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, 2004

                           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 ELECTRIC COMPANY, LTD
                                   SECTION D-2
                              NO. 100 NANHAI 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:

                                6,686,778 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               1
Item 2.    Offer Statistics and Expected Timetable                             1
Item 3.    Key Information                                                     1
Item 4.    Information on the Company                                         12
Item 5.    Operating Financial Review and Prospects - Management's
           Discussion and Analysis                                            26
Item 6.    Directors, Senior Management and Employees                         34
Item 7.    Major Shareholders and Related Party Transactions                  37
Item 8.    Financial Information                                              38
Item 9.    Offer and Listing                                                  38
Item 10.   Additional Information                                             39
Item 11.   Quantitative and Qualitative Disclosure About Market Risk          42
Item 12.   Description of Securities Other than Equity Securities             42
Item 13.   Defaults, Dividend Arrearages and Delinquencies                    42
Item 14.   Material Modifications to the Rights of Security Holders and
           Use of Proceeds                                                    42
Item 15.   Controls and Procedures                                            42
Item 16A.  Audit Committee Financial Expert                                   43
Item 16B.  Code of Ethics                                                     43
Item 16C.  Principal Accountant Fees and Services                             43
Item 16D.  Exemptions From the Listing Standards for Audit Committees         44
Item 16E   Purchases of Equity Securities by the Issuer and
           Affiliated Purchasers                                              44
Item 17.   Financial Statements                                               44
Item 18.   Financial Statements                                               44
Item 19.   Exhibits                                                           45





                                        i

<PAGE>

                                     PART I

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

         We, Jinpan International Limited ("Jinpan International"), together
with our 85% owned subsidiary Hainan Jinpan Electric Company, Ltd ("Hainan
Jinpan"), a Sino-foreign cooperative joint venture, and Hainan Jinpan's
predecessor, Haikou Jinpan Special Transformer Works ("Haikou Jinpan"), 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, 2004, of RMB8.28 = 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 mean that the
Renminbi amounts (i) actually represent the corresponding dollar amounts stated,
or (ii) can be converted into dollars at the assumed rate.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not Applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not Applicable.

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 December 31, 2004, 2003, 2002,
2001 and 2000.

                                      - 1 -

<PAGE>

<TABLE>
<CAPTION>

                                                                    Year ended December 31,

                                  --------------------------------------------------------------------------------------------
                                     2000             2001               2002           2003                  2004
                                  ----------       ----------         ----------     ----------   ----------------------------
                                     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                            141,264          184,480            229,421       276,564         349,609            42,254
   Costs of goods sold              (73,869)        (104,686)          (128,770)     (157,559)       (228,519)           27,619
   Gross profit                      67,395           79,794            100,651       119,005         121,090            14,635


   Selling and
   administrative  expenses         (50,744)         (57,396)           (81,325)      (86,883)        (84,772)          (10,245)

   Interest Expenses                   (925)            (600)              (541)         (354)           (423)              (51)

   Other income                       7,824            8,413             14,186         4,717           3,032               366
   Income before taxation            23,550           30,211             32,971        36,485          38,927             4,705
   Income Tax                        (2,385)          (2,911)            (3,116)       (3,727)         (4,031)             (487)
   Income before Minority            21,165           27,300             29,855        32,758          34,896             4,218
   Interest
   Minority interest                 (4,427)          (4,229)            (4,972)       (5,845)         (6,032)             (729)
   Net income                        16,738           23,071             24,883        26,913          28,864             3,489

   Earnings (loss) per share:

      Basic                             2.66             3.66               3.96         4.21            4.44              0.54
      Fully diluted                     2.65             3.65               3.93         4.15            4.33              0.53
  Number of shares outstanding:
      Basic                        6,298,978        6,298,978          6,279,866    6,390,804       6,489,178         6,489,178
      Fully diluted                6,326,556        6,326,556          6,329,854    6,487,116       6,663,305         6,663,305

</TABLE>

<TABLE>
<CAPTION>

                                  December        December       December       December                 December
                                  31, 2000        31, 2001       31, 2002       31, 2003                  31, 2004
                               -------------    ------------   ------------   -------------      ------------------------

                                    RMB             RMB             RMB               RMB            RMB         U.S.$(1)

<S>                                  <C>             <C>            <C>              <C>            <C>            <C>
Balance Sheet Data:

   Cash and cash equivalents         36,560          44,510         63,800           66,571         46,433         5,612
   Total assets                     168,142         203,711        267,261          283,890        351,228        42,450
   Minority interest                 11,506           7,028         10,899            6,841          5,437           657
   Equity                           137,412         160,464        184,604          208,854        233,857        28,265
</TABLE>

--------------------
(1) For your convenience, translation of amounts from Renminbi into U.S. dollars
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, 2004 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.

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

      Matters discussed in this document may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements in order to encourage
companies to provide prospective information about their businesses.

Forward-

                                      - 2 -

<PAGE>

looking statements include statements concerning plans, objectives, goals,
strategies, future events or performance, and underlying assumptions and other
statements, other than statements of historical fact.

      We desire to take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are including this cautionary
statement in connection with this safe harbor legislation. This document and any
other written or oral statements made by us or on our behalf may include
forward-looking statements, which reflect our current views with respect to
future events and financial performance. The words "believe", "expect",
"anticipate", "intend", "estimate", "forecast", "project" and similar
expressions identify forward-looking statements.

      The forward-looking statements in this document are based upon various
assumptions, many of which are based in turn upon further assumptions, including
without limitation, management's examination of historical operating trends,
data contained in our records and other data available from third parties.
Although we believe that these assumptions were reasonable when made, because
these assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond our
control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections. In addition to these important factors and
matters discussed elsewhere herein and in the documents incorporated by
reference herein, important factors that, in our view, could cause actual
results to differ materially from those discussed in the forward-looking
statements, including the achievement of the anticipated levels of
profitability, growth, cost, the timely development and acceptance of new
products, the impact of competitive pricing, the impact of general business and
global economic conditions and other important factors described from time to
time in the reports filed by us with the Securities and Exchange Commission.

      Except to the extent required by law, neither we, nor any of our
respective agents, employees or advisors intends or has any duty or obligation
to supplement, amend, update or revise any of the forward-looking statements
contained or incorporated by reference in this document.

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

         You should carefully consider the risks described below before making
an investment decision. The risks described below are not the only ones facing
our company. Any of these risks may have a material adverse effect on our
business, financial condition or results of operations. The trading price of our
shares could decline due to any of these risks and you may lose all or part of
your investment.

                          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 REVENUES IS DERIVED FROM SALES OF OUR CAST
RESIN TRANSFORMERS, ANY DECREASE IN SALES COULD HARM OUR OPERATING RESULTS.

                                      - 3 -

<PAGE>

         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 OR DAMAGE
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 the 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.

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 comprise
the cores of our transformers and copper foil and wire for our copper windings.
We obtain all of our requirements for cast resin from Bakelite, a German
corporation, the silicon steel from Thyssenkrupp Electrial Street GmbH, a
European company, and the copper foil and wire from Delta & Wye Transformer
Co.,Ltd and Hainan Qiongshan Dayou Machinery Manufacture 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
face increased costs which may have a material adverse effect on our results of
operations.

         Other raw materials required to manufacture 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 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. We have never experienced any disruption in the supply of any raw
material that has had a material impact on our operations however, we cannot be

                                      - 4 -

<PAGE>

certain that a disruption in supply by our raw material suppliers will not occur
in the future. If such disruption occurs and we experience a significant delay
in the supply of these materials, there may be a material adverse effect to our
results of operations.

COMPETITION WITH OTHER LARGE AND SMALL TRANSFORMER MANUFACTURERS MAY RESULT IN
DOWNWARD PRESSURE ON PRICES AND A 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 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 historically not 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 may
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 World Trade Organization, we may have
additional competitors in China such as ABB, Siemens and Alstom.

WE MAY FACE PRODUCT LIABILITY CLAIMS THAT MAY 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 product liability insurance for our
products, consistent with industry practice in China. Such a product liability
claim may adversely affect our business, operating results or financial
condition.

IF WE ARE UNABLE TO MAINTAIN OUR EXPERTISE IN MANUFACTURING PROCESSES OR
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 for our products 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.

                                      - 5 -

<PAGE>

         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
         o        due to the fact that enforcement of our proprietary rights or
                  the defense against the proprietary claims of others may 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 our Memorandum and Articles of
Association and by the International Business Companies Act of the British
Virgin Islands. Principles of law relating to matters such 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
against 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



                                      - 6 -

<PAGE>

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 laws
protecting minority shareholders in the United States. 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 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

                                      - 7 -

<PAGE>

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 political,
economic, legal and other uncertainties which affect companies operating in
China.

         The economy of China differs from the economics of most countries
belonging to the Organization for Economic Co-operation and Development
("OECD"), in respects such 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 China.

         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 interpretations 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 for power plants and the potential unavailability of adequate
power and water supplies, transportation, satisfactory roads, communications
abilities and raw materials and parts.

                                      - 8 -

<PAGE>

         The Chinese economy has experienced significant growth in recent years,
but such growth has been uneven among various geographical regions and sectors
of the economy. The Chinese Government implemented various policies from time to
time, including, but not limited to, the periods from 1989 to 1991and again
commencing in 1993, to restrain the rate of economic growth, control inflation
and otherwise regulate economic expansion. Although we do not expect such
policies to impact our operations, we may 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 and
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 policy changes made by the Chinese government to any of
the following:

         o        laws and regulations, or their interpretation and enforcement
                  thereof,

         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 any
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. Moreover, economic development in China may also be limited 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 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 our 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.

                                      - 9 -

<PAGE>

         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.

         According to the statistical bulletin provided by China's National
Statistics Bureau, China's economic output in 2004 grew 9.5% over the previous
year, reaching 13.65 trillion RMB (1.65 trillion U.S. dollars). Imports and
exports grew 36% and 35.4% respectively, reaching 561.36 billion U.S. dollars
and 593.36 billion U.S. dollars. The consumer price index increased 3.9% in
2004. There is no assurance that the Chinese economy will continue to grow in
such rates and if it fails to do so our business may be adversely affected.

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 EXPOSE 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

                                     - 10 -

<PAGE>

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 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

         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 IN THE
EXCHANGE RATE TO CERTAIN FOREIGN CURRENCIES 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 from Germany. The Chinese government imposes control over our
foreign currency reserves in part through direct regulation of the conversion of
Renminbi into foreign currency 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. Such 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 currency 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 in the
future. 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.

                                     - 11 -

<PAGE>

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 which was renamed Hainan
Jinpan Electric Company Ltd. on October 9,2004. Our principal executive offices
are located at c/o Hainan Jinpan Electric Corporation Ltd., No. 100 Nanhai
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 the 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 establishment in August 1993, sold in excess of
12,748 cast resin transformers in China and has produced aggregate revenues of
approximately RMB1,513 million (U.S.$183 million) as of December 31, 2004.
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 purchased all the 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 2004, Hainan
Jinpan had total sales of RMB349.6 million (U.S.$42.2 million) based upon sales
of our transformers having a total capacity of 4.6 million KVA. Hainan Jinpan
obtained an ISO9001 certification of its cast resin transformers in April 1997,
which was renewed for an additional period of three years expiring in 2006.
Hainan Jinpan also obtained 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 underwent complete type testing and was 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 processes;
         o        equipment; and
         o        personnel.



                                     - 12 -

<PAGE>

         We have begun the process of obtaining our core and coil "UL"
certification. Such certification requires compliance with the UL's Standards
for Safety, under which product samples are tested and evaluated in accordance
with 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 generally be used. Most step down
transformers in China use oil to disperse the heat created when high voltage is
transformed to low voltage. 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 and 188 degree Celsius
insulation (class F and class H). We manufacture and sell 16 standard sizes of
transformers with KVA capacities ranging between 100 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 20,000 KVA.

         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 twenty-five 25 design engineers who utilize 3D design
system, Mechanic Desk Top software and Auto Desk to design custom made
transformers. For example, our engineers designed

                                     - 13 -

<PAGE>

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 our transformers:

         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;

         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.

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.

                                     - 14 -

<PAGE>

BUSINESS STRATEGY

         During 2003 we adopted a strategy which focused on promoting and
developing new products, forward integration, and strengthening our sales force.
Last year we continued to execute our strategy along the same strategic lines.
Our efforts enabled us to become entrenched as the leading cast resin
transformer manufacturer in China while making advances in other international
markets:

New products

         Cast resin transformer products forms the core of our product line and
are higher on the evolutionary scale of transformer products requiring highly
advanced production technology. We continue to develop and expand our already
broad product line, extending product uses into areas where we believe we will
have a competitive edge over our competitors. The ZQSC10 24 pulse rectifier
transformer developed this year is one such product and benefits the end user by
greatly reducing the harmonics in rectifier circuits to help protect the
network. Another product developed this year is the ZIDCB9-3000 isolation
transformer utilized in 800 mega-watt power plants and is a technology that was
previously imported to China. We believe new products will greatly enhance our
competitiveness in China and abroad.

Forward Integration

         During 2004 we have successfully engaged in developing Jinpan Electric
as a supplier of switch gear products. Switch gear forms the part of the system
that enables operators to switch system equipment in and out of the network. We
have executed a licensing agreement with a world leading manufacturer of circuit
breakers for use in our switch gear assemblies. These efforts have paid off
handsomely with respect to landing some fairly large scale projects for switch.
We see a similar scenario with respect to the success realized though our unit
substation business which was initiated in 1999 and has grown considerably since
then. A unit substation is a miniature power generation station comprised of
high voltage switchgear, a transformer, low voltage switchgear, a power meter
and power factor compensation device all interconnected with cables or buss
bars. Jinpan creates unit substations by integrating the aforementioned
equipment together with our transformers. Unit substations are commonly used in
applications related to construction and reconstruction of city power networks.
Switch gear and transformers are a key component to unit substations. In an
effort to position our company as a broader total solutions provider of
electrical equipment we have changed the company's name to Hainan Jinpan
Electric. Based on our success with integrated assemblies, we believe that we
are well on the road of becoming a major electrical equipment supplier and
offering complete packages to our customers.

Strengthen our sales force and advance our markets

         By the end of December 2004 our efforts to strengthen our sales force
stands at having 32 sales offices with 55 direct employees and 15 independent
sales agents in China, and 1 sales office with 4 independent sales rep
organization in North America addressing international (external to China)
business. We will continue this trend as needed to fully exploit various high
growth markets.

         Significant progress has been made during 2004 in addressing the large
original equipment manufacturers (OEM) market. We have successfully passed a
rigorous qualification program for one of the world's largest power generating
equipment manufacturers a have since supplied this manufacturer transformers for
projects. As a measure of our success Jinpan Electric was present an award for
best new supplier by this major OEM at a supplier's conference. In addition we
were audited and surveyed by several other leading OEMs during 2004 and have
scored vary high achieving the highest rankings. We will continue working with
and supporting our U.S. partners who purchase our cores and coils for their

                                     - 15 -

<PAGE>

transformer production and sales. Due to the change in scope of our UL project
we will be able to offer the North American market UL listed products on a
complete line of transformer assemblies verse supplying manufacturers with a UL
recognized core and coil which they in turn would have to have UL listed for
their complete transformer package. .

         We also continue to focus our attention on ensuring that our delivery
times and price structure remain competitive and that we satisfy and respond to
our customers' needs. Our engineers in our U.S. office and Haikou Headquarters
work closely to ensure fast delivery of core and coils from Haikou.

BACKGROUND INFORMATION RELATING TO THE ELECTRIC TRANSFORMER INDUSTRY IN CHINA

        Over the past 26 years, beginning in 1978, when China introduced the
reform and changed its policy, China's economy has grown at an annual average
growth rate of approximately 9.3%. In 2003 and 2004, the GDP grew 9.3% and 9.5%,
respectively. China's capacity to generate electricity increased from 57.12
million kilowatts in 1978 to 440 million kilowatts in 2004, representing an
annual compounded growth rate of 8.17%. In 2004, China ranked second worldwide
with a total electricity output amounting to 2,187 billion KWH, with an annual
compounded growth rate of 8.59%, increasing from 256.6 billion KWH in 1978. In
2004, the total electricity output in China grew 14.5% from the previous year.
However, the supply of electricity in China still falls short due to strong
economic growth. The fast growth of industrial output is the key driving force
behind the consumption of electricity. We expect the production capacity of the
Chinese industrial sector to further improve in 2005, resulting from the fast
growth in fixed asset investments. Thus, we expect that the electricity demand
by the industrial sector will continue to grow steadily. It is expected that
newly installed generating capacity in 2005 will attain 60 to 70 million
kilowatts and that the demand for electricity in 2005 will reach 2,500 billion
kilowatt-hours.

         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 also been requiring
greater amounts of electricity in comparison to the past because of the
significant population increases in the major cities caused by the large influx
of rural migrants in recent years.

         The electrical equipment industry achieved a total output value of
RMB787.2 billion (95.7 billion U.S. dollars) in 2004, up 37.37% from 2003, which
was the highest growth rate among the 13 sections of China's machine-building
industry. Profit of the industry reached RMB42.8 billion (5.17 billion U.S.
dollars). According to the statistics released by the Chinese National Bureau of
Statistics, the total production output of China transformer industry reached
489.70 million KVA in 2004, an increase of 30.1% compared with the previous
year.

         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 0.43 million KVA. Since 1993, installations of cast resin
transformers have risen dramatically as shown in the table below:

                                     - 16 -

<PAGE>

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

                 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
                 2003                      17.55
                 2004                      23.00

         From 2000 through 2004, the production and sales of cast resin
transformers in China was 91.71 million KVA, translating into an average
production and sales per year of 18.34 million KVA, which represents a compound
annual growth rate of 21.71% in sales of transformers in China. According to
industry experts, the power generating capacity in China is expected to increase
to 900 million kilowatts by the year 2020, which represents an annual compound
growth rate of 5% to 6%. This increase in power generating capacity represents
increased market opportunities for Jinpan.

         The table below sets forth our consolidated sales, by geographic
region, for the years ended December 31, 2002, 2003 and 2004:

<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31,
                                                                              -----------------------
                                                                       2002            2003            2004
                                                                       ----            ----            ----

(U.S. DOLLARS IN MILLIONS)

<S>                                                                     <C>             <C>             <C>
Beijing                                                                 5.9             5.9             5.06
Guangdong                                                               4.9             4.9             4.10
Wuhan                                                                   1.7             1.5             2.22
Chongqing                                                               0.4             1.8             1.14
Yunnan, Guizhou                                                         1.0             1.0             1.17
Sichuan                                                                 1.8             2.7             2.62
Liaoning                                                                3.0             2.3             5.29
Shanghai                                                                                2.8             3.30
Jiangsu                                                                                 3.1             5.05
Zhejiang                                                                                1.5             1.81
Tianjin                                                                                                 2.38
Guangxi                                                                                                 1.54
Changsha                                                                                                1.34
Shanxi                                                                                                  1.24
Hainan                                                                                                  0.94
Other                                                                   9.0             5.9             3.05
                                                                     ------------------------------------------
                                                          Total:       27.7            33.4            42.25
</TABLE>

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

         The principal raw materials we require for our business are (1) epoxy
resin, used to coat the copper coils of our transformers, (2) silicon steel,
which comprises the cores of our transformers, and (3) copper foil, for our
copper foil windings. We obtain all of our epoxy resin from Bakelite, a German

                                     - 17 -

<PAGE>

corporation, the silicon steel from Thyssenkrupp Electrical Street GmbH, a
European company, and the copper foil from Mansfelder Kupfer and Messign GmbH
and KM Europe Metals, both German companies and from Delta & Wye Transformer
Co.,Ltd and Hainan Qiongshan Dayou Machinery Manufacture Co. Ltd. in China.

         Other raw materials required 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 32 regional sales offices in various cities in China,
including Beijing, Shanghai and Chongqing. We employ 55 sales representatives,
36 of whom are based in our regional sales offices and 19 are based at our
headquarters in Haikou. All of our sales representatives are salaried employees.
We also sell our products through 15 independent sales agents who receive
commissions based on sales. We sell the majority of our transformers in Beijing,
Guangdong, Zhejiang and the northeast of China.

OUR SIGNIFICANT CUSTOMERS

         Sales to our five largest customers aggregated approximately 15%, 16%
and 13% of our total sales during the fiscal years ended December 31, 2002, 2003
and 2004, respectively, and sales to our largest customer for those same periods
accounted for approximately 4%, 4%, and 3.2% of our total sales, respectively.
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 will 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.

         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.

                                     - 18 -

<PAGE>

         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:

         1.       measurement of winding resistance;
         2.       measurement of voltage ratio;
         3.       measurement of impedance voltage;
         4.       measurement of current;
         5.       source voltage withstand test;
         6.       induced overvoltage withstand test;
         7.       measurement of winding insulation resistance;
         8.       measurement of partial discharge;
         9.       lightning impulse test;
         10.      temperature raise test;
         11.      measurement of sound level; and
         12.      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 2003,
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

                                     - 19 -

<PAGE>

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 any accidents, we believe that our competitors do not manufacture
transformers that are safer or of a higher quality than our transformers.

         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.

GOVERNMENT REGULATION

General conditions in China.

         Since 1949, China has been a socialist state 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. Although China recently 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,
future government action, including any decision by the Chinese government to
discontinue supporting 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 our operations. China's economic reform plan
was designed to bring foreign investment capital and technological advancements
into China. The result of these reforms has been a move towards a more mixed
economy and away from a more centrally-planned one. 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 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 political,
economic, legal and other uncertainties which affect companies operating in
China:

Government regulation in China.

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

         o        laws and regulations, or their interpretation and enforcement
                  thereof,

         o        confiscatory or increased taxation,


                                     - 20 -

<PAGE>

         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 any
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. Moreover, economic development in China may also be limited 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 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 our 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, effective 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.

         On April 1, 1996 the Chinese government reduced the rate of import
duties of 4,971 tax items, thus making the tariff rate decrease from 35% to 23%
on average. On October 1, 1997, the Chinese government reduced the import duty
rate of 4,874 commodity items, resulting in the reduction of the customs duties
from 23% to 17% on average. Starting from January 1, 2001, the Chinese
government decided to reduce the customs duties again, and the overall level of
the Customs duty decreased to 15.3%. This decrease involved a total of 3,462 tax
items, making up 49% of China's total tax items. Having entered the WTO, the
Chinese government will continue to carry out its promise of gradually reducing
customs duties. Commencing January 1, 2005, China's overall customs duty rate
decreased to 9.9% from 10.4%, which includes the reduction of the average import
duty rate for agricultural products which decreased from 15.6% to 15.3% and the
average import duty rate of industrial products which decreased

                                     - 21 -

<PAGE>

from 9.5% to 9%. These tariff reductions will allow a flow of more foreign goods
into the domestic market at lower prices and will pose competitive pressure on
Chinese enterprises.

      Since January 1, 2005, China has entered into the "post-WTO transitional
period" from its WTO entry. The "post-WTO transitional period" is the period
from January 1, 2005 to the date when China opens all its sectors it promised to
foreign participation. This will negatively impact domestic sales of China's
agricultural, auto and financial and services industries, as well as the retail
sector, because these domestic businesses will lose sales to their foreign
counterparts. In 2005, the transitional period for several important service
sectors, including banking, securities, insurance and retail trade will expire.
On July 1, 2006, the auto tariffs will be reduced to 25% and the average tariff
for auto parts to 10%. After 2005, it is anticipated that certain tariff quotas
will reach their highest points. For example. tariff quotas for wheat and corn
are expected to comprise 10.7% and 6%, respectively, of gross domestic output.
After 2005, regional limits on the insurance industry will be cancelled and the
total assets requirement for foreign brokerage firms will be reduced and sole
foreign-funded brokerage firms will be allowed to establish. In 2006, several
limitations imposed upon foreign-owned banks will be cancelled and foreign banks
will be allowed to service Chinese clients in Renminbi. After 2005,
foreign-funded enterprises will be allowed into several industries including
construction, tourism and transportation that they previously could not enter.
In 2007, regional limitations on basic telecommunications will be cancelled and
the foreigners will be allowed to tap into up to 49% of the market.

      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 protection of intellectual property
rights and all the legitimate rights and interests of foreign investors. The
central government is speeding up the drafting of amendments and the abolishment
of obsolete laws, rules and regulations in accordance with China's WTO
commitments. China's entrance into the WTO will create many economic
opportunities for China, as well as many challenges.

      According to the Customs General Administration, the total volume of
China's foreign trade in 2004 reached a record high of 1.15474 trillion U.S.
dollars, up 35.7% over the prior year, moving China up to the number three spot,
as the world's third largest trading power behind the United States and Germany.
The total foreign trade volume of China more than doubled in the past three
years since China's entry into WTO. Both import and export volume topped 500
billion U.S. dollars in 2004, among which the export volume comprised 593.36
billion U.S. dollars, up 35.4%, and the import volume registered at 561.36
billion U.S. dollars, up 36%, with an annual trade surplus of 31.98 billion U.S.
dollars. About 60% of China's foreign trade is conducted through
foreign-invested and private companies. Exports of electromechanical and
high-tech products increased rapidly last year.

      In 2004, China attracted 62 billion U.S. dollars of foreign direct
investment, second only to the United States. China's foreign exchange reserve
surged by as much as 206.7 billion U.S. dollars to 609.9 billion dollars by the
year-end, second only to Japan. China has been targeting "basic balance and
slight surplus" in international payments for many years. Bilateral trade
between China and its major trade partners continued to maintain rapid growth
during January and February of this year. For the first two months of 2005,
trade between China and the European Union ("EU"), its largest partner, was
close to 30 billion U.S. dollars, an increase of nearly 30% over the prior year.
The U.S. remained China's number two trade partner with a total volume of 26.6
billion U.S. dollars, an increase of 21.5% over the prior year. Japan continued
to be China's largest import resource with bilateral trade amounting to 24.57
billion U.S. dollars, an increase of 10.6% over the prior year. The total trade
volume between China and the

                                     - 22 -

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Association of Southeast Asian Nations (ASEAN) increased 23.6% to 16.63 billion
U.S. dollars, making ASEAN China's fourth largest trade partner for the first
time.

      According to the Ministry of Commerce, 5,444 new foreign investment
companies were approved during the first two months of 2005, a decline of 9.02%
compared to the prior year. Contracted foreign investment in China during this
period reached 20.052 billion U.S. dollars and utilized foreign investment
reached 0.969 billion, increases of 6.15% and 8.21% , respectively, over the
prior year. By the end of February 2005, China approved the establishment of
514,385 foreign-invested companies and contracted foreign investment has reached
1,116.66 billion U.S. dollars, while actual utilized foreign investment has
reached 570.069 billion U.S. dollars.

      According to the statistics released by the federation of China's
machine-building industry, the total output in 2004 was valued at RMB3.27
trillion (395 billion U.S. dollars), up 27.4% as compared to the prior year.
Profits of the machine-building industry reached RMB185.8 billion (22.5 billion
U.S. dollars), a rise of 16.5% from 2003, which accounted for 16.4% of the
country's overall industrial profits. The statistics also show that exports in
the machine-building sector grew by 50% to RMB858 billion (104 billion U.S.
dollars). Imports have grown by 43%to RMB137 billion (16.6 billion U.S. dollars)
in 2004, compared to 2003.

         While China's entry into the WTO and the 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.

         According to the National Bureau of Statistics ("NBS"), China's GDP in
2004 reached RMB13.65 trillion (1.65 trillion U.S. dollars), an increase of 9.5%
over the previous year. The added value of primary industry rose 6.3% to RMB2.07
trillion (about 250 billion U.S. dollars), that of secondary and tertiary
industries rose 11.1 and 8.3% to RMB7.24 trillion (874.4 billion dollars) and
RMB4.34 trillion (524.15 billion dollars) respectively.

         China recorded RMB6.28 trillion (766 billion U.S. dollars) in overall
industrial value last year, increasing 11.5% over the prior year and remaining
the biggest contributor to economic expansion. Coal output went up 15%, while
power output was up 14.9%. Aggregate production of pig iron, crude steel and
rolled steel rose 24.1%, 32.2% and 23.5%, respectively. The automobile sector
manufactured 5.2 million motor vehicle units. Total profits for China's
industrial sector stood at RMB1.13 trillion (138.3 billion U.S. dollars), up
38.1%.

         In 2004, urban per capita disposable income was RMB9,422 (1,138 U.S.
dollars), an increase of 7.7%in real terms after allowing for price factors and
rural per capita net income was RMB2,936 (355 U.S. dollars), up 6.8% in real
terms after allowing for price factors.

         Consumer spending remained stable but showed invigorating signs in
China last year, with combined retail sales volume growing 13.3%as compared to
the prior year to RMB5.4 trillion (652.17 billion U.S. dollars) in 2004. It
climbed 10.2% after deducting price hikes, 1 percentage point higher on an
annualized basis. According to the National Development and Reform Commission of
China's Price Monitoring Center, China's CPI rose 3.9% in 2004.

         Investment in fixed assets totaled RMB7.01 trillion (about 854.5
billion U.S. dollars) in 2004, up 25.8% over the prior year, or a drop of 1.9
percentage points from the previous year. Fixed asset investment in our industry
climbed 26.9% in 2004 as compared to 2003, to RMB178.08 billion (21.51

                                     - 23 -

<PAGE>

billion U.S. dollars). The growth rate fell a dramatic 65.5 percentage points as
compared to the prior year. In April of 2004, the Chinese Government launched
efforts to clamp down on overheated investment in selected sectors such as
steel, alumina and cement. Credit tightening and scrutiny over approval of land
deals soon cooled the investment spree.

         The year 2005 is the last year of the tenth Five-Year Plan (2001-2005),
the government has set its main targets for this year's economic and social
development as follows: GDP growth around 8%, 9 million new jobs for urban
residents, registered urban unemployment rate within 4.6%, rise in the consumer
price index of no more than 4%, and basic balance in international payments.

         The concept of a "harmonious society" was first launched by the
government in its work report in March of 2005. A harmonious society features
democracy and the rule of law, equity, justice, sincerity, amity and vitality.
It gives full scope to people's talent and creativity, enables all people to
share in the social wealth brought by reform and development, and forges an ever
closer relationship between the people and government.

         The State Development and Reform Commission forecasts in a December
2004 report that investment for the year of 2005 will increase at approximately
18%, retailing sales of consumer products at approximately 9.5%, exports at
approximately 15% and industries above the scale at approxiamtely16%.

         The government pledged to continue to strengthen and improve
macro-regulation, to follow prudent fiscal and monetary policies and better
coordinate the macroeconomic policies, to rein in the scale of fixed-asset
investment and to vigorously expanding consumer demand. It will implement
fiscal, tax, financial and industrial policies that encourage consumption while
paying particular attention to strengthening the rural infrastructure, expanding
rural markets and stimulating the distribution of agricultural products. The
government has committed itself to try its best to keep the overall price level
stable.

         Since the later half of 2004 the Chinese economy appeared to become
"overheated", including excessive capital investment, tightened supply and
demand relation, increased money supply , and reduction in grain output. . To
stablize economic development, the Chinese government adopted the macroeconomic
-control policy, specifically for the use of land and credit.The government also
introduced a series of policies, which support some sectors and clamp down on
others by treating them differently. These include policies for supporting grain
production, restricting development of land use and controlling excessive growth
in capital investment.

         On 28 October 2004, the Central Bank of China raised the interest rate
by 0.27%. The increase in interest rate ended the era of decreasing interest
rates seen over the past nine successive years.. China may again increase
interest rates in the second half of this year. The interest rate adjustment
indicates that the macro-control measures are shifting gradually from the
government control policy to economic and market-orientated measures.

         Heated discussions transpired during 2004 regarding revaluation of the
RMB currency. According to the government's work report, China will reform the
mechanism for setting the exchange rate for the RMB and keep it basically stable
at a proper and balanced level in order to ensure a healthy and sustainable
development of the Chinese economy.

         A notable document released by the government during 2004, "Notions of
the Central Committee of the CPC and the State Council on Policies for Promoting
Increase of Income for Farmers", stressed that concerted efforts must be made to
support the grain production in the major grain producing areas and promote the
grain-producing farmers to increase their income. Under the guidance of this
document, the

                                     - 24 -

<PAGE>

year of 2004 has witnessed a series of more direct, powerful and resolute
policies and measures "good for the agricultural development". The reform of
taxes and fees helped reduce 30% of the burden on farmers and as a result grain
production increased for the first time in five years.

         The year of 2004 is the "power-supply shortage year" in China. The
energy crisis raised the curtain of the intensified supply and transportation of
coal, oil and transmission of electricity. The encouragement of using the
electricity in many places was replaced by "switching off to restrict the use of
electricity".

         China faced the hidden crisis of a lack of energy resources behind its
speedy economic growth. In 2003, China consumed some 30% of the total iron and
steel product, 40% of total cement and 31% of the total coal production of the
whole world but its GDP amounted to only to 4% of the world. .

China's Corporate Income Tax.

         The income tax rate for domestic companies in China is 33% while it is
15% for foreign funded companies. This differing treatment is unfair to Chinese
enterprises due in part to China's entry into the WTO. There is a nationwide
debate in China on the reforms that have gone on for years. The debate has grown
louder in 2004 when financial authorities pushed hard for the adoption of a
unified corporate income tax, which would mean higher rates for foreign-funded
enterprises. The debate did not generate results last year. China will offer
preferential tax treatment to selected sectors instead and foreign investors
will get more preferential tax treatment than domestic ones if they invest in
certain sectors. There will be a transitional period for foreign investors to
maintain their tax privileges for an unspecified period of time. Experts and
local companies have complained the policy does not comply with WTO principles
and that, as a kind of discrimination against domestic firms, it also results in
a reduction of China's tax revenues. China's top legislature, the National
People's Congress ("NPC"), has listed the Law on Enterprises' Income Tax in its
lawmaking plan for 2005. NPC deputy Cheng Faguang revealed that China might
unify the income tax rates in 2008. The possible income tax rate may be set
around 25%-28%.

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 materially in compliance with applicable environmental laws.

                                     - 25 -

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PROPERTY, PLANT 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
4.6 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 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 administrative 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 2009. This lease
provides for rent of approximately $2,887 per month.

         We lease 29 and own 3 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 RMB3,500 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.

                                     - 26 -

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ITEM 5.    OPERATING FINANCIAL REVIEW AND PROSPECTS

         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 generally accepted accounting principles in the
United States (U.S. GAAP). The preparation of these financial statements
requires us to make estimates and judgments that affect the amounts reported in
the consolidated financial statements and accompanying notes. These estimates
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. We base our
estimates and judgments on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. 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 judgments used in the preparation of our
consolidated financial statements.

Provision for Doubtful Accounts

         We reserve for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. We
estimate the provision for doubtful accounts related to trade receivable based
on two methods. The amounts calculated using each of these methods are combined
to determine the total amount we reserve. First, we evaluate specific accounts
where we have information that certain customers are unable to meet their
financial obligations. In these cases, we make judgment, based on the best
available facts and circumstances, including but not limited to, the length of
our relationship with the customer and customer's current credit status based on
third party credit reports and known market factors, to record specific reserve
for customers against amounts due to reduce our receivables to amounts that we
expect to collect. These specific reserves are re-evaluated and adjusted as
additional information received affects the amounts estimated. We perform an
additional analysis of collectibility for non-specific accounts based on a
collective assessment of historical collection, write-off experience, current
economic trends, changes in our customer payment terms and other factors that
may affect our ability to collect. While 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.

               As of December 31, 2003 and 2004, the Provision for Doubtful
Accounts was RMB 11 million and RMB 9.5 million respectively. For the year ended
December 31, 2003, we did not have to record any additional provision subsequent
to the year ended because the actual uncollectible amount were lower the
estimated amounts. For the year ended December 31, 2004, we also did not record
any additional provision as of May 31, 2005.

Inventories Obsolescence

              Inventories are stated at the lower of cost or market value.
Market value represents the net realizable value for inventories. We
periodically review our inventory for excess inventory, obsolescence and
declines in market value below cost and record an allowance against the
inventory balance for any such declines.We write down the value of ending
inventory for obsolete and unmarketable inventory equal to the difference
between the cost of inventory and the estimated market value.These reviews
require management to estimate future demand for our products and the market
conditions. Possible



                                     - 27 -

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changes in these estimates could result in revisions to the valuation of
inventory. If actual market conditions are less favorable than those projected,
additional inventory write-downs may be required. If actual market conditions
are more favorable then projected, inventory previously written down may be
sold, resulting in lower cost of sales and higher income from operations than
expected in that period.

                    As of December 31, 2003 and 2004, we recorded inventory
obsolescence allowance in the amount of RMB 1.6 million and RMB 1.4 million. Foe
the year ended December 31, 2003,we did not have to record any additional
allowance subsequent to the year-end because actual write-offs were lower than
the estimated amounts. For the year ended December 31, 2004, we also did not
have to record any additional allowance as of May 31, 2005.

Deferred Tax Valuation Allowance

         Estimates and judgments are required in the calculation of certain tax
liabilities and in determining the recoverability of certain of the deferred tax
assets, which arise from net operating losses, tax carryforwards and temporary
differences between the timing of the recognition of revenues and expenses for
tax and financial statement purposes. 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.

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, 2002,
2003 and 2004.

<TABLE>
<CAPTION>

                                                                    Year ended December 31

                                                                    ----------------------
                                                               2002            2003           2004
                                                               ----            ----           ----
<S>                                                                <C>             <C>           <C>
Net sales                                                          100%            100%          100%

Cost of goods sold                                              (56.1%)           (57%)       (65.4%)
Gross profit                                                      43.9%           43.0%         34.6%


                                     - 28 -

<PAGE>

Selling, general and administrative expenses                    (35.4%)         (31.5%)       (24.3%)
Other income                                                       6.2%            1.7%          0.9%
Income tax provision                                             (1.4%)          (1.3%)        (1.2%)
Income before minority interest                                   13.3%           11.9%           10%
Minority interest                                                (2.2%)          (2.1%)        (1.7%)
Net income                                                        11.1%            9.8%          8.3%
</TABLE>

Year ended December 31, 2004 compared with the year ended December 31, 2003

             Sales. Net sales increased RMB73 million or approximately 26.4%
from RMB276.6 million in the year ended December 31, 2003 to RMB349.6 million in
the year ended December 31, 2004. The increase in sales was primarily driven by
the increase in sales volume. During 2004, sales of units increased by 27% to
3,167 units as compared with 2,503 units in 2003. During 2004, the company
continued to gain market share and new customers contributed to 90% of the sales
increase in 2004.

         Cost of goods sold. Cost of goods sold increased by RMB71 million or
approximately 45% from RMB157.6 million in the year ended December 31, 2003 to
RMB228.6 million in the year ended December 31, 2004. Cost of goods sold as a
percentage of sales increased by 8.4% in the year ended December 31, 2004, from
57% in the year ended December 31, 2003, to 65.4% in the year ended December 31,
2004. This was primarily the result of increasing raw material prices. The
average steel price was RMB20, 000 per ton in year 2004, which was an
approximate 60% increase as compared with 2003, and the average copper wire
price was RMB36,000 per ton, which was an approximate 34.5% increase as compared
with 2003. If the company did not take the actions mentioned below, the cost of
goods sold as percentage of sales would have increased 30%, however, the company
fully utilized its financial strength to purchase a large volume of materials
which a cut costs by approximately 16% and improved the production design and
efficiency which cut costs by an additional approximate of 5.6%. Overall, the
cost of goods sold as a percentage of sales increased by 8.4%.

         Gross Profit. Gross profit increased RMB2.1 million or approximately
1.75% to RMB121.1 million in the year ended December 31, 2004 from RMB119
million in the year ended December 31, 2003. As a percentage of sales, gross
profit decreased from 43 % in the year ended December 31, 2003, to 34.6% in the
year ended December 31, 2004, primarily as a result of the reasons mentioned
above.

         Selling and administrative expenses. Selling and Administrative
expenses, including the provision for doubtful debt, decreased by RMB2.5 million
or approximately 3% from RMB86.9 million in the year ended December 31, 2003, to
RMB84.4 million in the year ended December 31, 2004. As a percentage of sales,
selling and administrative expenses decreased from 31% in the year 2003, to
24.1% in the year ended December 31, 2004. The decrease of RMB2.5 million was
primarily the result of (1) RMB1 million decrease in provision for doubtful
debt; (2)RMB1.5 million reduction in discretionary spending in areas such as
marketing, commissions and administration expenses.The decrease of provision for
doubtful debt is the result of better accounts receivable aging structure and
collection of some of aged receivable. We are continuing to focus our efforts on
achieving additional operating efficiencies by reviewing and improving upon our
existing business process and cost structure.

         Net Income. Net income increased by RMB2 million or approximately 7.2%
from RMB26.9 million in the year ended December 31, 2003, to RMB28.9 million in
the year ended December 31, 2004. As a percentage of sales, net income decreased
from 9.8% in the year ended December 31, 2003, to 8.3% in the year ended
December 31, 2004.

                                     - 29 -

<PAGE>

         Basic Earnings Per Share. Basic earnings per share increased by RMB0.23
or approximately 5.5% from RMB4.21 in the year ended December 31, 2003 to
RMB4.44 in the year ended December 31, 2004.

Year ended December 31, 2003 compared with the year ended December 31, 2002

             Sales. Net sales increased by RMB47 million or approximately 20.5%
from RMB229.4 million in the year ended December 31, 2002 to RMB276.6 million in
the year ended December 31, 2003. The increase in sales was primarily driven by
the increase in sales volume, gaining market shares from our competitors and the
continuing expansion of our customer base. Our products' high quality is also
gaining recognition in China and the U.S. markets.

         Cost of goods sold. Cost of goods sold increased by RMB28.8 million or
approximately 22.3% from RMB128.8 million in the year ended December 31, 2002 to
RMB157.6 million in the year ended December 31, 2003. Cost of goods sold as a
percentage of sales increased by 0.9% in the year ended December 31, 2003, from
56.1% in the year ended December 31, 2002, to 57.% in the year ended December
31, 2003. This was primarily the result of increasing raw material prices.

         Gross Profit. Gross profit increased by RMB18.4 million or
approximately 18.2% to RMB119 million in the year ended December 31, 2003 from
RMB100.7 million in the year ended December 31, 2002. As a percentage of sales,
gross profit decreased by from 43.9 % in the year ended December 31, 2002, to
43% in the year ended December 31, 2003, primarily as a result of the increase
in raw material prices.

         Selling and administrative expenses. Selling and administrative
expenses, including the provision for doubtful debt, and employee stock option
compensation cost increased by RMB5.6 million or approximately 6.8% from RMB81.3
million in the year ended December 31, 2002, to RMB86.9 million in the year
ended December 31, 2003. As a percentage of sales, selling and administrative
expenses decreased from 35.4% in the year 2002, to 31.5% in the year ended
December 31, 2003. Selling and administrative expenses sharply increased after
an accrued charge of RMB3.3 million related to employee stock option
compensation cost.

         Net Income. Net income increased by RMB2 million or approximately 8%
from RMB24.9 million in the year ended December 31, 2002, to RMB26.9 million in
the year ended December 31, 2003. As a percentage of sales, net income decreased
from 10.8% in the year ended December 31, 2002, to 9.7% in the year ended
December 31, 2003. The decrease is a result of the company accruing an
operational stock option compensation cost of RMB3.3 million.

         Basic Earnings Per Share. Basic earnings per share increased by RMB0.25
or approximately 6% from RMB3.96 in the year ended December 31, 2002 to RMB4.21
in the year ended December 31, 2003.

Impact of Inflation

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

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

                                     - 30 -

<PAGE>

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 currency 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 currency 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. 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.

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 beginning January
1, 2002, the tariff will be reduced 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 to enter into the domestic market at lower prices which will pose pressure
on Chinese enterprises. China's machinery industry is expected to be impacted by
China's entrance into the WTO.

         As a result of its entrance into the WTO, China will become more
involved in international economic cooperation and competition. The transitional
period for China after it 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 to foreign investment. 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 protection of intellectual property rights and
all the legitimate rights and interests of foreign investors. The central
government is speeding up the drafting of amendments and the abolishment of
obsolete laws, rules and regulations in accordance with China's WTO commitments.

                                     - 31 -

<PAGE>

Taxation

         Hainan Jinpan is subject to PRC income tax at the applicable tax rate
of 15%; however Hainan Jinpan has enjoyed a 50% tax exemption approved by
China's government since 1997. The 50% tax exemption ended on January 1, 2005.

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

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

         On December 31, 2004, we had working capital of RMB201.9 million
compared to RMB186.05 million at December 31, 2003. This increase is due to an
increase in accounts receivable and inventories. At December 31, 2004, we had
approximately RMB46.4 million in cash and cash equivalents as compared to
RMB66.6 million at December 31, 2003. On December 31, 2004, we had accounts
receivable of RMB171.9 million as compared to RMB124.4 million at December 31,
2003. 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 capital
requirements. As of December 31, 2004, we had inventories of RMB67.6 million as
compared to RMB37.8 million as of December 31, 2003. The increase of RMB29.8
million is primarily as a result of (1) RMB3.7 million increase in raw
materials; (2) RMB2.8 million increase in finished goods; and(3) RMB23.6 million
increase in work in process. The build-up for work in process was due to few
large orders that are to be delivered in January and February of year 2005.

         Net cash used in operation activities in 2004 was RMB9 million which is
RMB 27.7 million lower than the cash flows provided by operating activities
during year 2003. Cash used in operating activities during 2004 was primarily
the result of increase in accounts receivable of RMB 47 million , increase in
inventory of RMB 29 million, net income of RMB 34.5 million after adjusting for
non-cash depreciation expense of RMB 5.7 million and increase in Accounts
Payable and other payable of RMB 30 million. Net cash used in investing
activities in 2004 was RMB10.2 million which was primarily the result of
expanding production facilities and purchasing equipment of RMB 11 million. We
do not expect any material changes in cash receipts from sales to our customers
and payments to our vendors to acquire inventory.

         Our principal commitment consisted of a long-term obligation
outstanding under our operating lease. We don't expect any major increase in
capital expenditures in the year 2005.

         We have a credit facility of RMB33 million with the Nan Yan Commercial
Bank. The letter of credit under this credit facility is guaranteed by Jinpan
International Ltd., bearing interest at a weighted average rate of 4.84% per
annum for the year ended December 31, 2004. We borrowed a total of RMB8.6
million at the end of December 2004.We also borrowed RMB15 million from Yan-Pu
Bank, which is unsecured and bearing interest at the rate of 6.138% annually.

         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, if at all.

                                     - 32 -

<PAGE>

         On February 9, 2004, we affected a 2-for-1 stock split.

         AGGREGATE CONTRACTUAL OBLIGATIONS

         Apart from the operating lease commitment disclosed in note 13 to the
audited financial statements, we had no other contractual obligations. As of
December 31, 2004, we had the following known contractual obligations:

<TABLE>
<CAPTION>

------------------------- -----------------------------------------------------------------------------------------
                                                 Payments due by period (RMB in thousands)
------------------------- -----------------------------------------------------------------------------------------
Contractual Obligations   Total         Less than 1 year     1-3 Years       3-5 years     More than 5 years
------------------------- ------------- -------------------- --------------- ------------- ------------------------
<S>                       <C>           <C>                  <C>             <C>           <C>
Operating Lease           2,871         1,127                1,371           373           0
Obligations

------------------------- ------------- -------------------- --------------- ------------- ------------------------
Total                     2,871         1,127                1,371           373           0
------------------------- ------------- -------------------- --------------- ------------- ------------------------
</TABLE>

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

         We have maintained our lead position as the most technologically
advanced supplier of cast coil transformers in China after years of developing
technology driven by power distribution applications. Our recent development
efforts are driving by applications associated with power generation and related
equipment. We will continue to invest in technology through research and
development as we have done in the past focusing on product line extensions
while incorporating the latest manufacturing technologies into our production
processes. We will be able to reach new markets and supply technologically
advanced products possessing superior quality and performance attributes that
create more value for our customers.

Our recent research and development activities include:

         o Development of ZICB9 isolation transformer for use in 800 Mega-watt
         power plants.

         o Development of our ZQSC line of multiple coil rectifier transformers.
         These units incorporate 2 sets of 12 pulse outputs to form a single 24
         pulse rectifier transformer with 15 degrees of phase shift per winding
         to reduce harmonic loading by 50%. These units are used in
         infrastructure which supports subway and commuter rail systems.

         o UL product recognition: The scope of the project has been increased
         to cover the full range of complete transformer products. Phase one
         testing which defines the parameters and criterion to be used during
         thermal ageing (phase two) has been completed. UL product recognition
         will open the North American market.

         o Forward integration technologies: Development of switchgear included
         KYN28A-12 switchgear with a modular construction facilitating
         retrofitting and equipment upgrading, GCMS/GCL low voltage switchgear,
         and DC low voltage switchgear for uninterruptible power supplies (UPS).
         Two new substations were also developed: YBM3A & ZGS9.

                                     - 33 -

<PAGE>

Keeping abreast of the latest developments in the industry

         Our technical staff remains well informed with respect to advances in
manufacturing equipment raw materials and processing methods. Detailed
information is gathered by attending major industrial fairs and trade shows
related to our industry. Typically, our technical staff attends such events as
the Industrial Fair in Hanover, Germany, the International Electri-technical
Exhibition in Beijing, China and the IEEE Power Engineering Society's ("PES")
Transmission and Distribution show in the U.S. Members of our technical staff
recently participated in all of these major shows and held technical discussions
with major equipment and material suppliers and manufacturers.

TRENDS

------

         We foresee that sales will continue to grow this year; however, with
the majority of our materials being purchased from European suppliers, the
increase of the Euro and uncertain pricing in steel and copper are likely to
have an impact on costs during 2005.

DIVIDENDS

---------

         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. In October 2003, the board declared a cash
dividend of $0.40 per share ($0.20 per share if adjusted for 2-for-1 stock
split) of common stock for the year 2004. We made two distributions to realize
overall distribution of U.S.$0.40 per shares during the year 2004. In February
2005, the board declared a cash dividend of U.S.$0.20 per share. The company
made the first distribution of U.S.$0.10 per share on March 10, 2005. The second
distribution of U.S.$0.10 per share will make during the second half of 2005.
The 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, e.g.,
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.

LEGAL PROCEEDINGS

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

                                     - 34 -

<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS
------------------------------

         We are not party to any material off-balance sheet arrangements.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

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

         Our directors and executive officers are as follows:

NAME                      AGE      POSITION

Li Zhiyuan                50       Chairman of the Board of Directors, President
                                   and Chief Executive Officer
Ling Xiangsheng           53       Vice Chairman of the Board and Vice President
Jing Yuqing               42       Secretary
William D. Nagel          68       Director
Liwen Zhang               50       Director
Donald S. Burris          61       Director
Mark Du                   44       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.
He has a Mechanical Engineering degree from Villanova University and an MBA
degree from Syracuse University. From 1961 to 1997, Mr. Nagel was employed by
the General Electric Company where he held various executive positions including
Director of Marketing for GE's Semiconductor businesses and Director of
Strategic Planning and Development for GE's Power Delivery Businesses. While at
General Electric, Mr. Nagel helped to establish offshore partnerships and
develop licensee arrangements using GE's advanced

                                     - 35 -

<PAGE>

transformer technologies. Much of Mr. Nagel's work with General Electric was
performed in China, Japan, Australia, Europe, Korea and Taiwan. Mr. Nagel
retired from GE in 1998.

         DR. LI-WEN ZHANG was elected to our Board of Directors in June 2003.
Dr. Zhang is a permanent staff member of the United Nations Department of
General Assembly Management Affairs currently in Economic and Social Council
Servicing Branch. As part of the managing staff, Dr. Zhang provided consultation
to the Delegation of Beijing Fiscal Bureau on socioeconomic issues in November
of 2000. In 1996, Dr Zhang helped organize a conference in Shanghai with Chinese
authorities regarding the Development and Management of Special Economic Zones
in a Transitional Economy. Dr. Zhang received a Ph.D. in International
Comparative Education from Columbia University in 2001 and holds a Masters
degree in Economic Policy Management from Columbia University Graduate School of
Business and International Affairs.

         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, 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 RMB4,790,397 comprised of salaries in the amount of
RMB3,355,200and bonuses in the amount of RMB1,435,197. The aggregate amount set
aside by Hainan Jinpan during its last fiscal year to provide for pension,
retirement or similar benefits for directors and officers was RMB157,824

         Pursuant to our 1997 Stock Option Plan (the "Plan"), we have granted to
certain of our directors, officers and consultants, stock options immediately
exercisable at an exercise price of $2.13 per share to purchase 400,000 shares
of our common stock, the term of the option ended on July 31, 2003. In July
2003, seven of our directors and officers exercised their stock options and
purchased a total of 360,000 shares of our common stock. The remaining options
to purchase 40,000 shares of common stock expired without being exercised. In
addition, we have granted to certain of our directors stock options immediately
exercisable at an exercise price of $2.187 per share to purchase 260,000 shares
of our common stock which were exercisable until February 11, 2003. Such options
have expired without being exercised and were added back into the pool of
options eligible for future grant under the Plan. Furthermore, we agreed to
grant to one of our directors stock options at an exercise price of $2.187 per
share to purchase 200,000 shares of our common stock, exercisable until three
years from the time of grant. We amended this stock option agreement in February
2000. The amended agreement provides that

                                     - 36 -

<PAGE>

the director has been granted options to purchase 100,000 shares of our common
stock in lieu of the options previously granted. Such option expired in April
2002.

         In February 2001, we granted stock options to five of our directors and
our Chief Financial Officer, to purchase an aggregate of 120,000 shares of our
common stock. Such options are exercisable at $1.35 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.

         In September 2003, we granted stock options to seven of our employees
to purchase an aggregate of 140,000 shares of common stock. Such options are
exercisable at the price of U.S. $3.55 per share and are subject to termination
of employment, furthermore, the options expire 10 years from the date granted,
are not transferable other than on death and are exercisable from the date of
grant.

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, Dr. Li-Wen Zhang 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, Li-Wen Zhang
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, 2004, we had approximately 281 employees in China,
including 56 engineers or technicians, 40 management and administrative
personnel, 55 marketing and sales personnel, 130 factory personnel and 4
employees in the United States, including 2 management and administrative
personnel, 1 marketing and sales personnel and 1 accounting 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.

                                     - 37 -

<PAGE>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

MAJOR SHAREHOLDERS

         The following table sets forth specific information as of May 9, 2005,
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)                             1,946,532                 29.11%

        Common Stock           Jing Yuqing (3)                            1,946,532                 29.11%

        Common Stock           Ling Xiangsheng (4)                        1,110,954                 16.61%

        Common Stock           William D. Nagel  (5)                         49,800                    *

        Common Stock           Liwen Zhang (6)                               10,000                    *

        Common Stock           Donald S. Burris                              10,000                    *

        Common Stock           All officers and directors as a            3,127,286                 46.77%
                               group (6 persons) (7)
</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: (i) 1,323,066 shares of common stock, (ii) 20,000 shares of
         common stock issuable upon exercise of currently exercisable stock
         options, and (iii) 603,466 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: (i) 583,466 shares of common stock (ii) 20,000 shares of
         common stock issuable upon exercise of currently exercisable stock
         options, and (iii) 1,343,066 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. The trust sold 219,471 shares of common stock
         during 2003.

(4)      Includes: (i) 1,090,954 shares of common stock, and (ii) 20,000 shares
         of common stock issuable upon exercise of currently exercisable stock
         options.

(5)      Includes (i) 19,800 shares of common stock, and (ii) 30,000 shares of
         common stock issuable upon exercise of currently exercisable stock
         options.

(6)      Represents 10,000 shares of common stock issuable upon exercise of
         currently exercisable stock options.

(7)      Includes 110,000 shares of common stock issuable upon exercise of
         currently exercisable stock options issued to all directors and
         executive officers.

                                     - 38 -

<PAGE>

         To the best of our knowledge, as of May 5, 2005, 3,057,486 shares of
common stock or 45.72% of all shares of common stock outstanding were held by 3
record holders in the United States.

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

         During the year ended December 31, 2003, the minority shareholder in
the joint venture, borrowed RMB11,277,000 from Jinpan JV which carries an annual
interest rate of 5.31%. The amount of RMB8,947,000 was repaid in November 2003
and the remainder was repaid in December 2003. The interest income of RMB475,000
was received from the minority shareholder in June 2004.

         During the year ended December 31, 2002, the minority shareholder,
Haikuo Jinpan Corp., borrowed RMB888,000 from Jinpan JV, which was interest free
and payable within one year. The amount was repaid in December 2002.

ITEM 8.  FINANCIAL INFORMATION.

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

         See Consolidated Financial Statements attached to this Form 20-F.

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 2004
through May 2005. All prices are adjusted for a 2-for-1 stock split effective
February 9, 2004.

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

1999                                   3.000             0.5625
2000                                   1.875              0.625
2001                                   1.500              0.550
2002                                   2.075              1.000
2003                                    8.00              1.585
2004                                    7.90              4.920

                                             Common Stock

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

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

March 30, 2003                         1.845              1.585
June 30, 2003                          2.155              1.710
September 30, 2003                     4.500              2.100
December 31, 2003                      8.000              3.275
March 30, 2004                         8.760              6.320
June 30, 2004                           7.90              5.510
September 30, 2004                     7.030              4.970
December 31, 2004                      6.570              4.920



                                     - 39 -

<PAGE>

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

November, 2004                         5.90               4.970
December, 2004                         6.570              5.70
January, 2005                          6.850              5.940
February, 2005                         6.830              6.040
March, 2005                            6.500              5.500
April, 2005                            6.900              5.390
May, 2005                             6.8500             5.6700


         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 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 (vi)
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 dividend

                                     - 40 -

<PAGE>

per share (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.

         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

                                     - 41 -

<PAGE>

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.

         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.

                                     - 42 -

<PAGE>

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 corporate securities. Accordingly, our
exposure to financial market risk derives primary from changes in interest rate
.. The primary objective of our investments in corporate securities is to
preserve principal while maximizing yields, without significantly increasing
risk. These available for sale securities are subject to interest rate risk. The
fair market value of these securities may fluctuate with changes in interest
rate.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not applicable.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

         None.

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

         None.

ITEM 15. CONTROLS AND PROCEDURES

         As of the end of the period covered by this Annual Report, the
Company's management (with the participation of its Chief Executive Officer and
Chief Financial Officer conducted an evaluation pursuant to Rule 13a-15
promulgated under the Exchange Act, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. In evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures and implementing controls and
procedures based on the application of management's judgment.

         In connection with the audit of our consolidated financial statements
for the year ended December 31, 2004, we and our independent public accounting
firm, Ernst & Young, identified the following material weaknesses (as defined by
the Public Company Accounting Oversight Board, Auditing Standard No.2) in our
internal control over financial reporting: 1

         o    We do not have an adequate financial reporting system over
              preparation and close process of U.S. GAAP consolidated financial
              statements to ensure that material errors do not occur in
              preparation.

         o    We do not have adequate accounting resources and expertise in
              respect of the preparation of U.S. GAAP consolidated financial
              statements.

         o    We have allowed certain customers to pay over period in excess of
              one year.

         We have taken and will continue to take steps to correct material
weakness. We have our U.S. personnel who passed the Uniform CPA examination and
are more familiar with US GAAP to coordinate in preparation of financial
statements. We are in the process to engage external consultants to help us
correct the material weakness and improve internal control over financial
reporting. These consultants will recommend with respect to data collection,
financial reporting and internal control procedures pursuant to Section 404 of
the Sarbanes-Oxley Act, which will take effect beginning with the year ending
December 31, 2006. We have taken steps in year 2005 to improve the documentation
of our revenue recognition policies.

         Other than as described above, there have been no material changes in
internal control over financial reporting that occurred during 2004 that has
materially affected, or are reasonably likely to material effect our internal
control over financial reporting.



                                     - 43 -

<PAGE>

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

         Liwen Zhang, a member of our Audit Committee, meets the criteria of an
"Audit Committee Financial Expert" under the applicable rules and regulations of
the SEC, and her designation as the Audit Committee's Financial Expert has been
ratified by the Board. Ms. Zhang is "independent", as that term is defined in
the American Stock Exchange listing standards.

ITEM 16B. CODE OF ETHICS

         The Company has adopted a code of ethics which is applicable to all
directors, officers and employees of the Company, including its principal
executive, financial and accounting officers and persons performing similar
functions (the "Code of Ethics"). The Code of Ethics covers areas of
professional and business conduct, and is intended to promote honest and ethical
behavior, including fair dealing and the ethical handling of conflicts of
interest, support full, fair, accurate, timely and understandable disclosure in
reports and documents the Company files with, or submits to, the SEC and other
governmental authorities, and in its other public communications; deter
wrongdoing; encourage compliance with applicable laws and governmental rules and
regulations; and ensure the protection of the Company's legitimate business
interests. The Company encourages all of its directors, officers and employees
promptly to report any violations of the Code of Ethics, and has provided
mechanisms by which they may do so. The Company will provide a copy of the Code
of Ethics to any person, without charge, upon written request addressed to the
Corporate Secretary of the Company at the Company's corporate headquarters in
Hainan, China.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The Audit Committee maintains a policy of approving and recommending
only those services to be performed by the Company's external auditors which are
permitted under the Sarbanes-Oxley Act and the applicable rules of the SEC
relating to auditor's independence, and which are otherwise consistent with and
will encourage, and are remunerated at levels that accord with, the basic
principles of auditor independence. The practice of the Audit Committee is to
receive from the Company's management, at the time of approval of the Company's
annual financial statements for the preceding fiscal year, a list of all
services, including audit, audit-related, tax and other services, proposed to be
provided during the current fiscal year to the Company and its subsidiaries by
Ernst & Young as well as a report regarding the extent of such services actually
provided by Ernst & Young during the previous fiscal year and the fees paid for
such services performed. After reviewing and considering the services proposed
to be provided during the current fiscal year and, where appropriate in order
better to understand their nature, discussing them with management, the Audit
Committee pre-approves such of the proposed services, with a specific
pre-approved budget, as it considers appropriate in accordance with the above
principles. Management also maintains a practice of discussing these matters on
an ongoing basis during the year with Liwen Zhang, the Audit Committee's
appointed delegate in respect of audit-related and non audit-related services.
Additional services from Ernst & Young and any increase in budgeted amounts will
similarly be pre-approved during the year by the Audit Committee on a
case-by-case basis.

         All audit-related and non-audit-related services performed by Ernst &
Young during 2004 were reported to, and the services proposed to be provided by
them during 2005 pre-approved by, the Audit Committee on January 4, 2005, in
accordance with the procedures outlined above.

         The following table provides information regarding fees paid by the
Company to Ernst & Young for all services, including audit services, for the
years ended December 31, 2004 and 2003:

                      YEAR ENDED DECEMBER 31, 2003  YEAR ENDED DECEMBER 31, 2004
Audit Fees            RMB335,000                    RMB800,00
Audit Related Fees    RMB16,000                     RMB20,000
Tax Fees              RMB49,870                     RMB14,904
All Other fees        RMB29,349
Total                 RMB430,219                    RMB834,904

         "Audit Fees" are the aggregate fees billed for the audit of our annual
financial statements. This category also includes services that generally the
independent accountant provides, such as statutory

                                     - 44 -

<PAGE>

audits, consents and assistance with and review of documents filed with the SEC.
"Audit-Related Fees" are the aggregate fees billed for assurance and related
services that are reasonably related to the performance of the audit and are not
reported under Audit Fees. These fees include mainly accounting consultations
regarding the accounting treatment of matters that occur in the regular course
of business, implications of new accounting pronouncements and other accounting
issues that occur from time to time. "Tax Fees" are the aggregate fees billed
for professional services rendered for tax compliance, tax advice, other than in
connection with the audit. Tax compliance involves preparation of original and
amended tax returns, tax planning and tax advice.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

         Not yet applicable to Registrant.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

         In the year 2002, the company board of directors approved a share
buyback plan up to 640,000 shares of common stocks. The company purchased 59,154
shares at the average price of US$1.52 in the year 2002. The company purchased
14,004 shares at the average price of US$2.90 in the year 2003. In the year
2004, the company purchased 111,112 shares at the price of US$4.75 per share.

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
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income

Consolidated Statements of Shareholders Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements:

         (b) Exhibits

1.1      Memorandum  of  Association  and  Articles  of  Association  of  Jinpan
         International Limited. (1)

1.2      Amendments   to  the   Memorandum  of   Association   and  Articles  of
         Association. (1)

23.1     Consent of Ernst & Young, Hong Kong.

31.1     Certification  of  Principal  Executive  Officer  pursuant to 17 C.F.R.
         240.13a-14(a),  as adopted  pursuant  to ss. 302 of the  Sarbanes-Oxley
         Act.

31.2     Certification  of  Principal  Financial  Officer  pursuant to 17 C.F.R.
         240.13a-14(a),  as adopted  pursuant  to ss. 302 of the  Sarbanes-Oxley
         Act.

                                     - 45 -

<PAGE>

32.1     Certification   of   Principal   Executive   Officer   pursuant  to  18
         U.S.C.ss.1350,  as adopted  pursuant  to ss. 906 of the  Sarbanes-Oxley
         Act.

32.2     Certification  of  Principal  Financial  Officer  pursuant to 18 U.S.C.
         1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act.

----------
(1)      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.

                                     - 46 -

<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: July 15, 2005

<PAGE>

         Financial Statements

         JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

         Years ended December 31, 2004, 2003 and 2002


<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                           Pages

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES:

    Report of Independent Auditors                                         F-1

    Consolidated Balance Sheets as of December 31, 2004 and 2003           F-2

    Consolidated Statements of Income

       for the years ended December 31, 2004, 2003 and 2002                F-3

    Consolidated Statements of Shareholders' Equity

       for the years ended December 31, 2004, 2003 and 2002                F-4

    Consolidated Statements of Cash Flows

       for the years ended December 31, 2004, 2003 and 2002                F-5

    Notes to Consolidated Financial Statements                         F-6 - F30


<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of
Jinpan International Limited

We have audited the accompanying consolidated balance sheets of Jinpan
International Limited and subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jinpan
International Limited and subsidiaries at December 31, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles.

/s/ Ernst & Young
Hong Kong
June 30, 2005

                                      F-1

<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                       2004             2004           2003
                                                              -------------     ------------    -----------
                                                      Notes             US$              RMB            RMB
                                                                        ---              ---            ---
                                                               (In thousands, except number of shares and per
                                                                                 share data)
<S>                                                     <C>          <C>             <C>            <C>
Assets
Current assets:

    Cash and cash equivalents                                         5,612           46,433         66,571
    Investments available for sale                       4              407            3,367          4,798
    Notes receivable                                                  1,231           10,189          8,798
    Accounts receivable, net                             5           20,778          171,914        124,415
    Inventories, net                                     6            8,172           67,614         37,870
    Prepaid expenses                                                  1,079            8,930          6,771
    Other receivables                                                   654            5,410          5,023
                                                              -------------     ------------    -----------
Total current assets                                                 37,933          313,857        254,246

Property, plant and equipment, net                       7            4,338           35,894         26,856
Construction in progress                                                 93              766          1,811
Deferred tax assets                                      8               86              711            977
                                                              -------------     ------------    -----------
Total assets                                                         42,450          351,228        283,890
                                                              =============     ============    ===========

Liabilities and Shareholders' Equity

Current liabilities:

    Short term bank loans                                9            2,851           23,591          2,016
    Accounts payable                                                  3,335           27,594         12,815
    Income tax                                           8               18              151             18
    Value added tax                                                     498            4,122          1,125
    Advance from customers                                              635            5,257          2,082
    Commission payable                                                3,432           28,392         24,039
    Accrued employee benefits                                           738            6,108          5,155
    Government grant                                    10            1,240           10,258          7,402
    Dividend payable                                                      3               23         10,794
    Other liabilities                                                   778            6,438          2,749
                                                              -------------     ------------    -----------
Total current liabilities                                            13,528          111,934         68,195
Minority interest                                                       657            5,437          6,841
Commitments and contingent liabilities                  12
Shareholders' equity:
    Common stock, US$0.009 par value:
       Authorized shares - 20,000,000
       Issued and outstanding shares - 6,699,045 in     18               60              499            496
       2004 and 6,664,911 in 2003
    Convertible preferred stock, US$0.009 par value:
       Authorized shares - 1,000,000
       Issued and outstanding shares - 15,311 in        18                -                1              2
       2004 and 21,445 in 2003, 6% p.a.
    Additional paid-in capital                                       10,575           87,515         86,807
    Reserves                                            18            2,317           19,245         17,128
    Retained earnings                                                15,950          131,972        105,225
    Accumulated other comprehensive income                               21               69            273
                                                              -------------     ------------    -----------
                                                                     28,923          239,301        209,931
    Less: Treasury shares at cost,

    Common stock -184,270 in 2004 and 73,158 in 2003                   (658)          (5,444)        (1,077)
                                                              -------------     ------------    -----------
Total shareholders' equity                                           28,265          233,857        208,854
                                                              -------------     ------------    -----------
Total liabilities and shareholders' equity                           42,450          351,228        283,890
                                                              =============     ============    ===========
</TABLE>

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

                                      F-2

<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>

                                                                           Year ended December 31,

                                                               2004            2004             2003                2002
                                                      ------------- -- ------------- --- ------------ --- --------------
                                              Notes             US$             RMB              RMB                 RMB
                                                                ---             ---              ---                 ---
                                                                          (In thousands, except per share data)
<S>                                             <C>           <C>             <C>             <C>                <C>
Net sales                                       17            42,254          349,609         276,564            229,421
Other income                                                     206            1,702           3,853             13,945
                                                           ---------        ---------       ---------          ---------
                                                              42,460          351,311         280,417            243,366

Costs and expenses:

    Cost of products sold                                    (27,619)        (228,519)       (157,559)          (128,770)
    Provision for doubtful debts                                  47              392            (665)            (2,764)
    Selling and administrative                               (10,245)         (84,772)        (86,218)           (78,561)
                                                           ---------        ---------       ---------          ---------
                                                             (37,817)        (312,899)       (244,442)          (210,095)

Other income/ (expense):

    Gain from sales of investment                                 26              222               -                  -
    Dividend income of investment                                 41              339               9                  -
    Interest Income                                               46              377             855                241
    Interest                                                     (51)            (423)           (354)              (541)
                                                           ---------        ---------       ---------          ---------
                                                                  62              515             510               (300)
                                                           ---------        ---------       ---------          ---------

Income before income taxes                                     4,705           38,927          36,485             32,971
Income taxes                                     8              (487)          (4,031)         (3,727)            (3,116)
                                                           ---------        ---------       ---------          ---------

Income before minority interest                                4,218           34,896          32,758             29,855
Minority interest                                               (729)          (6,032)         (5,845)            (4,972)
                                                           ---------        ---------       ---------          ---------
Net income                                                     3,489           28,864           26,913             24,883
                                                           =========        =========       =========          =========

Earnings per share

    -Basic                                                   US$0.54          RMB4.44         RMB4.21            RMB3.96
                                                           =========        =========       =========          =========
    -Diluted                                                 US$0.53          RMB4.33         RMB4.15            RMB3.93
                                                           =========        =========       =========          =========

Weighted average number of shares
    -Basic                                                 6,489,178        6,489,178       6,390,804          6,279,866
    -Diluted                                               6,663,305        6,663,305       6,487,116          6,329,854
</TABLE>

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

                                      F-3

<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>

                                                                                                                   Convertible
                                      Treasury       Number of       Number of        Treasury          Common       preferred
                                         stock          common       preferred           stock           stock           stock
                                        shares          shares          shares             RMB             RMB             RMB
                                      --------       ---------       ---------        --------          ------     -----------
                                                             (In thousands, except for number of shares)
<S>                                   <C>            <C>                <C>             <C>                <C>               <C>
Balance at January 1, 2002                  --       6,298,778          27,578              --             469               2
Net Income                                  --              --              --              --              --              --
Transfer to reserves                        --              --              --              --              --              --
Required shares                        (59,154)             --              --            (742)             --              --
Currency translation adjustment             --              --              --              --              --              --
                                      --------       ---------         -------          ------          ------         -------

Balance at December 31, 2002           (59,154       6,298,778          27,578            (742)            469               2

Net Income                                  --              --              --              --              --              --
Transfer to reserves                        --              --              --              --              --              --

Cash dividends declared

   ($0.40 per share)                        --              --              --              --              --              --

Cash dividends distributed

   ($0.05 per share)                        --              --              --              --              --              --

Reacquired shares                      (14,004)             --              --            (335)             --              --
Exercise of stock options for cash          --         360,000              --              --              27              --
Unrealized gains on investments             --              --              --              --              --              --
Employee stock-based compensation           --              --              --              --              --              --
Currency translation adjustments            --              --              --              --              --              --
                                      --------       ---------         -------          ------          ------         -------

Balance at December 31, 2003           (73,158)      6,658,778          27,578          (1,077)            496               2

Net income                                  --              --              --              --              --              --
Transfer  to reserves                       --              --              --              --              --              --
Reacquired shares                     (111,112)             --              --          (4,367)             --              --
Exercise of stock options for cash          --          28,000              --              --               2              --
Unrealized loss on investments              --              --              --              --              --              --
Reclassification adjustment
  for gains included in net income          --              --              --              --              --              --
Employee stock-based compensation           --              --              --              --              --              --
Currency translation adjustments            --              --              --              --              --              --
                                      --------       ---------         -------          ------          ------         -------

Balance at December 31, 2004          (184,270)      6,686,778          27,578          (5,444)            498               2
                                      ========       =========          ======          ======          ======         =======



                                      F-4
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(CONTINUED)

                                                                                   Accumulated
                                    Additional                                           other
                                       paid-in                        Retained   comprehensive   Comprehensive
                                       capital        Reserves        earnings          income          income           Total
                                           RMB             RMB             RMB             RMB             RMB             RMB
                                    ----------        --------        --------   -------------   -------------           -----
                                                             (In thousands, except for number of shares)

Balance at January 1, 2002              77,157          10,806          71,913             117              --         160,464
Net Income                                  --              --          24,883              --          24,883          24,883
Transfer to reserves                        --           4,116          (4,116)             --              --              --
Required shares                             --              --              --              --              --            (742)
Currency translation adjustment             --              --              --              (1)             (1)             (1)
                                      --------       ---------         -------          ------          ------         -------
                                                                                                        24,882
                                                                                                        ======
Balance at December 31, 2002            77,157          14,922          92,680             116                         184,604
Net Income                                  --              --          26,913              --          26,913          26,913
Transfer to reserves                        --           2,206          (2,206)             --              --              --

Cash dividends declared

  ($0.40 per share)                         --              --         (10,794)             --              --         (10,794)

Cash dividends distributed

  ($0.05 per share)                         --              --          (1,368)             --              --          (1,368)

Reacquired shares                           --              --              --              --              --            (335)
Exercise of stock options for cash       6,303              --              --              --              --           6,330

Unrealized gains on investments             --              --              --             112             112             112
Employee stock-based compensation        3,347              --              --              --              --           3,347

Currency translation adjustments            --              --              --              45              45              45
                                      --------       ---------         -------          ------          ------         -------
                                                                                                        27,070
                                                                                                        ======
Balance at December 31, 2003            86,807          17,128         105,225             273                         208,854

Net income                                  --              --          28,864              --          28,864          28,864
Transfer  to reserves                       --           2,117          (2,117)             --              --              --
Reacquired shares                           --              --              --              --              --          (4,367)
Exercise of stock options for cash         457              --              --              --              --             459
Unrealized loss on investments              --              --              --             (74)            (74)            (74)

Reclassification adjustment

  for gains included in net income          --              --              --            (112)           (112)           (112)

Employee stock-based compensation          251              --              --              --              --             251

Currency translation adjustments            --              --              --             (18)            (18)            (18)
                                      --------       ---------         -------          ------          ------         -------
                                                                                                       (28,860)
                                                                                                        ======
Balance at December 31, 2004            87,515          19,245         131,972              69                         233,857
                                      ========       =========         =======          ======                         =======
</TABLE>

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




                                      F-5
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>

                                                                                Year ended December 31,
                                                                      2004            2004            2003            2002
                                                                       US$             RMB             RMB             RMB
                                                                       ---             ---             ---             ---
                                                                                           (In thousands)
<S>                                                                 <C>             <C>             <C>             <C>
Operating activities
    Net income                                                       3,489          28,864          26,913          24,883
    Adjustments to reconcile net income to
       net cash provided by/(used in) operating activities:
       Depreciation                                                    691           5,721           5,450           5,206
       Deferred income taxes                                            32             266              49             (74)
       Provision for doubtful debts                                    (47)           (392)            665           2,764
       Provision for inventories                                        --              --           1,677              --
       Loss/(gain) on disposal of fixed assets                          (2)            (16)            112              22
       Minority interest                                               729           6,032           5,845           4,972
       Employee stock-based compensation                                30             251           3,347              --

       Gain from sales of available-for-sales securities               (26)           (222)             --              --
    Changes in operating assets and liabilities
       Accounts receivable                                          (5,693)        (47,107)        (12,056)        (21,806)
       Notes receivable                                               (168)         (1,391)         (8,798)             --
       Inventories                                                  (3,595)        (29,744)        (10,114)          4,000
       Prepaid expenses                                               (261)         (2,159)          4,806          (9,820)
       Other receivables                                               (47)           (387)         (5,860)           (411)
       Accounts payable                                              1,786          14,779           7,368          (5,663)
       Income tax                                                       16             133            (815)            784
       Value added tax                                                 362           2,997          (2,230)          1,503
       Advance from customers                                          384           3,175          (1,656)            (48)
       Commission payable                                              526           4,353           4,966          11,124
       Accrued employee benefits                                       115             953          (4,230)          5,951
       Government grant                                                345           2,856           2,598             375
       Other liabilities                                               251           2,074             785            (158)
                                                                    ------          ------          ------          ------
Net cash provided by/(used in) operating activities                 (1,083)         (8,964)         18,822          23,604

Investing activities
    Decrease/(increase) in restricted time deposit                      --              --          20,000         (20,000)
    Purchases of property, plant and equipment                      (1,370)        (11,339)         (3,571)         (4,178)
    Proceeds from sales of property, plant and equipment                54             445             700              37
    Payment for construction in progress                              (144)         (1,189)         (1,612)             --
    Proceeds from sales of available-for-sales securities              177           1,468              --              --
    Purchases of available-for-sale securities                          --              --          (4,686)             --
                                                                    ------          ------          ------          ------
Net cash provided by (used in) investing activities                 (1,283)        (10,615)         10,831         (24,141)

Financing activities
    Proceeds from bank loan                                         11,090          91,760          45,485          78,892
    Repayment of bank loan                                          (8,482)        (70,185)        (67,136)        (57,221)
    Acquisition of treasury stock                                     (528)         (4,367)           (335)           (742)
    Proceeds from exercise of stock options                             55             459           6,330              --
    Decrease in dividend payable to minority shareholders             (899)         (7,437)         (9,903)         (1,101)
    Dividends paid                                                  (1,302)        (10,771)         (1,368)             --
                                                                    ------          ------          ------          ------
Net cash provided by/(used in) financing activities                    (66)           (541)        (26,927)         19,828
Effect of exchange rate changes on cash                                 (2)            (18)             45              (1)
                                                                    ------          ------          ------          ------
Net increase/(decrease) in cash and cash equivalents                (2,434)        (20,138)          2,771          19,290
Cash and cash equivalents at beginning of year                       8,046          66,571          63,800          44,510
                                                                    ------          ------          ------          ------
Cash and cash equivalents at end of year                             5,612          46,433          66,571          63,800
                                                                    ======          ======          ======          ======

Interest paid                                                           51             423             354             541
Income taxes paid                                                      154           1,271           3,018           1,563
</TABLE>

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


                                      F-6
<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, 2004, the Company had direct interests in the
         following subsidiaries:

<TABLE>
<CAPTION>

                                                 Percentage of equity
                                    Date of            interest

             Name of entity      establishment      attributable to      Paid-up capital   Principal activities
                                                      the Company

         ---------------------------------------------------------------------------------------------------------
           <S>                    <C>                   <C>               <C>               <C>
             Hainan Jinpan        June 3, 1997            85%             RMB21,520,000      Manufacturing and
           Electric Co., Ltd.                                                               sale of cast resin
             ("Jinpan JV" )                                                                    transformers

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

</TABLE>

         Hainan Jinpan Electric company, Ltd. is a Sino-foreign cooperative
         joint venture and Hainan Jinpan's predecessor was Haikou Jinpan Special
         Transformer Works ("Haikou Jinpan"). 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
         People's Republic of China (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. 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, Hainan JV 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.

         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:


                                      F-7
<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. PRC is a socialist state which,
              since 1949, has been controlled by the Communist Party of China.
              In the late 1970's, China's government permitted greater
              provincial and local economic autonomy and private economic
              activity, away from a more centrally-planned economy. 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

              Since the 1970's, 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.


                                      F-8
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

         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.

         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.


                                      F-9
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2004. 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)  Principles of Consolidation

              The consolidated financial statements include the accounts of the
              Company and its subsidiaries, substantially all of which are
              wholly-owned. All significant intercompany accounts and
              transactions have been eliminated.

         (b)  Cash and Cash Equivalents

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

         (c)  Trade Receivables

              Trade receivables, which generally have 30-180 day terms, are
              recognised and carried at original invoice amount less an
              allowance for any uncollectable amounts. An estimate for doubtful
              debts is made when collection of the full amount is no longer
              probable. Bad debts are written off when identified.

         (d)  Investment Available for Sale

              The Group classifies its marketable debt and equity securities at
              the date of acquisition as available-for-sale. These securities
              are reported at fair value with the related unrealized gains and
              losses included in other comprehensive income (loss), a component
              of shareholder's equity.

              The Group classifies investments with maturities between 3 and 12
              months as short-term investments. Short-term investments consist
              of corporate bonds, mutual fund and trust fund. Available-for-sale
              securities with maturities greater than twelve months are
              classified as short-term when they represent investments of cash
              that are intended to be used in current operations.


                                      F-10
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (d) Investments Available for Sale (continued)

              When determining whether an impairment of investments exists or a
              decline in value of an available-for-sale security is
              other-than-temporary, the Group evaluates evidence to support a
              realizable value in excess of the current market price for
              securities with readily determinable fair value. Such information
              may include the investment's financial performance (including such
              factors as earnings trends, dividend payments, asset quality and
              specific events), the near term prospects of the investment, the
              financial condition and prospects of the investment's region and
              industry, and the Group's investment intent. Typically, a
              sustained decline in the market value of a quoted security for six
              months is generally indicative of an other-than-temporary
              impairment. When a decline in value is deemed to be
              other-than-temporary, an impairment loss is recognised through a
              charge to interest income and other, net in the current period to
              the extent of the decline below the carrying value of the
              investment. Adverse changes in market conditions or poor operating
              results of underlying investments could result in additional
              other-than-temporary losses in future periods.

         (e)  Notes Receivable

              Notes receivable are unsecured, interest-free and payable within
              six months.

         (f)  Inventories

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

         (g)  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.

         (h)  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, 2004 represented office building acquired but not
              ready for occupancy at year end and machinery under installation.


                                      F-11
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (i)  Impairment of Long-lived Assets

              The Group accounts for the impairment of long-lived assets in
              accordance with Statement of Financial Accounting Standards No.
              144, "Accounting for the Impairment or Disposal of Long-Lived
              Assets". For long-lived assets used in operations, the Group
              records impairment losses when events and circumstances indicate
              that these assets might be impaired and the undiscounted cash
              flows estimated to be generated by those assets are less than the
              carrying amounts of those assets. If less, the impairment losses
              are based on the excess of the carrying amounts of these assets
              over their respective fair values. Their fair values would then
              become the new cost basis. The fair values are determined by
              quoted market prices if available. When quoted market prices are
              not available, the present value of the future estimated net cash
              flow is generally used. For assets held for sale, impairment
              losses are measured at the lower of the carrying amount of the
              assets or the fair value of the assets less costs to sell. For
              assets to be disposed of other than by sale, impairment losses are
              measured as their carrying amount less salvage value, if any, at
              the time the assets cease to be used.

         (j)  Income Taxes

              The Group 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.

          (k) 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.

          (l) 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.


                                      F-12
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (m)  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, 2004, 2003 and 2002 amounted
              to RMB1,149,000, RMB982,000 and RMB1,204,000, respectively.

         (n)  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. There are no acceptance
              provisions, and generally no installation or other services
              required after the delivery. Installation, when requested, is
              inconsequential and not essential to the functionality of the
              equipment. The following policies apply to the Group'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

         (o)  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.

         (p)  Earnings Per Common and Common Equivalent Share

              On January 21, 2004, the Board of Directors of the Group declared
              a two-for-one stock split to be effective February 6, 2004.
              Accordingly, all outstanding shares and per share data in all
              periods presented have been restated to reflect the stock split.

              Basic earnings per share for the years ended December 31, 2004,
              2003 and 2002 have been computed by dividing net income of
              RMB28,864,000, RMB26,913,000 and RMB24,883,000 by the weighted
              average number of 6,498,178, 6,390,804 and 6,279,866 shares of
              common stock outstanding, respectively, after giving effect of
              two-for-one stock split.

              Diluted earnings per share for the years ended December 31, 2004,
              2003 and 2002 have been computed by dividing net income of
              RMB28,864,000, RMB26,913,000 and RMB24,883,000 by the weighted
              average number of 6,663,305, 6,487,116 and 6,329,854 shares of
              common stock outstanding, respectively, after giving effect in
              2003 and 2002 of two-for-one stock split. Reconciliation of for
              the denominator is as follows:


                                      F-13
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (p) Earnings Per Common and Common Equivalent Share (continued)
<TABLE>
<CAPTION>

                                                                          2004              2003              2002
                                                                 --------------    --------------    --------------
            Denominator   for  basic   earnings   per  share
               - weighted average shares                             6,498,178         6,390,804         6,279,866

               Effect of dilutive securities:
                 Convertible preferred stock                            27,578            27,578            27,578
                 Exercisable stock options                             137,549            68,734            22,410
                                                                 --------------    --------------    --------------

            Denominator  for  diluted   earnings  per  share
               - adjusted weighted average shares and
                 assumed conversions                                 6,663,305         6,487,116         6,329,854
                                                                 ==============    ==============    ==============

         (q) Accumulated Other Comprehensive Income (Loss)

              Unrealized gains or losses on the Group's available-for-sale
              securities and foreign currency translation adjustments are
              included in accumulated other comprehensive income (loss).

              The following are the components of accumulated other
              comprehensive income (loss):

                                                                                       Foreign
                                                                    Unrealized        Currency

                                                                  Gains/(loss)
                                                                 Translation on
                                                                 Securities
                                                                 Adjustments
                                                                 Total

                                                                           RMB             RMB         RMB
                                                                                  (in thousands)
             <S>                                                       <C>               <C>              <C>
             Balance at January 1, 2002                                   --              117              117
             Foreign currency translation adjustments                     --               (1)              (1)
                                                                        --------------------------------------
             Balance at December 31, 2002                                 --              116              116
                                                                        ======================================
             Unrealized gains on available-for-sale
                securities                                               112               --              112
             Foreign currency translation adjustments                     --               45               45
                                                                        --------------------------------------
             Balance at December 31, 2003                                112              161              273
                                                                        ======================================
              Unrealized losses on available-for-sale
                securities                                               (74)              --              (74)
              Reclassification adjustment for gains included
                in net income                                           (112               --              (112)
             Foreign currency translation adjustments                     --              (18)             (18)
                                                                        --------------------------------------
             Balance at December 31, 2004                                (74)             143               69
                                                                        ======================================
</TABLE>


                                      F-14
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (r)  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, 2004, 2003 and 2002
              amounted to RMB1,962,000, RMB1,056,000 and RMB1,390,000,
              respectively.

         (s)  Advertising Expense

              The cost of advertising is expensed as incurred. The Group
              incurred RMB372,000, RMB1,007,000 and RMB566,000 in advertising
              costs during 2004, 2003 and 2002, respectively.

         (t)  Shipping and Handling Expenses

              The cost of shipping and handling is expensed into selling and
              administration expenses as incurred. The Group incurred RMB10
              million, RMB7.3 million and RMB8.1 million in shipping and
              handling costs during 2004, 2003 and 2002, respectively.

         (u)  Stock Based Compensation

              The Group has adopted the disclosure-only provision of FAS
              Statement No. 123, Accounting for Stock Based Compensation
              ("SFAS123") 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. Compensation expense, both recorded and pro
              forma, is recognized over the options' vesting period.

              At December 31, 2004, the Group has one stock-based employee
              compensation plan, which is described more fully in Note 17 the
              "1997 Stock Option Plan".


                                      F-15
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (u) Stock Based Compensation (continued)

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

<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                           2004            2003             2002
                                                                    ------------    ------------    -------------
                                                                            RMB             RMB              RMB
                                                                        (In thousands, except per share data)

              <S>                                                        <C>             <C>              <C>
              Net income, as reported                                    28,864          26,913           24,883

              Add:  Employee  stock-based  compensation,   net  of
              taxes,  as  calculated  under APB 25 included in net
              income as reported                                            251           3,347                -

              Deduct:  Total  stock-based  employee   compensation
              expense  determined  under fair value  based  method
              for all awards, net of related tax effects                      -          (2,705)               -
                                                                         ------          ------           ------

              Pro forma net income                                       29,115          27,555           24,883

              Earnings per common share (cents):

              Basic - as reported                                          4.44            4.21             3.96
              Basic - pro forma                                            4.48            4.31             3.96

              Diluted - as reported                                        4.33            4.15             3.93
              Diluted - pro forma                                          4.37            4.25             3.93
</TABLE>

         (v)  Product Warranty

              The Group provides a basic limited warranty, including parts and
              labor, for all products for one year. The Group incurred
              RMB72,000, RMB81,000, and RMB163,000 in product warranty expense
              during 2004, 2003 and 2002, respectively.


                                      F-16
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (w) New accounting pronouncement

              On December 16, 2004, the Financial Accounting Standards Board
              (FASB) issued Statement of Financial Accounting Standard
              ("SFAS")No. 123 (revised 2004) ("SFAS 123(R)"), Share-Based
              Payment, which is a revision of FASB Statement No. 123, Accounting
              for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion
              No. 25, Accounting for Stock Issued to Employees, and amends FASB
              Statement No. 95, Statement of Cash Flows. Generally, the approach
              in SFAS 123(R) is similar to the approach described in SFAS 123.
              However, SFAS 123(R) requires all share-based payments to
              employees, including grants of employee stock options, to be
              recognized in the income statement based on their fair values. Pro
              forma disclosure is no longer an alternative.

              Early adoption will be permitted in periods in which financial
              statements have not yet been issued. The Group is required to
              adopt SFAS 123(R) no later than January 1, 2006.

              SFAS 123(R) permits public companies to adopt its requirements
              using one of two methods:

              1. A "modified prospective" method in which compensation cost is
              recognized beginning with the effective date (a) based on the
              requirements of SFAS 123(R) for all share-based payments granted
              after the effective date and (b) based on the requirements of
              Statement 123 for all awards granted to employees prior to the
              effective date of SFAS 123(R) that remain unvested on the
              effective date.

              2. A "modified retrospective" method which includes the
              requirements of the modified prospective method described above,
              but also permits entities to restate based on the amounts
              previously recognized under SFAS 123 for purposes of pro forma
              disclosures either (a) all prior periods presented or (b) prior
              interim periods of the year of adoption.

              The Company plans to adopt SFAS 123(R) using the
              modified-prospective method.

              As permitted by Statement 123, the Group currently accounts for
              share-based payments to employees using Opinion 25's intrinsic
              value method and, as such, generally recognizes no compensation
              cost for employee stock options. Accordingly, the adoption of
              Statement 123(R)'s fair value method will have a significant
              impact on the Group's result of operations, although it will have
              no impact on our overall financial position. The impact of
              adoption of Statement 123(R) cannot be predicted at this time
              because it will depend on levels of share-based payments granted
              in the future. Statement 123(R) also requires the benefits of tax
              deductions in excess of recognized compensation cost to be
              reported as a financing cash flow, rather than as an operating
              cash flow as required under current literature. This requirement
              will reduce net operating cash flows and increase net financing
              cash flows in periods after adoption. While the Group cannot
              estimate what those amounts will be in the future (because they
              depend on, among other things, when employees exercise stock
              options), the amount of operating cash flows recognized in prior
              periods for such excess tax deductions were nil For all periods
              presented.


                                      F-17
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (w) New accounting pronouncement (Continued)

              In November 2004, the FASB issued SFAS No. 151, "Inventory
              Costs--An Amendment of ARB No. 43, Chapter 4" ("SFAS 151"). SFAS
              151 amends the guidance in ARB No. 43, Chapter 4, "Inventory
              Pricing," to clarify the accounting for abnormal amounts of idle
              facility expense, freight, handling costs, and wasted material
              (spoilage). Among other provisions, the new rule requires that
              items such as idle facility expense, excessive spoilage, double
              freight, and rehandling costs be recognized as current-period
              charges regardless of whether they meet the criterion of "so
              abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires
              that the allocation of fixed production overheads to the costs of
              conversion be based on the normal capacity of the production
              facilities. SFAS 151 is effective for fiscal years beginning after
              June 15, 2005. The Group does not expect the adoption of SFAS No.
              151 to have a material effect on its results of operations or
              financial condition.

              In December 2004, the FASB issued SFAS No. 153, "Exchanges of
              Nonmonetary Assets-An Amendment of APB Opinion No. 29, Accounting
              for Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates
              the exception from fair value measurement for nonmonetary
              exchanges of similar productive assets in paragraph 21(b) of APB
              Opinion No. 29, "Accounting for Nonmonetary Transactions," and
              replaces it with an exception for exchanges that do not have
              commercial substance. SFAS 153 specifies that a nonmonetary
              exchange has commercial substance if the future cash flows of the
              entity are expected to change significantly as a result of the
              exchange. SFAS 153 is effective for the fiscal periods beginning
              after June 15, 2005. The Group does not expect the adoption of
              SFAS No. 153 to have a material effect on its results of
              operations or financial condition.

         (x)  Reclassifications

              Certain amounts in the 2003 and 2002 financial statements have
              been reclassified to conform to the 2004 presentation.


                                      F-18
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. INVESTMENTS AVAILABLE FOR SALE

              Available-for-sale securities held by the Group at December 31,
              2004, 2003 are as follows:

<TABLE>
<CAPTION>

                                                            2004             2004               2003
                                                            ----             ----               ----
                                                             US$              RMB                RMB
                                                                    (In thousands)

        <S>                                                  <C>            <C>                <C>
        Corporate bonds

           Cost                                              416            3,441              3,745
           Gross unrealized loss                              (9)             (74)                 -
                                                  ---------------    -------------   ----------------
           Fair market value                                 407            3,367              3,745
                                                  ---------------    -------------   ----------------

        Mutual fund

           Cost                                                -                -                569
           Gross unrealized gains                              -                -                 74
                                                  ---------------    -------------   ----------------
           Fair market value                                   -                -                643
                                                  ---------------    -------------   ----------------

        Trust fund

           Cost                                                -                -                372
           Gross unrealized gains                              -                -                 38
                                                  ---------------    -------------   ----------------
           Fair market value                                   -                -                410
                                                  ---------------    -------------   ----------------
        Total investments available for sale                 407            3,367              4,798
                                                  ===============    =============   ================
</TABLE>

         The time periods during which the available-for-sale securities have
         been in a continuous unrealized loss position as of December 31, 2004
         and 2003 are less than twelve months. Any gains or losses on sales of
         investments or amounts reclassified out of accumulated other
         comprehensive income into earnings are computed based upon specific
         identification method.

         The net carrying value and estimated fair value of debt and marketable
         equity securities at December 31, 2004, by contractual maturity, are
         shown below. Expected maturities will differ from contractual
         maturities because the issuers of the securities may have the right to
         prepay obligations without prepayment penalties.

<TABLE>
<CAPTION>

        Available-for-Sale                                       Cost                   Fair Market Value
                                                           US$                RMB            US$            RMB
                                                                              (In thousands)

        <S>                                               <C>               <C>             <C>           <C>
        Due in one year or less                             26                211             25            207
        Due after one year through four years              390              3,230            382          3,160
                                                     ---------- ------------------ -------------- --------------
        Total                                              416              3,441            407          3,367
                                                     ========== ================== ============== ==============
</TABLE>


                                      F-19
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. ACCOUNTS RECEIVABLE, NET

         Accounts receivable comprised:

<TABLE>
<CAPTION>

                                                              2004           2004           2003
                                                              ----           ----           ----
                                                               US$            RMB            RMB
                                                               ---            ---            ---
                                                                        (In thousands)

        <S>                                                 <C>           <C>            <C>
        Accounts receivable - trade                         21,925        181,398        135,481
        Less: provision for doubtful debts                  (1,147)        (9,484)       (11,066)
                                                            ------        -------        -------

        Accounts receivable, net                            20,778        171,914        124,415
                                                            ======        =======        =======
<CAPTION>

                                                              2004           2004           2003           2002
                                                              ----           ----           ----           ----
                                                               US$            RMB            RMB            RMB
                                                                     (In thousands)

        <S>                                                 <C>           <C>            <C>             <C>
        Movement of provision for doubtful debts
        Balance as at January 1                             (1,338)       (11,066)       (11,177)        (8,413)
        Reversal/(provided) during the year                     47            392           (665)        (2,764)
        Less: Written off during the year                      144          1,190            776              -
                                                       ------------    -----------    -----------    -----------
        Balance as at December 31                           (1,147)        (9,484)       (11,066)      (11,177)
                                                       ============    ===========    ===========    ===========

6. INVENTORIES, NET

         Inventories comprised:

                                                              2004           2004           2003
                                                              ----           ----           ----

                                                                US$            RMB            RMB
                                                                ---            ---            ---
                                                                    (In thousands)

        Finished products                                    2,393         19,796         16,067
        Products in process                                    941          7,789          5,266
        Raw materials                                        5,014         41,482         18,181
                                                            ------        -------        -------
                                                             8,348         69,067         39,514
        Less: provision for inventories                       (176)        (1,453)        (1,644)
                                                            ------        -------        -------
        Inventories                                          8,172         67,614         37,870
                                                      =============    ===========    ===========

                                                              2004           2004           2003           2002
                                                              ----           ----           ----           ----
                                                               US$            RMB            RMB            RMB
                                                                            (In thousands)

        Movement of provision for inventories
        Balance as at January 1                               (199)        (1,644)                            -
                                                                                               -
        Provided during the year                                 -              -         (1,677)             -
        Less: Written off during the year                       23            191             33              -
                                                       ------------    -----------    -----------    -----------

        Balance as at December 31                             (176)        (1,453)        (1,644)             -
                                                       ============    ===========    ===========    ===========
</TABLE>


                                      F-20
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>

                                                                2004             2004             2003
                                                                ----             ----             ----
                                                                 US$              RMB              RMB
                                                                 ---              ---              ---
                                                                       (In thousands)

        <S>                                                    <C>             <C>               <C>
        Buildings                                              1,434           11,869            8,171
        Machinery and equipment                                6,350           52,536           42,829
        Motor vehicles                                         1,126            9,318            8,263
        Furniture, fixtures and office equipment                 586            4,849            4,572
                                                               -----           ------           ------
                                                               9,496           78,572           63,835
        Less: accumulated depreciation                         (5,158)         (42,678)         (36,979)
                                                               -----           ------           ------
                                                               4,338           35,894           26,856
                                                               =====           ======           ======
</TABLE>

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

8. DEFERRED TAX ASSETS AND 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 expired 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, 2004, 2003 and 2002 were as follows:

<TABLE>
<CAPTION>

                                                                 2004           2004          2003          2002
                                                              --------------------------------------------------
                                                                  US$            RMB           RMB           RMB
                                                                  ---            ---           ---           ---
                                                                      (In thousands, except for per share data)
         <S>                                                     <C>          <C>           <C>           <C>
         Effect on net income of the year                         487          4,031         3,727         3,116
                                                                =====          =====         =====         =====
         Effect on basic earnings per share                      0.07           0.62          0.58          0.50
                                                                =====          =====         =====         =====
         Effect on diluted earnings per share                    0.07           0.60          0.57          0.49
                                                                =====          =====         =====         =====
</TABLE>


                                      F-21
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. DEFERRED TAX ASSETS AND INCOME TAXES (CONTINUED)

         Pretax income for the years ended December 31, 2004, 2003 and 2002 was
         taxed in the following jurisdictions:

<TABLE>
<CAPTION>

                                                                    2004           2004          2003         2002
                                                                    ----           ----          ----         ----
                                                                     US$            RMB           RMB          RMB
                                                                     ---            ---           ---          ---
                                                                                (In thousands)

        <S>                                                        <C>         <C>            <C>          <C>
        British Virgin Islands                                      (799)       (6,609)        (8,070)      (3,144)
        United States of America                                    (100)         (829)        (3,694)      (4,261)
        The People's Republic of China                             5,604         46,365        48,249       40,376
                                                                   -----         ------        ------       ------
                                                                   4,705         38,927        36,485       32,971
                                                                   =====         ======        ======       ======

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

                                                                    2004           2004          2003         2002
                                                                    ----           ----          ----         ----
                                                                     US$            RMB           RMB          RMB
                                                                     ---            ---           ---          ---
                                                                                 (In thousands)

        Current

               Non-US                                               (455)        (3,765)       (3,678)      (3,190)

        Deferred

               Non-US                                                (32)          (266)          (49)          74
                                                                   -----         ------        ------       ------
                                                                    (487)        (4,031)       (3,727)      (3,116)
                                                                   =====         ======        ======       ======

         Deferred tax assets comprised the following at December 31, 2004 and
         2003:

                                                                    2004           2004          2003
                                                                    ----           ----          ----
                                                                     US$            RMB           RMB

                                                                              (In thousands)

<CAPTION>

        <S>                                                         <C>           <C>           <C>
        Deferred tax assets

            Provision for doubtful debts                              69            567           811
            Deferred income                                           17            144           202
            Net operating loss carry forward of Jinpan USA
                                                                     865          7,158         6,827

        Total deferred tax assets                                    951          7,869         7,840
            Less:   Valuation  allowance  for  deferred  tax
              assets                                                (865)        (7,158)       (6,827)
                                                                    ----         ------        ------
                                                                      86            711         1,013
                                                                    ----         ------        ------
        Deferred tax liabilities

            Interest income                                            -               -          (36)
                                                                    ----         ------        ------
        Total deferred tax liabilities                                 -               -          (36)
                                                                    ----         ------        ------
        Net deferred tax assets                                       86            711           977
                                                                    ====         ======        ======
</TABLE>


                                      F-22
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8. DEFERRED TAX ASSETS AND INCOME TAXES (CONTINUED)

         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 RMB7,158,000 (2003: RMB6,827,000) valuation
         allowance covering 100% of net operating loss of Jinpan USA. The change
         in the valuation allowance for the current year is RMB331,000 (2003:
         RMB1,478,000). At December 31, 2004, the Group has available net
         operating loss of RMB17,895,000 (2003: RMB17,067,000), which will
         expire in the years 2017 to 2023.

         There were no deferred tax liabilities as at December 31, 2004.

         The reconciliation of income tax computed at the PRC statutory income
         tax rate of 15% (2001:15% and 2000:15%) in Hainan Province, the PRC to
         income before minority interests is as follows:

<TABLE>
<CAPTION>

                                                                         2004           2004         2003         2002
                                                                      ------------------------------------------------
                                                                          US$            RMB          RMB          RMB
                                                                                         (In thousands)

         <S>                                                             <C>          <C>          <C>          <C>
         Computed expected income taxes                                   705          5,839        5,473        4,945
         Impact of tax holiday of Jinpan JV                              (420)        (3,477)      (3,715)      (3,190)
         Non-deductible losses                                            117            969        1,210          472
         Effect of difference between the PRC and USA tax rate            (25)          (207)        (924)      (1,065)
         Change in valuation allowance                                     40            331        1,478        1,704
         Others                                                            70            576          205          250
                                                                      -------        -------      -------      -------
                                                                          487          4,031        3,727        3,116
                                                                      =======        =======      =======      =======
</TABLE>

9. SHORT TERM BANK LOANS

         Bank loans comprised:           2004            2004          2003
                                         ----------------------------------
                                          US$             RMB           RMB
                                                     (In thousands)

         Short term bank loan           1,813          15,000             -
         Letters of credit              1,038           8,591         2,016
         Less: current portion         (2,851)        (23,591)       (2,016)
                                      -------         -------       -------
                                            -               -             -
                                      =======         =======       =======

         The bank loan is unsecured, bears an interest at the rate of 6.138% per
         annum and is repayable on December 14, 2005.

         Letters of credit are secured by three directors and guaranteed by
         Jinpan International Limited, bears interest at a weighted average rate
         of 4.84%, 4.74% and 5.25% per annum for the years ended December 31,
         2004, 2003 and 2002, respectively, and are repayable within 60 days, 60
         days and 90 days in the year 2004, 2003 and 2002, respectively. The
         Group has total credit facilities of RMB33,094,000 (US$4,000,000) as of
         December 31, 2004, of which RMB24,503,000 (US$2,962,000) is unused. Of
         the total credit facilities, RMB33,094,000 (US$4,000,000) will be
         expired in July 2005.


                                      F-23
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 approval from the
         government. The Group recognized income of RMB70,000, nil and
         RMB1,280,000 in 2004, 2003 and 2002, respectively. As of December 31,
         2004, Jinpan JV received RMB2,926,000 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, 2004.

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 RMB42
         million, RMB44 million and RMB37 million as of December 31, 2004, 2003
         and 2002.

         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, 2004, 2003 and 2002, the directors
         of Jinpan JV proposed the following appropriations to reserves.

<TABLE>
<CAPTION>

                                                 2004         2004          2003          2002
                                              ------------------------------------------------
                                                  US$          RMB           RMB           RMB
                                                  ---          ---           ---           ---
                                                                  (In thousands)

         <S>                                      <C>        <C>           <C>           <C>
         Statutory reserve fund                   256        2,117         2,206         1,863
         Enterprise expansion fund                  -            -             -         2,253
         Staff welfare and bonus fund               -            -             -             -
         Dividends                                  -            -        12,162             -
                                              -------      -------        ------       -------

                                                  256        2,117        14,368         4,116
                                              =======      =======       =======       =======
</TABLE>

         No dividends were declared during the year ended December 31, 2004 and
         2002.

         The Group declared a cash dividend of US$5 cents per share of common
         stock on April 30, 2003, which was paid on August 25, 2003. On October
         14, 2003, the Group declared a dividend of US$40 cents per share of
         common stock, which had been paid to all stockholders in 2004.


                                      F-24
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. COMMITMENTS AND CONTINGENT LIABILITES

         (1)      Contingent liabilities

                  Jinpan JV obtained an irrevocable letters of credit of
                  RMB11,118,000 from Nan Yang Commercial Bank for the purchase
                  of raw materials. Those irrevocable letters of credit are
                  guaranteed by the Company with the terms as follows:

                  (a)  The Company and Jinpan JV should jointly and severally
                       pay and satisfy to Nan Yang Commercial Bank on demand all
                       sums of money debts and liabilities whether certain or
                       contingent whether now or at any time herein after owing
                       or incurred to the bank from or by the Jinpan JV;

                  (b)  The Company guarantees the irrevocable letters of credit
                       for the effective contract period starting from July 1,
                       2004 until July 11, 2007.

         (2)      Commitments

                  Operating lease commitments

                  The Group leases certain buildings and apartments under
                  non-cancelable lease arrangements. These operating leases
                  expire in various years through 2009. These leases may be
                  renewed for periods ranging from one to two years.

                  Future minimum payments under all non-cancelable operating
                  leases consisted of the following at December 31, 2004:

                                                          US$             RMB
                                                          ---             ---
                                                                  (In thousands)

                  2005                                    136           1,127
                  2006                                    115             950
                  2007                                     51             421
                  2008                                     36             298
                  2009                                      9              75
                                                          ---           -----
                  Total minimum lease payments            347           2,871
                                                          ===           =====

                  Capital commitments

                  As of December 31, 2004 the Group has commitments of
                  RMB1,829,000 for the purchase of new office and plant and
                  machinery.

                  Employment contracts

                  The Group's employees in the PRC, include engineers and
                  technicians, management and administrative personnel,
                  marketing and sales personnel, factory personnel while
                  employees in the United States include management and
                  administrative personnel and marketing and sales personnel.
                  All of the employees are contract employees and have entered
                  into renewable employment contracts with the Group. Terms of
                  the employment agreements with management, engineers, sales
                  persons and technicians range from two to five years and terms
                  of the employment agreements with support personnel range from
                  six months to one year.


                                      F-25
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. COMMITMENTS AND CONTINGENT LIABILITES (continued)

         (2) Commitments (continued)

                  Future minimum payments to employees under employment
                  contracts with terms in excess of one year consisted of the
                  following at December 31, 2004:

<TABLE>
<CAPTION>

                                                                    US$            RMB
                                                                    ---            ---
                                                                      (In thousands)

                  <S>                                               <C>           <C>
                  2005                                              309           2,554
                  2006                                              141           1,166
                  2007                                              136           1,126
                  2008                                              120             993
                                                                    ---           -----
                  Total minimum employment contract payments        706           5,839
                                                                    ===           =====
</TABLE>

13. LOANS TO THE MINORITY SHAREHOLDER

         During the year ended December 31, 2003, the minority shareholder
         borrowed RMB11,277,000 from Jinpan JV, which carried an annual interest
         rate of 5.31% . The amount of RMB8,947,000 was repaid in November 2003
         and the remaining repaid in December 2003. The interest income of
         RMB475,000 generated from the loans to minority shareholder was
         received in June 2004. There were no such transactions in 2004.

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, accounts receivable and short-term investments.

         The Group maintains cash and cash equivalents with Bank of China,
         Industrial and Commercial Bank of China, China Construction Bank and
         Bank of Communications 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 their fair value
         because of the short maturity of those instruments.

         Investments, Accounts receivable, notes receivable, other receivables,
         advance from customers and bank loans: The carrying amounts reported in
         the balance sheet for these items approximate their fair value. The
         carrying value of accounts receivable, notes receivable, other
         receivables, advance from customers, accruals, and bank loans
         approximate their market values based on their short-term maturities.
         The fair value of investments as of December 31, 2004 is RMB3,367,000,
         which is based on quoted market prices.


                                      F-26
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. CONCENTRATION OF RISK

         During 2004, the Group was dependent on one major supplier Bakelite for
         cast resin,  which accounted for  approximately  3% (2003: 4%) of total
         purchases.  In  addition,  the  Company  was  dependent  on  two  major
         suppliers,   Delta  &  Wye  Transformer   Co.,  Ltd.  and  Thyssenkrupp
         Electrical   Steel  GmbH.  for  silicon  steel,   which  accounted  for
         approximately  27% (2003:  6%) and 14% (2003:  21%) of total  purchase,
         respectively,  and was dependent on Outokumpu  Poricooper OY and Hainan
         Qiongshan Dayou Machinery  Manufacture Co. Ltd. for copper foil,  which
         accounted for  approximately  3% (2003: 7%) and 27% (2003: 6%) of total
         purchases, respectively.


16. PENSION AND OTHER POSTRETIREMENT BENIFITS

         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 6% 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, 2004, 2003 and 2002 amounted to RMB523,000 (US$63,212), RMB367,000
         and RMB493,000, 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,
                                                           2004             2004             2003            2002
                                                           ----             ----             ----            ----
                                                            US$               RMB             RMB              RMB
                                                                          (In thousands)

        <S>                                              <C>            <C>              <C>             <C>
        Revenues from external customers:
        United States                                       534            4,416            1,776           7,413
        PRC                                              41,720          345,193          274,788         222,008
                                                         ------          -------          -------         -------
                                                         42,254          349,609          276,564         229,421
                                                         ======          =======          =======         =======
        Long lived assets by area:

        United States                                         2               19               50              50
        PRC                                               4,429           36,641           28,617          29,188
                                                         ------          -------          -------         -------
                                                          4,431           36,660           28,667          29,238
                                                         ======          =======          =======         =======
</TABLE>


                                      F-27
<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 Group were authorized and empowered, in the name
         and on behalf of the Group, to purchase up to 640,000 shares of the
         Group'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 funds, with the acquired
         stock to be available for use under the Group's stock option plan or
         for other corporate purposes. In 2004, the Company purchased 111,112
         shares from an original shareholder at US$4.75 per share, which was
         US$2.83 less than the market price at the date of purchase. As of
         December 31, 2004, 184,270 (2003: 73,158) shares of the Group's common
         stock were transferred back into treasury at an aggregate cost of
         $657,915(2003: $130,133), approximately RMB5,444,000 (2003:
         RMB1,077,000).

         The Group'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 non-cumulative preferred per share dividend (6% per annum)
         payable in kind, compounded quarterly. All accrued and unpaid dividends
         (approximately RMB6,047 as at December 31, 2004 and RMB5,924 as at
         December 31, 2003) on the preferred stock are to be cancelled upon
         conversion into common stock. In the event of the Group'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) $2.188 per share, and (ii)
         an amount equal to declared but unpaid dividends on each such share.

         (a) 1997 stock option plan

                  A total of 1,000,000 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 July 2003, seven directors, officers and employees of the
                  Group exercised stock options to purchase a total 360,000
                  shares of common stock of the Group, which were granted to
                  them on July 31, 1998 by the compensation committee of the
                  board of directors of the Company, pursuant to the Stock
                  Option Plan. Of the options granted, the senior management
                  purchased 360,000 shares of common stock at the exercise price
                  of US$2.125 per share. Total amount received from the exercise
                  of the share options was US$765,000.


                                      F-28
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. EQUITY (CONTINUED)

         (b) Stock option agreement

                  In January 1998, the Group entered into an agreement with Dr.
                  Mu to grant to Dr. Mu in April 1999, options to purchase
                  200,000 shares of common stock of the Company at an exercise
                  price of US$2.188 per share provided that Dr. Mu serve as a
                  director of the Group during the period commencing from
                  January 1, 1999 and ending March 31, 1999. The Group 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.

                  Dr. Mu terminated his relationship with the Group in January
                  2000. This agreement was amended in February 2000 to reduce
                  the option grant to 100,000 shares and to permit Dr. Mu to
                  retain the option. No compensation cost was incurred as a
                  result of this agreement. The options expired in February
                  2002.

                  No options were exercised in relation to this agreement in
                  2004, 2003 and 2002.

         (c) 2001 stock option agreements

                  In February 2001, the Group entered into stock option
                  agreements with five of its directors and Chief Financial
                  Officer, to purchase 120,000 shares of common stock of the
                  Group. Options granted are exercisable at the price of US$1.35
                  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 Group accounts for this plan under APB 25 and related
                  interpretations and no compensation cost was recognized.

                  Ms. 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. Option grant in 2001 permitted Mr.
                  Li and Ms. Zhu to retain the option.

                  In February 2004, one of the directors exercised stock option
                  to purchase total 20,000 shares of common stock of the Company
                  at the exercise price of US$1.35 per share. Total amount
                  received from the exercise of the share option was US$27,000.

         (d) 2003 stock option agreement

                  In September 2003, the Group entered into stock option
                  agreements with seven of its employees, to purchase 140,000
                  shares of common stock of the Group. Options granted are
                  exercisable at the price of US$3.55 per share and subject to
                  termination of employment, expire 10 years from the date of
                  grant, are not transferable other than on death, and are
                  exercisable from the date of grant.

                  The options are exercisable in either US$ or RMB, consequently
                  the measurement date is not fixed. Compensation is measured
                  each reporting period until the options are exercised,
                  forfeited or expire unexercised. The Group recorded
                  compensation expense of RMB 251,000 (2003: RMB3,347,000) for
                  the year ended December 31, 2004 in connection with these
                  options.


                                      F-29
<PAGE>

JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. EQUITY (CONTINUED)

         (d) 2003 stock option agreement (continued)

                  In March 2004, two employees exercised stock option to
                  purchase total 8,000 shares of common stock of the Group at
                  the exercise price of US$3.55 per share. Total amount received
                  from the exercise of the share option was US$28,400.

         (e) Warrants granted to non-employees

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

                  Number of common stock reserved for issuance upon exercise of
                  warrants, stock options and preferred stock

                                                       2004                 2003
                                                       ----                 ----

                  Warrants                                -                    -
                  Stock options                     232,000              260,000
                  Preferred stock                    15,311               21,445
                                                    -------              -------
                  Total                             247,311              281,445
                                                    =======              =======

         (f) Disclosure of information pursuant to FAS 123

                  The fair value of options granted in 2004, 2003 and 2002
                  reported below has been estimated at the date of grant using
                  the Black-Scholes option pricing model with the following
                  weighted average assumptions:

                                                     2004        2003    2002
                                                     ----        ----    ----

                  Risk-free interest rate               -       3.10%       -
                  Dividend yield                        -           -       -
                  Volatility factor                     -       80.3%       -
                  Weighted average expected life        -     5 years       -

                  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
                  Group'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.


                                      F-30
<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 Group's stock option activities, and related
                  information for the years ended December 31, 2004, 2003 and
                  2002 are as follows:

<TABLE>
<CAPTION>

                                                           2004                    2003                    2002
                                                 ------------------------------------------------------------------------
                                                              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    260,000       2.869     880,000        2.074     880,000       2.074
               Granted                                   -           -     140,000        3.550           -           -
               Exercised                           (28,000)      1.979    (360,000)       2.084           -           -
               Cancelled                                 -           -           -            -           -           -
               Forfeited                                 -           -    (400,000)           -           -           -
                                                 ----------- ----------- ----------- ------------------------------------
               Outstanding at the end of year      232,000       2.602     260,000        2.869     880,000       2.074
               Exercisable at the year end         232,000       2.602     260,000        2.869     880,000       2.074

               Weighted average fair value of
                 options granted during the year       N/A                 USD2.34                      N/A
</TABLE>

              Weight-average exercise prices for options outstanding as December
              31, 2004 are US$2.602. The weighted-average remaining contractual
              life of those options is eight years.

19. SUBSEQUENT EVENT

         On February 1, 2005, the Board of Directors the Group declared a cash
         dividend of US$.20 per share of common stock for the year 2005. The
         Group made the first distribution of US$.10 per share on March 10,
         2005, to shareholders of record on February 23, 2005.


                                      F-31