Deswell Industries, Inc. Reports Twelve Month Consolidated Statement of Operations.

HONG KONG--(BUSINESS WIRE)--November 20, 1996--Deswell Industries, Inc. (NASDAQ NM Symbols: DSWLF, DSWWF) (the "Company") reported its Twelve Month Consolidated Statement of Operations for the period from October 1, 1995 to September 30, 1996.

In compliance with section 11(a) of the Securities Act of 1933 and Rule 158(b) promulgated thereunder, Deswell reported the following Consolidated Statement of Operations covering the period from October 1, 1995 to September 30, 1996. This report is intended as an earnings statement made generally available to the Company's securities holders covering the twelve month period beginning after the effective date of the Company's registration statement. -0-

                    DESWELL INDUSTRIES, INC.
        Consolidated Statement of Operations (unaudited)
       (U.S. dollars in thousands, except per share data)

                              Year ended
                           September 30, 1996

Net sales                     $   33,806
Cost of sales                     19,083
Gross profit                      14,723
Selling, general and
 administrative expenses           6,040
Operating income                   8,683
Interest expense                    (89)
Other income, net                    433
Income before income taxes         9,027
Income taxes                         304
Income before minority interests   8,723
Minority interests                 1,663
Net income                    $    7,060

Earnings per share            $     1.55

Average number of shares
 outstanding                       4,559
(in thousands)

Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies for original equipment manufacturers ("OEMs") and contract manufactures 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 technology ("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. Limited, Inter-Tel Incorporated, Behringer spezeiller studiotechnik GmbH, Prod-Art Company Limited and Shakespeare (H.K.) Limited. -0-

DESWELL INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (U.S. dollars in thousands except per share data)

1. Management's Statement

In the opinion of Management, the accompanying unaudited financial statement contains all adjustments (all of which are normal and recurring in nature) necessary to present fairly the results of operations of Deswell Industries, Inc. (the Company) for the twelve months ended September 30, 1996. The notes to the Consolidated Financial Statements which are contained in the Form 20-F Annual Report filed on July 12, 1996 under the Securities Exchange Act of 1934 should be read in conjunction with these Consolidated Financial Statements.

2. Public Offering of Common Shares and Warrants

In July 1995, the company completed its initial public offering in the United States (the "IPO") of 1,000,000 Common Shares at $8.625 per share and 1,000,000 Warrants at $0.01 per Warrant (each two Warrants exercisable at $9.056 ($4.528 per Warrant) to purchase one Common Share) and the issuance in August 1995 of an additional 150,000 Common Shares and 150,000 Warrants upon the exercise of the over-allotment option by the underwriters in the IPO. The net proceeds from this offering aggregated approximately $7,903.

In July 1996, Stock Options of 38,500 Common Shares and Advisor's Option of 8,000 Common Shares and 8,000 Warrants were exercised respectively.

3. Earnings Per Share

The primary earnings per share is computed on the net income divided by the weighted average number of Common Shares in issue throughout the relevant period. The weighted average number of Common Shares in 1996 takes account of the IPO 1,000,000 Common Shares issued in July 1995, the Over-allotment 150,000 Common Shares issued in August 1995 and the additional Common Shares issued upon the exercise of Stock Options and Advisor's Option in July 1996. The weighted average number of Common Shares in 1995 takes account of both the IPO 1,000,000 Common Shares issued in July 1995 and the Over-allotment 150,000 Common Shares issued in August 1995.

-0- The Stock Options and Warrants outstanding as at September 30, 1996 did not dilute the primary earnings per share by 3% or more.

CONTACT: Lippert/Heilshorn & Associates

John Nesbett, ext. 101

212-838-3777

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