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, 2003

                           Commission File No. 1-14742
                           ---------------------------

                          JINPAN INTERNATIONAL LIMITED

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

                             British Virgin Islands
                 (Jurisdiction of incorporation or organization)

                   c/o Hainan Jinpan Special Transformer Works
                                   Section D-2
                             No. 100 Industry Avenue
                             Jinpan Development Area
                               Haikou, Hainan PRC
                    (Address of principal executive offices)


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

                         Common Stock, $0.018 par value
                                (Title of Class)

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

                                      None.

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

                                      None.

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

                                3,329,389 shares

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                          Yes        |X|        No       |_|

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

                          Item 17   |_|         Item 18  |X|


<PAGE>


                                Table of Contents
                                -----------------

                                                                            Page
                                                                            ----


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







                                      -2-
<PAGE>



                                     PART I

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

         We, Jinpan International Limited, together with our 85% owned
subsidiary Hainan Jinpan Special Transformer Works, a Sino-foreign cooperative
joint venture, and Hainan Jinpan's predecessor, Haikou Jinpan Special
Transformer Works, are referred to in this annual report collectively as "we",
unless Jinpan International, Hainan Jinpan or Haikou Jinpan are specifically
referenced. We prepare our financial statements in accordance with U.S. GAAP. We
publish our financial statements in Renminbi Yuan, which are referred to in the
financial statements as "RMB" or "Renminbi", the lawful currency of the People's
Republic of China. For the reader's convenience, some financial information has
been translated from Renminbi to the U.S. Dollar, referred to herein as "U.S.$"
using the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York on December 31, 2003, of RMB 8.28 = U.S.$1.00. The dollar amounts reflected
in these convenience translations should not be construed as representing
amounts that actually can be received or paid in dollars or convertible into
dollars (unless otherwise indicated), nor do such convenience translations means
that the Remnibi amounts (i) actually represent the corresponding dollar amounts
stated, or (ii) could be converted into dollars at the assumed rate.

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         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, 2003, 2002, 2001,
2000 and 1999. Year-end data for the year ended December 31, 1999 was derived
from our Consolidated Financial Statements audited by Arthur Andersen & Co.,
Hong Kong, independent public accountants. Year-end data for the years ended
December 31, 2003, 2002, 2001 and 2000 was derived from our Consolidated
Financial Statements audited by Ernst & Young, Hong Kong, independent public
accountants, whose report for the years ended December 31, 2003, December 31,
2002, December 31, 2001 and December 31, 2000, is included elsewhere in this
report.



                                      -3-
<PAGE>




<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                              --------------------------------------------------------------------------------------------------
                                   1999           2000            2001             2002                     2003
                              --------------------------------------------------------------------------------------------------
                                      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                            106,800          141,264            184,480    229,421         276,564            33,426
   Costs of goods sold              (56,691)         (73,869)          (104,686)  (128,770)        (157559)          (19,043)
   Gross profit                      50,109           67,395             79,794    100,651         119,005            14,383

   Selling and
   administrative  expenses         (38,497)         (50,744)           (57,396)   (81,325)        (86,883)          (10,500)

   Interest Expenses                   (385)            (925)              (600)      (541)           (354)
                                                                                                                         (43)
   Other income                       7,849            7,824              8,413     14,186           4,717               569
   Income before taxation
                                     19,076           23,550             30,211     32,971          36,485             4,409
   Income Tax                        (1,285)          (2,385)            (2,911)    (3,116)         (3,727)             (450)
   Income before Minority            17,791           21,165             27,300     29,855          32,758             3,959
   Interest
   Minority interest                 (3,608)          (4,427)            (4,229)    (4,972)         (5,845)             (706)
   Net income                        14,183           16,738             23,071     24,883          26,913             3,253

   Earnings (loss) per share:

    basic                              2.26             2.66               3.66       3.96            4.21              0.51
    fully diluted                      2.24             2.65               3.65       3.93            4.15              0.50
    Number of shares outstanding:
    basic                         6,285,134        6,298,978          6,298,978  6,279,866       6,390,804         6,390,804
    fully diluted                 6,326,356        6,326,556          6,326,556  6,329,854       6,487,116         6,487,116

</TABLE>



<TABLE>
<CAPTION>
                                      December        December       December     December        December
                                      31, 1999        31, 2000       31, 2001     31, 2002        31, 2003
                                     ----------      ----------     ----------   ----------  -------------------

                                         RMB             RMB             RMB         RMB       RMB      U.S.$(1)
Balance Sheet Data:
<S>                                     <C>             <C>            <C>         <C>         <C>        <C>
   Cash and cash equivalents            41,556          36,560         44,510      63,800      66,571     8,047
   Total assets                        145,685         168,142        203,711     267,261     283,890    34,314
   Minority interest                     5,224          11,506          7,028      10,899       6,841       827
   Equity                              121,555         137,412        160,464     184,604     208,854    25,244

</TABLE>

--------------------
(1) For your convenience, translation of amounts from Renminbi into U.S. dollar
has been made at the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve Bank
of New York on December 31, 2003 of RMB8.28 = U.S.$1.00. No representation is
made that the Renminbi amounts could have been, or could be, converted into U.S.
dollar at that rate or at any other established rate.


                                      -4-
<PAGE>

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

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

         We desire to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and we 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 facin g
our company. Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. 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,


                                      -5-
<PAGE>

including, without limitation, the inability of the enterprise to conduct its
business due to financial losses or a breach of the joint venture agreement by
one of the parties thereto.

BECAUSE A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM SALES OF OUR CAST
RESIN TRANSFORMERS, ANY DECREASE IN SALES COULD HARM OUR OPERATING RESULTS.

         Sales generated by cast resin transformers will continue to account for
virtually all of our revenues. Accordingly, our business and results of
operations are dependent on the demand for this single product and any decrease
in the demand for such product, whether as a result of competition,
technological changes, economic conditions in China or other factors, or
restrictions on our ability to market this product for any reason, would have a
material adverse effect on our business, financial condition and results of
operations.

ACCIDENTS INVOLVING THE USE OF OUR TRANSFORMERS COULD RESULT IN INJURY 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 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 comprises
the cores of our transformers and copper foil for our copper foil windings. We
obtain all of our requirements for cast resin from Bakelite, a German
corporation, silicon steel from Thyssenkrupp Electrical Street GmbH a European
company, and copper foil from OuoKumpu Poricooper oY 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 be faced with increased costs and our
results of operations could be materially adversely affected.



                                      -6-
<PAGE>

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

COMPETITION WITH OTHER LARGE AND SMALL TRANSFORMER MANUFACTURERS COULD RESULT IN
DOWNWARD PRESSURE ON PRICES AND LOSS OF MARKET SHARE. WE MAY ALSO FACE
COMPETITION FROM FOREIGN COMPANIES.

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

WE MAY FACE PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN COSTLY LITIGATION AND
DIVERT THE ATTENTION OF OUR MANAGEMENT.

         Our business exposes us to potential liability risks that are inherent
in the manufacturing and marketing of potentially dangerous electrical
equipment. We do not currently maintain product liability insurance in respect
of our products, consistent with industry practice in China. There can be no
assurance that a product liability claim would not adversely affect our
business, operating results or financial condition.

IF WE ARE UNABLE TO MAINTAIN OUR EXPERTISE IN MANUFACTURING PROCESSES AND
IDENTIFY NEW TECHNOLOGIES AS THEY ARISE WE WILL BE UNABLE TO COMPETE
SUCCESSFULLY.

         The electrical transformer industry may be subject to changing
technology, evolving industry standards, emerging competition and innovative
product introductions. Although we are not presently aware of a more advanced
technology than we currently possess that is applicable to our products, 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



                                      -7-
<PAGE>

technologies developed by others will not render our products, services or
technologies noncompetitive, obsolete or less marketable.

WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS BY THIRD PARTIES THAT COULD SUBJECT US
TO FINANCIAL LIABILITY OR LIMIT OUR PRODUCT OFFERINGS AND OUR COMPETITIVE
POSITION COULD BE HARMED IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY.

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

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

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

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

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

IF WE LOSE OUR KEY PERSONNEL, OUR ABILITY TO OPERATE OUR COMPANY AND OUR RESULTS
OF OPERATIONS MAY SUFFER.

         Our success is largely dependent upon our ability to hire and retain
additional marketing personnel. We employ highly qualified employees but
competition for qualified personnel is intense, and there can be no assurance
that we will be able to hire or retain additional qualified marketing personnel.
Any inability to attract and retain qualified marketing personnel will have a
material adverse effect on us.

OUR GROWTH MAY BE SLOW IF THE DEMAND FOR ELECTRIC POWER IN CHINA DOES NOT
CONTINUE.

         Demand for our products is linked closely to increased demand for
electric power in China. While such demand has experienced tremendous growth
over the past several years, there can be no assurance that such growth will
continue. Any material decline in the use of electricity in China is likely to
have an adverse impact on our business.

BRITISH VIRGIN ISLANDS LAW IS LESS DEFINED THAN THE LAWS GOVERNING CORPORATIONS
ORGANIZED IN THE UNITED STATES AND MAY PROVIDE LESS PROTECTION FOR SHAREHOLDERS.

         Our corporate affairs are governed by our Memorandum and Articles of
Association and by the International Business Companies Act of the British
Virgin Islands. Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of our management, directors and
controlling shareholders and the rights of our shareholders differ from those
that would apply if we were incorporated in a jurisdiction within the United
States. Further, the rights of shareholders under British Virgin Islands law are
not as clearly established as the rights of shareholders under legislation or
judicial



                                      -8-
<PAGE>

precedent in existence in most United States jurisdictions. Thus, our public
shareholders may have more difficulty in protecting their interests in the face
of actions by our management, directors or controlling shareholders than they
might have as shareholders of a corporation incorporated in a United States
jurisdiction.

BRITISH VIRGIN ISLANDS LAW DOES NOT PROVIDE FOR DIRECTORS TO HAVE FIDUCIARY
DUTIES TO THE CORPORATION AND ITS SHAREHOLDERS RATHER, A DIRECTOR'S LIABILITY IS
GENERALLY LIMITED TO CASES OF WILLFUL MALFEASANCE IN THE PERFORMANCE OF A
DIRECTOR'S DUTIES.

         Under the laws of most jurisdictions in the United States, majority and
controlling shareholders generally have certain "fiduciary" responsibilities to
the minority shareholders. Shareholder action must be taken in good faith and
actions by controlling shareholders, which are obviously unreasonable may be
declared null and void. British Virgin Islands law protecting the interests of
minority shareholders may not be as protective in all circumstances as the law
protecting minority shareholders in United States jurisdictions. In addition, in
most United States jurisdictions, directors owe a fiduciary duty to the
corporation and its shareholders, including a duty of care, pursuant to which
directors must properly apprise themselves of all reasonably available
information, and a duty of loyalty, pursuant to which they must protect the
interests of the corporation and refrain from conduct that injures the
corporation or its shareholders or that deprives the corporation or its
shareholders of any profit or advantage. Under British Virgin Islands law,
liability of a corporate director to the corporation is basically limited to
cases of willful malfeasance in the performance of his duties or to cases where
the director has not acted honestly and in good faith and with a view to the
best interests of the corporation.

DIRECTORS OF BRITISH VIRGIN ISLANDS COMPANIES MAY ACT WITHOUT SHAREHOLDER
APPROVAL TO IMPLEMENT REORGANIZATIONS, CERTAIN MERGERS OR CONSOLIDATIONS, ASSET
SALES OR TRANSFERS AND THE DISSOLUTION OF A COMPANY.

         The directors of a British Virgin Islands company, subject to court
approval but without shareholder approval, may, among other things, implement a
reorganization, certain mergers or consolidations, the sale, transfer, exchange
or disposition of any assets, property, part of the business, or securities of
the company, the winding-up or dissolution of the company, or any combination
thereof, if they determine it is in the best interests of the company, its
creditors, or its stockholders.

BRITISH VIRGIN ISLANDS COURTS MAY NOT ENFORCE JUDGMENTS RENDERED BY UNITED
STATES COURTS.

         There is doubt that the courts of the British Virgin Islands would
enforce, either in an original action or an action for enforcement of judgments
of United States courts liabilities which are predicated upon the securities
laws of the United States.

                     RISKS RELATED TO OUR CHINESE OPERATIONS

         WE MAY BE SUBJECT TO THE POLITICAL, ECONOMIC, LEGAL AND OTHER
UNCERTAINTIES OF CHINA, WHICH IS A SOCIALIST STATE CONTROLLED BY THE COMMUNIST
PARTY OF CHINA.

         China is a socialist state which, since 1949, has been controlled by
the Communist Party of China. Changes in the top political leadership of the
Chinese government may have a significant impact on policy and the political and
economic environment in China. Furthermore, because economic reforms



                                      -9-
<PAGE>

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

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

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

         o        political,
         o        economic,
         o        legal, and
         o        other uncertainties.

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

         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



                                      -10-
<PAGE>

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

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

WE ARE SUBJECT TO GOVERNMENT REGULATION AND OUR OPERATING RESULTS COULD BE
AFFECTED BY CHANGES IN THOSE REGULATIONS.

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

         o    laws and regulations, or their interpretation and enforcement,
         o    confiscatory or increased taxation,
         o    restrictions on currency conversion and currency devaluations,
         o    imports, import duties and sources of supply, or
         o    the expropriation of private enterprise.

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

         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.



                                      -11-
<PAGE>

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

CHINA'S ENTRANCE IN THE WORLD TRADE ORGANIZATION MAY RESULT IN INCREASED
COMPETITION FROM INTERNATIONAL COMPANIES.

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

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

DESPITE CONTINUED ECONOMIC REFORMS, THE ECONOMIC CONDITIONS IN CHINA MAY
ADVERSELY AFFECT OUR OPERATIONS.

         China has operated a centrally-planned economy since 1949. Since 1978,
China has implemented a series of economic reform programs in an effort to
revitalize its economy and improve living standards, including the
implementation of policies designed to attract foreign investment and
technology.

         According to the statistical bulletin provided by China's National
Statistics Bureau, China's economic output in 2003 grew 9.1% over the previous
year, reaching 11.7 trillion yuan (1.4 trillion US dollars). Imports and exports
grew 39.9% and 34.6% respectively, reaching 412.8 billion US dollars and 439.4
billion US dollars. The consumer price index increased 1.2% in 2003. 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


                                      -12-
<PAGE>

by government agencies may be subject to considerable discretion in individual
cases. As legal systems in China develop, we, like other foreign business
entities, may be adversely affected by new laws, changes to existing laws (or
new interpretations of the laws) and preemption of provincial or local laws by
national laws. In addition, in circumstances where adequate laws do exist, it
still may not be possible for us to obtain swift and equitable enforcement of
those legal rights under Chinese law.

OUR FACILITIES ARE SUBJECT TO CHINESE ENVIRONMENTAL REGULATIONS THAT EXPOSES US
TO POTENTIAL FINANCIAL LIABILITY.

         Environmental protection in China is regulated in accordance with the
Environmental Protection Law of the People's Republic of China, which became
effective on December 26, 1989. This law sets national standards for
environmental quality and monitoring as well as for the utilization of natural
resources and the reduction of pollution. As a manufacturer, we are subject to
annual inspections. We have passed our most recent inspection and believe that
we are in material compliance with applicable environmental laws. We have,
however, in September 2000, obtained ISO 14001 certification from the
Environmental Management Certification Center for the Machinery Industry.

THE 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 AND
DEVALUATION IN THE EXCHANGE RATE TO UNITED STATES DOLLARS AND MAY ADVERSELY
AFFECT OUR FINANCIAL PERFORMANCE.

         We receive almost all of our revenues in Renminbi, which is not freely
convertible into foreign exchange. However, we require foreign currency to meet
foreign currency obligations, such as for future purchases of certain equipment
and raw materials. The Chinese government imposes control over our foreign
currency reserves in part through direct regulation of the conversion of
Renminbi into foreign exchange and through restrictions on foreign imports.
Effective January 1, 1994, pursuant to the Notice of the People's Bank of China
Concerning Further Reform of the Foreign Currency Control System ("PBOC
Notice"), the conversion of Renminbi into Hong Kong and United States dollars
must be based on rates set by the PBOC, which rates are set daily based on the
previous day's Chinese interbank foreign exchange market rate with reference to
current exchange rates on the world financial markets, or the "PBOC Rate".
Effective as of December 1, 1996, Renminbi has become fully convertible for all
current account transactions. Foreign exchange, which is required for current
account transactions, can be bought freely at authorized Chinese banks so long
as the procedural requirements prescribed by law are met. Payment of dividends
to foreign investors holding equity interests in Chinese companies, including
Foreign Investment Enterprises, is considered a current account transaction. At
the same time, Chinese companies are also required to sell their foreign
exchange earnings to authorized Chinese banks. Purchase of foreign exchange for
capital account transactions still requires prior approval of the State


                                      -13-
<PAGE>

Administration for Foreign Exchange. During the last five years, the value of
the Renminbi generally has experienced volatility in the exchange rate of
Renminbi to United States dollars, and there was a significant devaluation in
the exchange rate of January 1, 1994, in connection with the abolition of the
official exchange rate and implementation of the new unitary rate exchange
system. Although the Renminbi / United States dollar exchange rate has been
relatively stable since January 1, 1994, there can be no assurance that the
exchange rate will not again become volatile or that the Renminbi will not
devalue further against the United States dollar. Exchange rate fluctuations may
adversely affect our financial performance because of our foreign currency
denominated liabilities and may materially adversely affect the value,
translated or converted as applicable into United States dollars, of our net
fixed assets, our earnings and our declared dividends. We currently do not
engage in any hedging activities in order to minimize the effect of exchange
rate risks.

ITEM 4.  INFORMATION ON THE COMPANY

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

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

         Hainan Jinpan was established in June 1997 as a Sino-foreign
cooperative joint venture between Haikou Jinpan and Jinpan International. It is
located in Hainan Province in southern China and is principally involved in the
design, manufacture and sale of cast resin transformers. Until June 30, 1997,
Hainan Jinpan's operations were wholly-owned and conducted by Haikou Jinpan,
which has, since its establishment in August 1993, sold in excess of 9,729 cast
resin transformers in China and has produced aggregate revenues of approximately
RMB 1,164 million (U.S.$141 million) as of December 31, 2003. Pursuant to the
terms of the joint venture contract between Haikou Jinpan and Jinpan
International, Haikou Jinpan received a 15% equity interest in Hainan Jinpan in
exchange for the capital contribution of its building, equipment and other
production and related facilities, while we received an 85% equity interest in
Hainan Jinpan in return for our commitment to contribute capital of U.S.$2.1
million. Hainan Jinpan has purchased all remaining assets and liabilities of
Haikou Jinpan in exchange for U.S.$2.1 million.

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

         GENERAL OVERVIEW

         Through our joint venture interest in Hainan Jinpan, we design,
manufacture and sell cast resin transformers for voltage distribution equipment
in China. Our cast resin transformers allow high voltage transmissions of
electricity to be distributed to various locations in lower, more usable
voltages. We are one of the largest manufacturers and distributors of cast resin
transformers in China, using the aggregate capacity of the transformers as
measured in kilovolt-amperes ("KVA") as a basis for comparison. In 2003, Hainan
Jinpan had total sales of RMB276.6 million (U.S.$33.4 million) based upon sales
of our transformers having a total capacity of 2.44 million KVA. Hainan Jinpan
obtained an ISO9001 certification of its cast resin transformers in April 1997,
which has been renewed for an additional period of three years expiring in 2006.
Hainan Jinpan also gained an ISO14001 certification from the Environmental
Management Certification Center for the Machinery Industry in September 2000,
making



                                      -14-
<PAGE>

it one of only a few Chinese transformer manufacturers to have been so certified
by the International Standardizing Organization. Equipment manufactured by
Hainan Jinpan has gone through complete type testing and has been certified by
KEMA High Power Laboratory in September 1999. In addition, Hainan Jinpan's
transformers have been certified by the Chinese Ministry of Machinery and
Ministry of Electric Power, indicating that Hainan Jinpan has satisfied the
required national standards related to its:

         o    product quality;
         o    manufacturing process;
         o    equipment; and
         o    personnel.

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

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



                                      -15-
<PAGE>

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 20,000KVA.

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

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

         o    are manufactured with fire resistant components;
         o    do not use a potentially environmentally harmful cooling liquid
              that may leak;
         o    produce less power or energy loss than other available
              transformers;
         o    require little maintenance;
         o    are resistant to short circuit shocks;
         o    have greater emergency overload capability;
         o    have greater reliability; and
         o    have smaller dimensions and are less noisy than other
              transformers.

How electricity transformers generally work.

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

         o    the need for periodic maintenance;
         o    the risk of combustion or explosion; and
         o    the possibility of leakage, which creates potential environmental
              problems.

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



                                      -16-
<PAGE>

How cast resin transformers generally work.

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

BUSINESS STRATEGY

         Our current business strategy is centered about strengthening our
position as a leading manufacturer in China by concentrating on the following
areas:

New products

         We will continue to develop technologies in order to extend our product
line in areas in which we believe we will have a competitive edge over our
competitors. One of these new technologies which has been developed over the
past three years is resin cast coil transformers, which require highly advanced
production technology. The duration of any new projects we enter into will vary
depending on the complexity of the applicable technology. We believe new
products will greatly enhance our competitiveness in China and abroad.

Forward Integration

         In an effort to leverage our sales force and existing customer base we
will continue exploring areas for possible forward integration. Currently, our
sales force is comprised of 31 sales offices with 58 direct sales employees and
11 independent sales agents covering all major provinces and industrial cities
throughout China. Our forward integration efforts are undertaken as a result of
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, transformer, low
voltage switchgear, power measure and power factor compensation device and
interconnected with cable or buss bar. Jinpan fabricates unit substations by
integrating the aforementioned equipment together with our transformers. Unit
substations are especially used in applications related to construction and
reconstruction of the city power network. Currently we are investing potential
business possibilities associated with the fabrication of the other components
that form part of the unit substation. Based on our success with the unit
substations, we believe that in the long term we will be able to become a major
supplier and offer complete packages to our customers.

Strengthen our sales force and advance our markets

         We have increased our sales force and as of December 31, 2003 we had 31
sales offices and 11 independent sales agents . We will continue this trend as
needed to fully exploit the high growth markets.

         We will continue working with and supporting our U.S. partners who
purchase our cores and coils for their transformer production and sales. We
anticipate that UL product recognitions will open the North American market to
our products. We plan on stepping up sales and promotional efforts to handle the
expected increase in sales volume as access is gained to this new line of
customers.



                                      -17-
<PAGE>

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

         We continue to focus our attention on ensuring that our delivery times
and price structure remains competitive and that we satisfy our customers needs
with a high degree of responsiveness. 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

         From 1998 to 2003 the GDP of China grew 42.2% as adjusted for
inflation, which represented an average annual rate of increase of 7.9%. During
the same period in China, annual urban household per capita income increased
44.7% as adjusted for inflation, which represented an average annual rate of
increase of 9.32%. The electricity production of China increased 54.4%, which
represents an average annual increase of 10.54%. In 2003, China ranked second
worldwide with the total electricity output amounting 1,911 billion KWH, an
increase of 15.5% from the previous year. We believe that the fast growing
Chinese economy has been the main reason for the significant increase in demand
for many consumer products requiring electric power for their operations.
Furthermore, China's major cities, such as Beijing, Shanghai and Guangzhou, have
been requiring a greater capacity to provide electrical power than in the past
because of the significant population increases in the major cities caused by
the large influx of rural migrants in recent years.

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

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

         1993                           2.64
         1994                           3.97
         1995                           6.19
         1996                           6.48
         1997                           6.14
         1998                           8.76
         1999                           9.88
         2000                          11.98
         2001                          14.40
         2002                          15.78
         2003                          17.55

         From 1999 through 2003, the production and sales of cast resin
transformers in China was 69.6 million KVA, translating to an average production
and sales per year of 14.3 million KVA, which is an increase of 14.6% per year
in transformers sales in China. According to the power supply part of the
Chinese government's Five Year Plan, as modified, from 2003 to 2005, the power
generating capacity in China should be increased by 25 million KW per year and
should amount to 430 million KW by 2005. Market demands for transformers is
closely related to power generating equipment and, calculating in the proportion
of 1:11, there should be a transformer demand of 27.5 million KVA by 2005. The
Chinese government's Five Year Plan also calls for environmental protection and
energy saving, which are advantages of our cast resin transformer. In 2002, the
integrated profit index of Jinpan ranked third



                                      -18-
<PAGE>

among the transformer industry of China, and now we are committing to improving
our core competitiveness by reducing costs and perfecting our enterprise
culture.

         The table below sets forth our consolidated sales, by geographic
region, for the years ended December 31, 2001, 2002 and 2003:

                                          YEAR ENDED DECEMBER 31,
                                          -----------------------
                                   2001            2002            2003
                                   ----            ----            ----
                                        (U.S. DOLLARS IN MILLIONS)

Beijing                             5.7             5.9             5.9
Guangdong                           3.9             4.9             4.9
Wuhan                               1.5             1.7             1.5
Chongqing                           --              0.4             1.8
Yunnan, Guizhou                     --              1.0             1.0
Chengdu                             1.3             1.8             2.7
Dongbei                             2.2             3.0             2.3
Shanghai                                                            2.8
Jiangsu                                                             3.1
Zhejiang                                                            1.5
Other                               7.7             9.0             5.9
                                   -------------------------------------------
                           Total:  22.3            27.7            33.4


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

         The principal raw materials we require for our business are cast resin
used to coat the copper coils of our transformers, silicon steel, which
comprises the cores of our transformers and copper foil for our copper foil
windings. We obtain all of our requirements of cast resin from Bakelite, a
German corporation, silicon steel from Thyssenkrupp Electrical Street GmbH, a
European company, and copper foil from Mansfelder Kupfer and Messign GmbH and KM
Europe Metals, both German companies and from Hainan Qiongshan Dayou Machinery
Manufacture Co. Ltd. in China.

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

OUR SALES AND MARKETING NETWORK

         We sell our cast resin transformers through our sales network, which
consists of the use of 31 regional sales offices in various cities in China,
including Beijing, Shanghai and Chongqing. We employ 52 sales representatives,
38 of whom are based in our regional sales offices and 14 are based at our
headquarters in Haikou. All of our sales representatives are salaried employees.
We also sell our products through 11 independent sales agents who receive
commissions based on sales. We sell the majority of our transformers in Beijing,
Guangdong, Chengdu and the northeast of China.



                                      -19-
<PAGE>

OUR SIGNIFICANT CUSTOMERS

         Sales to our five largest customers aggregated approximately 15%, 15%
and 16% of our total sales during the fiscal years ended December 31, 2001, 2002
and 2003, respectively, and sales to our largest customer for those same periods
accounted for approximately 5%, 4% and 4%, respectively, of our total sales.
There can be no assurance that any of our principal customers will maintain
their volume of business with us or that a similar volume of business would be
forthcoming from new or existing customers to replace any lost business. The
loss of one or more of these existing principal customers without replacement by
a customer of similar volume could have a material adverse effect on our
business and financial condition.

         OUR TRADEMARK, "JST"

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

         o    we will not be able to register other names or service marks we
              may consider important;
         o    our currently registered trademark, any future trademark or
              printed materials currently does or will violate the proprietary
              rights of others;
         o    our trademarks would not be upheld by the Chinese government or
              its judicial system if challenged;
         o    we will be prevented from using our trademarks or other printed
              materials; or
         o    due to the fact that enforcement of our proprietary rights or the
              defense against the proprietary claims of others could be
              extremely costly, we may not have the financial resources
              necessary to enforce or defend our trademarks.

         HOW OUR CAST RESIN TRANSFORMERS ARE MANUFACTURED

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

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



                                      -20-
<PAGE>

customer unless each required test has been passed. The standard testing
procedure is comprised of the following 12 procedures:

         o    measurement of winding resistance;
         o    measurement of voltage ratio;
         o    measurement of impedance voltage;
         o    measurement of current;
         o    source voltage withstand test;
         o    induced overvoltage withstand test;
         o    measurement of winding insulation resistance;
         o    measurement of partial discharge;
         o    lightning impulse test;
         o    temperature raise test;
         o    measurement of sound level; and
         o    short-circuit test.

         OUR COMPETITORS IN THE ELECTRIC TRANSFORMER BUSINESS

         We believe that there are in excess of 40 manufacturers of cast resin
transformers in China, most of which are small scale manufacturers. We primarily
compete in the cast resin transformer market with two large transformer
manufacturers but also with a large number of small transformer manufacturers.
Most of our competitors are government-owned entities. We believe that in 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 governmental approvals and regulatory processes to the same
extent as are government-owned entities. We believe that these factors in
particular result in lower production costs and greater flexibility.
Furthermore, since none of our transformers have been returned to us or, to our
knowledge, have been the cause of an accident, we believe that our competitors
do not manufacture a transformer that is safer or of a higher quality than the
transformers we manufacture.

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

GOVERNMENT REGULATION

General conditions in China.

         China is a socialist state which, since 1949, has been controlled by
the Communist Party of China. Changes in the top political leadership of the
Chinese government may have a significant impact on policy and the political and
economic environment in China. Furthermore, because economic reforms



                                      -21-
<PAGE>

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

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

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

         o    political,
         o    economic,
         o    legal, and
         o    other uncertainties.

Government regulation in China.

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

         o    laws and regulations, or their interpretation and enforcement,
         o    confiscatory or increased taxation,
         o    restrictions on currency conversion and currency devaluations,
         o    imports, import duties and sources of supply, or
         o    the expropriation of private enterprise.

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



                                      -22-
<PAGE>

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

         o    the inadequate development of the Chinese infrastructure,

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

         o    limited transportation and communications capabilities.

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

International trade in China.

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

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

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

         According to the General Administration of Customs ("GAC"), China had a
trade surplus of U.S. $25.5 billion in 2002, US $4.9 billion less than the
previous year. The total volume of foreign trade amounted to U.S. $851 billion,
an increase of 37.1% compared with the previous year. Total exports increased by
34.6% to U.S. $438.4 billion and imports grew by 39.9% to U.S. $412.8 billion.
Machinery and electronic products lead the growth in exports. Imports and
exports of collectively owned and private companies, which have been able to
trade overseas after China's entry to the WTO in 2001, increased 57.1% to U.S. $
53.22 billion. China's foreign trade with Japan, its largest trading partner,
reached U.S. $133.6 billion in 2003. The United States and European Union ranked
second and third in terms of total trade with China, exporting and importing
U.S. $126.4 billion and U.S. $ 125.3 billion, respectively.



                                      -23-
<PAGE>

         China received contracts for direct foreign investment in the amount of
U.S. $115 billion during 2003 of which U.S. $53.5 billion has already been
invested. This represents a 39.0% increase in contractual amounts to be invested
and a 1.4% increase in actual funds invested.

         According to Chinese customs statistics released on June 17, 2004, the
total volume of foreign trade for the first 5 months of 2004 amounted to U.S.
$423.8 billion, an increase of 37% compared with the same period of 2003.
Exports increased 33.4% to U.S. $207.60 billion and imports increased 41% to
U.S. $216.20 billion.

         According to the statistics of Ministry of Commerce in China, released
on March 16, 2004, from January to February 2004 overseas investments worth US
$19.14 billion flowed into China, an increase of 34.5% from last year. During
the same period, the government approved 6,025 foreign-funded companies, an
increase of 11.74% from the same period last year. Contractual foreign
investment totaled U.S. $50.97 billion.1

         While China's entry into the WTO and related relaxation of trade
restrictions may lead to increased foreign investment, it may also lead to
increased competition in China's markets from international companies.

ECONOMIC CONDITIONS IN CHINA AND HOW THEY AFFECT US.

         China achieved an economic output of U.S. $1.4 trillion, exports of
U.S. $438.4 billion and import of U.S. $412.8 billion in the year 2003.
According to China's official statistics, China's economy grew by 9.1% in 2003
and it is expected down to a 7% growth rate in 2004. The global economic recover
is having an impact on China. The consumer price index up 1.2% in December 2003
compared with the last year. The Chinese government continued to expand
consumption as an important part of its proactive fiscal policy. Retail sales of
consumer goods in China totaled 4.58 trillion RMB (U.S.$550 billion), 9.1% over
the figure for 2002. New growth areas emerged as the focus of consumer spending,
including energy, IT, housing, communications, tourism, education and
automobiles.

         China's industrial output grew by 12.6% over the previous year to reach
RMB5.4 trillion (U.S. $647 billion), according to the National Bureau of
Statistics. The industrial value added rose by 12.6% to RMB 5.36 trillion (US $
648 million), with rapid growth registered in the sectors of energy, high
technology raw material and automobile manufacturing.

China's Corporate Income Tax.

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



                                      -24-
<PAGE>

by government agencies may be subject to considerable discretion in individual
cases. As legal systems in China develop, we, like other foreign business
entities, may be adversely affected by new laws, changes to existing laws (or
new interpretations of the laws) and preemption of provincial or local laws by
national laws. In addition, in circumstances where adequate laws do exist, it
still may not be possible for us to obtain swift and equitable enforcement of
those legal rights under Chinese law.

China's environmental law and how it affects us.

         Environmental protection in China is regulated in accordance with the
Environmental Protection Law of the People's Republic of China, which became
effective on December 26, 1989. This law sets national standards for
environmental quality and monitoring as well as for the utilization of natural
resources and the reduction of pollution. As a manufacturer, we are subject to
annual inspections. We have passed our most recent inspection and believe that
we are in material compliance with applicable environmental laws.

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

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

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



                                      -25-
<PAGE>

rent of approximately RMB11,000. Our subsidiary, Jinpan International (U.S.A)
Ltd., has administration offices in Englewood Cliffs, New Jersey, which
encompass approximately 130 square meters and are subject to a lease with a
third party expiring in March 2009. This lease provides for rent in the
approximate amount of $2,887 per month.

         We lease 20 sales offices in China located in Beijing, Shanghai, Hefei,
Nanning, Anshan, Changsha, Hangzhou, Kunming, Tianjin, Wuhan, Chongqing,
Chengdu, Suzhou, Taiyuan, Shenyang, Xian, Guangzhou, Lanzhou, Shenzhen and
Dalian, which are subject to leases that provide for monthly rents ranging from
RMB 1,200 to RMB 7,227 per month. These sales offices range in size from 50
square meters to approximately 165 square meters. We also use office space in
the sales offices of three of our independent sales agents, whereby instead of
paying rent for the use of the office space, we pay additional commissions to
our independent sales agents who work from these offices.


ITEM 5.    OPERATING FINANCIAL REVIEW AND PROSPECTS

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

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

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

Provision for Doubtful Accounts

         We reserve provision for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. While the bad debts have historically been within the provision
established, we cannot guarantee that we will continue to experience the same
bad debt rate that we have in the past.

Inventories Obsolescence

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



                                      -26-
<PAGE>

Deferred Tax Valuation Allowance

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

Revenue Recognition

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

OPERATING RESULTS
-----------------

SUMMARY OF FINANCIAL RESULTS

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

                                                      Year ended December 31
                                                      ----------------------
                                                 2001         2002        2003
                                                 ----         ----        ----

Net sales                                        100.0%         100%       100%

Cost of goods sold                              (56.7%)      (56.1%)    (57.0%)
Gross profit                                      43.3%        43.9%      43.0%
Selling, general and administrative expenses     31.11%        35.4%      31.5%
Other income                                      4.23%         6.2%       1.7%
Income tax provision                             (1.6%)       (1.4%)     (1.3%)
Income before minority interest                   14.8%        13.0%      11.8%
Minority interest                                (2.3%)       (2.2%)     (2.1%)
Net income                                        12.5%        10.8%       9.7%

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

         Sales. Net sales increased 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 more and more recognition in China and the U.S. markets.

         Cost of goods sold. Cost of goods sold increased RMB28.8 million or
approximately 22.3% from RMB128.8 million in the year ended



                                      -27-
<PAGE>

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 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 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 decrease from 35.4% in the year 2002, to 31.4% in the year ended
December 31, 2003. Selling and administrative expenses was up sharply after an
accrued charge of RMB 3.3 million related to employee stock option compensation
cost.

         Net Income. Net income increased 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 a
non-operational stock option compensation cost of RMB3.3 million through
adoption of variable accounting methods. If the company did not accrue the
compensation cost, the net income would have increased 20% or RMB 4.9 million as
compared with year 2002.

         Basic Earnings Per Share. Basic earnings per share increased RMB0.25 or
approximately 6% from RMB 3.96 in the year ended December 31, 2002 to RMB4.21 in
the year ended December 31, 2003.

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

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

         Cost of goods sold. Cost of goods sold increased RMB24.1 million or
approximately 23.0% from RMB104.7 million in the year ended December 31, 2001 to
RMB128.8 million in the year ended December 31, 2002. Cost of goods sold as a
percentage of sales decreased by 0.6% in the year ended December 31, 2002, from
56.7% in the year ended December 31, 2001, to 56.1% in the year ended December
31, 2002. This was primarily the result of cost control measures.

         Gross Profit. Gross profit increased RMB20.9 million or approximately
26.1% to RMB100.7 million in the year ended December 31, 2002 from RMB79.8
million in the year ended December 31, 2001. As a percentage of sales, gross
profit increase from 43.3 % in the year ended December 31, 2001, to 43.9% in the
year ended December 31, 2002, which was primarily the result of cost control
measures.

         Selling and administrative expenses. Selling and Administrative
expenses, including the provision for doubtful debt, increased RMB23.9 million
or approximately 41.7% from RMB57.4 million in the year ended December 31, 2001,
to RMB81.3 million in the year ended December 31, 2002. As a



                                      -28-
<PAGE>

percentage of sales, selling and administrative expenses increased from 31.1% in
the year 2001, to 35.4% in the year ended December 31, 2002. This was primarily
the result of an increase in U.S. marketing expenses.

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

         Basic Earnings Per Share. Basic earnings per share increased RMB0.30 or
approximately 8% from RMB 3.66 in the year ended December 31, 2001 to RMB3.96 in
the year ended December 31, 2002.

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



                                      -29-
<PAGE>

national treatment that China will gain from other WTO members will be helpful
in increasing the country's export volume. China's State Council announced that
from the beginning of January 1, 2002, the tariff is down to 12% from 15.3%, and
it will be reduced further to a level of 10% in 2005. This tariff reduction will
allow more foreign goods into the domestic market at lower prices and this will
pose pressure on China enterprises. China's machinery industry is expected to be
impacted by China's entrance into the WTO.

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

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
government since 1997. The 50% tax exemption holiday will be ended on January 1,
2005.

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

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

         At December 31, 2003, we had working capital of RMB186.05 million
compared to RMB165.24 million at December 31, 2002. This increase is due to an
increase in cash, accounts receivable and inventories. At December 31, 2003, we
had approximately RMB66.6 million in cash and cash equivalents as compared to
RMB63.8 million at December 31, 2002. At December 31, 2003, we had accounts
receivable of RMB124.4 million as compared to RMB111.6 million at December 31,
2002. 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.

         Net cash generated by operating activities in 2003 and 2002 was RMB18.8
million and RMB23.6 million, respectively. Net cash generated by operating
activities in 2003 and 2002 was primary due to net income, adjusted by non-cash
related expenses and a net decrease in working capital items.

         Our principal commitments consisted of long-term obligation outstanding
under operating lease. We anticipate having capital expenditures of US$1 million
in the first 6 months of 2004 in order meet the raising demand of our products.
We expect an increase in the rate of capital expenditures consistent with our
anticipated growth in operation.

         We have a credit facility of RMB20.7 million with the Nan Yan
Commercial Bank. The letter of credit under this credit facility is unsecured,
bearing interest at a weighted average rate of 4.7% per



                                      -30-
<PAGE>

annum for the year ended December 31, 2003. We borrowed a total of RMB 2.02
million for the purchase of raw materials overseas at the end of December 2003.

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

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

         Apart from operating lease commitments disclosed in note 13 to the
audited financial statements, we had no other contractual obligations. As at
date December 31, 2003, the Group had the following known contractual
obligations:

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

<S>                                               <C>        <C>             <C>                     <C>
Contractual Obligations   Total         Less than 1 year     1-3 Years       3-5 years     More than 5 years
------------------------- ------------- -------------------- --------------- ------------- ------------------------
Operating Lease           3,330         929                  1,678           364           359
Obligations
------------------------- ------------- -------------------- --------------- ------------- ------------------------
Total                     2,220         929                  1,678           364           359
------------------------- ------------- -------------------- --------------- ------------- ------------------------
</TABLE>


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

         In order to maintain our lead position as the most technologically
advanced supplier of cast coil transformers in China, we continuously invest in
technology through research and development. Our research and development policy
focuses on product line extensions while incorporating the latest manufacturing
technologies into our production processes. The end result is the ability to
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 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    Extension of our product line to include excitation transformers.
          These transformers are used in large scale industries where the
          processing plants need to include power generation capabilities. Very
          few transformer manufacturers can provide these types of transformers
          to meet the requirements of such applications.



                                      -31-
<PAGE>

          o    Development of specialized manufacturing equipment. Our
          manufacturing engineering team has completed a project involving the
          internal design and fabrication of specialized manufacturing equipment
          to increase our manufacturing capacity and efficiency.

          o    UL product recognition. Specialized test equipment has been put
          in place and trial test runs are being conducted at the time of this
          report. UL product recognition will open the North American market for
          us.

          o    Forward Integration technologies. Feasibility studies are being
          conducted regarding fabricating other equipment used in unit
          substations. During this study our engineering staff is evaluating
          technology of certain components used in fabricating this equipment
          and the possibility of licensing the technology for these key
          components.

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
recent increase of the Euro and increase price in steel and copper are likely to
have an impact on costs during 2004. The outbreak of SARS virus in the year 2003
appears to have no impact on the overall growth of the company.

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 of common stock for the year 2004. We made two
distributions to realize overall distribution of $0.40 per shares during the
year 2004. 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, i.e., surplus, as determined by resolution of the board. As we are a
holding company, the amount of our retained earnings will be limited by the
amount of dividends which can be declared by our subsidiaries under applicable
law as discussed directly below.

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



                                      -32-
<PAGE>

         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 is any of
our or its property the subject of, any material pending legal or arbitration
proceeding.

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                49       Chairman of the Board of Directors,
                                   President and Chief Executive Officer
Ling Xiangsheng           52       Vice Chairman of the Board and Vice President
Jing Yuqing               41       Secretary
William D. Nagel          67       Director
Liwen Zhang               49       Director
Donald S. Burris          60       Director
Mark Du                   43       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



                                      -33-
<PAGE>

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 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.



                                      -34-
<PAGE>

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

         The total compensation paid to our directors and officers during the
last fiscal year was RMB3,895,560 comprised of salaries in the amount of
RMB2,239,560 and bonuses in the amount of RMB1,656,000. 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 RMB113,080.

         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, exercisable until 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 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 US $3.55 per share and subject to termination of
employment, 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.



                                      -35-
<PAGE>

EMPLOYEES
---------

         As of December 31, 2003, we had approximately 223 employees in China,
including 43 engineers or technicians, 32 management and administrative
personnel, 52 marketing and sales personnel, 85 factory personnel and 11
trainees and 5 employees in the United States, including 2 management and
administrative personnel and 3 marketing and sales personnel. All of our
employees are contract employees and have entered into renewable employment
contracts with us. Terms of our employment agreements with management,
engineers, sales persons and technicians range from two to three years and terms
of our employment agreements with support personnel range from six months to one
year.

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

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

MAJOR SHAREHOLDERS
------------------

         The following table sets forth specific information as of June 9, 2004,
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.

         All numbers in the Table are adjusted for a 2 for 1 stock split
effective February 9,2004.


<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                 29.15%

        Common Stock           Jing Yuqing (3)                           1,946,532                 29.15%

        Common Stock           Ling Xiangsheng (4)                       1,173,934                 17.58%

        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           3,190,266                 47.13%
                               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.



                                      -36-
<PAGE>

     (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) 1,153,934 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.

         To the best of our knowledge, as of June 5, 2004, 3,060,466 shares of
common stock or 45.96% 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 RMB 11,277,000 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 remaining was repaid in December 2003. The interest income of
RMB475,000 was received from minority shareholder in June 2004.

         During the year ended December 31, 2002, the minority shareholders
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 2003
through May 2004. All prices are adjusted for a 2 for 1 stock split effective
February 9, 2004.



                                      -37-
<PAGE>

          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

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

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

March 30, 2002                         1.900              1.000
June 30, 2002                          2.075              1.000
September 30, 2002                     1.650              1.000
December 31, 2002                      1.825              1.000
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

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

November, 2003                         7.190              4.875
December, 2003                         7.250              5.375
January, 2004                          9.995              6.900
February, 2004                        10.000              6.600
March, 2004                            8.000              6.510
April, 2004                            8.200              6.330
May,                                  6.8500             5.6700
2004

         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



                                      -38-
<PAGE>

directors are empowered to cause us to borrow money, to mortgage or charge
our undertakings and property and to issue debentures, debenture stock or other
securities when money is borrowed. Under our Articles of Association, a director
shall not require a share qualification. Our Articles of Association do not
state whether in the absence of an independent quorum, a director has, or does
not have, the power to vote compensation to himself or another director. There
is no age limit requirement causing retirement of any director.

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

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

         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.



                                      -39-
<PAGE>

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

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

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

MATERIAL CONTRACTS

         None.

EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

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

TAXATION

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

         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.



                                      -40-
<PAGE>

         There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands on companies incorporated under the International
Business Companies Act. In addition, the common stock of these companies is not
subject to transfer taxes, stamp duties or similar charges.

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

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

DOCUMENTS ON DISPLAY

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

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK.

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

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not applicable.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

         None.

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. Based on this evaluation, the
Company's chief executive officer and chief financial officer concluded that as
of the end of the period covered by this Annual Report such disclosure controls
and procedures were effective to provide reasonable assurance that



                                      -41-
<PAGE>

information required to be disclosed by the Company in reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC.

         In addition, there were no changes in our internal control over
financial reporting that occurred during 2003 that have materially affected, or
that are reasonably likely to materially affect, our internal control over
financial reporting.

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



                                      -42-
<PAGE>

Zhang_3, 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 2003 were reported to, and the services proposed to be provided by
them during 2004 pre-approved by, the Audit Committee in January4 2004, 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, 2003 and 2002:

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31, 2002           YEAR ENDED DECEMBER 31, 2003
<S>                                          <C>                                    <C>
Audit Fees                               RMB 300,000                            RMB 335,000
Audit Related Fees                       RMB 8,307                              RMB 16,000
Tax Fees                                 RMB 48,120                             RMB 49,870
All Other fees                           RMB 25,160                             RMB 29,349
Total                                    RMB 381,587                            RMB 430,219
</TABLE>



         "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 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

         Neither the Company nor any affiliated purchaser purchased any of the
Company's equity securities during 2003.

ITEM 17.   FINANCIAL STATEMENTS.

         Not applicable.



                                      -43-
<PAGE>

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)

12.1      Certification of Principal Executive Officer pursuant to 17 CFR
          240.13a-14(a), as adopted pursuant toss.302 of the Sarbanes-Oxley Act.

12.2      Certification of Principal Financial Officer pursuant to 17 CFR
          240.13a-14(a), as adopted pursuant toss.302 of the Sarbanes-Oxley Act.

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

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

14.1     Consent of Ernst & Young, Hong Kong.


-------------------------------
(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.





                                      -44-
<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 14, 2004


















                                      -45-

<PAGE>





                                  EXHIBIT INDEX
                                  -------------

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

12.1      Certification of Principal Executive Officer pursuant to 17 CFR
          240.13a-14(a), as adopted pursuant toss.302 of the Sarbanes-Oxley Act.

12.2      Certification of Principal Financial Officer pursuant to 17 CFR
          240.13a-14(a), as adopted pursuant toss.302 of the Sarbanes-Oxley Act.

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

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

14.1      Consent of Ernst & Young, Hong Kong.















                                      -46-


<PAGE>










    Financial Statements

    JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES

    Years ended December 31, 2003, 2002 and 2001
    with
    Report of Independent Auditors







<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                  Pages

<S>                                                                            <C>
JINPAN INTERNATIONAL LIMITED AND SUBSIDIARIES:

    Report of Independent Auditors                                                F-1

    Consolidated Balance Sheets as of December 31, 2003 and 2002                  F-2

    Consolidated Statements of Income
       for the years ended December 31, 2003, 2002 and 2001                       F-3

    Consolidated Statements of Shareholders' Equity
       for the years ended December 31, 2003, 2002 and 2001                       F-4

    Consolidated Statements of Cash Flows
       for the years ended December 31, 2003, 2002 and 2001                       F-5

    Notes to Consolidated Financial Statements                             F-6 - F-25
</TABLE>




<PAGE>


Report of Independent Registered Public Accounting Firm


Shareholders and Board of Directors
Jinpan International Limited


We  have  audited  the  accompanying   consolidated  balance  sheets  of  Jinpan
International  Limited and subsidiaries as of December 31, 2003 and 2002 and the
related consolidated statements of income,  shareholders' equity, and cash flows
for each of the  three  years in the  period  ended  December  31,  2003.  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.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial   position  of  Jinpan
International  Limited and  subsidiaries  at December 31, 2003 and 2002, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period  ended  December  31, 2003,  in  conformity  with U.S.
generally accepted accounting principles.


                                                 /s/ Ernst & Young


Hong Kong
May 30, 2004


                                       F-1
<PAGE>

Jinpan International Limited and Subsidiaries

Consolidated Balance Sheets
As of December 31, 2003 and 2002
<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                     2003         2003          2002
                                                                                     -------------------------------
                                                                     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                                                        8,047      66,571      63,800
      Restricted time deposit                                           4                  -           -      20,000
      Short-term investment                                             5                580       4,798           -
      Notes receivable                                                                 1,064       8,798           -
      Accounts receivable, net                                          6             15,038     124,415     111,594
      Inventories, net                                                  7              4,577      37,870      29,433
      Prepaid expenses                                                                   818       6,771      11,577
      Other receivables                                                                  607       5,023         593
                                                                                    --------    --------    --------
Total current assets                                                                  30,731     254,246     236,997
Property, plant and equipment, net                                      8              3,246      26,856      29,238
Construction in progress                                                                 219       1,811           -
Deferred tax assets                                                     9                118         977       1,026
                                                                                    --------    --------    --------
Total assets                                                                          34,314     283,890     267,261
                                                                                    ========    ========    ========
Liabilities and Shareholders' Equity
Current liabilities:
    Short term bank loans                                              10                244       2,016      23,667
    Accounts payable                                                                   1,549      12,815       5,447
    Income tax                                                          9                  2          18         833
    Value added tax                                                                      136       1,125       3,355
    Advance from customers                                                               252       2,082       3,738
    Commission payable                                                                 2,906      24,039      19,073
    Management bonus                                                                     421       3,485       2,700
    Accruals                                                                             202       1,670       6,685
    Government grant                                                   11                895       7,402       4,804
    Dividend payable                                                                   1,304      10,794           -
    Other liabilities                                                                    332       2,749       1,456
                                                                                    --------    --------    --------
Total current liabilities                                                              8,243      68,195      71,758
Minority interest                                                                        827       6,841      10,899
Commitments                                                            13                                          -
Shareholders' equity:
      Common stock, US$0.018 par value:
           Authorized shares - 20,000,000
           Issued and outstanding shares - 6,658,778 in 2003 and
           6,298,778 in 2002                                           19                 60         496         469
      Convertible preferred stock, US$0.018 par value:
           Authorized shares - 1,000,000
           Issued and outstanding shares - 27,578 in 2003
           and 2002, 6% p.a                                            19                  -           2           2
      Additional paid-in capital                                                      10,488      86,807      77,157
      Reserves                                                         19              2,057      17,128      14,922
      Retained earnings                                                               12,718     105,225      92,680
      Accumulated other comprehensive income                                              51         273         116
                                                                                    --------    --------    --------
                                                                                      25,374     209,931     185,346
      Less: Treasure shares at cost,
               Common stock - 73,158 in 2003 and 59,154  in 2002                        (130)     (1,077)       (742)
                                                                                    --------    --------    --------
Total shareholders' equity                                                            25,244     208,854     184,604
                                                                                    --------    --------    --------
Total liabilities and shareholders' equity                                            34,314     283,890     267,261
                                                                                    ========    ========    ========
</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, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                               2003            2003             2002                2001
                                                      ------------- -- ------------- --- ------------ --- --------------
                                              Notes             US$             RMB              RMB                 RMB
                                                                ---             ---              ---                 ---
                                                                          (In thousands, except per share data)
<S>                                             <C>          <C>            <C>              <C>                <C>

Net sales                                       18           33,426         276,564          229,421            184,480
Other income                                                    569           4,717           14,186              8,413
                                                      -------------    -------------     ------------     --------------
                                                             33,995         281,281          243,607            192,893

Costs and expenses:
    Cost of products sold                                   (19,043)       (157,559)        (128,770)          (104,686)
    Provision for doubtful debts                                (80)           (665)          (2,764)            (1,600)
    Selling and administrative                              (10,420)        (86,218)         (78,561)           (55,796)
    Interest expenses                                           (43)           (354)            (541)              (600)
                                                      -------------    -------------     ------------     --------------
                                                            (29,586)       (244,796)        (210,636)          (162,682)
                                                      -------------    -------------     ------------     --------------
Income before income taxes                                    4,409          36,485           32,971             30,211
Income taxes                                    9              (450)         (3,727)          (3,116)            (2,911)
                                                      -------------    -------------     ------------     --------------
Income before minority interest                               3,959          32,758           29,855             27,300
Minority interest                                              (706)         (5,845)          (4,972)            (4,229)
                                                      -------------    -------------     ------------     --------------
Net income                                                    3,253           26,913           24,883             23,071
                                                      =============    =============     ============     ==============

Earnings per share
    -Basic                                                  USD0.51         RMB4.21          RMB3.96            RMB3.66
                                                      =============    =============     ============     ==============
    -Diluted                                                USD0.50         RMB4.15          RMB3.93            RMB3.65
                                                      =============    =============     ============     ==============

Weighted average number of shares

    -Basic                                                6,390,804       6,390,804        6,279,866          6,298,978

    -Diluted                                              6,487,116       6,487,116        6,329,854          6,326,556
</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, 2003, 2002 and 2001
<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, 2001                  -    6,298,778      27,578           -          469           2
Net income                                   -            -           -           -            -           -
Currency translation adjustments             -            -           -           -            -           -
                                     ---------    ---------   ---------   ---------    ---------   ---------
Balance at December 31, 2001                 -    6,298,778      27,578           -          469           2
Net income                                   -            -           -           -            -           -
Transfer to reserves                         -            -           -           -            -           -

Reacquired shares                      (59,154)           -           -        (742)           -           -

Currency translation adjustments             -            -           -           -            -           -
                                     ---------    ---------   ---------   ---------    ---------   ---------
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              -            -           -           -            -           -
Compensation recognised adopting
               variable accounting           -            -           -           -            -           -
Currency translation adjustments             -            -           -           -            -           -
                                     ---------    ---------   ---------   ---------    ---------   ---------
Balance at December 31, 2003           (73,158)   6,658,778      27,578      (1,077)         496           2
                                     =========    =========   =========   =========    =========   =========

                                                                     Accumulated
                                  Additional                           other com-      Compre-
                                     paid-in                Retained   prehensive      hensive
                                     capital    Reserves    earnings       income       income        Total
                                        RMB          RMB         RMB          RMB          RMB          RMB
                                   ---------   ---------   ---------    ---------    ---------    ---------
                                                (In thousands, except for number of shares)
Balance at January  1, 2001           77,157      10,806      48,842          136            -      137,412
Net income                                 -           -      23,071            -       23,071       23,071
Currency translation adjustments           -           -           -          (19)         (19)         (19)
                                   ---------   ---------   ---------    ---------    ---------    ---------
                                                                                        23,052
                                                                                        ======
Balance at December 31, 2001          77,157      10,806      71,913          117            -      160,464
Net income                                 -           -      24,883            -       24,883       24,883
Transfer to reserves                       -       4,116      (4,116)           -            -
Reacquired shares                          -           -           -            -            -
                                                                                                       (742)
Currency translation adjustments           -           -           -           (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
Compensation recognised adopting
               variable accounting     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
                                   =========   =========   =========    =========                 =========

The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>
                                       F-4
<PAGE>
Jinpan International Limited and Subsidiaries

Consolidated Statements of Cash Flows
For the years ended December 31, 2003, 2002 and 2001
<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                              --------------------------------------
                                                               2003      2003        2002      2001
                                                               US$        RMB        RMB        RMB
                                                              -----     ------     ------     ------
                                                                         (In thousands)
<S>                                                           <C>       <C>        <C>        <C>
Operating activities
    Net income                                                3,253     26,913     24,883     23,071
    Adjustments to reconcile net income to
        net cash provided by operating activities:
        Depreciation                                            659      5,450      5,206      4,494
        Deferred income taxes                                     6         49        (74)       (80)
        Provision for doubtful debts                             80        665      2,764      1,336
      Provision for inventories                                 202      1,677          -          -
      Loss on disposal of fixed assets                           14        112         22          -
      Minority interest                                         706      5,845      4,972      4,229
      Employee stock-based compensation                         404      3,347          -          -
    Changes in operating assets and liabilities
       Accounts receivable                                   (1,457)   (12,056)   (21,806)   (23,346)
       Notes receivable                                      (1,064)    (8,798)         -          -
       Inventories                                           (1,223)   (10,114)     4,000     (8,651)
       Prepaid expenses                                         580      4,806     (9,820)     4,791
       Other receivables                                       (708)    (5,860)      (411)     1,505
       Accounts payable                                         891      7,368     (5,663)     5,266
       Income tax                                               (99)      (815)       784         (5)
       Value added tax                                         (269)    (2,230)     1,503       (246)
       Advance from customers                                  (200)    (1,656)       (48)     2,328
       Commission payable                                       600      4,966     11,124      2,558
       Management bonus                                          95        785        290      2,410
       Accruals                                                (606)    (5,015)     5,661        724
       Government grant                                         315      2,598        375      4,429
       Other liabilities                                         95        785       (158)       198
                                                              -----     ------     ------     ------
Net cash provided by operating activities                     2,274     18,822     23,604     25,011
Investing activities
     Decrease/(Increase) in restricted time deposit           2,415     20,000    (20,000)         -
     Purchases of property, plant and equipment                (432)    (3,571)    (4,178)    (4,212)
     Proceeds from sales of property, plant and equipment        85        700         37          -
     Payment for construction in progress                      (195)    (1,612)         -     (2,690)
    Purchases of available-for-sale securities                 (567)    (4,686)         -          -
                                                              -----     ------     ------     ------
Net cash provided by (used in) investing activities           1,306     10,831    (24,141)    (6,902)
Financing activities
     Proceeds from bank loan                                  5,498     45,485     78,892      1,996
     Repayment of bank loan                                  (8,115)   (67,136)   (57,221)    (3,429)
    Acquisition of treasury stock                               (41)      (335)      (742)         -
    Proceeds from exercise of stock options                     765      6,330          -          -
    Net decrease in amounts due to minority
         shareholders                                        (1,196)    (9,903)    (1,101)    (8,707)
    Dividends paid                                             (165)    (1,368)         -          -
                                                              -----     ------     ------     ------
Net cash provided by (used in) financing activities          (3,254)   (26,927)    19,828    (10,140)
Effect of exchange rate changes on cash                          11         45         (1)       (19)
                                                              -----     ------     ------     ------
Net increase in cash and cash equivalents                       337      2,771     19,290      7,950
Cash and cash equivalents at beginning of year                7,710     63,800     44,510     36,560
                                                              -----     ------     ------     ------
Cash and cash equivalents at end of year                      8,047     66,571     63,800     44,510
                                                              =====     ======     ======     ======
Interest paid                                                    43        354        541        600
Income taxes paid                                               365      3,018      1,563      1,122

The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>

                                       F-5
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

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

         As of  December  31,  2003,  the Company  had direct  interests  in the
         following subsidiaries:

<TABLE>
<CAPTION>

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

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

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

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

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





















                                       F-6
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

         a) Political environment

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

         b) Economic environment

         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-7
<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.

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,  2003.  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.


                                      F-8
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

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

         (c) Short-term investment

             The Company 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 Company 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.

             When determining  whether an impairment of investments  exists or a
             decline   in   value   of   an   available-for-sale   security   is
             other-than-temporary,  the Company 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  Company'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.

         (d) Notes receivable

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

         (e) Inventories

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

                                      F-9
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (f) 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.

         (g) 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, 2003
             represented office building acquired but not ready for occupancy at
             year end and machinery under installation.

         (h) Impairment of Long-lived Assets

             The Company  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 Company
             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.

         (i) Income Taxes

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

                                      F-10
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (j) Value Added Tax

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

         (k) 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.

         (l) 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, 2003, 2002 and 2001 amounted to
             RMB982,000, RMB1,204,000 and RMB922,000, respectively.

         (m) 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,  installation  or other  services  required  after  the
             delivery.  The following  policies  apply to the Company's  revenue
             transactions:

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

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

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

                                      F-11
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (n) 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.

         (o) Earnings Per Common and Common Equivalent Share

             On January 21, 2004, the Board of Directors of the Company 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, 2003,
             2002  and 2001  have  been  computed  by  dividing  net  income  of
             RMB26,913,000,  RMB24,883,000  and  RMB23,071,000  by the  weighted
             average  number of 6,390,804,  6,279,866  and  6,298,978  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, 2003,
             2002  and 2001  have  been  computed  by  dividing  net  income  of
             RMB26,913,000,  RMB24,883,000  and  RMB23,071,000  by the  weighted
             average  number of 6,487,116,  6,329,854  and  6,326,556  shares of
             common stock  outstanding,  respectively,  after  giving  effect of
             two-for-one  stock split.  Reconciliation of for the denominator is
             as follows:

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

<TABLE>
<CAPTION>
                                                                            2003                 2002               2001
                                                                 -------------------- ------------------- ---------------
<S>                                                              <C>                  <C>                 <C>
            Denominator   for  basic   earnings   per  share  -
               weighted average shares                                 6,390,804            6,279,866          6,298,978

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

            Denominator  for  diluted   earnings  per  share  -
                    adjusted   weighted   average   shares  and
                    assumed conversions                                6,487,116            6,329,854          6,326,556
                                                                 ================     ================    ===============
</TABLE>

         (p) Accumulated Other Comprehensive Income (Loss)

             Unrealized  gains or  losses  on the  Company'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):

                                      F-12
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
                                                                                              Foreign
                                                                      Unrealized             Currency
                                                                        Gains on          Translation
                                                                      Securities          Adjustments              Total
                                                                             RMB                  RMB                RMB
                                                                 ----------------     ----------------    ---------------
                                                                                         (In thousands)
<S>                                                              <C>                   <C>                <C>
             Balance at January 1, 2001                                        -                  136                136
             Foreign currency translation adjustments                          -                  (19)                (19)
                                                                 ----------------     ----------------    ---------------
             Balance at December 31, 2001                                      -                  117                117
                                                                 ================     ================    ===============
             Foreign currency translation adjustments                          -                   (1)                 (1)
                                                                 ----------------     ----------------    ---------------
             Balance at December 1, 2002                                       -                  116                116
                                                                 ================     ================    ===============
             Unrealized gains, net of unrealized losses of
                 available-for-sale securities                               112                    -                112
             Foreign currency translation adjustments                          -                   45                 45
                                                                 ----------------     ----------------    ---------------

             Balance as at December 31, 2003                                 112                  161                273
                                                                 ================     ================    ===============
</TABLE>

         (q) 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,  2003,   2002  and  2001  amounted  to
             RMB1,056,000, RMB1,390,000 and RMB544,000, respectively.

         (r) Advertising Expense

             The cost of  advertising  is  expensed  as  incurred.  The  Company
             incurred  RMB1,007,000,  RMB566,000  and  RMB738,000 in advertising
             costs during 2003, 2002 and 2001, respectively.

         (s) Shipping and Handling Expenses

             The cost of shipping  and  handling is  expensed  into  selling and
             administration  expenses as incurred.  The Company  incurred RMB7.3
             million, RMB8.1 million and RMB7.8 million in shipping and handling
             costs during 2003, 2002 and 2001, respectively.

         (t) Stock Based Compensation

             The  Company  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.  Expense,  both recorded and pro forma over the
             options' vesting period.


                                      F-13
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

             At December  31,  2003,  the Company has one  stock-based  employee
             compensation  plan,  which is  described  more fully in Note 18 the
             "1997 Stock Option Plan".

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

<TABLE>
<CAPTION>
                                                                                        Year ended December 31,
                                                                                     2003           2002            2001
                                                                             -------------    -----------    ------------
                                                                                      RMB            RMB             RMB
                                                                                 (In thousands, except per share data)
<S>                                                                                <C>            <C>             <C>
              Net income, as reported                                              26,913         24,883          23,071

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

              Deduct: Total stock-based  employee  compensation expense
              determined  under fair value based method for all awards,
              net of related tax effects                                           (2,705)             -             (104)
                                                                             -------------    -----------    ------------

              Pro forma net income                                                 27,555         24,883          22,967

              Earnings per common share (cents):
</TABLE>


<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                              2003           2002            2001
                                                      -------------    -----------    ------------
                                                               RMB            RMB             RMB
                                                          (In thousands, except per share data)
<S>                                                           <C>            <C>             <C>
              Basic - as reported                             4.21           3.96            3.66
              Basic - pro forma                               4.31           3.96            3.65

              Diluted - as reported                           4.15           3.93            3.65
              Diluted - pro forma                             4.25           3.93            3.63
</TABLE>

         (t) Product Warranty

             The Company provides a basic limited warranty,  including parts and
             labor,  for  all  products  for  one  year.  The  Company  incurred
             RMB81,000,  RMB163,000,  and RMB108,000 in product warranty expense
             during 2003, 2002 and 2001, respectively.



                                      F-14
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (u) New accounting pronouncement

             In January 2003, the Financial  Accounting  Standards  Board issued
             Interpretation   No.  46,   "Consolidation   of  Variable  Interest
             Entities" (FIN 46).  Variable  interest  entities often are created
             for  a  single  specified  purpose,   for  example,  to  facilitate
             securitization,  leasing,  hedging,  research and  development,  or
             other  transactions or arrangements.  Formerly,  "Consolidation  of
             Certain  Special   Purpose   Entities"  in  its  draft  form,  this
             interpretation   of   Accounting    Research   Bulletin   No.   51,
             "Consolidated  Financial  Statements",  defines what these variable
             interest  entities are and provides  guidelines  on how to identify
             them and also on how an enterprise should assess its interests in a
             variable entity to decide whether to consolidate  that entity.  The
             provision  of FIN 46  must  be  immediately  applied  for  variable
             interest  entities  created  after  January 31, 2003.  For variable
             interests  in entities  commonly  referred  to as "special  purpose
             entities",  implementation of this statement is required by January
             1,   2004.   And  for  all  other   variable   interest   entities,
             implementation  is required by December  31, 2004.  Currently,  the
             Company  does not  have  any  variable  interest  entities  and the
             Company does not expect the adoption of FIN 46 will have a material
             impact  on  the  Company's   results  of  operations  or  financial
             condition.

4.       RESTRICTED TIME DEPOSIT

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

5.       SHORT-TERM INVESTMENTS

         Available-for-sale  securities  held by the Group at December 31, 2003,
         2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                   2003            2003          2002
                                                             --------------- -------------- -------------
                                                                    US$             RMB           RMB
                                                                            (In thousands)

<S>                                                          <C>             <C>             <C>
        Corporate bonds
           Cost                                                     452           3,745                -
           Gross unrealized gains                                     -               -                -
                                                             -----------     -----------    -------------
           Fair market value                                        452           3,745                -
                                                             -----------     -----------    -------------
        Mutual fund
           Cost                                                      69             569                -
           Gross unrealized gains                                     9              74                -
                                                             -----------     -----------    -------------
           Fair market value                                         78             643                -
                                                             -----------     -----------    -------------
        Trust fund
           Cost                                                      45             372                -
           Gross unrealized gains                                     5              38                -
                                                             -----------     -----------    -------------
           Fair market value                                         50             410                -
                                                             -----------     -----------    -------------
        Total short-term investments                                580           4,798                -
                                                             ===========     ===========    =============
</TABLE>

                                      F-15
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

6.       ACCOUNTS RECEIVABLE, NET

<TABLE>
<CAPTION>

         Accounts receivable comprised:
                                                                   2003            2003             2002
                                                             --------------- -------------- -------------
                                                                    US$             RMB              RMB
                                                                    ---             ---              ---
                                                                            (In thousands)
<S>                                                              <C>            <C>              <C>
        Accounts receivable - trade                              16,376         135,481          122,771
        Less: provision for doubtful debts                       (1,338)        (11,066)         (11,177)
                                                             -----------     -----------    -------------

        Accounts receivable, net                                 15,038         124,415          111,594
                                                             ===========     ===========    =============

<CAPTION>
                                                                   2003            2003             2002            2001
                                                             ----------- --- ----------- -- ------------- --- -----------
                                                                    US$             RMB              RMB             RMB
                                                                                    (In thousands)
<S>                                                              <C>            <C>             <C>             <C>
        Movement of provision for doubtful debts
        Balance as at January 1                                  (1,350)        (11,177)        (  8,413)       (  7,077)
        Provided during the year                                    (81)           (665)        (  2,764)       (  1,600)
        Less: Written off during the year                           93              776                -             264
                                                             -----------     -----------    -------------     -----------

        Balance as at December 31                                (1,338)        (11,066)        (11,177)          (8,413)
                                                             ===========     ===========    =============     ===========
</TABLE>

7.       INVENTORIES

         Inventories comprised:              2003       2003       2002
                                           -------    -------    -------
                                              US$       RMB         RMB
                                           -------    -------    -------
                                                   (In thousands)
         Finished products                   1,942     16,067     13,028
         Products in process                   636      5,266      4,241
         Raw materials                       2,198     18,181     12,164
                                           -------    -------    -------
                                             4,776     39,514     29,433
         Less: provision for inventories      (199)    (1,644)         -
                                           -------    -------    -------
         Inventories                         4,577     37,870     29,433
                                           =======    =======    =======


<TABLE>
<CAPTION>
                                                                   2003            2003             2002          2001
                                                             --------------- -------------- ----------------- -----------
                                                                    US$             RMB              RMB           RMB
                                                                                    (In thousands)
       <S>                                                          <C>           <C>               <C>           <C>
        Movement of provision for inventories
        Balance as at January 1                                       -               -                -               -
        Provided during the year                                    (203)         (1,677)              -               -
                                                                                                       -               -
        Less: Written off during the year                              4              33               -               -
                                                             -----------     -----------    -------------     -----------

        Balance as at December 31                                   (199)         (1,644)              -               -
                                                             ===========     ===========    =============     ===========
</TABLE>



                                      F-16
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

8.       PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                  2003           2003              2002
                                                               -------         -------          -------
                                                                   US$            RMB               RMB
                                                               -------         -------          -------
                                                                           (In thousands)
<S>                                                                <C>          <C>               <C>
         Buildings                                                 988          8,171             7,123
         Machinery and equipment                                 5,177         42,829            41,963
         Motor vehicles                                            999          8,263             7,460
         Furniture, fixtures and office equipment                  553          4,572             4,221
                                                               -------         -------          -------

                                                                 7,717         63,835            60,767

         Less: accumulated depreciation                         (4,471)       (36,979)          (31,529)
                                                               -------         -------          -------

                                                                 3,246         26,856            29,238
                                                               =======         =======          =======
</TABLE>

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

9.       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.



                                      F-17
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

9.       DEFERRED TAX ASSETS AND INCOME TAXES (CONTINUED)

         Total  dollar and per share effect of tax holidays of Jinpan JV for the
         years ended December 31, 2003, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>

                                                                       2003          2003          2002          2001
                                                                    --------------------------------------------------
                                                                        US$           RMB           RMB           RMB
                                                                        ---           ---           ---           ---
                                                                          (In thousands, except for per share data)
<S>                                                                     <C>          <C>           <C>           <C>
         Effect on net income of the year                               446          3,727         3,116         2,911
                                                                      =====         ======        ======        ======
         Effect on basic earnings per share                            0.07           0.58          0.50          0.46
                                                                      =====         ======        ======        ======
         Effect on diluted earnings per share                          0.07           0.57          0.49          0.46
                                                                      =====         ======        ======        ======

         Pretax income for the years ended December 31, 2003,  2002 and 2001 was
         taxed in the following jurisdictions:

                                                                       2003          2003          2002          2001
                                                                    --------------------------------------------------
                                                                        US$           RMB           RMB           RMB
                                                                        ---           ---           ---           ---
                                                                                       (In thousands)

         British Virgin Islands                                        (975)        (8,070)       (3,144)       (2,815)
         United States of America                                      (447)        (3,694)       (4,261)       (1,970)
         The People's Republic of China                               5,831         48,249        40,376        34,996
                                                                      -----         ------        ------        ------
                                                                      4,409         36,485        32,971        30,211
                                                                      =====         ======        ======        ======

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

                                                                       2003           2003         2002          2001
                                                                    --------------------------------------------------
                                                                        US$           RMB           RMB           RMB
                                                                        ---           ---           ---           ---
                                                                                      (In thousands)
        Current
               Non-US                                                  (444)        (3,678)       (3,190)       (2,991)

        Deferred
               Non-US                                                    (6)           (49)           74            80
                                                                      -----         ------        ------        ------
                                                                       (450)        (3,727)       (3,116)       (2,911)
                                                                      =====         ======        ======        ======
</TABLE>




                                      F-18
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

9.       DEFERRED TAX ASSETS AND INCOME TAXES (CONTINUED)

         Deferred tax assets  comprised  the  following at December 31, 2003 and
         2002:
<TABLE>
<CAPTION>
                                                                                         2003         2003          2002
                                                                                    -------------------------------------
                                                                                          US$          RMB           RMB
                                                                                          ---          ---           ---
                                                                                               (In thousands)
<S>                                                                                       <C>          <C>         <C>
        Deferred tax assets
            Provision for doubtful debts                                                   98          811           811
            Deferred income                                                                24          202           215
            Net operating loss of Jinpan USA carry forward                                825        6,827         5,349
                                                                                    ----------    ---------    ----------
        Total deferred tax assets                                                         947        7,840         6,375
            Less: Valuation allowance for deferred tax assets                            (825)       (6,827)       (5,349)
                                                                                    ----------    ---------    ----------
                                                                                          122        1,013           1,026
                                                                                    ----------    ---------    ----------
        Deferred tax liabilities
            Interest income                                                                (4)          (36)           -
                                                                                    ----------    ---------    ----------
        Total deferred tax liabilities                                                     (4)          (36)           -
                                                                                    ----------    ---------    ----------
        Net deferred tax assets                                                           118          977         1,026
                                                                                    ==========    =========    ==========
</TABLE>

         Management  of the Group does not believe  that  sufficient  objective,
         positive evidence  currently exists to conclude that  recoverability of
         net operating loss of Jinpan USA is more likely than not. Consequently,
         the Group has provided a RMB6,827,000  (2002:  RMB5,349,000)  valuation
         allowance covering 100% of net operating loss of Jinpan USA. The change
         in the  valuation  allowance  for  the  current  year  is  RMB1,478,000
         (2002:RMB1,704,000).  At December 31, 2003, the Group has available net
         operating  loss of  RMB17,067,000  (2002:  RMB13,374,000),  which  will
         expire in the years 2017 to 2022.

         There were no deferred  tax  liabilities  as at  December  31, 2003 and
         2002.

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

                                                                         2003           2003         2002         2001
                                                                      ------------------------------------------------
                                                                          US$            RMB          RMB          RMB
                                                                                         (In thousands)
<S>                                                                       <C>          <C>          <C>          <C>
         Computed expected income taxes                                   662          5,473        4,945        4,532
         Impact of tax holiday of Jinpan JV                              (449)        (3,715)      (3,190)      (2,991)
         Non-deductible losses                                            146          1,210          472          422
         Effect of difference between the PRC and USA tax rate           (112)          (924)      (1,065)     (   493)
         Change in valuation allowance                                    178          1,478        1,704          788
         Others                                                            25            205          250          653
                                                                      -------        -------      -------      -------

                                                                          450          3,727        3,116        2,911
                                                                      =======        =======      =======      =======



                                      F-19
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

10.      SHORT TERM BANK LOANS
<CAPTION>

         Bank loans comprised:                                                          2003         2003          2002
                                                                                  -------------------------------------
                                                                                         US$          RMB           RMB
                                                                                               (In thousands)
<S>                                                                                     <C>        <C>         <C>
         Short term bank loan                                                              -            -       20,000
         Letters of credit                                                               244        2,016        3,667
         Less: current portion                                                          (244)      (2,016)     (23,667)
                                                                                     -------      -------       -------
                                                                                           -            -            -
                                                                                     =======      =======       =======
</TABLE>

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

         Letters of credit are  unsecured,  bear interest at a weighted  average
         rate of 4.74% and 5.25% per annum for the years ended December 31, 2003
         and 2002, respectively, and are repayable within 60 days and 90 days in
         the year 2003 and  2002,  respectively.  The  Group  has  total  credit
         facilities of RMB20,683,000  (US$2,500,000) as of December 31, 2003, of
         which  RMB18,667,000  (US$2,256,000)  is  unused.  The  Group had total
         credit  facilities of  RMB45,485,000  as of December 31, 2002, of which
         RMB41,818,000 was unused. Of the total credit facilities, RMB33,080,000
         (US $4,000,000) expired in July 2003, and the others had no fixed terms
         of utilization.

11.      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 nil, RMB1,280,000 and nil in
         2003, 2002 and 2001,  respectively.  As of December 31, 2003, Jinpan JV
         received  RMB7,402,000 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, 2003.

12.      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  RMB44
         million and RMB37 million as of December 31, 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.



                                      F-20
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

12.      DISTRIBUTION OF INCOME (CONTINUED)

         During the years ended December 31, 2003,  2002 and 2001, the directors
         of Jinpan JV proposed the following appropriations to reserves.
<TABLE>
<CAPTION>

                                                                         2003            2003         2002        2001
                                                                      ------------------------------------------------
                                                                          US$             RMB          RMB         RMB
                                                                          ---             ---          ---         ---
                                                                                           (In thousands)
<S>                                                                       <C>          <C>          <C>              <C>
         Statutory reserve fund                                           267          2,206        1,863            -
         Enterprise expansion fund                                          -              -        2,253            -
         Staff welfare and bonus fund                                       -              -            -            -
         Dividends                                                      1,470         12,162            -            -
                                                                      -------        -------      -------      -------

                                                                        1,737         14,368        4,116            -
                                                                      =======        =======      =======      =======
</TABLE>

         The Company  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 Company  declared a dividend of US 40 cents per share of
         common stock to be paid to all stockholders.

         No dividends were declared during the years ended December 31, 2002 and
         2001.

13.      COMMITMENTS

         Operating lease commitments

         The   Company   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  non-cancelable  operating  leases with
         initial  terms  of one  year  or more  consisted  of the  following  at
         December 31, 2003:

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

         2004                                              113           929
         2005                                              113           929
         2006                                               91           749
         2007                                               44           364
         2008                                               35           287
         2009                                                9            72
                                                 -------------    ----------
         Total minimum lease payments                      405         3,330
                                                 =============    ==========

         Capital commitments

         As of December 31, 2003 the Company has commitments of RMB2,187,000 for
         the purchase of new office and plant and machinery.

                                      F-21
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

13.      COMMITMENTS (CONTINUED)

         Employment contracts

         As of December 31, 2003, the Company has approximately 223 employees in
         the PRC,  including 43  engineers or  technicians,  32  management  and
         administrative  personnel, 52 marketing and sales personnel, 85 factory
         personnel  and  11  trainees  and 5  employees  in the  United  States,
         including 2 management and administrative personnel and 3 marketing and
         sales personnel.  All of the employees are contract  employees and have
         entered into renewable employment contracts with the Company.  Terms of
         the employment agreements with management, engineers, sales persons and
         technicians  range from two to three years and terms of the  employment
         agreements with support personnel range from six months to one year.

         Future  minimum  payments  to  employees  under   employment   contract
         consisted of the following at December 31, 2003:

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

         2004                                                  320         2,644
         2005                                                  320         2,644
         2006                                                  320         2,644
                                                            ------        ------
         Total minimum employment contract payments            960         7,932
                                                            ======        ======

14.      RELATED PARTY TRANSACTIONS

         During the year ended  December  31, 2003,  the  minority  shareholders
         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 intercompany  loans was received in June
         2004.

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

15.      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
         Nan Yang  Commercial  Bank in the PRC and Citibank,  N.A. in the United
         States.

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

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

         Fair Value

         Cash and cash equivalents:  The carrying amount reported in the balance
         sheet  for cash and cash  equivalents  approximates  their  fair  value
         because of the short maturity of those instruments.

                                      F-22
<PAGE>
Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

15.      FINANCIAL INSTRUMENTS (CONTINUED)

         Accounts  receivable,  notes receivable,  other  receivables,  accounts
         payable,  advance from customers,  accruals, other liabilities and bank
         loans:  The carrying  amounts  reported in the balance  sheet for these
         items  approximate  their fair value.  The  carrying  value of accounts
         receivable,  notes receivable,  other  receivables,  accounts payables,
         advance from  customers,  accruals,  other  liabilities  and bank loans
         approximate  their market values based on their short-term  maturities.
         The total fair values of short-term investments as of December 31, 2003
         are  RMB4,798,000,  based  on the  market  values  of  publicly  traded
         short-term investments as of December 31, 2003.

16.      CONCENTRATION OF RISK

         During  2003,  the  Company was  dependent  on two major  suppliers  of
         silicon steel and electrical  magnetic wires,  Thyssenkrupp  Electrical
         Street GmbH and Hainan Qiongshan Dayou Machinery  Manufacture Co. Ltd.,
         which accounted for  approximately  21% (2002: 33%) and 10% (2002: 29%)
         of total purchases, respectively.

17.      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 5% of the employees' basic salary,  respectively.  Payment is made,
         on a monthly  basis,  to a PRC insurance  company  organized by the PRC
         government which is responsible for the payments of pension benefits to
         retired  employees.  Jinpan  JV  has no  obligations  for  the  pension
         benefits  beyond the  annual  contributions  as  described  above.  The
         pension costs  recognized by Jinpan JV during the years ended  December
         31, 2003, 2002 and 2001 amounted to  RMB367,000(US$44,356),  RMB493,000
         and RMB287,000, respectively.

18.      OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA

         Description of products by segment

         Cast resin transformers is the only reportable segment of the Group.
<TABLE>
<CAPTION>
                  Geographic area data
                                                                                  Year ended December 31,
                                                             2003             2003             2002            2001
                                                        ----------------------------------------------------------------
                                                             US$               RMB             RMB              RMB
                                                                                 (In thousands)
<S>                                                                <C>           <C>              <C>             <C>
        Revenues from external customers:
        United States                                              215           1,776            7,413           6,965
        PRC                                                     33,211         274,788          222,008         177,515
                                                        ---------------    ------------    -------------    ------------
                                                                33,426         276,564          229,421         184,480
                                                        ===============    ============    =============    ============
        Long lived assets by area:
        United States                                                6              50               50              49
        PRC                                                      3,459          28,617           29,188          30,276
                                                        ---------------    ------------    -------------    ------------
                                                                 3,465          28,667           29,238          30,325
                                                        ===============    ============    =============    ============
</TABLE>

                                      F-23
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

19.      EQUITY

         Pursuant to the board resolution of the Company dated January 21, 2002,
         the officers of the Company were authorized and empowered,  in the name
         and on behalf of the Company,  to purchase up to 320,000  shares of the
         Company's common stock from time to time in the open market and through
         privately,  negotiated  transactions;  such repurchase program is to be
         financed from internally  generated  corporate funds, with the acquired
         stock to be available for use under the Company's stock option plan for
         other corporate purpose.  As of December 31, 2003, 73,158 shares of the
         Company's  common  stock  were  transferred  back into  treasury  at an
         aggregate cost of $130,133 (approximately RMB1,077,000).

         The  Company's  convertible  preferred  stock  ("preferred  stock")  is
         convertible  at any time to shares of  common  stock and each  share of
         preferred  stock  entitles  its holder to the same number of votes as a
         share of common  stock.  Holders of  preferred  stock are  entitled  to
         receive a preferred per share  dividend (6% per annum) payable in kind,
         compounded quarterly.  All accrued and unpaid dividends  (approximately
         RMB5,  924 as at December  31, 2003) on the  preferred  stock are to be
         cancelled  upon  conversion  into  common  stock.  In the  event of the
         Company's  liquidation,  dissolution  or  winding  up,  the  holders of
         preferred stock are entitled to a preference over the holders of common
         stock in the  distribution  of assets in an amount equal to the sum of:
         (i) $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
             Company  exercised stock option to purchase total 360,000 shares of
             common stock of the Company, 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 constituting
             the payment in full of aggregated exercise cost was US$765,000.

         (b) Stock option agreement

             In January 1998, the Company  entered into an agreement with Dr. Mu
             to grant to Dr.  Mu in April  1999,  options  to  purchase  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
             Company  during  the  period  commencing  from  January 1, 1999 and
             ending March 31, 1999.  The Company  accounted  for this plan under
             APB  25  and  related   interpretations   under   which   aggregate
             compensation of approximately  RMB1,759,000  related to this option
             was  charged  to the  statement  of  income  over the  period  from
             February  1998 to March 1999.  During the year ended  December  31,


                                      F-24
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

19.      EQUITY (CONTINUED)

             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  Company 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 2003,
             2002 and 2001.

         (c) 2001 stock option agreements

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

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

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

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

         (d) 2003 stock option agreement

             In September 2003, the Company entered into stock option agreements
             with seven of its employees,  to purchase  140,000 shares of common
             stock of the Company.  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 Company recorded  compensation  expense of
             RMB  3,347,000  for the year ended  December 31, 2003 in connection
             with these options.

             No options were exercised in relation to this agreement in 2003.

         (e) Warrants granted to non-employees

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


                                      F-25
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

19.      EQUITY (CONTINUED)

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

                                                   2003                2002
                                                --------            --------

              Warrants                                -             230,100
              Stock options                     260,000             880,000
                                               --------           ---------

              Total                             260,000           1,110,100
                                               ========           =========

         (f) Disclosure of information pursuant to FAS 123

             The fair value of options  granted for 2003, 2002 and 2001 reported
             below  has  been   estimated   at  the  date  of  grant  using  the
             Black-Scholes  option  pricing  model with the  following  weighted
             average assumptions:

                                                     2003     2002          2001
                                                     ----     ----          ----

              Risk-free interest rate               3.10%        -         4.55%
              Dividend yield                            -        -             -
              Volatility factor                     80.3%        -         50.5%
              Weighted average expected life      5 years        -       2 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 Company's stock
             options have characteristics  significantly different from those of
             traded options and changes in the subjective input  assumptions can
             materially affect the fair value estimate. In management's opinion,
             the existing  models do not  necessarily  provide a reliable single
             measure of the fair value of its stock options.

             A summary of the  Company's  stock option  activities,  and related
             information  for the years ended  December 31, 2003,  2002 and 2001
             are as follows:
<TABLE>
<CAPTION>

                                                           2003                    2002                    2001
                                                 ------------------------------------------------------------------------
                                                               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     880,000       2.074     880,000        2.074     760,000       2.188
               Granted                              140,000       3.550           -            -     120,000       1.350
               Exercised                           (360,000)      2.084           -            -           -           -
               Cancelled                                  -           -           -                        -
               Forfeited                           (400,000)          -           -            -           -           -
                                                 ----------- ----------- ----------- ------------------------------------
               Outstanding at the end of year       260,000       2.869     880,000        2.074     880,000       2.188
               Exercisable at the year end          260,000       2.869     880,000        2.074     880,000       2.074

               Weighted average fair value of
                 options granted during the year    USD2.34                     N/A                  US$0.11
</TABLE>

                                      F-26
<PAGE>

Jinpan International Limited and Subsidiaries

Notes to Consolidated Financial Statements

19.      EQUITY (CONTINUED)

             Weight-average  exercise prices for options outstanding as December
             31, 2003 are US$ 2.869. The weighted-average  remaining contractual
             life of those options is eight years.

20.      SUBSEQUENT EVENT

         On January 21,  2004,  the Board of  Directors  the Company  declared a
         two-for-one  stock split to be  effective  February 6, 2004.  The stock
         split will be  applicable to all  shareholders  of record as of January
         30, 2004.




























                                      F-27