<PAGE>
 
===============================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                        
                                   FORM 10-K
                                        
[X]  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended June 26, 1998

                                       OR

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


                         Commission File Number 0-13914

                            TRIO-TECH INTERNATIONAL
             (Exact name of Registrant as specified in its Charter)

             California                                   95-2086631
   (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                   Identification Number)
 
          355 Parkside Drive
       San Fernando, California                             91340
 (Address of principal executive offices)                (Zip Code)

                  Registrant's Telephone Number:  818-365-9200
                                        
          Securities registered pursuant to Section 12(b) of the Act:
                                      None

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

                                                         Name of each exchange
              Title of each class                         on which registered
          Common Stock, no par value                       Nasdaq Small Cap


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

  Based on the closing sales price on June 26, 1998, the aggregate market value
of the voting stock held by nonaffiliates of the registrant was $4,781,435.
Number of shares of common stock outstanding as of August 26, 1998 is 2,744,396

       Indicate by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K.  [_]

                      DOCUMENTS INCORPORATED BY REFERENCE
                                        
The number of pages in this filing is 35.  The Exhibit Index begins on page 15.

===============================================================================

                                      -1-
<PAGE>
 
                            TRIO-TECH INTERNATIONAL

                                        
 INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE

                                        
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                             ----------
<S>             <C>                                                                                          <C>
FORM 10-K       COVER                                                                                                 1
 
                INDEX                                                                                                 2
 
Part I.                                                                                                               3
Item 1          Business                                                                                              3
Item 2          Properties                                                                                            9
Item 3          Legal Proceedings                                                                                    10
Item 4          Submission of matters to a vote of security holders
 
PART II                                                                                                              11
Item 5          Market for registrants common stock                                                                  11
Item 6          Selected financial data                                                                              12
Item 7          Management's discussion and analysis of financial condition and results of operations                13
Item 8          Financial statements and supplementary data                                                          15
Item 9          Disagreements on accounting and financial disclosure                                                 15
 
PART III                                                                                                             15
 
PART IV                                                                                                              15
Item 14         Exhibits, financial statement schedules and reports on form 8-k                                      15
 
SIGNATURE                                                                                                            18
 
EXHIBITS
                Independent Auditors' Report                                                                         19
 
                Consolidated Balance Sheets as of June 26, 1998 and June 27, 1997                                    20
 
                Consolidated Statements of Income for the Years Ended June 26, 1998, June 27, 1997 and
                June 28, 1996                                                                                        21
 
                Consolidated Statements of Shareholders' Equity  for the Years Ended June 26, 1998, June
                27, 1997 and June 28, 1996                                                                           22
  
                Consolidated Statements of Cash Flows for the Years Ended June 26, 1998, June 27, 1997
                and June 28, 1996                                                                                    23
 
                Notes to Condensed Consolidated Financial Statements                                                 25
</TABLE>

                                      -2-
<PAGE>
 
                                     PART I
                                        
ITEM 1 - BUSINESS
-----------------

GENERAL
-------

Trio-Tech International designs, manufactures and sells equipment and systems
used in the manufacture and testing of semiconductor devices and electronic
components. In addition the Company operates test facilities in the United
States, Europe and Southeast Asia which provide semiconductor testing services
to component manufacturers and users.

The Company's wet process equipment and temperature controlled chucks are used
to manufacture and test semiconductor wafers and other microelectronic
substrates in the "front-end" of the manufacturing process. The Company's
centrifuges, leak detectors, HAST systems, burn-in systems and rate of turn
tables are used primarily at the "back-end" of the semiconductor manufacturing
process to test finished semiconductor devices and electronic components.

Trio-Tech operates seven test facilities, one in the United States, one in
Europe and five in Southeast Asia. These provide customers a comprehensive range
of testing services, such as burn-in and life testing, for finished or packaged
components. Many manufacturers of semiconductors find it cost effective to sub-
contract these services to third parties.

Trio-Tech operations in Europe and Southeast Asia have active distribution
operations. These provide sales and support for Trio-Tech's equipment in these
regions and also distribute and support additional products from other
manufacturers. These products are complementary with the Company's products and
are used by the semiconductor and electronics industries.

Trio-Tech is actively pursuing a strategic plan for growth which is designed to
increase the Company's addressable market by expanding its product offerings
with equipment and services for the front-end of the manufacturing process to
complement its traditional niche in the back-end. The Company plans to achieve
this goal through a combination of new product development and acquisitions of
complementary products and companies.

The acquisition of Universal Systems, a leader in the design and manufacture of
wet process equipment, in November 1997, was an important step in this
direction. Another is the continuing development of Trio-Tech's temperature
controlled chucks and the development of its COBIS-II burn-in systems.

The terms "Trio-Tech" and "the Company" refer to Trio-Tech International and/or
its subsidiaries.

COMPANY HISTORY
---------------


<TABLE>

<C>          <S>
      1958   Incorporated in California
      1976   The Company formed Trio-Tech International Pte Ltd (TTIPte) in Singapore.
      1984   The Company formed the European Electronic Test Center (EETC), a Cayman Islands subsidiary, to operate a test
             facility in Dublin, Ireland.
      1985   The Company's Singapore subsidiary entered into a joint-venture agreement, Trio-Tech Malaysia,  to operate a test
             facility in Penang.
      1986   Trio-Tech International listed on the NASDAQ Small Cap  market under the symbol TRTC.
      1988   The Company acquired the Rotating Test Equipment Product Line of Genisco Technology Corporation.
      1990   Trio-Tech International acquired Express Test Corporation in California.
             Trio-Tech Malaysia opened a new facility in Kuala Lumpur.
      1992   Trio-Tech Singapore opened Trio-Tech Bangkok, Thailand
      1994   Trio-Tech Malaysia started a new testing operation in Batang Kali.
      1997   In November  1997, the Company acquired Universal Systems of Campbell, California.
</TABLE>

                                      -3-
<PAGE>
 
ANALYSIS OF SALES
-----------------

The following table sets forth the percentage of revenues derived from product
sales, testing services and industry segments during the last three fiscal years
and the breakdown of revenues derived from customers in the United States,
Southeast Asia and Europe. The amounts represented in product sales and service
include revenues derived from the test equipment distribution business in
Singapore.  See Note 12 to Consolidated Financial Statements, Business Segments,
for a more detailed description.


<TABLE>
<CAPTION>
                                                                               Year Ended
                                ----------------------------------------------------------------------------------------------
                                      June 26, 1998                         June 27, 1997                   June 28, 1996
                                     --------------                         -------------                   -------------
                                                                  (Dollar amounts in thousands)
<S>                             <C>           <C>                  <C>           <C>                  <C>          <C> 
Product and service sales by
  region:
United States                   $     4,095        19 %            $     2,409          11 %          $    2,466         11 %
Southeast Asia                        8,309        38                    6,694          31                 7,691         33
Europe                                1,011         5                      441           2                   272          1
                                -----------   -----------          -----------   -----------          ----------   -----------
Total                           $    13,415        62 %            $     9,544          44 %          $   10,429         45 %
                                ===========   ===========          ===========   ===========          ==========   ===========
 
Testing services sales  by   
region:
United States                   $       312         1 %            $       215           1 %          $      205          1 %
Southeast Asia                        7,586        35                   11,305          53                11,642         50
Europe                                  539         2                      484           2                   909          4
                                -----------   -----------          -----------   -----------          ----------   -----------
Total                           $     8,437        38 %            $    12,004          56 %          $   12,756         55 %
                                ===========   ===========          ===========   ===========          ==========   ===========
 
Net sales:
Manufacturing                   $     6,335        29 %            $     6,334          29 %          $    6,069         26 %
Testing                               8,437        39                   12,004          56                12,756         55
Distribution                          7,080        32                    3,210          15                 4,360         19
                                -----------   -----------          -----------   -----------          ----------   -----------
Total net sales                 $    21,852       100 %            $    21,548         100 %          $   23,185        100 %
                                ===========   ===========          ===========   ===========          ==========   ===========
</TABLE>


BACKGROUND TECHNOLOGY
---------------------

Semiconductor devices are fundamental building blocks used in electronic
equipment and systems.  Each semiconductor device consists of an integrated
circuit that performs electronic functions. Integrated circuits are manufactured
through a series of complex steps on a wafer substrate, which is usually made of
silicon and measures three to eight inches in diameter. A finished wafer
consists of many integrated circuits, each referred to as a "device" or "die" ,
the number depending on the area of the circuits and the size of the wafer.
Manufacturers have increasingly utilized larger diameter wafers, and the
transition to 300mm (12 inch) wafers is currently underway throughout the
industry.

Wafers are typically sent through a series of 100 to 300 process steps. At many
of the process steps the wafer is washed and dried using wet process stations.
The finished wafer is put through a series of tests where each device on the
wafer is tested for functionality. After testing, the wafer is diced and each
die is encapsulated in packaging material, usually plastic or ceramic, with lead
wires that allow mounting onto printed circuit boards. Finished devices are put
through a series of screening processes, such as burn-in and electrical testing,
to ensure they meet necessary performance and quality standards, before shipment
to the customer.  In 1997,  the worldwide market for semiconductor devices was
estimated at $140 billion.

In addition to the growing demand for semiconductors, integrated circuits are
continually becoming more complex, with greater capacity, versatility and
smaller size. In order to fabricate these semiconductors,  manufacturers must
continually improve their fabrication, packaging and test facilities. In 1997,
the world market for semiconductor manufacturing equipment was estimated at $30
billion.

                                      -4-
<PAGE>
 
The market for semiconductor manufacturing equipment can be divided into wafer
fabrication (front-end) and assembly, packaging and test (back-end). The front-
end equipment market is estimated to be approximately 70% of the total with
back-end 20% and facilities 10% of the total.

Trio-Tech's products and services are applicable at several stages of the
manufacturing and test processes. Its wet process benches are used at many wafer
fabrication stages. Its Artic temperature chucks are used to test semiconductor
wafers at accurately controlled temperatures.  Its component centrifuges, leak
detectors, HAST equipment and burn-in systems are all used to test and screen
finished semiconductor devices to ensure they meet the specifications required
by the manufacturers and customers.

Trio-Tech's test services are concentrated on the back-end screening and test of
semiconductor devices. With the high concentration of semiconductor assembly and
packaging facilities in Southeast Asia, a large demand exists for third party
test services in this region. Customers use third party test services especially
to accommodate fluctuations in output or to benefit from economies which can be
offered by third party service providers.


PRODUCTS
--------

The Company designs and manufactures equipment for the manufacture and test of
semiconductor wafers, devices and other electronic components.

Wet Process Benches

Wet Process benches are used for cleaning, rinsing and drying semiconductor
wafers, magnetic disks, flat panel displays and other microelectronic
substrates. This product line, which is manufactured by the Company's subsidiary
Universal Systems, includes manual and automated wet process stations, and
features radial and linear robots, state-of-the art PC touch-screen controllers
and sophisticated scheduling and control software.

Temperature Controlled Wafer Chucks

The Artic Temperature Controlled Chucks are used for test, characterization and
failure analysis of semiconductor wafers and other components at accurately
controlled hot and cold temperatures. Several models are available with
temperature ranges from -65 degrees C to +400 degrees C and in diameters from 4
to 12 inch. These systems provide excellent performance to meet the most
demanding customer applications. A unique mechanical design, for which patents
are pending, provides excellent mechanical stability across the temperature
ranges.

Autoclaves and HAST ( Highly Accelerated Stress Test ) Equipment

Trio-Tech manufactures a range of autoclaves and HAST systems and specialized
test fixtures.  Autoclaves provide pressurized, saturated vapor (100% relative
humidity) test environments for fast and easy monitoring of integrated circuit
manufacturing processes. HAST equipment, which provides a pressurized high
temperature environment with variable humidity, is used to determine the
moisture resistance of plastic encapsulated devices. HAST provides a fast and
cost-effective alternative to conventional non-pressurized temperature and
humidity testing.

Burn-in Equipment and Boards

Trio-Tech manufactures burn-in systems, burn-in boards and burn-in board test
systems.   Burn-in equipment is used to subject semiconductor devices to
elevated temperatures while testing them electrically to identify early product
failures ("infant mortalities") as well as to assure long-term reliability.
Burn-in testing approximates, in a compressed time frame, the electrical and
thermal conditions to which the device would be subjected during its normal
life.

During 1998 the Company developed and launched its new COBIS-II burn-in system
which offers state-of-the-art dynamic burn-in capabilities and  a Windows-based
operating system with full data logging and  networking features.  The Company
also  offers burn-in boards for its COBIS burn-in systems and other brands of
burn-in systems.  Burn-in boards are used to mount devices during high
temperature environmental stressing.

Component Centrifuges and Leak Detection Equipment

Component centrifuges and leak detection equipment are used to test the
mechanical integrity of ceramic and other hermetically sealed semiconductor
devices and electronic parts for high reliability and aerospace applications.
The company's centrifuges are

                                      -5-
<PAGE>
 
used to identify mechanical weaknesses of devices by spinning them at a
specified acceleration, creating a pressure of up to 30,000 g's (900,000 pounds
per square inch). The Company's leak detection equipment is designed to detect
leaks in hermetic packaging by first pressurizing the devices in a tracer gas or
fluid and then visually scanning for bubble trails emanating from defective
devices.

Rate of Turn Tables

The Company manufactures a range of rate-of turn tables which are used to
subject test parts to accurately controlled angular velocities and g-forces. The
systems are typically used to test accelerometers, gyroscopes, turn and bank
indicators, inertial platforms and other motion sensors. Applications include
automotive and aerospace markets.


PRODUCT DEVELOPMENT
-------------------

Artic Temperature Controlled Chucks

Trio-Tech is continuing to develop its Artic temperature controlled chucks.
During 1998, the Company introduced two new models. The new high temperatures
chucks operate between ambient and +400 degrees C. The Company also developed
and delivered the first of the new 12 inch chucks for the latest 300mm wafer
technologies. These chucks have many new features including the ability to hold
the wafer under high probing forces with minimum mechanical deflection.

Wet Process Benches

The Company's subsidiary, Universal Systems, is actively developing its line of
wet process equipment. During 1998 Universal developed and introduced its new
fully automatic, PC/PLC-based workstation. This is designed for the new copper
plating semiconductor processes currently being developed by the leading
semiconductor manufacturers.

Burn-in Equipment

During 1998 the Trio-Tech developed and launched the new COBIS-II burn-in system
which offers state-of-the-art dynamic burn-in capabilities, a Windows-based
operating system with full data logging and  networking features.  The Company
also  offers burn-in boards for its COBIS burn-in systems and other brands of
burn-in systems.


TESTING SERVICES
----------------

Trio-Tech owns and operates facilities that provide testing services for
semiconductor devices and other electronic components to meet the requirements
of military, aerospace, industrial and commercial applications.

The Company uses its own proprietary equipment for certain burn-in, centrifugal
and leak tests, and commercially available equipment for various other
environmental tests.  The Company conducts the majority of its testing
operations in Southeast Asia with facilities in Singapore, Malaysia and
Thailand.  Several of these facilities have ISO 9002 certification. The Company
also operates test facilities in San Fernando, California and Dublin, Ireland.

The testing services are used by manufacturers and purchasers of semiconductors
and other components who either do not have  testing capabilities or whose in-
house screening facilities are not sufficient to test devices to military or
certain commercial specifications.  In addition, Trio-Tech provides overflow
testing and independent verification for companies with in-house capabilities.

Trio-Tech's laboratories perform a variety of tests, including stabilization
bake, thermal shock, temperature cycling, mechanical shock, constant
acceleration, gross and fine leak tests, electrical testing, static and dynamic
burn-in tests, and vibration testing.  The laboratories also perform
qualification testing, consisting of intense tests conducted on small samples of
output from manufacturers who require qualification of their processes and
devices.


DISTRIBUTION ACTIVITIES
-----------------------

The Company's Singapore subsidiary continues to develop its international
distribution division.  The distribution operation markets, sells and supports
Trio-Tech's products in Southeast Asia.  In addition to Trio-Tech's own
products, this operation also distributes other complementary products from
other manufacturers in the United States,  Europe and Japan.

                                      -6-
<PAGE>
 
The Singapore distribution operation now provides a wide range of products for
its customers, including environmental chambers, parametric component testers,
shakers and vibration systems,  solderability testers and other manufacturing
and test products.


MARKETING, DISTRIBUTION AND SERVICES
------------------------------------

The Company markets its products and services worldwide, both directly and
through independent sales representatives.  There are approximately 12 of these
representatives that operate within the United States and 7 in various foreign
countries.  The Company's marketing efforts in the United States are coordinated
from its headquarters in San Fernando, and its Far East and European marketing
efforts are assigned to its subsidiaries in Singapore and Ireland, respectively.
The Company advertises in trade journals and participates in trade shows.

The Company's products and services are purchased by independent testing
laboratories and by users and manufacturers of  semiconductor devices,
including, IBM,  AMD,  Motorola, National Semiconductor, SGS Thomson and Texas
Instruments.  During the year ended June 26, 1998, the Company had sales of
$3,522,000 to Texas Instruments.


BACKLOG
-------

The following table sets forth the Company's backlog at the dates indicated
(amounts in thousands):

<TABLE>
<CAPTION>
                                                          June 26, 1998                       June 27, 1997
                                                     -------------------------            ----------------------
<S>                                                  <C>                                  <C>    
           Manufacturing backlog                     $                   2,702            $                1,980
 
           Testing service backlog                                       2,202                             2,339
 
           Distribution backlog                                          1,732                             1,543
                                                     -------------------------            ----------------------
                                                     $                   6,636            $                5,862
                                                     =========================            ======================
</TABLE>

Based upon past experience, the Company does not anticipate any significant
cancellations. The purchase orders for equipment call for delivery within the
next 12 months. Testing services backlog is scheduled to be performed within the
next year.  The Company does not anticipate any difficulties in meeting delivery
schedules.


MANUFACTURING AND SUPPLY
------------------------

The Company's products are designed by its engineers and are assembled and
tested at its facilities in San Fernando and  Campbell, California, Singapore
and Ireland.  All parts and certain components are purchased from outside
sources for assembly by the Company.

Trio-Tech uses Fluorinert, a special indicator fluid sold by the 3M Company, in
its gross leak equipment, and Krypton 85, sold by Amersham, in its Tracer-Flo.
The Company has not experienced any difficulty in obtaining Fluorinert or
Krypton 85 to date.  There can be no assurance that the Trio-Tech will not
experience difficulties or delays in obtaining Fluorinert or Krypton 85 in the
future. The Company plans to discontinue the Tracer Flo product line in December
1998 and will have no requirement for Krypton 85 gas after that time.


COMPETITION
-----------

The semiconductor equipment industry is highly competitive. The principal
competitive factors in the industry are product performance, reliability,
service and technical support, product improvements, price, established
relationships with customers and product familiarity. The Company has
competitors for its various products. However, the Company believes its products
compete favorably with respect to each of these factors in the markets in which
it operates. There can be no assurance that competition will not increase or
that the Company's technological advantages may not be reduced or lost as a
result of technological advances by competitors or changes in semiconductor
processing technology.

                                      -7-
<PAGE>
 
There are numerous testing laboratories in the areas in which the Company
operates that perform a range of testing services similar to those offered by
the Company.  Since the Company has sold and will continue to sell its products
to competing laboratories and other test products are available from other
manufacturers,  the Company's competitors can offer the same testing
capabilities. This equipment is also available to semiconductor manufacturers
and users who might otherwise use outside testing laboratories, including the
Company, to perform environmental testing.  The existence of competing
laboratories and the purchase of testing equipment by semiconductor
manufacturers and users are potential threats to the Company's future revenues
and earnings from testing.


PATENTS
-------

Trio-Tech  holds a United States Patent granted in 1987 in relation to its
pressurization humidity testing equipment.  The Company also holds a United
States Patent granted in 1994 on certain aspects of its Artic temperature test
systems.  In 1996 Trio-Tech filed United States and European patent applications
for certain aspects of its new Artic temperature chucks which are currently
pending.


GOVERNMENT REGULATION
---------------------

The Tracer-Flo process uses Krypton 85, an inert radioactive gas, the supply and
handling of which are subject to regulation by the United States Nuclear
Regulatory Commission (NRC) and the California Department of Health Physics.
The Company must, therefore, train the Tracer-Flo operators, which are licensed
by the State of California, and must maintain records and control its supplies
of Krypton 85.  The California agency conducts periodic site inspections, and
the NRC monitors interstate shipments and can inspect the Company's shipping
records.  No security clearance is required to handle the gas, which has a low
level of radioactivity. This product line has experienced declining sales for
several years. The Company has decided to discontinue this product line in
December 1998 and has already notified its customers.


EMPLOYEES
---------

As of June 26, 1998, the Company had 43 employees in the United States, 202 in
Singapore, 221 in Malaysia, 114 in Bangkok, and 19 in Ireland for a total of
599. None of the Company's employees is represented by a labor union.

                                      -8-
<PAGE>
 
ITEM 2 - PROPERTIES
-------------------

The following table sets forth information as to the location and general
character of the principal manufacturing
and testing  facilities of the Registrant:

<TABLE>
<CAPTION>
                                                                                                              Owned (O)
                                                                                   Approx.                  or Leased (L)
                                                                                   Sq. Ft.                   Expiration
              Location                             Principal Use                   Occupied                     Date
------------------------------------       ---------------------------       -----------------       -----------------------
 
<S>                                           <C>                               <C>                     <C>
355 Parkside Dr.                              Headquarters/                             21,000          (L) Jan. 1999
San Fernando, CA 9l340                        Manufacturing/
                                              Testing
 
1190 Dell Avenue, Unit L                      Manufacturing                              6,000          (L) month to
Campbell, Ca 95008                                                                                      month
 
Abbey Road                                    Testing/Manufac-                          18,400          (O) *1
Deansgrange Co.                               turing
Dublin, Ireland
 
No. 5, Kian Teck Road                         Manufacturing                             30,000          (L) *2
Jurong Town, Singapore
 
1004, Toa Payoh North,                        Testing                                    6,833          (L) month to
HEX 07-01/07,                                                                                           month
Singapore
 
Plot 1A, Phase 1                              Testing                                   49,924          (L) Aug. 2030
Bayan Lepas Free
Trade Zone
11900 Penang
 
Lot No. 6. Lorong                             Testing                                   23,000          (L) June 1999
Enggang 37 Ulu Kelang
Ampang Industrial Area.
Ulu Kelang, Selangor,
Kuala Lumpur
 
327, Chalongkrung Road,                       Testing                                   11,300          (O) *3
Lamplathew, Lat Krabang,
Bangkok 10520, Thailand
 
Lot No. B7, Kawasan MIEL                      Manufacturing                             24,142          (O)*4
Batang Kali, Phase II,
43300 Batang Kali
Selangor Darul Ehsan,
Malaysia
</TABLE>

*1   Purchased for 270,000 Irish Pounds, equivalent to approximately U.S.
     $261,000 based on the exchange rate as of June 28, 1985, of which
     approximately 30% was recovered by the Company as part of the grant monies
     received from the Industrial Development Authority of the Republic of
     Ireland.

                                      -9-
<PAGE>
 
*2   Purchased for S$1 million, equivalent to approximately U.S.$ 447,000 based
     on the exchange rate as of June 28,1985.  This amount was completely repaid
     in fiscal year 1991.  However, under Singapore law, this land may not be
     purchased outright.  Accordingly, the term for this land lease will expire
     in December 2030.  The Company has acquired the fullest ownership rights
     possible under Singapore law which includes an option to renew the lease at
     that time.
 
*3   Purchased for Thai Baht 13,500,000, equivalent to approximately
     U.S.$533,000 based on the exchange rate as of June 25, 1993.  The mortgage
     agreement commenced in October 1992 and will expire in September 1998.

*4   Purchased for Malaysia Ringgit 1,000,000, equivalent to U.S.$387,000 based
     on the exchange rate as at June 24, 1994.


ITEM 3 - LEGAL PROCEEDINGS
--------------------------

On August 24, 1995, the Company was served in a civil action brought by HM
Holdings, Inc. (HM) against 106 defendants, including the Company.  HM has paid
$3,750,000 to the Federal Environmental Protection Agency to settle a proceeding
alleging that HM's predecessor company caused soil and groundwater contamination
of the North Hollywood (California) Superfund Site and may have additional
liabilities.  HM alleges that the 106 defendants caused or contributed to the
contamination.  An additional legal matter may arise in part out of a related
suit by Lockheed Martin Corporation against HM and other defendants, possibly
including the Company (which has not been served in this related suit),
involving the nearby Burbank Superfund Site, which HM is seeking to settle and
to assign its claim against the 106 defendants to Lockheed Martin.  The Company
vacated its Burbank location in 1987.  The Company and its counsel have not yet
had the opportunity to investigate the allegations.  The Company believes its
liability insurance should cover this claim, but its insurers have not yet made
a decision regarding this matter.  Management, based on its present information,
believes that the outcome of this litigation will not materially affect the
Company's consolidated financial position or results of operations.

There are no material proceedings to which any director, officer or affiliate of
the Registrant, any beneficial owner of more than five percent of the
Registrant's common stock or any associate of such person is a party that is
adverse to the Registrant or its properties.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

On December 8, 1997, the Company's Shareholders approved the Company's 1998
Stock Option Plan.  The vote was 1,929,036 shares in favor, 20,850 shares
against, 1,500 shares abstaining and 11,276 broker nonvotes. The purpose of the
1998 Stock Option Plan is to enable the Company to attract and retain top-
quality employees, officers, directors and consultants and to provide them with
an incentive to enhance stockholder return

On December 8, 1997, the Company's Shareholders approved the Directors Stock
Option Plan (the "Directors Plan). The vote was 1,933,711 shares in favor,
16,175 shares against, 1,500 shares abstaining and 11,276 broker nonvotes. The
purpose of the Directors Plan is to give appropriate compensation to the
Directors of the Company.

                                      -10-
<PAGE>
 
                                    PART II
                                        
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK
---------------------------------------------

The Registrant's common stock is traded on the Nasdaq Small Cap Market under the
symbol "TRTC".  The following table sets forth, for the periods indicated, the
range of high and low sales prices of Trio-Tech International's Common Stock as
quoted by  Nasdaq. These prices do not include retail mark-ups, markdowns or
commissions:

<TABLE>
<CAPTION>
                      Quarter Ended                      High                      Low
         -------------------------------             -------------             -------------
             Fiscal 1997
         -------------------------------
                     <S>                                     <C>                       <C>
                     September 27, 1996                       5.75                      3.75
                     December 27, 1996                        6.50                      5.25
                     March 28, 1997                           7.88                      6.00
                     June 27, 1997                            8.13                      7.38
 
             Fiscal 1998
         -------------------------------
                     September 26, 1997                       8.83                      4.92
                     December 26, 1997                       11.67                      4.13
                     March 27, 1998                           6.50                      4.41
                     June 26, 1998                            5.25                      4.00
         -------------------------------
              Fiscal 1999
         -------------------------------
                     June 29  to
                     September 10, 1998                       4.63                      2.75
 
</TABLE>

The Registrant's common stock is held by approximately 625 shareholders of
record as of August 26, 1998.  1,273,404 shares are held by Cede and Co., a
clearinghouse that holds stock certificates in "street" name for an unknown
number of shareholders.

The Company has not declared any cash dividends on its common stock. Any future
determinations as to cash dividends will depend upon the earnings and financial
position of the Company at that time and such other factors as the Board of
Directors may deem appropriate.  It is anticipated that no dividends will be
paid to holders of common stock in the foreseeable future.

                                      -11-
<PAGE>
 
<TABLE>
<CAPTION>
ITEM 6 - SELECTED FINANCIAL DATA
(In thousands except per share data)
 
 
                                   June 26,          June 27,          June 28,        June 30,           June 24,
                                     1998              1997              1996            1995               1994
                                -----------         ----------         ----------      ----------        ----------
<S>                             <C>                <C>               <C>               <C>               <C> 
Statement of Operations

Net sales                        $   21,852        $   21,548        $   23,185        $   19,488        $   15,165
                                                                                                                                  
Income from Operations                  969             3,057             2,712             1,547             1,204
                                                                                                                                  
Net Income                              831             1,002               806               570             2,040
                                                                                                                                  
Net income per share:                                                                                                            
Basic:                                                                                                                            
      Before Extraordinary items       0.34              0.54              0.45              0.31              0.17
      Extraordinary items                                                                                      1.01
                                 ----------         ----------       ----------        ----------        ----------
Net income per share             $     0.34        $      0.54       $     0.45        $     0.33        $     1.18
                                 ==========        ===========       ==========        ==========         =========
 
Weighted average common
    shares outstanding (Basic)    2,413,000          1,850,000        1,793,000         1,743,000         1,728,000
 
Balance Sheet
 
Current assets                    $  14,036        $   13,843        $  11,760         $   6,848         $   5,525        
Current liabilities                   7,439             7,039            8,169             5,159             5,014        
Working capital                       6,597             6,804            3,591             1,689               511        
                                                                                                                                  
Total assets                         19,331            18,528           17,416            12,646            11,298        
                                                                                                                                  
Long-term debt and                                                                                                                
    capitalized leases                  426               723              688               597               939        
Shareholders' equity              $   8,763        $    6,463        $   5,207         $   4,419         $   3,626        
</TABLE>

                                      -12-
<PAGE>
 
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

Year Ended June 26, 1998 ("1998") Compared to Year Ended June 27, 1997 ("1997")
-------------------------------------------------------------------------------

Net sales increased by $304,000 or 1.4% from $21,548,000 in 1997 to $21,852,000
in 1998 despite the general slowdown in the semiconductor industry and the poor
economic conditions in Southeast Asia.  Net sales for the Far East operations
decreased $2,105,000 or 11.7% from $17,999,000 in 1997 to $15,894,000 in 1998
due mainly to lower testing volume in Malaysia and Singapore.

Cost of sales increased $1,460,000 or 13.3% from  $12,718,000 in 1997 to
$14,178,000 in 1998.  As a percentage of sales, it increased 5.9%  from 59.0% in
1997 to 64.9% in 1998. This decline is primarily due to a shift in relative
sales from high margin test services to lower margin equipment sales.

Interest expense increased in 1998, from $110,000 in 1997 to $168,000 in 1998.
This is a result of increased interest rates.

Other income has increased significantly from $460,000 in 1997 to $504,000 in
1998 primarily due to interest income earned on certificates of deposit and
service income earned by providing administrative services to a customer in
Thailand.

Net income decreased by $171,000 or 17.1% from $1,002,000 in 1997 to $831,000 in
1998 due mainly to lower testing volume in Malaysia.  Minority interest profit
allocation was significantly less in 1998 versus 1997 due to a decrease in
profits of the 55% owned Trio-Tech Malaysia.


Year Ended June 27 1997 ("1997") Compared to Year Ended June 28, 1996 ("1996")
------------------------------------------------------------------------------

Net sales decreased by $1,637,000 or 7.1% from $23,185,000 in 1996 to
$21,548,000 in 1997.  This is attributable to the general slowdown in the
semiconductor industry.  Net sales for the Far East operations decreased
$1,334,000 or 6.9% from $19,333,000 in 1996 to $17,999,000 in 1997 due partly to
lower testing volume in Singapore and Malaysia.

Cost of sales decreased $1,947,000 or 13.3% from $14,665,000 in 1996 to
$12,718,000 in 1997.  As a percentage of sales, it has decreased 4.3% from 63.3%
in 1996 to 59.0% in 1997.  This is a result of stringent cost controls and scale
down of operations in the Far East region.

Interest expense continued to decrease in 1997, from $141,000 in 1996 to
$110,000 in 1997.  This is a direct result of reduced interest rates and reduced
average outstanding debt balances.

Other income has increased significantly from $287,000 in 1996 to $460,000 in
1997 primarily due to interest income earned on certificates of deposit and
service income earned by providing administrative services to a customer in
Thailand.

Net income has improved by $196,000 or 24.3% from $806,000 in 1996 to $1,002,000
in 1997.

Liquidity and Capital Resources
-------------------------------

The Company's working capital decreased slightly from $6,804,000 as of June 27,
1997 to $6,597,000 as of June 26, 1998 due to capital expenditures of
$1,648,000 and an unrealized currency translation loss of $2,164,000, reflecting
a currency devaluation in Southeast Asia relative to the U.S. Dollar, offset in
part by proceeds of $3,351,000 from a private placement of common stock and
warrants.

The Company's subsidiary, TTI Pte, has a secured credit agreement with a bank
which provides for a total line of credit of $3,125,000.  The agreement contains
certain debt covenants including maintaining a minimum net worth of $2,400,000
at TTI Pte.  Borrowings under the line were $481,000 and nil at the end of
fiscal 1998 and 1997, respectively.  The interest rate on borrowings is at the
bank's prime rate (8.25% at June 26, 1998) plus 1.25%.  Borrowings under this
agreement are collateralized by substantially all of TTI Pte's assets. This line
of credit expires March 1999.

The Company's subsidiary, TTM has a secured credit agreement with a bank which
provides for a total line of credit of $132,000.  At June 26, 1998, there were
no borrowings outstanding.  The line of credit bears interest at the bank's
reference rate (12.3% at June 26, 1998) plus 2.75%. This line of credit expires
May 1999.

                                     -13-
<PAGE>
 
The Company's subsidiary, TTBK, has a line of credit which provides for
borrowings of approximately $48,000.  Interest on the line is at the bank's
reference rate (15.75% at June 26, 1998) plus 1.0%.  There were no borrowings
against this line as of June 26, 1998. This line of credit does not have an
expiration date.
 
The Company's subsidiary, TT Ireland, has a credit agreement which provides for
a mortgage loan of $400,000 Borrowings under the line amounted to $294,000 as of
June 26, 1998.  Interest is at the bank's prime rate (6.7% at June 26, 1998)
plus 3.5%.

The Company obtained a revolving line of credit of $150,000 from a bank bearing
interest at 1.8% above the bank's reference rate (9.75% at June 26, 1998).
Borrowings under the line amounted to $150,000 as of June 26, 1998. This line of
credit expires February 1999.

Year 2000 Compliance issue
--------------------------

The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2-
digit year is commonly referred to as the "Year 2000 Compliance" issue.  As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information. The Company has reviewed all significant internal
applications and is in the process of considering and implementing modifications
necessary to ensure Year 2000 compliance.

In addition, the Company is in the process of communicating with others with
whom it does significant business, to determine their Year 2000 Compliance
readiness and the extent to which the Company is vulnerable to any third party
Year 2000 Compliance.  However, there can be no guarantee that the systems of
other companies on which the Company's systems rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.

The total cost to the Company of these Year 2000 Compliance activities has not
been and is not anticipated to be material to its financial position or to its
results of operations.  These costs and the date on which the Company plans to
complete the Year 2000 Compliance modification and testing processes are based
on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors.  However, there can
be no guarantee that these estimates will be achieved and actual results could
differ from those plans.

Economic conditions in Southeast Asia
--------------------------------------

The Company's operations, balance sheet and cash flows have been affected by
recent economic instability in portions of Southeast Asia, which accounted for
approximately 73% of the Company's  net sales in the year ended June 1998 and
83% for each of the years ending June 1997 and 1996.  A recent currency
devaluation in Thailand and continuing currency weaknesses in Thailand, Malaysia
and Singapore have required downward accounting adjustments in the U.S. dollar
value of net assets located in those countries.  Unsettled economic conditions
in those countries and elsewhere have had some effect on orders by semiconductor
companies for Trio-Tech's testing services.  Although the Company has continued
to manage its operations profitably, extended economic instability could
adversely affect the Company's financial condition, results of operations or
cash flows. See note 1 about restricted currencies.

Forward-Looking Statements
--------------------------

The discussions of the Company's business and activities set forth in this
report and in other past and future reports and announcements by the Company may
contain forward-looking statements and assumptions regarding future activities
and results of operations of the Company.  In light of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
hereby identifies the following factors which could cause actual results to
differ materially from those reflected in any forward-looking statement made by
or on behalf of the Company: market acceptance of Company products and services;
changing business conditions or technologies in the semiconductor industry,
which could affect demand for the Company's products and services; the impact of
competition; problems with technology; product development schedules; delivery
schedules; changes in military or commercial testing specifications which could
affect the market for the Company's products and services; difficulties in
profitability integrating acquired businesses, if any, into the Company; risks
associated with conducting business internationally and especially in Southeast
Asia, including currency fluctuations and devaluations, currency restrictions,
local laws and restrictions and possible social, political and economic
instability; general and economic conditions; and other economic, financial and
regulatory factors beyond the Company's control.

                                      -14-
<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

The information called for by this item is included in the Company's
consolidated financial statements beginning on page 20 of this Annual Report on
Form 10-K.

ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
-------------------------------------------------------------

None

                                    PART III
                                        
The information required by Part III is hereby incorporated by reference from
the Company's Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 1998.

                                    PART IV
                                        
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

(a) (1)  FINANCIAL STATEMENTS:

         The following financial statements, including notes thereto and the
         independent auditors' report with respect thereto, are filed as part of
         this Annual Report on Form 10-K, starting on page 19 hereof:

         1.   Independent Auditors' Report
         2.   Consolidated Balance Sheets
         3.   Consolidated Statements of Income
         4.   Consolidated Statements of Shareholders' Equity
         5.   Consolidated Statements of Cash Flows
         6.   Notes to Consolidated Financial Statements

(a) (2) FINANCIAL STATEMENT SCHEDULES:

         The following schedules are filed as part of this Annual Report on Form
         10-K, starting on page 38 hereof:

         1.   Schedule VIII - Valuation and Qualifying Accounts and Reserves

         No other schedules have been included because they are not applicable,
         not required, or because information is included in the consolidated
         financial statements or notes thereto.

(b)      REPORTS ON FORM 8-K:

          The Company did not file any  reports on form 8-K during the quarter
          ended June 26, 1998.

(c)  EXHIBITS:

Number                    Description                      Page Number
------                    -----------                      -----------

3.1   Articles of Incorporation, as currently in effect.
      [Previously filed as Exhibit 3.1 to the Annual
      Report on Form 10-K for June 24, 1988.]                _______

3.2   Bylaws, as currently in effect.  [Previously filed
      as Exhibit 3.2 to the Annual Report on Form 10-K
      for June 24, 1988.]                                    _______

10.1  Trio-Tech Stock Option Plan.  [Previously filed
      as Exhibit 10.1 to the Registration Statement
      on Form S-8 (No. 2-87606).]                            _______

                                      -15-
<PAGE>
 
Number                    Description                      Page Number
------                    -----------                      -----------

10.2  Real Estate Lease, dated September 29, 1987,
      between Stierlin Industrial Center and Registrant.
      [Previously filed as Exhibit 10.5 to the
      Registration Statement on Form S-1 (No. 2-87606).]     _______

10.3  Tenancy of Flatted Factory Unit, dated December 2,
      1982, between Jurong Town Corporation and
      Registrant.  [Previously filed as Exhibit 10.8
      to the Registration Statement on Form S-1
      (No. 2-87606).]                                        _______

10.4  Tenancy of Flatted Factory Unit, dated September 10,
      1982, between Jurong Town Corporation and
      Registrant.  [Previously filed as Exhibit 10.9
      to the Registration Statement on Form S-1
      (No. 2-8766).]                                         _______

10.5  Real Estate Lease, dated December 15, 1986,
      between San Fernando Associates and Registrant.
      [Previously filed as Exhibit 10.17 to the Annual
      Report on Form 10-K for June 28, 1987.]                _______

10.6  Deferred Compensation Agreement, dated March 1,
      1986, between the Company and A. Charles Wilson.
      [Previously filed as Exhibit 10.16 to the Annual
      Report on Form 10-K for June 24, 1988.]                _______

10.7  Deferred Compensation Agreement, dated March 1,
      1986, between the Company and John C. Guy.
      [Previously filed as Exhibit 10.17 to the Annual
      Report on Form 10-K for June 24, 1988.]                _______

10.9  Credit Facility Letter dated November 2, 1993, 
      between Trio-Tech International Pte. Ltd. and 
      Standard Chartered Bank.                               -------

10.10  1998 Stock Option Plan.  [Previously filed
       as Exhibit 1  to the Company's proxy statement filed 
       under regulation 14A on October 27, 1997].             _______

10.11  Directors Stock Option Plan.  [Previously filed
       as Exhibit 2  to the Company's proxy statement filed 
       under regulation 14A on October 27, 1997].

22.1   Subsidiaries of the Registrant (100% owned by the
       Registrant except as otherwise stated):

       Trio-Tech International Pte. Ltd., a Singapore
       Corporation

       Trio-Tech Test Services Pte. Ltd., a Singapore
       Corporation

       Trio-Tech Reliability Services, a California
       Corporation

       Express Test Corporation, A California Corporation

       European Electronic Test Center, Ltd., A Cayman Islands
       Corporation

                                      -16-
<PAGE>
 
Number                    Description                      Page Number
------                    -----------                      -----------

       Trio-Tech Malaysia, a Malaysia Corporation
       (55% owned by the Registrant)

       Trio-Tech Kualala Lumpur, a Malaysia Corporation
       (100% owned by Trio-Tech Malaysia)

       Trio-Tech Bangkok, a Thailand Corporation

       Prestal Enterprise Sdn Bhd, a Malaysia Corporation
       (73% owned by the Registrant)

       KTS Incorporated, doing business as Universal Systems, a California
       Corporation

27.1   Financial Data Schedule

                                      -17-
<PAGE>
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             TRIO-TECH INTERNATIONAL


                              By: /s/ Victor H.M. Ting
                                  --------------------
                                  Victor H.M. Ting
                                  Vice President and
                                  Chief Financial Officer
                                  Date: September 24, 1998


Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

               /s/ A. Charles Wilson                      September 24, 1998  
               -------------------------------            
               A. Charles Wilson, Director
               Chairman of the Board


               /s/ S. W. Yong                             September 24, 1998
               -------------------------------            
               S. W. Yong, Director
               President and Chief Executive
               Officer


               /s/ Victor H.M. Ting                       September 24, 1998
               -------------------------------
               Victor H.M. Ting
               Vice President, Chief Financial Officer
               and Principal Accounting Officer


               /s/ Jason T. Adelman                       September 24, 1998
               -------------------------------
               Jason T. Adelman, Director


               /s/ Frank S. Gavin                         September 24, 1998
               -------------------------------
               Frank S. Gavin, Director


               /s/ Richard C. Horowitz                    September 24, 1998
               -------------------------------
               Richard C. Horowitz, Director


               /s/ F.D. (Chuck) Rogers                    September 24, 1998
               -------------------------------
               F.D. (Chuck) Rogers, Director


               /s/ William L. Slover                      September 24, 1998
               -------------------------------
               William L. Slover, Director

                                      -18-
<PAGE>
 
INDEPENDENT AUDITORS' REPORT


Board of Directors
Trio-Tech International
San Fernando, California:

We have audited the accompanying consolidated balance sheets of Trio-Tech
International and subsidiaries (the Company) as of June 26, 1998 and June 27,
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended June 26, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Trio-Tech International and
subsidiaries as of June 26, 1998 and June 27, 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 26, 1998 in conformity with generally accepted accounting principles.


DELOITTE & TOUCHE LLP

/s/  DELOITTE & TOUCHE LLP

Los Angeles, California
September 4, 1998

                                      -19-
<PAGE>
 
<TABLE> 
<CAPTION> 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------

                                                                                    June 26,                     June 27,
ASSETS                                                       Notes                   1998                          1997
                                                           ---------          ------------------            ------------------
 
CURRENT ASSETS:
<S>                                                           <C>           <C>                              <C> 
     Cash                                                                   $     3,305,000                 $       868,000
     Cash deposits                                                                3,947,000                       7,104,000
     Trade accounts receivable, less
        allowance for doubtful
        accounts of $468,000 in
        1998 and $404,000 in 1997                                                 4,124,000                       3,646,000
                     
                     
     Other receivables                                                              299,000                         161,000
     Inventories                                              2                   2,056,000                       1,784,000
     Prepaid expenses and other
        current assets                                                              305,000                         280,000
                                                                            ---------------                 ---------------
           Total current assets                               5,7                14,036,000                      13,843,000
 
PROPERTY AND EQUIPMENT, Net                                   3,5,7               4,669,000                       4,421,000
     
OTHER ASSETS                                                  4                     626,000                         264,000
                                                                            ---------------                 --------------
TOTAL ASSETS                                                                $    19,331,000                 $    18,528,000
                                                                            ===============                 ===============
 
CURRENT LIABILITIES:
     Lines of credit                                          5             $       631,000                 $       150,000
     Accounts payable                                                             2,126,000                       1,121,000
     Accrued expenses                                         6                   3,804,000                       3,605,000
     Income taxes payable                                                           690,000                       1,965,000
     Current portion of long-term debt
        and capitalized leases                                7,9                   188,000                         198,000
                                                                            ---------------                 --------------
           Total current liabilities                                              7,439,000                       7,039,000
                                                                            ---------------                 ---------------
LONG-TERM DEBT AND 
CAPITALIZED
     LEASES, net of current portion                           7,9                   426,000                         723,000
                                                                            ---------------                 --------------
DEFERRED INCOME TAXES                                         8                     581,000                         776,000
                                                                            ---------------                 --------------
MINORITY INTEREST                                                                 2,122,000                       3,527,000
                                                                            ---------------                 --------------
COMMITMENTS AND CONTINGENCIES                                 9
SHAREHOLDERS' EQUITY:                                         10
   Common stock; authorized,
     15,000,000 shares; issued and
     outstanding, 2,747,586 shares
     (1998) and 1,936,596 shares
     (1997) stated at                                                             8,708,000                       5,075,000
Retained earnings (accumulated deficit)                                             497,000                        (334,000)
   Cumulative currency translation                                                 (442,000)                      1,722,000
                                                                            ---------------                 --------------
                Total shareholders' equity                                        8,763,000                       6,463,000
                                                                            ---------------                 --------------
TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY                                                   $    19,331,000                 $    18,528,000
                                                                            ===============                 ===============
</TABLE>

                                 See notes to consolidated financial statements.

                                      -20-
<PAGE>
 
<TABLE>
<CAPTION>


TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------------------------------------------------------------------------


                                                                                            Year Ended
                                                                --------------------------------------------------------------
                                                                  June 26,                  June 27,                  June 28,
                                              Notes                  1998                      1997                      1996
                                              -----             ---------                ----------                   --------
                                    
<S>                                            <C>           <C>                       <C>                       <C>        
NET SALES                                      12            $  21,852,000             $  21,548,000             $  23,185,000
COST OF SALES                                                   14,178,000                12,718,000                14,665,000
                                                             -------------             -------------             ------------- 
GROSS PROFIT                                                     7,674,000                 8,830,000                 8,520,000
                                    
OPERATING EXPENSES:                 
      General and administrative                                 4,853,000                 3,780,000                 4,506,000
      Selling                                                    1,852,000                 1,993,000                 1,302,000
                                                             -------------             -------------             ------------- 
                       Total                                     6,705,000                 5,773,000                 5,808,000
                                                             -------------             -------------             ------------- 
                                    
INCOME FROM OPERATIONS                         12                  969,000                 3,057,000                 2,712,000
                                    
OTHER INCOME (EXPENSE)             
      Interest expense                         5,7                (168,000)                 (110,000)                 (141,000)
      Other income                                                 504,000                   460,000                   287,000
                                                             -------------             -------------             ------------- 
                       Total                                       336,000                   350,000                   146,000
                                                             -------------             -------------             ------------- 
INCOME BEFORE INCOME TAXES          
      AND MINORITY INTEREST                                      1,305,000                 3,407,000                 2,858,000
                                    
INCOME TAXES                                    8                  455,000                 1,264,000                 1,109,000
                                                             -------------             -------------             ------------- 
                                    
INCOME BEFORE MINORITY              
      INTEREST                                                     850,000                 2,143,000                 1,749,000
                                    
MINORITY INTEREST                                                  (19,000)               (1,141,000)                 (943,000)
                                                             -------------             -------------             ------------- 
                                    
NET INCOME                                                   $     831,000             $   1,002,000             $     806,000
                                                             =============             =============             ============= 
EARNINGS PER SHARE:                 
      Basic                                                  $        0.34             $        0.54             $        0.45
                                                             =============             =============             ============= 
                                    
      Diluted                                                $        0.33             $        0.51             $        0.42
                                                             =============             =============             ============= 
                                    
WEIGHTED AVERAGE NUMBER             
   OF COMMON AND COMMON                        
   POTENTIAL SHARES                        
   OUTSTANDING                   
      Basic                                                      2,413,000                 1,850,000                 1,793,000
      Diluted                                                    2,485,000                 1,961,000                 1,929,000
</TABLE>


                                 See notes to consolidated financial statements.

                                      -21-
<PAGE>
 
<TABLE> 
<CAPTION> 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
------------------------------------------------------------------------------------------------------------------------------------


                                                 Common Stock                             
                                         ---------------------------------                             Cumulative
                                                 Number of                    Retained Earnings         Currency
                                                  Shares        Amount      (Accumulated Deficit)     Translation        Total
                                        -------------------  ------------  ----------------------  -----------------  -------------
 
<S>                                             <C>         <C>               <C>                  <C>                  <C>     
    Balance, June 30, 1995                      1,771,503   $   4,822,000       $  (2,142,000)      $  1,739,000     $  4,419,000
 
    Net income                                                                        806,000                             806,000
 
    Repurchase of common stock                       (668)         (2,000)                                                 (2,000)
 
    Exercise of stock options (Note 10)            37,871          58,000                                                  58,000
    
 
    Foreign currency translation adjustment                                                              (74,000)         (74,000)
    
                                                ---------   -------------       -------------       ------------     ------------  
    Balance, June 28, 1996                      1,808,706   $   4,878,000       $  (1,336,000)      $  1,665,000     $  5,207,000
 
    Net income                                                                      1,002,000                           1,002,000
 
    Retirement of common stock                       (360)                                                                      0
 
    Exercise of stock options (Note 10)           128,250         197,000                                                 197,000
    
 
    Foreign currency translation adjustment                                                               57,000           57,000
    
                                                ---------   -------------       -------------       ------------     ------------  
    Balance, June 27, 1997                      1,936,596   $   5,075,000       $    (334,000)      $  1,722,000     $  6,463,000
 
    Net income                                                                        831,000                             831,000
 
    Issuance of common stock                      723,216       3,488,000                                               3,488,000
 
    Exercise of stock options (Note 10)            87,774         145,000                                                 145,000
 
    Foreign currency translation adjustment                                                           (2,164,000)      (2,164,000)
                                                ---------   -------------       -------------       ------------     ------------  
    Balance, June 26, 1998                      2,747,586   $   8,708,000       $     497,000       $   (442,000)    $  8,763,000
                                                =========   =============       =============       ============     ============
 
</TABLE>


                                 See notes to consolidated financial statements.

                                      -22-
<PAGE>
 
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                                                 Year Ended
                                                                -------------------------------------------
                                                                  June 26,        June 27,        June 28,
                                                                    1998            1997            1996
                                                                -----------     -----------     ----------- 
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                    $   831,000     $ 1,002,000     $   806,000
  Adjustments to reconcile net income to
    net cash provided by operations:
      Depreciation and amortization                                 944,000       1,359,000       1,561,000
      (Gain)/loss on sale of property and equipment                 (10,000)         67,000          82,000 
      Changes in assets and liabilities:
        Accounts receivable                                        (344,000)      1,106,000        (654,000)
        Notes and other receivables                                (114,000)         18,000           7,000
        Inventories                                                (224,000)       (363,000)       (245,000)
        Prepaid expenses and other current assets                   (21,000)       (144,000)        (38,000)
        Other assets                                               (428,000)         14,000         136,000
        Accounts payable and accrued expenses                       (58,000)       (772,000)      2,861,000
        Deferred income taxes                                      (195,000)          5,000         (99,000)
                                                                -----------     -----------     ----------- 
          Net cash provided by operating activities                 331,000       2,292,000       4,417,000
                                                                -----------     -----------     ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Certificates of deposit                                         3,157,000      (3,990,000)     (2,561,000)
  Capital expenditures                                           (2,574,000)       (926,000)     (1,821,000)
  Minority interest                                                (109,000)        991,000       1,014,000
  Proceeds from sale of property and equipment                      104,000         131,000         256,000
                                                                -----------     -----------     ----------- 
          Net cash provided by investing activities                 578,000      (3,794,000)     (3,112,000)
                                                                -----------     -----------     ----------- 
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on lines of credit                                                     (120,000)        (99,000)
   Borrowings under lines of credit                                 501,000          25,000         125,000
   Principal payments of long-term obligations                     (327,000)       (461,000)       (379,000)
   Proceeds from long-term obligations                                              213,000         492,000
   Issuance of common stock                                       3,669,000         197,000          58,000
   Repurchase of common stock                                       (36,000)                         (2,000)
                                                                -----------     -----------     ----------- 
          Net cash provided by (used in) financing activities     3,807,000        (146,000)        195,000
                                                                -----------     -----------     ----------- 
EFFECT OF EXCHANGE RATE ON CASH                                  (2,279,000)        402,000         (60,000)
NET INCREASE/(DECREASE) IN CASH                                   2,437,000      (1,246,000)      1,440,000
CASH, BEGINNING OF PERIOD                                           868,000       2,114,000         674,000
                                                                -----------     -----------     ----------- 
CASH, END OF PERIOD                                             $ 3,305,000     $   868,000     $ 2,114,000
                                                                ===========     ===========     ===========
</TABLE>

                                                                       continued

                                 See notes to consolidated financial statements.

                                      -23-
<PAGE>
 
<TABLE> 

<S>                                                             <C>             <C>             <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for:
    Interest                                                    $   254,000     $   117,000     $   144,000
    Income taxes                                                $ 1,190,000     $   845,000     $   225,000
</TABLE>

The fair value of the net assets acquired in connection with the purchase of 
Universal Systems (see Note 1) is summarized as follows:

<TABLE> 

<S>                                                             <C>             
    Net assets                                                  $   500,000
    Acquisition costs                                                24,000
                                                                -----------
    Purchase price                                              $   524,000
                                                                ===========
</TABLE> 


                                 See notes to consolidated financial statements.

                                      -24-
<PAGE>
 
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 26, 1998 JUNE 27, 1997 AND JUNE 28, 1996
--------------------------------------------------------------------------------


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation - Trio-Tech International and subsidiaries (the
    "Company" or "TTI") is a designer and manufacturer of equipment used to test
    the structural integrity of semiconductor devices that must meet high-
    reliability specifications.  The Company also owns and operates testing
    facilities that perform structural and electronic testing of semiconductor
    devices and acts as a distributor of electronic testing equipment in
    Singapore and other Southeast Asian countries. The consolidated financial
    statements include the accounts of the Company and its principal
    subsidiaries: Trio-Tech International Pte Ltd (TTI Pte), Trio-Tech Test
    Services Pte Ltd (TTTS Pte), Express Test, European Electronic Test Centre
    (EETC), Trio-Tech Bangkok (TTBk), Trio-Tech Malaysia (TTM) (a 55% owned
    subsidiary of TTI Pte), Prestal Enterprise Sdn Bhd (PESB) (a 73% owned
    subsidiary of TTI Pte) and Universal Systems.   All material intercompany
    transactions, profits and balances have been eliminated.

    Use of Estimates -  The preparation of financial statements in conformity
    with generally accepted accounting principles 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 date
    of the financial statements and the reported amounts of revenues and
    expenses during the reporting period.  Actual results could differ from
    those estimates.

    Accounting Period -  The Company's fiscal reporting period coincides with
    the 52-53 week period ending on the last Friday in June.

    Cash and Cash Deposits - Cash and cash deposits consists of bank balances
    and amounts invested in interest earning instruments having a maturity of 12
    months or less.  Approximately $3,000,000 of cash is held in the Company's
    55% owned Malaysian subsidiary. $1,300,000 of this cash is denominated in
    the currency of Malaysia.  On September 1, 1998, the government of Malaysia
    announced its intention to limit the movement of certain cash balances
    denominated in Malaysian currency.

    Inventories- Inventories are stated at the lower of cost, using the first-
    in, first-out (FIFO) method, or market.

    Property and Equipment - Property and equipment and capitalized leases are
    stated at cost, less accumulated depreciation and amortization. Depreciation
    and amortization are provided over the estimated useful lives of the assets
    or the terms of the leases, whichever are shorter, using the straight-line
    method. Estimated useful lives range from 3 to 45 years. Capital grants from
    the Industrial Development Authority in Ireland are accounted for when
    claimed by reducing the cost of the related assets. The grants are amortized
    over the depreciable lives of those assets.

    Foreign Currency Translation - All assets and liabilities of operations
    outside the United States have been translated at the foreign exchange rates
    in effect at year-end.  Revenues and expenses for the year are translated at
    average exchange rates in effect during the year.  Unrealized translation
    gains and losses are not included in determining net income but are
    accumulated and reported as a separate component of shareholders' equity.
    Net realized gains and losses resulting from foreign currency transactions
    are credited or charged to income.

    73% of the Company's revenues are earned in Singapore, Malaysia and
    Thailand.  These countries have been significantly affected, and will
    continue to be affected, by currency volatility in the Southeast Asia
    Region.

    Other Assets - The excess of cost over net assets acquired is included in
    other assets and is being amortized over 5-10 years.  The Company reviews
    the carrying value of all intangible assets on a regular basis, and if
    future cash flows are believed insufficient to recover the remaining
    carrying value of an intangible asset, the carrying value is written down in
    the period the impairment is identified to its estimated fair value.

    Taxes on Income - Deferred taxes are computed annually for differences
    between the financial statement basis and tax basis of assets and
    liabilities that will result in taxable or deductible amounts in the future.
    Such deferred income tax asset and liability computations are based on
    enacted tax laws and rates applicable to periods in which the differences
    are expected to reverse. Valuation allowances are established when necessary
    to reduce deferred income tax assets to the amount expected to be realized.

                                      -25-
<PAGE>
 
    Retained earnings - It is the intention of the Company to reinvest earnings
    of its foreign subsidiaries in the operations of those subsidiaries.
    Accordingly, no provision has been made for U.S. income and foreign
    withholding taxes which would result if such earnings were repatriated. The
    amount of earnings retained in foreign subsidiaries is $6,231,000 at June
    26, 1998.
  
    Research and Development Costs - The Company incurred research and
    development costs of $158,000 in 1998, $18,782 in 1997 and $46,000 in 1996
    which were charged to cost of sales as incurred.

    Purchase of Universal Systems - In November 1997, The Company purchased
    Universal Systems, a manufacturer of wet-process stations in Campbell,
    California.  Universal was purchased for $524,000 which consisted of cash of
    $250,000, common stock of $250,000 and acquisition expenses of $24,000.

    Stock Based Compensation - In October 1995, the Financial Accounting
    Standards Board (FASB) issued Statement of Financial Accounting Standards
    (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company has
    determined that it will not change to the fair value method and will
    continue to use Accounting Principles Board Opinion No. 25 for measurement
    and recognition of employee stock-based transactions.

    Earnings per Share - The Company adopted the Statement of Financial
    Accounting Standards No. 128 ("SFAS"), "Earnings per Share". SFAS 128
    replaces the presentation of primary and fully diluted earnings per share
    ("EPS") with a presentation of basic EPS based upon the weighted-average
    number of common shares and also requires dual presentation of basic and
    diluted EPS for companies with "complex capital structures". EPS for the
    current and prior periods has been presented in conformity with the
    provisions of SFAS 128. The following table is a reconciliation of the
    weighted-average shares used in the computation of basic and diluted EPS for
    the years presented herein:

<TABLE>
<CAPTION>
                                                                        June 26,             June 27,             June 28,
                                                                          1998                 1997                 1996
                                                                  -----------------    -----------------    -----------------
<S>                                                              <C>                  <C>                 <C> 
            Net income used to compute basic
              and diluted earnings per share                         $      831,000       $    1,002,000       $      806,000
                                                                  -----------------    -----------------    -----------------
 
            Weighted average number of common
              shares outstanding - basic                                  2,413,000            1,850,000            1,793,000
 
            Dilutive effect of stock options and warrants                    71,000              111,000              136,000
                                                                  -----------------    -----------------    ----------------- 
            Number of shares used to compute
              primary earnings per share - diluted                        2,484,000            1,961,000            1,929,000
                                                                  =================    =================    =================
</TABLE>

    New Accounting Pronouncements - In June 1997, the FASB issued SFAS No. 130,
    Reporting Comprehensive Income. The Company anticipates adopting this
    standard for fiscal 1999. The Company is unable to determine whether the
    adoption will have a material impact on the financial position or results of
    operations of the Company.

    In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
    Enterprise and Related Information. The Company adopted this pronouncement
    for the year ended June 26, 1998.

    Reclassification - Certain reclassifications have been made to the previous
    year's financial statements to conform to current year presentation.

    Fair Values of Financial Instruments - The carrying value of trade accounts
    receivable, inventories, trade accounts payable and accrued expenses
    approximate the fair value due to their short-term maturities. The carrying
    value of the Company's lines of credit are considered to approximate their
    fair value because the interest rates are based on variable reference rates.
    The amount of long-term debt is not significant.

    Concentration of credit risk - Financial instruments that subject the
    Company to credit risk consists primarily of accounts receivables.
    Concentration of credit risk with respect to accounts receivable is
    generally diversified due to the number of entities composing the Company's
    customer base and their geographic dispersion. The Company had one major
    customer which accounted for 16% of the Company's sales during fiscal year
    1998; this customer represented 9% of accounts receivable at June 26, 1998.
    Two major customers which accounted for 13% and 22% of the Company's sales
    during 

                                      -26-
<PAGE>
 
    fiscal year 1997 and represented 10% and 23% of accounts receivable at June
    27, 1997. Two customers accounted for 14% and 20% of sales during fiscal
    year 1996 and represented 7% and 16% of accounts receivable at June 28,
    1996.. The Company has no significant concentration of credit risks other
    than discussed above and performs ongoing credit evaluations of its
    customers and maintains an allowance for potential credit losses. The 
    allowance for doubtful accounts is composed of:
 
<TABLE>
<CAPTION>
                                                       June 26,                    June 27,                    June 28,
                                                        1998                        1997                        1996
                                                ------------------          ------------------          ------------------
            <S>                                 <C>                            <C>                      <C>                     
              Beginning                            $       404,000             $       177,000             $        10,000
              Additions charged to
               cost and expenses                             90,000                     376,000                     178,000
              Actual write-offs                             (26,000)                   (149,000)                    (11,000)
                                                 ------------------          ------------------          ------------------
              Ending                               $        468,000             $       404,000             $       177,000
                                                 ==================          ==================          ==================
</TABLE>

2.  INVENTORIES

    Inventories consist of the following:

<TABLE>
<CAPTION>
                                                      June 26,                   June 27,         
                                                        1998                       1997           
                                                ------------------         ------------------     
            <S>                                 <C>                         <C>                   
              Raw materials                        $       905,000            $       551,000     
              Work in progress                             696,000                    526,000     
              Finished goods                               455,000                    707,000     
                                                ------------------         ------------------     
                                                   $     2,056,000            $     1,784,000     
                                                ==================         ==================     
</TABLE>

3.  PROPERTY AND EQUIPMENT 

    Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                June 26,                        June 27,
                                                                                  1998                            1997
                                                                           ------------------              ------------------
            <S>                                                            <C>                           <C>    
              Building and improvements                                     $     1,806,000                 $     2,308,000
              Leasehold improvements                                                928,000                       1,020,000
              Machinery and equipment                                             9,525,000                      10,084,000
              Furniture and fixtures                                              1,713,000                       1,853,000
              Equipment under capital leases                                        797,000                       1,328,000
                                                                         ------------------              ------------------
                                                                                 14,769,000                      16,593,000
 
              Less:
                 Accumulated depreciation and amortization                        9,427,000                      11,080,000
                 Accumulated amortization on
                  equipment under capital leases                                    673,000                       1,092,000
                                                                         ------------------              ------------------
                 Net property and equipment                                 $     4,669,000                 $     4,421,000
                                                                         ==================              ==================
</TABLE>

                                      -27-
<PAGE>
 
4.  OTHER ASSETS
    Other assets consist of the following:

<TABLE>
<CAPTION>
                                                                         June 26,                  June 27,
                                                                           1998                      1997
                                                                    ------------------        ------------------
            <S>                                                   <C>                        <C>        
               Cost in excess of net assets                                             
                 acquired, net of accumulated                                           
                 amortization of $526,000 (1998)                                        
                 and $459,000 (1997)                                   $       611,000           $       178,000
              Other                                                             15,000                    86,000
                                                                    ------------------        ------------------
              Total                                                    $       626,000           $       264,000
                                                                    ==================        ==================
</TABLE>

5.  LINES OF CREDIT
 
    The Company's subsidiary, TTI Pte, has a secured credit agreement with a
    bank which provides for a total line of credit of $3,125,000. The agreement
    contains certain debt covenants including maintaining a minimum net worth of
    $2,400,000 at TTI Pte. Borrowings under the line were $481,000 and nil at
    the end of fiscal 1998 and 1997, respectively. The interest rate on
    borrowings is at the bank's prime rate (8.25% at June 26, 1998) plus 1.25%.
    Borrowings under this agreement are collateralized by substantially all of
    TTI Pte's assets. This line of credit expires in March 1999.
  
    The Company's subsidiary, TTM has a secured credit agreement with a bank
    which provides for a total line of credit of $132,000.  At June 26, 1998 and
    June 27, 1997, there were no borrowings outstanding. The line of credit
    bears interest at the bank's reference rate (12.3% at June 26, 1998) plus
    2.75%. This line of credit expires in May 1999.
    
    The Company's subsidiary, TTBK, has a line of credit which provides for
    borrowings of approximately $48,000. Interest on the line is at the bank's
    reference rate (15.75% at June 26, 1998) plus 1.0%. There were no borrowings
    against this line as of June 26, 1998. This line of credit does not have an
    expiration date.
  
    The Company obtained a revolving line of credit of $150,000 from a bank
    bearing interest at 1.8% above the bank's reference rate (9.75% at June 26,
    1998).  Borrowings under the line amounted to $150,000 as of June 26, 1998
    and June 27, 1997.  This line of credit expires in February 1999.

6.  ACCRUED EXPENSES

    Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                         June 26,                        June 27,
                                                                           1998                            1997
                                                                    ------------------              ------------------
             <S>                                                    <C>                             <C> 
              Payroll and related                                      $     1,280,000                 $     1,655,000
              Other                                                          2,524,000                       1,950,000
                                                                    ------------------              ------------------
              Total                                                    $     3,804,000                 $     3,605,000
                                                                    ==================              ==================
</TABLE>

                                      -28-
<PAGE>
 
7.  LONG-TERM DEBT AND CAPITALIZED LEASES
 
    Long-term debt and capitalized leases consist of the following:

<TABLE>
<CAPTION>
                                                                                              June 26,                   June 27,
                                                                                                1998                       1997
                                                                                          ---------------            ---------------

           <S>                                                                         <C>                       <C>  
              Capitalized lease obligations, due in
                 various installments through 1998 bearing
                 interest at approximately 8.0% and 9.75%,
                 collateralized by leased assets (see Note 9)                            $       197,000            $       289,000
 
              Mortgage loan, due in monthly
                 installments through 2001, bearing
                 interest at 9.9%.                                                               294,000                    338,000
 
              Mortgage loan, due in monthly
                 installments through 1998, bearing interest
                 at 1.0% above bank reference rate (15.75% at
                 June 26, 1998), collateralized by land and building
                 in TTBk.                                                                        123,000                    254,000
 
              Note payable to officer and shareholder, bearing
                 interest at 10%, due January 1, 1998, unsecured.                                                            40,000
                                                                                      ------------------         ------------------
                                                                                                 614,000                    921,000
                             Less current portion                                                188,000                    198,000
                                                                                      ------------------         ------------------
                                                                                         $       426,000            $       723,000
                                                                                      ==================         ==================
</TABLE>
    Maturities of long-term debt as of June 26, 1998 are as follows (exclusive
    of capital lease obligations):

<TABLE>
<CAPTION>
              Fiscal
               Year
           ----------
          <S>                                                                <C> 
                 1999                                                          $       103,000
                 2000                                                                  134,000
                 2001                                                                  140,000
                 2002                                                                   40,000
                                                                               ---------------
                                                                               $       417,000
                                                                                ==============
</TABLE>

8.  TAXES ON INCOME

    The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                              Year Ended
                                                ----------------------------------------------------------------
                                                        June 26,               June 27,                June 28,
                                                          1998                   1997                    1996
                                                -----------------      -----------------       -----------------
           <S>                                 <C>                    <C>                      <C> 
            Current:
               Domestic                            $       24,000         $     (157,000)         $        1,000
               Foreign                                    235,000              1,426,000               1,009,000
                                                -----------------      -----------------       -----------------
                                                          259,000              1,269,000               1,010,000
                                                -----------------      -----------------       -----------------
 
            Deferred:
               Domestic                                   -                      -                       -
               Foreign                                   196,000                 (5,000)                 99,000
                                                -----------------      -----------------       -----------------
                                                   $      455,000         $    1,264,000          $    1,109,000
                                                =================      =================       =================
</TABLE>
                                                                               
                                      -29-
<PAGE>
 
The pre-tax income (loss) before minority interest related to domestic and
foreign operations is as follows:

<TABLE>
<CAPTION>
                                                                              Year Ended
                                                   -------------------------------------------------------------
                                                       June 26,                June 27,                June 28,
                                                         1998                    1997                    1996
                                                   -------------          -----------------       --------------
          <S>                                    <C>                   <C>                    <C>                 
            Domestic                              $      (18,000)         $     (137,000)         $      380,000
            Foreign                                    1,323,000               3,544,000               2,478,000
                                               -----------------       -----------------       -----------------
                                                  $    1,305,000          $    3,407,000          $    2,858,000
                                               =================       =================       =================
</TABLE>

The reconciliation between the U.S. federal statutory tax rate and the effective
income tax rate is as follows:

<TABLE>
<CAPTION>
                                                                                         Year Ended
                                                         ----------------------------------------------------------------------
                                                              June 26,                 June 27,                 June 28,
                                                               1998                     1997                     1996
                                                         --------------------     --------------------     --------------------
       <S>                                              <C>                       <C>                      <C>                      

         Statutory federal tax rate                                  35%                     35%                     35%
         Foreign income taxed at lower rates                       (11)%                   (24)%                   (22)%
         Deferred income tax asset valuation allowance                8%                     26%                     26%
         Other                                                        3%
                                                         --------------------     --------------------     --------------------
         Effective rate                                              35%                     37%                     39%
                                                         ====================     ====================     ====================
</TABLE>

The Company files income tax returns in several countries.  Income in one
country is not offset by losses in another country. Accordingly, no benefit is
provided for losses in countries except where the loss can be carried back
against income recognized in previous years. Income taxes are provided in those
countries where income is earned. The effect of providing tax against profits
while not providing benefit for losses results in an effective tax rate which
differs from the federal statutory rate.
 
The components of deferred income tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                                                         June 26,                   June 27,
                                                                          1998                       1997
                                                                --------------------       --------------------
<S>                                                            <C>                         <C>    
     Deferred income tax assets:
        Net operating loss carry forward                          $       1,245,000          $       1,087,000
        Provision for local tax                                             189,000                    153,000
        Provision for bad debts                                             181,000                    100,000
        Reserve for obsolescence                                             42,000                     82,000
        Other                                                                28,000                     58,000
                                                                --------------------       --------------------
        Total deferred income tax assets                                  1,685,000                  1,480,000
 
     Deferred income tax liabilities:
        Depreciation                                                       (315,000)                  (367,000)
        Other                                                              (265,000)                  (409,000)
                                                                --------------------       --------------------
        Total income tax liabilities                                       (580,000)                  (776,000)
                                                                --------------------       --------------------
          Subtotal                                                         1,105,000                    704,000
     Valuation allowance                                                 (1,685,000)                (1,480,000)
                                                                --------------------       --------------------
     Net deferred income tax liability                            $        (581,000)         $        (776,000)
                                                                ====================       ====================
</TABLE>


    At June 26, 1998 the Company has net operating loss carryforwards of
    approximately $2,870,000 available to offset future U.S. federal taxes,
    which expire as follows: $2,434,000 in 2005 and $436,000 in 2006.

                                      -30-
<PAGE>
 
9.  COMMITMENTS AND CONTINGENCIES

    The Company leases certain of its facilities and equipment under long-term
    agreements expiring at various dates through 2030.  Certain of these leases
    require the Company to pay real estate taxes and insurance and provide for
    escalation of lease costs based on certain indices.  Future minimum payments
    under capital leases and noncancellable operating leases as of June 26, 1998
    are as follows:

<TABLE>
<CAPTION>
                                                             Capital                           Rental
                            Fiscal Year                      Leases                          Commitment
                           -------------              --------------------              --------------------
                           <S>                        <C>                               <C>                              
                                 1999                 $          85,000                 $         344,000
                                 2000                            92,000                           220,000
                                 2001                            20,000                           104,000
                                 2002                                                              56,000
                                 2003                                                              56,000
                                 Thereafter                                                     2,082,000
                                                   --------------------              --------------------
                                 Total minimum
                                  lease payments      $         197,000                 $       2,862,000
                                                   ====================              ====================
</TABLE>

    Total rental expense on all operating leases, both cancelable and
    noncancelable, amounted to $407,000 in 1998, $371,000 in 1997 and $768,000
    in 1996.  Total rental income under sublease was $70,000 in 1998, $138,000
    in 1997 and $232,000 in 1996.

    On August 24, 1995, the Company was named in a civil action brought against
    106 defendants alleging that they may have caused or contributed to soil and
    groundwater contamination that required the plaintiff to pay $3,750,000 to
    the Federal Environmental Protection Agency to settle.  The Company has not
    yet had the opportunity to investigate the allegations.    In the opinion of
    management, based on its present information, this matter should not have a
    material impact on the Company's consolidated financial statements.

10. STOCK OPTIONS

   The Company has three stock option plans under which officers, directors and
   employees are eligible to receive options to purchase shares of the Company's
   common stock. One of these plans, adopted in 1988, has been terminated except
   for outstanding options, which are still exercisable, to purchase an
   aggregate of 188,000 shares.  Additionally, the Board of Directors issues
   non-qualified options at their discretion at a price not less than fair
   market value at the date of grant.
 
   On December 8, 1997, the Company's shareholders approved the Company's 1998
   Stock Option Plan (the 1998 Plan) under which employees, officers, directors
   and consultants receive options to purchase the Company's common stock at a
   price that is not less than 100 percent of the fair market value at the date
   of grant.  There are 300,000 shares authorized for grant under the 1998 Stock
   Option Plan.
 
   On December 8, 1997, the Company's shareholders  approved the Directors Stock
   Option Plan (the "Directors Plan") under which duly elected non-employee
   Directors and the President (if he or she is a director of the Company) of
   the Company (currently seven individuals) receive options to purchase the
   Company's common stock at a price of 85% of the fair market value of the
   underlying shares on the date of grant.  The shares are nonqualified and
   there are 150,000 shares authorized for grant under the Directors Plan.
 
   The Company applies Accounting Principles Board Opinion No. 25, Accounting
   for Stock Issued to Employees, and related interpretations in accounting for
   its Plan.  Accordingly, no compensation expense has been recognized.  Had
   compensation cost for the Company's Plan been determined based upon the fair
   value at the grant date for awards under this Plan consistent with the
   methodology prescribed under Statement of Financial Accounting Standards No.
   123, Accounting for Stock Based Compensation, the Company's net income and
   earnings per share would have been reduced to the pro  forma amounts
   indicated below:
 
                                      -31-
<PAGE>
 
<TABLE>
<CAPTION>
                                                                Year Ended                           Year Ended
                                                               June 26, 1998                       June 27, 1997
                                                            -----------------                    -----------------
          <S>                                              <C>                                  <C>                              
            Net Income:
                As Reported                               $            831,000                    $       1,002,000
                Pro forma                                 $            (25,000)                   $         440,000
 
            Basic earnings per Share:
                As Reported                               $               0.34                    $            0.51
                Pro forma                                 $             (0.01)                    $            0.23
</TABLE>
                                                                               
   The fair value of the options granted during fiscal 1998 is $7.19 on the date
   of grant using the Black Scholes option-pricing model with the assumptions
   listed below.
 
<TABLE>
<CAPTION>
                                                                  Year Ended                           Year Ended
                                                                 June 26, 1998                        June 27, 1997
                                                              -----------------                    -----------------
          <S>                                                <C>                                  <C>  
            Volatility                                                    49.3%                                41.7%
            Risk free interest rate                                  5.36-5.69%                                 6.1%
            Expected life (years)                                          3.9                                  2.1
</TABLE>

 
             The following tables summarize information concerning outstanding
   and exercisable options at June 26, 1998 and June 27, 1997.
 
<TABLE>
<CAPTION>
                                                  Year Ended June 27, 1997
----------------------------------------------------------------------------------------------------------------------------
                        Options and Warrants Outstanding                                   Options and Warrants Exercisable
--------------------------------------------------------------------------        ------------------------------------------
               Number           Weighted Average               Weighted                  Number                  Weighted
             Outstanding            Remaining                  Average                Exercisable                Average
            June 26, 1998       Contractual Life            Exercise Price           June 26, 1998            Exercise Price
         ----------------    --------------------    ---------------------        -----------------    ---------------------
        <S>                  <C>                    <C>                          <C>                  <C>                      
                   18,750                    0.45       $             1.60                   18,750       $             1.60
                   20,625                    1.45                     2.17                   20,625                     2.17
                   36,375                    2.32                     3.00                   27,281                     3.00
                   22,500                    2.32                     3.67                   11,250                     3.67
                    1,313                    2.32                     3.00                      984                     3.00
                    5,625                    3.47                     3.67                    2,813                     3.67
                   30,000                    3.58                     4.67                   30,000                     4.67
                   22,500                    3.58                     5.67                   22,500                     5.67
                   30,000                    4.27                     5.34                   30,000                     5.34
                   45,000                    4.27                     7.70                   45,000                     7.70
                   50,000                    4.35                     7.70                   12,500                     7.70
                  349,600                    4.36                     7.00                  349,600                     7.00
                    5,000                    4.45                     7.00                    1,250                     7.00
         ----------------    --------------------        -----------------        -----------------        -----------------
                  637,288                    3.91       $             6.17                  572,553       $             6.18
         ================    ====================        =================        =================        =================
</TABLE>

Included in the total option and warrants outstanding at June 26, 1998 were 
444,600 warrants issued in fiscal 1998 which permit purchase of common stock at
an average price of $7.15.

                                      -32-
<PAGE>

   The following table summarizes the stock option activity for the three years
   ended June 26, 1998:

<TABLE>
<CAPTION>
                                                                                                 Number of
                                                  Stock Options                                   Shares
         ------------------------------------------------------------------------------      -------------
        <S>                                                                                  <C>           
            Balance at June 30, 1995 (weighted average price of $2.38 per share)                   295,791
               Granted at a weighted average price of $4.50 per share                               45,750
               Exercised at a weighted average price of $1.52 per share                           (37,871)
               Canceled at a weighted average price of $1.52 per share                             (1,875)
 
            Balance at June 28, 1996 (weighted average price of $1.78 per share)                   301,796
               Granted at a weighted average price of $5.50 per share                               28,500
               Exercised at a weighted average price of $2.30 per share                          (128,250)
               Canceled at a weighted average price of $1.52 per share                             (9,084)
 
            Balance at June 27, 1997 (weighted average price of $2.06 per share)                   192,962
               Granted at a weighted average price of $7.19 per share                               87,500
               Exercised at a weighted average price of $1.66 per share                           (87,774)
               Canceled at a weighted average price of $0.00 per share                                   0
                                                                                             ------------- 
            Balance at June 26, 1998 (weighted average price of $4.77 per share)                   192,688
                                                                                             =============
                                                                                             -------------
            Options exercisable at June 26, 1998                                                   139,553
                                                                                             =============
</TABLE>

11. SHAREHOLDERS' EQUITY

    In July 1997, the Board of Directors approved a three-for-two stock split.
    The date of distribution was October 7, 1997.  All figures presented in
    these financial statements give effect to this stock split.
 
12. BUSINESS SEGMENTS

    The Company operates principally in three industry segments, the designing
    and manufacturing of equipment that tests the structural integrity of
    integrated circuits and other products which measure the rate of turn, the
    testing service industry that performs structural and electronic tests of
    semiconductor devices and the distribution of various products from other
    manufacturers in Singapore and Southeast Asia.

    The allocation of the cost of equipment, the current year investment in new
    equipment and depreciation expense have been made on the basis of the
    primary purpose for which the equipment was acquired.

    The Company's wholly owned subsidiary, TTI Pte. in Singapore (including TTI
    Pte.'s wholly owned subsidiaries TTTS Pte and TTBk, 55% owned joint venture
    of Trio-Tech Malaysia, another subsidiary wholly owned by Trio-Tech Malaysia
    and 73% owned PESB), operates in the manufacturing, the testing service and
    the distribution industry segments.

    All intersegment sales are sales from the manufacturing segment to the
    testing and distribution segment.  Corporate assets mainly consist of cash
    and prepaid expenses.  Corporate expenses mainly consist of salaries,
    insurance, professional expenses and directors' fees.

<TABLE>
<CAPTION>
                                                           1998                   1997                   1996
                                                  -------------------    -------------------    -------------------
           <S>                                     <C>                     <C>                   <C>
            Revenues:                                      
               Manufacturing                         $      6,335,000       $      6,334,000       $      6,069,000
               Testing                                      8,437,000             12,004,000             12,756,000
               Distribution                                 7,080,000              3,210,000              4,360,000
                                                   ------------------     ------------------    -------------------
                  Total revenues                     $     21,852,000       $     21,548,000       $     23,185,000
                                                   ==================     ==================    ===================
</TABLE>

                                      -33-
<PAGE>
 
<TABLE>
<CAPTION>
 
Operating profit:
<S>                                           <C>             <C>             <C>
  Manufacturing                               $  (443,000)    $  (881,000)    $  (367,000)
  Testing                                         712,000       3,772,000       3,238,000
  Distribution                                    643,000          20,000        (363,000)
                                              -----------     -----------     -----------
    Total operating profit                        912,000       2,911,000       2,508,000
                                              -----------     -----------     -----------
  Corporate income (expenses)                      57,000         146,000         204,000
                                              -----------     -----------     -----------
    Total operating profit                    $   969,000     $ 3,057,000     $ 2,712,000
                                              ===========     ===========     ===========
 
Depreciation and amortization:
  Manufacturing                               $   237,000     $   263,000     $   206,000
  Testing                                         579,000       1,074,000       1,316,000
  Distribution                                     62,000          22,000          39,000
                                              -----------     -----------     -----------
    Total depreciation and amortization       $   878,000     $ 1,359,000     $ 1,561,000
                                              ===========     ===========     ===========
 
Capital expenditures:
  Manufacturing                               $   804,000     $   469,000     $   234,000
  Testing                                       1,741,000         452,000       1,050,000
  Distribution                                     29,000           5,000         537,000
                                              -----------     -----------     -----------
    Total capital expenditures                $ 2,574,000     $   926,000     $ 1,821,000
                                              ===========     ===========     ===========
 
Identifiable assets:
  Manufacturing                               $ 7,345,000     $ 4,027,000     $ 3,650,000
  Testing                                       6,589,000      10,667,000       9,562,000
  Distribution                                  5,171,000       3,818,000       4,145,000
  Corporate                                       226,000          16,000          59,000
                                              -----------     -----------     -----------
    Total assets                              $19,331,000     $18,528,000     $17,416,000
                                              ===========     ===========     ===========
 
 
Net sales into regions:
  United States                               $ 4,408,000     $ 2,624,000     $ 2,671,000
  Southeast Asia                               15,894,000      17,999,000      19,333,000
  Ireland                                       1,550,000         925,000       1,181,000
                                              -----------     -----------     -----------
    Total net sales                           $21,852,000     $21,548,000     $23,185,000
                                              ===========     ===========     ===========
 
Operating (loss) profit:
  United States                               $    35,000     $  (151,000)    $   176,000
  Southeast Asia                                  891,000       3,077,000       2,311,000
  Ireland                                         (14,000)        (15,000)         21,000
                                              -----------     -----------     -----------
    Total operating profit                        912,000       2,911,000       2,508,000
                                              -----------     -----------     -----------
  Corporate income (expenses)                      57,000         146,000         204,000
                                              -----------     -----------     -----------
    Total operating profit                    $   969,000     $ 3,057,000     $ 2,712,000
                                              ===========     ===========     ===========
 
Assets:
  United States                               $ 5,926,000     $ 1,855,000     $ 2,143,000
  Southeast Asia                               12,545,000      15,951,000      14,422,000
  Ireland                                         860,000         722,000         851,000
                                              -----------     -----------     -----------
    Total assets                              $19,331,000     $18,528,000     $17,416,000
                                              ===========     ===========     ===========
</TABLE>

                                      -34-
<PAGE>
 
     The Company exports a portion of its equipment. Export sales by geographic
area are as follows:
<TABLE>
<CAPTION>
                                                June 26,        June 27,        June 28,
                                                  1998            1997            1996
                                              -----------     -----------     -----------
<S>                                           <C>             <C>             <C>
            Southeast Asia                    $   836,000     $ 1,179,000     $   957,000
            Europe                                558,000         153,000         646,000
            All others                            175,000         108,000         157,000
                                              -----------     -----------     -----------
                                              $ 1,569,000     $ 1,440,000     $ 1,760,000
                                              ===========     ===========     ===========
</TABLE>

 
 13.      QUARTERLY FINANCIAL DATA (UNAUDITED)
 
          The Company's summarized quarterly financial data are as follows:

<TABLE>
<CAPTION>
Year ended June 27, 1997                                 SEP. 27,           DEC. 27,           MAR. 28,           JUN. 27,
                                                    ----------------    ---------------     --------------   --------------
<S>                                                  <C>               <C>                <C>                <C>
Revenues                                             $      5,616        $     5,419         $    5,031       $      5,482
Expenses                                                    4,647              4,692              4,348              4,454
                                                    ----------------    ---------------     --------------   --------------
Income before income taxes and
        Minority interest                                     969                727                683              1,028
Income taxes                                                  421                251                228                364
                                                    ----------------    ---------------     --------------   --------------
Income before minority interest                               548                476                455                664
Minority interest                                            (379)              (274)              (157)              (331)
                                                    ----------------    ---------------     --------------   --------------
Net income                                           $        169        $       202         $      298       $        333
                                                    ================    ===============     ==============   ==============
 
Net income per share:
Basic                                                $       0.09        $      0.11         $     0.16       $       0.18
                                                    ================    ===============     ==============   ==============
 
Fully diluted                                        $       0.09       $       0.10       $       0.15       $       0.17
                                                    ================    ===============     ==============   ==============
</TABLE> 


<TABLE> 
<CAPTION>  

Year ended June 27, 1997                                 SEP. 26,           DEC. 26,           MAR. 27,           JUN. 26,
                                                    ----------------    ---------------     --------------   --------------
<S>                                                  <C>               <C>                <C>                <C>  
Revenues                                             $      5,095        $     4,811         $    5,558       $      6,388
Expenses                                                    4,674              4,572              5,330              5,970
                                                    ----------------    ---------------     --------------   --------------
 
Income before income taxes and
        Minority interest                                     421                239                228                418
Income taxes                                                  162                 95                149                 49
                                                    ----------------    ---------------     --------------   --------------
Income before minority interest                               259                144                 79                369
Minority interest                                             (48)                37                127               (136)
                                                    ----------------    ---------------     --------------   --------------
Net income                                           $        211        $       181         $      206       $        233
                                                    ================    ===============     ==============   ==============
 
Net income per share:
Basic                                                $       0.11       $       0.08       $       0.08       $       0.08
                                                    ================    ===============     ==============   ==============
 
Fully diluted                                        $       0.10       $       0.08       $       0.08       $       0.08
                                                    ================    ===============     ==============   ==============
</TABLE>

                                      -35-