Global-tech Advanced Innovations 20F/A 2004 Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F/A

Amendment No. 1

(Mark One)

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

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

For the fiscal year ended March 31, 2004

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

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

Date of event requiring this shell company report

Commission file number001-14812

GLOBAL-TECH APPLIANCES INC.

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

British Virgin Islands

(Jurisdiction of incorporation or organization)

21/F., Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong

(Address of principal executive offices)

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


Title of each class:		Name of each exchange on which registered:
Common Shares, $0.01 par value per share		The New York Stock Exchange

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

Not Applicable

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

Not Applicable

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

12,177,898 Common Shares, par value $0.01 per share

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

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17¨ Item 18x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

EXPLANATORY NOTE

This Annual Report on the Form 20-F/A (“Form 20-F/A”) is being filed as Amendment No. 1 to our Annual Report on the Form 20-F for the fiscal year ended March 31, 2004 initially filed with the Securities and Exchange Commission (“SEC”) on September 30, 2004. This Amendment No. 1 is being filed to reflect the restatement of our audited consolidated financial statements for the fiscal year ended March 31, 2004 to correct an accounting error relating to non-cash stock compensation expense for stock options subject to variable accounting and to make related changes. The decision to restate our previously issued financial statements for the fiscal year ended March 31, 2004 was approved by the Audit Committee of our Board of Directors on July 15, 2005 upon the recommendation of management and was discussed with our independent registered public accounting firm. For a further description of the restatement, see Note - 4 “Restatement of information previously reported” to the accompanying audited consolidated financial statements.

We also revised the footnote disclosure in Note – 3(o) “Stock-based compensation” to our consolidated financial statements to reflect the pro forma effect on net loss and loss per share amounts for the fiscal year ended March 31, 2002 after re-calculation of total stock-based compensation expense determined under the fair value method for all awards.

This Amendment No. 1 amends and restates each of Item 3A, Selected financial data and Item 5A, Operating results in its entirety to reflect changes related to the restatement described above.

Item 15 of this Form 20-F/A has been amended and restated in its entirety in connection with the restatement to include the Company’s amended disclosure about its system of controls and procedures.

Item 18 of this Form 20-F/A has been amended and restated in its entirety to include the restated consolidated financial statements for the fiscal year ended March 31, 2004 and the Report of Independent Registered Public Accounting Firm related to our restated financial statements for the fiscal year ended March 31, 2004.

Item 19 of this Form 20-F/A has been revised to include currently dated certifications of our Chief Executive Officer and Acting Chief Financial Officer and the consents of independent registered public accounting firms concerning their reports appearing in this Form 20-F/A.

This Form 20-F/A does not reflect events occurring after the filing on September 30, 2004 of the original Form 20-F for the fiscal year ended March 31, 2004, and does not modify or update the disclosure therein in any way other than to reflect the amendments described above. As a result, this Form 20-F/A continues to speak as of September 30, 2004.

TABLE OF CONTENTS


		Page
Item 3.	Key Information	4
	A. Selected financial data	4

Item 5.	Operating and Financial Review and Prospects	9
	A. Operating results	9

Item 15.	Controls and Procedures	16

Item 18.	Financial Statements	16

Item 19.	Exhibits	16

	Index to Consolidated Financial Statements	F-2
	Exhibit Index	E-1

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

References throughout this annual report to a fiscal year refer to the fiscal year ended on March 31 of that year. “Fiscal 2004,” for example, refers to the fiscal year ended March 31, 2004.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Item 3. Key Information.

A. Selected financial data.

The selected consolidated income statement data for the fiscal years ended March 31, 2002, 2003 and 2004 and the selected consolidated balance sheet data as of March 31, 2003 and March 31, 2004 set forth below have been prepared in accordance with U.S. GAAP and are derived from our consolidated financial statements and notes thereto included elsewhere in this annual report. The selected consolidated statement of income data for the fiscal years ended March 31, 2000 and 2001 and the selected consolidated balance sheet data as of March 31, 2000, March 31, 2001 and March 31, 2002 set forth below have been prepared in accordance with U.S. GAAP and are derived from our consolidated financial statements and notes thereto not included elsewhere in this annual report. The selected consolidated financial data set forth below should be read in conjunction with “Item 5—Operating and Financial Review and Prospects,” the consolidated financial statements and the notes thereto and other financial information which appear elsewhere in this annual report.


	Fiscal Year Ended March 31,
	2000			2001			2002			2003			2004
	(In thousand, except for per share data) (3)
													(as restated)
Statement of income data:
Net sales	$	92,357		$	108,874	(4)	$	85,321	(5)	$	75,489	(6)	$	66,901
Cost of goods sold		70,647			91,781	(4)		65,148	(5)		54,906	(6)		52,942

Gross profit		21,710			17,093			20,173			20,583			13,959
Selling, general and administrative expenses		15,948	(1)		17,236	(1)(4)		14,299	(1)(5)		15,298	(1)		19,019	(1)(7)
Legal and professional fees on potential acquisitions		500			—			—			—			—

Operating income (loss)		5,262			(143	)		5,874			5,285			(5,060	)
Interest expense		217			269			126			57			17
Interest income		3,461			3,729			1,984			1,241			851
Other income (loss), net		451			(34	)(4)		85	(5)		228	(6)		428

Income (loss) from continuing operations before income tax		8,957			3,283			7,817			6,697			(3,798	)
Provision for income taxes		225			513			1,417			624			108

Income (Loss) from continuing operations		8,732			2,770			6,400			6,073			(3,906	)
Discontinued operations:
Loss from operations of discontinued thin film electro-luminescent (“TFEL”) display business, net of applicable income tax of $nil for 2002 and 2003		—			—			10,993	(2)		835	(2)		—

Gain on disposal of TFEL business		—			—			—			29	(2)		—

Net income (loss) before minority interests		8,732			2,770			(4,593	)		5,267			(3,906	)
Minority interests		—			—			1,570			—			—

Net income (loss)	$	8,732		$	2,770		$	(3,023	)	$	5,267		$	(3,906	)

Basic and diluted earnings (loss) per common share	$	0.72		$	0.23		$	(0.25	)	$	0.43		$	(0.32	)

Dividend declared and paid per share		—		$	1.35			—			—			—

Basic and diluted weighted average number of shares outstanding		12,109			12,135			12,140			12,141			12,153

(1)

Includes a provision of $233,000 against advances to a former minority shareholder of a subsidiary and his affiliates in fiscal 2000. Also includes provisions of $103,000, $19,000, $274,000, $556,000 and $669,000, respectively, against a related party loan and the related interest receivable in fiscal 2000, 2001, 2002, 2003 and 2004.

(2)

On November 1, 2002, we announced that our subsidiary, Global Lite Array (BVI) Limited (GLA) entered into an agreement to sell Lite Array, Inc.’s (LA) TFEL display business, including the interest that LA owned in a joint venture manufacturing facility in Jiangmen, China, to the former management of LA. As a result of this agreement, the results of operations for LA’s TFEL business have been reported as a discontinued operation and previous financial statements have been restated to conform to the current operating structure.

(3)	For fiscal 2001 certain reclassifications have been made to prior year balances in order to conform to the current fiscal year presentation.

(4)	In this Form 20-F, the Company revised the line items of net sales, cost of goods sold, selling, general and administrative expenses and other income, net to reflect certain reclassifications.

•

Net sales in fiscal 2001, formerly reported as $108,378,912, were revised to $108,873,668 after the inclusion of $320,835 of sales price variances from purchase orders due to customer requests and gross tooling income of $173,921 that were previously reported under other income, net.

•

Cost of goods sold, formerly reported as $85,563,357, was revised to $91,780,960 as a result of the Company’s decision to adopt the provision of EITF 96-9 rather than disclosing a write-off of inventory as a separate line item. The following table shows the change in cost of goods sold.


	*Fiscal Year Ended March 31,*
	*2001¹*			*2001²*
Material	$	74,202,037		$	79,686,446
Labor and overhead		12,915,526			13,648,720
Change in inventory		(1,554,206	)		(1,554,206	)

Cost of goods sold	$	85,563,357		$	91,780,960

¹	The amounts are before the re-classification of write-off for inventory and tooling and the loss on cessation of a product line.

In fiscal2001, the amounts for the write-off of inventory and tooling (dueto the re-organization of Sunbeam Corporation) and loss on cessation of a product line are $4,991,407 and $2,523,293, respectively.Of the total write-off and loss of $7,514,700, $5,472,512 is reflected in material, $733,194 in labor and overhead and therefore $6,205,706 in cost of goods sold. In accordance with the Company’s accounting classifications and Regulation S-X, an aggregate of $1,308,994 is reflected in various items of selling, general and administrative expenses. In addition, an aggregate of $11,897 of tooling costs were included inmaterials.

•

For fiscal 2001, SG&A expenses, formerly reported as $15,927,158, were revised to $17,236,152 after the inclusion of $1,308,994 related to the write-off of inventory and tooling as per the adjustment above. The significant components comprising SG&A before and after the reclassification are presented below.


	*Fiscal Year Ended March 31,*
	*2001¹*		*2001²*
Freight and handling	$	2,544,175	$	2,544,175
Salaries and benefits		7,495,269		7,495,269
Other selling, general & administrative expenses (each item included in this category is less than 10% of the total SG&A expense)		5,887,714		7,196,708

Total SG&A	$	15,927,158	$	17,236,152

¹	The amounts are before the inclusion of the remaining $1,308,994 of other expenses related to the write-off of inventory and tooling.

²	The amounts are after the inclusion of the remaining $1,308,994 of other expenses related to the write-off of inventory and tooling as per the reclassification described above.

•

Other income, net, for fiscal 2001 formerly reported as $448,618, was revised to an other loss, net of $34,241 as a result of reclassifying $320,835 of sales price variances and $162,024, tooling income, net to net sales. The other loss, net resulted from a $63,093 exchange loss, which was partially offset by sundry income of $28,852.

The Company revised its interpretation of EITF 96-9 with respect to the amounts of $4,991,407, write-off of inventory and tooling, and $2,523,292, loss on cessation of a production line. Originally, our accounting classification of these costs was to treat them as an exit of business. Consequently, we revised the fiscal 2001 financial data and included $6,205,706 of inventory write-off and dedicated tooling write-off in the cost of goods sold. The revised selling, general and administrative expenses in fiscal 2001 included $1,308,994 attributable to the write-off of inventory and tooling. This amount included bad debts of $325,570, a provision for loss on a promissory note of $224,357 and legal fees of $759,067. The revision had no impact on the Company’s net income for fiscal 2001.

(5)	In this Form 20-F, the Company revised the line items of fiscal 2002 net sales, cost of goods sold, selling, general and administrative expenses and other income, net to reflect certain reclassifications.

•

Net sales in fiscal 2002, formerly reported as $85,115,259, were revised to $85,321,486 as a result of the inclusion of approximately $117,852 of sales price variances from purchase orders due to customer requests and gross tooling income of $88,375 that were previously reported under other income, net.

•

Cost of goods sold, formerly reported as $65,086,105, was revised to $65,148,112 as a result of the inclusion of $62,007 of tooling costs. The following table shows the changes to cost of goods sold that result:


	*Fiscal Year Ended March 31,*
	*2002¹*		*2002²*
Material	$	48,484,665	$	48,546,672
Labor and overhead		11,794,722		11,794,722
Change in inventory		4,806,718		4,806,718

Cost of goods sold	$	65,086,105	$	65,148,112

¹	The amounts are before the inclusion of $62,007 tooling costs in the cost of goods sold.

²	The amounts include tooling costs.

•

SG&A expenses, formerly reported as $14,717,163, were revised to $14,299,163 as a result of the reverse of approximately $418,000, a provision for the cost of the potential resolution of certain litigation accrued in the prior periods that was previously reported as other income. The significant components comprising SG&A before and after the reclassification are presented below:


	*Fiscal Year Ended March 31,*
	*2002*		*2002*
Freight and handling	$	1,959,283	$	1,959,283
Salaries and benefits		6,195,282		6,195,282
Other selling, general & administrative expenses (each item included in this category is less than 10% of the total SG&A expenses)		6,562,598		6,144,598

Total SG&A	$	14,717,163	$	14,299,163

•

Other income, net, formerly reported as $646,867, was revised to $84,648 as a result of netting out $117,852 of sales price variances, $26,368 of tooling income, net of all related costs and $418,000, the reverse of a provision for the cost of the potential resolution of certain litigation accrued in prior periods.

(6)	In this Form 20-F, the Company revised the line items of fiscal 2003 net sales, cost of goods sold and other income, net to reflect certain reclassifications.

•

In fiscal 2003, Net sales, formerly reported as $75,058,017, were revised to $75,489,275 as a result of the inclusion of $431,258 of tooling income.

•

Cost of goods sold, formerly reported as $54,729,836, was revised to $54,906,458 as a result of the inclusion of $176,622 of tooling costs. The following table reflects the changes to cost of goods sold that result:


	*Fiscal Year Ended March 31,*
	*2003¹*		*2003²*
Material	$	42,637,587	$	42,814,209
Labor and overhead		10,478,381		10,478,381
Change in inventory		1,613,868		1,613,868

Cost of goods sold	$	54,729,836	$	54,906,458

¹	The amounts are before the inclusion of $176,622of tooling costs in cost of goods sold.

²	The amounts include tooling costs.

•

Other income, net, formerly reported as $483,016, was revised to $228,380 as a result of netting out $254,636 of tooling income net of related cost

(7)

In this Form 20-F/A, the Company restated its consolidated financial statements for the fiscal year ended March 31, 2004 by amending the line item “Selling, general and administrative expenses” to recognize a non-cash stock compensation expense of $2,355,319 resulting from the application of variable accounting to certain outstanding share options of the Company. SG&A expense, formerly reported as $16,663,503, was revised to $19,018,822 after the inclusion of this non-cash expense. See Note 4 “Restatement of information previously reported”, Note 22 “Basic and diluted earnings (loss) per share” and Note 30 “Stock options” of Notes to Consolidated Financial Statements.

The summarized results of discontinued operations are as follows:


	2002			2003
	US$			US$
Net sales	$	444,717		$	594,621
Cost of goods sold		392,992			503,889

Gross profit		51,725			90,732

Selling, general and administrative expenses		1,643,896			539,099
Impairment of property, plant and equipment		258,233			—
Share of loss of a joint venture		5,236,684			378,646
Amortization of goodwill		328,316			—
Write-off of goodwill		3,611,472			—

Operating loss		(11,026,876	)		(827,013	)

Interest income (expense)		34,030			(8,924	)
Other income, net		—			491

Loss from discontinued operations	$	(10,992,846	)	$	(835,446	)

The aggregate assets and liabilities of the discontinued TFEL business on the date of disposal were $480,407 and $3,145,432, respectively.


	At March 31,
	2000		2001		2002		2003		2004
	(In thousands)
Balance sheet data:
Working capital¹	$	87,213	$	70,113	$	64,931	$	72,356	$	73,672
Total assets		139,717		132,048		123,273		123,548		122,286
Net assets²		122,906		109,059		106,500		111,341		110,033
Total debt³		2,472		2,046		1,062		828		422
Shareholders’ equity		122,906		109,059		106,500		111,341		110,033

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

²	Net assets is the excess of total assets over total liabilities.

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

Item 5. Operating and Financial Review and Prospects.

A.Operating results.


	Fiscal Year Ended March 31,
	2002		2003		2004
					As restated
Net sales	100.0	%	100.0	%	100.0	%
Cost of goods sold	76.4		72.7		79.1

Gross profit	23.6		27.3		20.9
Selling, general administrative expenses	16.8		20.3		28.4

Operating income (loss)	6.8		7.0		(7.5	)
Interest expense	0.1		0.1		0.0
Interest income	2.3		1.6		1.3
Other income	0.1		0.3		0.6

Income (loss) from continuing operations before income taxes	9.1		8.8		(5.6	)
Provision for income taxes	1.7		0.8		0.2

Income (loss) from continuing operations	7.4		8.0		(5.8	)
Discontinued operations:
Loss from operation of the discontinued thin-film electroluminescent (“TFEL”) display business	12.9		1.1		0.0
Gain on disposal of TFEL display business	0.0		0.0		0.0

Income (loss) before minority interests	(5.5	)	6.9		(5.8	)
Minority interests	1.8		0.0		0.0

Net income (loss)	(3.7	)	6.9		(5.8	)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Fiscal Year Ended March 31, 2004 Compared with Fiscal Year Ended March 31, 2003

Net Sales.Our net sales include sales of finished goods, parts and accessories, and tooling income from procuring, designing and manufacturing molds for certain products that our customers choose to own. Tooling income is not a primary source of our sales revenue and immaterial to overall sales. Net sales consist of gross amounts invoiced less discounts and returns. Revenues from product sales are recognized at the time of shipment when title passes. Under the Company’s standard terms and conditions of sale, which are mainly FOB shipping point, title and risk of loss transfer to customers at the time product is delivered to the customer’s freight forwarder, and revenue is recognized accordingly unless customer acceptance is uncertain or significant obligations remain. It is rare to have any contingency concerning title passing when explicit shipping terms are stated. We do not recognize sales for those products where the customer has any right of return. Returns historically have been immaterial.

Net sales in fiscal 2004 decreased approximately 11.4% to $66.9 million from $75.5 million in fiscal 2003. The decrease was primarily due to declining sales in kitchen appliances, and garment care and travel products that were not offset by the increase in sales of floor care products.

Net sales are comprised primarily of sales in our three product categories: kitchen appliances; garment care and travel products and floor care products. Sales in each major category for fiscal 2004 as compared to fiscal 2003 were as follows:

•

floor care product sales increased to $49.7 million, or 74.3% of net sales, from $42.1 million, or 55.8% of net sales, primarily due to new floor care product models contracted for by new customers. We anticipate that the sales of floor care products will continue to be a significant revenue source for us in the near term.

•

kitchen appliance sales decreased to $12.0 million, or 18.0% of net sales, from $26.3 million, or 34.8% of net sales, primarily due to decreases in sales of coffeemakers, breadmakers, and food steamers partially offset by increased sales of deep fryers. In fiscal 2004, our last remaining significant customer for coffeemakers chose to source from a lower cost competitor at prices we chose not to match. We anticipate that the sales of kitchen appliances will continue to decrease in the near future.We do not believe the decrease in sales of kitchen appliances will have a significant impact on our results of operations.

•

sales of garment care and travel products decreased to $1.6 million, or 2.4% of net sales, from $2.8 million, or 3.7% of net sales, primarily due to the decrease in sales of steam clothes brushes and steam irons to our only major customer for these based in Europe.

In fiscal 2004, sales to North America accounted for $56.1 million or 83.9 % of net sales as compared to $64.8 million, or 85.8% of net sales in fiscal 2003. We anticipate that North America will continue to be our dominated market in fiscal 2005. In fiscal 2004, sales to Asian countries increased by approximately $3.5 million to $5.7 million, or 8.6% of net sales in fiscal 2004 from $2.3 million, or 3.0% in fiscal 2003. The increased Asian sales were primarily due to the increased sales of a deep fryer model which accounted for 6.2% of net sales in fiscal 2004. However, there is no assurance that the customer will continue to buy this deep fryer model from us or that sales to Asia will continue to increase in fiscal 2005.

Gross profit. Gross profit consists of net sales less cost of goods sold, which includes the costs of raw materials, production materials, labor, in-bound freight, depreciation and factory overhead. Gross profit in fiscal 2004 was $14.0 million, or 20.9% of net sales, as compared to $20.6 million, or 27.3% of net sales, in fiscal 2003.

The decrease in gross profit as a percentage of net sales was primarily due to lower selling prices, higher material costs and lower production levels to absorb overhead. We reduced our selling prices on some of our products particularly to our largest floor care customers to assist them in retaining shelf space at the mass merchants. As we anticipate that sales of floor care products will continue to be a significant sales revenue source for us in the future, we believe we may have to lower the price of certain of our floor care products to retain and attract new floor care customers. In fiscal 2004, our raw material costs as a percentage of net sales was approximately 63.6% as compared to 59.1% in fiscal 2003. In addition, the increase in material costs including plastic resin, metal and motor components that were mostly used in the manufacturing of floor care products currently cannot be shifted to our customers. In particular, we are required to use higher-grade plastic resins, which are more expensive, for our manufacture of floor care products.

Labor and overhead expenses as a percentage of net sales were 15.5% in fiscal 2004 as compared to 13.6% in fiscal 2003. There was a shortage of labor in Guangdong Province and as a result, wage rates and benefits increased. In addition, we had higher depreciation charges due to the change in useful lives of some of our fixed assets as well as increases in overhead expenses including consumable goods, loose tooling and staff benefits. Overhead is primarily a fixed cost so production activity levels directly impact gross profit. We are continuing to deploy automation in an effort to control our production costs. For example, we recently shipped equipment to our manufacturing facility that when installed will automate our system of surface mount assembly on printed circuit boards. We believe this automation process will enhance our product quality and reduce overhead expenses.

Selling, general and administrative expenses. The primary components of our selling, general and administrative, or SG&A expenses are related to advertising and promotion, product design and development, transportation of finished goods, salaries for marketing and administrative personnel, professional fees, non-cash compensation expense and utilities. SG&A expenses in fiscal 2004 were $19.0 million, or 28.4% of net sales, as compared to $15.3 million, or 20.3% of net sales, in fiscal 2003. Shipping, handling or other costs that are incurred for the sale of products are classified as a selling expense. The primary shipping expense relates to inland freight from the factory to the port, where title is passed to the customer. During the fiscal years ended March 31, 2004 and 2003, shipping and handling costs charged to selling expenses were $1.4 million and $1.8 million, respectively.

The increased SG&A expenses in fiscal 2004 were primarily due to recognition of a non-cash stock compensation expense of approximately $2.4 million. On May 10, 2000, we offered a voluntary program to exchange up to 991,900 options ranging in exercise price from $8.31 to $19.00 and replace them with a reduced number of options at a lower exercise price of US$6.25 per share. As a result of this re-pricing, 711,175 options, together with the 12,500 options granted within six months before or after the date of cancellation of the old options, became subject to variable accounting prospectively and non-cash stock compensation expense would prospectively be recognized for subsequent changes in intrinsic value. No incremental compensation cost was recognized as of the exchange or for the fiscal years ended March 31, 2002 or 2003 under variable accounting as the intrinsic value of the subject options was zero. Non-cash compensation expense of $2.4 million was recognized in fiscal 2004 relating to these options. Subsequent recognition of non-cash compensation expense or reversal of that expense may occur in future periods as a result of changes in the market price for our common shares. See Note 4 “Restatement of information previously reported”, Note 22 “Basic and diluted earnings (loss) per share” and Note 30 “Stock options” of Notes to consolidated financial statements.

Excluding the effect of the non-cash stock compensation expense, SG&A expenses were approximately $16.7 million in fiscal 2004. Out of the total SG&A expenses in fiscal 2004, $2.0 million and $2.2 million respectively were attributable to our new display and OLED programs compared to $1.3 million for our OLED program in fiscal 2003. The aggregate increase of $2.9 million was the main contributor to our total SG&A expenses increasing $1.4 million. Shipping savings due to lower volume and a reduction in engineering and administrative staff in our core business offset some of the increase in our display and OLED programs and legal and professional fees. We do not believe the reduction in engineering and administrative staff will have a significant impact on our results of operations of the core business.

Approximately 20% of the SG&A expenses for our display program was for marketing and business development and the balance for actual product development. In both fiscal 2004 and 2003, SG&A included license amortization of $0.7 million. Excluding this, our OLED development program costs increased to $1.5 million in fiscal 2004 from $0.6 million in the prior year.

We expect that SG&A expenses will increase for both the Global Display and OLED programs in fiscal 2005 as a result of an accelerated effort to market and produce display products. However, we plan to continue to tighten our control on other discretionary costs particularly those related to our small appliance business. For fiscal 2005, we plan to spend approximately $6 million to further support and expand research and development for our display programs.In addition, we plan to incur approximately $1.0 million and $1.5 million for our core business and OLED program, respectively.

The primary components of design and development expense included in SG&A include design and prototyping costs, patent fees, testing charges, inspection fees and salaries for engineers and designers. In fiscal 2004, total product development expenses were $2.3 million as compared to $1.8 million (after netting out the effect of discontinued operations in fiscal 2003) in fiscal 2003. Of the $2.3 million in fiscal 2004, $0.7 million and $0.3 million were incurred in the display and OLED programs, respectively.

Operating income (loss). In fiscal 2004, we incurred an operating loss of $5.1 million, as compared to an operating income of $5.3 million in fiscal 2003. The decrease was mainly due to lower gross profit due to decreased sales and production in our core business, an increase in investment in our new display and our OLED development programs and $2.4 million of non-cash compensation expense recognized.

Interest expense, interest income and other income, net. Interest expense consists of interest on our short and long-term bank loans. Interest expense was approximately $18,000 in fiscal 2004 as compared to $57,000 in fiscal 2003. The decrease in interest expense was due to lower outstanding bank loans and a lower effective rate on our loan borrowings. Interest income in fiscal 2004 was approximately $851,000 as compared to $1.2 million in fiscal 2003. The decrease was due to a decline in interest rate on the funds invested by the Company as we primarily invest cash in low risk financial instruments. In fiscal 2004, we had an average invested fund balance which includes cash and cash equivalents and short-term investment of approximately $63.5 million with an average rate of return of approximately 1.3% as compared to an average invested fund balance of approximately $59.7 million with an average rate of return of approximately 2.1% in fiscal 2003. Other income, net includes sundry and non-recurring income. Other income, net, in fiscal 2004 was approximately $428,000, as compared to $228,000 in fiscal 2003, and consisted primarily of exchange gains in both years.

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

Our Chinese subsidiaries are subject to income tax based upon the taxable income as reported in the statutory financial statements prepared under Chinese accounting regulations. Our subsidiary in China was exempt from income tax for two years starting from its first profitable year (after utilizing accumulated tax loss carry forwards or a lapse of five years) followed by a 50% exemption for the next three years. In September 2002, our subsidiary in China filed amended tax returns with the tax authorities for the tax periods of 1995 to 2002. The PRC tax authorities confirmed our amended tax returns as submitted, establishing the first profitable year as 1999. Our Chinese subsidiary was not therefore subject to income tax from 1999 and 2000 and received a 50% exemption for the years from 2001 to 2003. Commencing January 1, 2004, our subsidiary in China is subject to the full tax rate of 27.0%. This Chinese subsidiary is our manufacturing facility that incurs a significant portion of our manufacturing overhead. This subsidiary makes sales of finished goods to our other subsidiaries. For these reasons, we do not believe the full tax rate will have a significant impact on our financial condition or results of operations. In fiscal 2004, we established a new subsidiary, Dongguan Lite Array Company Limited, which is also exempt from income tax for a two-year period effective from its first profitable year and followed by a 50% exemption for the next three years. We do not believe the full implementation of the PRC income taxes will have a significant impact on our financial condition and results of operations. To the extent that we have income effectively connected with the conduct of a U.S. trade or business in any fiscal year, we would be subject to U.S. taxes at an effective rate up to

55%. We do not believe that our current method of operations subjects us to U.S. taxes. We have established a subsidiary in Macau, China where we conduct sales, marketing, administration and other activities. Similar to our subsidiaries established in the British Virgin Islands, we are not subject to taxation in Macau in accordance with Macau tax regulations.

We had taxable income in Hong Kong in both fiscal 2004 and 2003. The financial statements include provisions for profits tax of approximately $108,000 and $624,000 in fiscal 2004 and 2003, respectively.

Discontinued operations. In the third quarter of fiscal 2003, we sold the TFEL business to the former management of Lite Array, Inc. The loss from operations of the discontinued TFEL business was $835,000 (excluding $29,000 gain on disposal of TFEL business) in fiscal 2003.

Net income (loss). In fiscal 2004, net loss was approximately $3.9 million, or $0.32 per share as compared to a net income of $5.3 million, or $0.43 per share in fiscal 2003.

Fiscal Year Ended March 31, 2003 Compared with Fiscal Year Ended March 31, 2002

Net Sales. Our sales includes sales of finished goods, parts and accessories, and tooling income from procuring, designing and manufacturing molds for certain products pursuant to customer purchase orders. Tooling income is not our primary source of sales revenue and immaterial as related to sales. Our net sales consist of gross amounts invoiced less discounts and returns. Revenues from products are recognized at the time of shipment when title passes. Under the Company’s standard terms and conditions of sale, which are FOB shipping point, title and risk of loss transfer to customers at the time the product is delivered to the customer’s freight forwarder, and revenue is recognized accordingly unless customer acceptance is uncertain or significant obligations remain. It is rare to have any contingency concerning the passage of title when explicit shipping terms are stated. We do not recognize sales for those products where the customer has any right of return. Returns historically have been immaterial.

Net sales in fiscal 2003 decreased approximately 11.5% to $75.5 million from $85.3 million in fiscal 2002. Decreases in sales of kitchen appliances, garment care and travel products were partially offset by the increase in sales of floor care products. Our floor care products sales to one major customer, Royal Appliance (“Royal”) decreased from $36.2 million in fiscal 2002 to $33.4 million in fiscal 2003. However, the reduction in sales to Royal was more than offset by sales of floor care products to new customers. Despite being acquired by TTI, our competitor in Hong Kong, Royal continued to place purchase orders on the existing floor care products manufactured by us. Our sales of personal care and kitchen appliance products were also negatively impacted by the bankruptcy of Moulinex.

Net sales are comprised primarily of sales in our three major product categories: kitchen appliances; garment care and travel products and floor care products. Sales in each major category for fiscal 2003 as compared to fiscal 2002 were as follows:

•

sales of kitchen appliances decreased to $26.3 million, or 34.8% of net sales, from $36.1 million, or 42.3% of net sales, primarily due to the decrease in sales of coffeemakers, breadmakers, and food steamers, deep fryers and food processors to two major European customers.

•

sales of garment care products decreased to $2.2 million, or 2.9% of net sales, from $6.5 million, or 7.7% of net sales, primarily due to the decrease in sales of steam irons to our only major customer for these products based in Europe. That customer was able to secure a lower cost source of supply in China and we chose not to match that lower price because of the impact it would have on our profit margins.

•

floor care products sales increased to $42.1 million, or 55.8% of net sales, from $37.3 million, or 43.8% of net sales, primarily due to new floor care product models contracted for by new customers. We anticipate that sales of floor care products should continue to be a significant source of revenue for us in the near term and will generate profit sufficient to offset the impact of the anticipated sales decrease in the garment care and kitchen appliance product categories.

Gross profit.Gross profit consists of net sales less cost of goods sold, which includes the costs of raw materials, production materials, labor, freight in, depreciation and factory overhead. It has historically been our goal to attempt to make product development decisions and work with particular partners based on the opportunity for consistently profitable sales. Since fiscal 2001, sales of certain personal care and kitchen appliance products have consistently resulted in lower gross margins. In recent years, we have concentrated on manufacturing more profitable floor-care products to offset the price pressure being exerted by mass merchandisers on garment and kitchen appliance products. Consequently, we have experienced decreased sales on lower margin products such as coffeemakers, breadmakers, food-steamers and steam irons because of our business decision to concentrate on the manufacture of products with higher profit margins.

Gross profit in fiscal 2003 was $20.6 million, or 27.3% of net sales, as compared to $20.2 million, or 23.6% of net sales, in fiscal 2002. The increase in gross profit as a percentage of net sales was primarily due to lower material costs. In fiscal 2003, our raw material costs as a percentage of net sales were approximately 59.1% as compared to 62.5% in fiscal 2002. This decrease resulted primarily from better supply chain management in raw materials and product components. Labor and other overhead expenses as a percentage of net sales were 13.6% in fiscal 2003 as compared to 13.8% in fiscal 2002. Excluding similar depreciation charges for both fiscal 2002 and 2003, labor and overhead expenses as a percentage of net sales were approximately 8.9% in fiscal 2003 as compared to 9.3% in fiscal 2002.

Selling, general and administrative expenses. The primary components of our selling, general and administrative, or SG&A, expenses are related to advertising and promotion, product design and development, transportation of finished goods, salaries for marketing and administrative personnel, professional fees and utilities. SG&A expenses in fiscal 2003 were $15.3 million, or 20.3% of net sales, as compared to $14.3 million, or 16.8% of net sales, in fiscal 2002. We incurred more design and prototyping costs in fiscal 2003 due to initiating a number of programs for our display business. We were not able to achieve our goal of maintaining SG&A expenses at 15% of net sales as we incurred higher depreciation and amortization charges for transportation equipment and our OLED license and higher rent due to relocation of our executive office in September 2002, which was only partially offset by a reduction in selling and transportation expenses and legal and professional fees. It is anticipated that the Global Display and OLED programs will not generate sufficient revenue in fiscal 2004 to absorb the SG&A expenses incurred in respect of these programs. Therefore, we expect SG&A expenses will continue to increase in the near future and we anticipate that our target of 15% of net sales will be exceeded in the next few years by a significant factor until sales of display oriented products materialize. Over the next two fiscal years, we expect design and development expenses to increase to approximately $4.0 million per fiscal year, including approximately $1.5 million for Lite Array and approximately $1.5 million for Global Display and the balance in our core business. It is anticipated that these increased development costs included in SG&A expenses will have a material impact on our results of operations for fiscal 2004 and into the following year.

In fiscal 2002, we recognized approximately $0.3 million for the impairment of property, plant and equipment; $5.2 million representing our share of a loss in a joint venture and $3.6 million for the write-off of goodwill arising from the acquisition of the TFEL business, which are all reflected separately in discontinued operations on our financial statements.

The primary components of design and development included in SG&A expenses include expenses related to sample design, patent fees, testing charges, inspection fees and salaries for engineers and designers. Development expenses were approximately $2.2 million and $2.0 million in fiscal 2002 and 2003, respectively. After netting out the effect of discontinued operations, development expenses were $2.0 million and $1.8 million in fiscal 2002 and 2003. R&D expenses incurred in our Global Display business were immaterial in fiscal 2003. In fiscal 2003, we also incurred approximately $140,000 in R&D expenditures for OLED. The expense was mainly attributable to the wages for the dedicated OLED R&D staff.

Operating income (loss). In fiscal 2003, operating income was $5.3 million as compared to $5.9 million in fiscal 2002. The decrease was primarily due to SG&A not decreasing in the same proportion as sales.

Interest expense, interest income and other income, net. Interest expense consists of interest on our short and long-term banking facilities. Interest expense was approximately $57,000 in fiscal 2003 as compared to $126,000 in fiscal 2002. The decrease in interest expense was due to a lower effective rate of interest on our loan

borrowings. Interest income in fiscal 2003 was $1.2 million as compared to $2.0 million in fiscal 2002. The decrease was due to a decline in interest rates on the funds invested by the Company as we primarily invest our cash in short-term U.S. Government paper. In fiscal 2003, we had an average invested fund balance which includes cash and cash equivalents and short-term investments of approximately $59.7 million with an average return on investments of approximately 1.58% as compared to an average invested fund balance of approximately of $55.9 million with an average rate of return of approximately of 2.3% in fiscal 2002. Other income, net, in fiscal 2003 was approximately $228,000, as compared to $85,000 in fiscal 2002. The decrease in fiscal 2003 was due to lower sundry income.

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

To the extent that we have income effectively connected with the conduct of a U.S. trade or business in any fiscal year, we would be subject to U.S. taxes at an effective rate up to 55%. We do not believe that our current method of operations subjects us to U.S. taxes. We have established a subsidiary in Macau, China where we conduct sales, marketing, administration and other activities. Similar to our subsidiaries established in the British Virgin Islands, we are not subject to taxation in Macau in accordance with Macau tax regulations.

We had taxable income in Hong Kong in both fiscal 2003 and 2002. The financial statements include provisions for profit tax of approximately $0.6 million and $1.4 million in fiscal 2003 and 2002, respectively. The provision for fiscal 2002 includes $0.8 million in penalties, interest and taxes imposed on an insurance settlement we had received six years ago as a result of a flood at our former factory. Our tax position was disputed by the Inland Revenue Department of Hong Kong in their audit of certain subsidiaries for the period 1993-2001. Accordingly, we determined that a settlement was appropriate and paid a total of $1.2 million to settle outstanding issues with the Inland Revenue Department in May 2002.

Discontinued operations. In the third quarter of fiscal 2003, we sold the TFEL business to the former management of Lite Array, Inc. The loss from operations of the discontinued TFEL business was $11.0 million and $835,000 (excluding $29,000 gain on disposal of TFEL business) in fiscal 2002 and 2003, respectively.

Minority interests. Lite Array’s minority shareholder’s share of the loss in Lite Array has been credited to the income statement up to the total minority interest. All further losses incurred at Lite Array will accrue to us since the minority interest was exhausted in fiscal 2002.

Net income (loss). In fiscal 2003, net income was approximately $5.3 million or $0.43 per share, as compared to a net loss of $3.0 million, or $0.25 per share, in fiscal 2002.

Item 15. Controls and Procedures

The Company maintains a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures under supervision and with the participation of management, including the Company’s Chief Executive Officer and Acting Chief Financial Officer, as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Acting Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic Securities and Exchange Commission filings. There are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and circumvention or overriding of the controls and procedures. Further, the design of an internal control system must reflect the fact that we are subject to resource constraints, and the derived benefit must be evaluated as related to costs. When preparing its financial statements for fiscal 2005, the Company discovered an inadvertent error in its previously reported results for its fiscal year ended March 31, 2004 and previously announced fiscal 2005 periods. This unintentional error resulted from the failure for the last three quarters of fiscal 2004 and the first three quarters of fiscal 2005 to recognize non-cash compensation expense and income, respectively, related to the application of variable accounting to unexercised stock options issued by the Company in 2000 in an option exchange program. The Company took remedial action to issue a press release to the public and is filing this amended Form 20-F for fiscal 2004 and an amended Form 6-K with an amended quarterly report for the three and nine months ended December 31, 2004 to include restated financial statements reflecting these changes.

It should be noted that the design of any system of control is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. No significant changes were made to the Company’s internal controls or other factors that could significantly affect these controls subsequent to the date of evaluation.

Item 18. Financial Statements.

See pages F-1 through F-47 incorporated herein by reference.

Item 19. Exhibits.

See “Exhibit Index” on page E-1.

SIGNATURES

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

Date: September 23, 2005


GLOBAL-TECH APPLIANCES INC.

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

Audited Financial Statements

GLOBAL-TECH APPLIANCES INC.

(Incorporated in the British Virgin Islands with limited liability)

March 31, 2004

F - 1

GLOBAL-TECH APPLIANCES INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Pages
Reports of the Independent Auditors		F-3– F-4

Consolidated Balance Sheets as of March 31, 2003 and 2004		F-5

Consolidated Statements of Operations for Each of the Three Fiscal Years in the Period Ended March 31, 2004		F-6

Consolidated Statements of Changes in Shareholders’ Equity for Each of the Three Fiscal Years in the Period Ended March 31, 2004		F-7

Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended March 31, 2004		F-8– F-9

Notes to Consolidated Financial Statements		F-10– F-47

F - 2

REPORT OF THE INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheets of Global-Tech Appliances Inc. (a company incorporated in the British Virgin Islands; “Global-Tech”) and Subsidiaries (“the Company”) as of 31st March 2002, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for the year ended 31st March 2002. These accounts are the responsibility of the Company’s management. Our responsibility is to express an opinion on these accounts based on our audit.

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

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

PricewaterhouseCoopers

Hong Kong

31st August 2002, except for the effects of the restatement detailed in notes 20, 21 and 27, for which the date is 9th July, 2003.

F - 3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Global-Tech Appliances Inc.

We have audited the accompanying consolidated balance sheets of Global-Tech Appliances Inc. and its subsidiaries as of March 31, 2003 and 2004, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the two years in the period ended March 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global-Tech Appliances Inc. and its subsidiaries at March 31, 2003 and 2004, and the consolidated results of their operations and their cash flows for each of the two years in the period ended March 31, 2004, in conformity with U.S. generally accepted accounting principles.

As described in note 4 to the consolidated financial statements, the accompanying consolidated financial statements of Global-Tech Appliances Inc. as of March 31, 2004 and for the year ended March 31, 2004 have been restated.

Ernst & Young

Hong Kong

July 14, 2004, except for the effects of the restatements detailed in notes 3(o), 4, 20, 22 and 30, for which the date is August 26, 2005.

F - 4

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2003 AND 2004


	2003		2004
	US$		US$
			(as restated)
ASSETS

Current assets:
Cash and cash equivalents	21,514,277		15,102,510
Restricted cash	831,803		400,075
Callable deposit	—		5,000,000
Short-term investments	41,401,256		43,983,462
Accounts receivable, net	10,247,140		9,991,037
Deposits, prepayments and other assets	2,681,084		2,497,126
Inventories	7,507,110		8,808,455

Total current assets	84,182,670		85,782,665

Loan to a director	228,232		151,850
Property, plant and equipment	32,648,982		30,791,071
Land use rights	1,937,544		1,886,968
License	3,592,420		2,897,809
Patents	241,988		222,994
Promissory note receivable	716,380		553,089

Total assets	123,548,216		122,286,446

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Short-term bank loans	—		48,007
Current portion of long-term bank loans	512,046		373,612
Accounts payable	5,153,300		5,130,587
Fees payable for land use rights	273,003		91,019
Salaries and allowances payable	585,293		677,439
Accrued expenses	1,576,200		2,037,188
Income tax payable	3,726,645		3,753,125

Total current liabilities	11,826,487		12,110,977

Long-term bank loans	316,010		—
Deferred tax liabilities, net	64,400		142,928

Total liabilities	12,206,897		12,253,905

Shareholders’ equity:
Common stock, par value $0.01; 50,000,000 shares authorized; 12,830,000 and 12,857,045 shares issued as of March 31, 2003 and March 31, 2004	128,300		128,570
Preferred stock, par value $0.01; 1,000,000 shares authorized; no shares issued	—		—
Additional paid-in capital	81,753,145		84,226,550
Retained earnings	34,682,164		30,726,366
Accumulated other comprehensive deficits	(622,163	)	(555,498	)
Less: Treasury stock, at cost, 689,147 and 679,147 shares as of March 31, 2003 and March 31, 2004	(4,600,127	)	(4,493,447	)

Total shareholders’ equity	111,341,319		110,032,541

Total liabilities and shareholders’ equity	123,548,216		122,286,446

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

F - 5

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE FISCAL YEARS ENDED MARCH 31, 2002, 2003 AND 2004


	2002		2003		2004
	US$		US$		US$
					(as restated)
Net sales	85,321,486		75,489,275		66,901,315
Cost of goods sold	(65,148,112	)	(54,906,458	)	(52,942,382	)

Gross profit	20,173,374		20,582,817		13,958,933
Selling, general and administrative expenses	(14,299,163	)	(15,297,908	)	(19,018,822	)

Operating income (loss)	5,874,211		5,284,909		(5,059,889	)
Interest expense	(125,950	)	(56,550	)	(17,589	)
Interest income	1,983,763		1,240,648		851,066
Other income	84,648		228,380		427,814

Income (loss) from continuing operations before income taxes	7,816,672		6,697,387		(3,798,598	)
Provision for income taxes	(1,416,716	)	(624,230	)	(107,767	)

Income (loss) from continuing operations	6,399,956		6,073,157		(3,906,365	)

Discontinued operations:
Loss from operations of discontinued thin film electro-luminescent (“TFEL”) display business, net of applicable income tax of $nil for 2002 and 2003	(10,992,846	)	(835,446	)	—
Gain on disposal of TFEL business, net of applicable income tax of $nil	—		29,010		—

Loss on discontinued operations	(10,992,846	)	(806,436	)	—

Net income (loss) before minority interests	(4,592,890	)	5,266,721		(3,906,365	)
Minority interests	1,570,273		—		—

Net income (loss)	(3,022,617	)	5,266,721		(3,906,365	)

Basic and diluted earnings (loss) per common share	(0.25	)	0.43		(0.32	)


	Number		Number		Number

Basic and diluted weighted average number of shares outstanding	12,139,564		12,140,853		12,152,592

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

F - 6

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEARS ENDED MARCH 31, 2002, 2003 and 2004


	Number of shares				Amounts
	Common stock		Treasury stock		Common stock		Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive deficits		Total shareholders’ equity
					US$		US$		US$		US$		US$		US$
Balance as of March 31, 2001	12,830,000		(692,647	)	128,300		81,661,840		32,456,646		(4,637,465	)	(550,257	)	109,059,064

Net loss	—		—		—		—		(3,022,617	)	—		—		(3,022,617	)

Other comprehensive income – • unrealized loss on marketable securities, net of income tax of $nil	—		—		—		—		—		—		(178,918	)	(178,918	)
• reclassification adjustment for loss included in net income	—		—		—		—		—		—		532,150		532,150

Total comprehensive loss															(2,669,385	)

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

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

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

Balance as of March 31, 2002	12,830,000		(689,147	)	128,300		81,753,145		29,415,443		(4,600,127	)	(197,025	)	106,499,736

Net income	—		—		—		—		5,266,721		—		—		5,266,721

Other comprehensive income -
• unrealized gain on marketable securities, net of income tax of $nil	—		—		—		—		—		—		298,656		298,656

• reclassification adjustment for gain included in net income	—		—		—		—		—		—		1,288		1,288

• foreign currency translation adjustments	—		—		—		—		—		—		(725,082	)	(725,082	)

Total comprehensive income															4,841,583

Balance as of March 31, 2003	12,830,000		(689,147	)	128,300		81,753,145		34,682,164		(4,600,127	)	(622,163	)	111,341,319

Net loss, as restated	—		—		—		—		(3,906,365	)	—		—		(3,906,365	)

Other comprehensive income -
• unrealized gain on marketable securities, net of income tax of $nil	—		—		—		—		—		—		43,684		43,684

• foreign currency translation adjustments	—		—		—		—		—		—		22,981		22,981

Total comprehensive loss, as restated															(3,839,700	)

Issuance of treasury stock	—		10,000		—		—		—		106,680		—		106,680

Loss on issuance of treasury stock	—		—		—		—		(49,433	)	—		—		(49,433	)

Stocks compensation expense on options granted, as restated							2,355,319								2,355,319

Shares issued on exercise of options	36,545		—		365		205,868		—		—		—		206,233

Shares retired	(9,500	)	—		(95	)	(87,782	)	—		—		—		(87,877	)

Balance as of March 31, 2004, as restated	12,857,045		(679,147	)	128,570		84,226,550		30,726,366		(4,493,447	)	(555,498	)	110,032,541

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

F - 7

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED MARCH 31, 2002, 2003 and 2004


	2002		2003		2004
	US$		US$		US$
					(as restated)
Cash flows from operating activities:

Net income (loss) before minority interests	(4,592,890	)	5,266,721		(3,906,365	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization	912,606		868,085		916,163
Depreciation	4,541,452		4,326,955		5,011,615
Write-off of property, plant and equipment	—		163,312		22,354
Share of loss of a joint venture	5,236,684		—		—
Realized gain on disposal of short-term investments	(88,679	)	—		—
Gain on disposal of TFEL business	—		(29,010	)	—
Provision for impairment of property, plant and equipment	258,233		—		—
Write-off of goodwill	3,611,472		—		—
Issuance of stock options in lieu of consultancy fee	91,305		—		—
Stock compensation expense on options granted	—		—		2,355,319
Issuance of treasury stock in lieu of consultancy fee	—		—		57,247
Provision for income taxes	1,416,716		624,230		107,767
Changes in operating assets and liabilities:
Accounts receivable, net	(2,928,579	)	1,954,483		256,103
Deposits, prepayments and other assets	396,758		(558,772	)	183,958
Inventories	5,251,794		2,139,223		(1,301,345	)
Prepayment of land use rights	51,337		—		—
Promissory note receivable	188,398		58,222		2,272
Accounts payable	(7,769,245	)	(1,084,668	)	(22,713	)
Fees payable for a license	—		(1,800,000	)	—
Fees payable for land use rights	16,983		—		(181,984	)
Salaries and allowances payable	(386,371	)	43,471		92,146
Accrued expenses	(2,093,991	)	(353,170	)	508,995
Tax paid	(3,518	)	(1,230,199	)	(3,585	)

Net cash provided by operating activities	4,110,465		10,388,883		4,097,947

(To be continued)

F - 8

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED MARCH 31, 2002, 2003 and 2004 (continued)


	2002		2003		2004
	US$		US$		US$
					(as restated)
Cash flows from investing activities:

Proceeds from disposal of short-term investments	33,918,955		32,365,071		73,630,776
Proceeds from disposal of TFEL business	—		96,153		—
Purchase of a license	(800,000	)	—		—
Purchase of patents	(271,300	)	—		—
Purchase of short-term investments	(10,934,468	)	(64,951,111	)	(76,119,942	)
Loans granted to Lite Array prior to acquisition	(2,000,000	)	—		—
Purchases of property, plant and equipment	(1,991,086	)	(3,482,323	)	(3,168,940	)
Decrease in a loan to a director	78,461		76,667		76,667
Decrease in a promissory note	—		—		161,904
Increase (decrease) in an amount due to a director	180,000		(170,058	)	—
Increase in loans to a joint venture	(1,483,495	)	—		—
Increase in an investment in a joint venture	—		9,368		—
Net cash inflow in respect of the acquisition of subsidiaries	1,150,269		—		—
Increase in a callable deposit	—		—		(5,000,000	)
Decrease (increase) in restricted cash	—		(831,803	)	431,728

Net cash provided by (used in) investing activities	17,847,336		(36,888,036	)	(9,987,807	)

Cash flows from financing activities:

Issuance of treasury stock to consultants	18,752		—		—
Repayment of short-term bank borrowings	(816,472	)	—		—
Increase in long-term bank loans	—		686,903		—
Repayment of long-term bank loans	(1,060,076	)	(935,129	)	(435,407	)
Proceeds from stock option exercises	—		—		118,356

Net cash used in financing activities	(1,857,796	)	(248,226	)	(317,051	)

Net increase (decrease) in cash and cash equivalents	20,100,005		(26,747,379	)	(6,206,911	)

Cash and cash equivalents at beginning of fiscal year	28,489,112		48,589,117		21,514,277
Effect of foreign exchange rate changes on cash	—		(327,461	)	(204,856	)

Cash and cash equivalents at end of fiscal year	48,589,117		21,514,277		15,102,510

Supplemental disclosure information:
Cash paid for interest expense	125,950		56,660		17,589
Cash paid for tax expense	3,518		1,230,199		3,585

F - 9

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1	Organization and principal activities

Global-Tech Appliances Inc. (“Global-Tech”) was incorporated in the British Virgin Islands and is an investment holding company. Global-Tech and its subsidiaries are hereinafter collectively referred to as the “Company”. The Company is a designer, manufacturer and marketer of a wide range of consumer electrical products worldwide, including floor care products and small household appliances. During the year, the Company began exploring opportunities in display-oriented products and established a subsidiary, which focused on the development and manufacturing of high-value, more technologically advanced consumer products incorporating flat-panel displays. The Company’s manufacturing operation is located in Dongguan, the People’s Republic of China (“China”). The Company’s products are sold to customers primarily in the United States and Europe.

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

F - 10

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2	Subsidiaries

Details of Global-Tech’s principal subsidiaries as of March 31, 2004 were as follows:


Name of subsidiary	Place of incorporation/ establishment	Percentage of equity interest held	Principal activities
Kwong Lee Shun Trading Company Limited	Hong Kong	100%	Provision of management services
Pentalpha Enterprises Limited	Hong Kong	100%	Trading of raw materials and finished products
Pentalpha Hong Kong Limited	Hong Kong	100%	Trading of raw materials and household appliance products
Dongguan Wing Shing Electrical Products Factory Company Limited (“DWS”)	China	100%	Manufacturing of household appliance products
Wing Shing Products (BVI) Company Limited	British Virgin Islands	100%	Trading of household appliance products
Wing Shing Overseas Limited	British Virgin Islands	100%	Trading of raw materials and household appliance products
Global-Tech USA, Inc.	United States	100%	Provision of investment-related services
Pentalpha Macau Commercial Offshore Limited (“PMA”)	Macau	100%	Trading of household appliance products
Global Lite Array (BVI) Limited (“GLA”)	British Virgin Islands	76.75%	Investment holding
Lite Array OLED (BVI) Company Limited	British Virgin Islands	76.75%	Trading of raw materials and organic solid state flat-panel displays
Lite Array, Inc. (“LA”)	United States	76.75%	Research and development of organic solid state flat-panel displays
Global Display Limited	Hong Kong	100%	Development and marketing of multimedia flat-panel display products
GT Investments (BVI) Limited	British Virgin Islands	100%	Investment holding
Dongguan Lite Array Company Limited	China	100%	Manufacturing of flat-panel display products

3	Summary of significant accounting policies

(a)

Basis of consolidation

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

F - 11

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(b)

Subsidiaries

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

(c)

Use of estimates

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

(d)

Cash and cash equivalents

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

(e)

Short-term investments

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

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

(f)	Inventories

Inventories are stated at the lower of cost or market value. Cost, calculated on the first-in, first-out basis, comprises materials and, where applicable, direct labor and an appropriate proportion of production overhead expenditure.

F - 12

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(g)

Property, plant and equipment

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


		Annual rate
Leasehold improvements and buildings		Over the remaining lease term
Plant		4.5%
Machinery		10%
Moulds		20% - 33.3%
Transportation equipment		15% - 20%
Furniture, fixtures and equipment		15%

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

(h)	Goodwill and intangible assets

Goodwill represents the excess of cost over the fair value of net tangible and identifiable assets of the acquired business. In accordance with SFAS No. 142: “Goodwill and Other Intangible Assets”, goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests in certain circumstances.

Intangible assets represent a license and patents. Intangible assets are carried at cost less accumulated amortization. Intangible assets with a definite useful life will continue to be amortized using the straight-line method over the estimated lives of the assets. The license for Organic Light Emitting Diode (“OLED”) technology was recorded at fair value upon acquisition of LA. The license is being amortized on a straight-line basis over the expected remaining future economic life of 7 years starting from the date of acquisition. Patents are stated at historical cost and are amortized on a straight-line basis over the expected future economic lives ranging from 11 to 20 years.

F - 13

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(i)	Sales and revenue recognition

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

Under the Company’s standard terms and conditions of sales, which are mainly Free On Board shipping point, title and risk of loss transfer to the customer at the time product is delivered to the customer’s freight forwarder. At that time revenue is recognized unless customer acceptance is uncertain or significant obligations remain.

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

(j)	Advertising costs

Advertising costs represent costs relating to promotional activities intended to stimulate, directly or indirectly, a customer’s purchase of goods, and are charged to expense as incurred. Advertising expenses were US$8,133, US$10,764 and US$100,698 for the fiscal years ended March 31, 2002, 2003 and 2004, respectively.

(k)

Shipping and handling costs

Any shipping, handling or other costs incurred by the Company associated with sale of products are expensed as a selling expense. The primary shipping expense relates to inland freight from the factory to the port, where title passes to the customer. During the fiscal years ended March 31, 2002, 2003 and 2004, shipping and handling costs charged to selling expenses were US$1,959,283, US$1,814,460 and US$1,418,367, respectively.

Any inbound freight charges, receiving, inspection, warehousing and internal transfer costs incurred by the Company are expensed as cost of good sold. During the fiscal years ended March 31, 2002, 2003 and 2004, inbound freight costs charged to cost of good sold were US$675,740, US$567,567 and US$660,656, respectively. The other related costs are included in manufacturing overhead.

(l)

Foreign currencies

The functional currency of the Company is the Hong Kong dollar. The functional currencies of the Company’s subsidiaries in the locations outside Hong Kong are the respective local currencies.

F - 14

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(l)

Foreign currencies (continued)

In the financial statements of the individual companies, transactions in other currencies during the year are translated into the respective currencies at exchange rates in effect at the time of the transactions. Monetary assets and liabilities denominated in other currencies at any balance sheet date are remeasured into the respective currencies at the rates of exchange in effect at such balance sheet date. Non-monetary assets and liabilities, income and expenses denominated in other currencies are remeasured into the respective currencies at the rates of exchange in effect at the time of the transactions. Aggregate exchange gains and losses are included in the results of operations.

On consolidation, the financial statements of the subsidiaries are translated into United States dollars at rates of exchange in effect at the balance sheet date for assets and liabilities, and at the average rates of exchange during the year for income and expense items. Translation differences arising therefrom are credited or charged to the accumulated other comprehensive deficit account.

(m)	Operating leases

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

(n)	Income taxes

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

F - 15

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(o)	Stock-based compensation

The Company applies the intrinsic-value-based method prescribed in Accounting Principles Board (“APB”) Opinion No. 25: “Accounting for Stock Issued to Employees” in accounting for employee stock options. Accordingly, compensation expense is generally recognized only when options are granted with a discounted exercise price. Any resulting compensation expense is recognized ratably over the associated service period, which is generally the option vesting term.

On May 10, 2000, Global-Tech offered employees a voluntary program to exchange options previously granted at exercise prices ranging from US$8.31 to $19.00 for a lower number of options at an exercise price of US$6.25. In accordance with FASB Interpretation No. 44 (“FIN 44”): “Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25”, re-pricing of stock options in any form results in variable accounting. If the exercise price of a stock option is reduced, the modified stock option should be accounted for as variable from the date of modification to the date the award is exercised, is forfeited or expires unexercised. Additional non-cash compensation is adjusted for subsequent changes in the intrinsic value of the modified options (measured as the difference between the exercise price of the stock option and market value of the Company’s stock price) and additional compensation expense or income is recognized over the remaining vesting period.

F - 16

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(o)	Stock-based compensation(continued)

The Company has adopted the disclosure-only provisions of SFAS No. 123. The Company has determined pro forma net earnings and earnings per share information as if the fair value method described in SFAS No.123: “Accounting for Stock Based Compensation” had been applied to its employee stock-based compensation. The pro forma effect on net earnings (loss) and earnings (loss) per share for the fiscal years ended March 31, 2002, 2003 and 2004 is as follows:


	Year Ended March 31,
	2002		2003		2004
	US$		US$		US$
	(as revised)				(as restated)
	(Note)
Net income (loss), as reported or restated, where appropriate	(3,002,617	)	5,266,721		(3,906,365	)
Add: Stock compensation expense under APB Opinion No.25	—		—		2,355,319
Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of income tax of $nil	(1,948,010	)	(218,480	)	(6,289	)

Pro forma net income (loss) as reported or restated, where appropriate	(4,950,627	)	5,048,241		(1,557,335	)

Earnings (loss) per share
Basic – as reported or restated, where appropriate	(0.25	)	0.43		(0.32	)
Basic – pro forma	(0.41	)	0.42		(0.13	)

Diluted – as reported or restated, where appropriate	(0.25	)	0.43		(0.32	)
Diluted – pro forma	(0.41	)	0.42		(0.13	)

F - 17

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(o)	Stock-based compensation(continued)

Note:

The Company revised the pro forma effect on net loss and loss per share amounts for the fiscal year ended March 31, 2002 after re-calculation of total stock-based compensation expense determined under the fair value method for all awards.

The pro forma effects of revision on net loss and loss per share amounts for the fiscal year ended March 31, 2002 are set out below.


	2002
	US$
Pro forma net loss, as previously reported	(3,021,344	)
Additional stock-based compensation expense determined under the fair value method for all awards after revision, net of income tax of $nil	(1,929,283	)

Pro forma net loss, as revised	(4,950,627	)


	2002
	US$
Pro forma basic and diluted loss per common share, as previously reported	(0.25	)
Impact on pro forma basic and diluted loss per common share as a result of additional stock-based compensation expense determined under the fair value method for all awards after revision	(0.16	)

Pro forma basic and diluted loss per common share, as revised	(0.41	)

The Company accounts for stock options granted to a counter party other than an employee in accordance with EITF Issue No. 96-18: “Accounting for Equity Instruments That Are Issued to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services”. Fair value of the equity instruments is recognized on the measurement date. Measurement date is the date at which (i) a commitment for performance by the counter party to earn the equity instruments is reached or (ii) the counter party’s performance is completed.

F - 18

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(p)	Treasury stock

The Company accounts for the acquired shares of its own capital stock (“treasury stock”) in accordance with Accounting Research Bulletin (“ARB”) No. 43, Chapter 1B and APB Opinion No. 6. The cost of the acquired treasury stock is shown as a deduction from capital. When the treasury stock is reissued, an excess of purchase price over par or stated value is allocated between additional paid-in capital and retained earnings. Gains on sales of treasury stock not previously accounted for as constructively reissued are credited to additional paid-in capital while losses are charged to additional paid-in capital to the extent that previous net gains from the sale or retirement of the same class of stock are included therein, otherwise to retained earnings.

(q)	Comprehensive income

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

(r)	Loss contingencies

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

(s)	New Statements of Financial Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (“FIN 46”): “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen. FIN 46 provides a new framework for identifying variable interest entities (“VIEs”) and determining when a company should include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated financial statements. In general, a VIE is a corporation, partnership, limited liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either (i) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (ii) has a group of equity owners that are unable to make significant decisions about its activities, or (iii) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.

F - 19

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3	Summary of significant accounting policies (continued)

(s)

New Statements of Financial Accounting Standards (continued)

FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIE’s activities, is entitled to receive a majority of the VIE’s residual returns (if no party absorbs a majority of the VIE’s losses), or both.

A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE’s assets, liabilities and non-controlling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest.

FIN 46 was effective immediately for VIEs created after January 31, 2003. The provisions of FIN46, as revised, were early adopted for the Company’s interests in all VIEs and there was no cumulative effect on the Company’s results of operations or financial position upon the adoption of the provisions of the revised FIN 46.

F - 20

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.	Restatement of information previously reported

Subsequent to the issuance of the Company’s consolidated financial statements included in the annual report on Form 20-F for the fiscal year ended March 31, 2004 that was filed with the U.S. Securities and Exchange Commission on September 30, 2004, the Company made an adjustment of US$2,355,319 to stock compensation expense for 2004 to properly apply variable accounting for the replacement options granted in 2000. The original calculation did not properly calculate the intrinsic value of the replacement options as of March 31, 2004.

The effects of the adjustment on net loss, per share amounts and shareholders’ equity for the fiscal year ended March 31, 2004 are set out below.


	2004
	US$
Net loss, as previously reported	(1,551,046	)
Stock compensation expense recognized	(2,355,319	)

Net loss, as restated	(3,906,365	)


	2004
	US$
Loss per common share, as previously reported	(0.13	)
Impact on loss per common share as a result of the stock compensation expense recognized	(0.19	)

Loss per common share, as restated	(0.32	)


	2004
	US$
Total shareholders’ equity, as previously reported	110,032,541
Adjustment to net loss	(2,355,319	)
Adjustment to additional paid-in capital	2,355,319

Total shareholders’ equity, as restated	110,032,541

The restatement did not have any effect on cash flow or total shareholders’ equity as previously reported.

F - 21

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5	Cash and cash equivalents


	2003	2004
	US$	US$
Cash on hand and in banks	18,134,514	14,349,619
Money market fund	3,379,763	752,891

	21,514,277	15,102,510

6	Restricted cash

At March 31, 2004, cash of US$400,075 (2003: US$831,803) was pledged for banking facilities.

F - 22

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7	Short-term investments

The following is a summary of investment securities as of March 31, 2003 and 2004:


	Amortized Cost	Unrealized Gains	Fair Value
	US$	US$	US$
March 31, 2003

Available-for-sales securities:
Treasury bills	32,820,957	78,303	32,899,260
Equity securities	3,124	—	3,124
Debt securities	8,474,256	24,616	8,498,872

	41,298,337	102,919	41,401,256


	Amortized Cost	Unrealized Gains	Fair Value
	US$	US$	US$
March 31, 2004

Available-for-sales securities:
Treasury bills	34,907,639	38,601	34,946,240
Equity securities	3,124	—	3,124
Debt securities	8,926,096	108,002	9,034,098

	43,836,859	146,603	43,983,462

F - 23

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7	Short-term investments (continued)

The amortized cost and estimated fair value of the debt securities as at March 31, 2004, by contractual maturity, are shown below:


	Cost	Fair Value
	US$	US$
Due in one year or less	2,683,636	2,710,798
Due after one year through to five years	4,235,793	4,307,700
Due after five years through to ten years	2,006,667	2,015,600

	8,926,096	9,034,098

8	Accounts receivable, net


	2003		2004
	US$		US$
Trade receivables	10,286,223		10,029,161
Less: Allowance for doubtful accounts	(39,083	)	(38,124	)

	10,247,140		9,991,037

During the fiscal year ended March 31, 2004, no trade receivables (2002 and 2003: Nil) were written off against the allowance for doubtful accounts.

9	Inventories


	2003	2004
	US$	US$
Raw materials	4,133,697	4,325,079
Work-in-progress	2,552,922	3,382,301
Finished goods	820,491	1,101,075

	7,507,110	8,808,455

F - 24

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10	Related party transactions

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

The Company had the following transactions and balances with related parties during the three fiscal years ended March 31, 2004:

(a)

As of March 31, 2002, 2003 and 2004, the Company incurred annual real estate rental expenses of approximately US$818,988, US$719,318 and US$731,981, respectively, payable to related companies with common directors.

(b)

In October 1998, the Company extended an unsecured loan of US$1,000,000 to a United States corporation wholly owned by the spouse of an executive employee of the Company. The loan was granted to finance its start-up costs and working capital. The loan bears interest at a fixed annual rate of 7.0% and is repayable in quarterly installments of approximately US$80,952 commencing October 28, 2003, with any remaining balance due in full on October 28, 2008. The loan plus accrued interest was US$1,550,360 and US$1,530,762 as of March 31, 2003 and 2004 respectively. The Company provided a reserve of US$833,980 and US$977,673 against the loan and the related interest receivable as of March 31, 2003 and 2004 respectively. The net amount of the loan was included as a promissory note receivable on the accompanying balance sheet.

(c)

In October 1999, the Company made a loan to an executive employee for the purchase of a residence. The loan is in the original principal amount of US$460,000, bearing interest at a fixed annual rate of 6.02% and is secured by a mortgage on the property. As of March 31, 2003 and 2004, the loan balance was US$228,232 and US$151,850 respectively. The loan is repayable in six years with an annual installment of US$76,667 of principal together with interest on the unpaid principal balance, commencing October 2000; however, such annual repayments are forgiven in arrears on each repayment due date in consideration for the executive employee’s continued employment by the Company. The loan forgiven amount during the fiscal year was recorded as a compensation expense and charged to the statement of operations.

F - 25

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11	Property, plant and equipment


	2003		2004
	US$		US$
Leasehold improvements and buildings	21,150,835		21,156,857
Plant and machinery	21,012,712		22,420,995
Moulds	9,382,853		9,895,691
Transportation equipment	1,302,112		1,401,384
Furniture, fixtures and equipment	3,650,313		4,616,455

	56,498,825		59,491,382

Less: Accumulated depreciation	(23,849,843	)	(28,700,311	)

	32,648,982		30,791,071

In the year ended March 31, 2004, no impairment loss (2002: US$258,233 and 2003: Nil) was recognized in the statement of operations related to the TFEL business (Note 21).

As of March 31, 2003 and 2004, buildings with an aggregate net book value of approximately US$136,029 and US$122,681, respectively, were situated in Hong Kong and were held under leases expiring in 2044, and a manufacturing facility with an aggregate net book value of approximately US$16,749,404 and US$15,805,788 as of March 31, 2003 and 2004, respectively was situated in China. The land where the manufacturing facility was situated in China was held under land use rights that expire in 2043.

The amount of depreciation charged for the fiscal years ended March 31, 2002, 2003 and 2004 was US$4,541,452, US$4,326,955 and US$5,011,615 respectively.

12	Land use rights


		2003		2004
		US$		US$
		1,937,544		1,886,968

Land use rights represent operating lease expenses on land use payable in advance, which are charged to the statement of operations over the lease periods on a straight-line basis. The title certificate of such prepayment has not yet been obtained as at March 31, 2004.

F - 26

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13	License


	2003		2004
	US$		US$
At cost	4,866,701		4,867,762
Less: Accumulated amortization	(1,274,281	)	(1,969,953	)

	3,592,420		2,897,809

Amortization expense for the fiscal year	695,243		695,395

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

Estimated amortization expense:


		US$
For the fiscal year ended March 31, 2005		695,474
For the fiscal year ended March 31, 2006		695,474
For the fiscal year ended March 31, 2007		695,474
For the fiscal year ended March 31, 2008		695,474
For the fiscal year ended March 31, 2009		115,913

F - 27

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14	Patents


	2003		2004
	US$		US$
At cost	268,512		268,570
Less: Accumulated amortization	(26,524	)	(45,576	)

	241,988		222,994

Amortization expense for the fiscal year	19,086		19,046

Estimated amortization expense:


		US$
For the fiscal year ended March 31, 2005		19,577
For the fiscal year ended March 31, 2006		19,577
For the fiscal year ended March 31, 2007		19,577
For the fiscal year ended March 31, 2008		19,577
For the fiscal year ended March 31, 2009		19,577

15	Short-term bank loans


	2003	2004
	US$	US$
Bank overdrafts	—	10,490
Short-term bank loans	—	37,517

	—	48,007

Short-term bank borrowings drawn for working capital purposes are denominated in United States dollars and bear interest at rates ranging from 6.63% (2003: 6.87%) to 13.99% (2003: 13.99%) per annum.

F - 28

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15	Short-term bank loans (continued)

As of March 31, 2003 and 2004, certain subsidiaries had banking facilities of approximately HK$221,852,336 (equivalent to approximately US$28,446,254) and HK$237,894,696 (equivalent to US$30,509,881, respectively, for overdrafts, bank loans, guarantees and letters of credit, of which approximately HK$8,482,832 (equivalent to US$1,087,682) and HK$10,440,522 (equivalent to US$1,338,992), respectively, had been utilized as follows:


	2003	2004
	US$	US$
Letter of credit and shipping guarantees	210,231	743,652
Bills payable	34,484	153,684
Trust receipt loans	14,911	20,037
Bank loans	828,056	421,619

	1,087,682	1,338,992

The banking facilities are denominated in Hong Kong dollars except for a fixed loan facility of approximately EURO 414,732.

16	Long-term bank loans


	2003		2004
	US$		US$
Bank loans with interest charged at the following rates:
HIBOR + 1% per annum	231,687		35,655
LIBOR + 0.5% per annum	596,369		337,957
Less: Amount due within one year included under current liabilities	(512,046	)	(373,612	)

	316,010		—

Weighted average interest rate at the end of year	2.99	%	1.90	%

The Company has a long term Euro loan agreement with a bank that requires the Company to maintain “restricted cash” (Note 6) in an amount of not less than the outstanding amount of the loan.

F - 29

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17	Acquisition of subsidiaries

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

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


	2002
	US$
Net assets acquired:

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

	9,500,538

Satisfied by:
Conversion of convertible notes	5,652,652
Cash consideration	3,847,886

	9,500,538

F - 30

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17	Acquisition of subsidiaries (continued)


	2002
	US$
Net cash inflow from the acquisition of subsidiaries:

Consideration	9,500,538
Cash and bank equivalents acquired	(4,998,155	)
Conversion of convertible notes	(5,652,652	)

Net cash inflow in respect of the acquisition of subsidiaries	(1,150,269	)

Had the results of operations for the Company included GLA as at April 1, 2001, the Company’s pro forma revenue, net loss and net loss per common share before reclassifying the disposal of the TFEL business in 2002 as discussed in Note 21 would have been as follows:


	(Unaudited)
	2002
	US$
Pro forma net sales	85,794,063

Pro forma net loss	(3,527,228	)

Pro forma net loss per common share	(0.29	)

The goodwill arose from the acquisition of the entire interests in LA in May 2001 was charged to the statement of operations in the fiscal year 2002 as follows:


	2002
	US$
Goodwill	3,939,788
Less: Amortization	(328,316	)
Write-off	(3,611,472	)

	—

F - 31

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17	Acquisition of subsidiaries (continued)

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

18	Share capital

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

During the fiscal year ended March 31, 2003, no treasury stock was reissued by Global-Tech.

During the fiscal year ended March 31, 2004, Global-Tech reissued 10,000 shares of treasury stock to two independent consultants in August 2003.

19.

Other income


	2002	2003	2004
	US$	US$	US$
Exchange gain	—	137,481	317,468
Other	84,648	90,899	110,346

	84,648	228,380	427,814

F - 32

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20	Income taxes

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

Entities subject to Hong Kong profits tax are taxed at a rate of 17.5% (2002 and 2003: 16%) on their assessable income.

The subsidiary established in China, DWS, is subject to income tax at a rate of 27% (24% reduced tax rate and 3% local income tax rate, in the open coastal areas of China). Current income tax is computed based on the taxable income as reported in the statutory financial statements prepared under China accounting regulations. In September 2002, DWS submitted an amended tax return to China tax authority for the tax periods from 1995 to 2002. The China tax authority accepted the amended return which resulted in DWS being fully exempt from any income tax for the years 1999 and 2000 and 50% exempt from income tax for the years 2001 to 2003. Commencing from January 1, 2004, DWS’s earnings are subject to the full 27% tax rate.


	2002	2003	2004
	US$	US$	US$
Income taxes:
Current	1,373,906	602,640	29,239
Deferred	42,810	21,590	78,528

Provision for income taxes	1,416,716	624,230	107,767

The reconciliation of the Hong Kong income tax rate to the effective income tax rate based on income from continuing operations before income taxes stated in the consolidated statement of operations is as follows:


	2002		2003		2004
					(as restated)
Hong Kong income tax rate	16.0	%	16.0	%	17.5	%
Non-taxable income (loss) arising from offshore activities	( 4.8	)%	(17.2	)%	7.3	%
Non-taxable interest income	( 4.1	)%	( 3.6	)%	5.4	%
Non-tax deductible expenses	0.5	%	6.1	%	(19.0	)%
Additional tax charge including penalty	9.3	%	—		—
Changes in valuation allowance	1.2	%	8.0	%	(13.9	)%
Changes in tax rate	—		—		( 0.1	)%

Effective income tax rate	18.1	%	9.3	%	( 2.8	)%

F - 33

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20	Income taxes (continued)

Deferred income taxes as of March 31, 2003 and 2004 comprised the following temporary differences:


	2003		2004
	US$		US$
License	(203,885	)	191,014
Depreciation on fixed assets	(194,825	)	(141,152	)
Operating losses carried forward	603,445		1,365,197

	204,735		1,415,059

Less: Valuation allowances	(269,135	)	(1,557,987	)

	(64,400	)	(142,928	)

The Company provided deferred tax liabilities of US$142,928 (2003: US$64,400) as of March 31, 2004, which arose principally from the temporary difference on depreciation of fixed assets.

Valuation allowances have been established for net deferred tax assets. Management believes that the net deferred tax assets related to subsidiaries under Hong Kong tax jurisdiction are more likely than not to go unrealized because the Company is uncertain about their future profitability. The operating losses of these subsidiaries can be carried forward indefinitely.

In 2001, the Inland Revenue Department in Hong Kong conducted an audit on the tax returns of certain subsidiaries of the Company for the tax years from 1995 through 2001. As of March 31, 2002, the tax audit was closed with additional tax due of approximately US$203,000 and a penalty of approximately US$646,000 compounded by the Inland Revenue Department. The additional tax and penalty were included as part of the income tax provision for the fiscal year 2002 and the full amount was settled in fiscal year 2003.

F - 34

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21	Discontinued operations

During the fiscal year 2002, given that the sales expectations of products had not been met, management revised their views on the prospects of LA’s TFEL business. On November 1, 2002, the Company announced that its subsidiary, GLA entered into an agreement to sell the TFEL business, including the interest that LA owns in a joint venture manufacturing facility in Jiangmen, China, to the former management of LA. With the adoption of SFAS No. 144: “Accounting for Impairment or Disposal of Long Lived Assets”, the operating results of discontinued operating units were classified as a loss from operations of the discontinued business on the consolidated statement of operations. Previously, reported financial statements have been restated to conform to the current operating structure.


	2002		2003		2004
	US$		US$		US$
Net sales	444,717		594,621		—
Cost of goods sold	(392,992	)	(503,889	)	—

Gross profit	51,725		90,732		—

Selling, general and administrative expenses	(1,643,896	)	(539,099	)	—
Impairment of property, plant and equipment	(258,233	)	—		—
Share of loss of a joint venture	(5,236,684	)	(378,646	)	—
Amortization of goodwill	(328,316	)	—		—
Write-off of goodwill	(3,611,472	)	—		—

Operating loss	(11,026,876	)	(827,013	)	—

Interest income (expense)	34,030		(8,924	)	—
Other income, net	—		491		—

Loss from operations of discontinued TFEL business	(10,992,846	)	(835,446	)	—

The aggregate assets and liabilities of the discontinued TFEL business on the date of disposal were US$480,407 and US$3,145,432, respectively.

F - 35

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22	Basic and diluted earnings (loss) per share

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

The following table sets forth the computation of basic and diluted earnings (loss) per share:


	Year Ended March 31, 2002		Year Ended March 31, 2003		Year Ended March 31, 2004
	US$		US$		US$
					(as restated)
Numerator for basic and diluted earnings (loss) per share:
Income (loss) from continuing operations	6,399,956		6,073,157		(3,906,365	)
Loss on discontinued operations, net of gain on disposal	(9,422,573	)	(806,436	)	—

Income (loss) attributable to common shareholders	(3,022,617	)	5,266,721		(3,906,365	)


	Number		Number		Number
Denominator for basic and diluted earnings (loss) per share:
Weighted average number of shares	12,139,564		12,140,853		12,152,592


	US$		US$		US$
					(as restated)
Basic and diluted earnings (loss) per share:
Earnings (loss) from continuing operations	0.53		0.50		(0.32	)
Loss from discontinued operations	(0.78	)	(0.07	)	—

Earnings (loss) attributable to common shareholders	(0.25	)	0.43		(0.32	)

F - 36

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22	Basic and diluted earnings (loss) per share (continued)

1,126,808 stock options of the Company outstanding during the year ended March 31, 2004 had exercise prices below the weighted average share price of the Company’s common shares for the year, resulting in an additional 210,426 potential common shares for the purpose of the diluted loss per share calculation. The effect of the Company’s dilutive stock options was not included in the computation of diluted loss per share for the year ended March 31, 2004 because their inclusion would have been anti-dilutive.

During the two fiscal years ended March 31, 2002 and 2003, the respective weighted average share prices of the Company’s common shares for these two years were below the exercise prices of all stock options outstanding as at March 31, 2002 and 2003, resulting in no potential common shares for these years for the purpose of diluted earnings (loss) per share.

23	Design and development costs

The Company expenses all research and development costs when incurred. Included in selling, general and administrative expenses before reclassification of the TFEL business as a discontinued operation as discussed in Note 21 were design and development costs of US$2,210,886, US$1,967,467 and US$2,322,938 for the fiscal years ended March 31, 2002, 2003 and 2004, respectively.

F - 37

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24	Commitments

(a)	Capital commitments

As of March 31, 2004, the Company had capital commitments of US$643,724 (2003: US$117,018) for the purchase of property, plant and equipment.

(b)	Operating lease commitments

In addition to the land use rights described in Note 12, the Company has various operating lease agreements for parking lots, motor vehicles, equipment and real estate that extend through to 2008. Rental expenses excluding the land use rights described in Note 12 for the fiscal years ended March 31, 2002, 2003 and 2004 were US$538,000, US$551,857 and US$700,491, respectively. The operating lease expense for the land use rights described in Note 12 was US$50,998. Future minimum rental payments as of March 31, 2004 are as follows:


		2004
		US$
Payable during the following periods:

Within one year		331,964
Over one year but not exceeding two years		241,358
Over two years but not exceeding three years		155,415
Over three years but not exceeding four years		155,415
Over four years but not exceeding five years		103,610

		987,762

25	Contingent liabilities

The Company is involved in patent infringement and breach of contract litigation with Sunbeam Corporation and Sunbeam Products, Inc. (collectively “Sunbeam”) with both parties claiming and counter claiming. The trial on the claims of Sunbeam for indemnity and the claim of the Company for breach of contract began on January 12, 2004. On January 16, 2004, the Jury returned a verdict in favor of (i) Sunbeam on its claim for indemnity and awarded Sunbeam US$2.5 million against the Company’s subsidiary and (ii) the Company on its claim for breach of contract and awarded the Company US$6.6 million. The District Court gave a final judgment on February 11, 2004 to add prejudgment interest to the Jury’s award, and awarded Sunbeam US$3.4 million and the Company $6.6 million. The Company has filed a motion to reconsider the calculation of the prejudgment interest, which the Court denied. Sunbeam has moved for judgment notwithstanding the verdict and for a new trial. Sunbeam has argued, among other things, that the Company should be denied any recovery and alternatively that any recovery by the Company should be limited to US$1 million.

F - 38

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

25	Contingent liabilities (continued)

The District Court denied these motions by an order given on April 12, 2004. Sunbeam filed on May 10, 2004 an appeal against the final judgment, and the Company cross-appealed on May 21, 2004.

Given the appeals, the final outcome of the case is uncertain. Management, based upon the advice of legal counsel, have not accrued any liabilities or income pertaining to this litigation as the outcome is uncertain until the appeal process is finalized.

26	Employee benefits

(a)	Retirement fund

The Company has arranged a defined contribution retirement plan for all eligible employees under which the Company and the employees each contribute the lower of 5% of the employees’ basic salary or HK$1,000. The plan is administered and funded by an independent trustee. Salaried employees are eligible to participate on the first day of the month coincident with or immediately following the date on which they have completed the probationary period, provided they are employed on a full-time basis. Part-time employees are not eligible for the plan.

The costs of this plan recognized during the fiscal years ended March 31, 2002, 2003 and 2004 were US$173,000, US$162,911 and US$170,622, respectively. The Company has no other post-retirement or post-employment benefit plans.

(b)	Other benefits

The Company provides housing, medical care and subsidized meals to all factory employees. The aggregate amounts incurred by the Company for such benefits were US$468,000, US$675,454 and US$642,707 during the fiscal years ended March 31, 2002, 2003 and 2004, respectively.

F - 39

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

27	Segment information

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

(a)	Net sales by geographic area


	2002	2003	2004
	US$	US$	US$
Australia	706,303	546,087	486,377
Europe	18,639,073	7,539,028	4,461,180
North America	62,784,799	64,783,476	56,116,363
Asia	2,529,424	2,260,901	5,720,742
Other regions	661,887	359,783	116,653

	85,321,486	75,489,275	66,901,315

(b)	Net sales by product type


	2002	2003	2004
	US$	US$	US$
Floor care products	37,331,883	42,142,703	49,734,017
Kitchen appliances	36,086,555	26,259,590	12,044,008
Garment care and travel products and accessories	7,850,891	2,755,261	1,573,848
Other	4,052,157	4,331,721	3,549,442

	85,321,486	75,489,275	66,901,315

(c)	Long-lived assets*


	2002	2003	2004
	US$	US$	US$
Hong Kong and Macau	1,931,999	3,628,284	2,114,345
Mainland China	33,938,804	30,957,804	30,563,694
United States of America	329,786	438	—

	36,200,589	34,586,526	32,678,039

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

F - 40

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

27	Segment information (continued)

(d)	Major customers

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


	2002	2003	2004
	US$	US$	US$
Royal Appliance Manufacturing Company	36,236,368	33,428,598	32,357,447
Morphy Richards Limited	10,431,925	912,154	706,491
Global Marketing Corp.	11,830,759	9,180,199	61,158
Black & Decker	4,185,215	10,009,710	2,893,588
The Eureka Company	—	4,291,662	17,459,514

During the year ended March 31, 2004, the Company recorded 48% (2003: 44%) of total net sales and 36% (2003: 64%) of total accounts receivable from Royal Appliance Manufacturing Company Limited (“Royal Appliance”). Royal Appliance is an unrelated customer. The Company is a contract manufacturer of vacuum cleaners that are marketed by Royal Appliance under its brand names.

Royal Appliance has no purchase commitment to the Company for the continuous manufacturing of its products.

28	Risk considerations

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

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

F - 41

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

29	Financial instruments

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

30	Stock options

In September 1997, the Board of Directors adopted Global-Tech’s 1997 Stock Option Plan (as amended, the “Plan”). The Plan provides for the grant of (i) options that are intended to qualify as incentive stock options (“Incentive Stock Options”) within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) to employees and (ii) options not intended to qualify as Incentive Stock Options to employees and consultants. The total number of shares of Common Stock for which options may be granted under the Plan is 1,600,000 shares.

The Plan is administered by the Board of Directors or a committee of outside directors appointed by the Board of Directors, which will determine the terms of options, including the exercise price, the number of shares subject to the option and the terms and conditions of exercise. No option granted under the Plan is transferable by the optionee other than by will or the laws of descent and distribution and each option is exercisable during the lifetime of the optionee only by such optionee. With respect to any participant who owns (or is deemed to own) stock possessing more than 10% of the voting rights of Global-Tech’s outstanding capital stock, the exercise price of any Incentive Stock Option must not be less than 110% of the fair market value on the date of grant. The term of each option granted pursuant to the Plan may be established by the Board of Directors, or a committee of the Board of Directors, in its sole discretion; provided, however, that the maximum term of each Incentive Stock Option granted pursuant to the Plan is ten years. With respect to any Incentive Stock Option granted to a participant who owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of all classes of Global-Tech’s outstanding capital stock, the maximum term is five years.

Every option granted shall vest and become exercisable in accordance with the terms of the applicable option agreement. Options can be exercised for a period of ten years from the date of grant.

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

F - 42

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

��

30	Stock options (continued)

On May 10, 2000, Global-Tech offered a voluntary program to exchange up to approximately 991,900 options previously granted at exercise prices ranging from US$8.31 to US$19.00 for a lower number of options at an exercise price of US$6.25 per share. For employees, every 100 old options with an exercise price of US$19.00 per share could be exchanged for 60 new options at an exercise price of US$6.25 per share. For directors and officers holding options with exercise prices ranging from US$8.31 to US$14.50, the number of new options granted on exchange would be approximately 70.30% to 91.09% of the former number of options. The exchange ratios were determined by independent advisors at an amount that would result in no intrinsic gain at the time of the exchange. The vesting schedule and contractual life for those options exchanged remained unchanged. As a result, 914,100 options were exchanged for 711,175 options with an exercise price of US$6.25 per share as follows:


Pre- exchange exercise price per option	Options cancelled on exchange	Options granted on exchange	Post- exchange exercise price per option	Options granted six months before and after the cancellation date	Post- exchange number of options
US$			US$
8.31	420,000	382,568	6.25	—	382,568
14.50	312,000	219,347	6.25	—	219,347
19.00	182,100	109,260	6.25	12,500	121,760

	914,100	711,175		12,500	723,675

In accordance with FIN 44, these 711,175 options, together with the 12,500 options granted within six months before or after the date of cancellation of the old options, are subject to variable accounting prospectively and non-cash stock compensation expense is adjusted for subsequent changes in intrinsic value. No incremental compensation cost was recognized at the date of the re-pricing or for the fiscal years ended March 31, 2002 or 2003 under variable accounting as the intrinsic value of the subject options was zero. For the fiscal year ended March 31, 2004, US$2,355,319 of non-cash stock compensation expense was recognized in the consolidated statements of operations.

F - 43

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30	Stock options (continued)

For the fiscal year ended March 31, 2002, Global-Tech granted options to purchase (i) 50,000 shares of common stock in an exchange to a consultant with an exercise price and fair value of US$4.75 and US$1.51 per share respectively in May 2001; (ii) 12,000 shares to a new director with an exercise price of US$6.25 per share in June 2001 and 300,000 shares to three directors with an exercise price of US$4.75 per share in May 2001. During fiscal year 2002, an aggregate total of 88,187 shares were forfeited upon the resignation of the participants, including 17,520 shares at an exercise price of US$6.25 per share; 16,667 shares at an exercise price of US$4.75 per share; 15,000 shares at an exercise price of US$4.75 per share; 35,000 shares at the prevailing market price on the date of vesting and 4,000 shares at an exercise price of US$19.00 per share.

For the fiscal year ended March 31, 2004, Global-Tech granted options to purchase (i) 20,000 shares to an officer with the exercise price based upon the prevailing market price on the date of vesting; (ii) 12,000 shares to a director with an exercise price of US$7.60 per share in November 2003; (iii) 94,000 shares to thirty employees, 15,000 shares to two officers and 240,000 shares to three directors with an exercise price of US$7.64 per share in December 2003, all at the market price at the time of grant. During fiscal year 2004, an aggregate total of 13,880 shares with an exercise price of US$6.25 per share were forfeited upon the resignation of the participants.

F - 44

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30	Stock options (continued)

Changes in outstanding options under the Plan during the three fiscal years ended March 31 are as follows:


	2002				2003				2004
	Options		Exercise price range	Weighted- average exercise price	Options		Exercise price range	Weighted- average exercise price	Options		Exercise price range	Weighted- average exercise price
			US$	US$			US$	US$			US$	US$
Outstanding, beginning of year	866,975		4.75 – 19.00	6.16	1,140,788		4.75 – 19.00	5.84	1,141,688		4.55 – 19.00	5.75
Granted	362,000		4.75 – 6.25	4.14	9,400		4.55	4.55	381,000		7.60 – 8.32	7.67
Exercised	—		—	—	—		—	—	(35,603	)	4.75 – 6.25	5.55
Forfeited	(88,187	)	4.75 –19.00	13.99	(8,500	)	6.25	6.25	(13,880	)	6.25	6.25

Outstanding, end of year	1,140,788		4.75 – 19.00	5.84	1,141,688		4.55 – 19.00	5.75	1,473,205		4.55 – 19.00	6.25

Exercisable, end of year	1,030,698		4.75 – 19.00	5.73	1,099,047		4.75 – 19.00	5.75	1,078,105		4.55 – 19.00	5.76

F - 45

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30	Stock options (continued)


	Options outstanding as of March 31, 2004			Options exercisable as of March 31, 2004
Options	Range of exercise price per option	Weighted- average remaining contractual life	Weighted- average exercise price per option	Options	Weighted- average exercise price per option
	US$	(Years)	US$		US$
1,091,205	4.55 – 6.25	5.27	5.74	1,077,105	5.75
381,000	7.60 – 8.32	9.69	7.67	—	—
1,000	19.00	3.94	19.00	1,000	19.00

1,473,205	4.55 – 19.00	6.41	6.25	1,078,105	5.76

The fair values per option granted during the fiscal years ended March 31, 2002, 2003 and 2004 are estimated on the date of grant using the Black-Scholes option-pricing model to be US$2.143, US$2.750 and US$4.560 respectively, on a weighted-average basis. The fair values of the options granted are estimated on the date of grant using the following assumptions:


	2002		2003		2004
Risk-free interest rate	4.67	%	3.64	%	3.80	%
Expected dividend yield	0	%	0	%	0	%
Expected option life	7 years		7 years		7 years
Expected stock price volatility	30.38	%	56.88	%	55.54	%

In conjunction with the acquisition of LA on May 31, 2001 (See Note 17), GLA established a stock option plan on the date of acquisition. The shares issued under this plan are based on the shares of the GLA subsidiary and not of the Company. Under this plan, the following options to purchase shares were outstanding as of March 31, 2004:

800,000 options in GLA at an exercise price of US$0.34 per share issued to four directors. These options will be fully vested on May 31, 2004 and expire on May 31, 2011.

110,000 options in GLA at exercise prices ranging from US$0.20 to US$1.50 issued to employees. These options expire during the period from May 31, 2006 to May 29, 2013.

20,000 options in GLA at exercise prices of US$0.34 issued to an employee. These options expire on November 12, 2012.

F - 46

GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

31	Opsys warrants

PMA entered into an asset purchase and lease agreement with Opsys US Corporation (“Opsys”) in January 2003. Based on the agreement, PMA paid US$1 million to purchase assets from Opsys, and leased the purchased assets back to Opsys for three months at a rental of US$1,000 per month. As part of the consideration of entering into the lease agreement, Opsys granted warrants to PMA to purchase securities of Opsys. Management did not record warrants received on their books because they believe that the fair value of these warrants should be nil.

PMA further entered into a loan agreement with Opsys for US$100,000 in April 2003 to resolve a pressing cash flow problem of Opsys. As part of the terms of the loan agreement, Opsys granted warrants to PMA to purchase securities of Opsys. Management did not record these warrants received as an asset because they believe that the fair value of these warrants is nil since Opsys declared bankruptcy in fiscal year 2004.

F - 47

EXHIBIT INDEX


Exhibit Number		Description of Document
1.1		Memorandum of Association of Global-Tech, as amended. (Incorporated herein by reference to Exhibit 3.1 to Global-Tech’s Registration Statement on Form F-1, SEC File No. 333-8462 (the “Registration Statement”).)

1.2		Articles of Association of Global-Tech, as amended. (Incorporated herein by reference to Exhibit 3.2 to the Registration Statement.)

4.1		Commission Agreement between Global-Tech and Eyal Lior. (Incorporated herein by reference to Exhibit 10.1 to the Registration Statement.)

4.2		Employment Agreement between Global-Tech and Kwong Ho Sham. (Incorporated herein by reference to Exhibit 10.2 to the Registration Statement.)

4.3		Employment Agreement between Global-Tech and John C. K. Sham. (Incorporated herein by reference to Exhibit 10.3 to the Registration Statement.)

4.4		Supply Agreement between Global-Tech and Sunbeam Products, Inc. (Incorporated herein by reference to Exhibit 10.4 to the Registration Statement.)

4.5		Lease Agreement between Global-Tech and the People’s Government of Qingxi Town, Dongguan City, Guangdong Province, together with the English language translation thereof. (Incorporated herein by reference to Exhibit 10.5 to the Registration Statement.)

4.6		License Agreement between Global-Tech and the Buji Economic Development Company, together with the English language translation thereof. (Incorporated herein by reference to Exhibit 10.6 to the Registration Statement.)

4.7		Lease Agreement between Global-Tech and Wing Shing Products Company Limited. (Incorporated herein by reference to Exhibit 10.7 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 1999.)

4.8		Amendment to Tenancy Agreement dated April 17, 2002. (Incorporated herein by reference to Exhibit 4.8 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2002.)

4.9		Amended and Restated 1997 Stock Option Plan of Global-Tech. (Incorporated herein by reference to Exhibit 10.8 to the Registration Statement.)

4.10		1999 Employee Stock Purchase Plan of Global-Tech. (Incorporated herein by reference to Exhibit 1 to Global-Tech’s Report on Form 6-K for the month of February 1999.)

4.11		Credit Facility Agreement between Global-Tech and Standard Chartered Bank. (Incorporated herein by reference to Exhibit 10.11 to the Registration Statement.)

4.12		Supplemental advice letter dated April 26, 1999 from Standard Chartered Bank. (Incorporated herein by reference to Exhibit 10.10 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 1999.)

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

4.14		Supplemental advice letter dated July 10, 2000 from Standard Chartered Bank. (Incorporated herein by reference to Exhibit 4.13 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2001.)

4.15		Credit Facility Agreement with HongkongBank. (Incorporated herein by reference to Exhibit 10.12 to the Registration Statement.)

4.16		Supplemental advice letter dated September 30, 2000 from HongkongBank. (Incorporated herein by reference to Exhibit 4.15 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2001.)

4.17		Credit Facility Agreement dated April 7, 2000 with Citibank, N.A. (Incorporated herein by reference to Exhibit 4.16 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2001.)

4.18		Supplemental advice letter dated February 1, 2001 from Citibank, N.A. (Incorporated herein by reference to Exhibit 4.17 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2001.)

E - 1



4.19		Lease Agreement dated July 29, 2002 between Goman Limited and Pentalpha Hong Kong Limited. (Incorporated herein by reference to Exhibit 4.19 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2002.)

4.20		Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Pentalpha HK Ltd. (Incorporated herein by reference to Exhibit 4.20 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)

4.21		Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Wing Shing Products (BVI) Co, Ltd. (Incorporated herein by reference to Exhibit 4.21 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)

4.22		Credit Facility Agreement dated May 27, 2002 between Standard Chartered Bank and Kwong Lee Trading Co. Ltd. (Incorporated herein by reference to Exhibit 4.22 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)

4.23		Credit Facility Agreement dated December 5, 2002 with Citibank, N.A. (Incorporated herein by reference to Exhibit 4.23 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)

4.24		Credit Facility Agreement dated June 20, 2002 between Pentalpha Macau Commercial Offshore Ltd. with HongkongBank (Incorporated herein by reference to Exhibit 4.24 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2003.)

4.25		Credit Facility Agreement dated March 26, 2003 between Pentalpha Hong Kong Ltd. with HongkongBank (Incorporated herein by reference to Exhibit 4.25 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

4.26		Banking facilities latter dated November 4, 2003 between Pentalpha Macau Commercial Offshore Ltd and HongkongBank (Incorporated herein by reference to Exhibit 4.26 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

4.27		Credit Facility Agreement dated November 3, 2003 between Pentalpha Hong Kong Ltd. with HongkongBank (Incorporated herein by reference to Exhibit 4.27 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

4.28		Credit Facility Agreement dated September 24, 2003 between Standard Chartered Bank and Pentalpha Hong Kong Ltd (Incorporated herein by reference to Exhibit 4.28 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

4.29		Credit Facility Agreement dated July 28, 2003 between Standard Chartered Bank and Pentalpha Macau Commercial Offshore Ltd (Incorporated herein by reference to Exhibit 4.29 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

4.30		Credit Facility Agreement dated September 24, 2003 between Standard Chartered Bank and Kwong Lee Trading Co. Ltd (Incorporated herein by reference to Exhibit 4.30 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

8.1		Subsidiaries of the Company (Incorporated herein by reference to Exhibit 8.1 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.).

12.1		Rule 13a-14(a) Certification by Chief Executive Officer*

12.2		Rule 13a-14(a) Certification by Acting Chief Financial Officer*

13.1		Certification by Chief Executive Officer*

13.2		Certification by Acting Chief Financial Officer*

14.1		Code of Ethics (Incorporated herein by reference to Exhibit 14.1 to Global-Tech’s Annual Report on Form 20-F for the fiscal year ended March 31, 2004.)

23.1		Consent of Independent Registered Public Accounting Firm*

23.2		Consent of Independent Registered Public Accounting Firm*

23.3		Consent of Independent Registered Public Accounting Firm*

23.4		Consent of Independent Registered Public Accounting Firm*

*	Filed herewith

E - 2

Global-tech Advanced Innovations (GAI) Inactive 20-F/A2004 FY Annual report (foreign) (amended)