SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 20-F

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

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

For the fiscal year ended March 31, 1999

                                       OR

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

                         Commission File Number: 0-17601

                      BONSO ELECTRONICS INTERNATIONAL INC.
             (Exact name of Registrant as specified in its charter)

                             British Virgin Islands
                 (Jurisdiction of incorporation or organization)

                               Flat A-D, 8th Floor
                           Universal Industrial Centre
                              23-25 Shan Mei Street
                                 Fo Tan, Shatin
                           New Territories, Hong Kong
                    (Address of principal executive offices)

     Securities  registered or to be registered pursuant to Section 12(b) of the
Act: NONE

     Securities  registered  pursuant to Section 12(g) of the Act: COMMON STOCK,
PAR VALUE $.003; WARRANTS TO PURCHASE COMMON STOCK

     Securities  for which there is a reporting  obligation  pursuant to Section
15(d) of the Act: NONE

     Indicate the number of outstanding  shares of each of the Issuer's  classes
of capital or common  stock as of the close of the period  covered by the annual
report: 3,119,159 shares of Common Stock, $0.003 par value, at March 31, 1999.

     Indicate by check mark  whether the  registrant:  (i) 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 (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark which  financial  statement  item the Registrant has
elected to follow: Item 17 [ ] Item 18 [X]


<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

Item 1.    Description of Business.                                            1
Item 2.    Description of Property.                                           17
Item 3.    Legal Proceedings.                                                 19
Item 4.    Control of Registrant.                                             19
Item 5.    Nature of Trading Market.                                          19
Item 6.    Exchange Controls and Other Limitations Affecting
             Security Holders.                                                21
Item 7.    Taxation.                                                          21
Item 8.    Selected Financial Data.                                           22
Item 9.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.                                             24
Item 10.   Directors and Officers of Registrant.                              30
Item 11.   Compensation of Directors and Officers.                            33
Item 12.   Options to Purchase Securities from Registrant or Subsidiaries.    35
Item 13.   Interest of Management in Certain Transactions.                    36
Item 14.   Description of Securities to be Registered.                        36
Item 15.   Defaults Upon Senior Securities.                                   37
Item 16.   Changes in Securities and Changes in Security for Registered
             Securities.                                                      37
Item 17.   Financial Statements.                                              37
Item 18.   Financial Statements.                                              37
Item 19.   Financial Statements and Exhibits.                                 37




<PAGE>

                                     PART I


     As used in this Annual Report,  "China" refers to all parts of the People's
Republic of China other than the Special Administrative Region of Hong Kong. The
term "Company"  refers to Bonso  Electronics  International  Inc. and, where the
context so requires or suggests, its direct and indirect subsidiaries.

Item 1. Description of Business.

Overview

     Bonso Electronics  International Inc. was incorporated on August 8, 1988 as
a limited liability International Business Company under the laws of the British
Virgin  Islands  to serve  as a  holding  company  for the  Company's  operating
subsidiary,  which was formed in 1980. As an International Business Company, the
Company is prohibited  from doing business with persons  resident in the British
Virgin Islands,  owning real estate in the British Virgin Islands or acting as a
bank or insurance  company.  The Company was  incorporated in the British Virgin
Islands  principally to facilitate trading in its securities.  The government of
Hong Kong  imposes  a stamp  duty on the  transfer  of  securities  of Hong Kong
corporations.  No such duty is imposed by the British  Virgin  Islands,  and the
Company is also  exempt  from  income tax in the  British  Virgin  Islands.  The
Company's corporate  administrative matters are conducted through its registered
agent, HWR Services  Limited,  P.O. Box 71, Road Town,  Tortola,  British Virgin
Islands.  The Company's principal executive offices are located at Flat A-D, 8th
Floor,  Universal  Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New
Territories,  Hong Kong. Its telephone  number is  852-2605-5822,  its facsimile
number is 852-2691-1724 and its E-mail address is http//www.info@bonso.com.

     The Company designs, develops,  manufactures and sells a comprehensive line
of electronic scales and weighing instruments and electronic consumer and health
care  products.  The Company's  electronic  scales  include  bathroom,  kitchen,
office,  jewelry,  laboratory,  pocket, hanging,  postal,  industrial and parcel
scales that are used in consumer,  commercial and industrial  applications.  The
Company's  electronic  consumer  and health care  products  include  pedometers,
chronographs, electronic thermometers and blood pressure meters.

     The  Company  also plans to enter the field of digital  telecommunications,
with its  first  telecommunications  product  to be a 900MHz  ISM Band  cordless
telephone.  Development  of this  product  was  delayed  due to a lack of funds;
however, management is negotiating a lease financing arrangement with respect to
the necessary production equipment and intends to hire a manager with experience
in  producing  telecommunications  products.  Management  currently  expects  to
commence  production  of the 900MHz ISM Band  cordless  telephone  by the end of
calendar 1999 and management anticipates that the Company will develop different
kinds of  telecommunication  products in the future.  There can be no assurance,
however,  that  development of any of these  products,  including the 900MHz ISM
Band cordless telephone,  will be successfully completed,  that the Company will
obtain  customers  for any of  these  products  or that  sales  of any of  these
products will be profitable.

         The Company's  wholly-owned  Hong Kong  subsidiary - Bonso  Electronics
Limited  ("Bonso  Electronics")  - is responsible  for the design,  development,
manufacture and sale of the Company's products. Bonso Electronics has one active
Hong Kong subsidiary - Bonso Investment Limited ("BIL"),  which has been used to
acquire and hold the Company's real estate investments in Hong Kong and China.

         The Company has manufactured all of its products in China since 1989 in
order to take  advantage of lower  overhead  costs and  competitive  labor rates
available  there.  In  January  1997,  the  Company   completed  a  new,  larger
manufacturing  facility  in  the  DaYang  Synthetical  Development  District  in
Shenzhen,  China, which approximately tripled the Company's production capacity.


                                       1
<PAGE>



The leasehold,  facilities,  machinery, furniture and equipment at that facility
are owned and  operated by Bonso  Electronics  (Shenzhen)  Co.  Ltd.  ("Shenzhen
Bonso"), a 100% Company-owned Chinese limited liability company which was formed
in June 1994. The location of the Company's  factory in Shenzhen,  only about 50
miles  from Hong  Kong,  permits  the  Company  to manage  easily  manufacturing
operations  from Hong Kong,  and  facilitates  transportation  of the  Company's
products out of China through the port of Hong Kong.

Business Strategy

     The Company  experienced  dramatic growth from 1994 to 1998, with net sales
increasing  from  $12,548,770  in 1994 to  $23,715,576  in the fiscal year ended
March 31, 1998, and  profitability  increasing  from net income of $1,023,821 in
the fiscal year ended March 31, 1994 to net income of  $2,274,645  in the fiscal
year ended March 31, 1998.  However,  net sales decreased to $13,046,265 for the
fiscal year ended March 31, 1999 and net income decreased to $13,754. Management
attributes  these  decreases  primarily  to  decreased  orders  from  two  major
customers,  as well as various  smaller  customers  of the  Company.  Management
believes  that  the  Company's  continued  growth  depends  on  its  ability  to
strengthen  its  customer  base by  enhancing  and  diversifying  its  products,
increasing the number of customers and expanding into additional markets,  while
maintaining  or  increasing  sales of its  products to existing  customers.  The
Company's  continued growth and profitability is also dependent upon its ability
to control  production  costs and increase  production  capacity.  The Company's
strategy to achieve these goals is as follows:

     Product Enhancement and  Diversification.  The Company continually seeks to
improve and enhance its existing  products in order to provide a longer  product
life-cycle and to meet increasing customer demands for additional features.  The
Company's  research and development staff are currently working on such projects
as  redesigning  the existing  pedometer,  bicycle  computer and blood  pressure
monitor,  redesigning the Company's bicycle  accelerator in response to a change
in the  requirements of the Japanes  government,  expanding the health care line
and  attempting to make the Company's  products  more  competitive  in price and
features.  During the last fiscal year, the Company has completed development of
a waterproof digital thermometer, a chronograph,  an ear protector and two newly
designed  body  scales.  In  addition,  the Company  has,  in varying  stages of
development, a bicycle accelerator and postal, kitchen and Gem scales, which are
being developed to the specifications of OEM customers. See "Products," below

     Maintaining and Expanding Business Relations with Existing  Customers.  The
Company  promotes  its  relationships  with its  significant  customers  through
regular communication with them, visits to its customers in their home countries
and by  providing  direct  access to the  Company's  manufacturing  and  quality
control personnel. This access, together with the Company's concern for quality,
has  resulted  in a  relatively  low  level  of  defective  products.  Moreover,
management believes that the Company's emphasis on timely delivery, good service
and low cost has  contributed  and will continue to contribute to good relations
with its  customers  and increased  orders.  Further,  management of the Company
solicits suggestions from its customers for product enhancement and will develop
and  incorporate the  enhancements  suggested by its customers into its products
when feasible.

     Market  Expansion.  In 1998, the Company expanded its marketing  efforts in
the United  States and Europe.  Management  intends to continue  increasing  its
marketing efforts with the use of its Web page and mailing product brochures. In
addition,  the  Company  intends to  increase  the  frequency  of its direct and
telemarketing  contacts  with  both  existing  and  potential  customers  and is
negotiating  with an individual to represent the Company in Hamburg,  Germany in
order to expand the Company's marketing efforts in the European Union.




                                       2
<PAGE>


     Controlling  Production  Costs. In 1989,  recognizing  that labor cost is a
major  factor  permitting  effective  competition  in  the  consumer  electronic
products industry, the Company relocated all of its manufacturing  operations to
China to take advantage of the large  available  pool of relatively  inexpensive
manufacturing  labor.  The  Company has made an effort to locate and operate its
manufacturing  facilities  consistent  with the exigencies of  manufacturing  in
China.  For example,  the location of the  Company's  plant in China is in close
proximity,   approximately   50  miles,   to  Hong  Kong  thereby   facilitating
transportation of the Company's products to markets outside of China.

     The Company is currently  attempting  to control  production  costs by such
means as redesigning its existing scales in order to decrease material and labor
costs, controlling the number of employees, increasing the efficiency of workers
by  providing  regular  training  and  tools  and  redesigning  the  flow of the
production line.

     Increasing Production Capacity.  Since January 1997, the Company's products
have been manufactured at the Company's new manufacturing facility in the DaYang
Synthetical  Development  District in  Shenzhen,  China.  This new  facility has
triple the capacity of the Company's old manufacturing  plant. The floor area of
this new facility is not fully utilized.

Products

     The following  table sets forth the  percentage of net sales of each of the
Company's product lines for the fiscal years ended March 31, 1998 and 1999.

                                                Year ended March 31,
                                                -------------------
                                             1998                1999
                                             ----                ----
         Product Line

         Scales                               77%                 79%
         Health care products                 13                  15
         Electronic consumer products          3                   2
         Other products and services           7                   4
                                             ---                 ---
         Total                              100%                100%

Scales

     The Company's  weighing equipment ranges from the simplest spring scales to
high  precision   electronic   scales  that  translate   weight   readings  into
corresponding price and postage calculations.

     All of the  Company's  electronic  scales use strain gauge  sensors,  which
management  believes are one of the most  reliable and accurate  weight  sensing
systems currently available. A strain gauge sensor is a thin metal foil resistor
which is bonded to a metal  block,  and which  undergoes a change in  electrical
resistance as weight is loaded onto the metal block.  The  measurement of change
in electrical resistance yields a measure of the applied weight.

     The Company offers a variety of scales for diverse consumer, commercial and
industrial  applications.  Scales  currently  offered  by  the  Company  include
bathroom,  kitchen,  office,  jewelry,  laboratory,   pocket,  hanging,  postal,
industrial  and parcel scales.  The following  table sets forth the net sales of
each type of scale as a  percentage  of total scale  sales for the fiscal  years
ended March 31, 1998 and 1999:

                                                Year ended March 31,
                                                -------------------
                                             1998                1999
                                             ----                ----
         Type of Scale

         Postal and office                    45%                 29%
         Kitchen                               6                   8
         Jewelry and laboratory               18                  20
         Bathroom                             14                  15
         Pocket and hanging                   11                  19
         Industrial and parcel                 6                   9
                                             ---                 ---
         Total scale sales                   100%                100%

                                       3
<PAGE>

     The  Company's  electronic  scales offer many  advanced  features such as a
talking feature,  automatic power off,  automatic range,  audio signal,  digital
auto-calibration,  automatic  zero tracking and multiple  measuring  units.  The
scales  are built with  either  metal or  plastic  housings  and come in various
models and case  designs.  The  Company's  scales are  described  in more detail
below.

     Postal Scales. The Company's postal scales are used primarily by businesses
for  weighing  letters  and  parcels  of up to 2,000  grams  (4.4  lbs.) and are
accurate to 1 gram. Postal scales are calibrated to give postal or franking cost
for the various classes of delivery service  available to various  destinations.
The  scales are  marketed  primarily  in Europe  and the  United  States and are
customized for the postal system of the country of destination.

     Office  Scales.  The Company  sells  several  models of office  scales with
capacities ranging from 2,000 grams (4.4 lbs.) to 5,000 grams (11 lbs.), and the
scales are  accurate  to 1 gram.  The scales are used in offices to weigh  small
packages and letters.  The Company's  office scales are sold  principally in the
United States, Europe, Australia, Hong Kong and China.

     Kitchen  Scales.  The Company's  kitchen  scales are used in households and
restaurants  to weigh  ingredients  for cooking and portions  for dieting,  with
capacities ranging from 1,000 grams (2.2 lbs.) to 5,000 grams (11 lbs.), and the
scales are  accurate  to 1 gram.  The  Company's  kitchen  scales  are  marketed
principally in the United States and Europe.

     Jewelry and Laboratory  Scales.  Jewelry and laboratory  scales are used to
weigh  precious  metals and stones.  In the  laboratory,  the scales are used to
weigh  various  chemicals  and chemical  compounds.  The  Company's  jewelry and
laboratory  scales are  principally  sold in the United  States and Europe.  The
capacities  of these  scales range from 120 grams (0.25 lb.) to 1,200 grams (2.6
lbs.), and these scales are accurate to 0.01 gram or 0.1 gram, respectively.

     Bathroom  Scales.  The Company's  bathroom  scales are used by consumers to
monitor weight,  with  capacities up to 150 kilograms (330 lbs.).  The Company's
bathroom scales are marketed primarily in the United States, Europe and Japan.

     Pocket and Hanging Scales.  Pocket and hanging scales are small  electronic
scales  that can be carried by a business  person in his or her attache or brief
case.  The  capacities of the  Company's  pocket scales range from 80 grams (2.8
oz.) to 320 grams  (11.2  oz.),  and the scales are  accurate  to 0.1 gram.  The
hanging scales range from 15 kilograms (33 lbs.) to 25 kilograms (55 lbs.),  and
the scales are accurate to 10 grams.  The pocket scales are principally  used in
the jewelry  business  for  weighing low value metals and stones and the hanging
scales are primarily  used in fishing.  The Company's  pocket and hanging scales
are marketed primarily in the United States and Europe.

     Industrial/Parcel  Scales.  The Company  manufactures  different  models of
industrial/  parcel  scales,  which are used in  business  or  industry to weigh
heavier  parcels or objects (i.e.,  objects whose weight exceeds the capacity of
the Company's office scales).  Industrial/parcel  scales have a capacity ranging
from  25  kilograms  (55  lbs.)  to 150  kilograms  (330  lbs.).  The  Company's
industrial/parcel scales are marketed primarily in Europe.

Health Care Products

     Electronic  Thermometers.  The  Company's  electronic  thermometers,  which
include both fahrenheit and centigrade versions,  measure body temperature.  The
Company's electronic  thermometer is classified as a medical device under United
States law.  Medical  devices are  required to be approved by the United  States
Food and Drug Administration  (the FDA) prior to being marketed,  unless the law
provides  a  legal  exemption  from  such  approval.  The  Company's  electronic
thermometer has received  pre-market  approval from the FDA. Sales of electronic
thermometers  were  approximately  10% of the  Company's net sales in the fiscal
year ended March 31, 1998, and approximately 12% of net sales in the fiscal year
ended March 31, 1999.



                                       4
<PAGE>

     Blood Pressure  Meters.  The Company  introduced  electronic blood pressure
meters to its line of products in November 1994. The Company's  electronic blood
pressure  meters have digital  displays for highest blood  pressure  (systolic),
lowest blood pressure  (diastolic) and pulse rate (number of pulses per minute),
as well as mean blood pressure.  The meters have automatic power off,  automatic
pressure release,  manual rubber bulb pump and many other standard features. The
Company has  obtained FDA approva for  marketing  blood  pressure  meters in the
United  States.  Sales of blood  pressure  meters were  approximately  3% of the
Company's net sales in each of the fiscal years ended March 31, 1998 and 1999.

Electronic Consumer Products

     Chronographs.   The  Company  began  shipping   chronographs   in  1998.  A
chronograph is a device for measuring the speed of a projectile by measuring the
time it takes for it to go between two infra-red sensors.  Sales of chronographs
were  approximately  0.9% of the  Company's  net sales in the fiscal  year ended
March 31, 1999.

     Pedometers.  The Company began  shipping  electronic  pedometers in 1993. A
pedometer  is worn by a walker or jogger to measure  the  distance  traveled  by
recording the steps taken.  The Company's  pedometer can be adjusted for varying
stride  lengths,  and will keep track of  distance  traveled,  elapsed  time and
average speed.  Sales of pedometers were approximately 0.7% of the Company's net
sales in the fiscal  year  ended  March 31,  1998,  and 0.9% of net sales in the
fiscal year ended March 31, 1999.

     Distance Meters.  The Company began shipping distance meters in 1998. Sales
of distance  meters were less than 0.1% of the Company's net sales in the fiscal
year ended March 31, 1999.

     Other  Electronic  Consumer  Products.   In  the  past,  the  Company  also
manufactured   joysticks  and  bicycle   computers.   Sales  of  joysticks  were
approximately 1.9% of the Company's net sales in the fiscal year ended March 31,
1998 and sales of the Company's bicycle computers were  approximately  0.014% of
the Company's net sales in the fiscal year ended March 31, 1998. The Company did
not manufacture any joysticks or bicycle  computers during the fiscal year ended
March 31, 1999.

Other Products and Services

     The Company  also  receives  revenue  from  customer  funded  research  and
development  for products  subsequently  produced and sold to them,  the sale of
semi  completed  units  and the  sale of  spare  parts  for  repair  work by its
customers and from repair work performed by the Company for its customers. These
revenues  constituted  approximately  7% of net sales for the fiscal  year ended
March 31, 1998 and 4% of net sales for the fiscal year ended March 31, 1999.

Product Development, Design and Research

     The major responsibility of the product design and research and development
personnel  is to  develop  and  produce  designs to the  satisfaction  of and in
accordance with the specifications provided by the OEMs. Management believes its
engineering  and product  development  capabilities  are important to the future
success  of the  Company's  business.  Some  of the  Company's  product  design,
research and development  activities are customer funded and are initiated under
verbal agreements with specific customer for specific products.  The Company has
successfully  lowered its costs for its research and development  team by moving
most  research  and  development   activities  to  its  facility  in  China  and
principally  employing  Chinese  engineers  and  technicians  at costs  that are
substantially lower than would be required in Hong Kong.




                                       5
<PAGE>


     At March 31, 1999, the Company employed two individuals in Hong Kong and 16
individuals in China on its engineering  staff, who are at various times engaged
in research and development.  The Company also contracted with a firm in Germany
to develop the software  for the  Company's  proposed  cordless  telephone.  The
Company  spent  $158,706  and $566,030 on research  and  development  during the
fiscal years ended March 31, 1998 and 1999, respectively.  Management intends to
increase the number of research and development personnel to approximately 25.

     The Company has, in varying stages of  development,  a bicycle  accelerator
and  postal,   kitchen  and  Gem  scales,  which  are  being  developed  to  the
specifications of OEM customers, and has recently commenced production of an ear
protector and newly designed body scales.

Manufacturing

     The Company  currently  manufactures  and  assembles all of its products in
China.  Generally,  raw  materials,  electronic  components  and other parts are
transported  to the  Company's  manufacturing  plant in China where the finished
products are  assembled.  The finished goods are then  transported  back to Hong
Kong for sale by the Company.

     The  Company  manufactures  some of its own  components,  metal  parts  and
casings  and  plastic  parts at its  facility  in China.  In 1997,  the  Company
commenced  manufacturing its own strain gauges,  and it currently  produces over
80% of the strain gauges  utilized in its scales.  Management  believes that the
Company will realize a  substantial  cost saving from  producing  its own strain
gauges in the future.  Management's  objective is to eventually  produce 100% of
the strain gauges utilized by the Company; however, management may decide not to
produce some  low-demand  strain  gauges if it  determines  that to produce them
would not be cost effective.

     To take  advantage  of lower  overhead  costs and  competitive  labor rates
available  in  China,  the  Company  constructed  a  manufacturing  facility  in
Shenzhen, China in 1989. The location of that factory in Shenzhen, only about 30
miles from Hong Kong,  permitted  the  Company  to manage  easily  manufacturing
operations  from Hong Kong,  and  facilitated  transportation  of the  Company's
products  out of China  through the port of Hong Kong,  the busiest  seaport for
containerized  shipping in the world.  As sales  increased  since the year ended
March 31, 1990, the Company's use of available  factory capacity  increased.  In
planning for its future growth, the Company entered into a contract to acquire a
land  lease  for  construction  of  a  new  manufacturing  complex  which,  when
completed,  would approximately triple the Company's  production  capacity.  The
construction  of phase one of the new  manufacturing  complex was  completed  in
December 1996 and the Company commenced operations in the new complex in January
1997.  The  second,  and  final,  phase  was  completed  in May  1998.  The  new
manufacturing complex is located in the DaYang Synthetical  Development District
in Shenzhen,  China and is  approximately  50 miles from Hong Kong. See Item 2 -
"Description of Property--China," below.

     Because the Company  primarily  sells and ships its products  "F.O.B.  Hong
Kong," most of its customers are responsible for the  transportation of finished
products  from Hong Kong to their  final  destination  and bear the risk of loss
from such  transportation.  Components and finished  products are transported to
and from China  primarily  with the  Company's  own truck.  The  majority of the
Company's component parts purchased from Japan, Taiwan and Korea are transported
by ship or by air to Hong  Kong.  In  recent  years,  the  Company  has not been
materially affected by any transportation problems.

     Management  believes that it has  sufficient  water and power  supplies for
daily usage at its new manufacturing  complex. The Company has drilled two water
wells to obtain additional water and to minimize cost.



                                       6
<PAGE>


     The  availability of adequate power to run the Company's  factory is one of
the  difficulties  of having a factory  located in China.  In order to  minimize
potential  power  problems  that could  develop  in the  Shenzhen  factory,  the
factory, like most Chinese factories,  is equipped with power generators capable
of providing adequate electric power to operate the assembly line.

Component Parts and Suppliers

     The Company  purchases over 1,000 different  component parts from more than
100 major  suppliers and is not dependent  upon any single  supplier for any key
component.  The Company purchases  components for its products from suppliers in
Japan,  Taiwan,  South  Korea,  Hong Kong and  elsewhere.  The  Company  has not
experienced,  and management  does not expect to  experience,  any difficulty in
obtaining needed component parts for its products.

     The major component parts purchased by the Company are integrated  circuits
(chips),  LEDs,  LCDs,  strain  gauges,  force sensors,  resistors,  capacitors,
transistors, diodes, printed circuit boards and batteries. The Company purchases
both stock or off the shelf chips and custom chips.  There are many suppliers of
both stock and custom  chips in Japan and  Taiwan.  At the present  time,  Micro
Chips in Taiwan,  Samsung in South Korea and  Hitachi,  Toshiba and NEC in Japan
provide  most  of the  Company's  chips.  Chips  are one of the  most  expensive
component parts purchased by the Company.

     Strain  gauges are the second most  expensive  components  purchased by the
Company.  The Company currently  produces over 80% of the strain gauges utilized
in  its  scales,   and  obtains  the  remainder   principally  from  a  Japanese
manufacturer.  However,  the  Company  could also  purchase  strain  gauges from
suppliers  located in the United  States and China.  LEDs and LCDs are generally
custom made to match the chip design and are  principally  supplied by companies
in Taiwan,  Korea and Japan.  The circuit  boards can be purchased  from circuit
board manufacturers in Hong Kong. Resistors, capacitors, transistors, diodes and
batteries are standard stock items and are generally  purchased in Hong Kong and
Taiwan.

     The Company  produces  metal and  plastic  casings and parts for use in its
products.  Plastic resin and metal sheet can be purchased from suppliers in Hong
Kong and Japan.

Quality Control

     Management  maintains  strict quality control  procedures for every product
manufactured by the Company throughout the manufacturing  process.  Incoming raw
materials and components are checked by the Company's quality control personnel.
Moreover,  during the production  stage, the Company's quality control personnel
monitor each operation in the  manufacturing  process,  including the bonding of
the chips,  component  insertion and assembly of the printed  circuit boards and
casings.  All work in  process is also  checked  during  the  manufacturing  and
assembly  processes.  After the  assembly  stage,  every  product is checked for
proper functioning and cosmetic  appearance.  After packing and before shipment,
the  quality  control  personnel  randomly  check  goods  according  to  product
specifications. Historically, the Company's level of defective products has been
low, and not material to its financial  statements.  The Company's  products are
generally  covered by a one-year  limited  warranty which provides for repair or
replacement  of  defective  products.  In  certain  circumstances,  an  extended
warranty may be offered.  To date, claims against the Company under its warranty
program have been negligible.

     In April 1995, the Company received an ISO 9001 certificate from Det Norske
Veritas Industry B.V., The  Netherlands.  The Company passed a reviewed audit by
Det Norske  Veritas,  processed in March 1999,  and is qualified to maintain the
ISO 9001 certificate.



                                       7
<PAGE>


     The  ISO  9000  is a  program  developed  initially  by  the  International
Organization  for  Standardization  in Geneva,  Switzerland,  to provide quality
control  registration  standards that could be relied upon to provide assurances
with regard to a  registrant's  quality  control and  manufacturing  operations.
Management  believes  that ISO 9000  registration  provides its  customers  with
quality control  assurances that are recognized  internationally,  and that such
registration  also provides the Company with a competitive  advantage  over many
other  manufacturers  in the Far  East  who  have  not  registered  for ISO 9000
certification.  In addition,  the Company has submitted  applications for the CE
mark for some  products and, at the present  time,  over 36 product  groups have
been approved,  including the electromagnetic  compatibility directive (EMC) and
the medical  devices  directive  (MDD). A CE mark serves as  confirmation to the
European  authorities  that the marked product  complies with all European Union
directives  relevant to the product and that the product may be traded freely in
the European market.

     The  Company  has hired a Managing  Director  who will be  responsible  for
changing the Company's quality control to total quality management ("TQM").

Customers and Marketing

     The  Company  sells  its  products  in the  United  States,  Europe,  Asia,
Australia and Africa.  Customers for the Company's scales are primarily original
equipment manufacturers, which market the products under their own brand names.

     Net export sales to customers by geographic area consisted of the following
for each of the three years ended March 31, 1997, 1998 and 1999.

<TABLE>
<CAPTION>
                                                 Year ended March 31,
                 ----------------------------------------------------------------------------
                         1997                          1998                      1999
                 -----------------               -----------------         ------------------

<S>                 <C>              <C>       <C>             <C>        <C>             <C>
North America       $ 7,537,401      44%       $12,598,672     53%        $5,597,402      43%
Europe                5,492,294      33          8,129,063     34          6,248,263      48
Asia                  3,454,505      20          2,117,914      9          1,041,377       8
Australia               425,314       3            756,354      3            130,173       1
Africa                   79,505      --            113,573      1             29,050      --
                     ----------    ----         ----------   ----        -----------    ----
Total Net Sales     $16,989,019     100%       $23,715,576    100%        13,046,265     100%
</TABLE>

     The Company  maintains a marketing team in Hong Kong.  The Company  markets
its  products  primarily  through  use of its Web  page,  advertising  in  trade
publications  such as Hong Kong Enterprise and the use of direct mail catalogues
and product  literature.  In addition,  the  Company's  marketing  team contacts
existing and potential customers by telephone, mail, fax and in person.

     Major  Customers.  Sales of the  Company's  products to OEMs  accounted for
approximately  87% of the  Company's  total net sales  during  each of the years
ended March 31, 1997,  1998 and 1999.  The  Company's  principal  OEM  customers
include the following  entities  which market the Company's  products  under the
brand name indicated opposite their respective names:



                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                            Percent of Company's Sales
                                                                               Year ended March 31,
                                                                            --------------------------
       Customer                    Brand Name         Products                1997      1998     1999
       --------                    ----------         --------                ----      ----     ----

<S>                               <C>              <C>                        <C>       <C>     <C>
         Pitney Bowes, Inc. (USA)                   Pitney Bowes
                                                    Postal scales               18%      30%     15%



         Werner Dorsch Gmbh & Co. WEDO              Postal, office and
          (Germany)                                 parcel scales               11%      9%      15%

         Globaltec Corporation    ACCULAB           Jewelry, educational and
         (USA)                                      high precision scales       13%     15%      11%

         Omron Health Care        OMRON             Digital thermometers        11%      8%      10%

         Gottl Kern & Sohn Gmbh   KERN              Laboratory, hanging          3%      4%       7%
                                                    pocket and parcel scales
</TABLE>

     Werner Dorsch Gmbh & Co. and Globaltec  Corporation  have been customers of
the Company for fourteen and twelve  years,  respectively.  Management  believes
that the Company offers its customers  superior quality of products and superior
product  design and  development  capabilities,  together  with the low costs of
production associated with its operations in China.

     If the  Company  were to lose any  customers  who  account  for a  material
portion  of total  sales,  or if any of these  customers  were to  substantially
decrease their purchases from the Company, the Company's revenues,  earnings and
financial  position  would  be  materially  and  adversely  affected.  With  the
exception of Globaltec Corporation, the Company's dependence on the above-listed
customers is expected to continue in the foreseeable future. The Company follows
normal and  customary  business  practices in the  acceptance of orders from its
customers.  Orders from the  above-listed  customers are generally  supported by
bank guarantees, letters of credit or insurance from the Hong Kong Export Credit
Insurance  Corporation.  For updated  information  with respect to a decrease in
orders from two of the  Company's  major  customers  see Item 9 -  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Overview."

     Sales of the Company's products directly by the Company under its own brand
name accounted for approximately 13% of the Company's total net sales during the
years ended March 31, 1997, 1998 and 1999.

     Backlog.  The Company's backlog consists of orders from major customers and
purchase orders from other  customers of products  scheduled for shipment within
three to twelve months. It is the Company's  practice to charge customers 50% of
the total order price when orders are  cancelled  and, as a result,  the Company
has  experienced  nominal  cancellations.  This practice is not represented by a
written  agreement,  and the Company may not be able to enforce this arrangement
in every case in the  future.  The Company  generally  has not  experienced  any
difficulty  in shipping  orders by the dates  requested  by its  customers or in
material returns of its products. The amount of backlog that is manufactured and
shipped during any period is dependent on various factors,  including the timing
and scheduling of orders from material customers and accordingly,  the amount of
backlog at any date is not necessarily indicative of actual shipments and sales.
The Company's backlog was $3,040,771 at March 31, 1999, compared to a backlog of
$4,386,485 at March 31, 1998

                                       9
<PAGE>


Competition

     The electronic products business is highly competitive. The Company's major
competitors in the scale market include Management  Investment & Technology Co.,
Ltd. in Hong Kong and Charder Electronic  Company,  Ltd. in Taiwan. In the blood
pressure meter market,  the Company's major  competitor is AnD Co. Ltd of Japan.
In the electronic  thermometer market, its major competitors are Citizen Company
and  Terumo,  both of Japan.  Competition  is  primarily  based upon unit price,
product quality,  reliability,  product features and management's reputation for
integrity.  Management believes that the Company competes favorably with respect
to each of these factors.

Employees

     At March 31, 1999, the Company  employed 701 persons on a full-time  basis.
All of the  Company's  24  employees  located in Hong Kong held  administrative,
clerical,  sales and marketing positions. Of the 677 employees located in China,
596 were  engaged in  manufacturing  and 81 were engaged in  administrative  and
clerical  positions.  The  Company  is not a  party  to any  labor  contract  or
collective  bargaining  agreement.  The Company has  experienced  no significant
labor stoppages in recent years, and management believes that relations with its
employees are satisfactory.

     The Company  currently  houses all 677 employees  located in the PRC at the
Shenzhen facility, including administrative staff. The facility is able to house
up to 2,180 employees.

     Patents,  Licenses,   Trademarks,   Franchises,   Concessions  and  Royalty
Agreements

     The Company has no patents,  licenses,  franchises,  concessions or royalty
agreements  that are  material  to its  business  as a whole.  The  Company  has
obtained a trademark registration in Hong Kong and China for the marks BONSO and
MODUS in  connection  with certain  electronic  apparatus and intends to file an
application in the United States for registration of such trademarks.

Government Regulation

     In the United States,  the Medical Device Amendments of 1976 to the federal
Food, Drug and Cosmetic Act (Amendments) and the regulations  issued or proposed
thereunder provide for regulation by the Food and Drug  Administration (the FDA)
of the marketing, manufacturing, labeling, packaging and distribution of medical
devices.  These regulations  include  requirements that manufacturers of medical
devices register with the FDA and furnish lists of devices manufactured by them.
Certain  pre-market  requirements  must be met prior to the marketing of medical
devices introduced after May 28, 1976. These range from a minimum requirement to
wait 90 days  after  notification  to the FDA  before  introduction  of  medical
devices  substantially  similar  to  devices  already on the market to a maximum
requirement to comply with the potentially  expensive and time consuming process
of pre-market analysis and testing necessary to obtain FDA approval prior to the
commercial  marketing of new medical devices. In addition,  the FDA also has the
authority  to  prescribe  performance  standards  for the types of  health  care
products manufactured by the Company.  Should such standards be prescribed,  the
Company's  products  would be  required  to  conform to them.  To date,  no such
standards have been adopted and the Company cannot predict what changes, if any,
may be necessitated in its products should such performance  standards be issued
in  the  future.  In  addition  to  the  Amendments,   there  are  also  certain
requirements of other federal laws and of state,  local and foreign  governments
that may apply to the  manufacture  and marketing of the  Company's  health care
products.



                                       10
<PAGE>


     The only  products of the Company  that are subject to material  government
regulation are its electronic thermometers and electronic blood pressure meters,
which  are  subject  to  qualifying  procedures  with  the FDA.  The  qualifying
procedures  set forth by the FDA for  pre-market  approval  with  respect to the
electronic thermometers and blood pressure meters have been satisfied.

     In the European Union, Medical Devices Approval is required for the sale of
the Company's electronic thermometers and blood pressure meters. The Company has
obtained Medical Devices Approval for its electronic thermometers. A customer is
currently  seeking Medical Devices Approval,  on behalf of the Company,  for the
Company's  blood  pressure  meters and  management  expects such  approval to be
granted within six months to a year.

Certain Foreign Issuer Considerations

     Transfer of Sovereignty  over Hong Kong to China.  The principal  executive
offices  of the  Company  and all  manufacturing  operations  and  assets of the
Company are located in Hong Kong and China. Prior to July 1, 1997, Hong Kong was
a British Crown Colony with  responsibility  for  administering its own internal
affairs.  After several years of  negotiations  concerning  Hong Kong's  future,
Great  Britain and China  signed  (December  1984) and  ratified  (May 1985) the
Sino-British  Joint  Declaration  on the  Future of Hong Kong (the  Sino-British
Agreement).  Pursuant to the Sino-British  Agreement,  Hong Kong was restored to
China on July 1, 1997.

     Ownership  of  Real  Property.  All  land  in Hong  Kong  is  owned  by the
Government  of the Hong Kong  Special  Administrative  Region (the  Government).
Prior to July 1, 1997, the Government granted Crown Leases to persons, firms and
corporations  on the basis of an annual crown rental payment and other terms and
conditions therein  contained.  Crown Leases were freely assignable during their
term. In  implementation  of the  Sino-British  Agreement,  the New  Territories
Leases (Extension) Ordinance was enacted and came into effect on April 25, 1988.
Pursuant to that Ordinance,  all leases in the New Territories of Hong Kong were
extended up to June 30, 2047.  Such  extension was at no premium but was subject
to an annual fee  equivalent  to 3% of the ratable  value of the  property to be
charged  with  effect  from the date on which  the  original  lease  would  have
expired.

     The land  ownership  system in China is similar to Hong Kong,  in which all
land is  owned  by the  government.  The  Chinese  government  and  its  various
government  instrumentalities grant leases to persons, firms and corporations on
the basis of an annual  rental  payment  and other  terms and  conditions.  Such
leases are generally freely transferable during their term.

     Enforceability  of  Certain  Civil  Liabilities.  The  Company is a British
Virgin  Islands  holding  corporation.   The  Company  has  appointed  Henry  F.
Schlueter,  1050 Seventeenth Street,  Suite 1700, Denver,  Colorado 80265 as its
agent upon whom process may be served in any action brought against it under the
securities laws of the United States. However, outside the United States, it may
be difficult for investors to enforce  judgments against the Company obtained in
the United States in any such actions,  including actions  predicated upon civil
liability provisions of the United States securities laws. In addition,  most of
the Company's  officers and directors  reside  outside the United States and the
assets of these  persons and of the  Company  are located  outside of the United
States.  As a result,  it may not be possible for investors to effect service of
process  within the United States upon such persons,  or to enforce  against the
Company or such persons  judgments  obtained in United States courts  predicated
upon the liability  provisions of the United States securities laws. The Company
has been advised by Harney,  Westwood and Riegels  ("HW&R"),  its British Virgin
Islands counsel, and by Norman M.K. Yeung & Co., Solicitors ("Yeung & Co."), its
Hong Kong  counsel,  that there is  substantial  doubt as to the  enforceability
against the Company or any of its  directors  and officers  located  outside the
United States in original  actions or in actions for enforcement of judgments of
United States courts of  liabilities  predicated  solely on the civil  liability
provisions of the United States securities laws.



                                       11
<PAGE>


     The Company has been advised by Yeung & Co. and HW&R that no treaty  exists
between Hong Kong or the British Virgin Islands and the United States  providing
for the reciprocal enforcement of foreign judgments. However, the courts of Hong
Kong and the British Virgin  Islands are generally  prepared to accept a foreign
judgment as evidence of a debt due. An action may then be commenced in Hong Kong
or the British  Virgin Islands for recovery of this debt. A Hong Kong or British
Virgin  Islands  court wil only accept a foreign  judgment as evidence of a debt
due if: (i) the judgment is for a liquidated amount in a civil matter;  (ii) the
judgment is final and  conclusive  and has not been stayed or satisfied in full;
(iii) the  judgment  is not  directly or  indirectly  for the payment of foreign
taxes, penalties, fines or charges of a like nature (in this regard, a Hong Kong
or British  Virgin  Islands court is unlikely to accept a judgment for an amount
obtained  by  doubling,  trebling or  otherwise  multiplying  a sum  assessed as
compensation  for the loss or damage  sustained by the person in whose favor the
judgment  was  given);   (iv)  the  judgment  was  not  obtained  by  actual  or
constructive  fraud or duress;  (v) the foreign court has taken  jurisdiction on
grounds  that are  recognized  by the common law rules as to conflict of laws in
Hong Kong or the  British  Virgin  Islands;  (vi) the  proceedings  in which the
judgment  was  obtained  were  not  contrary  to  natural  justice;   (vii)  the
proceedings  in which the judgment  was  obtained,  the judgment  itself and the
enforcement  of the judgment are not contrary to the public  policy of Hong Kong
or the British  Virgin  Islands;  (viii) the person against whom the judgment is
given is  subject to the  jurisdiction  of the Hong Kong or the  British  Virgin
Islands  court;  and (ix) the  judgment  is not on a claim for  contribution  in
respect of damages  awarded by a judgment  that does not satisfy the  foregoing.
Enforcement of a foreign judgment in Hong Kong or the British Virgin Islands may
also be limited or affected by applicable bankruptcy,  insolvency,  liquidation,
arrangement,  moratorium  or similar laws  relating to or  affecting  creditors'
rights  generally  and will be subject to a statutory  limitation of time within
which proceedings may be brought.

     Under United States law,  majority and controlling  shareholders  generally
have  certain  "fiduciary"   responsibilities  to  the  minority   shareholders.
Shareholder  action  must be taken in good  faith  and  actions  by  controlling
shareholders that are obviously  unreasonable may be declared null and void. The
British Virgin Islands law protecting the interests of the minority shareholders
may not be as protective in all  circumstances  as the law  protecting  minority
shareholders  in United States  jurisdictions  While British  Virgin Islands law
does  permit a  shareholder  of a  British  Virgin  Islands  company  to sue its
directors  derivatively,  i.e. in the name of and for the benefit of the company
and to sue the  company  and its  directors  for his  benefit and the benefit of
others  similarly  situated,  the  circumstances in which any such action may be
brought and the  procedures and defenses that may be available in respect of any
such action may result in the rights of shareholders of a British Virgin Islands
company being more limited than those rights of  shareholders in a United States
company.

Special Risk Factors

Forward-Looking Statements

     Important  Factors  Related to  Forward-Looking  Statements  and Associated
Risks. This Annual Report contains forward-looking statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act of 1934.  In  addition,  the  Company  may from  time to time make
written or oral forward-looking  statements.  Written forward-looking statements
may appear in documents  filed with the Securities and Exchange  Commission (the
"Commission"),   in  press   releases  and  i  reports  to   shareholders.   The
forward-looking  statements  included  herein are based on current  expectations
that  involve  a  number  of  risks  and  uncertainties.  These  forward-looking
statements  are based on  assumptions  that  political,  economic and commercial
conditions in Hong Kong and China will not change materially or adversely,  that
competitive  conditions  affecting  the Company  will not change  materially  or
adversely,  that  demand for the  Company's  products  will be strong,  that the


                                       12
<PAGE>


Company  will retain  existing  key  management  personnel,  that the  Company's
forecasts  will  accurately  anticipate  market demand and that there will be no
material  adverse  change in the Company's  operations or business.  Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future  economic,   competitive  and  market   conditions  and  future  business
decisions,  all of which are difficult or impossible to predict  accurately  and
many of which are  beyond  the  control  of the  Company.  Although  the  Compan
believes that the  assumptions  underlying  the  forward-looking  statements are
reasonable,  any of the assumptions could prove inaccurate and, therefore, there
can be no assurance that the results contemplated in forward-looking information
will be realized.

     In addition,  as disclosed elsewhere under other risk factors, the business
and  operations of the Company are subject to  substantial  risks which increase
the uncertainty  inherent in such  forward-looking  statements.  In light of the
significant  uncertainties inherent in the forward-looking  information included
herein,  the  inclusion  of  such  information  should  not  be  regarded  as  a
representation  by the Company or any other person that the  objectives or plans
of the  Company  will be  achieved.  The  Privat  Securities  Reform Act of 1995
contains  a safe  harbor for  forward-looking  statements  on which the  Company
relies in making  such  disclosures.  In  connection  with this safe  harbor the
Company is hereby identifying  important factors that could cause actual results
to differ materially from those contained in any forward-looking statements made
by or on behalf of the Company.  Any such statement is qualified by reference to
the cautionary statements included in this Annual Report.

Political,  Legal,  Economic and  Other Uncertainties of Operations in China and
Hong Kong

     Transfer of Sovereignty  over Hong Kong to China.  The principal  executive
and  corporate  offices of the  Company  are  located  in Hong Kong,  formerly a
British Crown Colony.  Sovereignty over Hong Kong was transferred effective July
1, 1997 to China, and Hong Kong became a Special Administrative Region of China.
The  National  People's  Congress of China  enacted the Basic Law in 1990 as the
constitution  of  Hong  Kong  under  China's   sovereignty  (Basic  Law).  While
management  does not believe that the transfer of sovereignty  over Hong Kong to
China will have a material adverse effect on the Company's  business,  there can
be no  assurance  as to  the  continued  stability  of  political,  economic  or
commercial  conditions in Hong Kong, and any  instability  could have an adverse
impact on the Company's business.

     The Hong Kong  dollar  and the  United  States  dollar  have been  fixed at
approximately 7.80 Hong Kong dollars to $1.00 since 1983. The Chinese government
expressed  its  intention in the Basic Law to maintain the stability of the Hong
Kong currency after the sovereignty of Hong Kong was transferred to China. There
can be no assurance that this will continue and the Company could face increased
currency risks if the current exchange rate mechanism is changed.

     Internal Political and Other Risks of Manufacturing in China. The Company's
manufacturing  facility  is  located  in  China.  As  a  result,  the  Company's
operations and assets are subject to significant political,  economic, legal and
other uncertainties.  Changes in policies by the Chinese government resulting in
changes  in  laws,  regulations  or  the  interpretation  thereof,  confiscatory
taxation,  restrictions  on  imports  and  sources  of  supply,  import  duties,
corruption,  currency  revaluations or the  expropriation of private  enterprise
could materially and adversely affect the Company.  Over the past several years,
the Chinese  government  has pursued  economic  reform  policies  including  the
encouragement    of   private    economic    activity   and   greater   economic
decentralization.  There can be no assurance  that the Chinese  government  will
continue to pursue such  policies,  that such  policies  will be  successful  if
pursued,  that such policies will not be significantly altered from time to time


                                       13
<PAGE>


or that  business  operations  in China would not become  subject to the risk of
nationalization,  which  could  result in the total loss of  investment  in that
country.  Economic  development  may be  limited  as well by the  imposition  of
austerity measures intended to reduce inflation,  the inadequate  development of
infrastructure  and the  potential  unavailability  of adequate  power and water
supplies,  transportation and communications. If for any reason the Company were
required to move its  manufacturing  operations  outside of China, the Company's
profitability  would be substantially  impaired,  its competitiveness and market
position would be materially  jeopardized and there can be no assurance that the
Company could continue its operations.

     Recent  Relations with the U.S. China currently  enjoys most favored nation
("MFN") trade status, which provides China with the trading privileges generally
available to trading  partners of the United States.  The United States annually
reconsiders the renewal of China's MFN status.  Various interest groups continue
to urge  that the  United  States  not  renew  MFN for  China  and  there can no
assurance  that  controversies  will not arise  that  threaten  the  status  quo
involving  trade  between the United  States and China or that the United States
will  not  revoke  or  refuse  to  renew  China's  MFN  status.  In any of  such
eventualities, the business of the Company could be adversely affected, by among
other things, causing the Company's products in the United States to become more
expensive,  which could  result in a reduction  in the demand for the  Company's
products by customers in the United States.  Trade  friction  between the United
States and China,  whether or not actually  affecting  the  Company's  business,
could also adversely affect the prevailing  market price of the Company's Common
Stock and warrants.

     Uncertain Chinese Legal System and Application of Laws. The legal system of
China relating to foreign investments is both new and continually evolving,  and
currently  there  can be no  certainty  as to the  application  of its  laws and
regulations in particular instances.  China does not have a comprehensive system
of  laws.  Enforcement  of  existing  laws or  agreements  may be  sporadic  and
implementation and interpretation of laws inconsistent. The Chinese judiciary is
relatively  inexperienced in enforcing the laws that exist,  leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate  law  exists  in China,  it may not be  possible  to  obtain  swift and
equitable enforcement of that law.

     Possible  Changes and  Uncertainties in Economic  Policies.  As part of its
economic reform,  China has designated  certain areas,  including Shenzhen where
the  Company's  manufacturing  complex is located,  as Special  Economic  Zones.
Foreign  enterprises in these areas benefit from greater  economic  autonomy and
more favorable tax treatment than  enterprises in other parts of China.  Changes
in the policies or laws governing  Special  Economic Zones could have a material
adverse effect on the Company.  Moreover,  economic  reforms and growth in China
have been more successful in certain provinces than others, and the continuation
or increase of such  disparities  could affect the political or social stability
of China.

     Dependence on Single Factory.  All of the Company's  products are currently
manufactured  at its  manufacturing  facility  located in Shenzhen,  China.  The
Company does not own the land  underlying its factory  complex.  It occupies the
site under an agreement with the local Chinese government  pursuant to which the
Company is entitled  to use the land upon which its factory  complex is situated
until May 2044.  This  agreement and the  operations  of the Company's  Shenzhen
factory are dependent on the Company's  relationship  with the local government.
The  Company's  operations  and  prospects  would be  materially  and  adversely
affected by the failure of the local  government to honor the agreement.  In the
event of a dispute, enforcement of the agreement could be difficult in China.

     Moreover,  fire fighting and disaster relief or assistance in China may not
be as  developed  as in  Western  countries.  The  Company  currently  maintains


                                       14
<PAGE>


property damage insurance  aggregating  approximately  $13,900,000  covering its
stock  in  trade,  goods  and  merchandise,  furniture  and  equipment  and  the
buildings.  The  Company  does not  maintain  business  interruption  insurance.
Investors are cautioned  that material  damage to, or the loss of, the Company's
factory due to fire, severe weather, flood or other act of God or cause, even if
insured against, could have a material adverse effect on the Company's financial
condition, results of operations, business and prospects.

     Asian Economic Problems. Recently, several countries in Southeast Asia have
experienced a significant  devaluation  of their  currencies  and decline in the
value of their  capital  markets.  In addition,  several  Asian  countries  have
experienced a number of bank failures and  consolidations.  The Company does not
believe  that the  declines  in  Southeast  Asia will  affect the demand for the
Company's  products,  because  virtually all of the Company's  products are sold
into developed countries not experiencing these declines. Moreover, because most
of the Company's  products are paid for in U.S.  dollars,  the Company  believes
that it is less  susceptible  to the effects of a  devaluation  in the Hong Kong
dollar or Chinese renminbi if either or both were to occur despite assurances to
the contrary by the Chinese government.  However,  the decline in the currencies
of other  Southeast  Asian  countries  could render the Company's  products less
competitive  if competitors  located in these  countries are able to manufacture
competitive  products at a lower  effective  cost.  Investors are cautioned that
there can be no  assurance  that the decline in  Southeast  Asia will not have a
material adverse effect on the Company's business,  financial condition, results
of operations or market price of its securities.

Risk Factors Relating to the Business of the Company

     Dependence  on  Major  Customers.   Four  major  customers   accounted  for
approximately 62% of the Company's sales in the fiscal year ended March 31, 1998
and 51% of its sales  during the fiscal year ended March 31,  1999.  The loss of
any of these  major  customers  could  have a  material  negative  impact on the
Company's  business.  See  Item  1 -  "Description  of  Business--Customers  and
Marketing--Major  Customers" and Item 9 - "Management's  Discussion and Analysis
of Financial Condition--Overview."

     Dependence on Key Personnel.  The Company's future  performance will depend
to a  significant  extent upon the efforts and  abilities of certain  members of
senior  management as well as upon the  Company's  ability to attract and retain
other qualified personnel. In particular,  the Company is largely dependent upon
the continued  efforts of Mr.  Anthony So, the Company's  President,  Secretary,
Treasurer  and  Chairman  of its  Board of  Directors,  and Mr.  Kim Wah  Chung,
Director of  Engineering  and Research and  Development.  To the extent that the
services of Mr. So or Mr. Chung would be unavailable to the Company, the Company
would be  required  to obtain  other  personnel  to perform the duties that they
otherwise  would  perform.  There can be no assurance  that the Company would be
able to  employ  another  qualified  person  or  persons,  with the  appropriate
background  and  expertise,  to replace Mr. So or Mr. Chung on terms suitable to
the Company. See Item 10 - "Directors and Officers of Registrant."

     Competition.  The  Company's  business  is in an  industry  that is  highly
competitive,  and many of its competitors,  both local and  international,  have
substantially  greater  technical,  financial and marketing  resources  than the
Company. See Item 1 - "Description of Business--Competition."

     Need for  Qualified  Employees.  The success of the Company is dependent on
its ability to attract and retain qualified technical,  marketing and production
personnel. The Company will have to compete with other larger companies for such
personnel,  and  there  can be no  assurance  that the  Company  will be able to
attract or retain such qualified personnel.



                                       15
<PAGE>


     Control by Founder.  At the present time,  Mr.  Anthony So, the founder and
President  of  the  Company,   beneficially  owns  approximately  37.5%  of  the
outstanding shares of Common Stock. Due to his stock ownership, Mr. So may be in
a position  to elect the Board of  Directors  and,  therefore,  to  control  the
business  and affairs of the Company  including  certain  significant  corporate
actions  such as  acquisitions,  the sale or purchase of assets and the issuance
and sale of the Company's securities. See Item 4 - "Control of Registrant."

     Potential  Fluctuations in Operating Results.  The Company's  quarterly and
annual  operating  results are  affected by a wide variety of factors that could
materially and adversely affect net sales, gross profit and profitability.  This
could result from any one or a combination of factors,  many of which are beyond
the control of the Company.  Results of  operations  in any period should not be
considered  indicative  of results to be  expected  in any  future  period,  and
fluctuations in operating  results may also result in fluctuations in the market
price of the Company's Common Stock.

     No  Assurance  of Exercise of Warrants  or  Sufficient  Operating  Revenue;
Potential Need for Outside Funding.  In 1998, the Company solicited the exercise
of  certain  outstanding  warrants  which  were  issued  to the  public in 1994.
Management  intended to utilize a portion of the proceeds from such exercises to
fund expansion of operations,  including the  development  and production of the
Company's  proposed  cordless  telephone.  However,  only 25,597  warrants  were
exercised.  There is no  assurance  that any more of the  Company's  outstanding
warrants  will be  exercised.  Accordingly,  funding  for the  expansion  of the
Company's  operations  will be  dependent on the  Company's  ability to generate
significant operating revenue or procure additional  financing.  There can be no
assurance  that  sufficient  operating  revenue  can be  generated  or that  any
additional  financing  can be  arranged  on  favorable  terms and in the amounts
required to fund the expanded operations of the Company.

     Possible Inability of Warrantholders to Exercise Warrants.  Exercise of the
Company's  outstanding warrants is subject to the Company either maintaining the
effectiveness of its registration statement, or filing an effective registration
statement  with the  Securities  and Exchange  Commission and complying with the
appropriate  state securities laws. No assurance can be given that at the time a
warrantholder seeks to exercise the right to purchase the Company's Common Stock
an  effective  registration  statement  will in fact be in  effect  or that  the
Company will have complied with all appropriate state securities laws.

     Future  Sales  of  Common  Stock.  As of the  date of this  Annual  Report,
1,168,421 of the  Company's  outstanding  shares of Common Stock are  restricted
securities as that term is defined in Rule 144 promulgated  under the Securities
Act.  The  Securities  Act and Rule 144  promulgated  thereunder  place  certain
prohibitions on the sale of such restricted securities. Further, the Company has
issued options to purchase  1,130,000  shares of Common Stock.  The  possibility
exists that, when permitted,  the sale to the public of these shares,  or shares
acquired  upon  exercise of the options,  could have a depressing  effect on the
price of the Common Stock. Further, future sales of such shares and the exercise
of such options could adversely affect the Company's ability to raise capital in
the future.

     Volatility  of Stock  Price.  The markets for equity  securities  have been
volatile and the price of the Company's Common Stock has been and could continue
to be subject to wide fluctuations in response to quarter to quarter  variations
in operating results, news announcements,  trading volume, sales of Common Stock
by officers, directors and principal shareholders of the Company, general market
trends and other factors.

     Potential  Adverse  Effect of  Redemption  of Public  Warrants.  The Public
Warrants are  redeemable by the Company at any time at $0.05 per Warrant upon 30
to 45 days notice if the closing  price of the Common  Stock for 20  consecutive
trading  days within the 30-day  period  preceding  the date the notice is given


                                       16
<PAGE>


equals or exceeds $8.575 per share. If the Company calls the Public Warrants for
redemption,  the holders of the Public  Warrants  must either (i)  exercise  the
Public  Warrants  and pay the exercise  price  therefor at a time when it may be
disadvantageous  for the holders to do so; (ii) sell the Public  Warrants at the
then  current  market  price when they might  otherwise  wish to hold the Public
Warrants;  or (iii) accept the nominal  redemption price,  which is likely to be
substantially  less than the market value of the Public  Warrants.  No assurance
can be given that at the time of redemption an effective  registration statement
will be in effect or that the Company will have  complied  with all  appropriate
state  securities laws so that a Public  Warrantholder  will be able to exercise
his Public  Warrants  rather than  accepting  the $0.05 per  Warrant  redemption
price.

Certain Legal Consequences of Foreign Incorporation and Operations

     Enforceability of Civil Liabilities.  The Company is a holding  corporation
organized as an  International  Business  Company  under the laws of the British
Virgin  Islands and its principal  operating  subsidiary is organized  under the
laws of Hong Kong,  where the  Company's  principal  executive  offices are also
located. Outside the United States, it may be difficult for investors to enforce
judgments  against the Company  obtained in the United States in actions brought
against the Company, including action predicated upon civil liability provisions
of federal  securities  laws. In addition,  most of the  Company's  officers and
directors  reside  outside the United States and the assets of these persons and
of the Company are located outside of the United States. As a result, it may not
be possible for investors to effect  service of process within the United States
upon such persons,  or to enforce against the Company or such persons  judgments
predicated upon the liability  provisions of U.S.  securities  laws. The Company
has been advised by its Hong Kong counsel and its British Virgin Islands counsel
that there is substantial doubt as to the enforceability  against the Company or
any of its directors or officers  located  outside the United States in original
actions or in actions for enforcement of judgments of U.S. courts of liabilities
predicated solely on the civil liability  provisions of federal securities laws.
See   Item   1   -   "Description    of    Business--Certain    Foreign   Issuer
Considerations--Enforceability of Certain Civil Liabilities."

     Certain Legal  Consequences of Incorporation in the British Virgin Islands.
The  Company  is  organized  under  the  laws  of the  British  Virgin  Islands.
Principles  of law  relating to matters  affecting  the  validity  of  corporate
procedures,  the  fiduciary  duties of the Company's  management,  directors and
controlling  shareholders  and the rights of the Company's  shareholders  differ
from, and may not be as protective of shareholders as, those that would apply if
the  Company  were  incorporated  in a  jurisdiction  within the United  States.
Directors  of the  Company  have  the  power  to take  certain  actions  without
shareholder  approval,  including an amendment of the  Company's  Memorandum  or
Articles  of  Association  and  certain  fundamental   corporate   transactions,
including  reorganizations,  certain mergers or  consolidations  and the sale or
transfer of assets.  In addition,  there is doubt that the courts of the British
Virgin Islands would enforce liabilities predicated upon U.S. securities laws.

     Exemptions under the Exchange Act as a Foreign Private Issuer.  The Company
is a foreign  private issuer within the meaning of rules  promulgated  under the
Exchange Act. As such,  and though its Common Stock is registered  under Section
12(g) of the Exchange Act, it is exempt from certain  provisions of the Exchange
Act applicable to United States public companies including:  the rules under the
Exchange Act  requiring the filing with the  Commission of quarterly  reports on
Form 10-Q or current  reports on Form 8-K,  the  sections  of the  Exchange  Act
regulating the solicitation of proxies, consents or authorizations in respect to
a security  registered  under the  Exchange Act and the sections of the Exchange
Act  requiring  insiders to file public  reports of their  stock  ownership  and
trading activities and establishing  insider liability for profits realized from
any  short-swing  trading  transaction  (i.e.,  a purchase and sale, or sale and
purchase,  of the issuer's equity securities within six months or less). Because
of the exemptions  under the Exchange Act applicable to foreign private issuers,
shareholders of the Company are not afforded the same protections or information
generally  available to investors  in public  companies  organized in the United
States.



                                       17
<PAGE>


Item 2. Description of Property.

British Virgin Islands

     The offices of the Company  are  located at Cragmuir  Chambers,  Road Town,
Tortola,  British  Virgin  Islands.  Only corporate  administrative  matters are
conducted at such offices,  through the Company's registered agent, HWR Services
Limited.

Hong Kong

     The  Company  owns  approximately   9,185  square  feet  in  the  Universal
Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New Territories,  Hong
Kong.  This  facility is used  primarily as the  Company's  principal  executive
office.  The Company  purchased the property from an unaffiiated  third party in
May 1999 for approximately $743,590.

     The Company owns a residential  property in Hong Kong,  which is located at
Savanna Garden,  House No. 27, Tai Po, New Territories,  Hong Kong. House No. 27
consists of approximately 2,475 square feet plus a 177 square foot terrace and a
2,308  square  foot  garden  area.  The use of House No. 27 is  provided  to Mr.
Anthony So as part of his compensation. See Item 13 - "Interest of Management in
Certain Transactions."

China

     The  Company's  existing  factory in China is located  at  Shenzhen  in the
DaYang Synthetical  Development District,  close to the border between Hong Kong
and China.  This  factory  consists  of two  factory  buildings,  which  contain
approximately   194,990   square  feet,   two  workers'   quarters,   containing
approximately   115,050  square  feet,  a  canteen  and  recreation   center  of
approximately   25,270   square  feet,   an  office   building,   consisting  of
approximately   25,230  square  feet,  and  staff  quarters  for  the  Company's
supervisory  employees,  consisting of  approximately  35,110 square feet, for a
total of approximately 395,650 square feet. The facility is utilized pursuant to
a Contract  on the Use of Land and Supply of Workers  with  Shenzhen  Baoan Fuan
Industrial   Company.   The  agreement   provides  that  the  Company  will  use
approximately  269,000 square feet of land for a period of 50 years,  commencing
May 10, 1994.  To obtain the land lease,  the Company  agreed to pay  $1,810,344
plus a monthly  management fee in the amount of $2,750. The Company used part of
the proceeds of a  $1,500,000  loan it received in July 1994 to pay a portion of
the initial  acquisition  cost; the balance of the initial  acquisition cost was
paid out of the net proceeds of a public  offering of the  Company's  securities
conducted in December 1994.  The facility is  wholly-owned  by the Company.  The
agreement provides that at the expiration of the land lease, the Company will be
given  priority for  negotiation of a new agreement for the use of the land. The
Company's total  investment in the facility is approximately  $8,000,000.  Phase
one of the facility was completed in December 1996, and manufacturing  commenced
in the new  facility  in January  1997.  The  second,  and  final,  phase of the
facility was completed in May 1998.

     The  Company  also  owns two  residential  properties,  one  consisting  of
approximately  1,000 square feet, located at Lijingge Court, Unit F, 15th Floor,
Hai Li Building,  Shenzhen,  China,  and one consisting of  approximately  1,125
square feet located at the 12th floor, Yuk Yui Court,  Gui Hua Garden,  Shenzhen
Bay, China.  Both properties are utilized by management staff and directors when
they require accommodations in China.

     On June 18, 1998, the Company  purchased  Units 12 and 13 on the 3rd floor,
Block A of Sunshine Plaza in Beijing,  China for an aggregate  purchase price of
$600,999,  payable as follows:  $383,468 was paid before June 18, 1998;  and the
balance of $217,531,  plus  interest in the amount of $30,241,  is payable on or
before May 18, 2000.  Unit 12 consists of 102.38  square meters Unit 13 consists
of 172.77 square meters. Both Units are rented to unaffiliated third parties for
an aggregate monthly rental of $3,353.

                                       18
<PAGE>


Adequacy of Facilities

     Management  believes that the Company's new  manufacturing  complex will be
adequate for its reasonably foreseeable needs.

Item 3. Legal Proceedings.

     On August 28, 1998, a lawsuit was filed in the United States District Court
for the Central  District of  California  against the Company and the  Company's
Warrant Agent alleging that the Company had committed  securities fraud,  common
law fraud and breach of  contract  arising out of the  original  sale of certain
warrants which were sold to the public in 1994 and the issuance on July 22, 1998
of a notice to redeem those warrants on September 4, 1998 for $0.05 per warrant.
The lawsuit was  dismissed,  without  prejudice,  on September 2, 1998,  and the
Company  rescinded  the  redemption of the warrants that was noticed on July 22,
1998.

     Management  is not  aware  of any  legal  proceedings  contemplated  by any
governmental   authority  involving  the  Company,  its  subsidiaries  or  their
property. No director,  officer or affiliate of the Company, or any associate of
a director,  officer or affiliate of the Company:  (i) is a party adverse to the
Company or its  subsidiaries  in any legal  proceedings;  or (ii) has an adverse
interest to the Company or its subsidiaries in any legal proceedings.  Except as
described herein,  the Company and its subsidiaries are not parties to any legal
proceedings  and there are no other  material  legal  proceedings  pending  with
respect to the property of the Company and its subsidiaries.

Item 4. Control of Registrant.

     The  Company is not  directly  or  indirectly  owned or  controlled  by any
foreign government or by another corporation. The following table sets forth, as
of July 14, 1999, the beneficial ownership of the Company's Common Stock by each
person  known by the  Company  to own  beneficially  more than 10% of the Common
Stock  of the  Company  outstanding  as of such  date  and by the  officers  and
directors of the Company as a group. Except as otherwise  indicated,  all shares
are owned directly.

<TABLE>
<CAPTION>
                                                          Amount Owned
                                             ---------------------------------------------
                                                 Shares of             Options to Purchase        Percent of
         Person or Group                       Common Stock                 Common Stock             Class(1)
         ---------------                       ------------            -------------------        -----------

<S>                                             <C>                            <C>                   <C>
         Anthony So                             1,168,421(2)                   567,000               47.1%
         Officers and directors                 1,168,421                    1,036,000               53.1%
           as a group (8 persons)
</TABLE>
----------------------
     (1) Based on  beneficial  ownership  of both  shares  of  Common  Stock and
     options to purchase Common Stock which are immediately exercisable.
     (2)  Owned of record by a  corporation  that is wholly  owned by a trust of
     which Mr. So is the sole beneficiary.

     There are no  arrangements  known to the Company the operation of which may
at a subsequent date result in a change in control of the Company.



                                       19
<PAGE>


Item 5. Nature of Trading Market.

     The  Company's  Common  Stock and  warrants  are traded  only in the United
States  over-the-counter  market.  The  Common  Stock is quoted on the  National
Association of Securities  Dealers,  Inc. Automated  Quotation System ("Nasdaq")
National Market under the trading symbol BNSO; the warrants are quoted under the
trading symbol BNSOW on Nasdaq.

     The table set forth below presents the range, on a quarterly basis, of high
and low  closing  sales  prices  per share of Common  Stock and per  warrant  as
reported  by Nasdaq for the last two fiscal  years and for the first  quarter of
the fiscal year ending March 31, 2000. The quotations  represent  prices between
dealers and do not include  retail markup,  markdown or commissions  and may not
necessarily represent actual transactions.

Common Stock

<TABLE>
<CAPTION>
         Quarter Ended                                                            High              Low

<S>                                                                             <C>              <C>
     Fiscal 1998
     June 30, 1997                                                              $ 2.25           $1.6875
                  -----------------------------------------------------
     September 30, 1997                                                         $ 6.50(2)        $2.0625(2)
                        -----------------------------------------------
     December 31, 1997                                                          $ 8.375(2)       $5.375(2)
                       ------------------------------------------------
     March 31, 1998                                                             $10.125(2)       $5.875(2)
                   ----------------------------------------------------

     Fiscal 1999
     June 30, 1998                                                              $11.375(2)       $9.0625(2)
                  -----------------------------------------------------
     September 30, 1998                                                         $11.125(2)       $5.125(2)
                        -----------------------------------------------
     December 31, 1998                                                          $  6.125(2)      $3.125(2)
                       ------------------------------------------------
     March 31, 1999                                                             $  7.50(2)       $5.375(2)
                   ----------------------------------------------------

     Fiscal 2000
     June 30, 1999                                                              $7.938(2)        $5.75(2)
                  -----------------------------------------------------



                                       20
<PAGE>


<CAPTION>
Public Warrants(1)

         Quarter Ended                                                            High              Low
<S>                                                                             <C>              <C>
     Fiscal 1998
     June 30, 1997                                                              $0.40625         $0.3125
                  -----------------------------------------------------
     September 30, 1997                                                         $1.50(2)         $0.40625(2)
                        -----------------------------------------------
     December 31, 1997                                                          $2.375(2)        $0.78125(2)
                      -------------------------------------------------
     March 31, 1998                                                             $2.5625(2)       $1.125(2)
                    ---------------------------------------------------

     Fiscal 1999
     June 30, 1998                                                              $3.375(2)        $2.125(2)
                  -----------------------------------------------------
     September 30, 1998                                                         $3.453(2)        $0.063(2)
                        -----------------------------------------------
     December 31, 1998                                                          $0.656(2)        $0.156(2)
                      -------------------------------------------------
     March 31, 1999                                                             $0.875(2)        $0.313(2)
                    ---------------------------------------------------

     Fiscal 2000
     June 30, 1999                                                              $0.75(2)         $0.188(2)
                  -----------------------------------------------------
</TABLE>

----------------------
     (1)  The Public  Warrants were issued in December 1994 pursuant to a public
          offering of Units each consisting of one share of Common Stock and two
          Public Warrants.
     (2)  Reflects high and low closing prices as reported by Nasdaq.

     The 3,119,159  shares of Common Stock  outstanding as of July 14, 1999 were
held by approximately 296 holders of record worldwide,  including 292 holders of
record in the United States. Management believes that holders of record hold for
approximately 676 beneficial holders.

Transfer and Warrant Agent

     The transfer agent and registrar for the Common Stock and the Warrant Agent
for the warrants is U.S. Stock Transfer  Corporation,  1745 Gardena Avenue #200,
Glendale, California 91204.

Item 6. Exchange Controls and Other Limitations Affecting Security Holders.

     There are no exchange control  restrictions on payments of dividends on the
Company's Common Stock or on the conduct of the Company's  operations  either in
Hong Kong, where the Company's  principal  executive offices are located, or the
British Virgin Islands,  where the Company is incorporated.  Other jurisdictions
in which the Company  conducts  operations may have various  exchange  controls.
Taxation and  repatriation of profits  regarding the Company's China  operations
are regulated by Chinese laws and regulations.  To date, these controls have not
had and are not expected to have a material  impact on the  Company's  financial
results.  There are no material  British Virgin Islands laws that impose foreign
exchange  controls  on the  Company  or that  affect the  payment of  dividends,
interest or other  payments to holders of the Company's  securities  who are not
residents of the British  Virgin  Islands.  British  Virgin  Islands law and the
Company's  Memorandum and Articles of  Association  impose no limitations on the
right of nonresident or foreign owners to hold or vote the Company's securities.



                                       21
<PAGE>


Item 7. Taxation.

Taxation

     Under current British Virgin Islands law, the Company is not subject to tax
on its income. Most of the Company's  subsidiaries' profits accrue in Hong Kong,
where the corporate tax rate is currently  16%.  There is no tax payable in Hong
Kong on offshore profit or on dividends paid to Bonso Electronics Limited by its
subsidiaries  or by Bonso  Electronics  Limited to the Company.  Therefore,  the
overall  effective tax rate of the Company may be lower than that of most United
States corporations; however, such could be materially and adversely affected by
changes in the tax laws of the British Virgin Islands, Hong Kong or China.

     No reciprocal tax treaty  regarding  withholding  exists between the United
States and the British Virgin Islands. Under current British Virgin Islands law,
dividends,  interest or  royalties  paid by the Company to  individuals  are not
subject to tax as long as the recipient is not a resident of the British  Virgin
Islands. If the Company were to pay a dividend,  the Company would not be liable
to withhold any tax, but  shareholders  would receive gross  dividends,  if any,
irrespective of their residential or national status.

     Dividends,   if  any,  paid  to  any  United  States  resident  or  citizen
shareholder would be treated as dividend income for United States federal income
tax   purposes.   Such   dividends   would   not  be   eligible   for   the  70%
dividends-received  deduction allowed to United States corporations on dividends
from a domestic  corporation  under  Section 243 of the United  States  Internal
Revenue Code of 1986 (the "Internal  Revenue Code").  Various  Internal  Revenue
Code  provisions  impose  special taxes in certain  circumstances  on non-United
States  corporations  and their  shareholders.  Shareholders  of the Company are
urged to consult their tax advisors with regard to such  possibilities and their
own tax situation.

     In addition to United States federal income  taxation,  shareholders may be
subject to state and local taxes upon their receipt of dividends.

Dividend Policy

     The Company has never paid any  dividends  on its Common Stock and does not
anticipate  paying any  dividends in the future.  The Board of Directors has not
adopted a policy with respect to the payment of dividends.  The  declaration  of
cash  dividends may be  considered  by the Board of Directors  from time to time
based on the Company's results of operations. The Company's dividend policy will
be dependent  on its net income,  financial  position  and capital  requirements
along with economic and market conditions, industry standards and other factors.
In addition, dividend distribution and repatriation of profits or funds from the
Company's operations in China are regulated by Chinese laws and regulations.  No
profits are  generated  from China  because  the  Company's  Chinese  operations
involve only the manufacture and assembly of its products which are then shipped
to Hong Kong for sale and distribution. No assurance can be given, however, that
such laws will not be interpreted  differently in the future,  in which case the
Company's ability to pay dividends could be adversely affected.  In light of the
above,  no assurance can be given as to the amount or timing of future  dividend
payments,  if  any.  See  Item 6 -  "Exchange  Controls  and  Other  Limitations
Affecting Security Holders."



                                       22
<PAGE>


Item 8. Selected Financial Data.

     The selected  consolidated  financial  data set forth below as of March 31,
1998 and 1999 and for each of the three  fiscal  years in the period ended March
31, 1999 are derived  from the audited  Consolidated  Financial  Statements  and
notes  thereto,  which  are  prepared  in  accordance  with  generally  accepted
accounting  principles in the United States of America in United States dollars,
and which appear  elsewhere  in this Annual  Report.  The selected  consolidated
financial  data set forth below as of March 31 1995,  1996 and 1997 and for each
of the two fiscal  years in the period  ended March 31,  1996 have been  derived
from the Company's audited consolidated financial statements which do not appear
in this Annual Report. The selected consolidated financial data are qualified in
their  entirety by reference  to, and should be read in  conjunction  with,  the
Consolidated  Financial  Statements and related notes and Item 9 - "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included elsewhere in this Annual Report.

<TABLE>
<CAPTION>

                                       SELECTED CONSOLIDATED FINANCIAL DATA

                                                                       Year ended March 31,
                                                     ----------------------------------------------------------
Income Statement Data                              1995         1996          1997         1998         1999
                                                 (In thousands of United States dollars, except per share data)

<S>                                                <C>          <C>          <C>          <C>          <C>
Net sales                                          $13,266      $14,248      $16,989      $23,716      $13,046
Cost of sales                                       (8,936)      (9,412)     (12,096)     (17,071)       8,812
                                                    -------      -------      -------     --------     -------
Gross margin                                         4,330        4,836        4,893        6,645        4,234
Selling expenses                                      (265)        (325)        (433)        (420)        (197)
Salaries and related costs                          (1,561)      (1,960)      (1,973)      (1,897)      (1,626)
Research and development expenses                     (108)        (173)        (122)        (159)        (566)
Administration and general expenses                     98       (1,234)      (1,609)      (1,815)      (1,601)
Provision for permanent diminution in value
  of investment in a joint venture company              --         (153)          --           --           --
Net gain on liquidation of a joint venture
  company                                               --           --          160           --           --
                                                  --------     --------          ---     --------     --------
Income from operations                               2,494          991          916        2,354          244
Interest income                                         75          127           64           73           63
Interest expenses                                     (560)        (607)        (532)        (503)        (445)
Less: Interest capitalized                              --           58           61           46           25
                                                 ---------       ------       ------        -----           --
                                                      (560)        (549)        (471)        (457)        (420)
                                                                       -
Foreign exchange (losses)/gains                       (146)        (124)        (136)          35           38
Other income                                            --           76          102          243           53
                                                 ---------        -----        -----        -----       ------
Income/(loss) before income taxes                    1,863          521          475        2,248          (22)
Income tax (expense)/benefit                           (67)          96           72           27           36
                                                 ----------       -----         ----        -----       ------
Income before minority interests                     1,796          617          547        2,275           14
Minority interests                                      47          (10)          --           --           --
                                                 ---------        ------      ------      -------      -------
Net income                                          $1,843      $   607      $   547       $2,275      $    14
                                                 ---------       ------       ------       ------      -------
Earnings per share   - Basic                       $ 0.95       $ 0.21       $ 0.19        $ 0.80      $  0.45
                     - Diluted                     $ 0.95       $ 0.21       $ 0.19        $ 0.73      $  0.37

                                       23
<PAGE>

<CAPTION>

                                                                           As of March 31,
                                                  -------------------------------------------------------------
Balance Sheet Data                                   1995          1996         1997        1998        1999
                                                     ----          ----         ----        ----        ----

<S>                                                <C>         <C>          <C>          <C>         <C>
Working capital                                    $ 4,719     $  3,801     $  1,663     $  3,184    $  3,316
Total assets                                        18,278       20,700       20,516       20,647      18,660
Long-term debt and capital lease obligations,
  net of current maturities                             68          744          787          243          42
Deferred income taxes(liabilities)/assets             (103)         (49)          16           74         112
Shareholders' equity                                10,764       11,433       12,142        14,479     14,626

</TABLE>


Item 9. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     This section  contains  forward-looking  statements  that involve risks and
uncertainties.  The Company's actual results could differ  materially from those
anticipated in these forward-looking  statements as a result of certain factors,
including those set forth under Item 1 - "Description of Business--Special  Risk
Factors." The following  discussion  and analysis  should be read in conjunction
with  Item  8  -  "Selected  Financial  Data"  and  the  Consolidated  Financial
Statements and notes thereto appearing elsewhere in this Annual Report.

Overview

     The Company  derives its revenues  principally  from the sale of electronic
scales and electronic  consumer and health care products  manufactured  by it in
China.  For the fiscal year ended March 31,  1998,  the Company had net sales of
$23,715,576  and net income of  $2,274,645.  However,  in the fiscal  year ended
March 31, 1999, net sales decreased to $13,046,265  and net income  decreased to
$13,754.

     The  Company was  operating  at full  capacity  in its prior  manufacturing
facility and, in January 1997,  it moved its  manufacturing  operations to a new
facility which has approximately tripled the Company's  manufacturing  capacity.
Management  believes  that the Company  will be able to  increase  sales to take
advantage  of its  increased  manufacturing  capacity  and  improve  margins and
financial  performance.  Increased revenue and net income in future periods will
depend on the Company's ability to (i) strengthen its customer base by enhancing
and diversifying its products; (ii) increase the number of its customers;  (iii)
expand into additional markets;  (iv) maintain or increase sales of its products
to existing  customers;  (v)  increase  production;  and (vi) control all of its
costs.  Although labor costs are increasing in China,  the Company's labor costs
continue to  represent a relatively  small  percentage  of its total  production
costs.  Management  believes that  increased  labor costs in China will not have
significant  effect on its total production costs or results of operations,  and
that the Company will be able to continue to increase its  production at its new
facility  without  substantially  increasing  its  non-production  salaries  and
related  costs.  In  addition,  the  Company  has  not  experienced  significant
difficulties  in obtaining raw materials for its products,  and management  does
not anticipate any such difficulties in the foreseeable future.

     As of the date of filing this  Annual  Report on Form 20-F,  the  Company's
year to date revenues have  declined when compared to the  comparable  period in
the prior year.  Management  believes that the decline in the Company's revenues
from 1998 to 1999 is attributable to a general decline in the worldwide  economy
and reduced orders from two of the Company's  major  customers,  as well as from
various smaller  customers.  One of these major customers has reduced its orders


                                       24
<PAGE>


significantly  and  management  does not  believe  that it is  likely  that this
customer's  orders will  increase in the future.  Management  believes  that the
other major customer's order reduction is temporary and expects that orders from
that customer will  increase in the third and fourth fiscal  quarters.  In 1998,
management  initiated a cost savings  program in order to reduce the effect upon
the  Company's  net income of the reduced  sales  volume.  The cost saving steps
included a temporary  reduction in managements'  salaries which were restored to
previous  levels as of April 1, 1999.  Management is optimistic that the Company
will be able to not only  replace  sales lost during the last fiscal year but to
increase  sales  volume  during the next  fiscal  year as a result of  increased
marketing  activities,  diversification  of the Company's  customer base and new
product  development.  Readers are cautioned that there can be no assurance that
management will be successful in achieving these objectives.



Results of Operations

     The following  table sets forth selected income data as a percentage of net
sales for the periods indicated.

<TABLE>
<CAPTION>
                                                                  Year ended March 31,
                                                            -------------------------------
         Income Statement Data                              1997          1998         1999
                                                            ----          ----         ----
<S>                                                        <C>            <C>          <C>
         Net sales                                         100.0%         100.0%       100.0%
         Cost of sales                                     (71.2)         (72.0)       (67.5)
                                                         --------       --------     --------
         Gross margin                                       28.8           28.0         32.5
         Selling expenses                                   (2.5)          (1.8)        (1.5)
         Salaries and related costs                        (11.6)          (8.0)       (12.5)
         Research and development expenses                  (0.7)          (0.7)        (4.3)
         Administration and general expenses                (9.5)          (7.6)       (12.3)
         Net gain on liquidation of a joint venture company  0.9           --            --
                                                           -----         -----          -----
         Income from operations                              5.4            9.9          1.9
         Interest income                                     0.4            0.3          0.4
         Interest expense                                   (3.1)          (2.1)        (3.4)
                                                           -----          -----        -----
         Less: Interest capitalized                          0.3            0.2          0.2
                                                           -----          -----        -----
                                                            (2.8)          (1.9)        (3.2)
         Foreign exchange (losses)/gains                    (0.8)             0.2          0.3
         Other income                                        0.6            1.0          0.4
                                                             ---            ---          ---
         Income before income taxes                          2.8            9.5       (0.2)
         Income tax benefit                                  0.4            0.1          0.3
         Net income                                          3.2%           9.6%         0.1%
                                                             ====           ====         ====
</TABLE>


Fiscal year ended March 31, 1999 compared to fiscal year ended March 31, 1998

     Net Sales.  The Company's sales  decreased  45.0% from  $23,715,576 for the
fiscal year ended March 31, 1998, to $13,046,265 for the fiscal year ended March
31, 1999, primarily as a result of decreased orders from two major customers and
from various smaller customers of the Company.



                                       25
<PAGE>


     Gross Margin.  Gross margin  increased from 28.0% to 32.5% primarily due to
the fact that the Company was able to utilize existing inventory by modifying it
to fill orders and the fact that the Company manufactured over 80% of the strain
gauges  which  it  used  in its  products.  Implementation  of a  "just-in-time"
inventory system,  which resulted in a reduction in inventory,  also contributed
to this increase.

     Selling Expenses. Selling expenses decreased by 53.1% from $419,755 for the
fiscal year ended March 31, 1998 to $196,974 for the fiscal year ended March 31,
1999. This decrease was attributable primarily to the decrease in sales.

     Salaries and Related Costs.  Salaries and related costs  decreased by 14.3%
from  $1,897,412  for the fiscal year ended March 31, 1998 to $1,625,731 for the
fiscal  year ended  March 31,  1999.  This  decrease  was  primarily  due to the
Company's  efforts to control the number of employees in light of the  reduction
in  orders  from  two  major  customers  as well  as a  temporary  reduction  in
management's salaries.

     Research and  Development.  Research  and  development  expenses  increased
256.7% from $158,706 during the fiscal year ended March 31, 1998 to $566,030 for
the fiscal year ended March 31,  1999,  primarily  as a result of the  Company's
increased emphasis on developing new products to diversify its customer base and
particularly  the  expenditure  of  $392,454  on  development  of the  Company's
proposed cordless telephone.

     Administration  and General Expenses.  Administration  and general expenses
decreased by 11.8% from  $1,814,535 for the fiscal year ended March 31, 1998, to
$1,601,186  for the  fiscal  year  ended  March  31,  1999.  This  decrease  was
attributable  primarily to various cost saving programs such as negotiating with
the owner of the Universal  Industrial Centre property for a reduction of rental
expenses.  The Company subsequently  purchased its office space in an attempt to
control this expense in the long run.

     Income from  Operations.  Income from  operations  decreased  by 89.6% from
$2,354,079  for the fiscal year ended March 31, 1998 to $244,171  for the fiscal
year  ended  March  31,  1999,  primarily  as a result  of  reduced  sales and a
resulting increase in research and development efforts.

     Other Income.  Other income decreased by 78.3% from $242,669 for the fiscal
year ended March 31,  1998 to $52,662 for the fiscal year ended March 31,  1999,
primarily as a result of reduced orders for scrap and increased efficiency which
resulted in a reduction of scrap for resale.

     Foreign  Exchange  Losses/Gains.  Foreign exchange rates produced a gain of
$35,187  for the fiscal  year ended March 31, 1998 and a gain of $37,882 for the
fiscal year ended March 31, 1999. This difference was primarily  attributable to
the difference between the pegged exchange rate and the actual transaction rate.

     Interest Expenses. Interest expenses decreased by 8.1% from $457,838 in the
fiscal  year ended March 31, 1998 to $420,536 in the fiscal year ended March 31,
1999, as a result of reduced bank borrowings.

     Income Taxes.  The Company received an income tax credit of $27,117 for the
fiscal year ended March 31, 1998 and $36,087 for the fiscal year ended March 31,
1999.  The  increase in tax credit is  basically  due to approved  tax losses of
certain of the Company's subsidiaries during the year.

     Net Income.  Net income  decreased by 99.4% from  $2,274,645 for the fiscal
year ended March 31,  1998 to $13,754 for the fiscal year ended March 31,  1999,
primarily as a result of  decreased  turnover  and the other  factors  described
above.



                                       26
<PAGE>


Fiscal year ended March 31, 1998 compared to fiscal year ended March 31, 1997

     Net Sales.  The Company's sales  increased  39.6% from  $16,989,019 for the
fiscal year ended March 31, 1997, to $23,715,576 for the fiscal year ended March
31,  1998,  primarily as a result of increased  orders  received  from two major
customers.  Increased shipments to the Company's two largest customers accounted
for 32.6% of the net  increase  in sales.  The  addition  of new  products  also
contributed  to the increase in net sales.  A new model built-in scale and glass
body scale accounted for approximately 2.4% of the net increase, and the balance
of 4.6% is the result of increased orders from various existing customers.

     Gross Margin.  Gross margin  decreased from 28.8% to 28.0% primarily due to
increased production costs and decreased selling prices for certain products.

     Selling Expenses.  Selling expenses decreased by 3.0% from $432,518 for the
fiscal year ended March 31, 1997 to $419,755 for the fiscal year ended March 31,
1998.  This decrease was  attributable  primarily to better control over freight
costs by shipping out larger lots of goods.

     Salaries and Related  Costs.  Salaries and related costs  decreased by 3.9%
from  $1,973,021  for the fiscal year ended March 31, 1997 to $1,897,412 for the
fiscal  year ended  March 31,  1998.  This  decrease  was  primarily  due to the
Company's efforts to control the number of employees.

     Research and Development. Research and development expenses increased 29.8%
from  $122,263  during the fiscal year ended March 31, 1997 to $158,706  for the
fiscal year ended March 31,  1998,  primarily as a result of the increase in new
product development,  such as a series of low profile body scales, a generic LCD
scale and a new pocket scale.

     Administration  and General Expenses.  Administration  and general expenses
increased by 12.8% from  $1,609,217 for the fiscal year ended March 31, 1997, to
$1,814,535  for the  fiscal  year  ended  March  31,  1998.  This  increase  was
attributable  primarily  to a write-off of deposits on property in the amount of
$78,436  and an  increase  in  depreciation  expense of  $134,401 as a result of
placing additional depreciable assets into service.

     Income from  Operations.  Income from  operations  increased by 157.1% from
$915,569 for the fiscal year ended March 31, 1997 to  $2,354,079  for the fiscal
year ended March 31, 1998, primarily as a result of the factors described above.

     Other Income. Other income increased by 138.3% from $101,843 for the fiscal
year ended March 31, 1997 to $242,669  for the fiscal year ended March 31, 1998,
primarily  as a result of  increased  assembly  subcontracting  work for a third
party.

     Foreign  Exchange  Losses/Gains.  Foreign exchange rates produced a loss of
$135,780  for the fiscal year ended March 31, 1997 and a gain of $35,187 for the
fiscal year ended March 31, 1998. This difference was primarily  attributable to
the difference between the pegged exchange rate and actual transaction rate.

     Interest Expenses. Interest expenses decreased by 2.7% from $470,655 in the
fiscal  year ended March 31, 1997 to $457,838 in the fiscal year ended March 31,
1998, as a result of reduced bank borrowings.

     Income Taxes.  The Company received an income tax credit of $71,368 for the
fiscal year ended March 31, 1997 and $27,117 for the fiscal year ended March 31,
1998. The decrease in tax credit is basically due to the increase in tax expense
of $35,926

     Net Income.  Net income  increased  by 316.2% from  $546,589 for the fiscal
year ended March 31, 1997 to $2,274,645 for the fiscal year ended March 31, 1998
primarily as a result of increased  turnover,  better control of  administrative
overhead and other factors described above.



                                       27
<PAGE>


Seasonality

     The first  calendar  quarter of each year is  typically  the slowest  sales
period as the  Company's  manufacturing  facilities  in China are closed for two
weeks for Chinese New Year holidays to permit employees to travel to their homes
in China.  Throughout the remainder of the year,  the Company's  products do not
appear to be subject to significant seasonal variation.

     Employee incentive  compensation is conditioned on the employee's return to
work  following  the Chinese  New Year and is paid to  employees  following  the
reopening  of the factory  after the  holidays.  Management  believes  that this
method  has  resulted  in lower  employee  turnover  than might  otherwise  have
occurred.

Liquidity and Capital Resources

     The  Company has  traditionally  relied on  borrowings  to meet its working
capital  requirements.  These  borrowings  have been  supplemented by internally
generated  funds and trade  credits from  suppliers.  As of March 31, 1999,  the
Company  had  in  place  general   banking   facilities   with  three  financial
institutions  aggregating  $6,217,949.  Such  facilities  include the ability to
obtain overdrafts, letters of credit, notes payable and fixed loans. As of March
31,  1999,  the  Company  had  utilized  $2,059,357  under its  general  banking
facilities.  Interest on this  indebtedness  fluctuates  with the prime rate and
HIBOR as set by the Hong Kong Bankers  Association.  The bank credit  facilities
are  collateralized  by certain bank  deposits of the Company,  by the Company's
real property  located at Savanna Garden in Hong Kong and by a bank guarantee in
the amount of $150,000. The Company's bank credit facilities are due for renewal
annually. Management of the Company anticipates that the banking facilities will
be renewed on  substantially  the same terms.  Excluding the current  portion of
long term debt and capital lease  obligations,  the amounts of total  short-term
bank  borrowings  outstanding as of March 31, 1999 and 1998 were  $1,944,756 and
$3,199,737,  respectively.  During the fiscal  year ended  March 31,  1999,  the
Company  paid a  total  of  $445,644  in  interest  on  indebtedness  (including
capitalized interest).

     Management is negotiating an equipment lease financing  arrangement for the
equipment  which  will be needed to  produce  the  Company's  proposed  cordless
telephone.  Management anticipates that the Company will finance 85% of the cost
of the equipment,  which will require an initial payment of  approximately  HK$1
million. The terms of the lease financing  arrangement are expected to include a
3-year term with annual interest equal to HIBOR plus 3.375% and monthly payments
of principal and interest.

     Operating  activities  provided  $2,644,612 of net cash for the fiscal year
ended March 31,  1999  compared  to  $3,262,259  of net cash for the fiscal year
ended March 31, 1998.  The decrease from the fiscal year ended March 31, 1998 to
the fiscal year ended March 31, 1999, was primarily due to the decrease in sales
and in net income. Investing activities used $926,312 of net cash for the fiscal
year ended  March 31, 1999 and used  $1,604,013  of net cash for the fiscal year
ended March 31, 1998. The decrease in net cash used in investing activities from
the fiscal year ended March 31, 1998 to the fiscal year ended March 31, 1999 was
primarily due to a decrease in the acquisition of property, plant and equipment.
Financing activities used $1,892,619 of net cash for the fiscal year ended March
31, 1999 and used  $1,294,420  for the fiscal year ended  March 31,  1998.  This
increase was primarily due to the repayment of banking facilities.

     As of March 31, 1999, the Company had $271,447 in cash and cash equivalents
as opposed to $448,454 as of March 31, 1998.  There are no other material unused
sources of liquid  assets.  The  Company  believes  that  there are no  material
restrictions  (including  foreign  exchange  controls)  on  the  ability  of the
Company's  subsidiaries  to  transfer  funds to the  Company in the form of cash
dividends, loans, advances or product/material purchases.



                                       28
<PAGE>


     The Company's current ratio (current assets divided by current liabilities)
increased from 1.54 as of March 31, 1998 to 1.83 as of March 31, 1999. Its quick
ratio (cash and cash  equivalents,  restricted  cash  deposits  and  receivables
divided by current liabilities) increased from 0.53 as of March 31, 1998 to 0.65
as of March 31, 1999.

     As of March 31, 1999, the Company had  contingent  liabilities to banks for
outstanding letters of credit of $114,601 as opposed to $502,270 as of March 31,
1998.

Impact of Inflation

     Management  believes that  inflation  has not had a material  effect on its
business  between 1998 and 1999.  The Company has generally  been able to modify
and improve its product  designs so that it could either  increase the prices of
its products or lower the production  cost in order to keep pace with inflation.
All of the  Company's  manufacturing  is  being  done in  China,  and  China  is
experiencing  deflation.  If such  trend  continues,  the  Company  could  incur
decreased labor costs with regard to its Chines  operations,  resulting in lower
production  costs.  Although the costs to the Company of components  used in the
manufacture of its products have been  relatively  stable,  management  believes
that any possible significant increase in material costs would affect the entire
electronics  industry and thus would not have a negative  material impact on the
Company's competitive position.

Year 2000

     The  Company,  like many owners of computer  software,  will be required to
modify  portions of its software so that it will  function  properly in the year
2000.  The  Company's  information  technology  systems are  maintained  under a
maintenance  arrangement  with the primary vendor of its information  technology
software.  The vendor has advised  that it does not  anticipate  any problems in
making the  necessary  modifications  to the Company's  software.  The Company's
inventory and purchasing  software,  as well as its accounting system, have been
updated for Year 2000  compliance,  including  upgrading of hardware.  The total
costs in relation to these  upgrades are  immaterial to the Company.  Management
anticipates that all necessary  changes to its software will be completed before
December 31,  1999,  and that the Company will not  experience  any  significant
impact with respect to Year 2000 compliance  with the Company's  non-information
technology systems and equipment.

Taxation

     Under current British Virgin Islands law, the Company is not subject to tax
on its income.  Most of the  Company's  profits  accrue in Hong Kong,  where the
corporate  tax rate is  currently  16%.  There is no tax payable in Hong Kong on
offshore  profit  or on  dividends  paid to  Bonso  Electronics  Limited  by its
subsidiaries  or by Bonso  Electronics  Limited to the Company.  Therefore,  the
overall  effective tax rate of the Company may be lower than that of most United
States corporations; however, such could be materially and adversely affected by
changes in the tax laws applicable to the Company.

Exchange Rates

     The Company  sells most of its  products to  international  customers.  The
Company's principal export markets are North America (mainly the United States),
Europe (mainly  Germany) and Asia.  Other markets are other  European  countries
(such as the United  Kingdom),  Australia  and  Africa.  Sales to  international
customers are made directly from the Company to its customers. The Company sells
all of its  products  in  United  States  dollars  and  pays  for  its  material
components  principally  in United  States and Hong Kong  dollars.  A very small
portion of the components used by the Company are paid for in Japanese yen. Most
factory expenses incurred by the Company are paid in Chinese  renminbi.  Because


                                       29
<PAGE>


the Hong Kong dollar is pegged to the United  States  dollar,  the only material
foreign  exchange risk to the Company arises from potential  fluctuations in the
Chinese  renminbi;  however,  the Chinese  renminbi  was very stable in the past
fiscal year and it is unlikely that there will be material  fluctuations  in the
coming year. The Company does not currently engage in hedging transactions,  and
does not intend to do so in the future.

Recent Accounting Pronouncements

     The Financial Accounting Standards Board has issued certain  pronouncements
which are  effective  as  indicated  below  with  respect  to the  fiscal  years
presented in the consolidated financial statements.

     SFAS No. 130,  "Reporting  Comprehensive  Income," is effective  for fiscal
years  beginning  after  December  15,  1997.   Reclassification   of  financial
statements for earlier periods  provided for  comparative  purposes is required.
This  statement  establishes   guidelines  for  the  reporting  and  display  of
comprehensive income and its components (revenues,  expenses,  gains and losses)
in a full set of  general-purpose  financial  statements.  It requires  that all
items  that  are  required  to  be  recognized  under  accounting  standards  as
components of comprehensive  income be reported in a financial statement that is
displayed with the same  prominence as other financial  statements;  it does not
address  issues  of  recognition  of   measurement.   The  primary   element  of
comprehensive   income  applicable  to  the  Company  is  the  foreign  currency
cumulative  translation  adjustment.  The  adoption of SFAS No. 130 will have no
impact on the Company's  consolidated results of operations,  financial position
or cash flows.

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information,"  is effective for fiscal years  beginning after December 15, 1997.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative purposes is required.  This statement establishes guidelines for the
way that public business enterprises report information about operating segments
in financial statements.  This statement also establishes guidelines for related
disclosures  about products and services,  geographic areas and major customers.
The  Company  has  evaluated  the  disclosure  requirements  of SFAS No. 131 and
believes the adoption will not have a material  impact on its future  disclosure
requirements.

     SFAS  No.  132,   "Employers'   Disclosures   about   Pensions   and  Other
Post-retirement  Benefits,"  is  effective  for  fiscal  years  beginning  after
December 15, 1997.  Restatement of disclosures for earlier periods  provided for
comparative purposes is required.  This statement revises employers' disclosures
about pension and other  post-retirement  benefit plans.  It does not change the
measurement  or  recognition  of those plans.  It  standardizes  the  disclosure
requirements  for  pensions  and other  post-retirement  benefits  to the extent
practicable,   requires  additional   information  on  changes  in  the  benefit
obligations  and fair  values  of plan  assets  that will  facilitate  financial
analysis,  and eliminates  certain  disclosures  that are no longer useful.  The
statement  suggests  combined  formats  for  presentation  of pension  and other
post-retirement  benefit  disclosures.  The Company has evaluated the disclosure
requirements  of SFAS No. 132 and believes the adoption will not have a material
impact on its future disclosure requirements.

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities,"  is  effective  for fiscal  years  beginning  after June 15,  1999.
Restatement of disclosures for earlier periods provided for comparative purposes
is required.  This statement establishes  accounting and reporting standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  and for hedging  activities.  The statement  requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial position and measure those instruments at fair value. The
Company has evaluated the disclosure  requirements  of SFAS No. 133 and believes
that  implementation  of the new standard  will have no impact on its results of
operations and financial position.



                                       30
<PAGE>


     SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
is effective for fiscal years  beginning after December 15, 1998. This statement
amends  SFAS 65,  "Accounting  for  Certain  Mortgage  Banking  Activities"  and
requires  that after the  securitization  of  mortgage  loans held for sale,  an
entity   engaged  in  mortgage   banking   activities   classify  the  resulting
mortgage-backed  securities or other retained interests based on its ability and
intent to sell or hold these investments. This statement conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage  banking  enterprise  with the  subsequent  accounting for securities
retained  after the  securitization  of other  types of assets by a  nonmortgage
banking  enterprise.  The Company has evaluated the disclosure  requirements  of
SFAS No. 134 and believes that  implementation  of the new standard will have no
impac on its results of operations and financial position.

Item 10. Directors and Officers of Registrant.

     The directors,  executive officers and a key employee of the Company are as
follows:

Name                             Position with the Company
----                             -------------------------

Anthony So               55      President, Chief Executive Officer, Secretary,
                                 Treasurer, Chief Financial Officer, Chairman
                                 of the Board and Director
Kim Wah Chung            41      Director of Engineering and Research and
                                 Development and Director
Kam Sun Luk              54      General Manager and Director
Cathy, Kit Teng Pang     36      Director of Finance and Director
Henry F. Schlueter       48      Assistant Secretary
Woo-Ping Fok             50      Director
George O'Leary           61      Director

Key Employee
Michael Byrne            51      Managing Director

     ANTHONY SO is the founder of the Company.  He has been President,  Chairman
of the Board of Directors  and  Treasurer of the Company since its inception and
has been  Secretary  of the Company  since July 1991.  Mr. So  received  his BSE
degree  in civil  engineering  from  National  Taiwan  University  in 1967 and a
masters degree in business  administration  ("MBA") from the Hong Kong campus of
the University of Hull,  Hull,  England in 1994. Mr. So has been Chairman of the
Hong Kong GO  Association  since 1986, and also served as Chairman of the Alumni
Association of National Taiwan  University for the 1993-1994  academic year. Mr.
So has  served as a trustee of the  Chinese  University  of Hong Kong,  New Asia
College since 1994.

     KIM WAH CHUNG has been a director of the Company since  September 21, 1994.
Mr. Chung has been employed by the Company  since 1981 and  currently  holds the
position of Director of Engineering and Research and  Development.  Mr. Chung is
responsible  for all research  projects and product  development of the Company.
Mr. Chung's entire  engineering  career has been spent with the Company,  and he
has been involved with every major product development made by the Company.  Mr.
Chung was graduated with honors i 1981 from the Chinese  University of Hong Kong
with a Bachelor of Science degree in electronics.

     KAM SUN LUK was  elected  to the  Board  of  Directors  of the  Company  on
September  21,  1994 and has been  employed  by the  Company as  Director of New
Projects and Quality  Control since October 1993. Mr. Luk obtained his bachelors
degree in electrical  engineering  from National Taiwan  University in 1968. Mr.
Luk is also a member of the Institute of Electrical Engineers United Kingdom and
a  Chartered  Engineer  in  Electrical  Engineering.  Mr.  Luk was  employed  by
Semiconductor  Devices Ltd. of Hong Kong in a variety of positions  between 1970
and 1992 when he joined the Company, including serving as Semiconductor Devices'
General Manager and Senior Vice President.



                                       31
<PAGE>


     CATHY,  KIT TENG PANG has been a director of the Company  since  January 1,
1998.  Ms. Pang was first  employed by the Company as  Financial  Controller  in
December 1996 and was promoted to Director of Finance on April 1, 1998. Ms. Pang
was employed as an auditor in an international  audit firm from 1987 to 1991, at
which  time she  joined a Hong Kong  Listed  company  in the  field of  magnetic
industry  as  Assistant  Financial  Controller.  From 1994  until she joined the
Company in 1996, she was employed as Deput Chief  Accountant in a management and
property  development company in Hong Kong and China. Ms. Pang has a Bachelor of
Business Administration degree from York University in Toronto, Canada. She is a
member of the American Institute of Certified Public Accountants and of the Hong
Kong Society of Accountants.

     HENRY F.  SCHLUETER has served as Assistant  Secretary of the Company since
October 6, 1988.  Since 1992,  Mr.  Schlueter has been the managing  director of
Schlueter & Associates, P.C., a law firm, practicing in the areas of securities,
mergers and acquisitions, finance and corporate law. From 1989 to 1991, prior to
establishing  Schlueter & Associates,  P.C., Mr.  Schlueter was a partner in the
Denver,  Colorado office of Kutak Rock (formerly  Kutak,  Rock & Campbell),  and
from 1984 to 1989,  he was a partner in the  Denver  office of Nelson & Harding.
Mr.  Schlueter  is a  member  of the  American  Institute  of  Certified  Public
Accountants,  the  Colorado  Society  of CPA's,  the  Colorado  and  Denver  Bar
Associations  and the Wyoming State Bar. Mr.  Schlueter  received his law degree
from the University of Wyoming College of Law in 1978.

     WOO-PING  FOK was  elected  to the Board of  Directors  of the  Company  on
September 21, 1994.  Mr. Fok and his firm,  Norman M.K. Yeung & Co., have served
as Hong Kong  counsel to the  Company  since 1993.  Mr. Fok was  admitted to the
Canadian  Bar as a Barrister & Solicitor  in December  1987 and was a partner in
the law firm of Woo & Fok, a Canadian law firm with its head office in Edmonton,
Alberta,  Canada.  In 1991,  Mr. Fok was qualified to practice as a Solicitor of
England  &  Wales,  a  Solicitor  of Hong Kon and a  Barrister  &  Solicitor  of
Australian  Capital  Territory.  Mr.  Fok  practices  law in Hong  Kong and is a
partner with Norman M.K.  Yeung & Co. Mr. Fok's major areas of practice  include
conveyancing  or real property law,  corporations  and business law,  commercial
transactions  and  international  trade with a special  emphasis  in China trade
matters.

     GEORGE O'LEARY has been a director of the Company since January 1997.  From
November 1994 to the present time, Mr. O'Leary has been President of Pacific Rim
Products,  Newport Beach,  California,  a trading company that provides offshore
sourcing alternatives to U.S. based electronics companies. For eight years prior
to 1994,  Mr.  O'Leary  was  President,  CEO and a  director  of  Micro  General
Corporation, Santa Ana, California, a manufacturer and distributor of mechanical
and  electronic  scale  products.  Fo eight years prior to that, Mr. O'Leary was
Vice  President  and  General  Manager  of Lanier  Business  Products,  Atlanta,
Georgia,  a manufacturer and distributor of office  products.  Mr. O'Leary has a
Bachelor  of  Science  degree  in  Electrical   Engineering  from   Northeastern
University, Boston, Massachusetts.

     MICHAEL  BYRNE has  served  as  Managing  Director  for the  Company  since
October,  1998.  Mr.  Byrne has been  employed by various  manufacturing  firms,
including  International  Harvester,  Prince Engineering,  Combustion Engneering
Canada and Aerospace  Technologies of Australia,  since 1964. From 1993 to 1995,
Mr.  Byrne was  employed  as a senior  manufacturing  executive  by  Henderson's
Automotive  Group,  a supplier of metal and foam seating  components to all four
automotive assemblers. In that position he managed three factories in Melbourne,
Adelaide  and Geelong  and led  Henderson's  very  successful  productivity  and
quality improvement  programs.  In July 1995, Mr. Byrne established  Henderson's
first venture into  automotive trim products,  specifically  leather seat covers
for Mitsubishi's export Diamante program.  The new Henderson's trim plant became
a model for demonstrating  the effectiveness of focused customer service,  total
quality management and innovative human resource strategies.  Mr. Byrne received
his Masters of Business Administration degree from the University of Adelaide in
December  1998 and  also  holds a  Graduate  Management  Qualification  from the
Australian Graduate School of Management.



                                       32
<PAGE>


     At the present  time no family  relationship  exists among any of the named
directors and  executive  officers;  however,  Mr. Cham Some So, who served as a
director  until his  resignation on April 30, 1998, is the father of Anthony So.
No arrangement or understanding  exists between any such director or officer and
any other  persons  pursuant  to which any  director  or  executive  officer was
elected as a director or executive officer of the Company.  The directors of the
Company are elected  annually  and serve until their  successors  take office or
until their death,  resignation or removal.  The executive officers serve at the
pleasure of the Board of Directors of the Company.

Item 11.  Compensation of Directors and Officers .

Executive Officers and Directors

     The following table sets forth certain  information as to the  compensation
paid to certain of the  Company's  executive  officers and directors and for all
directors and executive officers as a group for the year ended March 31, 1999:

<TABLE>
<CAPTION>
                                                                                    Cash                   Non-Cash
Name of Individual         Capacities in Which Served                            Compensation            Compensation
------------------         --------------------------                            ------------            ------------
<S>                       <C>                                                  <C>                  <C>
Anthony So                 President, Chief Executive Officer,
                           Secretary, Treasurer, Chief Financial
                           Officer, Chairman of the Board and
                           Director                                            $ 346,153(1)           $  95,385(1)
Kim Wah Chung              Director of Engineering and Research
                           and Development and Director                        $  59,615(2)           $  53,974(2)
Kam Sun Luk                Director of New Projects and Quality
                           Control and Director                                $  86,539(3)           $   4,615(3)
Cathy Pang                 Director of Finance and Director                    $  85,817(4)           $   4,577(4)
Henry F. Schlueter         Assistant Secretary                                 $     --               $     --
Woo Ping Fok               Director                                            $     --               $     --
George O'Leary             Director                                            $ 115,342(5)           $     --
Cham Some So               Director                                            $  13,000(6)           $     --
All directors and
officers as a group (8 persons)(7)                                             $ 706,466(7)           $ 158,551
</TABLE>
----------------------
     (1)  Cash  compensation  consists  of  emoluments  of  $346,153.   Non-cash
          compensation  consists  of a  $15,385  contribution  to the  Company's
          Provident Fund Plan and the value of housing provided to Mr. So valued
          at $80,000 during fiscal 1999. See "Provident  Fund Plan," below,  and
          Item 13 - "Interest of Management in Certain Transactions."
     (2)  Cash  compensation   consists  of  emoluments  of  $59,615.   Non-cash
          compensation  consists  of a  $10,461  contribution  to the  Company's
          Provident Fund Plan, life insurance of $5,051 and a housing  allowance
          of $38,462.  See "Provident Fund Plan," below, and Item 13 - "Interest
          of Management in Certain Transactions."
     (3)  Cash  compensation   consists  of  emoluments  of  $86,539.   Non-cash
          compensation  consists  of a  $4,615  contribution  to  the  Company's
          Provident Fund Plan. See "Provident Fund Plan," below.
     (4)  Cash  compensation   consists  of  emoluments  of  $85,817.   Non-cash
          compensation  consists  of a  $4,577  contribution  to  the  Company's
          Provident Fund Plan. See "Provident Fund Plan," below.
     (5)  Consists of payments made pursuant to a sales  commission  arrangement
          with the  Company.  See Item 13 - "Interest of  Management  in Certain
          Transactions."

                                       33
<PAGE>


     (6)  Consists  of  $13,000  paid as a  director's  fee.  Mr.  Cham  Some So
          resigned from the Board of Directors as of April 30, 1998.
     (7)  Includes  Mr. Cham Some So who  resigned as a director as of April 30,
          1998.

     The  Company  did not set aside or accrue any  amounts to provide  pension,
retirement  or similar  benefits for  directors and officers for the fiscal year
ended March 31, 1999, other than  contributions to the Company's  Provident Fund
Plan which aggregated $35,038 for officers and directors in 1999.

Directors

     Except for Cham Some So, who was paid a  director's  fee of $13,000  during
the fiscal year ended March 31, 1999,  directors  do not receive any  additional
monetary compensation for serving as directors of the Company.  However, outside
directors  receive stock options  pursuant to the 1996  Non-Employee  Directors'
Stock  Option Plan and have been  granted  other  options.  (See  "Stock  Option
Plans--The 1996 Non-Employee Directors' Stock Option Plan," below, and Item 12 -
"Options to Purchase Securities from Registrant or Subsidiaries.") All directors
are reimbursed for all reasonable  expenses incurred in connection with services
as a director.

Provident Fund Plan

     On January 1, 1988, the Company  started a provident fund plan with a major
international  assurance  company  to  provide  life  insurance  and  retirement
benefits  to  its  employees.  All  permanent  full-time  employees,   excluding
employees of the China subsidiary, are eligible to join the plan.

     Each  participant is required to contribute 5% of his salary,  which amount
is deducted  monthly from the  participant's  salary.  The  contribution  by the
Company is either 5%,  7.5% or 10% of the  participant's  salary,  depending  on
whether the length of the participant's service is less than five years, between
five and ten years or more than ten years, respectively.

     At  normal   retirement  age  or  "ill  health"  (defined   essentially  as
disability),  the  participant  is entitled to receive  from the plan a lump sum
equal  to  the  total  of the  participant's  and  the  Company's  balances.  On
resignation prior to normal retirement age, a participant is entitled to receive
from  the  plan  a lump  sum  equal  to his  balance  plus a  percentage  of the
employer's balance determined in accordance with a predetermined scale. Upon the
death of a participant,  the benefit (calculated as at normal retirement age) is
paid to the employer to be held in trust for the participant's beneficiaries and
paid to them as the employer determines.

     The Company's  aggregate  contributions  to the Provident Fund Plan for the
years  ended March 31,  1997,  1998 and 1999  amounted  to $54,924,  $45,227 and
$54,046, respectively.

Stock Option Plans

The 1996 Stock Option Plan

     In August  1996,  the Board of  Directors  of the Company  adopted the 1996
Stock  Option  Plan (the  "Employees'  Plan")  which  provides  for the grant of
options  to  purchase  an  aggregate  of not more  than  400,000  shares  of the
Company's  Common Stock.  The purpose of the Employees'  Plan is to make options
available to management  and employees of the Company in order to encourage them
to secure or increase on reasonable  terms their stock  ownership in the Company
and to encourage them to remain in the employ o the Company.



                                       34
<PAGE>


     The Employees' Plan will be  administered  by a committee  appointed by the
Board of Directors which  determines the persons to be granted options under the
Employees' Plan, the number of shares subject to each option, the exercise price
of each option and the option period,  subject to the requirement that no option
may be  exercisable  more than 10 years  after the date of grant.  The  exercise
price of an option may be less than fair market value of the  underlying  shares
of Common Stock. No options granted under the Employee Plan will be transferable
by the optionee other than by will or the laws of descent and  distribution  and
each option will be  exercisable,  during the lifetime of the optionee,  only by
such optionee.

     The exercise price of an option granted pursuant to the Employees' Plan may
be paid in  cash,  by the  surrender  of  options,  in  Common  Stock,  in other
property,  including the optionee's  promissory note, or by a combination of the
above.

The 1996 Non-Employee Directors' Stock Option Plan

     In  August  1996,  the Board of  Directors  of the  Company  adopted a 1996
Non-Employee  Directors' Stock Option Plan (the "Non-Employee  Directors' Plan")
which  provides  for the grant of options to purchase an  aggregate  of not more
than  100,000  shares  of  the  Company's  Common  Stock.  The  purpose  of  the
Non-Employee  Directors' Plan is to promote the long-term success of the Company
by  creating  a  long-term  mutuality  of  interests  between  the  non-employee
directors  and  the  stockholders  of the  Company,  to  provide  an  additional
inducement  for such directors to remain with the Company and to provide a means
through  which the Company may attract able persons to serve as directors of the
Company.  The  Non-Employee  Directors' Plan will be administered by a committee
(the "Committee") appointed by the Board of Directors.

     Under the Non-Employee Directors' Plan, on the third business day following
each  Annual  Meeting  of the  stockholders,  each  director  who is not then an
employee of the Company or any of its subsidiaries will automatically be granted
a stock option to purchase 10,000 shares of Common Stock.  The exercise price of
all options granted under the Non-Employee  Directors' Plan will be equal to the
fair  market  value of the  underlying  shares  on the date of  grant,  based on
guidelines set forth in the Non-Employee Directors' Plan. The exercise price may
be paid in  cash,  by the  surrender  of  options,  in  Common  Stock,  in other
property,  including the optionee's  promissory note, or by a combination of the
above. The term of each option granted  pursuant to the Non-Employee  Directors'
Plan will be ten years from the date of grant;  however,  no such  option may be
exercised during the first six months of its term. The term of an option granted
pursuant to the  Non-Employee  Directors'  Plan may be reduced in the event that
the optionee ceases to be a director of the Company.  No option granted pursuant
to the Non-Employee  Directors' Plan will be transferable otherwise than by will
or the laws of descent and distribution.


Item 12. Options to Purchase Securities from Registrant or Subsidiaries.

Public Warrants

     As a result of a public  offering of Units  conducted in December 1994, the
Company issued 2,200,000 warrants to the public. An aggregate of 25,597 of these
warrants  were  exercised  in  October  1998.  Each of the  remaining  2,174,403
warrants  entitles  the holder  thereof to purchase one share of Common Stock at
$7.35 per share.  By their  terms,  the  warrants  expire on December  14, 1999,
unless extended.



                                       35
<PAGE>


Representatives' Warrants

     In conjunction  with a public offering of Units conducted in December 1994,
the Company issued  Representatives'  Warrants  entitling the holders thereof to
purchase up to 110,000 Units,  each Unit to consist of one share of Common Stock
and two warrants, at an exercise price of $9.1875 per Unit. The Representatives'
Warrants  are  exercisable  until  December 14,  1999.  Upon any transfer  after
December 15, 1996 to a person other than an officer,  shareholder or director of
the Representatives, the transferred Representatives' Warrants must be exercised
immediately or they will lapse. In addition,  the Company granted certain rights
to the holders of the Representatives' Warrants under the Securities Act.

Options

     The following table sets forth all options to purchase Common Stock granted
by the Company which are outstanding as of the date of this Annual Report.

       Number of              Exercise Price               Expiration
        Options                  per Share                    Date

        20,000                     $2.25                October 16, 2006
        420,000                    $2.00                January 31, 2007
        40,000                     $5.06                September 8, 2007
        220,000                    $6.20                  January 2008
        415,000                    $3.60                  October 2008
        15,000                     $3.70                  October 2008

Item 13. Interest of Management in Certain Transactions.

     Over the years, the Company has provided to and received cash advances from
its officers and directors.  In October 1994,  the Board of Directors  adopted a
policy  resolution  prohibiting  the Company  from making any loan or advance of
money or  property,  or  guaranteeing  the  obligation  of any  directors of the
Company,  and limiting  the  Company's  ability to make such loans,  advances or
guarantees to officers of the Company or its  subsidiaries  unless a majority of
independent,  disinterested  outside directors determine that such loan, advance
or guarantee  may  reasonably be expected to benefit the Company.  Further,  all
future material affiliated transactions, loans and loan guarantees, if any, will
be made on terms that are no less  favorable  to the Company than those that are
generally  available from  unaffiliated  third parties.  The Company has neither
provided nor received any cash  advances to it officers or directors  since this
policy resolution was adopted.

     It is common practice in Hong Kong, the location of the Company's principal
executive offices,  to provide a housing allowance or living  accommodations for
senior  executives  as part of their  compensation.  The  Company  provides  Mr.
Anthony So with living accommodations  consisting of a Company-owned  townhouse,
for which the Company paid a total purchase price of  approximately  $1,337,000.
The Company  valued this  benefit at $80,000  during the fiscal year ended March
31,  1999.  The  Company  also  provides  Mr. Kim Wah  Chung,  its  Director  of
Engineering and Research and  Development and a director of the Company,  with a
housing  allowance  which amounted to $38,462 during the fiscal year ended March
31, 1999.

     Mr.  George  O'Leary,  a director of the Company,  is paid a commission  on
orders placed by customers  which he obtains for the Company.  The amount of the
commission is negotiated on a deal-by-deal  basis,  without a written agreement.
During the fiscal years ended March 31, 1998 and 1999,  Mr.  O'Leary was paid an
aggregate of $354,835 and $115,342, respectively, in commissions.




                                       36
<PAGE>

                                     PART II

Item 14. Description of Securities to be Registered.

         Not applicable.





                                       37
<PAGE>



                                    PART III

Item 15. Defaults Upon Senior Securities.

     Not applicable.

Item  16.   Changes  in  Securities  and  Changes  in  Security  for  Registered
            Securities.

     On July 22,  1998 the  Company  issued a notice  to  redeem  the  Company's
warrants on September 4, 1998 for $0.05 per warrant.  On September 2, 1998,  the
notice to redeem was rescinded.


                                     PART IV

Item 17. Financial Statements.

     Not applicable.

Item 18. Financial Statements.

     Reference  is made to Item  19(a)  for a list of all  financial  statements
filed as part of this Annual Report on Form 20-F.

Item 19. Financial Statements and Exhibits.

     (a) The following Financial Statements are filed as part of this Annual
Report:

                                                                           Page

  Index to Consolidated Financial Statements                                F-1
  Report of Independent Accountants                                         F-2
  Consolidated Balance Sheets as of March 31, 1998 and 1999                 F-3
  Consolidated Statements of Comprehensive Income for the years             F-4
  ended March 31, 1997, 1998 and 1999
  Consolidated Statements of Changes in Shareholders' Equity for the        F-5
  years ended March 31, 1997, 1998 and 1999
  Consolidated Statements of Cash Flows for the years ended                 F-6
  March 31, 1997, 1998 and 1999
  Notes to Consolidated Financial Statements                     F-7 through 27

     (b) No Exhibits are filed as part of this Annual Report.



                                       37


                                       38
<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the  registrant  certifies  that it meets all of the  requirements  for
filing on Form 20-F and has duly caused  this Annual  Report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                            BONSO ELECTRONICS INTERNATIONAL INC.



Date  August 2, 1999                        /s/ Anthony So
                                            ------------------------------------
                                            Anthony So, President





























                                       39
<PAGE>
                        Consolidated Financial Statements

                      Bonso Electronics International Inc.
                  (Incorporated in the British Virgin Islands)
                                and Subsidiaries

                                 March 31, 1999

                             PricewaterhouseCoopers
                             Independent Accountants



<PAGE>



              Bonso Electronics International Inc. and Subsidiaries
                   Index to Consolidated Financial Statements



Contents                                                                   Pages



Report of Independent Accountants............................................. 2



Consolidated Balance Sheets as of March 31, 1998 and 1999..................... 3



Consolidated Statements of Comprehensive Income
for the years ended 31, 1997, 1998 and 1999................................... 4



Consolidated Statements of Changes in Shareholders'
Equity for the years ended 31,  1997, 1998 and 1999........................... 5



Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1998 and 1999................................................. 6



Notes to Consolidated Financial Statements...............................7 to 27




                                      F-1
<PAGE>




                        Report of Independent Accountants


Board of Directors and Shareholders
Bonso Electronics International Inc. and Subsidiaries


We  have  audited  the  accompanying   consolidated   balance  sheets  of  Bonso
Electronics  International  Inc. and Subsidiaries  (the "Group") as of March 31,
1998 and 1999 and the related consolidated  statements of comprehensive  income,
changes in  shareholders'  equity and cash flows for each of the three  years in
the period ended March 31, 1999. These consolidated financial statements are the
responsibility of the Group's  management.  Our  responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits 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 financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of the Group as of
March 31, 1998 and 1999 and the results of their  operations  and cash flows for
each of the three years in the period ended March 31, 1999, in  conformity  with
generally accepted accounting principles in the United States of America.




PricewaterhouseCoopers

Hong Kong, May 28, 1999



                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                                 Bonso Electronics International Inc. and Subsidiaries
                                              Consolidated Balance Sheets
                                         (Expressed in United States Dollars)

                                                                                            March 31
                                                                                 -----------------------------
                                                                                 1998                   1999
                                                                                 ----                   ----
                                                                                 $                      $
<S>                                                                              <C>                     <C>
Assets

Current assets

 Cash and cash equivalents ......................................                448,454                 271,447
 Restricted cash deposits (Note 7) ..............................                952,267               1,011,688
 Trade receivables, net (Note 2) ................................                964,958                 362,236
 Inventories, net (Note 3) ......................................              5,966,700               4,697,928
 Notes receivable ...............................................                340,518                 690,449
 Deferred income tax assets - current (Note 5(d)) ...............                 35,088                  31,251
 Other receivables, deposits and prepayments ....................                400,924                 243,231
                                                                             -----------             -----------
 Total current assets ...........................................              9,108,909               7,308,230
                                                                             -----------             -----------

Deposits ........................................................                447,735                    --

Deferred income tax assets - non current (Note 5(d)) ............                 38,430                  81,223

Property, plant and equipment

 Leasehold land and buildings ...................................              7,259,414               8,997,073
 Construction-in-progress .......................................                785,364                    --
 Plant and machinery ............................................              3,385,846               3,495,632
 Molds ..........................................................              2,108,967               2,112,608
 Furniture, fixtures and equipment ..............................              2,122,805               2,661,718
 Motor vehicles .................................................                306,946                 306,979
                                                                             -----------             -----------
                                                                              15,969,342              17,574,010
 Less: accumulated depreciation and amortization ................             (4,917,853)             (6,303,179)
                                                                             -----------             -----------
 Net property, plant and equipment ..............................             11,051,489              11,270,831
                                                                             -----------             -----------
 Total assets ...................................................             20,646,563              18,660,284
                                                                             -----------             -----------

(cont'd)
              See notes to these consolidated financial statements


<PAGE>

<CAPTION>

                                 Bonso Electronics International Inc. and Subsidiaries
                                       Consolidated Balance Sheets (continued)
                                         (Expressed in United States Dollars)

                                                                                           March 31
                                                                                 ---------------------------
                                                                                 1998                   1999
                                                                                 ----                   ----
                                                                                 $                      $
<S>                                                                              <C>                     <C>


Liabilities and shareholders' equity

Current liabilities

 Bank overdrafts (Note 7) .......................................                600,721                 643,278
 Notes payable (Note 7) .........................................              2,260,384                 581,349
 Accounts payable ...............................................              1,560,954               1,135,910
 Accrued charges and deposits ...................................                482,222                 516,458
 Income taxes payable ...........................................                 30,000                  11,667
 Short-term loans (Note 7) ......................................                338,632                 720,129
 Current portion of long-term debt and
  capital lease obligations
   (Notes 4 and 6(a)) ...........................................                652,041                 383,409
                                                                             -----------             -----------
 Total current liabilities ......................................              5,924,954               3,992,200
                                                                             -----------             -----------
Long-term debt and capital lease obligations, net of current
 maturities (Notes 4 and 6(a)) ..................................                242,889                  42,397

Commitments and contingencies (Note 10)

Shareholders' equity (Notes 8(b), 14 and 15)

 Common stock par value $0.003 per share
  - authorized shares - 23,333,334
  - issued and outstanding shares - 3,119,159 ...................                  8,485                   9,353
 Additional paid-in capital .....................................              8,724,503              10,285,105
 Promissory note receivable from shareholder (Note 8(b)) ........             (1,350,000)             (1,430,000)
 Common stock subscribed (Note 8(b)) ............................              1,350,000                    --
 Retained earnings ..............................................              5,512,204               5,525,958
 Accumulated other comprehensive income .........................                233,528                 235,271
                                                                             -----------             -----------
                                                                              14,478,720              14,625,687
                                                                             -----------             -----------
Total liabilities and shareholders' equity ......................             20,646,563              18,660,284
                                                                             -----------             -----------
</TABLE>

              See notes to these consolidated financial statements





                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                   Bonso Electronics International Inc. and Subsidiaries
                      Consolidated Statements of Comprehensive Income
                           (Expressed in United States Dollars)

                                                        Year ended March 31
                                              -----------------------------------------
                                                  1997           1998           1999
                                                  $              $              $

<S>                                            <C>            <C>            <C>
Net sales (Note 16) .......................    16,989,019     23,715,576     13,046,265
Cost of sales .............................    12,096,085     17,071,089      8,812,173
                                              -----------    -----------    -----------
Gross margin ..............................     4,892,934      6,644,487      4,234,092

Selling expenses ..........................       432,518        419,755        196,974
Salaries and related costs ................     1,973,021      1,897,412      1,625,731
Research and development expenses (Note 11)       122,263        158,706        566,030
Administration and general expenses .......     1,609,217      1,814,535      1,601,186
Net gain on liquidation of a joint venture
 company (Note 13) ........................      (159,654)          --             --
                                              -----------    -----------    -----------
Income from operations ....................       915,569      2,354,079        244,171
Interest income ...........................        64,248         73,431         63,488
Interest expenses .........................      (532,068)      (503,896)      (445,644)
Less: Interest capitalized ................        61,413         46,058         25,108
                                              -----------    -----------    -----------

                                                 (470,655)      (457,838)      (420,536)
Foreign exchange (losses)/gains ...........      (135,780)        35,187         37,882
Other income ..............................       101,843        242,669         52,662
                                              -----------    -----------    -----------
Income/(loss) before income taxes .........       475,225      2,247,528        (22,333)
Income tax benefit (Note 5(c)) ............        71,364         27,117         36,087
                                              -----------    -----------    -----------
Net income ................................       546,589      2,274,645         13,754

Other comprehensive income, net of tax:
Foreign currency translation adjustments ..       162,970         43,129          1,743
                                              -----------    -----------    -----------
Comprehensive income ......................       709,559      2,317,774         15,497
                                              -----------    -----------    -----------

Earning per share (Note 12)
 Basic ....................................         19.34 cents    80.39 cents    0.45 cents
                                              -----------    -----------    -----------

 Diluted ..................................         19.21 cents    72.57 cents    0.37 cents
                                              -----------    -----------    -----------
</TABLE>



              See notes to these consolidated financial statements


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                        Bonso Electronics International Inc. and Subsidiaries
                     Consolidated Statements of Charges in Shareholders' Equity
                                (Expressed in United States Dollars)

                                                                                   Promissory
                                              Common stock                         note
                                        -----------------------                    receivable
                                           Shares       Amount      Additional     from
                                        outstanding  outstanding  paid-in capital  shareholder
                                        -----------  -----------  ---------------  -----------
                                                     $             $               $
<S>                                      <C>               <C>       <C>            <C>
Balance, March 31, 1996 ............     2,825,949         8,477     8,705,917          --

Net income .........................

Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments
 Reversal upon liquidation
  of a joint venture company .......
Comprehensive income ...............
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1997 ............     2,825,949         8,477     8,705,917          --

Net income .........................
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments
 Reversal upon liquidation of a
   subsidiary ......................
                                       -----------   -----------   -----------    ----------
Comprehensive income ...............
Common stock issued upon exercise
 of warrant (Note 15) ..............         2,613             8        18,586
Common stock subscribed
 (Note 8(b)) .......................          --            --            --      (1,350,000)
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1998 ............     2,828,562         8,485     8,724,503    (1,350,000)

Net income .........................        13,754          --          13,754
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustment..          --           1,743         1,743
                                       -----------   -----------   -----------    ----------

Comprehensive income ...............
Issue of common stock (Note 8(b))...       200,000           600     1,349,400          --
Common stock issued upon
 exercise of share option (Note (14).        5,000           193       131,202          --
Common stock issued upon exercise
 of warrant, net of expenses (Note
15)                                         25,597            75          --            --
Interest income from promissory
 note receivable (Note 8(b)) .......          --            --          80,000       (80,000)
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1999 ............     3,119,159         9,353    10,285,105    (1,430,000)
                                       -----------   -----------   -----------    ----------

(cont'd)

<PAGE>

<CAPTION>
                        Bonso Electronics International Inc. and Subsidiaries
               Consolidated Statements of Charges in Shareholders' Equity (continued)
                                (Expressed in United States Dollars)

                                                                     Accumulated
                                                                     other
                                                                     comprehensive
                                                                     income-
                                       Common                        foreign      Total
                                       stock           Retained      currency     shareholders'
                                       subscribed      earnings      adjustments  equity
                                       ----------      --------      -----------  ------------
                                       $               $             $            $
<S>                                   <C>              <C>        <C>             <C>
Balance, March 31, 1996 ............         --       2,690,970        27,429     11,432,793

Net income .........................                    546,589          --          546,589

Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments                       --          57,746          57,746
 Reversal upon liquidation
  of a joint venture company .......                      --         105,224         105,224
Comprehensive income ...............                    546,589      162,970         709,559
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1997 ............         --       3,237,559       190,399     12,142,352

Net income .........................                 2,274,645          --        2,274,645
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments                       --          45,779         45,779
 Reversal upon liquidation of a
   subsidiary ......................                      --          (2,650)        (2,650)
                                       ----------   -----------   -----------    -----------
Comprehensive income ...............         --       2,274,645        43,129      2,317,774
Common stock issued upon exercise
 of warrant (Note 15) ..............         --            --            --           18,594
Common stock subscribed
 (Note 8(b)) .......................    1,350,000          --            --             --
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1998 ............    1,350,000     5,512,204       233,528     14,478,720

Net income .........................                     13,754          --           13,754
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustment..                       --           1,743          1,743
                                       ----------   -----------   -----------    -----------

Comprehensive income ...............                     13,754         1,743         15,497
Issue of common stock (Note 8(b))...   (1,350,000)         --            --             --
Common stock issued upon
 exercise of share option (Note (14).        --            --            --          131,395
Common stock issued upon exercise
 of warrant, net of expenses (Note
15                                           --            --            --               75
Interest income from promissory
 note receivable (Note 8(b)) - .....         --            --            --             --
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1999 ............         --       5,525,958       235,271     14,625,687
                                       ----------   -----------   -----------    -----------

</TABLE>


              See notes to these consolidated financial statements


                                      F-5
<PAGE>

<TABLE>
<CAPTION>
                             Bonso Electronics International Inc. and Subsidiaries
                                     Consolidated Statements of Cash Flows
                                     (Expressed in United States Dollars)
                                                                                                   Year ended March 31
                                                                                     --------------------------------------------
                                                                                     1997               1998                 1999
                                                                                     ----               ----                 ----
                                                                                     $                  $                    $
<S>                                                                                 <C>               <C>                    <C>
Cash flows from operating activities
 Net income ............................................................            546,589           2,274,645              13,754
 Adjustments to reconcile net income to net cash
  provided by operating activities
 Depreciation ..........................................................            681,730             942,894           1,109,286
 Amortization ..........................................................            279,201             482,214             275,323
 Other .................................................................            (71,716)            113,794             (51,187)

 Changes in assets and liabilities, net of disposed
  subsidiary:
 Trade receivables .....................................................            394,234              45,929             596,696
 Other receivables, deposits and prepayments ...........................            773,636             (57,577)            157,693
 Notes receivable ......................................................           (535,685)            427,015            (349,931)
 Inventories ...........................................................            275,537              53,994           1,341,075
 Accounts payable, accrued charges and deposits ........................          1,237,089          (1,084,467)           (390,808)
 Other .................................................................            (56,309)             63,818             (57,289)
                                                                                 ----------          ----------          ----------
 Net cash provided by operating activities .............................          3,524,306           3,262,259           2,644,612
                                                                                 ----------          ----------          ----------
Cash flows from investing activities
 Restricted cash deposits ..............................................            664,820             (65,947)            (59,421)
 Deposit for properties ................................................               --               (64,215)               --
 Proceeds from disposal of property, plant and
  equipment ............................................................            212,494              83,418                --
 Acquisition of property, plant and equipment ..........................         (2,844,115)         (1,557,269)           (866,891)
                                                                                 ----------          ----------          ----------
 Net cash used in investing activities .................................         (1,966,801)         (1,604,013)           (926,312)
                                                                                 ----------          ----------          ----------
Cash flows from financing activities
 Issue of shares on exercise of warrants and options ...................               --                  --               317,966
 Expenses paid for warrant redemption ..................................               --                  --              (201,586)
 Principal payments under long-term debt ...............................           (307,692)           (410,256)           (381,826)
 Capital lease payments ................................................           (169,569)           (355,750)           (372,192)
 Net repayment under banking facilities ................................         (1,180,565)           (528,414)         (1,254,981)
                                                                                 ----------          ----------          ----------
 Net cash used in financing activities .................................         (1,657,826)         (1,294,420)         (1,892,619)
                                                                                 ----------          ----------          ----------
 Effect of foreign exchange rate changes on cash .......................             23,457              (4,519)             (2,688)
                                                                                 ----------          ----------          ----------
 Net (decrease)/increase in cash .......................................            (76,864)            359,307            (177,007)
 Cash and cash equivalents, beginning of year ..........................            166,011              89,147             448,454
                                                                                 ----------          ----------          ----------
                                                                                     89,147             448,454             271,447
                                                                                 ----------          ----------          ----------
Supplemental disclosure of cash flow information

 Cash paid during the year for:
  Interest paid, net of amounts capitalized ............................            470,655             457,838             420,536
  Income tax paid, net of refund .......................................             50,383             (33,818)            (21,202)
</TABLE>

              See notes to these consolidated financial statements


                                      F-6
<PAGE>


             Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies

     Bonso Electronics  International  Inc. ("the Company") and its subsidiaries
     are engaged in the designing,  manufacturing and selling of a comprehensive
     line of electronic  scales and weighing  instruments,  electronic  consumer
     products and health care products.

     The consolidated  financial  statements have been prepared in United States
     dollars and in accordance with generally accepted accounting  principles in
     the United States of America.  The  preparation of  consolidated  financial
     statements  requires  management  to make  estimates and  assumptions  that
     affect the reported  amounts of assets and  liabilities  and  disclosure of
     contingent  assets  and  liabilities  at  the  dates  of  the  consolidated
     financial  statements  and the  reported  amounts of revenues  and expenses
     during the  reporting  periods.  Significant  estimates  made by management
     include provisions made against  inventories and trade receivables.  Actual
     results could differ from those estimates.

     The significant accounting policies are as follows:

(a)  Principles of consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its foreign subsidiaries  (hereinafter  collectively referred to as the
     "Group").  All  significant  intercompany  accounts  and  transactions  are
     eliminated.

(b)  Cash and cash equivalents

     Cash and cash  equivalents are short-term,  highly liquid  investments with
     original maturities of three months or less. Cash equivalents are stated at
     cost, which  approximates  fair value because of the short term maturity of
     these instruments.

(c)  Inventories

     Inventories  are stated at the lower of cost or net  realizable  value with
     cost determined on a first-in, first-out basis. Net realizable value is the
     price at which  inventories  can be sold in the normal  course of  business
     after allowing for the costs of completion and disposal.

(d)  Revenue recognition

     Revenue is recognized when the products are shipped to customers.

(e)  Property, plant and equipment

     (i)  Property,  plant and equipment are stated at cost.  Leasehold land and
          buildings are amortized on a straight-line  basis over 15 to 50 years,
          representing  the  shorter of the  remaining  term of the lease or the
          expected useful life to the Group.

     (ii) Construction-in-progress  represents  factories  and office  buildings
          under  construction  and is stated at cost. Cost includes the costs of
          construction  and interest  charges  arising from  borrowings  used to
          finance   these   assets   during   the   period   of    construction.
          Construction-in-progress  is not  depreciated  during  the  period  of
          construction.


                                      F-7
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies (cont'd)

(e)  Property, plant and equipment (cont'd)

     (iii)Other  fixed  assets  are  carried at cost and  depreciated  using the
          straight-line  method over their  expected  useful lives to the Group.
          The principal annual rates used for this purpose are:


          Plant and machinery                  - 14% to 33.3%
          Molds                                - 20%
          Furniture, fixtures and equipment    - 20%
          Motor vehicles                       - 20%

     (iv) The cost of major improvements and betterments is capitalized, whereas
          the cost of maintenance and repairs is expensed in the year incurred.

     (v)  Any  gain  or  loss  on  disposal  is  included  in  the  Consolidated
          Statements of Comprehensive Income.

(f)  Research and development costs

     Research and development costs are charged to expense as incurred.

(g)  Advertising

     Advertising  costs are expensed as incurred and are included within selling
     expenses.

     Total  advertising  costs incurred for the years ended March 31, 1997, 1998
     and 1999 amounted to $22,315 and $9,078 and $43,424 respectively.

(h)  Deferred income taxes

     Amounts in the consolidated  financial  statements  related to income taxes
     are calculated  using the  principles of Statement of Financial  Accounting
     Standards  ("SFAS") No. 109,  "Accounting  for Income Taxes".  SFAS No. 109
     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. Under this method, deferred tax assets
     and liabilities are determined based on the temporary  differences  between
     the financial reporting basis and tax basis of assets and liabilities using
     enacted  tax rates in  effect  for the year in which  the  differences  are
     expected to reverse.  Future tax benefits, such as net operating loss carry
     forwards, are recognized to the extent that realization of such benefits is
     more likely than not to occur.

(i)  Capitalization of interest costs

     Interest  attributable  to borrowings  used to finance the  construction of
     factories and office  buildings is capitalized as an additional cost of the
     related  assets.  Interest is capitalized by applying the weighted  average
     interest  rate  on  borrowings   outstanding  during  the  year  or,  where
     applicable,  the  interest  rate  related to  specific  borrowings,  to the
     average amount of the  accumulated  expenditures  for the assets during the
     period.  Capitalization  of interest  ceases when the property is ready for
     its intended use.


                                      F-8
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies (cont'd)

(j)  Foreign currency translations

     (i)  The  functional  currency  of the  Company  and one of its  Hong  Kong
          subsidiaries  is the United States dollar and the functional  currency
          of the other  Hong Kong  subsidiaries  is the Hong  Kong  dollar.  The
          functional  currency  of the  Company's  subsidiary  in  the  Peoples'
          Republic of China (the "PRC") is the Renminbi,  the national  currency
          of the PRC. The  functional  currency of the  Company's  subsidiary in
          Canada, which was liquidated in 1998, is the Canadian dollar.

     (ii) The financial statements of foreign subsidiaries where the U.S. dollar
          is  the  functional  currency  and  which  have  certain  transactions
          denominated  in non-U.S.  dollar  currencies  are remeasured as if the
          functional  currency were the U.S. dollar.  The remeasurement of local
          currencies into U.S. dollars creates translation adjustments which are
          included in net income.

     (iii)The  financial  statements  of foreign  subsidiaries,  where the local
          currency is the functional currency,  are translated into U.S. dollars
          using   exchange  rates  in  effect  at  period  end  for  assets  and
          liabilities  and average  exchange rates during each reporting  period
          for statement of income.  Adjustments  resulting  from  translation of
          financial   statements  are  reflected  as  a  separate  component  of
          shareholders' equity.

(k)  Adoption of new accounting standards

     The Group adopted the provisions of SFAS No. 130, "Reporting  Comprehensive
     Income".  This  statement  establishes  guidelines  for the  reporting  and
     display of  comprehensive  income and its components  (revenues,  expenses,
     gains and losses) in a full set of general-purpose financial statements. It
     requires that all items that are required to be recognized under accounting
     standards as components of comprehensive  income be reported in a financial
     statement  that is displayed  with the same  prominence as other  financial
     statements;  it does not address issues of recognition or measurement.  The
     primary  element of  comprehensive  income  applicable  to the Group is the
     foreign currency cumulative translation adjustment.  The Group adopted this
     standard  from  December  15,  1998.  The  comparative  figures  have  been
     restated.

     The Group  adopted  the  provisions  of SFAS No.  131,  "Disclosures  about
     Segments  of  an  Enterprise  and  Related  Information".   This  statement
     establishes  guidelines for the way that public business enterprises report
     information  about  operating  segments  in  financial   statements.   This
     statement  also  establishes   guidelines  for  related  disclosures  about
     products and services,  geographic  areas, and major  customers.  The Group
     adopted this standard from December 15, 1998.


                                      F-9
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

2    Allowance for doubtful accounts

     Changes in the allowance for doubtful accounts consist of:


                                                1997        1998           1999
                                                ----        ----           ----
                                                $           $              $

Balance, April 1 .......................       52,919       99,856        33,333
Additions charged to expense ...........       46,937         --           6,026
Write-off ..............................         --        (26,126)         --
Provision written back .................         --        (40,397)         --
                                              -------      -------       -------
Balance, March 31 ......................       99,856       33,333        39,359
                                              -------      -------       -------

3    Inventories

(a)  The components of inventories are as follows:
                                                            March 31
                                                   --------------------------
                                                   1998                  1999
                                                   ----                  ----
                                                   $                     $

Raw materials ......................            4,288,182             3,601,695
Work in progress ...................              849,343               841,008
Finished goods .....................            1,096,799               450,546
                                               ----------            ----------
                                                6,234,324             4,893,249
                                               ----------            ----------
Provisions .........................             (267,624)             (195,321)
                                               ----------            ----------
                                                5,966,700             4,697,928
                                               ----------            ----------

(b)  Changes in the inventories provisions consist of the following:


                                            1997           1998          1999
                                            ----           ----          ----
                                            $                    $       $

Balance, April 1 ...................        49,014        146,530       267,624
Additions charged to expense .......       131,516        121,094          --
Write-back .........................       (34,000)          --         (72,303)
                                          --------       --------      --------
Balance, March 31 ..................       146,530        267,624       195,321
                                          --------       --------      --------

                                      F-10
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

4    Long-term debt

     Long-term debt denominated in Hong Kong dollars consists of the following:

                                                                March 31
                                                            ----------------
                                                            1998        1999
                                                            ----        ----
                                                            $           $

Loan payable to a bank at HIBOR plus 2.25% per annum
(8.5% as of March 31, 1998) .............................  307,692        --
Loan payable to a property developer at 14% per annum ...     --       131,786
Less: current portion ................................... (307,692)   (111,494)
                                                           --------    --------
Long-term debt, less current maturities ..................     --        20,292
                                                           --------    --------

5    Taxation

(a)  The companies are subject to tax on an entity basis on income arising in or
     derived  from Hong Kong and the PRC.  The current  rates of taxation of the
     subsidiaries  operating  in Hong Kong and  Shenzhen  in the PRC are 16% and
     15%, respectively.  The Group is not subject to income taxes in the British
     Virgin Islands.

(b)  Pursuant  to the  relevant  income tax laws in the PRC,  Bonso  Electronics
     (Shenzhen)  Co., Ltd, a wholly owned  subsidiary  of the Company,  is fully
     exempt  from PRC state  income  tax for two years  starting  from the first
     profit-making  year  followed by a 50%  reduction  over the  ensuing  three
     years. Bonso Electronics (Shenzhen) Co., Ltd. was loss-making for the years
     ended March 31, 1997, 1998 and 1999.

(c)  The  components of the income tax benefit are as follows:

                                                       Year ended March 31
                                                  ---------------------------
                                                  1997       1998        1999
                                                  ----       ----        ----
                                                  $          $           $

Deferred income tax benefit .................     65,438     57,117      38,956
 Current income tax benefit/(expense) .......      5,926    (30,000)     (2,869)
                                                 -------    -------     -------
Total income tax benefit ....................     71,364     27,117      36,087
                                                 -------    -------     -------

                                      F-11
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

5    Taxation (cont'd)

(d)  Deferred tax assets are comprised of the following:

                                                         March 31
                                                    ----------------
                                                    1998        1999
                                                    ----        ----
                                                    $           $

       Deferred tax liabilities
        Accelerated depreciation ..............    (34,387)    (11,807)
       Deferred tax assets
        Tax loss carry forwards ...............    133,993     127,723
        Valuation allowance ...................    (61,176)    (34,693)
                                                  --------    --------
                                                    72,817      93,030
                                                  --------    --------
        Other .................................     35,088      31,251
                                                  --------    --------
                                                   107,905     124,281
                                                  --------    --------
                                                    73,518     112,474
                                                  --------    --------
       Less: current portion ..................     35,088      31,251
                                                  --------    --------
       Deferred tax assets, non current portion     38,430      81,223
                                                  --------    --------

     As of March 31, 1999,  the Group had  accumulated  tax losses  amounting to
     $798,265 (the tax effect thereon is $127,723)  which may be carried forward
     and applied to reduce future  taxable  income which is earned in or derived
     from Hong Kong. Realization of deferred tax assets associated with tax loss
     carry forwards is dependent upon generating sufficient taxable income prior
     to their expiration.  A valuation allowance is established against such tax
     losses when  management  believes it is more likely than not that a portion
     may be disputed by the tax authorities.

     As of March 31, 1999, the Group's  accumulated  tax losses have no definite
     period of expiration.

(e)  Changes in the valuation allowance consist of:


                                                  1997       1998        1999
                                                  ----       ----        ----
                                                  $          $           $

    Balance, April 1 ........................     89,112    147,716      61,176
    Additions/(reductions) charged/(credited)
     to income tax expense ..................     58,604     55,082      (4,630)
    Release of valuation allowance upon:
     - liquidation of subsidiary ............       --      (62,089)       --
     - approval of losses by tax authorities        --      (77,621)    (21,853)
    Effect of change in tax rate ............       --       (1,912)       --
                                                --------   --------    --------
    Balance, March 31 .......................    147,716     61,176      34,693
                                                --------   --------    --------


                                      F-12
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

5    Taxation (cont'd)

(f)  The actual income tax benefit  attributable to earnings for the years ended
     March  31,  1997,  1998 and 1999  differed  from the  amounts  computed  by
     applying the Hong Kong  statutory tax rate in accordance  with the relevant
     income tax law as a result of the following:

<TABLE>
<CAPTION>
                                                                Year ended March 31
                                                         -------------------------------
                                                         1997          1998         1999
                                                         ----          ----         ----
                                                         $             $            $

<S>                                                       <C>          <C>          <C>
       Hong Kong statutory tax rate ...............       16.5%        16.5%        16.0%
       Income tax (expense)/credit at the Hong Kong
        statutory tax rate ........................    (78,412)    (370,842)       3,573

       Offshore profit not subject to income tax ..    181,409      381,167       40,477

       Valuation allowance on tax loss ............    (58,604)      22,539       26,483

       Over/(under)provision for Hong Kong tax in
        prior years ...............................      5,926       10,246      (22,064)

       Other ......................................     21,045      (15,993)     (12,382)
                                                      --------     --------     --------
       Total income tax benefit ...................     71,364       27,117       36,087
                                                      --------     --------     --------
</TABLE>






                                      F-13
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

6    Leases

(a)  Capital leases

     Motor  vehicles and plant and machinery  include the following  amounts for
     capitalized leases:

                                       Motor vehicles        Plant and machinery
                                          March 31                 March 31
                                      ----------------        ----------------
                                      1998        1999        1998        1999
                                      ----        ----        ----        ----
                                      $           $           $           $
  Cost .........................      45,835      45,835   1,397,129   1,495,847
  Less: accumulated amortization       7,639      16,806     344,684     643,041
                                   ---------   ---------   ---------   ---------
                                      38,196      29,029   1,052,445     852,806
                                   ---------   ---------   ---------   ---------

     During the years ended March 31,  1997,  1998 and 1999,  the Group  entered
     into additional capital lease obligations  amounting to $880,261,  $143,471
     and $78,974 respectively.

     Future  minimum  payments  for capital  leases as of March 31, 1999 with an
     initial term of more than one year are as follows:
                                                                         $

     2000 ........................................................       326,686
     2001 ........................................................        13,812
                                                                         -------
     Total minimum lease payments ................................       340,498

     Less: amount representing interest ..........................        46,478
                                                                         -------
     Present value of net minimum lease payments (including
      current portion of $271,915, as of March 31, 1999) .........       294,020
                                                                         -------

(b)  Operating leases

     As of March 31,  1999,  future  minimum  lease  commitments  in  respect of
     noncancellable  operating  leases for office premises and staff quarters in
     Hong Kong and the PRC are  $46,795,  payable in the year  ending  March 31,
     2000.

     Rent expense for all operating  leases  amounted to $279,311,  $196,622 and
     $166,824 for the years ended March 31, 1997, 1998 and 1999, respectively.


                                      F-14
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

7    Banking facilities

     As of March 31, 1999,  the Group had general  banking  facilities  for bank
     overdrafts,  notes  payable,  short-term  loans  and  long-term  debt.  The
     facilities are  interchangeable  with total amounts available of $6,217,949
     (1998: $6,948,717), including facilities in respect of letters of credit of
     $1,410,257 (1998:  $1,282,051).  All general banking  facilities granted to
     the Group are denominated in Hong Kong dollars.

     The Group's general banking facilities, expressed in United States Dollars,
     are further analyzed as follows:

<TABLE>
<CAPTION>

                           Amount available        Amount utilized    Terms of banking facilities as of
                               March 31                March 31                  March 31, 1998
                           ----------------        -----------------       ---------------------------

                           1998        1999        1998         1999       Interest          Repayment
                           ----        ----        ----         ----           rate              terms
                           $           $           $            $          --------          ---------
<S>                     <C>         <C>         <C>            <C>      <C>           <C>
Trade financing facilities:


 Notes payable .......  3,635,726   2,771,089   2,260,384      581,349   Prime rate   Repayable in
                                                                      to Prime rate    full within
                                                                       plus 0.5% or    four months
                                                                         HIBOR plus
                                                                                 2%

 Short-term loans ....    723,248   1,075,064     338,632      720,129   Prime rate   Repayable in
                                                                      to Prime rate    full within
                                                                       plus 0.5% or   three months
                                                                         HIBOR plus
                                                                                 2%

 Letters of credit .... 1,282,051   1,410,257     502,270      114,601          Nil            Nil

Other facilities:

 Bank overdrafts ......   897,436     961,539     600,721      643,278   Prime rate      Repayable
                                                                         plus 0.25%      on demand
                                                                      to Prime rate
                                                                          plus 1.5%

 Long-term debt, ......   410,256        --       307,692        --           HIBOR            Nil
  including current ...                                                  plus 2.25%
  maturities (Note 4)
                        ---------   ---------   ----------   ------------
                        6,948,717   6,217,949   4,009,699    2,059,357
                        ---------   ---------   ----------   ------------
</TABLE>

     The Prime rate and HIBOR rate were  8.75% and  5.63%,  respectively,  as of
     March 31,  1999.  The Prime  rate is  determined  by the Hong Kong  Bankers
     Association and is subject to revision from time to time.


                                      F-15
<PAGE>

             Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

7    Banking facilities (cont'd)

     The banking facilities are collateralized by the following:

(a)  a legal  charge over a leasehold  property of the Group with net book value
     of $1,241,712 (1998: $1,269,917); and

(b)  a bank guarantee of $150,000 (1998:  $150,000) and restricted cash deposits
     of $1,011,688 (1998: $952,267).  The restricted cash deposits have original
     maturities of less than three months.

     The weighted average interest rate of short-term borrowings of the Group is
     as follows:

                                                        Year ended March 31
                                                        -------------------
                                                          1998       1999
                                                          ----       ----

       Bank overdrafts ...............................     9.5%      10.2%
       Notes payable .................................     9.4%       9.5%
       Short-term loans ..............................     9.4%       9.5%

8    Related party transactions

(a)  The Group paid  emoluments,  commissions  and/or  consultancy fees to their
     directors as follows:

<TABLE>
<CAPTION>

          Year ended  Mr So Hung Gun,
          March 31           Anthony     Mr So Cham Some     Mr Ray Mehra    Mr Chung Kim Wah
          --------    --------------     ---------------     ------------    ----------------

<S>       <C>               <C>                 <C>              <C>             <C>
          1997              $443,590            $ 66,410         $ 21,986        $115,226(ii)
          1998              $500,560            $ 66,410         $ 11,000        $140,175(ii)
          1999              $441,538            $ 13,000               --        $113,589(ii)

                                                                Mr George         Ms Pang Kit
                      Mr Luk Kam Sun     Mr Fok Woo Ping          O'Leary         Teng, Cathy
                      --------------     ---------------        ---------         -----------
          1997              $100,564            $ 12,000      $ 52,605(i)                 Nil
          1998              $106,923                 Nil      $354,835(i)            $ 24,029
          1999              $ 91,154                 Nil      $115,342(i)            $ 90,394
</TABLE>

          (i)  This represented commissions paid to Mr George O'Leary.

          (ii) Included in the  emoluments  is a housing  allowance  for $38,462
               payable to a company  in which Mr Chung Kim Wah has a  beneficial
               interest  for each of the three  years in the period  ended March
               31, 1999.


                                      F-16
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

8    Related party transactions (cont'd)

(b)  Promissory note receivable from shareholder

     On  March  27,  1998,  Advantage  List  &  Marketing  Corporation  ("ALMC")
     subscribed  200,000  shares of common  stock of the  Company  at a price of
     $6.75 per share  which  represented  the fair  market  value at the date of
     subscription,  in exchange for ALMC's promissory note of $1,470,000. On the
     same date, ALMC entered into a pledge agreement  simultaneously under which
     ALMC agreed to pledge the common  stock to the Company as security  for the
     payment of the promissory  note. The promissory note is with full recourse,
     interest free and shall be fully repayable on or before September 27, 1999.
     On  September  17,  1998,  a total of 200,000  shares of common  stock were
     issued and the shares were held by the  Company as security  for payment of
     the promissory  note.  The  promissory  note was recorded at its discounted
     value of $1,350,000.  Interest of $80,000 accrued thereon in the year ended
     March 31, 1999 has been included in additional paid in capital.


9    Provident fund plan

(a)  With effect from January 1, 1988,  Bonso  Electronics  Limited  ("BEL"),  a
     wholly-owned  foreign  subsidiary of the Company,  started a provident fund
     plan (the "Plan") with a major  international  assurance company to provide
     life  insurance and retirement  benefits for its  employees.  All permanent
     full time employees,  excluding  factory workers,  are eligible to join the
     provident fund plan.

(b)  Members of the Plan are required to contribute 5% of their monthly  salary.
     The contribution by BEL is as follows:

           Years of service                    % of salary as BEL's contribution
           ----------------                    ---------------------------------
          Less than 5 years                                  5.0%
          5 to 10 years                                      7.5%
          More than 10 years                                10.0%

(c)  At normal retirement age, death or ill health, the member shall be entitled
     to receive  from the Plan a lump sum equal to the total of the member's and
     BEL's contributions plus a return on their investment. On resignation prior
     to normal  retirement  age, a member  shall be entitled to receive from the
     Plan a lump sum equal to the member's  contributions  plus a percentage  of
     the employer's  balance  determined in accordance with a predetermined  set
     scale.

(d)  BEL's  contributions  to the Plan for the years ended March 31, 1997,  1998
     and 1999 amounted to $54,924, $45,227 and $54,046 respectively.

10   Commitments and contingencies

     As of March 31, 1999,  the Group had  contingent  liabilities  to banks for
     outstanding letters of credit of $114,601 (1998: $502,270).

11   Research and development expenses

     Included in the research and development  expenses for the year ended March
     31, 1999 was $392,454 incurred in connection with a telephone project.


                                      F-17
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

12   Earnings per share

                                                     Year ended March 31
                                                 ---------------------------
                                                 1997        1998       1999
                                                 ----        ----       ----
                                                 $           $          $

Income available to common
 shareholders: ............................     546,589   2,274,645      13,754
Weighted average shares outstanding .......   2,825,949   2,829,448   3,079,219
Incremental shares from assumed exercise
 of:
  Warrants ................................        --        25,562     166,024
  Stock options ...........................      20,095     279,362     429,060
Dilutive potential common shares ..........      20,095     304,924     595,084
                                              ---------   ---------   ---------
Diluted weighted average shares ...........   2,846,044   3,134,372   3,674,303
                                              ---------   ---------   ---------

Basic earnings per share ..................   19.34 cents 80.39 cents 0.45 cents
Diluted earnings per share ................   19.21 cents 72.57 cents 0.37 cents

     Earnings per share are computed  based on the  weighted  average  number of
     common  shares and,  as  appropriate,  dilutive  common  stock  equivalents
     outstanding for the period and the related income amount.

     Warrants to purchase  16,667 shares of common stock at $6.00 per share were
     outstanding for the fiscal years ended March 31, 1997 but were not included
     in the  calculation  of earnings per share because the  warrants'  exercise
     price was greater than the market price of the Company's  common stock. The
     warrants were exercised during the year ended March 31, 1998.

     Warrants to purchase  110,000  shares of common  stock at $9.1875 per share
     were  outstanding  during the fiscal years ended March 31,  1997,  1998 but
     were not included in the calculation of diluted  earnings per share because
     the  warrants'  exercise  price was  greater  than the market  price of the
     Company's  common stock.  The warrants,  which expire on December 14, 1999,
     were still outstanding as of March 31, 1999.

     Warrants to purchase  2,200,000  shares of common  stock at $7.35 per share
     were outstanding  during the fiscal years ended March 31, 1997 and 1998 but
     were not included in the  calculation of diluted  earnings per share during
     the year ended March 31,  1997  because the  warrants'  exercise  price was
     greater than the market price of the  Company's  common  stock.  During the
     year ended March 31, 1999,  25,597  warrants  were  exercised by the public
     shareholders  to purchase  25,597  shares of common  stock of the  Company.
     Warrants to purchase  2,174,403  shares of common stock at $7.35 per share,
     which expire on December 14, 1999,  were still  outstanding as of March 31,
     1999.


                                      F-18
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

13   Minority interests

     In April  1993,  the Group,  together  with a Chinese  partner,  formed and
     invested in a joint venture company in the PRC,  Shenzhen Bonso Electronics
     Limited  ("SBEL"),  owned  as to 60% by the  Group  and 40% by the  Chinese
     partner.  According to the joint venture  agreement,  the registered  share
     capital of SBEL was $3,205,128  (HK$25 million);  the Group and the Chinese
     partner could appoint three and two directors,  respectively,  to the board
     of SBEL. The Group effectively controlled all major financial and operating
     policy  decisions  of SBEL.  Accordingly,  this joint  venture  company was
     consolidated.

     In accordance with an agreement  between the Group and the Chinese partner,
     SBEL was liquidated on October 31, 1996. The land and buildings  originally
     contributed  to the joint venture by the Chinese  partner  reverted to same
     and all other assets and liabilities including the plant and machinery were
     taken up by the Group.  During the year ended March 31, 1996, the directors
     estimated  that a  provision  for  permanent  diminution  in  value of SBEL
     amounting to $152,480 was  necessary  and  accordingly a provision for this
     amount  was  recorded.  During  the year  ended  March 31,  1997,  upon the
     liquidation  of SBEL,  a gain of $159,654  was  recognized  by the Group of
     which  $152,480  represents  the reversal of the  provision  for  permanent
     diminution in value.

14   Stock option plan

(a)  In October 1996, the Board of Directors approved the 1996 Stock Option Plan
     and 1996  Non-Employee  Directors'  Stock Option Plan. Under the 1996 Stock
     Option  Plan,  the  Company  may grant  options of common  stock to certain
     employees and directors of the Company for a maximum of 400,000 shares. The
     1996 Stock  Option Plan is  administered  by a committee  appointed  by the
     Board of Directors which determines the terms of options granted, including
     the  exercise  price,  the  option  periods  and the number of shares to be
     subject to each option.  The exercise  price of options  granted  under the
     1996 Stock Option Plan may be less than the fair market value of the common
     shares on the date of grant.  The maximum term of options granted under the
     1996 Stock Option Plan is 10 years.  The right to acquire the common shares
     is not  assignable  except for certain  conditions  stipulated  in the 1996
     Stock Option Plan. In January 1997, the Board of Directors  delegated to Mr
     So Hung Gun,  Anthony,  the  authority to issue  options to  employees  and
     directors of the Company for an additional 25,000 shares.

     In January 1997, the Company granted options to three directors to purchase
     an  aggregate  of  375,000  shares of  common  stock of the  Company  at an
     exercise  price of $2.00 per share,  which was equal to the market value on
     the date of grant,  in  accordance  with the 1996 Stock  Option  Plan.  The
     options  shall  expire on January 31, 2007 and can be exercised at any time
     immediately after granting.

     In January 1998, the Company  granted options to an employee to purchase an
     aggregate  of 25,000  shares of common  stock of the Company at an exercise
     price of $6.20 per share which is greater than the market value on the date
     of grant,  in accordance with the 1996 Stock Option Plan. The options shall
     expire on  January  1, 2008 and can be  exercised  at any time  immediately
     after granting.

     No options  have been  exercised  during the years ended March 31, 1998 and
     1999.

                                      F-19
<PAGE>


             Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(a)  (cont'd)

     The stock options  outstanding  in respect of the 1996 Stock Option Plan as
     of March 31, 1999 is summarized as follows:

                                                              Average per share
                                                            --------------------
                                                  Number      Exercise   Market
                                                  of shares   price      price

Balance, March 31, 1997 ........................  375,000     $2.00      $2.00
Grant at exercise price greater than the
 market value of the common shares .............  25,000     $6.20      $6.13
                                                  -------     -----      -----
Balance, March 31, 1998 and 1999 ...............  400,000     $2.26      $2.26
                                                  -------     -----      -----

     Under the 1996 Non-Employee  Directors' Stock Option Plan, the non-employee
     directors are automatically granted stock options on the third business day
     following the day of each annual general meeting of the Company to purchase
     an aggregate of 100,000  shares of common stock.  The exercise price of all
     options granted under the 1996  Non-Employee  Directors'  Stock Option Plan
     shall be one  hundred  percent  of the fair  market  value per share of the
     common  shares on the date of grant.  The maximum  term of options  granted
     under the 1996  Non-Employee  Directors'  Stock Option Plan is 10 years. No
     stock  option  may be  exercised  during  the first six  months of its term
     except for certain conditions provided in the 1996 Non-Employee  Directors'
     Stock Option Plan. The right to acquire the common shares is not assignable
     except  for  certain   conditions   stipulated  in  the  1996  Non-Employee
     Directors' Stock Option Plan.

     In October 1996, the Company issued options to three non-employee directors
     in accordance with the 1996  Non-Employee  Directors'  Stock Option Plan to
     purchase an aggregate of 30,000 shares of common stock of the Company at an
     exercise  price of $2.25 per share and the options shall expire October 16,
     2006 and can be exercised at any time immediately after granting.

     In  September  1997,  the  Company  issued  options  to  four  non-employee
     directors in accordance with the 1996 Non-Employee  Directors' Stock Option
     Plan to  purchase  an  aggregate  of 40,000  shares of common  stock of the
     Company  at an  exercise  price of $5.06 per share  and the  options  shall
     expire on September  8, 2007 and can be  exercised at any time  immediately
     after granting.

     No annual  general  meeting  was held by the  Company for the year 1998 and
     therefore  no  stock  option  was  granted  in  accordance  with  the  1996
     Non-Employee  Directors'  Stock Option Plan during the year ended March 31,
     1999.

     No options  have been  exercised  during the year ended  March 31, 1998 and
     10,000 stock options were exercised to purchase  10,000 common stock of the
     Company at an exercise  price of $2.25 per share  during the year ended 31,
     1999.


                                      F-20
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(a)  (cont'd)

     The stock options activity in respect of the 1996  Non-Employee  Directors'
     Stock Option Plan as of March 31, 1999 is summarized as follows:

                                                              Average per share
                                                              -----------------
                                                   Number      Exercise  Market
                                                   of shares   price     price

Balance, March 31, 1997 .......................     30,000     $2.25     $2.25
Grant at exercise price equal to the market
 value of the common shares ...................     40,000     $5.06     $5.06
                                                   -------     -----     -----
Balance, March 31, 1998 .......................     70,000     $3.86     $3.86

Exercised during the year .....................    (10,000)    $2.25     $2.25
                                                   -------     -----     -----
Balance, March 31, 1999 .......................     60,000     $4.12     $4.12
                                                   -------     -----     -----

(b)  In  January  1997,  the  Company  granted  options  to  three  non-employee
     directors to purchase an aggregate of 100,000 shares of common stock of the
     Company.  The  exercise  price is $2.00 per  share,  which was equal to the
     market  value of the  Company's  common  stock on the  date of  grant.  The
     options  shall  expire on January 31, 2007 and can be exercised at any time
     immediately after granting.

     No options  have been  exercised  during the years ended March 31, 1997 and
     1998, and 55,000 options were exercised to purchase  55,000 common stock of
     the Company at an exercise  price of $2.00 per share  during the year ended
     March 31, 1999.

     The stock options summary as of March 31, 1999 is summarised as follows:

                                                             Average per share
                                                            ------------------
                                                  Number     Exercise  Market
                                                  of shares  price      price

Balance, March 31, 1997 ......................        --        --       --
Grant at exercise price equal to the market
 value of the common shares ..................     100,000     $2.00   $2.00
                                                  --------     -----   -----
Balance, March 31, 1998 ......................     100,000     $2.00   $2.00

Exercised during the year ....................     (55,000)    $2.00   $2.00
                                                  --------     -----   -----
Balance, March 31, 1999 ......................      45,000     $2.00   $2.00
                                                  --------     -----   -----

                                      F-21
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

     At  various  times in  January  1998,  the  Company  issued  options to the
     directors  and an  employee of the  Company to  purchase  an  aggregate  of
     195,000 shares of common stock of the Company at an exercise price of $6.20
     per share. The options shall expire in January 2008 and can be exercised at
     any time immediately  after granting.  The exercise prices of these options
     were equal to or greater  than the fair market  value at the time of grant.
     No options  have been  exercised  during the years ended March 31, 1998 and
     1999.

     In October 1998, the Company issued options to the directors,  non-employee
     directors and certain  employees of the Company to purchase an aggregate of
     430,000 shares of common stock of the Company at an exercise price of $3.60
     to $3.70.  The options shall expire in October 2008 and can be exercised at
     any time immediately  after granting.  The exercise prices of these options
     were greater  than the fair market  value at the time of grant.  No options
     have been exercised during the year ended March 31, 1999.

(e)  The  following  table  summarizes  the  information   about  stock  options
     outstanding at March 31, 1999:


                          Number                          Exercisable
                       outstanding at     Average life      shares at
     Exercise price    March 31, 1999        (years)     March 31, 1999
     --------------    --------------     ------------     --------------

     $2.00                 420,000             7.8          420,000
     $2.25                  20,000             7.5           20,000
     $3.60                 415,000             9.5          415,000
     $3.70                  15,000             9.5           15,000
     $5.06                  40,000             8.4           40,000
     $6.20                 220,000             8.8          220,000
                         ---------             ---        ---------
     $2.00 to $6.20      1,130,000             8.7        1,130,000
                         ---------             ---        ---------

(f)  Included  in the options  outstanding  as of March 31, 1999 were 10,000 and
     63,000 units held by Mr Ray Mehra and Mr So Cham Some,  respectively,  both
     of whom have  resigned as  directors  of the Company on January 2, 1998 and
     April 30, 1998, respectively.
                                      F-22

<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(g)  The Company  applies  Accounting  Principles  Board ("APB") Opinion No. 25,
     "Accounting for Stock Issued to Employees" and related  interpretations  in
     accounting  for its  employee  stock  options.  Under APB  Opinion  No. 25,
     because the exercise  price of all the options issued by the Company equals
     or is higher than the market price of the  underlying  stock on the date of
     grant, no compensation expense is recognized.

     Pro forma  information  regarding  net  income  and  earnings  per share is
     required by SFAS No. 123 "Accounting for Stock-Based Compensation", and has
     been  determined  as if the Company had  accounted  for its employee  stock
     options  under the fair value method of SFAS No. 123. The weighted  average
     fair value of options  granted  during the years  ended  March 31, 1998 and
     1999 were $820,200 and $2,503,363,  respectively.  The fair value for these
     options was  estimated  at the date of grant using a  Black-Scholes  Option
     Valuation  model with the following  weighted-average  assumptions  for the
     year ended March 31, 1999:  risk-free  interest rates of 5.48% to 5.49%; no
     dividend  yield;  volatility  factor of the  expected  market  price of the
     Company's common share of 81.20%; and a  weighted-average  expected life of
     the option of ten years.

     For  purposes  of pro forma  disclosure,  the  estimated  fair value of the
     options is amortized to expense over the options' vesting period. The Group
     pro forma information follows:


                                                    1998           1999
                                                    ----           ----
                                                    $              $
      Net income

      As reported ...........................     2,274,645         13,754
      Pro forma .............................     1,454,445     (2,489,609)

     Basis earnings/(losses) per share

      As reported ...........................   80.39 cents        0.45 cents
      Pro forma .............................   51.40 cents      (80.85) cents

     Diluted earnings/(losses) per share

      As reported ...........................   72.57 cents        0.37 cents
      Pro forma .............................   46.40 cents      (67.76) cents

     Because  compensation  expense  associated with an award is recognized over
     the vesting  period,  the initial impact on pro forma net income may not be
     representative of compensation  expense in future years, when the effect of
     the  amortization  of  multiple  awards  would be  reflected  in the income
     statement.



                                      F-23
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

15   Warrants

     In 1994, the Company  issued 16,667  warrants under a loan agreement to the
     lender to  purchase  common  shares of the  Company at $6.00 per share.  No
     warrants were  exercised  during the year ended March 31, 1997. In December
     1997,  2,613 shares of common  stock were issued at $7.11 per share,  which
     represented  the fair market value at the date of issue,  upon the exercise
     of all the warrants on a cashless basis.

     As a result of the Company's  second public  offering in December 1994, the
     Company issued  2,200,000  five-year  warrants to its public  shareholders.
     Each warrant  entitles  the holder  thereof to purchase one share of common
     stock of the Company at $7.35 per share.  The  warrants  expire on December
     14, 1999.  The warrants are  redeemable by the Company at $0.05 per warrant
     upon 30 to 45 days  notice at any time after  December  14,  1995,  or such
     earlier date as the  representatives of the underwriters may determine,  if
     the  closing  price  per  share  of  common  stock  of the  Company  for 20
     consecutive  trading  days  within the 30-day  period  prior to the date of
     notice of  redemption  is given  equals or exceeds  $8.575  per  share.  No
     warrants were  exercised or redeemed  during the years ended March 31, 1997
     and 1998. A total of 25,597  warrants  were  exercised  to purchase  25,597
     shares of common  stock of the  Company at $7.35 per share  during the year
     ended March 31, 1999.

     In conjunction with the second public offering, the Company issued warrants
     to  the   representatives   of  the  underwriters  (the   "Representatives'
     Warrants") to purchase from the Company up to an aggregate of 110,000 units
     at an exercise  price of $9.1875 per unit;  each unit consists of one share
     of  common  stock  and  two   five-year   warrants  of  the  Company.   The
     Representatives'  Warrants  are  exercisable  for a period  of three  years
     commencing  December 15, 1996.  Upon any transfer to a person other than an
     officer,   shareholder   or   director  of  the   representatives   of  the
     underwriters,   the  transferred   five-year  warrants  must  be  exercised
     immediately or they will lapse.  No warrants have been  transferred  during
     the years ended March 31, 1997, 1998 and 1999.


                                      F-24
<PAGE>

              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

16   Business segment information

(a)  The Group's  operations have been classified into three business  segments:
     scales, health care products and other. Summarized financial information by
     business segment for 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>

                                                                                     Identifiable        Depreciation
                                                    Net           Operating          assets as of        and             Capital
                                                    sales         profit             March 31            amortization    expenditure
                                                    -----         ---------          ------------        ------------    -----------
                                                    $             $                  $                   $               $
<S>                                              <C>                <C>               <C>                <C>                 <C>
1999

Scales ..................................        10,306,549         3,042,936         12,098,180         1,015,272           132,395
Health care products ....................         1,956,940            55,066            212,450            17,829             2,325
Other ...................................           782,776           532,353          2,053,884           172,361            22,476
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        13,046,265         3,630,355         14,364,514         1,205,462           157,196
Corporate ...............................              --          (3,386,184)         4,295,770           179,147         1,442,324
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        13,046,265           244,171         18,660,284         1,384,609         1,599,520
                                                 ----------        ----------         ----------        ----------        ----------

1998

Scales ..................................        18,260,994         5,234,759         14,604,822         1,110,023         1,280,219
Health care products ....................         3,083,025            73,197            204,218            15,521            17,901
Other ...................................         2,371,557           534,778          1,492,015           113,399           130,786
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        23,715,576         5,842,734         16,301,055         1,238,943         1,428,906
Corporate ...............................              --          (3,488,655)         4,345,508           186,165           271,834
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        23,715,576         2,354,079         20,646,563         1,425,108         1,700,740
                                                 ----------        ----------         ----------        ----------        ----------

1997

Scales ..................................        11,892,313         3,188,072         13,369,205           656,807         4,534,113
Health care products ....................         2,718,243            66,246            277,802            13,648            94,216
Other ...................................         2,378,463           720,500          3,021,421           148,438         1,024,703
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        16,989,019         3,974,818         16,668,428           818,893         5,653,032
Corporate ...............................              --          (3,059,249)         3,847,183           142,038             8,100
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        16,989,019           915,569         20,515,611           960,931         5,661,132
                                                 ----------        ----------         ----------        ----------        ----------
</TABLE>

     Operating  profit by segment equals total operating  revenues less expenses
     which are related to the segment's operating revenues.  Identifiable assets
     by segment are those assets that are used in the operation of that segment.
     Corporate assets consist  principally of cash and cash equivalents,  income
     tax recoverable,  deferred income tax assets and other identifiable  assets
     not related specifically to individual segments.

                                      F-25
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

16   Business segment information (cont'd)

(b)  The Group  primarily  operates in Hong Kong and the PRC. The manufacture of
     components and their assembly into finished  products is carried out in the
     PRC.  The Hong Kong office is mainly  responsible  for the  purchase of raw
     materials,  arrangement of shipments and research and  development.  As the
     operations are  integrated,  it is not practicable to distinguish the sales
     and net income  derived from the  activities in Hong Kong from those in the
     PRC.

     Identifiable assets by geographical areas are as follows:


                                                   1998                 1999
                                                   ----                 ----
                                                   $                    $

     Hong Kong ....................             7,469,828             5,314,252
     The PRC ......................            13,176,735            13,346,032
                                               ----------            ----------
     Total assets .................            20,646,563            18,660,284
                                               ----------            ----------

(c)  The following is a summary of net export sales to customers by geographical
     area for the years ended March 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>

                                                   Year ended March 31
                              ---------------------------------------------------------
                              1997       %         1998         %        1999         %
                              ----       -         ----         -        ----         -
                              $                    $                     $
<S>                        <C>          <C>    <C>             <C>    <C>            <C>
     United States of
       America ..........  6,873,780    40     12,570,427      53     5,609,457      43
     Germany ............  3,994,167    24      6,290,634      27     4,212,958      32
     Others  ............  6,121,072    36      4,854,515      20     3,223,850      25
                          ----------   ---     ----------     ---    ----------     ---
                          16,989,019   100     23,715,576     100    13,046,265     100
                          ----------   ---     ----------     ---    ----------     ---
</TABLE>

(d)  The details of sales made to  customers  constituting  10% or more of total
     sales of the Group is as follows:

<TABLE>
<CAPTION>
                                                                                   Year ended March 31
                                                            -----------------------------------------------------
                                             Business       1997         %       1998          %       1999           %
                                             segment        $                    $                     $
                                             ---------      ----         -       ----          -       ----           -
<S>                                        <C>             <C>          <C>            <C>    <C>             <C>
Pitney Bowes, Inc. (USA) ...............    Scales          3,007,070    18     7,075,338      30     2,011,393       15

Globaltec Corporation (USA) ............    Scales          2,252,184    13     3,721,060      15     1,454,550       11
Werner Dorsch Gmbh & Co. ...............
 (Germany) .............................    Scales          1,906,961    11     2,105,307       9     1,998,505       15
Omron Healthcare .......................    Health care
 Group .................................    products        1,888,335    11     1,841,427       8     1,358,356       10
                                            ---------       ---------  ----    ----------    ----    ----------     ----
                                                            9,054,550    53    14,743,132      62     6,822,804       51
                                            ---------       ---------  ----    ----------    ----    ----------     ----
</TABLE>



                                      F-26
<PAGE>


              Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

17   Financial instruments

     In accordance with SFAS No. 107 "Disclosures  about Fair Value of Financial
     Instruments", the carrying amounts and fair values of the Group's financial
     instruments are as follows:

<TABLE>
<CAPTION>
                                                 Carrying amount                   Fair value
                                                     March 31                       March 31
                                              --------------------             -----------------
                                              1998            1999             1998         1999
                                              ----            ----             ----         ----
                                              $               $                $            $

<S>                                          <C>             <C>             <C>            <C>
Cash and cash equivalents ............       448,454         271,447         448,454        271,447
Restricted cash deposits .............       952,267       1,011,688         952,267      1,011,688
Deposits .............................       447,735            --           447,735           --
Bank overdrafts ......................       600,721         643,278         600,721        643,278
Notes payable ........................     2,260,384         581,349       2,260,384        581,349
Short-term loans .....................       338,632         720,129         338,632        720,129
Long-term debt .......................       307,692         131,786         299,215        136,013
Promissory note receivable ...........     1,350,000       1,350,000       1,350,000      1,350,000
                                           ---------       ---------       ---------      ---------
</TABLE>

     The following  methods and assumptions were used to estimate the fair value
     of each class of financial instruments:

(a)  Cash and cash equivalents, restricted cash deposits, bank overdrafts, notes
     payable and short-term loans - the carrying amount  approximates fair value
     because   of   the   short    maturity    of   these    instruments.

(b)  Long term debt - interest  rates that are currently  available to the Group
     for issuance of debt with similar terms and remaining  maturities  are used
     to  estimate  the fair  value of debt  issues  that  are not  quoted  on an
     exchange.  Fair value  estimates  are made at a specific  point in time and
     based on relevant  market  information.  These  estimates are subjective in
     nature,  involve  uncertainties  and matters of  significant  judgement and
     therefore cannot be determined with precision. Changes in assumptions could
     significantly affect the estimates.

(c)  Deposits - the carrying  amount of refundable  deposits  approximates  fair
     value based on the terms of the related contracts.

(d)  Promissory  note  receivable - the fair value of promissory note receivable
     approximates  the carrying  value based on a comparison of interest rate to
     current market rate for instruments of similar nature.

     All  other  financial   instruments   included  among  current  assets  and
     liabilities are stated at cost which approximates their fair value.

18   Post balance sheet date events

     In May  1999,  the  Group  acquired  an  office  premise  in Hong Kong at a
     consideration of $743,590.


                                      F-27
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{"company-data": {"conformed-name": "BONSO ELECTRONICS INTERNATIONAL INC", "cik": "0000846546", "assigned-sic": "3590", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "000-17601", "film-number": "99677513"}, "business-address": {"street1": "FLAT AD 8TH FLR 23-25 SHAN MEI ST", "street2": "UNIVERSAL INDUSTL. CENTRE FO TAN SHA TIN", "city": "NEW TERRITORIES HONG", "state": "K3", "phone": "011852260558224"}, "mail-address": {"street1": "FLAT AD 8TH FLR 23-25 SHAN MEI ST", "street2": "UNIVERSAL INDUSTL CENTRE FO TAN SHA TIN", "city": "NT HONG KONG", "state": "K3"}}
SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 20-F

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

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

For the fiscal year ended March 31, 1999

                                       OR

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

                         Commission File Number: 0-17601

                      BONSO ELECTRONICS INTERNATIONAL INC.
             (Exact name of Registrant as specified in its charter)

                             British Virgin Islands
                 (Jurisdiction of incorporation or organization)

                               Flat A-D, 8th Floor
                           Universal Industrial Centre
                              23-25 Shan Mei Street
                                 Fo Tan, Shatin
                           New Territories, Hong Kong
                    (Address of principal executive offices)

     Securities  registered or to be registered pursuant to Section 12(b) of the
Act: NONE

     Securities  registered  pursuant to Section 12(g) of the Act: COMMON STOCK,
PAR VALUE $.003; WARRANTS TO PURCHASE COMMON STOCK

     Securities  for which there is a reporting  obligation  pursuant to Section
15(d) of the Act: NONE

     Indicate the number of outstanding  shares of each of the Issuer's  classes
of capital or common  stock as of the close of the period  covered by the annual
report: 3,119,159 shares of Common Stock, $0.003 par value, at March 31, 1999.

     Indicate by check mark  whether the  registrant:  (i) 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 (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark which  financial  statement  item the Registrant has
elected to follow: Item 17 [ ] Item 18 [X]
TABLE OF CONTENTS

                                                                            Page

Item 1.    Description of Business.                                            1
Item 2.    Description of Property.                                           17
Item 3.    Legal Proceedings.                                                 19
Item 4.    Control of Registrant.                                             19
Item 5.    Nature of Trading Market.                                          19
Item 6.    Exchange Controls and Other Limitations Affecting
             Security Holders.                                                21
Item 7.    Taxation.                                                          21
Item 8.    Selected Financial Data.                                           22
Item 9.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.                                             24
Item 10.   Directors and Officers of Registrant.                              30
Item 11.   Compensation of Directors and Officers.                            33
Item 12.   Options to Purchase Securities from Registrant or Subsidiaries.    35
Item 13.   Interest of Management in Certain Transactions.                    36
Item 14.   Description of Securities to be Registered.                        36
Item 15.   Defaults Upon Senior Securities.                                   37
Item 16.   Changes in Securities and Changes in Security for Registered
             Securities.                                                      37
Item 17.   Financial Statements.                                              37
Item 18.   Financial Statements.                                              37
Item 19.   Financial Statements and Exhibits.                                 37
PART I

     As used in this Annual Report,  "China" refers to all parts of the People's
Republic of China other than the Special Administrative Region of Hong Kong. The
term "Company"  refers to Bonso  Electronics  International  Inc. and, where the
context so requires or suggests, its direct and indirect subsidiaries.

Item 1. Description of Business.

Overview

     Bonso Electronics  International Inc. was incorporated on August 8, 1988 as
a limited liability International Business Company under the laws of the British
Virgin  Islands  to serve  as a  holding  company  for the  Company's  operating
subsidiary,  which was formed in 1980. As an International Business Company, the
Company is prohibited  from doing business with persons  resident in the British
Virgin Islands,  owning real estate in the British Virgin Islands or acting as a
bank or insurance  company.  The Company was  incorporated in the British Virgin
Islands  principally to facilitate trading in its securities.  The government of
Hong Kong  imposes  a stamp  duty on the  transfer  of  securities  of Hong Kong
corporations.  No such duty is imposed by the British  Virgin  Islands,  and the
Company is also  exempt  from  income tax in the  British  Virgin  Islands.  The
Company's corporate  administrative matters are conducted through its registered
agent, HWR Services  Limited,  P.O. Box 71, Road Town,  Tortola,  British Virgin
Islands.  The Company's principal executive offices are located at Flat A-D, 8th
Floor,  Universal  Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New
Territories,  Hong Kong. Its telephone  number is  852-2605-5822,  its facsimile
number is 852-2691-1724 and its E-mail address is http//www.info@bonso.com.

     The Company designs, develops,  manufactures and sells a comprehensive line
of electronic scales and weighing instruments and electronic consumer and health
care  products.  The Company's  electronic  scales  include  bathroom,  kitchen,
office,  jewelry,  laboratory,  pocket, hanging,  postal,  industrial and parcel
scales that are used in consumer,  commercial and industrial  applications.  The
Company's  electronic  consumer  and health care  products  include  pedometers,
chronographs, electronic thermometers and blood pressure meters.

     The  Company  also plans to enter the field of digital  telecommunications,
with its  first  telecommunications  product  to be a 900MHz  ISM Band  cordless
telephone.  Development  of this  product  was  delayed  due to a lack of funds;
however, management is negotiating a lease financing arrangement with respect to
the necessary production equipment and intends to hire a manager with experience
in  producing  telecommunications  products.  Management  currently  expects  to
commence  production  of the 900MHz ISM Band  cordless  telephone  by the end of
calendar 1999 and management anticipates that the Company will develop different
kinds of  telecommunication  products in the future.  There can be no assurance,
however,  that  development of any of these  products,  including the 900MHz ISM
Band cordless telephone,  will be successfully completed,  that the Company will
obtain  customers  for any of  these  products  or that  sales  of any of  these
products will be profitable.

         The Company's  wholly-owned  Hong Kong  subsidiary - Bonso  Electronics
Limited  ("Bonso  Electronics")  - is responsible  for the design,  development,
manufacture and sale of the Company's products. Bonso Electronics has one active
Hong Kong subsidiary - Bonso Investment Limited ("BIL"),  which has been used to
acquire and hold the Company's real estate investments in Hong Kong and China.

         The Company has manufactured all of its products in China since 1989 in
order to take  advantage of lower  overhead  costs and  competitive  labor rates
available  there.  In  January  1997,  the  Company   completed  a  new,  larger
manufacturing  facility  in  the  DaYang  Synthetical  Development  District  in
Shenzhen,  China, which approximately tripled the Company's production capacity.

                                       1
The leasehold,  facilities,  machinery, furniture and equipment at that facility
are owned and  operated by Bonso  Electronics  (Shenzhen)  Co.  Ltd.  ("Shenzhen
Bonso"), a 100% Company-owned Chinese limited liability company which was formed
in June 1994. The location of the Company's  factory in Shenzhen,  only about 50
miles  from Hong  Kong,  permits  the  Company  to manage  easily  manufacturing
operations  from Hong Kong,  and  facilitates  transportation  of the  Company's
products out of China through the port of Hong Kong.

Business Strategy

     The Company  experienced  dramatic growth from 1994 to 1998, with net sales
increasing  from  $12,548,770  in 1994 to  $23,715,576  in the fiscal year ended
March 31, 1998, and  profitability  increasing  from net income of $1,023,821 in
the fiscal year ended March 31, 1994 to net income of  $2,274,645  in the fiscal
year ended March 31, 1998.  However,  net sales decreased to $13,046,265 for the
fiscal year ended March 31, 1999 and net income decreased to $13,754. Management
attributes  these  decreases  primarily  to  decreased  orders  from  two  major
customers,  as well as various  smaller  customers  of the  Company.  Management
believes  that  the  Company's  continued  growth  depends  on  its  ability  to
strengthen  its  customer  base by  enhancing  and  diversifying  its  products,
increasing the number of customers and expanding into additional markets,  while
maintaining  or  increasing  sales of its  products to existing  customers.  The
Company's  continued growth and profitability is also dependent upon its ability
to control  production  costs and increase  production  capacity.  The Company's
strategy to achieve these goals is as follows:

     Product Enhancement and  Diversification.  The Company continually seeks to
improve and enhance its existing  products in order to provide a longer  product
life-cycle and to meet increasing customer demands for additional features.  The
Company's  research and development staff are currently working on such projects
as  redesigning  the existing  pedometer,  bicycle  computer and blood  pressure
monitor,  redesigning the Company's bicycle  accelerator in response to a change
in the  requirements of the Japanes  government,  expanding the health care line
and  attempting to make the Company's  products  more  competitive  in price and
features.  During the last fiscal year, the Company has completed development of
a waterproof digital thermometer, a chronograph,  an ear protector and two newly
designed  body  scales.  In  addition,  the Company  has,  in varying  stages of
development, a bicycle accelerator and postal, kitchen and Gem scales, which are
being developed to the specifications of OEM customers. See "Products," below

     Maintaining and Expanding Business Relations with Existing  Customers.  The
Company  promotes  its  relationships  with its  significant  customers  through
regular communication with them, visits to its customers in their home countries
and by  providing  direct  access to the  Company's  manufacturing  and  quality
control personnel. This access, together with the Company's concern for quality,
has  resulted  in a  relatively  low  level  of  defective  products.  Moreover,
management believes that the Company's emphasis on timely delivery, good service
and low cost has  contributed  and will continue to contribute to good relations
with its  customers  and increased  orders.  Further,  management of the Company
solicits suggestions from its customers for product enhancement and will develop
and  incorporate the  enhancements  suggested by its customers into its products
when feasible.

     Market  Expansion.  In 1998, the Company expanded its marketing  efforts in
the United  States and Europe.  Management  intends to continue  increasing  its
marketing efforts with the use of its Web page and mailing product brochures. In
addition,  the  Company  intends to  increase  the  frequency  of its direct and
telemarketing  contacts  with  both  existing  and  potential  customers  and is
negotiating  with an individual to represent the Company in Hamburg,  Germany in
order to expand the Company's marketing efforts in the European Union.

                                       2
Controlling  Production  Costs. In 1989,  recognizing  that labor cost is a
major  factor  permitting  effective  competition  in  the  consumer  electronic
products industry, the Company relocated all of its manufacturing  operations to
China to take advantage of the large  available  pool of relatively  inexpensive
manufacturing  labor.  The  Company has made an effort to locate and operate its
manufacturing  facilities  consistent  with the exigencies of  manufacturing  in
China.  For example,  the location of the  Company's  plant in China is in close
proximity,   approximately   50  miles,   to  Hong  Kong  thereby   facilitating
transportation of the Company's products to markets outside of China.

     The Company is currently  attempting  to control  production  costs by such
means as redesigning its existing scales in order to decrease material and labor
costs, controlling the number of employees, increasing the efficiency of workers
by  providing  regular  training  and  tools  and  redesigning  the  flow of the
production line.

     Increasing Production Capacity.  Since January 1997, the Company's products
have been manufactured at the Company's new manufacturing facility in the DaYang
Synthetical  Development  District in  Shenzhen,  China.  This new  facility has
triple the capacity of the Company's old manufacturing  plant. The floor area of
this new facility is not fully utilized.

Products

     The following  table sets forth the  percentage of net sales of each of the
Company's product lines for the fiscal years ended March 31, 1998 and 1999.

                                                Year ended March 31,
                                                -------------------
                                             1998                1999
                                             ----                ----
         Product Line

         Scales                               77%                 79%
         Health care products                 13                  15
         Electronic consumer products          3                   2
         Other products and services           7                   4
                                             ---                 ---
         Total                              100%                100%

Scales

     The Company's  weighing equipment ranges from the simplest spring scales to
high  precision   electronic   scales  that  translate   weight   readings  into
corresponding price and postage calculations.

     All of the  Company's  electronic  scales use strain gauge  sensors,  which
management  believes are one of the most  reliable and accurate  weight  sensing
systems currently available. A strain gauge sensor is a thin metal foil resistor
which is bonded to a metal  block,  and which  undergoes a change in  electrical
resistance as weight is loaded onto the metal block.  The  measurement of change
in electrical resistance yields a measure of the applied weight.

     The Company offers a variety of scales for diverse consumer, commercial and
industrial  applications.  Scales  currently  offered  by  the  Company  include
bathroom,  kitchen,  office,  jewelry,  laboratory,   pocket,  hanging,  postal,
industrial  and parcel scales.  The following  table sets forth the net sales of
each type of scale as a  percentage  of total scale  sales for the fiscal  years
ended March 31, 1998 and 1999:

                                                Year ended March 31,
                                                -------------------
                                             1998                1999
                                             ----                ----
         Type of Scale

         Postal and office                    45%                 29%
         Kitchen                               6                   8
         Jewelry and laboratory               18                  20
         Bathroom                             14                  15
         Pocket and hanging                   11                  19
         Industrial and parcel                 6                   9
                                             ---                 ---
         Total scale sales                   100%                100%

                                       3
The  Company's  electronic  scales offer many  advanced  features such as a
talking feature,  automatic power off,  automatic range,  audio signal,  digital
auto-calibration,  automatic  zero tracking and multiple  measuring  units.  The
scales  are built with  either  metal or  plastic  housings  and come in various
models and case  designs.  The  Company's  scales are  described  in more detail
below.

     Postal Scales. The Company's postal scales are used primarily by businesses
for  weighing  letters  and  parcels  of up to 2,000  grams  (4.4  lbs.) and are
accurate to 1 gram. Postal scales are calibrated to give postal or franking cost
for the various classes of delivery service  available to various  destinations.
The  scales are  marketed  primarily  in Europe  and the  United  States and are
customized for the postal system of the country of destination.

     Office  Scales.  The Company  sells  several  models of office  scales with
capacities ranging from 2,000 grams (4.4 lbs.) to 5,000 grams (11 lbs.), and the
scales are  accurate  to 1 gram.  The scales are used in offices to weigh  small
packages and letters.  The Company's  office scales are sold  principally in the
United States, Europe, Australia, Hong Kong and China.

     Kitchen  Scales.  The Company's  kitchen  scales are used in households and
restaurants  to weigh  ingredients  for cooking and portions  for dieting,  with
capacities ranging from 1,000 grams (2.2 lbs.) to 5,000 grams (11 lbs.), and the
scales are  accurate  to 1 gram.  The  Company's  kitchen  scales  are  marketed
principally in the United States and Europe.

     Jewelry and Laboratory  Scales.  Jewelry and laboratory  scales are used to
weigh  precious  metals and stones.  In the  laboratory,  the scales are used to
weigh  various  chemicals  and chemical  compounds.  The  Company's  jewelry and
laboratory  scales are  principally  sold in the United  States and Europe.  The
capacities  of these  scales range from 120 grams (0.25 lb.) to 1,200 grams (2.6
lbs.), and these scales are accurate to 0.01 gram or 0.1 gram, respectively.

     Bathroom  Scales.  The Company's  bathroom  scales are used by consumers to
monitor weight,  with  capacities up to 150 kilograms (330 lbs.).  The Company's
bathroom scales are marketed primarily in the United States, Europe and Japan.

     Pocket and Hanging Scales.  Pocket and hanging scales are small  electronic
scales  that can be carried by a business  person in his or her attache or brief
case.  The  capacities of the  Company's  pocket scales range from 80 grams (2.8
oz.) to 320 grams  (11.2  oz.),  and the scales are  accurate  to 0.1 gram.  The
hanging scales range from 15 kilograms (33 lbs.) to 25 kilograms (55 lbs.),  and
the scales are accurate to 10 grams.  The pocket scales are principally  used in
the jewelry  business  for  weighing low value metals and stones and the hanging
scales are primarily  used in fishing.  The Company's  pocket and hanging scales
are marketed primarily in the United States and Europe.

     Industrial/Parcel  Scales.  The Company  manufactures  different  models of
industrial/  parcel  scales,  which are used in  business  or  industry to weigh
heavier  parcels or objects (i.e.,  objects whose weight exceeds the capacity of
the Company's office scales).  Industrial/parcel  scales have a capacity ranging
from  25  kilograms  (55  lbs.)  to 150  kilograms  (330  lbs.).  The  Company's
industrial/parcel scales are marketed primarily in Europe.

Health Care Products

     Electronic  Thermometers.  The  Company's  electronic  thermometers,  which
include both fahrenheit and centigrade versions,  measure body temperature.  The
Company's electronic  thermometer is classified as a medical device under United
States law.  Medical  devices are  required to be approved by the United  States
Food and Drug Administration  (the FDA) prior to being marketed,  unless the law
provides  a  legal  exemption  from  such  approval.  The  Company's  electronic
thermometer has received  pre-market  approval from the FDA. Sales of electronic
thermometers  were  approximately  10% of the  Company's net sales in the fiscal
year ended March 31, 1998, and approximately 12% of net sales in the fiscal year
ended March 31, 1999.

                                       4
Blood Pressure  Meters.  The Company  introduced  electronic blood pressure
meters to its line of products in November 1994. The Company's  electronic blood
pressure  meters have digital  displays for highest blood  pressure  (systolic),
lowest blood pressure  (diastolic) and pulse rate (number of pulses per minute),
as well as mean blood pressure.  The meters have automatic power off,  automatic
pressure release,  manual rubber bulb pump and many other standard features. The
Company has  obtained FDA approva for  marketing  blood  pressure  meters in the
United  States.  Sales of blood  pressure  meters were  approximately  3% of the
Company's net sales in each of the fiscal years ended March 31, 1998 and 1999.

Electronic Consumer Products

     Chronographs.   The  Company  began  shipping   chronographs   in  1998.  A
chronograph is a device for measuring the speed of a projectile by measuring the
time it takes for it to go between two infra-red sensors.  Sales of chronographs
were  approximately  0.9% of the  Company's  net sales in the fiscal  year ended
March 31, 1999.

     Pedometers.  The Company began  shipping  electronic  pedometers in 1993. A
pedometer  is worn by a walker or jogger to measure  the  distance  traveled  by
recording the steps taken.  The Company's  pedometer can be adjusted for varying
stride  lengths,  and will keep track of  distance  traveled,  elapsed  time and
average speed.  Sales of pedometers were approximately 0.7% of the Company's net
sales in the fiscal  year  ended  March 31,  1998,  and 0.9% of net sales in the
fiscal year ended March 31, 1999.

     Distance Meters.  The Company began shipping distance meters in 1998. Sales
of distance  meters were less than 0.1% of the Company's net sales in the fiscal
year ended March 31, 1999.

     Other  Electronic  Consumer  Products.   In  the  past,  the  Company  also
manufactured   joysticks  and  bicycle   computers.   Sales  of  joysticks  were
approximately 1.9% of the Company's net sales in the fiscal year ended March 31,
1998 and sales of the Company's bicycle computers were  approximately  0.014% of
the Company's net sales in the fiscal year ended March 31, 1998. The Company did
not manufacture any joysticks or bicycle  computers during the fiscal year ended
March 31, 1999.

Other Products and Services

     The Company  also  receives  revenue  from  customer  funded  research  and
development  for products  subsequently  produced and sold to them,  the sale of
semi  completed  units  and the  sale of  spare  parts  for  repair  work by its
customers and from repair work performed by the Company for its customers. These
revenues  constituted  approximately  7% of net sales for the fiscal  year ended
March 31, 1998 and 4% of net sales for the fiscal year ended March 31, 1999.

Product Development, Design and Research

     The major responsibility of the product design and research and development
personnel  is to  develop  and  produce  designs to the  satisfaction  of and in
accordance with the specifications provided by the OEMs. Management believes its
engineering  and product  development  capabilities  are important to the future
success  of the  Company's  business.  Some  of the  Company's  product  design,
research and development  activities are customer funded and are initiated under
verbal agreements with specific customer for specific products.  The Company has
successfully  lowered its costs for its research and development  team by moving
most  research  and  development   activities  to  its  facility  in  China  and
principally  employing  Chinese  engineers  and  technicians  at costs  that are
substantially lower than would be required in Hong Kong.

                                       5
At March 31, 1999, the Company employed two individuals in Hong Kong and 16
individuals in China on its engineering  staff, who are at various times engaged
in research and development.  The Company also contracted with a firm in Germany
to develop the software  for the  Company's  proposed  cordless  telephone.  The
Company  spent  $158,706  and $566,030 on research  and  development  during the
fiscal years ended March 31, 1998 and 1999, respectively.  Management intends to
increase the number of research and development personnel to approximately 25.

     The Company has, in varying stages of  development,  a bicycle  accelerator
and  postal,   kitchen  and  Gem  scales,  which  are  being  developed  to  the
specifications of OEM customers, and has recently commenced production of an ear
protector and newly designed body scales.

Manufacturing

     The Company  currently  manufactures  and  assembles all of its products in
China.  Generally,  raw  materials,  electronic  components  and other parts are
transported  to the  Company's  manufacturing  plant in China where the finished
products are  assembled.  The finished goods are then  transported  back to Hong
Kong for sale by the Company.

     The  Company  manufactures  some of its own  components,  metal  parts  and
casings  and  plastic  parts at its  facility  in China.  In 1997,  the  Company
commenced  manufacturing its own strain gauges,  and it currently  produces over
80% of the strain gauges  utilized in its scales.  Management  believes that the
Company will realize a  substantial  cost saving from  producing  its own strain
gauges in the future.  Management's  objective is to eventually  produce 100% of
the strain gauges utilized by the Company; however, management may decide not to
produce some  low-demand  strain  gauges if it  determines  that to produce them
would not be cost effective.

     To take  advantage  of lower  overhead  costs and  competitive  labor rates
available  in  China,  the  Company  constructed  a  manufacturing  facility  in
Shenzhen, China in 1989. The location of that factory in Shenzhen, only about 30
miles from Hong Kong,  permitted  the  Company  to manage  easily  manufacturing
operations  from Hong Kong,  and  facilitated  transportation  of the  Company's
products  out of China  through the port of Hong Kong,  the busiest  seaport for
containerized  shipping in the world.  As sales  increased  since the year ended
March 31, 1990, the Company's use of available  factory capacity  increased.  In
planning for its future growth, the Company entered into a contract to acquire a
land  lease  for  construction  of  a  new  manufacturing  complex  which,  when
completed,  would approximately triple the Company's  production  capacity.  The
construction  of phase one of the new  manufacturing  complex was  completed  in
December 1996 and the Company commenced operations in the new complex in January
1997.  The  second,  and  final,  phase  was  completed  in May  1998.  The  new
manufacturing complex is located in the DaYang Synthetical  Development District
in Shenzhen,  China and is  approximately  50 miles from Hong Kong. See Item 2 -
"Description of Property--China," below.

     Because the Company  primarily  sells and ships its products  "F.O.B.  Hong
Kong," most of its customers are responsible for the  transportation of finished
products  from Hong Kong to their  final  destination  and bear the risk of loss
from such  transportation.  Components and finished  products are transported to
and from China  primarily  with the  Company's  own truck.  The  majority of the
Company's component parts purchased from Japan, Taiwan and Korea are transported
by ship or by air to Hong  Kong.  In  recent  years,  the  Company  has not been
materially affected by any transportation problems.

     Management  believes that it has  sufficient  water and power  supplies for
daily usage at its new manufacturing  complex. The Company has drilled two water
wells to obtain additional water and to minimize cost.

                                       6
The  availability of adequate power to run the Company's  factory is one of
the  difficulties  of having a factory  located in China.  In order to  minimize
potential  power  problems  that could  develop  in the  Shenzhen  factory,  the
factory, like most Chinese factories,  is equipped with power generators capable
of providing adequate electric power to operate the assembly line.

Component Parts and Suppliers

     The Company  purchases over 1,000 different  component parts from more than
100 major  suppliers and is not dependent  upon any single  supplier for any key
component.  The Company purchases  components for its products from suppliers in
Japan,  Taiwan,  South  Korea,  Hong Kong and  elsewhere.  The  Company  has not
experienced,  and management  does not expect to  experience,  any difficulty in
obtaining needed component parts for its products.

     The major component parts purchased by the Company are integrated  circuits
(chips),  LEDs,  LCDs,  strain  gauges,  force sensors,  resistors,  capacitors,
transistors, diodes, printed circuit boards and batteries. The Company purchases
both stock or off the shelf chips and custom chips.  There are many suppliers of
both stock and custom  chips in Japan and  Taiwan.  At the present  time,  Micro
Chips in Taiwan,  Samsung in South Korea and  Hitachi,  Toshiba and NEC in Japan
provide  most  of the  Company's  chips.  Chips  are one of the  most  expensive
component parts purchased by the Company.

     Strain  gauges are the second most  expensive  components  purchased by the
Company.  The Company currently  produces over 80% of the strain gauges utilized
in  its  scales,   and  obtains  the  remainder   principally  from  a  Japanese
manufacturer.  However,  the  Company  could also  purchase  strain  gauges from
suppliers  located in the United  States and China.  LEDs and LCDs are generally
custom made to match the chip design and are  principally  supplied by companies
in Taiwan,  Korea and Japan.  The circuit  boards can be purchased  from circuit
board manufacturers in Hong Kong. Resistors, capacitors, transistors, diodes and
batteries are standard stock items and are generally  purchased in Hong Kong and
Taiwan.

     The Company  produces  metal and  plastic  casings and parts for use in its
products.  Plastic resin and metal sheet can be purchased from suppliers in Hong
Kong and Japan.

Quality Control

     Management  maintains  strict quality control  procedures for every product
manufactured by the Company throughout the manufacturing  process.  Incoming raw
materials and components are checked by the Company's quality control personnel.
Moreover,  during the production  stage, the Company's quality control personnel
monitor each operation in the  manufacturing  process,  including the bonding of
the chips,  component  insertion and assembly of the printed  circuit boards and
casings.  All work in  process is also  checked  during  the  manufacturing  and
assembly  processes.  After the  assembly  stage,  every  product is checked for
proper functioning and cosmetic  appearance.  After packing and before shipment,
the  quality  control  personnel  randomly  check  goods  according  to  product
specifications. Historically, the Company's level of defective products has been
low, and not material to its financial  statements.  The Company's  products are
generally  covered by a one-year  limited  warranty which provides for repair or
replacement  of  defective  products.  In  certain  circumstances,  an  extended
warranty may be offered.  To date, claims against the Company under its warranty
program have been negligible.

     In April 1995, the Company received an ISO 9001 certificate from Det Norske
Veritas Industry B.V., The  Netherlands.  The Company passed a reviewed audit by
Det Norske  Veritas,  processed in March 1999,  and is qualified to maintain the
ISO 9001 certificate.

                                       7
The  ISO  9000  is a  program  developed  initially  by  the  International
Organization  for  Standardization  in Geneva,  Switzerland,  to provide quality
control  registration  standards that could be relied upon to provide assurances
with regard to a  registrant's  quality  control and  manufacturing  operations.
Management  believes  that ISO 9000  registration  provides its  customers  with
quality control  assurances that are recognized  internationally,  and that such
registration  also provides the Company with a competitive  advantage  over many
other  manufacturers  in the Far  East  who  have  not  registered  for ISO 9000
certification.  In addition,  the Company has submitted  applications for the CE
mark for some  products and, at the present  time,  over 36 product  groups have
been approved,  including the electromagnetic  compatibility directive (EMC) and
the medical  devices  directive  (MDD). A CE mark serves as  confirmation to the
European  authorities  that the marked product  complies with all European Union
directives  relevant to the product and that the product may be traded freely in
the European market.

     The  Company  has hired a Managing  Director  who will be  responsible  for
changing the Company's quality control to total quality management ("TQM").

Customers and Marketing

     The  Company  sells  its  products  in the  United  States,  Europe,  Asia,
Australia and Africa.  Customers for the Company's scales are primarily original
equipment manufacturers, which market the products under their own brand names.

     Net export sales to customers by geographic area consisted of the following
for each of the three years ended March 31, 1997, 1998 and 1999.
Year ended March 31,
                 ----------------------------------------------------------------------------
                         1997                          1998                      1999
                 -----------------               -----------------         ------------------
North America       $ 7,537,401      44%       $12,598,672     53%        $5,597,402      43%
Europe                5,492,294      33          8,129,063     34          6,248,263      48
Asia                  3,454,505      20          2,117,914      9          1,041,377       8
Australia               425,314       3            756,354      3            130,173       1
Africa                   79,505      --            113,573      1             29,050      --
                     ----------    ----         ----------   ----        -----------    ----
Total Net Sales     $16,989,019     100%       $23,715,576    100%        13,046,265     100%
The Company  maintains a marketing team in Hong Kong.  The Company  markets
its  products  primarily  through  use of its Web  page,  advertising  in  trade
publications  such as Hong Kong Enterprise and the use of direct mail catalogues
and product  literature.  In addition,  the  Company's  marketing  team contacts
existing and potential customers by telephone, mail, fax and in person.

     Major  Customers.  Sales of the  Company's  products to OEMs  accounted for
approximately  87% of the  Company's  total net sales  during  each of the years
ended March 31, 1997,  1998 and 1999.  The  Company's  principal  OEM  customers
include the following  entities  which market the Company's  products  under the
brand name indicated opposite their respective names:

                                       8
Percent of Company's Sales
                                                                               Year ended March 31,
                                                                            --------------------------
       Customer                    Brand Name         Products                1997      1998     1999
       --------                    ----------         --------                ----      ----     ----
Pitney Bowes, Inc. (USA)                   Pitney Bowes
                                                    Postal scales               18%      30%     15%

         Werner Dorsch Gmbh & Co. WEDO              Postal, office and
          (Germany)                                 parcel scales               11%      9%      15%

         Globaltec Corporation    ACCULAB           Jewelry, educational and
         (USA)                                      high precision scales       13%     15%      11%

         Omron Health Care        OMRON             Digital thermometers        11%      8%      10%

         Gottl Kern & Sohn Gmbh   KERN              Laboratory, hanging          3%      4%       7%
                                                    pocket and parcel scales
Werner Dorsch Gmbh & Co. and Globaltec  Corporation  have been customers of
the Company for fourteen and twelve  years,  respectively.  Management  believes
that the Company offers its customers  superior quality of products and superior
product  design and  development  capabilities,  together  with the low costs of
production associated with its operations in China.

     If the  Company  were to lose any  customers  who  account  for a  material
portion  of total  sales,  or if any of these  customers  were to  substantially
decrease their purchases from the Company, the Company's revenues,  earnings and
financial  position  would  be  materially  and  adversely  affected.  With  the
exception of Globaltec Corporation, the Company's dependence on the above-listed
customers is expected to continue in the foreseeable future. The Company follows
normal and  customary  business  practices in the  acceptance of orders from its
customers.  Orders from the  above-listed  customers are generally  supported by
bank guarantees, letters of credit or insurance from the Hong Kong Export Credit
Insurance  Corporation.  For updated  information  with respect to a decrease in
orders from two of the  Company's  major  customers  see Item 9 -  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Overview."

     Sales of the Company's products directly by the Company under its own brand
name accounted for approximately 13% of the Company's total net sales during the
years ended March 31, 1997, 1998 and 1999.

     Backlog.  The Company's backlog consists of orders from major customers and
purchase orders from other  customers of products  scheduled for shipment within
three to twelve months. It is the Company's  practice to charge customers 50% of
the total order price when orders are  cancelled  and, as a result,  the Company
has  experienced  nominal  cancellations.  This practice is not represented by a
written  agreement,  and the Company may not be able to enforce this arrangement
in every case in the  future.  The Company  generally  has not  experienced  any
difficulty  in shipping  orders by the dates  requested  by its  customers or in
material returns of its products. The amount of backlog that is manufactured and
shipped during any period is dependent on various factors,  including the timing
and scheduling of orders from material customers and accordingly,  the amount of
backlog at any date is not necessarily indicative of actual shipments and sales.
The Company's backlog was $3,040,771 at March 31, 1999, compared to a backlog of
$4,386,485 at March 31, 1998

                                       9
Competition

     The electronic products business is highly competitive. The Company's major
competitors in the scale market include Management  Investment & Technology Co.,
Ltd. in Hong Kong and Charder Electronic  Company,  Ltd. in Taiwan. In the blood
pressure meter market,  the Company's major  competitor is AnD Co. Ltd of Japan.
In the electronic  thermometer market, its major competitors are Citizen Company
and  Terumo,  both of Japan.  Competition  is  primarily  based upon unit price,
product quality,  reliability,  product features and management's reputation for
integrity.  Management believes that the Company competes favorably with respect
to each of these factors.

Employees

     At March 31, 1999, the Company  employed 701 persons on a full-time  basis.
All of the  Company's  24  employees  located in Hong Kong held  administrative,
clerical,  sales and marketing positions. Of the 677 employees located in China,
596 were  engaged in  manufacturing  and 81 were engaged in  administrative  and
clerical  positions.  The  Company  is not a  party  to any  labor  contract  or
collective  bargaining  agreement.  The Company has  experienced  no significant
labor stoppages in recent years, and management believes that relations with its
employees are satisfactory.

     The Company  currently  houses all 677 employees  located in the PRC at the
Shenzhen facility, including administrative staff. The facility is able to house
up to 2,180 employees.

     Patents,  Licenses,   Trademarks,   Franchises,   Concessions  and  Royalty
Agreements

     The Company has no patents,  licenses,  franchises,  concessions or royalty
agreements  that are  material  to its  business  as a whole.  The  Company  has
obtained a trademark registration in Hong Kong and China for the marks BONSO and
MODUS in  connection  with certain  electronic  apparatus and intends to file an
application in the United States for registration of such trademarks.

Government Regulation

     In the United States,  the Medical Device Amendments of 1976 to the federal
Food, Drug and Cosmetic Act (Amendments) and the regulations  issued or proposed
thereunder provide for regulation by the Food and Drug  Administration (the FDA)
of the marketing, manufacturing, labeling, packaging and distribution of medical
devices.  These regulations  include  requirements that manufacturers of medical
devices register with the FDA and furnish lists of devices manufactured by them.
Certain  pre-market  requirements  must be met prior to the marketing of medical
devices introduced after May 28, 1976. These range from a minimum requirement to
wait 90 days  after  notification  to the FDA  before  introduction  of  medical
devices  substantially  similar  to  devices  already on the market to a maximum
requirement to comply with the potentially  expensive and time consuming process
of pre-market analysis and testing necessary to obtain FDA approval prior to the
commercial  marketing of new medical devices. In addition,  the FDA also has the
authority  to  prescribe  performance  standards  for the types of  health  care
products manufactured by the Company.  Should such standards be prescribed,  the
Company's  products  would be  required  to  conform to them.  To date,  no such
standards have been adopted and the Company cannot predict what changes, if any,
may be necessitated in its products should such performance  standards be issued
in  the  future.  In  addition  to  the  Amendments,   there  are  also  certain
requirements of other federal laws and of state,  local and foreign  governments
that may apply to the  manufacture  and marketing of the  Company's  health care
products.

                                       10
The only  products of the Company  that are subject to material  government
regulation are its electronic thermometers and electronic blood pressure meters,
which  are  subject  to  qualifying  procedures  with  the FDA.  The  qualifying
procedures  set forth by the FDA for  pre-market  approval  with  respect to the
electronic thermometers and blood pressure meters have been satisfied.

     In the European Union, Medical Devices Approval is required for the sale of
the Company's electronic thermometers and blood pressure meters. The Company has
obtained Medical Devices Approval for its electronic thermometers. A customer is
currently  seeking Medical Devices Approval,  on behalf of the Company,  for the
Company's  blood  pressure  meters and  management  expects such  approval to be
granted within six months to a year.

Certain Foreign Issuer Considerations

     Transfer of Sovereignty  over Hong Kong to China.  The principal  executive
offices  of the  Company  and all  manufacturing  operations  and  assets of the
Company are located in Hong Kong and China. Prior to July 1, 1997, Hong Kong was
a British Crown Colony with  responsibility  for  administering its own internal
affairs.  After several years of  negotiations  concerning  Hong Kong's  future,
Great  Britain and China  signed  (December  1984) and  ratified  (May 1985) the
Sino-British  Joint  Declaration  on the  Future of Hong Kong (the  Sino-British
Agreement).  Pursuant to the Sino-British  Agreement,  Hong Kong was restored to
China on July 1, 1997.

     Ownership  of  Real  Property.  All  land  in Hong  Kong  is  owned  by the
Government  of the Hong Kong  Special  Administrative  Region (the  Government).
Prior to July 1, 1997, the Government granted Crown Leases to persons, firms and
corporations  on the basis of an annual crown rental payment and other terms and
conditions therein  contained.  Crown Leases were freely assignable during their
term. In  implementation  of the  Sino-British  Agreement,  the New  Territories
Leases (Extension) Ordinance was enacted and came into effect on April 25, 1988.
Pursuant to that Ordinance,  all leases in the New Territories of Hong Kong were
extended up to June 30, 2047.  Such  extension was at no premium but was subject
to an annual fee  equivalent  to 3% of the ratable  value of the  property to be
charged  with  effect  from the date on which  the  original  lease  would  have
expired.

     The land  ownership  system in China is similar to Hong Kong,  in which all
land is  owned  by the  government.  The  Chinese  government  and  its  various
government  instrumentalities grant leases to persons, firms and corporations on
the basis of an annual  rental  payment  and other  terms and  conditions.  Such
leases are generally freely transferable during their term.

     Enforceability  of  Certain  Civil  Liabilities.  The  Company is a British
Virgin  Islands  holding  corporation.   The  Company  has  appointed  Henry  F.
Schlueter,  1050 Seventeenth Street,  Suite 1700, Denver,  Colorado 80265 as its
agent upon whom process may be served in any action brought against it under the
securities laws of the United States. However, outside the United States, it may
be difficult for investors to enforce  judgments against the Company obtained in
the United States in any such actions,  including actions  predicated upon civil
liability provisions of the United States securities laws. In addition,  most of
the Company's  officers and directors  reside  outside the United States and the
assets of these  persons and of the  Company  are located  outside of the United
States.  As a result,  it may not be possible for investors to effect service of
process  within the United States upon such persons,  or to enforce  against the
Company or such persons  judgments  obtained in United States courts  predicated
upon the liability  provisions of the United States securities laws. The Company
has been advised by Harney,  Westwood and Riegels  ("HW&R"),  its British Virgin
Islands counsel, and by Norman M.K. Yeung & Co., Solicitors ("Yeung & Co."), its
Hong Kong  counsel,  that there is  substantial  doubt as to the  enforceability
against the Company or any of its  directors  and officers  located  outside the
United States in original  actions or in actions for enforcement of judgments of
United States courts of  liabilities  predicated  solely on the civil  liability
provisions of the United States securities laws.

                                       11
The Company has been advised by Yeung & Co. and HW&R that no treaty  exists
between Hong Kong or the British Virgin Islands and the United States  providing
for the reciprocal enforcement of foreign judgments. However, the courts of Hong
Kong and the British Virgin  Islands are generally  prepared to accept a foreign
judgment as evidence of a debt due. An action may then be commenced in Hong Kong
or the British  Virgin Islands for recovery of this debt. A Hong Kong or British
Virgin  Islands  court wil only accept a foreign  judgment as evidence of a debt
due if: (i) the judgment is for a liquidated amount in a civil matter;  (ii) the
judgment is final and  conclusive  and has not been stayed or satisfied in full;
(iii) the  judgment  is not  directly or  indirectly  for the payment of foreign
taxes, penalties, fines or charges of a like nature (in this regard, a Hong Kong
or British  Virgin  Islands court is unlikely to accept a judgment for an amount
obtained  by  doubling,  trebling or  otherwise  multiplying  a sum  assessed as
compensation  for the loss or damage  sustained by the person in whose favor the
judgment  was  given);   (iv)  the  judgment  was  not  obtained  by  actual  or
constructive  fraud or duress;  (v) the foreign court has taken  jurisdiction on
grounds  that are  recognized  by the common law rules as to conflict of laws in
Hong Kong or the  British  Virgin  Islands;  (vi) the  proceedings  in which the
judgment  was  obtained  were  not  contrary  to  natural  justice;   (vii)  the
proceedings  in which the judgment  was  obtained,  the judgment  itself and the
enforcement  of the judgment are not contrary to the public  policy of Hong Kong
or the British  Virgin  Islands;  (viii) the person against whom the judgment is
given is  subject to the  jurisdiction  of the Hong Kong or the  British  Virgin
Islands  court;  and (ix) the  judgment  is not on a claim for  contribution  in
respect of damages  awarded by a judgment  that does not satisfy the  foregoing.
Enforcement of a foreign judgment in Hong Kong or the British Virgin Islands may
also be limited or affected by applicable bankruptcy,  insolvency,  liquidation,
arrangement,  moratorium  or similar laws  relating to or  affecting  creditors'
rights  generally  and will be subject to a statutory  limitation of time within
which proceedings may be brought.

     Under United States law,  majority and controlling  shareholders  generally
have  certain  "fiduciary"   responsibilities  to  the  minority   shareholders.
Shareholder  action  must be taken in good  faith  and  actions  by  controlling
shareholders that are obviously  unreasonable may be declared null and void. The
British Virgin Islands law protecting the interests of the minority shareholders
may not be as protective in all  circumstances  as the law  protecting  minority
shareholders  in United States  jurisdictions  While British  Virgin Islands law
does  permit a  shareholder  of a  British  Virgin  Islands  company  to sue its
directors  derivatively,  i.e. in the name of and for the benefit of the company
and to sue the  company  and its  directors  for his  benefit and the benefit of
others  similarly  situated,  the  circumstances in which any such action may be
brought and the  procedures and defenses that may be available in respect of any
such action may result in the rights of shareholders of a British Virgin Islands
company being more limited than those rights of  shareholders in a United States
company.

Special Risk Factors

Forward-Looking Statements

     Important  Factors  Related to  Forward-Looking  Statements  and Associated
Risks. This Annual Report contains forward-looking statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act of 1934.  In  addition,  the  Company  may from  time to time make
written or oral forward-looking  statements.  Written forward-looking statements
may appear in documents  filed with the Securities and Exchange  Commission (the
"Commission"),   in  press   releases  and  i  reports  to   shareholders.   The
forward-looking  statements  included  herein are based on current  expectations
that  involve  a  number  of  risks  and  uncertainties.  These  forward-looking
statements  are based on  assumptions  that  political,  economic and commercial
conditions in Hong Kong and China will not change materially or adversely,  that
competitive  conditions  affecting  the Company  will not change  materially  or
adversely,  that  demand for the  Company's  products  will be strong,  that the

                                       12
Company  will retain  existing  key  management  personnel,  that the  Company's
forecasts  will  accurately  anticipate  market demand and that there will be no
material  adverse  change in the Company's  operations or business.  Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future  economic,   competitive  and  market   conditions  and  future  business
decisions,  all of which are difficult or impossible to predict  accurately  and
many of which are  beyond  the  control  of the  Company.  Although  the  Compan
believes that the  assumptions  underlying  the  forward-looking  statements are
reasonable,  any of the assumptions could prove inaccurate and, therefore, there
can be no assurance that the results contemplated in forward-looking information
will be realized.

     In addition,  as disclosed elsewhere under other risk factors, the business
and  operations of the Company are subject to  substantial  risks which increase
the uncertainty  inherent in such  forward-looking  statements.  In light of the
significant  uncertainties inherent in the forward-looking  information included
herein,  the  inclusion  of  such  information  should  not  be  regarded  as  a
representation  by the Company or any other person that the  objectives or plans
of the  Company  will be  achieved.  The  Privat  Securities  Reform Act of 1995
contains  a safe  harbor for  forward-looking  statements  on which the  Company
relies in making  such  disclosures.  In  connection  with this safe  harbor the
Company is hereby identifying  important factors that could cause actual results
to differ materially from those contained in any forward-looking statements made
by or on behalf of the Company.  Any such statement is qualified by reference to
the cautionary statements included in this Annual Report.

Political,  Legal,  Economic and  Other Uncertainties of Operations in China and
Hong Kong

     Transfer of Sovereignty  over Hong Kong to China.  The principal  executive
and  corporate  offices of the  Company  are  located  in Hong Kong,  formerly a
British Crown Colony.  Sovereignty over Hong Kong was transferred effective July
1, 1997 to China, and Hong Kong became a Special Administrative Region of China.
The  National  People's  Congress of China  enacted the Basic Law in 1990 as the
constitution  of  Hong  Kong  under  China's   sovereignty  (Basic  Law).  While
management  does not believe that the transfer of sovereignty  over Hong Kong to
China will have a material adverse effect on the Company's  business,  there can
be no  assurance  as to  the  continued  stability  of  political,  economic  or
commercial  conditions in Hong Kong, and any  instability  could have an adverse
impact on the Company's business.

     The Hong Kong  dollar  and the  United  States  dollar  have been  fixed at
approximately 7.80 Hong Kong dollars to $1.00 since 1983. The Chinese government
expressed  its  intention in the Basic Law to maintain the stability of the Hong
Kong currency after the sovereignty of Hong Kong was transferred to China. There
can be no assurance that this will continue and the Company could face increased
currency risks if the current exchange rate mechanism is changed.

     Internal Political and Other Risks of Manufacturing in China. The Company's
manufacturing  facility  is  located  in  China.  As  a  result,  the  Company's
operations and assets are subject to significant political,  economic, legal and
other uncertainties.  Changes in policies by the Chinese government resulting in
changes  in  laws,  regulations  or  the  interpretation  thereof,  confiscatory
taxation,  restrictions  on  imports  and  sources  of  supply,  import  duties,
corruption,  currency  revaluations or the  expropriation of private  enterprise
could materially and adversely affect the Company.  Over the past several years,
the Chinese  government  has pursued  economic  reform  policies  including  the
encouragement    of   private    economic    activity   and   greater   economic
decentralization.  There can be no assurance  that the Chinese  government  will
continue to pursue such  policies,  that such  policies  will be  successful  if
pursued,  that such policies will not be significantly altered from time to time

                                       13
or that  business  operations  in China would not become  subject to the risk of
nationalization,  which  could  result in the total loss of  investment  in that
country.  Economic  development  may be  limited  as well by the  imposition  of
austerity measures intended to reduce inflation,  the inadequate  development of
infrastructure  and the  potential  unavailability  of adequate  power and water
supplies,  transportation and communications. If for any reason the Company were
required to move its  manufacturing  operations  outside of China, the Company's
profitability  would be substantially  impaired,  its competitiveness and market
position would be materially  jeopardized and there can be no assurance that the
Company could continue its operations.

     Recent  Relations with the U.S. China currently  enjoys most favored nation
("MFN") trade status, which provides China with the trading privileges generally
available to trading  partners of the United States.  The United States annually
reconsiders the renewal of China's MFN status.  Various interest groups continue
to urge  that the  United  States  not  renew  MFN for  China  and  there can no
assurance  that  controversies  will not arise  that  threaten  the  status  quo
involving  trade  between the United  States and China or that the United States
will  not  revoke  or  refuse  to  renew  China's  MFN  status.  In any of  such
eventualities, the business of the Company could be adversely affected, by among
other things, causing the Company's products in the United States to become more
expensive,  which could  result in a reduction  in the demand for the  Company's
products by customers in the United States.  Trade  friction  between the United
States and China,  whether or not actually  affecting  the  Company's  business,
could also adversely affect the prevailing  market price of the Company's Common
Stock and warrants.

     Uncertain Chinese Legal System and Application of Laws. The legal system of
China relating to foreign investments is both new and continually evolving,  and
currently  there  can be no  certainty  as to the  application  of its  laws and
regulations in particular instances.  China does not have a comprehensive system
of  laws.  Enforcement  of  existing  laws or  agreements  may be  sporadic  and
implementation and interpretation of laws inconsistent. The Chinese judiciary is
relatively  inexperienced in enforcing the laws that exist,  leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate  law  exists  in China,  it may not be  possible  to  obtain  swift and
equitable enforcement of that law.

     Possible  Changes and  Uncertainties in Economic  Policies.  As part of its
economic reform,  China has designated  certain areas,  including Shenzhen where
the  Company's  manufacturing  complex is located,  as Special  Economic  Zones.
Foreign  enterprises in these areas benefit from greater  economic  autonomy and
more favorable tax treatment than  enterprises in other parts of China.  Changes
in the policies or laws governing  Special  Economic Zones could have a material
adverse effect on the Company.  Moreover,  economic  reforms and growth in China
have been more successful in certain provinces than others, and the continuation
or increase of such  disparities  could affect the political or social stability
of China.

     Dependence on Single Factory.  All of the Company's  products are currently
manufactured  at its  manufacturing  facility  located in Shenzhen,  China.  The
Company does not own the land  underlying its factory  complex.  It occupies the
site under an agreement with the local Chinese government  pursuant to which the
Company is entitled  to use the land upon which its factory  complex is situated
until May 2044.  This  agreement and the  operations  of the Company's  Shenzhen
factory are dependent on the Company's  relationship  with the local government.
The  Company's  operations  and  prospects  would be  materially  and  adversely
affected by the failure of the local  government to honor the agreement.  In the
event of a dispute, enforcement of the agreement could be difficult in China.

     Moreover,  fire fighting and disaster relief or assistance in China may not
be as  developed  as in  Western  countries.  The  Company  currently  maintains

                                       14
property damage insurance  aggregating  approximately  $13,900,000  covering its
stock  in  trade,  goods  and  merchandise,  furniture  and  equipment  and  the
buildings.  The  Company  does not  maintain  business  interruption  insurance.
Investors are cautioned  that material  damage to, or the loss of, the Company's
factory due to fire, severe weather, flood or other act of God or cause, even if
insured against, could have a material adverse effect on the Company's financial
condition, results of operations, business and prospects.

     Asian Economic Problems. Recently, several countries in Southeast Asia have
experienced a significant  devaluation  of their  currencies  and decline in the
value of their  capital  markets.  In addition,  several  Asian  countries  have
experienced a number of bank failures and  consolidations.  The Company does not
believe  that the  declines  in  Southeast  Asia will  affect the demand for the
Company's  products,  because  virtually all of the Company's  products are sold
into developed countries not experiencing these declines. Moreover, because most
of the Company's  products are paid for in U.S.  dollars,  the Company  believes
that it is less  susceptible  to the effects of a  devaluation  in the Hong Kong
dollar or Chinese renminbi if either or both were to occur despite assurances to
the contrary by the Chinese government.  However,  the decline in the currencies
of other  Southeast  Asian  countries  could render the Company's  products less
competitive  if competitors  located in these  countries are able to manufacture
competitive  products at a lower  effective  cost.  Investors are cautioned that
there can be no  assurance  that the decline in  Southeast  Asia will not have a
material adverse effect on the Company's business,  financial condition, results
of operations or market price of its securities.

Risk Factors Relating to the Business of the Company

     Dependence  on  Major  Customers.   Four  major  customers   accounted  for
approximately 62% of the Company's sales in the fiscal year ended March 31, 1998
and 51% of its sales  during the fiscal year ended March 31,  1999.  The loss of
any of these  major  customers  could  have a  material  negative  impact on the
Company's  business.  See  Item  1 -  "Description  of  Business--Customers  and
Marketing--Major  Customers" and Item 9 - "Management's  Discussion and Analysis
of Financial Condition--Overview."

     Dependence on Key Personnel.  The Company's future  performance will depend
to a  significant  extent upon the efforts and  abilities of certain  members of
senior  management as well as upon the  Company's  ability to attract and retain
other qualified personnel. In particular,  the Company is largely dependent upon
the continued  efforts of Mr.  Anthony So, the Company's  President,  Secretary,
Treasurer  and  Chairman  of its  Board of  Directors,  and Mr.  Kim Wah  Chung,
Director of  Engineering  and Research and  Development.  To the extent that the
services of Mr. So or Mr. Chung would be unavailable to the Company, the Company
would be  required  to obtain  other  personnel  to perform the duties that they
otherwise  would  perform.  There can be no assurance  that the Company would be
able to  employ  another  qualified  person  or  persons,  with the  appropriate
background  and  expertise,  to replace Mr. So or Mr. Chung on terms suitable to
the Company. See Item 10 - "Directors and Officers of Registrant."

     Competition.  The  Company's  business  is in an  industry  that is  highly
competitive,  and many of its competitors,  both local and  international,  have
substantially  greater  technical,  financial and marketing  resources  than the
Company. See Item 1 - "Description of Business--Competition."

     Need for  Qualified  Employees.  The success of the Company is dependent on
its ability to attract and retain qualified technical,  marketing and production
personnel. The Company will have to compete with other larger companies for such
personnel,  and  there  can be no  assurance  that the  Company  will be able to
attract or retain such qualified personnel.

                                       15
Control by Founder.  At the present time,  Mr.  Anthony So, the founder and
President  of  the  Company,   beneficially  owns  approximately  37.5%  of  the
outstanding shares of Common Stock. Due to his stock ownership, Mr. So may be in
a position  to elect the Board of  Directors  and,  therefore,  to  control  the
business  and affairs of the Company  including  certain  significant  corporate
actions  such as  acquisitions,  the sale or purchase of assets and the issuance
and sale of the Company's securities. See Item 4 - "Control of Registrant."

     Potential  Fluctuations in Operating Results.  The Company's  quarterly and
annual  operating  results are  affected by a wide variety of factors that could
materially and adversely affect net sales, gross profit and profitability.  This
could result from any one or a combination of factors,  many of which are beyond
the control of the Company.  Results of  operations  in any period should not be
considered  indicative  of results to be  expected  in any  future  period,  and
fluctuations in operating  results may also result in fluctuations in the market
price of the Company's Common Stock.

     No  Assurance  of Exercise of Warrants  or  Sufficient  Operating  Revenue;
Potential Need for Outside Funding.  In 1998, the Company solicited the exercise
of  certain  outstanding  warrants  which  were  issued  to the  public in 1994.
Management  intended to utilize a portion of the proceeds from such exercises to
fund expansion of operations,  including the  development  and production of the
Company's  proposed  cordless  telephone.  However,  only 25,597  warrants  were
exercised.  There is no  assurance  that any more of the  Company's  outstanding
warrants  will be  exercised.  Accordingly,  funding  for the  expansion  of the
Company's  operations  will be  dependent on the  Company's  ability to generate
significant operating revenue or procure additional  financing.  There can be no
assurance  that  sufficient  operating  revenue  can be  generated  or that  any
additional  financing  can be  arranged  on  favorable  terms and in the amounts
required to fund the expanded operations of the Company.

     Possible Inability of Warrantholders to Exercise Warrants.  Exercise of the
Company's  outstanding warrants is subject to the Company either maintaining the
effectiveness of its registration statement, or filing an effective registration
statement  with the  Securities  and Exchange  Commission and complying with the
appropriate  state securities laws. No assurance can be given that at the time a
warrantholder seeks to exercise the right to purchase the Company's Common Stock
an  effective  registration  statement  will in fact be in  effect  or that  the
Company will have complied with all appropriate state securities laws.

     Future  Sales  of  Common  Stock.  As of the  date of this  Annual  Report,
1,168,421 of the  Company's  outstanding  shares of Common Stock are  restricted
securities as that term is defined in Rule 144 promulgated  under the Securities
Act.  The  Securities  Act and Rule 144  promulgated  thereunder  place  certain
prohibitions on the sale of such restricted securities. Further, the Company has
issued options to purchase  1,130,000  shares of Common Stock.  The  possibility
exists that, when permitted,  the sale to the public of these shares,  or shares
acquired  upon  exercise of the options,  could have a depressing  effect on the
price of the Common Stock. Further, future sales of such shares and the exercise
of such options could adversely affect the Company's ability to raise capital in
the future.

     Volatility  of Stock  Price.  The markets for equity  securities  have been
volatile and the price of the Company's Common Stock has been and could continue
to be subject to wide fluctuations in response to quarter to quarter  variations
in operating results, news announcements,  trading volume, sales of Common Stock
by officers, directors and principal shareholders of the Company, general market
trends and other factors.

     Potential  Adverse  Effect of  Redemption  of Public  Warrants.  The Public
Warrants are  redeemable by the Company at any time at $0.05 per Warrant upon 30
to 45 days notice if the closing  price of the Common  Stock for 20  consecutive
trading  days within the 30-day  period  preceding  the date the notice is given

                                       16
equals or exceeds $8.575 per share. If the Company calls the Public Warrants for
redemption,  the holders of the Public  Warrants  must either (i)  exercise  the
Public  Warrants  and pay the exercise  price  therefor at a time when it may be
disadvantageous  for the holders to do so; (ii) sell the Public  Warrants at the
then  current  market  price when they might  otherwise  wish to hold the Public
Warrants;  or (iii) accept the nominal  redemption price,  which is likely to be
substantially  less than the market value of the Public  Warrants.  No assurance
can be given that at the time of redemption an effective  registration statement
will be in effect or that the Company will have  complied  with all  appropriate
state  securities laws so that a Public  Warrantholder  will be able to exercise
his Public  Warrants  rather than  accepting  the $0.05 per  Warrant  redemption
price.

Certain Legal Consequences of Foreign Incorporation and Operations

     Enforceability of Civil Liabilities.  The Company is a holding  corporation
organized as an  International  Business  Company  under the laws of the British
Virgin  Islands and its principal  operating  subsidiary is organized  under the
laws of Hong Kong,  where the  Company's  principal  executive  offices are also
located. Outside the United States, it may be difficult for investors to enforce
judgments  against the Company  obtained in the United States in actions brought
against the Company, including action predicated upon civil liability provisions
of federal  securities  laws. In addition,  most of the  Company's  officers and
directors  reside  outside the United States and the assets of these persons and
of the Company are located outside of the United States. As a result, it may not
be possible for investors to effect  service of process within the United States
upon such persons,  or to enforce against the Company or such persons  judgments
predicated upon the liability  provisions of U.S.  securities  laws. The Company
has been advised by its Hong Kong counsel and its British Virgin Islands counsel
that there is substantial doubt as to the enforceability  against the Company or
any of its directors or officers  located  outside the United States in original
actions or in actions for enforcement of judgments of U.S. courts of liabilities
predicated solely on the civil liability  provisions of federal securities laws.
See   Item   1   -   "Description    of    Business--Certain    Foreign   Issuer
Considerations--Enforceability of Certain Civil Liabilities."

     Certain Legal  Consequences of Incorporation in the British Virgin Islands.
The  Company  is  organized  under  the  laws  of the  British  Virgin  Islands.
Principles  of law  relating to matters  affecting  the  validity  of  corporate
procedures,  the  fiduciary  duties of the Company's  management,  directors and
controlling  shareholders  and the rights of the Company's  shareholders  differ
from, and may not be as protective of shareholders as, those that would apply if
the  Company  were  incorporated  in a  jurisdiction  within the United  States.
Directors  of the  Company  have  the  power  to take  certain  actions  without
shareholder  approval,  including an amendment of the  Company's  Memorandum  or
Articles  of  Association  and  certain  fundamental   corporate   transactions,
including  reorganizations,  certain mergers or  consolidations  and the sale or
transfer of assets.  In addition,  there is doubt that the courts of the British
Virgin Islands would enforce liabilities predicated upon U.S. securities laws.

     Exemptions under the Exchange Act as a Foreign Private Issuer.  The Company
is a foreign  private issuer within the meaning of rules  promulgated  under the
Exchange Act. As such,  and though its Common Stock is registered  under Section
12(g) of the Exchange Act, it is exempt from certain  provisions of the Exchange
Act applicable to United States public companies including:  the rules under the
Exchange Act  requiring the filing with the  Commission of quarterly  reports on
Form 10-Q or current  reports on Form 8-K,  the  sections  of the  Exchange  Act
regulating the solicitation of proxies, consents or authorizations in respect to
a security  registered  under the  Exchange Act and the sections of the Exchange
Act  requiring  insiders to file public  reports of their  stock  ownership  and
trading activities and establishing  insider liability for profits realized from
any  short-swing  trading  transaction  (i.e.,  a purchase and sale, or sale and
purchase,  of the issuer's equity securities within six months or less). Because
of the exemptions  under the Exchange Act applicable to foreign private issuers,
shareholders of the Company are not afforded the same protections or information
generally  available to investors  in public  companies  organized in the United
States.

                                       17
Item 2. Description of Property.

British Virgin Islands

     The offices of the Company  are  located at Cragmuir  Chambers,  Road Town,
Tortola,  British  Virgin  Islands.  Only corporate  administrative  matters are
conducted at such offices,  through the Company's registered agent, HWR Services
Limited.

Hong Kong

     The  Company  owns  approximately   9,185  square  feet  in  the  Universal
Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New Territories,  Hong
Kong.  This  facility is used  primarily as the  Company's  principal  executive
office.  The Company  purchased the property from an unaffiiated  third party in
May 1999 for approximately $743,590.

     The Company owns a residential  property in Hong Kong,  which is located at
Savanna Garden,  House No. 27, Tai Po, New Territories,  Hong Kong. House No. 27
consists of approximately 2,475 square feet plus a 177 square foot terrace and a
2,308  square  foot  garden  area.  The use of House No. 27 is  provided  to Mr.
Anthony So as part of his compensation. See Item 13 - "Interest of Management in
Certain Transactions."

China

     The  Company's  existing  factory in China is located  at  Shenzhen  in the
DaYang Synthetical  Development District,  close to the border between Hong Kong
and China.  This  factory  consists  of two  factory  buildings,  which  contain
approximately   194,990   square  feet,   two  workers'   quarters,   containing
approximately   115,050  square  feet,  a  canteen  and  recreation   center  of
approximately   25,270   square  feet,   an  office   building,   consisting  of
approximately   25,230  square  feet,  and  staff  quarters  for  the  Company's
supervisory  employees,  consisting of  approximately  35,110 square feet, for a
total of approximately 395,650 square feet. The facility is utilized pursuant to
a Contract  on the Use of Land and Supply of Workers  with  Shenzhen  Baoan Fuan
Industrial   Company.   The  agreement   provides  that  the  Company  will  use
approximately  269,000 square feet of land for a period of 50 years,  commencing
May 10, 1994.  To obtain the land lease,  the Company  agreed to pay  $1,810,344
plus a monthly  management fee in the amount of $2,750. The Company used part of
the proceeds of a  $1,500,000  loan it received in July 1994 to pay a portion of
the initial  acquisition  cost; the balance of the initial  acquisition cost was
paid out of the net proceeds of a public  offering of the  Company's  securities
conducted in December 1994.  The facility is  wholly-owned  by the Company.  The
agreement provides that at the expiration of the land lease, the Company will be
given  priority for  negotiation of a new agreement for the use of the land. The
Company's total  investment in the facility is approximately  $8,000,000.  Phase
one of the facility was completed in December 1996, and manufacturing  commenced
in the new  facility  in January  1997.  The  second,  and  final,  phase of the
facility was completed in May 1998.

     The  Company  also  owns two  residential  properties,  one  consisting  of
approximately  1,000 square feet, located at Lijingge Court, Unit F, 15th Floor,
Hai Li Building,  Shenzhen,  China,  and one consisting of  approximately  1,125
square feet located at the 12th floor, Yuk Yui Court,  Gui Hua Garden,  Shenzhen
Bay, China.  Both properties are utilized by management staff and directors when
they require accommodations in China.

     On June 18, 1998, the Company  purchased  Units 12 and 13 on the 3rd floor,
Block A of Sunshine Plaza in Beijing,  China for an aggregate  purchase price of
$600,999,  payable as follows:  $383,468 was paid before June 18, 1998;  and the
balance of $217,531,  plus  interest in the amount of $30,241,  is payable on or
before May 18, 2000.  Unit 12 consists of 102.38  square meters Unit 13 consists
of 172.77 square meters. Both Units are rented to unaffiliated third parties for
an aggregate monthly rental of $3,353.

                                       18
Adequacy of Facilities

     Management  believes that the Company's new  manufacturing  complex will be
adequate for its reasonably foreseeable needs.

Item 3. Legal Proceedings.

     On August 28, 1998, a lawsuit was filed in the United States District Court
for the Central  District of  California  against the Company and the  Company's
Warrant Agent alleging that the Company had committed  securities fraud,  common
law fraud and breach of  contract  arising out of the  original  sale of certain
warrants which were sold to the public in 1994 and the issuance on July 22, 1998
of a notice to redeem those warrants on September 4, 1998 for $0.05 per warrant.
The lawsuit was  dismissed,  without  prejudice,  on September 2, 1998,  and the
Company  rescinded  the  redemption of the warrants that was noticed on July 22,
1998.

     Management  is not  aware  of any  legal  proceedings  contemplated  by any
governmental   authority  involving  the  Company,  its  subsidiaries  or  their
property. No director,  officer or affiliate of the Company, or any associate of
a director,  officer or affiliate of the Company:  (i) is a party adverse to the
Company or its  subsidiaries  in any legal  proceedings;  or (ii) has an adverse
interest to the Company or its subsidiaries in any legal proceedings.  Except as
described herein,  the Company and its subsidiaries are not parties to any legal
proceedings  and there are no other  material  legal  proceedings  pending  with
respect to the property of the Company and its subsidiaries.

Item 4. Control of Registrant.

     The  Company is not  directly  or  indirectly  owned or  controlled  by any
foreign government or by another corporation. The following table sets forth, as
of July 14, 1999, the beneficial ownership of the Company's Common Stock by each
person  known by the  Company  to own  beneficially  more than 10% of the Common
Stock  of the  Company  outstanding  as of such  date  and by the  officers  and
directors of the Company as a group. Except as otherwise  indicated,  all shares
are owned directly.
Amount Owned
                                             ---------------------------------------------
                                                 Shares of             Options to Purchase        Percent of
         Person or Group                       Common Stock                 Common Stock             Class(1)
         ---------------                       ------------            -------------------        -----------
Anthony So                             1,168,421(2)                   567,000               47.1%
         Officers and directors                 1,168,421                    1,036,000               53.1%
           as a group (8 persons)
----------------------
     (1) Based on  beneficial  ownership  of both  shares  of  Common  Stock and
     options to purchase Common Stock which are immediately exercisable.
     (2)  Owned of record by a  corporation  that is wholly  owned by a trust of
     which Mr. So is the sole beneficiary.

     There are no  arrangements  known to the Company the operation of which may
at a subsequent date result in a change in control of the Company.

                                       19
Item 5. Nature of Trading Market.

     The  Company's  Common  Stock and  warrants  are traded  only in the United
States  over-the-counter  market.  The  Common  Stock is quoted on the  National
Association of Securities  Dealers,  Inc. Automated  Quotation System ("Nasdaq")
National Market under the trading symbol BNSO; the warrants are quoted under the
trading symbol BNSOW on Nasdaq.

     The table set forth below presents the range, on a quarterly basis, of high
and low  closing  sales  prices  per share of Common  Stock and per  warrant  as
reported  by Nasdaq for the last two fiscal  years and for the first  quarter of
the fiscal year ending March 31, 2000. The quotations  represent  prices between
dealers and do not include  retail markup,  markdown or commissions  and may not
necessarily represent actual transactions.

Common Stock
Quarter Ended                                                            High              Low
Fiscal 1998
     June 30, 1997                                                              $ 2.25           $1.6875
                  -----------------------------------------------------
     September 30, 1997                                                         $ 6.50(2)        $2.0625(2)
                        -----------------------------------------------
     December 31, 1997                                                          $ 8.375(2)       $5.375(2)
                       ------------------------------------------------
     March 31, 1998                                                             $10.125(2)       $5.875(2)
                   ----------------------------------------------------

     Fiscal 1999
     June 30, 1998                                                              $11.375(2)       $9.0625(2)
                  -----------------------------------------------------
     September 30, 1998                                                         $11.125(2)       $5.125(2)
                        -----------------------------------------------
     December 31, 1998                                                          $  6.125(2)      $3.125(2)
                       ------------------------------------------------
     March 31, 1999                                                             $  7.50(2)       $5.375(2)
                   ----------------------------------------------------

     Fiscal 2000
     June 30, 1999                                                              $7.938(2)        $5.75(2)
                  -----------------------------------------------------

                                       20
Public Warrants(1)

         Quarter Ended                                                            High              Low
Fiscal 1998
     June 30, 1997                                                              $0.40625         $0.3125
                  -----------------------------------------------------
     September 30, 1997                                                         $1.50(2)         $0.40625(2)
                        -----------------------------------------------
     December 31, 1997                                                          $2.375(2)        $0.78125(2)
                      -------------------------------------------------
     March 31, 1998                                                             $2.5625(2)       $1.125(2)
                    ---------------------------------------------------

     Fiscal 1999
     June 30, 1998                                                              $3.375(2)        $2.125(2)
                  -----------------------------------------------------
     September 30, 1998                                                         $3.453(2)        $0.063(2)
                        -----------------------------------------------
     December 31, 1998                                                          $0.656(2)        $0.156(2)
                      -------------------------------------------------
     March 31, 1999                                                             $0.875(2)        $0.313(2)
                    ---------------------------------------------------

     Fiscal 2000
     June 30, 1999                                                              $0.75(2)         $0.188(2)
                  -----------------------------------------------------
----------------------
     (1)  The Public  Warrants were issued in December 1994 pursuant to a public
          offering of Units each consisting of one share of Common Stock and two
          Public Warrants.
     (2)  Reflects high and low closing prices as reported by Nasdaq.

     The 3,119,159  shares of Common Stock  outstanding as of July 14, 1999 were
held by approximately 296 holders of record worldwide,  including 292 holders of
record in the United States. Management believes that holders of record hold for
approximately 676 beneficial holders.

Transfer and Warrant Agent

     The transfer agent and registrar for the Common Stock and the Warrant Agent
for the warrants is U.S. Stock Transfer  Corporation,  1745 Gardena Avenue #200,
Glendale, California 91204.

Item 6. Exchange Controls and Other Limitations Affecting Security Holders.

     There are no exchange control  restrictions on payments of dividends on the
Company's Common Stock or on the conduct of the Company's  operations  either in
Hong Kong, where the Company's  principal  executive offices are located, or the
British Virgin Islands,  where the Company is incorporated.  Other jurisdictions
in which the Company  conducts  operations may have various  exchange  controls.
Taxation and  repatriation of profits  regarding the Company's China  operations
are regulated by Chinese laws and regulations.  To date, these controls have not
had and are not expected to have a material  impact on the  Company's  financial
results.  There are no material  British Virgin Islands laws that impose foreign
exchange  controls  on the  Company  or that  affect the  payment of  dividends,
interest or other  payments to holders of the Company's  securities  who are not
residents of the British  Virgin  Islands.  British  Virgin  Islands law and the
Company's  Memorandum and Articles of  Association  impose no limitations on the
right of nonresident or foreign owners to hold or vote the Company's securities.

                                       21
Item 7. Taxation.

Taxation

     Under current British Virgin Islands law, the Company is not subject to tax
on its income. Most of the Company's  subsidiaries' profits accrue in Hong Kong,
where the corporate tax rate is currently  16%.  There is no tax payable in Hong
Kong on offshore profit or on dividends paid to Bonso Electronics Limited by its
subsidiaries  or by Bonso  Electronics  Limited to the Company.  Therefore,  the
overall  effective tax rate of the Company may be lower than that of most United
States corporations; however, such could be materially and adversely affected by
changes in the tax laws of the British Virgin Islands, Hong Kong or China.

     No reciprocal tax treaty  regarding  withholding  exists between the United
States and the British Virgin Islands. Under current British Virgin Islands law,
dividends,  interest or  royalties  paid by the Company to  individuals  are not
subject to tax as long as the recipient is not a resident of the British  Virgin
Islands. If the Company were to pay a dividend,  the Company would not be liable
to withhold any tax, but  shareholders  would receive gross  dividends,  if any,
irrespective of their residential or national status.

     Dividends,   if  any,  paid  to  any  United  States  resident  or  citizen
shareholder would be treated as dividend income for United States federal income
tax   purposes.   Such   dividends   would   not  be   eligible   for   the  70%
dividends-received  deduction allowed to United States corporations on dividends
from a domestic  corporation  under  Section 243 of the United  States  Internal
Revenue Code of 1986 (the "Internal  Revenue Code").  Various  Internal  Revenue
Code  provisions  impose  special taxes in certain  circumstances  on non-United
States  corporations  and their  shareholders.  Shareholders  of the Company are
urged to consult their tax advisors with regard to such  possibilities and their
own tax situation.

     In addition to United States federal income  taxation,  shareholders may be
subject to state and local taxes upon their receipt of dividends.

Dividend Policy

     The Company has never paid any  dividends  on its Common Stock and does not
anticipate  paying any  dividends in the future.  The Board of Directors has not
adopted a policy with respect to the payment of dividends.  The  declaration  of
cash  dividends may be  considered  by the Board of Directors  from time to time
based on the Company's results of operations. The Company's dividend policy will
be dependent  on its net income,  financial  position  and capital  requirements
along with economic and market conditions, industry standards and other factors.
In addition, dividend distribution and repatriation of profits or funds from the
Company's operations in China are regulated by Chinese laws and regulations.  No
profits are  generated  from China  because  the  Company's  Chinese  operations
involve only the manufacture and assembly of its products which are then shipped
to Hong Kong for sale and distribution. No assurance can be given, however, that
such laws will not be interpreted  differently in the future,  in which case the
Company's ability to pay dividends could be adversely affected.  In light of the
above,  no assurance can be given as to the amount or timing of future  dividend
payments,  if  any.  See  Item 6 -  "Exchange  Controls  and  Other  Limitations
Affecting Security Holders."

                                       22
Item 8. Selected Financial Data.

     The selected  consolidated  financial  data set forth below as of March 31,
1998 and 1999 and for each of the three  fiscal  years in the period ended March
31, 1999 are derived  from the audited  Consolidated  Financial  Statements  and
notes  thereto,  which  are  prepared  in  accordance  with  generally  accepted
accounting  principles in the United States of America in United States dollars,
and which appear  elsewhere  in this Annual  Report.  The selected  consolidated
financial  data set forth below as of March 31 1995,  1996 and 1997 and for each
of the two fiscal  years in the period  ended March 31,  1996 have been  derived
from the Company's audited consolidated financial statements which do not appear
in this Annual Report. The selected consolidated financial data are qualified in
their  entirety by reference  to, and should be read in  conjunction  with,  the
Consolidated  Financial  Statements and related notes and Item 9 - "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included elsewhere in this Annual Report.
SELECTED CONSOLIDATED FINANCIAL DATA

                                                                       Year ended March 31,
                                                     ----------------------------------------------------------
Income Statement Data                              1995         1996          1997         1998         1999
                                                 (In thousands of United States dollars, except per share data)
Net sales                                          $13,266      $14,248      $16,989      $23,716      $13,046
Cost of sales                                       (8,936)      (9,412)     (12,096)     (17,071)       8,812
                                                    -------      -------      -------     --------     -------
Gross margin                                         4,330        4,836        4,893        6,645        4,234
Selling expenses                                      (265)        (325)        (433)        (420)        (197)
Salaries and related costs                          (1,561)      (1,960)      (1,973)      (1,897)      (1,626)
Research and development expenses                     (108)        (173)        (122)        (159)        (566)
Administration and general expenses                     98       (1,234)      (1,609)      (1,815)      (1,601)
Provision for permanent diminution in value
  of investment in a joint venture company              --         (153)          --           --           --
Net gain on liquidation of a joint venture
  company                                               --           --          160           --           --
                                                  --------     --------          ---     --------     --------
Income from operations                               2,494          991          916        2,354          244
Interest income                                         75          127           64           73           63
Interest expenses                                     (560)        (607)        (532)        (503)        (445)
Less: Interest capitalized                              --           58           61           46           25
                                                 ---------       ------       ------        -----           --
                                                      (560)        (549)        (471)        (457)        (420)
                                                                       -
Foreign exchange (losses)/gains                       (146)        (124)        (136)          35           38
Other income                                            --           76          102          243           53
                                                 ---------        -----        -----        -----       ------
Income/(loss) before income taxes                    1,863          521          475        2,248          (22)
Income tax (expense)/benefit                           (67)          96           72           27           36
                                                 ----------       -----         ----        -----       ------
Income before minority interests                     1,796          617          547        2,275           14
Minority interests                                      47          (10)          --           --           --
                                                 ---------        ------      ------      -------      -------
Net income                                          $1,843      $   607      $   547       $2,275      $    14
                                                 ---------       ------       ------       ------      -------
Earnings per share   - Basic                       $ 0.95       $ 0.21       $ 0.19        $ 0.80      $  0.45
                     - Diluted                     $ 0.95       $ 0.21       $ 0.19        $ 0.73      $  0.37

                                       23
As of March 31,
                                                  -------------------------------------------------------------
Balance Sheet Data                                   1995          1996         1997        1998        1999
                                                     ----          ----         ----        ----        ----
Working capital                                    $ 4,719     $  3,801     $  1,663     $  3,184    $  3,316
Total assets                                        18,278       20,700       20,516       20,647      18,660
Long-term debt and capital lease obligations,
  net of current maturities                             68          744          787          243          42
Deferred income taxes(liabilities)/assets             (103)         (49)          16           74         112
Shareholders' equity                                10,764       11,433       12,142        14,479     14,626
Item 9. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     This section  contains  forward-looking  statements  that involve risks and
uncertainties.  The Company's actual results could differ  materially from those
anticipated in these forward-looking  statements as a result of certain factors,
including those set forth under Item 1 - "Description of Business--Special  Risk
Factors." The following  discussion  and analysis  should be read in conjunction
with  Item  8  -  "Selected  Financial  Data"  and  the  Consolidated  Financial
Statements and notes thereto appearing elsewhere in this Annual Report.

Overview

     The Company  derives its revenues  principally  from the sale of electronic
scales and electronic  consumer and health care products  manufactured  by it in
China.  For the fiscal year ended March 31,  1998,  the Company had net sales of
$23,715,576  and net income of  $2,274,645.  However,  in the fiscal  year ended
March 31, 1999, net sales decreased to $13,046,265  and net income  decreased to
$13,754.

     The  Company was  operating  at full  capacity  in its prior  manufacturing
facility and, in January 1997,  it moved its  manufacturing  operations to a new
facility which has approximately tripled the Company's  manufacturing  capacity.
Management  believes  that the Company  will be able to  increase  sales to take
advantage  of its  increased  manufacturing  capacity  and  improve  margins and
financial  performance.  Increased revenue and net income in future periods will
depend on the Company's ability to (i) strengthen its customer base by enhancing
and diversifying its products; (ii) increase the number of its customers;  (iii)
expand into additional markets;  (iv) maintain or increase sales of its products
to existing  customers;  (v)  increase  production;  and (vi) control all of its
costs.  Although labor costs are increasing in China,  the Company's labor costs
continue to  represent a relatively  small  percentage  of its total  production
costs.  Management  believes that  increased  labor costs in China will not have
significant  effect on its total production costs or results of operations,  and
that the Company will be able to continue to increase its  production at its new
facility  without  substantially  increasing  its  non-production  salaries  and
related  costs.  In  addition,  the  Company  has  not  experienced  significant
difficulties  in obtaining raw materials for its products,  and management  does
not anticipate any such difficulties in the foreseeable future.

     As of the date of filing this  Annual  Report on Form 20-F,  the  Company's
year to date revenues have  declined when compared to the  comparable  period in
the prior year.  Management  believes that the decline in the Company's revenues
from 1998 to 1999 is attributable to a general decline in the worldwide  economy
and reduced orders from two of the Company's  major  customers,  as well as from
various smaller  customers.  One of these major customers has reduced its orders

                                       24
significantly  and  management  does not  believe  that it is  likely  that this
customer's  orders will  increase in the future.  Management  believes  that the
other major customer's order reduction is temporary and expects that orders from
that customer will  increase in the third and fourth fiscal  quarters.  In 1998,
management  initiated a cost savings  program in order to reduce the effect upon
the  Company's  net income of the reduced  sales  volume.  The cost saving steps
included a temporary  reduction in managements'  salaries which were restored to
previous  levels as of April 1, 1999.  Management is optimistic that the Company
will be able to not only  replace  sales lost during the last fiscal year but to
increase  sales  volume  during the next  fiscal  year as a result of  increased
marketing  activities,  diversification  of the Company's  customer base and new
product  development.  Readers are cautioned that there can be no assurance that
management will be successful in achieving these objectives.

Results of Operations

     The following  table sets forth selected income data as a percentage of net
sales for the periods indicated.
Year ended March 31,
                                                            -------------------------------
         Income Statement Data                              1997          1998         1999
                                                            ----          ----         ----
Net sales                                         100.0%         100.0%       100.0%
         Cost of sales                                     (71.2)         (72.0)       (67.5)
                                                         --------       --------     --------
         Gross margin                                       28.8           28.0         32.5
         Selling expenses                                   (2.5)          (1.8)        (1.5)
         Salaries and related costs                        (11.6)          (8.0)       (12.5)
         Research and development expenses                  (0.7)          (0.7)        (4.3)
         Administration and general expenses                (9.5)          (7.6)       (12.3)
         Net gain on liquidation of a joint venture company  0.9           --            --
                                                           -----         -----          -----
         Income from operations                              5.4            9.9          1.9
         Interest income                                     0.4            0.3          0.4
         Interest expense                                   (3.1)          (2.1)        (3.4)
                                                           -----          -----        -----
         Less: Interest capitalized                          0.3            0.2          0.2
                                                           -----          -----        -----
                                                            (2.8)          (1.9)        (3.2)
         Foreign exchange (losses)/gains                    (0.8)             0.2          0.3
         Other income                                        0.6            1.0          0.4
                                                             ---            ---          ---
         Income before income taxes                          2.8            9.5       (0.2)
         Income tax benefit                                  0.4            0.1          0.3
         Net income                                          3.2%           9.6%         0.1%
                                                             ====           ====         ====
Fiscal year ended March 31, 1999 compared to fiscal year ended March 31, 1998

     Net Sales.  The Company's sales  decreased  45.0% from  $23,715,576 for the
fiscal year ended March 31, 1998, to $13,046,265 for the fiscal year ended March
31, 1999, primarily as a result of decreased orders from two major customers and
from various smaller customers of the Company.

                                       25
Gross Margin.  Gross margin  increased from 28.0% to 32.5% primarily due to
the fact that the Company was able to utilize existing inventory by modifying it
to fill orders and the fact that the Company manufactured over 80% of the strain
gauges  which  it  used  in its  products.  Implementation  of a  "just-in-time"
inventory system,  which resulted in a reduction in inventory,  also contributed
to this increase.

     Selling Expenses. Selling expenses decreased by 53.1% from $419,755 for the
fiscal year ended March 31, 1998 to $196,974 for the fiscal year ended March 31,
1999. This decrease was attributable primarily to the decrease in sales.

     Salaries and Related Costs.  Salaries and related costs  decreased by 14.3%
from  $1,897,412  for the fiscal year ended March 31, 1998 to $1,625,731 for the
fiscal  year ended  March 31,  1999.  This  decrease  was  primarily  due to the
Company's  efforts to control the number of employees in light of the  reduction
in  orders  from  two  major  customers  as well  as a  temporary  reduction  in
management's salaries.

     Research and  Development.  Research  and  development  expenses  increased
256.7% from $158,706 during the fiscal year ended March 31, 1998 to $566,030 for
the fiscal year ended March 31,  1999,  primarily  as a result of the  Company's
increased emphasis on developing new products to diversify its customer base and
particularly  the  expenditure  of  $392,454  on  development  of the  Company's
proposed cordless telephone.

     Administration  and General Expenses.  Administration  and general expenses
decreased by 11.8% from  $1,814,535 for the fiscal year ended March 31, 1998, to
$1,601,186  for the  fiscal  year  ended  March  31,  1999.  This  decrease  was
attributable  primarily to various cost saving programs such as negotiating with
the owner of the Universal  Industrial Centre property for a reduction of rental
expenses.  The Company subsequently  purchased its office space in an attempt to
control this expense in the long run.

     Income from  Operations.  Income from  operations  decreased  by 89.6% from
$2,354,079  for the fiscal year ended March 31, 1998 to $244,171  for the fiscal
year  ended  March  31,  1999,  primarily  as a result  of  reduced  sales and a
resulting increase in research and development efforts.

     Other Income.  Other income decreased by 78.3% from $242,669 for the fiscal
year ended March 31,  1998 to $52,662 for the fiscal year ended March 31,  1999,
primarily as a result of reduced orders for scrap and increased efficiency which
resulted in a reduction of scrap for resale.

     Foreign  Exchange  Losses/Gains.  Foreign exchange rates produced a gain of
$35,187  for the fiscal  year ended March 31, 1998 and a gain of $37,882 for the
fiscal year ended March 31, 1999. This difference was primarily  attributable to
the difference between the pegged exchange rate and the actual transaction rate.

     Interest Expenses. Interest expenses decreased by 8.1% from $457,838 in the
fiscal  year ended March 31, 1998 to $420,536 in the fiscal year ended March 31,
1999, as a result of reduced bank borrowings.

     Income Taxes.  The Company received an income tax credit of $27,117 for the
fiscal year ended March 31, 1998 and $36,087 for the fiscal year ended March 31,
1999.  The  increase in tax credit is  basically  due to approved  tax losses of
certain of the Company's subsidiaries during the year.

     Net Income.  Net income  decreased by 99.4% from  $2,274,645 for the fiscal
year ended March 31,  1998 to $13,754 for the fiscal year ended March 31,  1999,
primarily as a result of  decreased  turnover  and the other  factors  described
above.

                                       26
Fiscal year ended March 31, 1998 compared to fiscal year ended March 31, 1997

     Net Sales.  The Company's sales  increased  39.6% from  $16,989,019 for the
fiscal year ended March 31, 1997, to $23,715,576 for the fiscal year ended March
31,  1998,  primarily as a result of increased  orders  received  from two major
customers.  Increased shipments to the Company's two largest customers accounted
for 32.6% of the net  increase  in sales.  The  addition  of new  products  also
contributed  to the increase in net sales.  A new model built-in scale and glass
body scale accounted for approximately 2.4% of the net increase, and the balance
of 4.6% is the result of increased orders from various existing customers.

     Gross Margin.  Gross margin  decreased from 28.8% to 28.0% primarily due to
increased production costs and decreased selling prices for certain products.

     Selling Expenses.  Selling expenses decreased by 3.0% from $432,518 for the
fiscal year ended March 31, 1997 to $419,755 for the fiscal year ended March 31,
1998.  This decrease was  attributable  primarily to better control over freight
costs by shipping out larger lots of goods.

     Salaries and Related  Costs.  Salaries and related costs  decreased by 3.9%
from  $1,973,021  for the fiscal year ended March 31, 1997 to $1,897,412 for the
fiscal  year ended  March 31,  1998.  This  decrease  was  primarily  due to the
Company's efforts to control the number of employees.

     Research and Development. Research and development expenses increased 29.8%
from  $122,263  during the fiscal year ended March 31, 1997 to $158,706  for the
fiscal year ended March 31,  1998,  primarily as a result of the increase in new
product development,  such as a series of low profile body scales, a generic LCD
scale and a new pocket scale.

     Administration  and General Expenses.  Administration  and general expenses
increased by 12.8% from  $1,609,217 for the fiscal year ended March 31, 1997, to
$1,814,535  for the  fiscal  year  ended  March  31,  1998.  This  increase  was
attributable  primarily  to a write-off of deposits on property in the amount of
$78,436  and an  increase  in  depreciation  expense of  $134,401 as a result of
placing additional depreciable assets into service.

     Income from  Operations.  Income from  operations  increased by 157.1% from
$915,569 for the fiscal year ended March 31, 1997 to  $2,354,079  for the fiscal
year ended March 31, 1998, primarily as a result of the factors described above.

     Other Income. Other income increased by 138.3% from $101,843 for the fiscal
year ended March 31, 1997 to $242,669  for the fiscal year ended March 31, 1998,
primarily  as a result of  increased  assembly  subcontracting  work for a third
party.

     Foreign  Exchange  Losses/Gains.  Foreign exchange rates produced a loss of
$135,780  for the fiscal year ended March 31, 1997 and a gain of $35,187 for the
fiscal year ended March 31, 1998. This difference was primarily  attributable to
the difference between the pegged exchange rate and actual transaction rate.

     Interest Expenses. Interest expenses decreased by 2.7% from $470,655 in the
fiscal  year ended March 31, 1997 to $457,838 in the fiscal year ended March 31,
1998, as a result of reduced bank borrowings.

     Income Taxes.  The Company received an income tax credit of $71,368 for the
fiscal year ended March 31, 1997 and $27,117 for the fiscal year ended March 31,
1998. The decrease in tax credit is basically due to the increase in tax expense
of $35,926

     Net Income.  Net income  increased  by 316.2% from  $546,589 for the fiscal
year ended March 31, 1997 to $2,274,645 for the fiscal year ended March 31, 1998
primarily as a result of increased  turnover,  better control of  administrative
overhead and other factors described above.

                                       27
Seasonality

     The first  calendar  quarter of each year is  typically  the slowest  sales
period as the  Company's  manufacturing  facilities  in China are closed for two
weeks for Chinese New Year holidays to permit employees to travel to their homes
in China.  Throughout the remainder of the year,  the Company's  products do not
appear to be subject to significant seasonal variation.

     Employee incentive  compensation is conditioned on the employee's return to
work  following  the Chinese  New Year and is paid to  employees  following  the
reopening  of the factory  after the  holidays.  Management  believes  that this
method  has  resulted  in lower  employee  turnover  than might  otherwise  have
occurred.

Liquidity and Capital Resources

     The  Company has  traditionally  relied on  borrowings  to meet its working
capital  requirements.  These  borrowings  have been  supplemented by internally
generated  funds and trade  credits from  suppliers.  As of March 31, 1999,  the
Company  had  in  place  general   banking   facilities   with  three  financial
institutions  aggregating  $6,217,949.  Such  facilities  include the ability to
obtain overdrafts, letters of credit, notes payable and fixed loans. As of March
31,  1999,  the  Company  had  utilized  $2,059,357  under its  general  banking
facilities.  Interest on this  indebtedness  fluctuates  with the prime rate and
HIBOR as set by the Hong Kong Bankers  Association.  The bank credit  facilities
are  collateralized  by certain bank  deposits of the Company,  by the Company's
real property  located at Savanna Garden in Hong Kong and by a bank guarantee in
the amount of $150,000. The Company's bank credit facilities are due for renewal
annually. Management of the Company anticipates that the banking facilities will
be renewed on  substantially  the same terms.  Excluding the current  portion of
long term debt and capital lease  obligations,  the amounts of total  short-term
bank  borrowings  outstanding as of March 31, 1999 and 1998 were  $1,944,756 and
$3,199,737,  respectively.  During the fiscal  year ended  March 31,  1999,  the
Company  paid a  total  of  $445,644  in  interest  on  indebtedness  (including
capitalized interest).

     Management is negotiating an equipment lease financing  arrangement for the
equipment  which  will be needed to  produce  the  Company's  proposed  cordless
telephone.  Management anticipates that the Company will finance 85% of the cost
of the equipment,  which will require an initial payment of  approximately  HK$1
million. The terms of the lease financing  arrangement are expected to include a
3-year term with annual interest equal to HIBOR plus 3.375% and monthly payments
of principal and interest.

     Operating  activities  provided  $2,644,612 of net cash for the fiscal year
ended March 31,  1999  compared  to  $3,262,259  of net cash for the fiscal year
ended March 31, 1998.  The decrease from the fiscal year ended March 31, 1998 to
the fiscal year ended March 31, 1999, was primarily due to the decrease in sales
and in net income. Investing activities used $926,312 of net cash for the fiscal
year ended  March 31, 1999 and used  $1,604,013  of net cash for the fiscal year
ended March 31, 1998. The decrease in net cash used in investing activities from
the fiscal year ended March 31, 1998 to the fiscal year ended March 31, 1999 was
primarily due to a decrease in the acquisition of property, plant and equipment.
Financing activities used $1,892,619 of net cash for the fiscal year ended March
31, 1999 and used  $1,294,420  for the fiscal year ended  March 31,  1998.  This
increase was primarily due to the repayment of banking facilities.

     As of March 31, 1999, the Company had $271,447 in cash and cash equivalents
as opposed to $448,454 as of March 31, 1998.  There are no other material unused
sources of liquid  assets.  The  Company  believes  that  there are no  material
restrictions  (including  foreign  exchange  controls)  on  the  ability  of the
Company's  subsidiaries  to  transfer  funds to the  Company in the form of cash
dividends, loans, advances or product/material purchases.

                                       28
The Company's current ratio (current assets divided by current liabilities)
increased from 1.54 as of March 31, 1998 to 1.83 as of March 31, 1999. Its quick
ratio (cash and cash  equivalents,  restricted  cash  deposits  and  receivables
divided by current liabilities) increased from 0.53 as of March 31, 1998 to 0.65
as of March 31, 1999.

     As of March 31, 1999, the Company had  contingent  liabilities to banks for
outstanding letters of credit of $114,601 as opposed to $502,270 as of March 31,
1998.

Impact of Inflation

     Management  believes that  inflation  has not had a material  effect on its
business  between 1998 and 1999.  The Company has generally  been able to modify
and improve its product  designs so that it could either  increase the prices of
its products or lower the production  cost in order to keep pace with inflation.
All of the  Company's  manufacturing  is  being  done in  China,  and  China  is
experiencing  deflation.  If such  trend  continues,  the  Company  could  incur
decreased labor costs with regard to its Chines  operations,  resulting in lower
production  costs.  Although the costs to the Company of components  used in the
manufacture of its products have been  relatively  stable,  management  believes
that any possible significant increase in material costs would affect the entire
electronics  industry and thus would not have a negative  material impact on the
Company's competitive position.

Year 2000

     The  Company,  like many owners of computer  software,  will be required to
modify  portions of its software so that it will  function  properly in the year
2000.  The  Company's  information  technology  systems are  maintained  under a
maintenance  arrangement  with the primary vendor of its information  technology
software.  The vendor has advised  that it does not  anticipate  any problems in
making the  necessary  modifications  to the Company's  software.  The Company's
inventory and purchasing  software,  as well as its accounting system, have been
updated for Year 2000  compliance,  including  upgrading of hardware.  The total
costs in relation to these  upgrades are  immaterial to the Company.  Management
anticipates that all necessary  changes to its software will be completed before
December 31,  1999,  and that the Company will not  experience  any  significant
impact with respect to Year 2000 compliance  with the Company's  non-information
technology systems and equipment.

Taxation

     Under current British Virgin Islands law, the Company is not subject to tax
on its income.  Most of the  Company's  profits  accrue in Hong Kong,  where the
corporate  tax rate is  currently  16%.  There is no tax payable in Hong Kong on
offshore  profit  or on  dividends  paid to  Bonso  Electronics  Limited  by its
subsidiaries  or by Bonso  Electronics  Limited to the Company.  Therefore,  the
overall  effective tax rate of the Company may be lower than that of most United
States corporations; however, such could be materially and adversely affected by
changes in the tax laws applicable to the Company.

Exchange Rates

     The Company  sells most of its  products to  international  customers.  The
Company's principal export markets are North America (mainly the United States),
Europe (mainly  Germany) and Asia.  Other markets are other  European  countries
(such as the United  Kingdom),  Australia  and  Africa.  Sales to  international
customers are made directly from the Company to its customers. The Company sells
all of its  products  in  United  States  dollars  and  pays  for  its  material
components  principally  in United  States and Hong Kong  dollars.  A very small
portion of the components used by the Company are paid for in Japanese yen. Most
factory expenses incurred by the Company are paid in Chinese  renminbi.  Because

                                       29
the Hong Kong dollar is pegged to the United  States  dollar,  the only material
foreign  exchange risk to the Company arises from potential  fluctuations in the
Chinese  renminbi;  however,  the Chinese  renminbi  was very stable in the past
fiscal year and it is unlikely that there will be material  fluctuations  in the
coming year. The Company does not currently engage in hedging transactions,  and
does not intend to do so in the future.

Recent Accounting Pronouncements

     The Financial Accounting Standards Board has issued certain  pronouncements
which are  effective  as  indicated  below  with  respect  to the  fiscal  years
presented in the consolidated financial statements.

     SFAS No. 130,  "Reporting  Comprehensive  Income," is effective  for fiscal
years  beginning  after  December  15,  1997.   Reclassification   of  financial
statements for earlier periods  provided for  comparative  purposes is required.
This  statement  establishes   guidelines  for  the  reporting  and  display  of
comprehensive income and its components (revenues,  expenses,  gains and losses)
in a full set of  general-purpose  financial  statements.  It requires  that all
items  that  are  required  to  be  recognized  under  accounting  standards  as
components of comprehensive  income be reported in a financial statement that is
displayed with the same  prominence as other financial  statements;  it does not
address  issues  of  recognition  of   measurement.   The  primary   element  of
comprehensive   income  applicable  to  the  Company  is  the  foreign  currency
cumulative  translation  adjustment.  The  adoption of SFAS No. 130 will have no
impact on the Company's  consolidated results of operations,  financial position
or cash flows.

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information,"  is effective for fiscal years  beginning after December 15, 1997.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative purposes is required.  This statement establishes guidelines for the
way that public business enterprises report information about operating segments
in financial statements.  This statement also establishes guidelines for related
disclosures  about products and services,  geographic areas and major customers.
The  Company  has  evaluated  the  disclosure  requirements  of SFAS No. 131 and
believes the adoption will not have a material  impact on its future  disclosure
requirements.

     SFAS  No.  132,   "Employers'   Disclosures   about   Pensions   and  Other
Post-retirement  Benefits,"  is  effective  for  fiscal  years  beginning  after
December 15, 1997.  Restatement of disclosures for earlier periods  provided for
comparative purposes is required.  This statement revises employers' disclosures
about pension and other  post-retirement  benefit plans.  It does not change the
measurement  or  recognition  of those plans.  It  standardizes  the  disclosure
requirements  for  pensions  and other  post-retirement  benefits  to the extent
practicable,   requires  additional   information  on  changes  in  the  benefit
obligations  and fair  values  of plan  assets  that will  facilitate  financial
analysis,  and eliminates  certain  disclosures  that are no longer useful.  The
statement  suggests  combined  formats  for  presentation  of pension  and other
post-retirement  benefit  disclosures.  The Company has evaluated the disclosure
requirements  of SFAS No. 132 and believes the adoption will not have a material
impact on its future disclosure requirements.

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities,"  is  effective  for fiscal  years  beginning  after June 15,  1999.
Restatement of disclosures for earlier periods provided for comparative purposes
is required.  This statement establishes  accounting and reporting standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  and for hedging  activities.  The statement  requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial position and measure those instruments at fair value. The
Company has evaluated the disclosure  requirements  of SFAS No. 133 and believes
that  implementation  of the new standard  will have no impact on its results of
operations and financial position.

                                       30
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
is effective for fiscal years  beginning after December 15, 1998. This statement
amends  SFAS 65,  "Accounting  for  Certain  Mortgage  Banking  Activities"  and
requires  that after the  securitization  of  mortgage  loans held for sale,  an
entity   engaged  in  mortgage   banking   activities   classify  the  resulting
mortgage-backed  securities or other retained interests based on its ability and
intent to sell or hold these investments. This statement conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage  banking  enterprise  with the  subsequent  accounting for securities
retained  after the  securitization  of other  types of assets by a  nonmortgage
banking  enterprise.  The Company has evaluated the disclosure  requirements  of
SFAS No. 134 and believes that  implementation  of the new standard will have no
impac on its results of operations and financial position.

Item 10. Directors and Officers of Registrant.

     The directors,  executive officers and a key employee of the Company are as
follows:

Name                             Position with the Company
----                             -------------------------

Anthony So               55      President, Chief Executive Officer, Secretary,
                                 Treasurer, Chief Financial Officer, Chairman
                                 of the Board and Director
Kim Wah Chung            41      Director of Engineering and Research and
                                 Development and Director
Kam Sun Luk              54      General Manager and Director
Cathy, Kit Teng Pang     36      Director of Finance and Director
Henry F. Schlueter       48      Assistant Secretary
Woo-Ping Fok             50      Director
George O'Leary           61      Director

Key Employee
Michael Byrne            51      Managing Director

     ANTHONY SO is the founder of the Company.  He has been President,  Chairman
of the Board of Directors  and  Treasurer of the Company since its inception and
has been  Secretary  of the Company  since July 1991.  Mr. So  received  his BSE
degree  in civil  engineering  from  National  Taiwan  University  in 1967 and a
masters degree in business  administration  ("MBA") from the Hong Kong campus of
the University of Hull,  Hull,  England in 1994. Mr. So has been Chairman of the
Hong Kong GO  Association  since 1986, and also served as Chairman of the Alumni
Association of National Taiwan  University for the 1993-1994  academic year. Mr.
So has  served as a trustee of the  Chinese  University  of Hong Kong,  New Asia
College since 1994.

     KIM WAH CHUNG has been a director of the Company since  September 21, 1994.
Mr. Chung has been employed by the Company  since 1981 and  currently  holds the
position of Director of Engineering and Research and  Development.  Mr. Chung is
responsible  for all research  projects and product  development of the Company.
Mr. Chung's entire  engineering  career has been spent with the Company,  and he
has been involved with every major product development made by the Company.  Mr.
Chung was graduated with honors i 1981 from the Chinese  University of Hong Kong
with a Bachelor of Science degree in electronics.

     KAM SUN LUK was  elected  to the  Board  of  Directors  of the  Company  on
September  21,  1994 and has been  employed  by the  Company as  Director of New
Projects and Quality  Control since October 1993. Mr. Luk obtained his bachelors
degree in electrical  engineering  from National Taiwan  University in 1968. Mr.
Luk is also a member of the Institute of Electrical Engineers United Kingdom and
a  Chartered  Engineer  in  Electrical  Engineering.  Mr.  Luk was  employed  by
Semiconductor  Devices Ltd. of Hong Kong in a variety of positions  between 1970
and 1992 when he joined the Company, including serving as Semiconductor Devices'
General Manager and Senior Vice President.

                                       31
CATHY,  KIT TENG PANG has been a director of the Company  since  January 1,
1998.  Ms. Pang was first  employed by the Company as  Financial  Controller  in
December 1996 and was promoted to Director of Finance on April 1, 1998. Ms. Pang
was employed as an auditor in an international  audit firm from 1987 to 1991, at
which  time she  joined a Hong Kong  Listed  company  in the  field of  magnetic
industry  as  Assistant  Financial  Controller.  From 1994  until she joined the
Company in 1996, she was employed as Deput Chief  Accountant in a management and
property  development company in Hong Kong and China. Ms. Pang has a Bachelor of
Business Administration degree from York University in Toronto, Canada. She is a
member of the American Institute of Certified Public Accountants and of the Hong
Kong Society of Accountants.

     HENRY F.  SCHLUETER has served as Assistant  Secretary of the Company since
October 6, 1988.  Since 1992,  Mr.  Schlueter has been the managing  director of
Schlueter & Associates, P.C., a law firm, practicing in the areas of securities,
mergers and acquisitions, finance and corporate law. From 1989 to 1991, prior to
establishing  Schlueter & Associates,  P.C., Mr.  Schlueter was a partner in the
Denver,  Colorado office of Kutak Rock (formerly  Kutak,  Rock & Campbell),  and
from 1984 to 1989,  he was a partner in the  Denver  office of Nelson & Harding.
Mr.  Schlueter  is a  member  of the  American  Institute  of  Certified  Public
Accountants,  the  Colorado  Society  of CPA's,  the  Colorado  and  Denver  Bar
Associations  and the Wyoming State Bar. Mr.  Schlueter  received his law degree
from the University of Wyoming College of Law in 1978.

     WOO-PING  FOK was  elected  to the Board of  Directors  of the  Company  on
September 21, 1994.  Mr. Fok and his firm,  Norman M.K. Yeung & Co., have served
as Hong Kong  counsel to the  Company  since 1993.  Mr. Fok was  admitted to the
Canadian  Bar as a Barrister & Solicitor  in December  1987 and was a partner in
the law firm of Woo & Fok, a Canadian law firm with its head office in Edmonton,
Alberta,  Canada.  In 1991,  Mr. Fok was qualified to practice as a Solicitor of
England  &  Wales,  a  Solicitor  of Hong Kon and a  Barrister  &  Solicitor  of
Australian  Capital  Territory.  Mr.  Fok  practices  law in Hong  Kong and is a
partner with Norman M.K.  Yeung & Co. Mr. Fok's major areas of practice  include
conveyancing  or real property law,  corporations  and business law,  commercial
transactions  and  international  trade with a special  emphasis  in China trade
matters.

     GEORGE O'LEARY has been a director of the Company since January 1997.  From
November 1994 to the present time, Mr. O'Leary has been President of Pacific Rim
Products,  Newport Beach,  California,  a trading company that provides offshore
sourcing alternatives to U.S. based electronics companies. For eight years prior
to 1994,  Mr.  O'Leary  was  President,  CEO and a  director  of  Micro  General
Corporation, Santa Ana, California, a manufacturer and distributor of mechanical
and  electronic  scale  products.  Fo eight years prior to that, Mr. O'Leary was
Vice  President  and  General  Manager  of Lanier  Business  Products,  Atlanta,
Georgia,  a manufacturer and distributor of office  products.  Mr. O'Leary has a
Bachelor  of  Science  degree  in  Electrical   Engineering  from   Northeastern
University, Boston, Massachusetts.

     MICHAEL  BYRNE has  served  as  Managing  Director  for the  Company  since
October,  1998.  Mr.  Byrne has been  employed by various  manufacturing  firms,
including  International  Harvester,  Prince Engineering,  Combustion Engneering
Canada and Aerospace  Technologies of Australia,  since 1964. From 1993 to 1995,
Mr.  Byrne was  employed  as a senior  manufacturing  executive  by  Henderson's
Automotive  Group,  a supplier of metal and foam seating  components to all four
automotive assemblers. In that position he managed three factories in Melbourne,
Adelaide  and Geelong  and led  Henderson's  very  successful  productivity  and
quality improvement  programs.  In July 1995, Mr. Byrne established  Henderson's
first venture into  automotive trim products,  specifically  leather seat covers
for Mitsubishi's export Diamante program.  The new Henderson's trim plant became
a model for demonstrating  the effectiveness of focused customer service,  total
quality management and innovative human resource strategies.  Mr. Byrne received
his Masters of Business Administration degree from the University of Adelaide in
December  1998 and  also  holds a  Graduate  Management  Qualification  from the
Australian Graduate School of Management.

                                       32
At the present  time no family  relationship  exists among any of the named
directors and  executive  officers;  however,  Mr. Cham Some So, who served as a
director  until his  resignation on April 30, 1998, is the father of Anthony So.
No arrangement or understanding  exists between any such director or officer and
any other  persons  pursuant  to which any  director  or  executive  officer was
elected as a director or executive officer of the Company.  The directors of the
Company are elected  annually  and serve until their  successors  take office or
until their death,  resignation or removal.  The executive officers serve at the
pleasure of the Board of Directors of the Company.

Item 11.  Compensation of Directors and Officers .

Executive Officers and Directors

     The following table sets forth certain  information as to the  compensation
paid to certain of the  Company's  executive  officers and directors and for all
directors and executive officers as a group for the year ended March 31, 1999:
Cash                   Non-Cash
Name of Individual         Capacities in Which Served                            Compensation            Compensation
------------------         --------------------------                            ------------            ------------
Anthony So                 President, Chief Executive Officer,
                           Secretary, Treasurer, Chief Financial
                           Officer, Chairman of the Board and
                           Director                                            $ 346,153(1)           $  95,385(1)
Kim Wah Chung              Director of Engineering and Research
                           and Development and Director                        $  59,615(2)           $  53,974(2)
Kam Sun Luk                Director of New Projects and Quality
                           Control and Director                                $  86,539(3)           $   4,615(3)
Cathy Pang                 Director of Finance and Director                    $  85,817(4)           $   4,577(4)
Henry F. Schlueter         Assistant Secretary                                 $     --               $     --
Woo Ping Fok               Director                                            $     --               $     --
George O'Leary             Director                                            $ 115,342(5)           $     --
Cham Some So               Director                                            $  13,000(6)           $     --
All directors and
officers as a group (8 persons)(7)                                             $ 706,466(7)           $ 158,551
----------------------
     (1)  Cash  compensation  consists  of  emoluments  of  $346,153.   Non-cash
          compensation  consists  of a  $15,385  contribution  to the  Company's
          Provident Fund Plan and the value of housing provided to Mr. So valued
          at $80,000 during fiscal 1999. See "Provident  Fund Plan," below,  and
          Item 13 - "Interest of Management in Certain Transactions."
     (2)  Cash  compensation   consists  of  emoluments  of  $59,615.   Non-cash
          compensation  consists  of a  $10,461  contribution  to the  Company's
          Provident Fund Plan, life insurance of $5,051 and a housing  allowance
          of $38,462.  See "Provident Fund Plan," below, and Item 13 - "Interest
          of Management in Certain Transactions."
     (3)  Cash  compensation   consists  of  emoluments  of  $86,539.   Non-cash
          compensation  consists  of a  $4,615  contribution  to  the  Company's
          Provident Fund Plan. See "Provident Fund Plan," below.
     (4)  Cash  compensation   consists  of  emoluments  of  $85,817.   Non-cash
          compensation  consists  of a  $4,577  contribution  to  the  Company's
          Provident Fund Plan. See "Provident Fund Plan," below.
     (5)  Consists of payments made pursuant to a sales  commission  arrangement
          with the  Company.  See Item 13 - "Interest of  Management  in Certain
          Transactions."

                                       33
(6)  Consists  of  $13,000  paid as a  director's  fee.  Mr.  Cham  Some So
          resigned from the Board of Directors as of April 30, 1998.
     (7)  Includes  Mr. Cham Some So who  resigned as a director as of April 30,
          1998.

     The  Company  did not set aside or accrue any  amounts to provide  pension,
retirement  or similar  benefits for  directors and officers for the fiscal year
ended March 31, 1999, other than  contributions to the Company's  Provident Fund
Plan which aggregated $35,038 for officers and directors in 1999.

Directors

     Except for Cham Some So, who was paid a  director's  fee of $13,000  during
the fiscal year ended March 31, 1999,  directors  do not receive any  additional
monetary compensation for serving as directors of the Company.  However, outside
directors  receive stock options  pursuant to the 1996  Non-Employee  Directors'
Stock  Option Plan and have been  granted  other  options.  (See  "Stock  Option
Plans--The 1996 Non-Employee Directors' Stock Option Plan," below, and Item 12 -
"Options to Purchase Securities from Registrant or Subsidiaries.") All directors
are reimbursed for all reasonable  expenses incurred in connection with services
as a director.

Provident Fund Plan

     On January 1, 1988, the Company  started a provident fund plan with a major
international  assurance  company  to  provide  life  insurance  and  retirement
benefits  to  its  employees.  All  permanent  full-time  employees,   excluding
employees of the China subsidiary, are eligible to join the plan.

     Each  participant is required to contribute 5% of his salary,  which amount
is deducted  monthly from the  participant's  salary.  The  contribution  by the
Company is either 5%,  7.5% or 10% of the  participant's  salary,  depending  on
whether the length of the participant's service is less than five years, between
five and ten years or more than ten years, respectively.

     At  normal   retirement  age  or  "ill  health"  (defined   essentially  as
disability),  the  participant  is entitled to receive  from the plan a lump sum
equal  to  the  total  of the  participant's  and  the  Company's  balances.  On
resignation prior to normal retirement age, a participant is entitled to receive
from  the  plan  a lump  sum  equal  to his  balance  plus a  percentage  of the
employer's balance determined in accordance with a predetermined scale. Upon the
death of a participant,  the benefit (calculated as at normal retirement age) is
paid to the employer to be held in trust for the participant's beneficiaries and
paid to them as the employer determines.

     The Company's  aggregate  contributions  to the Provident Fund Plan for the
years  ended March 31,  1997,  1998 and 1999  amounted  to $54,924,  $45,227 and
$54,046, respectively.

Stock Option Plans

The 1996 Stock Option Plan

     In August  1996,  the Board of  Directors  of the Company  adopted the 1996
Stock  Option  Plan (the  "Employees'  Plan")  which  provides  for the grant of
options  to  purchase  an  aggregate  of not more  than  400,000  shares  of the
Company's  Common Stock.  The purpose of the Employees'  Plan is to make options
available to management  and employees of the Company in order to encourage them
to secure or increase on reasonable  terms their stock  ownership in the Company
and to encourage them to remain in the employ o the Company.

                                       34
The Employees' Plan will be  administered  by a committee  appointed by the
Board of Directors which  determines the persons to be granted options under the
Employees' Plan, the number of shares subject to each option, the exercise price
of each option and the option period,  subject to the requirement that no option
may be  exercisable  more than 10 years  after the date of grant.  The  exercise
price of an option may be less than fair market value of the  underlying  shares
of Common Stock. No options granted under the Employee Plan will be transferable
by the optionee other than by will or the laws of descent and  distribution  and
each option will be  exercisable,  during the lifetime of the optionee,  only by
such optionee.

     The exercise price of an option granted pursuant to the Employees' Plan may
be paid in  cash,  by the  surrender  of  options,  in  Common  Stock,  in other
property,  including the optionee's  promissory note, or by a combination of the
above.

The 1996 Non-Employee Directors' Stock Option Plan

     In  August  1996,  the Board of  Directors  of the  Company  adopted a 1996
Non-Employee  Directors' Stock Option Plan (the "Non-Employee  Directors' Plan")
which  provides  for the grant of options to purchase an  aggregate  of not more
than  100,000  shares  of  the  Company's  Common  Stock.  The  purpose  of  the
Non-Employee  Directors' Plan is to promote the long-term success of the Company
by  creating  a  long-term  mutuality  of  interests  between  the  non-employee
directors  and  the  stockholders  of the  Company,  to  provide  an  additional
inducement  for such directors to remain with the Company and to provide a means
through  which the Company may attract able persons to serve as directors of the
Company.  The  Non-Employee  Directors' Plan will be administered by a committee
(the "Committee") appointed by the Board of Directors.

     Under the Non-Employee Directors' Plan, on the third business day following
each  Annual  Meeting  of the  stockholders,  each  director  who is not then an
employee of the Company or any of its subsidiaries will automatically be granted
a stock option to purchase 10,000 shares of Common Stock.  The exercise price of
all options granted under the Non-Employee  Directors' Plan will be equal to the
fair  market  value of the  underlying  shares  on the date of  grant,  based on
guidelines set forth in the Non-Employee Directors' Plan. The exercise price may
be paid in  cash,  by the  surrender  of  options,  in  Common  Stock,  in other
property,  including the optionee's  promissory note, or by a combination of the
above. The term of each option granted  pursuant to the Non-Employee  Directors'
Plan will be ten years from the date of grant;  however,  no such  option may be
exercised during the first six months of its term. The term of an option granted
pursuant to the  Non-Employee  Directors'  Plan may be reduced in the event that
the optionee ceases to be a director of the Company.  No option granted pursuant
to the Non-Employee  Directors' Plan will be transferable otherwise than by will
or the laws of descent and distribution.

Item 12. Options to Purchase Securities from Registrant or Subsidiaries.

Public Warrants

     As a result of a public  offering of Units  conducted in December 1994, the
Company issued 2,200,000 warrants to the public. An aggregate of 25,597 of these
warrants  were  exercised  in  October  1998.  Each of the  remaining  2,174,403
warrants  entitles  the holder  thereof to purchase one share of Common Stock at
$7.35 per share.  By their  terms,  the  warrants  expire on December  14, 1999,
unless extended.

                                       35
Representatives' Warrants

     In conjunction  with a public offering of Units conducted in December 1994,
the Company issued  Representatives'  Warrants  entitling the holders thereof to
purchase up to 110,000 Units,  each Unit to consist of one share of Common Stock
and two warrants, at an exercise price of $9.1875 per Unit. The Representatives'
Warrants  are  exercisable  until  December 14,  1999.  Upon any transfer  after
December 15, 1996 to a person other than an officer,  shareholder or director of
the Representatives, the transferred Representatives' Warrants must be exercised
immediately or they will lapse. In addition,  the Company granted certain rights
to the holders of the Representatives' Warrants under the Securities Act.

Options

     The following table sets forth all options to purchase Common Stock granted
by the Company which are outstanding as of the date of this Annual Report.

       Number of              Exercise Price               Expiration
        Options                  per Share                    Date

        20,000                     $2.25                October 16, 2006
        420,000                    $2.00                January 31, 2007
        40,000                     $5.06                September 8, 2007
        220,000                    $6.20                  January 2008
        415,000                    $3.60                  October 2008
        15,000                     $3.70                  October 2008

Item 13. Interest of Management in Certain Transactions.

     Over the years, the Company has provided to and received cash advances from
its officers and directors.  In October 1994,  the Board of Directors  adopted a
policy  resolution  prohibiting  the Company  from making any loan or advance of
money or  property,  or  guaranteeing  the  obligation  of any  directors of the
Company,  and limiting  the  Company's  ability to make such loans,  advances or
guarantees to officers of the Company or its  subsidiaries  unless a majority of
independent,  disinterested  outside directors determine that such loan, advance
or guarantee  may  reasonably be expected to benefit the Company.  Further,  all
future material affiliated transactions, loans and loan guarantees, if any, will
be made on terms that are no less  favorable  to the Company than those that are
generally  available from  unaffiliated  third parties.  The Company has neither
provided nor received any cash  advances to it officers or directors  since this
policy resolution was adopted.

     It is common practice in Hong Kong, the location of the Company's principal
executive offices,  to provide a housing allowance or living  accommodations for
senior  executives  as part of their  compensation.  The  Company  provides  Mr.
Anthony So with living accommodations  consisting of a Company-owned  townhouse,
for which the Company paid a total purchase price of  approximately  $1,337,000.
The Company  valued this  benefit at $80,000  during the fiscal year ended March
31,  1999.  The  Company  also  provides  Mr. Kim Wah  Chung,  its  Director  of
Engineering and Research and  Development and a director of the Company,  with a
housing  allowance  which amounted to $38,462 during the fiscal year ended March
31, 1999.

     Mr.  George  O'Leary,  a director of the Company,  is paid a commission  on
orders placed by customers  which he obtains for the Company.  The amount of the
commission is negotiated on a deal-by-deal  basis,  without a written agreement.
During the fiscal years ended March 31, 1998 and 1999,  Mr.  O'Leary was paid an
aggregate of $354,835 and $115,342, respectively, in commissions.

                                       36
PART II

Item 14. Description of Securities to be Registered.

         Not applicable.

                                       37
PART III

Item 15. Defaults Upon Senior Securities.

     Not applicable.

Item  16.   Changes  in  Securities  and  Changes  in  Security  for  Registered
            Securities.

     On July 22,  1998 the  Company  issued a notice  to  redeem  the  Company's
warrants on September 4, 1998 for $0.05 per warrant.  On September 2, 1998,  the
notice to redeem was rescinded.

                                     PART IV

Item 17. Financial Statements.

     Not applicable.

Item 18. Financial Statements.

     Reference  is made to Item  19(a)  for a list of all  financial  statements
filed as part of this Annual Report on Form 20-F.

Item 19. Financial Statements and Exhibits.

     (a) The following Financial Statements are filed as part of this Annual
Report:

                                                                           Page

  Index to Consolidated Financial Statements                                F-1
  Report of Independent Accountants                                         F-2
  Consolidated Balance Sheets as of March 31, 1998 and 1999                 F-3
  Consolidated Statements of Comprehensive Income for the years             F-4
  ended March 31, 1997, 1998 and 1999
  Consolidated Statements of Changes in Shareholders' Equity for the        F-5
  years ended March 31, 1997, 1998 and 1999
  Consolidated Statements of Cash Flows for the years ended                 F-6
  March 31, 1997, 1998 and 1999
  Notes to Consolidated Financial Statements                     F-7 through 27

     (b) No Exhibits are filed as part of this Annual Report.

                                       37

                                       38
SIGNATURES

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the  registrant  certifies  that it meets all of the  requirements  for
filing on Form 20-F and has duly caused  this Annual  Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                            BONSO ELECTRONICS INTERNATIONAL INC.

Date  August 2, 1999                        /s/ Anthony So
                                            ------------------------------------
                                            Anthony So, President

                                       39
Consolidated Financial Statements

                      Bonso Electronics International Inc.
                  (Incorporated in the British Virgin Islands)
                                and Subsidiaries

                                 March 31, 1999

                             PricewaterhouseCoopers
                             Independent Accountants
Bonso Electronics International Inc. and Subsidiaries
                   Index to Consolidated Financial Statements

Contents                                                                   Pages

Report of Independent Accountants............................................. 2

Consolidated Balance Sheets as of March 31, 1998 and 1999..................... 3

Consolidated Statements of Comprehensive Income
for the years ended 31, 1997, 1998 and 1999................................... 4

Consolidated Statements of Changes in Shareholders'
Equity for the years ended 31,  1997, 1998 and 1999........................... 5

Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1998 and 1999................................................. 6

Notes to Consolidated Financial Statements...............................7 to 27

                                      F-1
Report of Independent Accountants

Board of Directors and Shareholders
Bonso Electronics International Inc. and Subsidiaries

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Bonso
Electronics  International  Inc. and Subsidiaries  (the "Group") as of March 31,
1998 and 1999 and the related consolidated  statements of comprehensive  income,
changes in  shareholders'  equity and cash flows for each of the three  years in
the period ended March 31, 1999. These consolidated financial statements are the
responsibility of the Group's  management.  Our  responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits 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 financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of the Group as of
March 31, 1998 and 1999 and the results of their  operations  and cash flows for
each of the three years in the period ended March 31, 1999, in  conformity  with
generally accepted accounting principles in the United States of America.

PricewaterhouseCoopers

Hong Kong, May 28, 1999

                                      F-2
Bonso Electronics International Inc. and Subsidiaries
                                              Consolidated Balance Sheets
                                         (Expressed in United States Dollars)

                                                                                            March 31
                                                                                 -----------------------------
                                                                                 1998                   1999
                                                                                 ----                   ----
                                                                                 $                      $
Assets

Current assets

 Cash and cash equivalents ......................................                448,454                 271,447
 Restricted cash deposits (Note 7) ..............................                952,267               1,011,688
 Trade receivables, net (Note 2) ................................                964,958                 362,236
 Inventories, net (Note 3) ......................................              5,966,700               4,697,928
 Notes receivable ...............................................                340,518                 690,449
 Deferred income tax assets - current (Note 5(d)) ...............                 35,088                  31,251
 Other receivables, deposits and prepayments ....................                400,924                 243,231
                                                                             -----------             -----------
 Total current assets ...........................................              9,108,909               7,308,230
                                                                             -----------             -----------

Deposits ........................................................                447,735                    --

Deferred income tax assets - non current (Note 5(d)) ............                 38,430                  81,223

Property, plant and equipment

 Leasehold land and buildings ...................................              7,259,414               8,997,073
 Construction-in-progress .......................................                785,364                    --
 Plant and machinery ............................................              3,385,846               3,495,632
 Molds ..........................................................              2,108,967               2,112,608
 Furniture, fixtures and equipment ..............................              2,122,805               2,661,718
 Motor vehicles .................................................                306,946                 306,979
                                                                             -----------             -----------
                                                                              15,969,342              17,574,010
 Less: accumulated depreciation and amortization ................             (4,917,853)             (6,303,179)
                                                                             -----------             -----------
 Net property, plant and equipment ..............................             11,051,489              11,270,831
                                                                             -----------             -----------
 Total assets ...................................................             20,646,563              18,660,284
                                                                             -----------             -----------

(cont'd)
              See notes to these consolidated financial statements
Bonso Electronics International Inc. and Subsidiaries
                                       Consolidated Balance Sheets (continued)
                                         (Expressed in United States Dollars)

                                                                                           March 31
                                                                                 ---------------------------
                                                                                 1998                   1999
                                                                                 ----                   ----
                                                                                 $                      $
Liabilities and shareholders' equity

Current liabilities

 Bank overdrafts (Note 7) .......................................                600,721                 643,278
 Notes payable (Note 7) .........................................              2,260,384                 581,349
 Accounts payable ...............................................              1,560,954               1,135,910
 Accrued charges and deposits ...................................                482,222                 516,458
 Income taxes payable ...........................................                 30,000                  11,667
 Short-term loans (Note 7) ......................................                338,632                 720,129
 Current portion of long-term debt and
  capital lease obligations
   (Notes 4 and 6(a)) ...........................................                652,041                 383,409
                                                                             -----------             -----------
 Total current liabilities ......................................              5,924,954               3,992,200
                                                                             -----------             -----------
Long-term debt and capital lease obligations, net of current
 maturities (Notes 4 and 6(a)) ..................................                242,889                  42,397

Commitments and contingencies (Note 10)

Shareholders' equity (Notes 8(b), 14 and 15)

 Common stock par value $0.003 per share
  - authorized shares - 23,333,334
  - issued and outstanding shares - 3,119,159 ...................                  8,485                   9,353
 Additional paid-in capital .....................................              8,724,503              10,285,105
 Promissory note receivable from shareholder (Note 8(b)) ........             (1,350,000)             (1,430,000)
 Common stock subscribed (Note 8(b)) ............................              1,350,000                    --
 Retained earnings ..............................................              5,512,204               5,525,958
 Accumulated other comprehensive income .........................                233,528                 235,271
                                                                             -----------             -----------
                                                                              14,478,720              14,625,687
                                                                             -----------             -----------
Total liabilities and shareholders' equity ......................             20,646,563              18,660,284
                                                                             -----------             -----------
See notes to these consolidated financial statements

                                      F-3
Bonso Electronics International Inc. and Subsidiaries
                      Consolidated Statements of Comprehensive Income
                           (Expressed in United States Dollars)

                                                        Year ended March 31
                                              -----------------------------------------
                                                  1997           1998           1999
                                                  $              $              $
Net sales (Note 16) .......................    16,989,019     23,715,576     13,046,265
Cost of sales .............................    12,096,085     17,071,089      8,812,173
                                              -----------    -----------    -----------
Gross margin ..............................     4,892,934      6,644,487      4,234,092

Selling expenses ..........................       432,518        419,755        196,974
Salaries and related costs ................     1,973,021      1,897,412      1,625,731
Research and development expenses (Note 11)       122,263        158,706        566,030
Administration and general expenses .......     1,609,217      1,814,535      1,601,186
Net gain on liquidation of a joint venture
 company (Note 13) ........................      (159,654)          --             --
                                              -----------    -----------    -----------
Income from operations ....................       915,569      2,354,079        244,171
Interest income ...........................        64,248         73,431         63,488
Interest expenses .........................      (532,068)      (503,896)      (445,644)
Less: Interest capitalized ................        61,413         46,058         25,108
                                              -----------    -----------    -----------

                                                 (470,655)      (457,838)      (420,536)
Foreign exchange (losses)/gains ...........      (135,780)        35,187         37,882
Other income ..............................       101,843        242,669         52,662
                                              -----------    -----------    -----------
Income/(loss) before income taxes .........       475,225      2,247,528        (22,333)
Income tax benefit (Note 5(c)) ............        71,364         27,117         36,087
                                              -----------    -----------    -----------
Net income ................................       546,589      2,274,645         13,754

Other comprehensive income, net of tax:
Foreign currency translation adjustments ..       162,970         43,129          1,743
                                              -----------    -----------    -----------
Comprehensive income ......................       709,559      2,317,774         15,497
                                              -----------    -----------    -----------

Earning per share (Note 12)
 Basic ....................................         19.34 cents    80.39 cents    0.45 cents
                                              -----------    -----------    -----------

 Diluted ..................................         19.21 cents    72.57 cents    0.37 cents
                                              -----------    -----------    -----------
See notes to these consolidated financial statements

                                      F-4
Bonso Electronics International Inc. and Subsidiaries
                     Consolidated Statements of Charges in Shareholders' Equity
                                (Expressed in United States Dollars)

                                                                                   Promissory
                                              Common stock                         note
                                        -----------------------                    receivable
                                           Shares       Amount      Additional     from
                                        outstanding  outstanding  paid-in capital  shareholder
                                        -----------  -----------  ---------------  -----------
                                                     $             $               $
Balance, March 31, 1996 ............     2,825,949         8,477     8,705,917          --

Net income .........................

Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments
 Reversal upon liquidation
  of a joint venture company .......
Comprehensive income ...............
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1997 ............     2,825,949         8,477     8,705,917          --

Net income .........................
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments
 Reversal upon liquidation of a
   subsidiary ......................
                                       -----------   -----------   -----------    ----------
Comprehensive income ...............
Common stock issued upon exercise
 of warrant (Note 15) ..............         2,613             8        18,586
Common stock subscribed
 (Note 8(b)) .......................          --            --            --      (1,350,000)
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1998 ............     2,828,562         8,485     8,724,503    (1,350,000)

Net income .........................        13,754          --          13,754
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustment..          --           1,743         1,743
                                       -----------   -----------   -----------    ----------

Comprehensive income ...............
Issue of common stock (Note 8(b))...       200,000           600     1,349,400          --
Common stock issued upon
 exercise of share option (Note (14).        5,000           193       131,202          --
Common stock issued upon exercise
 of warrant, net of expenses (Note
15)                                         25,597            75          --            --
Interest income from promissory
 note receivable (Note 8(b)) .......          --            --          80,000       (80,000)
                                       -----------   -----------   -----------    ----------
Balance, March 31, 1999 ............     3,119,159         9,353    10,285,105    (1,430,000)
                                       -----------   -----------   -----------    ----------

(cont'd)
Bonso Electronics International Inc. and Subsidiaries
               Consolidated Statements of Charges in Shareholders' Equity (continued)
                                (Expressed in United States Dollars)

                                                                     Accumulated
                                                                     other
                                                                     comprehensive
                                                                     income-
                                       Common                        foreign      Total
                                       stock           Retained      currency     shareholders'
                                       subscribed      earnings      adjustments  equity
                                       ----------      --------      -----------  ------------
                                       $               $             $            $
Balance, March 31, 1996 ............         --       2,690,970        27,429     11,432,793

Net income .........................                    546,589          --          546,589

Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments                       --          57,746          57,746
 Reversal upon liquidation
  of a joint venture company .......                      --         105,224         105,224
Comprehensive income ...............                    546,589      162,970         709,559
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1997 ............         --       3,237,559       190,399     12,142,352

Net income .........................                 2,274,645          --        2,274,645
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustments                       --          45,779         45,779
 Reversal upon liquidation of a
   subsidiary ......................                      --          (2,650)        (2,650)
                                       ----------   -----------   -----------    -----------
Comprehensive income ...............         --       2,274,645        43,129      2,317,774
Common stock issued upon exercise
 of warrant (Note 15) ..............         --            --            --           18,594
Common stock subscribed
 (Note 8(b)) .......................    1,350,000          --            --             --
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1998 ............    1,350,000     5,512,204       233,528     14,478,720

Net income .........................                     13,754          --           13,754
Other comprehensive income,
 net of tax
Foreign currency adjustments:
 Cumulative translation adjustment..                       --           1,743          1,743
                                       ----------   -----------   -----------    -----------

Comprehensive income ...............                     13,754         1,743         15,497
Issue of common stock (Note 8(b))...   (1,350,000)         --            --             --
Common stock issued upon
 exercise of share option (Note (14).        --            --            --          131,395
Common stock issued upon exercise
 of warrant, net of expenses (Note
15                                           --            --            --               75
Interest income from promissory
 note receivable (Note 8(b)) - .....         --            --            --             --
                                       ----------   -----------   -----------    -----------
Balance, March 31, 1999 ............         --       5,525,958       235,271     14,625,687
                                       ----------   -----------   -----------    -----------
See notes to these consolidated financial statements

                                      F-5
Bonso Electronics International Inc. and Subsidiaries
                                     Consolidated Statements of Cash Flows
                                     (Expressed in United States Dollars)
                                                                                                   Year ended March 31
                                                                                     --------------------------------------------
                                                                                     1997               1998                 1999
                                                                                     ----               ----                 ----
                                                                                     $                  $                    $
Cash flows from operating activities
 Net income ............................................................            546,589           2,274,645              13,754
 Adjustments to reconcile net income to net cash
  provided by operating activities
 Depreciation ..........................................................            681,730             942,894           1,109,286
 Amortization ..........................................................            279,201             482,214             275,323
 Other .................................................................            (71,716)            113,794             (51,187)

 Changes in assets and liabilities, net of disposed
  subsidiary:
 Trade receivables .....................................................            394,234              45,929             596,696
 Other receivables, deposits and prepayments ...........................            773,636             (57,577)            157,693
 Notes receivable ......................................................           (535,685)            427,015            (349,931)
 Inventories ...........................................................            275,537              53,994           1,341,075
 Accounts payable, accrued charges and deposits ........................          1,237,089          (1,084,467)           (390,808)
 Other .................................................................            (56,309)             63,818             (57,289)
                                                                                 ----------          ----------          ----------
 Net cash provided by operating activities .............................          3,524,306           3,262,259           2,644,612
                                                                                 ----------          ----------          ----------
Cash flows from investing activities
 Restricted cash deposits ..............................................            664,820             (65,947)            (59,421)
 Deposit for properties ................................................               --               (64,215)               --
 Proceeds from disposal of property, plant and
  equipment ............................................................            212,494              83,418                --
 Acquisition of property, plant and equipment ..........................         (2,844,115)         (1,557,269)           (866,891)
                                                                                 ----------          ----------          ----------
 Net cash used in investing activities .................................         (1,966,801)         (1,604,013)           (926,312)
                                                                                 ----------          ----------          ----------
Cash flows from financing activities
 Issue of shares on exercise of warrants and options ...................               --                  --               317,966
 Expenses paid for warrant redemption ..................................               --                  --              (201,586)
 Principal payments under long-term debt ...............................           (307,692)           (410,256)           (381,826)
 Capital lease payments ................................................           (169,569)           (355,750)           (372,192)
 Net repayment under banking facilities ................................         (1,180,565)           (528,414)         (1,254,981)
                                                                                 ----------          ----------          ----------
 Net cash used in financing activities .................................         (1,657,826)         (1,294,420)         (1,892,619)
                                                                                 ----------          ----------          ----------
 Effect of foreign exchange rate changes on cash .......................             23,457              (4,519)             (2,688)
                                                                                 ----------          ----------          ----------
 Net (decrease)/increase in cash .......................................            (76,864)            359,307            (177,007)
 Cash and cash equivalents, beginning of year ..........................            166,011              89,147             448,454
                                                                                 ----------          ----------          ----------
                                                                                     89,147             448,454             271,447
                                                                                 ----------          ----------          ----------
Supplemental disclosure of cash flow information

 Cash paid during the year for:
  Interest paid, net of amounts capitalized ............................            470,655             457,838             420,536
  Income tax paid, net of refund .......................................             50,383             (33,818)            (21,202)
See notes to these consolidated financial statements

                                      F-6
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies

     Bonso Electronics  International  Inc. ("the Company") and its subsidiaries
     are engaged in the designing,  manufacturing and selling of a comprehensive
     line of electronic  scales and weighing  instruments,  electronic  consumer
     products and health care products.

     The consolidated  financial  statements have been prepared in United States
     dollars and in accordance with generally accepted accounting  principles in
     the United States of America.  The  preparation of  consolidated  financial
     statements  requires  management  to make  estimates and  assumptions  that
     affect the reported  amounts of assets and  liabilities  and  disclosure of
     contingent  assets  and  liabilities  at  the  dates  of  the  consolidated
     financial  statements  and the  reported  amounts of revenues  and expenses
     during the  reporting  periods.  Significant  estimates  made by management
     include provisions made against  inventories and trade receivables.  Actual
     results could differ from those estimates.

     The significant accounting policies are as follows:

(a)  Principles of consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its foreign subsidiaries  (hereinafter  collectively referred to as the
     "Group").  All  significant  intercompany  accounts  and  transactions  are
     eliminated.

(b)  Cash and cash equivalents

     Cash and cash  equivalents are short-term,  highly liquid  investments with
     original maturities of three months or less. Cash equivalents are stated at
     cost, which  approximates  fair value because of the short term maturity of
     these instruments.

(c)  Inventories

     Inventories  are stated at the lower of cost or net  realizable  value with
     cost determined on a first-in, first-out basis. Net realizable value is the
     price at which  inventories  can be sold in the normal  course of  business
     after allowing for the costs of completion and disposal.

(d)  Revenue recognition

     Revenue is recognized when the products are shipped to customers.

(e)  Property, plant and equipment

     (i)  Property,  plant and equipment are stated at cost.  Leasehold land and
          buildings are amortized on a straight-line  basis over 15 to 50 years,
          representing  the  shorter of the  remaining  term of the lease or the
          expected useful life to the Group.

     (ii) Construction-in-progress  represents  factories  and office  buildings
          under  construction  and is stated at cost. Cost includes the costs of
          construction  and interest  charges  arising from  borrowings  used to
          finance   these   assets   during   the   period   of    construction.
          Construction-in-progress  is not  depreciated  during  the  period  of
          construction.

                                      F-7
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies (cont'd)

(e)  Property, plant and equipment (cont'd)

     (iii)Other  fixed  assets  are  carried at cost and  depreciated  using the
          straight-line  method over their  expected  useful lives to the Group.
          The principal annual rates used for this purpose are:

          Plant and machinery                  - 14% to 33.3%
          Molds                                - 20%
          Furniture, fixtures and equipment    - 20%
          Motor vehicles                       - 20%

     (iv) The cost of major improvements and betterments is capitalized, whereas
          the cost of maintenance and repairs is expensed in the year incurred.

     (v)  Any  gain  or  loss  on  disposal  is  included  in  the  Consolidated
          Statements of Comprehensive Income.

(f)  Research and development costs

     Research and development costs are charged to expense as incurred.

(g)  Advertising

     Advertising  costs are expensed as incurred and are included within selling
     expenses.

     Total  advertising  costs incurred for the years ended March 31, 1997, 1998
     and 1999 amounted to $22,315 and $9,078 and $43,424 respectively.

(h)  Deferred income taxes

     Amounts in the consolidated  financial  statements  related to income taxes
     are calculated  using the  principles of Statement of Financial  Accounting
     Standards  ("SFAS") No. 109,  "Accounting  for Income Taxes".  SFAS No. 109
     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. Under this method, deferred tax assets
     and liabilities are determined based on the temporary  differences  between
     the financial reporting basis and tax basis of assets and liabilities using
     enacted  tax rates in  effect  for the year in which  the  differences  are
     expected to reverse.  Future tax benefits, such as net operating loss carry
     forwards, are recognized to the extent that realization of such benefits is
     more likely than not to occur.

(i)  Capitalization of interest costs

     Interest  attributable  to borrowings  used to finance the  construction of
     factories and office  buildings is capitalized as an additional cost of the
     related  assets.  Interest is capitalized by applying the weighted  average
     interest  rate  on  borrowings   outstanding  during  the  year  or,  where
     applicable,  the  interest  rate  related to  specific  borrowings,  to the
     average amount of the  accumulated  expenditures  for the assets during the
     period.  Capitalization  of interest  ceases when the property is ready for
     its intended use.

                                      F-8
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

1    Description of business and significant accounting policies (cont'd)

(j)  Foreign currency translations

     (i)  The  functional  currency  of the  Company  and one of its  Hong  Kong
          subsidiaries  is the United States dollar and the functional  currency
          of the other  Hong Kong  subsidiaries  is the Hong  Kong  dollar.  The
          functional  currency  of the  Company's  subsidiary  in  the  Peoples'
          Republic of China (the "PRC") is the Renminbi,  the national  currency
          of the PRC. The  functional  currency of the  Company's  subsidiary in
          Canada, which was liquidated in 1998, is the Canadian dollar.

     (ii) The financial statements of foreign subsidiaries where the U.S. dollar
          is  the  functional  currency  and  which  have  certain  transactions
          denominated  in non-U.S.  dollar  currencies  are remeasured as if the
          functional  currency were the U.S. dollar.  The remeasurement of local
          currencies into U.S. dollars creates translation adjustments which are
          included in net income.

     (iii)The  financial  statements  of foreign  subsidiaries,  where the local
          currency is the functional currency,  are translated into U.S. dollars
          using   exchange  rates  in  effect  at  period  end  for  assets  and
          liabilities  and average  exchange rates during each reporting  period
          for statement of income.  Adjustments  resulting  from  translation of
          financial   statements  are  reflected  as  a  separate  component  of
          shareholders' equity.

(k)  Adoption of new accounting standards

     The Group adopted the provisions of SFAS No. 130, "Reporting  Comprehensive
     Income".  This  statement  establishes  guidelines  for the  reporting  and
     display of  comprehensive  income and its components  (revenues,  expenses,
     gains and losses) in a full set of general-purpose financial statements. It
     requires that all items that are required to be recognized under accounting
     standards as components of comprehensive  income be reported in a financial
     statement  that is displayed  with the same  prominence as other  financial
     statements;  it does not address issues of recognition or measurement.  The
     primary  element of  comprehensive  income  applicable  to the Group is the
     foreign currency cumulative translation adjustment.  The Group adopted this
     standard  from  December  15,  1998.  The  comparative  figures  have  been
     restated.

     The Group  adopted  the  provisions  of SFAS No.  131,  "Disclosures  about
     Segments  of  an  Enterprise  and  Related  Information".   This  statement
     establishes  guidelines for the way that public business enterprises report
     information  about  operating  segments  in  financial   statements.   This
     statement  also  establishes   guidelines  for  related  disclosures  about
     products and services,  geographic  areas, and major  customers.  The Group
     adopted this standard from December 15, 1998.

                                      F-9
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

2    Allowance for doubtful accounts

     Changes in the allowance for doubtful accounts consist of:

                                                1997        1998           1999
                                                ----        ----           ----
                                                $           $              $

Balance, April 1 .......................       52,919       99,856        33,333
Additions charged to expense ...........       46,937         --           6,026
Write-off ..............................         --        (26,126)         --
Provision written back .................         --        (40,397)         --
                                              -------      -------       -------
Balance, March 31 ......................       99,856       33,333        39,359
                                              -------      -------       -------

3    Inventories

(a)  The components of inventories are as follows:
                                                            March 31
                                                   --------------------------
                                                   1998                  1999
                                                   ----                  ----
                                                   $                     $

Raw materials ......................            4,288,182             3,601,695
Work in progress ...................              849,343               841,008
Finished goods .....................            1,096,799               450,546
                                               ----------            ----------
                                                6,234,324             4,893,249
                                               ----------            ----------
Provisions .........................             (267,624)             (195,321)
                                               ----------            ----------
                                                5,966,700             4,697,928
                                               ----------            ----------

(b)  Changes in the inventories provisions consist of the following:

                                            1997           1998          1999
                                            ----           ----          ----
                                            $                    $       $

Balance, April 1 ...................        49,014        146,530       267,624
Additions charged to expense .......       131,516        121,094          --
Write-back .........................       (34,000)          --         (72,303)
                                          --------       --------      --------
Balance, March 31 ..................       146,530        267,624       195,321
                                          --------       --------      --------

                                      F-10
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

4    Long-term debt

     Long-term debt denominated in Hong Kong dollars consists of the following:

                                                                March 31
                                                            ----------------
                                                            1998        1999
                                                            ----        ----
                                                            $           $

Loan payable to a bank at HIBOR plus 2.25% per annum
(8.5% as of March 31, 1998) .............................  307,692        --
Loan payable to a property developer at 14% per annum ...     --       131,786
Less: current portion ................................... (307,692)   (111,494)
                                                           --------    --------
Long-term debt, less current maturities ..................     --        20,292
                                                           --------    --------

5    Taxation

(a)  The companies are subject to tax on an entity basis on income arising in or
     derived  from Hong Kong and the PRC.  The current  rates of taxation of the
     subsidiaries  operating  in Hong Kong and  Shenzhen  in the PRC are 16% and
     15%, respectively.  The Group is not subject to income taxes in the British
     Virgin Islands.

(b)  Pursuant  to the  relevant  income tax laws in the PRC,  Bonso  Electronics
     (Shenzhen)  Co., Ltd, a wholly owned  subsidiary  of the Company,  is fully
     exempt  from PRC state  income  tax for two years  starting  from the first
     profit-making  year  followed by a 50%  reduction  over the  ensuing  three
     years. Bonso Electronics (Shenzhen) Co., Ltd. was loss-making for the years
     ended March 31, 1997, 1998 and 1999.

(c)  The  components of the income tax benefit are as follows:

                                                       Year ended March 31
                                                  ---------------------------
                                                  1997       1998        1999
                                                  ----       ----        ----
                                                  $          $           $

Deferred income tax benefit .................     65,438     57,117      38,956
 Current income tax benefit/(expense) .......      5,926    (30,000)     (2,869)
                                                 -------    -------     -------
Total income tax benefit ....................     71,364     27,117      36,087
                                                 -------    -------     -------

                                      F-11
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

5    Taxation (cont'd)

(d)  Deferred tax assets are comprised of the following:

                                                         March 31
                                                    ----------------
                                                    1998        1999
                                                    ----        ----
                                                    $           $

       Deferred tax liabilities
        Accelerated depreciation ..............    (34,387)    (11,807)
       Deferred tax assets
        Tax loss carry forwards ...............    133,993     127,723
        Valuation allowance ...................    (61,176)    (34,693)
                                                  --------    --------
                                                    72,817      93,030
                                                  --------    --------
        Other .................................     35,088      31,251
                                                  --------    --------
                                                   107,905     124,281
                                                  --------    --------
                                                    73,518     112,474
                                                  --------    --------
       Less: current portion ..................     35,088      31,251
                                                  --------    --------
       Deferred tax assets, non current portion     38,430      81,223
                                                  --------    --------

     As of March 31, 1999,  the Group had  accumulated  tax losses  amounting to
     $798,265 (the tax effect thereon is $127,723)  which may be carried forward
     and applied to reduce future  taxable  income which is earned in or derived
     from Hong Kong. Realization of deferred tax assets associated with tax loss
     carry forwards is dependent upon generating sufficient taxable income prior
     to their expiration.  A valuation allowance is established against such tax
     losses when  management  believes it is more likely than not that a portion
     may be disputed by the tax authorities.

     As of March 31, 1999, the Group's  accumulated  tax losses have no definite
     period of expiration.

(e)  Changes in the valuation allowance consist of:

                                                  1997       1998        1999
                                                  ----       ----        ----
                                                  $          $           $

    Balance, April 1 ........................     89,112    147,716      61,176
    Additions/(reductions) charged/(credited)
     to income tax expense ..................     58,604     55,082      (4,630)
    Release of valuation allowance upon:
     - liquidation of subsidiary ............       --      (62,089)       --
     - approval of losses by tax authorities        --      (77,621)    (21,853)
    Effect of change in tax rate ............       --       (1,912)       --
                                                --------   --------    --------
    Balance, March 31 .......................    147,716     61,176      34,693
                                                --------   --------    --------

                                      F-12
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

5    Taxation (cont'd)

(f)  The actual income tax benefit  attributable to earnings for the years ended
     March  31,  1997,  1998 and 1999  differed  from the  amounts  computed  by
     applying the Hong Kong  statutory tax rate in accordance  with the relevant
     income tax law as a result of the following:
Year ended March 31
                                                         -------------------------------
                                                         1997          1998         1999
                                                         ----          ----         ----
                                                         $             $            $
Hong Kong statutory tax rate ...............       16.5%        16.5%        16.0%
       Income tax (expense)/credit at the Hong Kong
        statutory tax rate ........................    (78,412)    (370,842)       3,573

       Offshore profit not subject to income tax ..    181,409      381,167       40,477

       Valuation allowance on tax loss ............    (58,604)      22,539       26,483

       Over/(under)provision for Hong Kong tax in
        prior years ...............................      5,926       10,246      (22,064)

       Other ......................................     21,045      (15,993)     (12,382)
                                                      --------     --------     --------
       Total income tax benefit ...................     71,364       27,117       36,087
                                                      --------     --------     --------
F-13
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

6    Leases

(a)  Capital leases

     Motor  vehicles and plant and machinery  include the following  amounts for
     capitalized leases:

                                       Motor vehicles        Plant and machinery
                                          March 31                 March 31
                                      ----------------        ----------------
                                      1998        1999        1998        1999
                                      ----        ----        ----        ----
                                      $           $           $           $
  Cost .........................      45,835      45,835   1,397,129   1,495,847
  Less: accumulated amortization       7,639      16,806     344,684     643,041
                                   ---------   ---------   ---------   ---------
                                      38,196      29,029   1,052,445     852,806
                                   ---------   ---------   ---------   ---------

     During the years ended March 31,  1997,  1998 and 1999,  the Group  entered
     into additional capital lease obligations  amounting to $880,261,  $143,471
     and $78,974 respectively.

     Future  minimum  payments  for capital  leases as of March 31, 1999 with an
     initial term of more than one year are as follows:
                                                                         $

     2000 ........................................................       326,686
     2001 ........................................................        13,812
                                                                         -------
     Total minimum lease payments ................................       340,498

     Less: amount representing interest ..........................        46,478
                                                                         -------
     Present value of net minimum lease payments (including
      current portion of $271,915, as of March 31, 1999) .........       294,020
                                                                         -------

(b)  Operating leases

     As of March 31,  1999,  future  minimum  lease  commitments  in  respect of
     noncancellable  operating  leases for office premises and staff quarters in
     Hong Kong and the PRC are  $46,795,  payable in the year  ending  March 31,
     2000.

     Rent expense for all operating  leases  amounted to $279,311,  $196,622 and
     $166,824 for the years ended March 31, 1997, 1998 and 1999, respectively.

                                      F-14
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

7    Banking facilities

     As of March 31, 1999,  the Group had general  banking  facilities  for bank
     overdrafts,  notes  payable,  short-term  loans  and  long-term  debt.  The
     facilities are  interchangeable  with total amounts available of $6,217,949
     (1998: $6,948,717), including facilities in respect of letters of credit of
     $1,410,257 (1998:  $1,282,051).  All general banking  facilities granted to
     the Group are denominated in Hong Kong dollars.

     The Group's general banking facilities, expressed in United States Dollars,
     are further analyzed as follows:
Amount available        Amount utilized    Terms of banking facilities as of
                               March 31                March 31                  March 31, 1998
                           ----------------        -----------------       ---------------------------

                           1998        1999        1998         1999       Interest          Repayment
                           ----        ----        ----         ----           rate              terms
                           $           $           $            $          --------          ---------
Trade financing facilities:

 Notes payable .......  3,635,726   2,771,089   2,260,384      581,349   Prime rate   Repayable in
                                                                      to Prime rate    full within
                                                                       plus 0.5% or    four months
                                                                         HIBOR plus
                                                                                 2%

 Short-term loans ....    723,248   1,075,064     338,632      720,129   Prime rate   Repayable in
                                                                      to Prime rate    full within
                                                                       plus 0.5% or   three months
                                                                         HIBOR plus
                                                                                 2%

 Letters of credit .... 1,282,051   1,410,257     502,270      114,601          Nil            Nil

Other facilities:

 Bank overdrafts ......   897,436     961,539     600,721      643,278   Prime rate      Repayable
                                                                         plus 0.25%      on demand
                                                                      to Prime rate
                                                                          plus 1.5%

 Long-term debt, ......   410,256        --       307,692        --           HIBOR            Nil
  including current ...                                                  plus 2.25%
  maturities (Note 4)
                        ---------   ---------   ----------   ------------
                        6,948,717   6,217,949   4,009,699    2,059,357
                        ---------   ---------   ----------   ------------
The Prime rate and HIBOR rate were  8.75% and  5.63%,  respectively,  as of
     March 31,  1999.  The Prime  rate is  determined  by the Hong Kong  Bankers
     Association and is subject to revision from time to time.

                                      F-15
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

7    Banking facilities (cont'd)

     The banking facilities are collateralized by the following:

(a)  a legal  charge over a leasehold  property of the Group with net book value
     of $1,241,712 (1998: $1,269,917); and

(b)  a bank guarantee of $150,000 (1998:  $150,000) and restricted cash deposits
     of $1,011,688 (1998: $952,267).  The restricted cash deposits have original
     maturities of less than three months.

     The weighted average interest rate of short-term borrowings of the Group is
     as follows:

                                                        Year ended March 31
                                                        -------------------
                                                          1998       1999
                                                          ----       ----

       Bank overdrafts ...............................     9.5%      10.2%
       Notes payable .................................     9.4%       9.5%
       Short-term loans ..............................     9.4%       9.5%

8    Related party transactions

(a)  The Group paid  emoluments,  commissions  and/or  consultancy fees to their
     directors as follows:
Year ended  Mr So Hung Gun,
          March 31           Anthony     Mr So Cham Some     Mr Ray Mehra    Mr Chung Kim Wah
          --------    --------------     ---------------     ------------    ----------------
1997              $443,590            $ 66,410         $ 21,986        $115,226(ii)
          1998              $500,560            $ 66,410         $ 11,000        $140,175(ii)
          1999              $441,538            $ 13,000               --        $113,589(ii)

                                                                Mr George         Ms Pang Kit
                      Mr Luk Kam Sun     Mr Fok Woo Ping          O'Leary         Teng, Cathy
                      --------------     ---------------        ---------         -----------
          1997              $100,564            $ 12,000      $ 52,605(i)                 Nil
          1998              $106,923                 Nil      $354,835(i)            $ 24,029
          1999              $ 91,154                 Nil      $115,342(i)            $ 90,394
(i)  This represented commissions paid to Mr George O'Leary.

          (ii) Included in the  emoluments  is a housing  allowance  for $38,462
               payable to a company  in which Mr Chung Kim Wah has a  beneficial
               interest  for each of the three  years in the period  ended March
               31, 1999.

                                      F-16
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

8    Related party transactions (cont'd)

(b)  Promissory note receivable from shareholder

     On  March  27,  1998,  Advantage  List  &  Marketing  Corporation  ("ALMC")
     subscribed  200,000  shares of common  stock of the  Company  at a price of
     $6.75 per share  which  represented  the fair  market  value at the date of
     subscription,  in exchange for ALMC's promissory note of $1,470,000. On the
     same date, ALMC entered into a pledge agreement  simultaneously under which
     ALMC agreed to pledge the common  stock to the Company as security  for the
     payment of the promissory  note. The promissory note is with full recourse,
     interest free and shall be fully repayable on or before September 27, 1999.
     On  September  17,  1998,  a total of 200,000  shares of common  stock were
     issued and the shares were held by the  Company as security  for payment of
     the promissory  note.  The  promissory  note was recorded at its discounted
     value of $1,350,000.  Interest of $80,000 accrued thereon in the year ended
     March 31, 1999 has been included in additional paid in capital.

9    Provident fund plan

(a)  With effect from January 1, 1988,  Bonso  Electronics  Limited  ("BEL"),  a
     wholly-owned  foreign  subsidiary of the Company,  started a provident fund
     plan (the "Plan") with a major  international  assurance company to provide
     life  insurance and retirement  benefits for its  employees.  All permanent
     full time employees,  excluding  factory workers,  are eligible to join the
     provident fund plan.

(b)  Members of the Plan are required to contribute 5% of their monthly  salary.
     The contribution by BEL is as follows:

           Years of service                    % of salary as BEL's contribution
           ----------------                    ---------------------------------
          Less than 5 years                                  5.0%
          5 to 10 years                                      7.5%
          More than 10 years                                10.0%

(c)  At normal retirement age, death or ill health, the member shall be entitled
     to receive  from the Plan a lump sum equal to the total of the member's and
     BEL's contributions plus a return on their investment. On resignation prior
     to normal  retirement  age, a member  shall be entitled to receive from the
     Plan a lump sum equal to the member's  contributions  plus a percentage  of
     the employer's  balance  determined in accordance with a predetermined  set
     scale.

(d)  BEL's  contributions  to the Plan for the years ended March 31, 1997,  1998
     and 1999 amounted to $54,924, $45,227 and $54,046 respectively.

10   Commitments and contingencies

     As of March 31, 1999,  the Group had  contingent  liabilities  to banks for
     outstanding letters of credit of $114,601 (1998: $502,270).

11   Research and development expenses

     Included in the research and development  expenses for the year ended March
     31, 1999 was $392,454 incurred in connection with a telephone project.

                                      F-17
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

12   Earnings per share

                                                     Year ended March 31
                                                 ---------------------------
                                                 1997        1998       1999
                                                 ----        ----       ----
                                                 $           $          $

Income available to common
 shareholders: ............................     546,589   2,274,645      13,754
Weighted average shares outstanding .......   2,825,949   2,829,448   3,079,219
Incremental shares from assumed exercise
 of:
  Warrants ................................        --        25,562     166,024
  Stock options ...........................      20,095     279,362     429,060
Dilutive potential common shares ..........      20,095     304,924     595,084
                                              ---------   ---------   ---------
Diluted weighted average shares ...........   2,846,044   3,134,372   3,674,303
                                              ---------   ---------   ---------

Basic earnings per share ..................   19.34 cents 80.39 cents 0.45 cents
Diluted earnings per share ................   19.21 cents 72.57 cents 0.37 cents

     Earnings per share are computed  based on the  weighted  average  number of
     common  shares and,  as  appropriate,  dilutive  common  stock  equivalents
     outstanding for the period and the related income amount.

     Warrants to purchase  16,667 shares of common stock at $6.00 per share were
     outstanding for the fiscal years ended March 31, 1997 but were not included
     in the  calculation  of earnings per share because the  warrants'  exercise
     price was greater than the market price of the Company's  common stock. The
     warrants were exercised during the year ended March 31, 1998.

     Warrants to purchase  110,000  shares of common  stock at $9.1875 per share
     were  outstanding  during the fiscal years ended March 31,  1997,  1998 but
     were not included in the calculation of diluted  earnings per share because
     the  warrants'  exercise  price was  greater  than the market  price of the
     Company's  common stock.  The warrants,  which expire on December 14, 1999,
     were still outstanding as of March 31, 1999.

     Warrants to purchase  2,200,000  shares of common  stock at $7.35 per share
     were outstanding  during the fiscal years ended March 31, 1997 and 1998 but
     were not included in the  calculation of diluted  earnings per share during
     the year ended March 31,  1997  because the  warrants'  exercise  price was
     greater than the market price of the  Company's  common  stock.  During the
     year ended March 31, 1999,  25,597  warrants  were  exercised by the public
     shareholders  to purchase  25,597  shares of common  stock of the  Company.
     Warrants to purchase  2,174,403  shares of common stock at $7.35 per share,
     which expire on December 14, 1999,  were still  outstanding as of March 31,
     1999.

                                      F-18
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

13   Minority interests

     In April  1993,  the Group,  together  with a Chinese  partner,  formed and
     invested in a joint venture company in the PRC,  Shenzhen Bonso Electronics
     Limited  ("SBEL"),  owned  as to 60% by the  Group  and 40% by the  Chinese
     partner.  According to the joint venture  agreement,  the registered  share
     capital of SBEL was $3,205,128  (HK$25 million);  the Group and the Chinese
     partner could appoint three and two directors,  respectively,  to the board
     of SBEL. The Group effectively controlled all major financial and operating
     policy  decisions  of SBEL.  Accordingly,  this joint  venture  company was
     consolidated.

     In accordance with an agreement  between the Group and the Chinese partner,
     SBEL was liquidated on October 31, 1996. The land and buildings  originally
     contributed  to the joint venture by the Chinese  partner  reverted to same
     and all other assets and liabilities including the plant and machinery were
     taken up by the Group.  During the year ended March 31, 1996, the directors
     estimated  that a  provision  for  permanent  diminution  in  value of SBEL
     amounting to $152,480 was  necessary  and  accordingly a provision for this
     amount  was  recorded.  During  the year  ended  March 31,  1997,  upon the
     liquidation  of SBEL,  a gain of $159,654  was  recognized  by the Group of
     which  $152,480  represents  the reversal of the  provision  for  permanent
     diminution in value.

14   Stock option plan

(a)  In October 1996, the Board of Directors approved the 1996 Stock Option Plan
     and 1996  Non-Employee  Directors'  Stock Option Plan. Under the 1996 Stock
     Option  Plan,  the  Company  may grant  options of common  stock to certain
     employees and directors of the Company for a maximum of 400,000 shares. The
     1996 Stock  Option Plan is  administered  by a committee  appointed  by the
     Board of Directors which determines the terms of options granted, including
     the  exercise  price,  the  option  periods  and the number of shares to be
     subject to each option.  The exercise  price of options  granted  under the
     1996 Stock Option Plan may be less than the fair market value of the common
     shares on the date of grant.  The maximum term of options granted under the
     1996 Stock Option Plan is 10 years.  The right to acquire the common shares
     is not  assignable  except for certain  conditions  stipulated  in the 1996
     Stock Option Plan. In January 1997, the Board of Directors  delegated to Mr
     So Hung Gun,  Anthony,  the  authority to issue  options to  employees  and
     directors of the Company for an additional 25,000 shares.

     In January 1997, the Company granted options to three directors to purchase
     an  aggregate  of  375,000  shares of  common  stock of the  Company  at an
     exercise  price of $2.00 per share,  which was equal to the market value on
     the date of grant,  in  accordance  with the 1996 Stock  Option  Plan.  The
     options  shall  expire on January 31, 2007 and can be exercised at any time
     immediately after granting.

     In January 1998, the Company  granted options to an employee to purchase an
     aggregate  of 25,000  shares of common  stock of the Company at an exercise
     price of $6.20 per share which is greater than the market value on the date
     of grant,  in accordance with the 1996 Stock Option Plan. The options shall
     expire on  January  1, 2008 and can be  exercised  at any time  immediately
     after granting.

     No options  have been  exercised  during the years ended March 31, 1998 and
     1999.

                                      F-19
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(a)  (cont'd)

     The stock options  outstanding  in respect of the 1996 Stock Option Plan as
     of March 31, 1999 is summarized as follows:

                                                              Average per share
                                                            --------------------
                                                  Number      Exercise   Market
                                                  of shares   price      price

Balance, March 31, 1997 ........................  375,000     $2.00      $2.00
Grant at exercise price greater than the
 market value of the common shares .............  25,000     $6.20      $6.13
                                                  -------     -----      -----
Balance, March 31, 1998 and 1999 ...............  400,000     $2.26      $2.26
                                                  -------     -----      -----

     Under the 1996 Non-Employee  Directors' Stock Option Plan, the non-employee
     directors are automatically granted stock options on the third business day
     following the day of each annual general meeting of the Company to purchase
     an aggregate of 100,000  shares of common stock.  The exercise price of all
     options granted under the 1996  Non-Employee  Directors'  Stock Option Plan
     shall be one  hundred  percent  of the fair  market  value per share of the
     common  shares on the date of grant.  The maximum  term of options  granted
     under the 1996  Non-Employee  Directors'  Stock Option Plan is 10 years. No
     stock  option  may be  exercised  during  the first six  months of its term
     except for certain conditions provided in the 1996 Non-Employee  Directors'
     Stock Option Plan. The right to acquire the common shares is not assignable
     except  for  certain   conditions   stipulated  in  the  1996  Non-Employee
     Directors' Stock Option Plan.

     In October 1996, the Company issued options to three non-employee directors
     in accordance with the 1996  Non-Employee  Directors'  Stock Option Plan to
     purchase an aggregate of 30,000 shares of common stock of the Company at an
     exercise  price of $2.25 per share and the options shall expire October 16,
     2006 and can be exercised at any time immediately after granting.

     In  September  1997,  the  Company  issued  options  to  four  non-employee
     directors in accordance with the 1996 Non-Employee  Directors' Stock Option
     Plan to  purchase  an  aggregate  of 40,000  shares of common  stock of the
     Company  at an  exercise  price of $5.06 per share  and the  options  shall
     expire on September  8, 2007 and can be  exercised at any time  immediately
     after granting.

     No annual  general  meeting  was held by the  Company for the year 1998 and
     therefore  no  stock  option  was  granted  in  accordance  with  the  1996
     Non-Employee  Directors'  Stock Option Plan during the year ended March 31,
     1999.

     No options  have been  exercised  during the year ended  March 31, 1998 and
     10,000 stock options were exercised to purchase  10,000 common stock of the
     Company at an exercise  price of $2.25 per share  during the year ended 31,
     1999.

                                      F-20
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(a)  (cont'd)

     The stock options activity in respect of the 1996  Non-Employee  Directors'
     Stock Option Plan as of March 31, 1999 is summarized as follows:

                                                              Average per share
                                                              -----------------
                                                   Number      Exercise  Market
                                                   of shares   price     price

Balance, March 31, 1997 .......................     30,000     $2.25     $2.25
Grant at exercise price equal to the market
 value of the common shares ...................     40,000     $5.06     $5.06
                                                   -------     -----     -----
Balance, March 31, 1998 .......................     70,000     $3.86     $3.86

Exercised during the year .....................    (10,000)    $2.25     $2.25
                                                   -------     -----     -----
Balance, March 31, 1999 .......................     60,000     $4.12     $4.12
                                                   -------     -----     -----

(b)  In  January  1997,  the  Company  granted  options  to  three  non-employee
     directors to purchase an aggregate of 100,000 shares of common stock of the
     Company.  The  exercise  price is $2.00 per  share,  which was equal to the
     market  value of the  Company's  common  stock on the  date of  grant.  The
     options  shall  expire on January 31, 2007 and can be exercised at any time
     immediately after granting.

     No options  have been  exercised  during the years ended March 31, 1997 and
     1998, and 55,000 options were exercised to purchase  55,000 common stock of
     the Company at an exercise  price of $2.00 per share  during the year ended
     March 31, 1999.

     The stock options summary as of March 31, 1999 is summarised as follows:

                                                             Average per share
                                                            ------------------
                                                  Number     Exercise  Market
                                                  of shares  price      price

Balance, March 31, 1997 ......................        --        --       --
Grant at exercise price equal to the market
 value of the common shares ..................     100,000     $2.00   $2.00
                                                  --------     -----   -----
Balance, March 31, 1998 ......................     100,000     $2.00   $2.00

Exercised during the year ....................     (55,000)    $2.00   $2.00
                                                  --------     -----   -----
Balance, March 31, 1999 ......................      45,000     $2.00   $2.00
                                                  --------     -----   -----

                                      F-21
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

     At  various  times in  January  1998,  the  Company  issued  options to the
     directors  and an  employee of the  Company to  purchase  an  aggregate  of
     195,000 shares of common stock of the Company at an exercise price of $6.20
     per share. The options shall expire in January 2008 and can be exercised at
     any time immediately  after granting.  The exercise prices of these options
     were equal to or greater  than the fair market  value at the time of grant.
     No options  have been  exercised  during the years ended March 31, 1998 and
     1999.

     In October 1998, the Company issued options to the directors,  non-employee
     directors and certain  employees of the Company to purchase an aggregate of
     430,000 shares of common stock of the Company at an exercise price of $3.60
     to $3.70.  The options shall expire in October 2008 and can be exercised at
     any time immediately  after granting.  The exercise prices of these options
     were greater  than the fair market  value at the time of grant.  No options
     have been exercised during the year ended March 31, 1999.

(e)  The  following  table  summarizes  the  information   about  stock  options
     outstanding at March 31, 1999:

                          Number                          Exercisable
                       outstanding at     Average life      shares at
     Exercise price    March 31, 1999        (years)     March 31, 1999
     --------------    --------------     ------------     --------------

     $2.00                 420,000             7.8          420,000
     $2.25                  20,000             7.5           20,000
     $3.60                 415,000             9.5          415,000
     $3.70                  15,000             9.5           15,000
     $5.06                  40,000             8.4           40,000
     $6.20                 220,000             8.8          220,000
                         ---------             ---        ---------
     $2.00 to $6.20      1,130,000             8.7        1,130,000
                         ---------             ---        ---------

(f)  Included  in the options  outstanding  as of March 31, 1999 were 10,000 and
     63,000 units held by Mr Ray Mehra and Mr So Cham Some,  respectively,  both
     of whom have  resigned as  directors  of the Company on January 2, 1998 and
     April 30, 1998, respectively.
                                      F-22
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

14   Stock option plan (cont'd)

(g)  The Company  applies  Accounting  Principles  Board ("APB") Opinion No. 25,
     "Accounting for Stock Issued to Employees" and related  interpretations  in
     accounting  for its  employee  stock  options.  Under APB  Opinion  No. 25,
     because the exercise  price of all the options issued by the Company equals
     or is higher than the market price of the  underlying  stock on the date of
     grant, no compensation expense is recognized.

     Pro forma  information  regarding  net  income  and  earnings  per share is
     required by SFAS No. 123 "Accounting for Stock-Based Compensation", and has
     been  determined  as if the Company had  accounted  for its employee  stock
     options  under the fair value method of SFAS No. 123. The weighted  average
     fair value of options  granted  during the years  ended  March 31, 1998 and
     1999 were $820,200 and $2,503,363,  respectively.  The fair value for these
     options was  estimated  at the date of grant using a  Black-Scholes  Option
     Valuation  model with the following  weighted-average  assumptions  for the
     year ended March 31, 1999:  risk-free  interest rates of 5.48% to 5.49%; no
     dividend  yield;  volatility  factor of the  expected  market  price of the
     Company's common share of 81.20%; and a  weighted-average  expected life of
     the option of ten years.

     For  purposes  of pro forma  disclosure,  the  estimated  fair value of the
     options is amortized to expense over the options' vesting period. The Group
     pro forma information follows:

                                                    1998           1999
                                                    ----           ----
                                                    $              $
      Net income

      As reported ...........................     2,274,645         13,754
      Pro forma .............................     1,454,445     (2,489,609)

     Basis earnings/(losses) per share

      As reported ...........................   80.39 cents        0.45 cents
      Pro forma .............................   51.40 cents      (80.85) cents

     Diluted earnings/(losses) per share

      As reported ...........................   72.57 cents        0.37 cents
      Pro forma .............................   46.40 cents      (67.76) cents

     Because  compensation  expense  associated with an award is recognized over
     the vesting  period,  the initial impact on pro forma net income may not be
     representative of compensation  expense in future years, when the effect of
     the  amortization  of  multiple  awards  would be  reflected  in the income
     statement.

                                      F-23
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

15   Warrants

     In 1994, the Company  issued 16,667  warrants under a loan agreement to the
     lender to  purchase  common  shares of the  Company at $6.00 per share.  No
     warrants were  exercised  during the year ended March 31, 1997. In December
     1997,  2,613 shares of common  stock were issued at $7.11 per share,  which
     represented  the fair market value at the date of issue,  upon the exercise
     of all the warrants on a cashless basis.

     As a result of the Company's  second public  offering in December 1994, the
     Company issued  2,200,000  five-year  warrants to its public  shareholders.
     Each warrant  entitles  the holder  thereof to purchase one share of common
     stock of the Company at $7.35 per share.  The  warrants  expire on December
     14, 1999.  The warrants are  redeemable by the Company at $0.05 per warrant
     upon 30 to 45 days  notice at any time after  December  14,  1995,  or such
     earlier date as the  representatives of the underwriters may determine,  if
     the  closing  price  per  share  of  common  stock  of the  Company  for 20
     consecutive  trading  days  within the 30-day  period  prior to the date of
     notice of  redemption  is given  equals or exceeds  $8.575  per  share.  No
     warrants were  exercised or redeemed  during the years ended March 31, 1997
     and 1998. A total of 25,597  warrants  were  exercised  to purchase  25,597
     shares of common  stock of the  Company at $7.35 per share  during the year
     ended March 31, 1999.

     In conjunction with the second public offering, the Company issued warrants
     to  the   representatives   of  the  underwriters  (the   "Representatives'
     Warrants") to purchase from the Company up to an aggregate of 110,000 units
     at an exercise  price of $9.1875 per unit;  each unit consists of one share
     of  common  stock  and  two   five-year   warrants  of  the  Company.   The
     Representatives'  Warrants  are  exercisable  for a period  of three  years
     commencing  December 15, 1996.  Upon any transfer to a person other than an
     officer,   shareholder   or   director  of  the   representatives   of  the
     underwriters,   the  transferred   five-year  warrants  must  be  exercised
     immediately or they will lapse.  No warrants have been  transferred  during
     the years ended March 31, 1997, 1998 and 1999.

                                      F-24
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

16   Business segment information

(a)  The Group's  operations have been classified into three business  segments:
     scales, health care products and other. Summarized financial information by
     business segment for 1997, 1998 and 1999 is as follows:
Identifiable        Depreciation
                                                    Net           Operating          assets as of        and             Capital
                                                    sales         profit             March 31            amortization    expenditure
                                                    -----         ---------          ------------        ------------    -----------
                                                    $             $                  $                   $               $
1999

Scales ..................................        10,306,549         3,042,936         12,098,180         1,015,272           132,395
Health care products ....................         1,956,940            55,066            212,450            17,829             2,325
Other ...................................           782,776           532,353          2,053,884           172,361            22,476
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        13,046,265         3,630,355         14,364,514         1,205,462           157,196
Corporate ...............................              --          (3,386,184)         4,295,770           179,147         1,442,324
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        13,046,265           244,171         18,660,284         1,384,609         1,599,520
                                                 ----------        ----------         ----------        ----------        ----------

1998

Scales ..................................        18,260,994         5,234,759         14,604,822         1,110,023         1,280,219
Health care products ....................         3,083,025            73,197            204,218            15,521            17,901
Other ...................................         2,371,557           534,778          1,492,015           113,399           130,786
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        23,715,576         5,842,734         16,301,055         1,238,943         1,428,906
Corporate ...............................              --          (3,488,655)         4,345,508           186,165           271,834
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        23,715,576         2,354,079         20,646,563         1,425,108         1,700,740
                                                 ----------        ----------         ----------        ----------        ----------

1997

Scales ..................................        11,892,313         3,188,072         13,369,205           656,807         4,534,113
Health care products ....................         2,718,243            66,246            277,802            13,648            94,216
Other ...................................         2,378,463           720,500          3,021,421           148,438         1,024,703
                                                 ----------        ----------         ----------        ----------        ----------
Total operating segments ................        16,989,019         3,974,818         16,668,428           818,893         5,653,032
Corporate ...............................              --          (3,059,249)         3,847,183           142,038             8,100
                                                 ----------        ----------         ----------        ----------        ----------
Group ...................................        16,989,019           915,569         20,515,611           960,931         5,661,132
                                                 ----------        ----------         ----------        ----------        ----------
Operating  profit by segment equals total operating  revenues less expenses
     which are related to the segment's operating revenues.  Identifiable assets
     by segment are those assets that are used in the operation of that segment.
     Corporate assets consist  principally of cash and cash equivalents,  income
     tax recoverable,  deferred income tax assets and other identifiable  assets
     not related specifically to individual segments.

                                      F-25
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

16   Business segment information (cont'd)

(b)  The Group  primarily  operates in Hong Kong and the PRC. The manufacture of
     components and their assembly into finished  products is carried out in the
     PRC.  The Hong Kong office is mainly  responsible  for the  purchase of raw
     materials,  arrangement of shipments and research and  development.  As the
     operations are  integrated,  it is not practicable to distinguish the sales
     and net income  derived from the  activities in Hong Kong from those in the
     PRC.

     Identifiable assets by geographical areas are as follows:

                                                   1998                 1999
                                                   ----                 ----
                                                   $                    $

     Hong Kong ....................             7,469,828             5,314,252
     The PRC ......................            13,176,735            13,346,032
                                               ----------            ----------
     Total assets .................            20,646,563            18,660,284
                                               ----------            ----------

(c)  The following is a summary of net export sales to customers by geographical
     area for the years ended March 31, 1997, 1998 and 1999:
Year ended March 31
                              ---------------------------------------------------------
                              1997       %         1998         %        1999         %
                              ----       -         ----         -        ----         -
                              $                    $                     $
United States of
       America ..........  6,873,780    40     12,570,427      53     5,609,457      43
     Germany ............  3,994,167    24      6,290,634      27     4,212,958      32
     Others  ............  6,121,072    36      4,854,515      20     3,223,850      25
                          ----------   ---     ----------     ---    ----------     ---
                          16,989,019   100     23,715,576     100    13,046,265     100
                          ----------   ---     ----------     ---    ----------     ---
(d)  The details of sales made to  customers  constituting  10% or more of total
     sales of the Group is as follows:
Year ended March 31
                                                            -----------------------------------------------------
                                             Business       1997         %       1998          %       1999           %
                                             segment        $                    $                     $
                                             ---------      ----         -       ----          -       ----           -
Pitney Bowes, Inc. (USA) ...............    Scales          3,007,070    18     7,075,338      30     2,011,393       15

Globaltec Corporation (USA) ............    Scales          2,252,184    13     3,721,060      15     1,454,550       11
Werner Dorsch Gmbh & Co. ...............
 (Germany) .............................    Scales          1,906,961    11     2,105,307       9     1,998,505       15
Omron Healthcare .......................    Health care
 Group .................................    products        1,888,335    11     1,841,427       8     1,358,356       10
                                            ---------       ---------  ----    ----------    ----    ----------     ----
                                                            9,054,550    53    14,743,132      62     6,822,804       51
                                            ---------       ---------  ----    ----------    ----    ----------     ----
F-26
Bonso Electronics International Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

17   Financial instruments

     In accordance with SFAS No. 107 "Disclosures  about Fair Value of Financial
     Instruments", the carrying amounts and fair values of the Group's financial
     instruments are as follows:
Carrying amount                   Fair value
                                                     March 31                       March 31
                                              --------------------             -----------------
                                              1998            1999             1998         1999
                                              ----            ----             ----         ----
                                              $               $                $            $
Cash and cash equivalents ............       448,454         271,447         448,454        271,447
Restricted cash deposits .............       952,267       1,011,688         952,267      1,011,688
Deposits .............................       447,735            --           447,735           --
Bank overdrafts ......................       600,721         643,278         600,721        643,278
Notes payable ........................     2,260,384         581,349       2,260,384        581,349
Short-term loans .....................       338,632         720,129         338,632        720,129
Long-term debt .......................       307,692         131,786         299,215        136,013
Promissory note receivable ...........     1,350,000       1,350,000       1,350,000      1,350,000
                                           ---------       ---------       ---------      ---------
The following  methods and assumptions were used to estimate the fair value
     of each class of financial instruments:

(a)  Cash and cash equivalents, restricted cash deposits, bank overdrafts, notes
     payable and short-term loans - the carrying amount  approximates fair value
     because   of   the   short    maturity    of   these    instruments.

(b)  Long term debt - interest  rates that are currently  available to the Group
     for issuance of debt with similar terms and remaining  maturities  are used
     to  estimate  the fair  value of debt  issues  that  are not  quoted  on an
     exchange.  Fair value  estimates  are made at a specific  point in time and
     based on relevant  market  information.  These  estimates are subjective in
     nature,  involve  uncertainties  and matters of  significant  judgement and
     therefore cannot be determined with precision. Changes in assumptions could
     significantly affect the estimates.

(c)  Deposits - the carrying  amount of refundable  deposits  approximates  fair
     value based on the terms of the related contracts.

(d)  Promissory  note  receivable - the fair value of promissory note receivable
     approximates  the carrying  value based on a comparison of interest rate to
     current market rate for instruments of similar nature.

     All  other  financial   instruments   included  among  current  assets  and
     liabilities are stated at cost which approximates their fair value.

18   Post balance sheet date events

     In May  1999,  the  Group  acquired  an  office  premise  in Hong Kong at a
     consideration of $743,590.

                                      F-27