HONG KONG (June 2, 1997) - Deswell Industries, Inc. (NASDAQ/DSWLF and DSWWF) ( the "Company" ) today announced its results for the fourth quarter and year ended March 31, 1997.

Net sales for the quarter were $12.7 million, an increase of 69% compared to sales of $7.5 million in the fourth quarter ended March 31, 1996. Operating income increased 76% to $3.1 million for the most recent quarter, compared to $1.8 million for the year-ago quarter, and net income increased 51% to $2.2 million for the most recent quarter, compared to $1.5 million for the year-ago quarter. Earnings per share and fully diluted earnings per share increased 38% to $0.44 (based on 5,078,000 and 5,127,000 weighted average shares outstanding respectively) compared to $0.32 (based on 4,550,000 weighted average shares outstanding) in the fourth quarter ended March 31, 1996.

Net sales for the year ended March 31, 1997 were $44.5 million, an increase of 46% compared to sales of $30.6 million for year ended March 31, 1996. Operating income increased 55% to $11.1 million, compared to $7.2 million in the previous year, and net income increased 48% to $8.7 million, compared to $5.9 million in the previous year. Earnings per share increased 35% to $1.90 (based on 4,610,000 weighted average shares outstanding) compared to $1.41 (based on 4,198,000 weighted average shares outstanding) for the year ended March 31, 1996. Fully diluted earnings per share increased by 23% $1.74 (based on 5,027,000 weighted average shares outstanding) compared to $1.41 (based on 4,198,000 weighted average shares outstanding).

The Company also announced that on May 28, 1997 its board of director declared a final cash dividend of $0.40 per Common Share (1996 final dividend $0.35 per share). The dividend will be payable on June 30, 1997 to shareholders of record as of June 16, 1997.

Mr. Richard Lau, Chief Executive Officer stated "Management is very pleased to report that the Company's strong earnings growth continued during the fourth quarter and throughout the year. There was strong growth recorded during the quarter despite what is traditionally a slow season for manufacturing companies operating in the People's Republic of China as most factories are closed for the Lunar New Year holidays."

"As previously announced, the Company has expanded its production facilities in all of its operations throughout the year to meet the needs of our customers. Moreover, the Company has acquired a new metallic operation subsidiary to vertically integrated into core business. During the year, we have also purchased approximately $8.5 million state-of-the-art machinery which play a vital role in accommodating Deswell's rapid growth. These actions demonstrate management's ongoing commitment to upgrading and expanding our production capacity."

Mr. Lau continued, "Our financial position remains strong. Working capital was $21.4 million as of March 31, 1997 as compared to $15.3 million as of March 31, 1996, and the current ratio was 3.8 with no short term and long term debt."

Mr. Lau concluded, "Looking ahead to 1997, I see year of great opportunity for Deswell and remain confident that the expansions and facility improvements made over the past year ideally position Deswell to service our increasing order flow from existing and new customers."

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies for original equipment manufacturers ("OEMs") and contract manufacturers at its factories in the People's Republic of China. The Company produces a wide variety of plastic parts and components used in the manufacture of consumer and industrial products; printed circuit board assemblies using surface mount ("SMT"), and pin-through hole ("PTH") interconnection technologies; and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company's customers include Mita Industries (H.K.) Limited, Nam Tai Electronics (Shenzhen) Co. Ltd., Inter-Tel Incorporated, Behringer spezeiller studytechnik GmbH, and Shakespeare (H.K.) Limited.

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