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The following table sets forth the names and ages of, and the positions and offices with the company held by, each of the executive officers of the company as of March 27, 2003:

Set forth below is a brief account of the business experience during the past five years of each executive officer of the company.

Daniel W. Duval was appointed Chairman in June 2002. He served as interim Chief Executive Officer from September 2002 to February 2003. Prior thereto, he served as a Director since 1987. In addition to the company, he also serves as Director of The Manitowoc Company, Inc., Miller-Valentine Group, and Gosiger, Inc. He also served as Vice Chairman of Robbins & Myers, Inc. from January 1999 to December 1999 and President and Chief Executive Officer and Director for more than five years prior thereto.

William E. Mitchell was appointed President and Chief Executive Officer of the company in February 2003. Prior thereto, he served as Executive Vice President of Solectron Coroporation and President of Solectron Global Services, Inc. since March 1999 and previously served as Chairman, President and Chief Executive Officer of Sequel, Inc. since 1995.

Robert E. Klatell has been Executive Vice President of the company since July 1995.

Betty Jane Scheihing has been a Senior Vice President of the company since May 1996.

Peter S. Brown has been a Senior Vice President of the company and General Counsel since September 2001. Prior to joining the company, he served as the managing partner of the London office of the law firm of Pillsbury Winthrop LLP (formerly, Winthrop, Stimson, Putnam, & Roberts) for more than five years.

Michael J. Long has been President and Chief Operating Officer of NACP since July 1999. In addition, he has been a Vice President of the company for more than five years.

Jan M. Salsgiver has been President of the Americas Components group since July 1999. Prior thereto, she served as President of the Arrow Supplier Services Group since its inception in January 1998. In addition, she has been a Vice President of the company for more than five years.

Paul J. Reilly has been Chief Financial Officer since October 2001 and has served as a Vice President of the company more than five years.

Mark F. Settle has been a Vice President of the company and Chief Information Officer since November 2001. Prior to joining the company, he served as Executive Vice President, Systems and Processing at Visa International since April 1999 and previously served as Chief Information Officer at Occidental Petroleum Corporation since February 1997.

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The company owns and leases sales offices, distribution centers, and administrative facilities worldwide. The company's executive office is located in Melville, New York and occupies a 163,000 square foot facility under a long-term lease. The company owns 20 locations throughout the Americas, Europe, and the Asia/Pacific region. The company occupies over 260 additional locations under leases due to expire on various dates through 2053. The company believes its facilities are well maintained and suitable for company operations.

The company and/or its subsidiaries are parties to various legal proceedings arising in the normal course of business. It is not anticipated that any such matters will have a material adverse impact, individually and in the aggregate, on the company's financial position, liquidity, or results of operation.

None.

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The company's common stock is listed on the New York Stock Exchange (trading symbol: "ARW"). The high and low sales prices during each quarter of 2002 and 2001 were as follows:

On February 28, 2003, there were approximately 3,000 shareholders of record of the company's common stock.

The company did not pay cash dividends on its common stock during 2002 or 2001. While the board of directors considers the payment of dividends on the common stock from time to time, the declaration of future dividends will be dependent upon the company's earnings, financial condition, and other relevant factors, including debt covenants.

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The following table sets forth certain selected consolidated financial data and should be read in conjunction with the company's consolidated financial statements and related notes appearing elsewhere in this annual report:

SELECTED FINANCIAL DATA (a)

(In thousands except per share data)

For an understanding of the significant factors that influenced the company's performance during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this annual report. In May 2002, the company sold substantially all of the assets of Gates/Arrow, a business unit within the company's North American Computer Products group ("NACP") that sold commodity computer products such as printers, monitors, other peripherals, and software in North America. The disposition of the Gates/Arrow operations represents a disposal of a "component of an entity" as defined in Financial Accounting Standards Board ("FASB") Statement No. 144. Accordingly, the company's consolidated financial statements and related notes have been presented to reflect Gates/Arrow as a discontinued operation for all periods.

Consolidated sales for 2002 decreased 22.1 percent from $9.5 billion in 2001 to $7.4 billion. Sales of electronic components declined 25.6 percent, principally as a result of significantly lower demand from telecommunications and networking customers and the large contract manufacturers that serve them reflecting continued low levels of business activity in those industries. Since the beginning of the economic downturn in the industry early in 2001, the company's operating groups that service these customers have experienced the greatest absolute decline in sales levels. Sales declined by 54.1 percent to such customers in 2002, compared with the year-earlier period. In addition, contributing to the decline is lower demand in the company's core OEM businesses due to the weakened general economic conditions worldwide. Historically, in the electronics distribution industry, Europe has trailed the business cycles experienced in North America by six to nine months; however, the decline in acti vity levels in Europe are less than in North America due to the fact that in Europe sales to telecommunication and networking customers, and the contract manufacturers that serve them, is a lower percentage of total business activity than it is in North America. Sales declined in Asia/Pacific principally due to the termination of a single large customer engagement during the middle of 2001, and a 60 percent decrease in the sales of microprocessors (a product segment not considered a part of the company's core business).

Computer products sales declined 11.4 percent for 2002, compared with the year-earlier period. Beginning in mid-2001, the company's computer products businesses implemented a new strategy which focused less on sales volume and placed more emphasis on profitability. While sales of computer products declined compared with 2001, operating income increased by 33.2 percent, excluding goodwill amortization. Sales of North American mid-range computer products were relatively flat compared with 2001, while operating income increased by 38 percent, excluding goodwill amortization in 2001. Sales of low margin microprocessors in 2002 decreased by 27.9 percent compared with the year-earlier period. The OEM market continues to be impacted by reduced activity levels at large complex telecommunications and networking companies. As a result, OEM sales were down 23 percent compared with the year-earlier period. Lastly, translation of the financial statements of the company's international operations into U.S. dollars resulted in increased revenues of $118 million because of a weakening U.S. dollar in 2002 when compared with 2001.

In 2001, consolidated sales decreased by 21.4 percent from $12.1 billion in 2000 to $9.5 billion. This decline was principally due to a 27.1 percent decrease in sales of electronic components as a result of severely depressed demand at telecommunications and networking customers and the contract manufacturers that serve them, and lower demand in the company's core OEM business due to weakened general economic conditions. In addition, the company terminated a single customer engagement in the Asia/Pacific region during 2001 which resulted in a sales decline of approximately $193 million versus 2000. Sales of computer products increased by 3.5 percent in 2001 when compared with 2000. In the fourth quarter of 2000, Hewlett Packard modified its agreements with its distributors transforming the previously existing relationship from

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Consolidated sales of $12.1 billion in 2000 were 44.9 percent higher than 1999 sales of $8.3 billion. This sales increase was driven by a 60.5 percent growth in the sales of electronic components and more than $850 million of sales from acquired companies and positive market conditions for computer products offset, in part, by foreign exchange rate differences and fewer sales of low margin microprocessors. Sales of computer products were flat in 2000 when compared with 1999. Translation of the financial statements of the company's international operations into U.S. dollars resulted in reduced revenues of $466 million when compared with 1999. Excluding the impact of acquisitions and foreign exchange rate differences, sales increased by 40.2 percent over the prior year.

In May 2002, the company sold substantially all of the assets of Gates/Arrow. Total cash proceeds are estimated to be $44.7 million, subject to price adjustments, of which $41.1 million has been collected as of December 31, 2002. The assets sold consisted primarily of accounts receivable, inventories, and property and equipment. The buyer also assumed certain liabilities.

The company recorded a net loss of $6.1 million (net of related taxes of $4.1 million) on the disposal of Gates/Arrow. The loss consists of the following (in millions):

Personnel costs relate to the termination of 88 individuals employed by the Gates/Arrow business and 57 NACP warehouse personnel due to reduced activity levels as a result of the sale. Facilities costs are principally related to vacated warehouse space no longer required as a result of the sale. The write-down of assets adjusted the carrying value of the assets sold to the value agreed upon under the terms of the contract of sale.

During 2002, the company repurchased senior notes due in the fourth quarter of 2003 with a principal amount of $398.2 million. The premium paid and the related deferred financing costs written-off upon the repurchase of this debt, aggregating $12.9 million, net of related taxes, is recognized as an extraordinary loss in the company's consolidated statement of operations. As a result of this transaction, net interest expense will be reduced by approximately $31.1 million from the date of the repurchase through the 2003 maturity dates should interest rates remain the same.

In June 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets." This Statement, among other things, eliminates the amortization of goodwill and requires annual tests for determining impairment of goodwill. On January 1, 2002, the company adopted Statement No. 142, and accordingly, discontinued the amortization of goodwill. If 2001 were restated

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As required under the accounting provisions of Statement No. 142, the company completed the two steps required to identify and measure goodwill impairment for each reporting unit as of January 1, 2002. The first step involved identifying all reporting units with carrying values (including goodwill) in excess of fair value determined by reference to comparable businesses using a weighted average EBIT multiple. The reporting units identified from the first step were then measured for impairment by comparing the units' fair value to their carrying value. Those reporting units having a carrying value substantially exceeding their fair value were identified as being fully impaired, and the company fully wrote down the related goodwill. For reporting units with potential impairment, the company determined the fair value of the assets and liabilities of the unit and wrote down the goodwill to its implied fair value accordingly. The majority of the reporting units' assets and liabilities were inve ntory, accounts receivable, accounts payable and accrued expenses, which are carried at fair value. No other impairment indicators have arisen since January 1, 2002.

In determining a reporting unit, the company looked to its current reporting structure at the date of adoption and allocated goodwill to the reporting units. In most cases, the goodwill was identifiable to specific acquisitions, so the allocation was direct. The following were determined to be the reporting units of the company: (i) North American Components, (ii) North American Computer Products, (iii) individual countries for Europe Components, (iv) Europe Computer Products, (v) South America, and (vi) individual countries for Asia.

As a result of the evaluation process discussed above, the company recorded an impairment charge of $603.7 million, which was recorded as a cumulative effect of change in accounting principle at January 1, 2002. The company does not have any other intangible assets subject to valuation under Statement No. 142.

During 2002, the company's chief executive officer resigned. As a result, the company recorded a severance charge totaling $5.4 million ($3.2 million net of related taxes) principally based on the terms of his employment agreement. Included therein are provisions principally related to salary continuation, retirement benefits, and the vesting of restricted stock and options.

In mid-2001, the company took a number of significant steps, including a reduction in its worldwide workforce, salary freezes and furloughs, cutbacks in discretionary spending, deferral of non-strategic projects, consolidation of facilities, and other major cost containment and cost reduction actions, to mitigate, in part, the impact of significantly reduced revenues. As a result of these actions, the company recorded restructuring costs and other special charges of $227.6 million or $145.1 million net of related taxes. The special charges include costs associated with headcount reductions, the consolidation or closing of facilities, valuation adjustments to inventory and Internet investments, the termination of certain customer engagements, and various other miscellaneous items. Of the total charge of $227.6 million, $174.6 million reduced operating income (including $97.5 million in cost of products sold) and $53 million was recorded as a loss on investments. There were no material revisions to these actions and their related costs. A summary of the special charges included in operating income is as follows (in millions):

The company recorded a charge of $15.2 million related to personnel costs. The total number of positions eliminated was nearly 1,200, out of the then existing worldwide total of 14,150, or approximately 9 percent. The actual number of employees terminated approximated original estimates. The reduction in headcount was principally due to reduced activity levels across all functions throughout the company. There was no single group of employees or business segment that was impacted by this restructuring. Instead, it impacted both exempt and non-exempt employees across a broad range of functions including sales and marketing, warehouse employees, employees working in value-added centers, finance personnel in credit/collections and accounts payable, human resources and IT. The company's approach was to reduce its headcount in the areas with reduced activities. Of the total positions eliminated, approximately 1,000 were completed by December 31, 2001 and the remaining positions were eliminated by March 31, 2002. The company also consolidated or closed 15 facilities and accordingly recorded a charge of $10 million related to vacated leases, including write-offs of related leasehold improvements.

The company also terminated certain customer programs principally related to services not traditionally provided by the company because they were not profitable. The $38.8 million provision included charges for inventory these customers no longer required, pricing disputes, and non-cancelable purchase commitments.

The company recorded an inventory provision of $97.5 million which was included in cost of products sold. The provision related to a substantial number of parts. In addition to North America, provisions were recorded in Europe and the Asia/Pacific region. The inventory charge was principally related to product purchased for single or limited customer engagements and in certain instances from non-traditional, non-franchised sources for which no contractual protections such as return rights, scrap allowance, or price protection exist. The inventory provision was principally for electronic components. The parts were written down to estimated realizable value; in many cases to estimated scrap value or zero. At December 31, 2002, approximately 60 percent of the inventory for which a provision was made had been scrapped and approximately 30 percent of this inventory was sold at its reduced carrying value with minimal impact on gross margins. The remaining inventory provision of approximately $7 million at December 31, 2002 relates to inventory which will primarily be disposed of or scrapped by the end of 2003.

Also included in the charge was $13.1 million for IT systems and other miscellaneous items related to logistics support and service commitments no longer being used, hardware and software not utilized by the company, professional fees related to contractual obligations of certain customer terminations, and the write-off of an investment in an IT-related service provider.

As a result of the significant decline in the Internet sector during 2001, the company assessed the value of its investments early in the third quarter of 2001. In order to assess the value of its investments, the company selected a pool of comparable publicly traded companies and obtained the stock price of each company at the date of the company's original investment and in the third quarter of 2001. The percentage change in the average stock price was applied to the related investment to determine the change in the value of the investment, modified to the extent that the entity had cash to repay the investors. The company determined that certain of these investments had experienced an other than temporary decline in their realizable values. Accordingly, in the third quarter of 2001, the company recorded a charge of $53 million to write various Internet investments down to their realizable values. At December 31, 2002, the remaining book value of these investments was $2.3 million.

In connection with the restructuring costs and other special charges discussed above, operating expenses declined, in part, as a result of the reduction in workforce, cutbacks in discretionary spending, deferral of non-strategic projects, and consolidation of facilities initiated in mid-2001 as a result of the significant reduction in sales and related activities. The full financial

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In 2001, the company recorded an integration charge of $9.4 million ($5.7 million net of related taxes) related to the acquisition of Wyle Electronics and Wyle Systems (collectively, "Wyle"). In connection with the integration of Wyle, approximately 240 positions, largely performing duplicate functions, were eliminated. A summary of the integration charge is as follows (in millions):

Of the expected $8.2 million to be spent in cash, approximately $7.2 million was spent as of December 31, 2002. The remaining amount to be spent in cash will be paid from the company's cash flow from operations. Non-cash usage amounted to $1.2 million.

At December 31, 2002, the remaining restructuring costs and other special charges and various integration charges recorded in connection with the acquisition of Wyle, as well as previous acquisitions, totaling $50.7 million, of which $35.8 million is expected to be spent in cash, will be utilized as follows:

The company recorded gross profit of $1.3 billion for 2002, compared with gross profit of $1.5 billion in the year-earlier period. Included in gross profit for 2001 are restructuring costs and other special charges of $97.5 million; excluding these charges gross profit would have been $1.6 billion. The decline in gross profit, exclusive of the aforementioned restructuring costs and other special charges, is principally due to the 22.1 percent decline in sales in 2002. The gross profit margins for 2002 improved by approximately 40 basis points when compared with the year-earlier period, excluding restructuring costs and other special charges. The increase in gross profit percentage is principally due to a change in the mix of sales, which in

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The company recorded operating income of $167.5 million in 2002 as compared with $152.7 million in 2001. Included in operating income for 2002 is the severance charge of $5.4 million associated with the resignation of the company's chief executive officer. Excluding this charge, operating income for 2002 would have been $172.9 million. Included in operating income for 2001 are $174.6 million of restructuring costs and other special charges described above, the integration charge of $9.4 million associated with the acquisition of Wyle, and goodwill amortization of $48 million. Excluding these charges and goodwill amortization, operating income for 2001 would have been $384.6 million. The decrease in operating income of $211.7 million for 2002 compared with the year-earlier period, exclusive of the aforementioned special charges and goodwill amortization, is principally a result of the 22.1 percent decline in sales offset, in part, by a 9.1 percent reduction in expenses.

The company recorded gross profit of $1.5 billion for 2001, compared with gross profit of $2 billion in the year-earlier period. Included in gross profit for 2001 are the aforementioned restructuring costs and other special charges of $97.5 million; excluding these charges gross profit would have been $1.6 billion. The decline in gross profit, exclusive of the aforementioned restructuring costs and other special charges, is principally due to the decline in sales of 21.4 percent in 2001. Exclusive of the aforementioned special charges, gross profit margins for 2001 improved by approximately 20 basis points when compared with the year-earlier period. The increase in gross profit percentage is principally due to a change in the mix of sales, which is more heavily concentrated on the businesses serving core OEM customers that typically have higher margins, and fewer sales to large accounts that typically have a lower gross profit percentage. It also reflects the computer products businesse s' increasing focus on higher margin business.

The company's operating income decreased to $152.7 million in 2001 compared with $773.2 million in 2000. Excluding the aforementioned special charges, operating income for 2001 would have been $336.7 million. The decrease in operating income was due to the sudden and dramatic reduction in sales that began in the latter part of the first quarter of 2001, and accelerated thereafter.

The company recorded gross profit of $2 billion for 2000, compared with gross profit of $1.2 billion in the year-earlier period. The increase in gross profit is principally due to the increase in sales of 44.9 percent in 2000. The gross profit margins for 2000 improved by approximately 150 basis points when compared with the year-earlier period. The increase in gross profit percentage is driven by margin improvements in core component businesses in North America and Europe.

Operating income increased to $773.2 million in 2000 compared with $326.2 million in 1999. Included in 1999 is an integration charge of $24.6 million associated with the acquisition and integration of Richey Electronics, Inc. ("Richey") and the electronics distribution group of Bell Industries, Inc. ("EDG"). Excluding this charge, operating income for 1999 would have been $350.7 million. The increase in operating income, exclusive of the integration charge, was a result of increased sales in the electronic components businesses around the world and increased gross profit margins, as well as the full year impact of cost savings resulting from the integration of Richey and EDG offset, in part, by lower sales of computer products and increased spending in the company's Internet business. The increase in operating income was offset, in part, by an increase in operating expenses, excluding the integration charge discussed above, of 36.3 percent in 2000, compared with the ye ar-earlier period due to the increase in sales. Despite this increase, operating expenses as a percentage of sales were 9.2 percent, the lowest in the company's history.

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Interest expense of $152.6 million in 2002 decreased from $210.6 million in the year-earlier period as a result of significantly lower debt balances. During the past twelve months, free cash flow, defined as cash flow from operations less capital expenditures, has totaled $616.1 million, thereby permitting the company to reduce debt by $385.8 million and increase cash by $137.2 million. The positive free cash flow reflects the decline in sales coupled with improved working capital utilization.

In 2001, interest expense increased to $210.6 million compared with $169.9 million in 2000. The increase in interest expense was the result of the full year impact of interest on $1.2 billion of additional borrowings incurred in 2000 to fund acquisitions offset, in part, by the generation of $1.7 billion in cash flow from operations in 2001. The increase in cash flow from operations is due to the company's decreased working capital and capital expenditure requirements. The cash generated from operations in 2001 was utilized to reduce debt by $1.1 billion and to increase cash on hand by $501.3 million.

Interest expense of $169.9 million in 2000 increased by $63 million from 1999 as a result of increases in borrowings to fund the company's acquisitions, working capital requirements, capital expenditures, and investments in Internet joint ventures.

The company recorded an income tax provision from continuing operations at an effective tax rate of 35.1 percent in 2002, compared with a benefit for taxes at an effective tax rate of 31.4 percent in the year-earlier period. Excluding the impact of the aforementioned charges and goodwill amortization, the effective tax rate for 2002 and 2001 would have been 36.3 percent and 33.2 percent, respectively. The company's effective tax rate is principally impacted by, among other factors, the statutory tax rates in the countries in which it operates and the related level of income generated by these operations.

In 2001, the company recorded an income tax benefit at an effective tax rate of 31.4 percent, compared with a provision for taxes at an effective tax rate of 40.7 percent in 2000. Excluding the impact of the aforementioned special charges, the effective tax rate would have been 40.8 percent for 2001.

The company recorded a provision for taxes at an effective tax rate of 40.7 percent in 2000 compared with 44.8 percent in the year-earlier period. Excluding the integration charge, the effective tax rate would have been 43.6 percent in 1999. The lower rate for 2000 was due to the company's significantly increased operating income, which lowered the negative effect of non-deductible goodwill amortization on the company's effective tax rate.

The company recorded a net loss of $610.5 million for 2002, compared with $73.8 million in the year-earlier period. Included in the results for 2002 are the net loss associated with discontinued operations, an extraordinary charge associated with the prepayment of debt, a cumulative effect of change in accounting principle as mandated by FASB Statement No. 142, and the severance charge mentioned above. The net loss associated with the discontinued operations, the extraordinary charge, and the change in accounting principle are discussed in greater detail above. Included in the results for 2001 are restructuring costs and other special charges and an integration charge, also previously discussed.

The company recorded income from continuing operations of $12.1 million ($.12 per share on a basic and diluted basis) in 2002, compared with losses from continuing operations of $75.6 million in the year-earlier period. Excluding the aforementioned severance charge, income from continuing operations would have been $15.3 million ($.15 per share on a basic and diluted basis) in 2002. Included in net loss from continuing operations for 2001 are restructuring costs and other special charges of