS 123. The fair value of options  granted for 2001 and
          2000 reported  below has been estimated at the date of grant using the
          Black-Scholes option pricing model with the following weighted average
          assumptions:


<TABLE>
<CAPTION>
                                                      2002         2001         2000
                                                ----------   ----------    ---------
<S>                                                  <C>           <C>          <C>
          Risk-free interest rate                        -        4.55%        6.53%
          Dividend yield                                 -            -            -
          Volatility factor                              -        50.5%        57.9%
          Weighted average expected life                 -      2 years      2 years

</TABLE>
          The  Black-Scholes  option  valuation  model was  developed for use in
          estimating  the fair  value of traded  options,  which have no vesting
          restrictions and are fully transferable. In addition, option valuation
          models require the input of highly  subjective  assumptions  including
          the expected stock price volatility.  The Company's stock options have
          characteristics  significantly  different from those of traded options
          and changes in the subjective input  assumptions can materially affect
          the fair value estimate.  In management's opinion, the existing models
          do not necessarily provide a reliable single measure of the fair value
          of its stock options.

          For the purpose of pro forma disclosures,  the estimated fair value of
          the options is  amortized  to write off the amount  over the  options'
          vesting  period.  The  Company's pro forma  information  is elaborated
          above in 3(o).



                                       20
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  EQUITY (CONTINUED)

     (f)  Disclosure of information pursuant to FAS 123 (continued)

          A summary  of the  Company's  stock  option  activities,  and  related
          information  for the years ended December 31, 2002,  2001 and 2000 are
          as follows:

<TABLE>
<CAPTION>
                                                      2002                    2001                    2000
                                            ------------------------------------------------------------------------
                                                          Weighted                Weighted                Weighted
                                                          average                  average                average
                                                          exercise                exercise                exercise
                                              Options      price      Options       price      Options      price
                                            ----------- ----------- ----------- ------------------------------------
                                                            US$                      US$                     US$

<S>                                            <C>           <C>       <C>            <C>       <C>           <C>
          Outstanding at beginning of year     440,000       4.147     380,000        4.375     730,000       4.375
          Granted                                    -           -      60,000        2.700      50,000       4.375
          Exercised                                  -           -           -            -           -           -
          Cancelled                                  -                       -                  100,000
          Forfeited                                  -           -           -            -     300,000       4.375
                                            ----------- ----------- ----------- ------------------------------------
          Outstanding at the end of year       440,000       4.147     440,000        4.375     380,000       4.375
          Exercisable at the year end          440,000       4.147     440,000        4.147     380,000       4.375

          Weighted average fair value of
            options granted during the year        N/A                 US$0.21                  US$0.83

</TABLE>
          Weight-average exercise prices for options outstanding as December 31,
          2002 are US$4.147. The weighted-average  remaining contractual life of
          those options is one year.

<PAGE>




                                  EXHIBIT INDEX

    EXHIBIT NO.            DESCRIPTION
    -----------            -----------

       23.1                Consent of Independent Auditor
       99.1                Certification Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.