RICHARDSON ELECTRONICS LTD/DE - 10-K Annual Report

Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended May 31, 1997

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to

Commission File No. 0-12906

RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)

Delaware 36-2096643
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)

40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices)

Registrant's telephone number including area code: (630) 208-2200

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.05 par value

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

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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]

As of August 21, 1997, there were outstanding 8,756,550 shares of Common Stock,
$.05 par value, and 3,243,081 shares of Class B Common Stock, $.05 par value,
which are convertible into Common Stock on a share for share basis, of the
registrant and the aggregate market value of such shares, based on the reported
last sales price of the Common Stock on such date, held by non-affiliates of
the registrant was approximately $50,600,000.

(Cover page continued)

Portions of the 1997 Annual Report to Stockholders of registrant for fiscal
year ended May 31, 1997 are incorporated in Parts I, II, and IV of this
Report. Portions of the registrant's Proxy Statement dated September 3, 1997
for the Annual Meeting of Stockholders scheduled to be held October 7, 1997
which will be filed pursuant to Regulation 14(A) are incorporated by
reference in Part III of this Report. Except as specifically incorporated
herein by reference, the above mentioned Annual Report to Stockholders and
Proxy Statement are not deemed filed as part of this report.

The exhibit index is located at pages 14 through 23.

PART I

Item 1. Business

The registrant (herein with its subsidiaries referred to as the "Company"
or "Richardson") operates in one industry as a specialized international value-
added distributor of electronic components, including vacuum tubes, power
semiconductors, related electronic components and security systems. These
devices are primarily used to control, switch or amplify electrical power or
signals, or as display devices in a variety of industrial, communication,
scientific and other applications. A significant portion of the Company's sales
are of replacement parts. Specialized areas of the original equipment industry
and research and development applications are also served by the Company. The
Company offers a wide range of value-added services, including among others,
labeling, testing, kitting, reloading and repackaging. The Company manufactures
certain of the electron tubes and other components it distributes.

Consolidated sales in 1997 were $255.1 million, up 6% over the prior year.
The Company believes that much of its growth is attributable to its
concentration on specialized areas of the electronics market. Historically, the
Company's primary business was the distribution of electron tubes and it
continues to be a major distributor of these products. In recent years, the
Company has followed the migration of its customers to newer technologies,
capitalizing on its expertise as a value-added distributor. Due to the
significant internal growth in other product offerings, including solid state
components, cathode ray tubes and security systems and related business
acquisitions, these product lines represented 55% of sales in fiscal 1997,
compared to 35% five years ago. The addition of new product lines is primarily
based upon compatibility with the Company's existing customer base. The Company
also seeks new applications and customers for its existing product lines.

The marketing and sales organization of the Company is divided into four
strategic business units (SBUs): Electron Device Group (EDG), Solid State and
Components (SSC), Display Products Group (DPG), and Security Systems Division
(SSD). EDG distributes power grid tubes and continuous wave magnetrons for
industrial heating applications and also thyratrons, ignitrons, receiving tubes
and special purpose tubes which are sold to many industries, including
automotive, steel, plastics and textiles companies. Power grid tube and camera
tube product lines are sold by EDG to the radio and television broadcast
industry. In addition, EDG assists other SBU's to market cathode ray tubes
(CRTs), power semiconductors and related components to the broadcast industry.
EDG also serves the avionics, marine, microwave and communications industries
with product lines including traveling wave tubes, klystrons, planar triodes,
hydrogen thyratrons, magnetrons and display storage tubes.

EDG also distributes high voltage switch tubes and x-ray tubes used in x-
ray imaging equipment and specialty tubes for analytical equipment, as well as
camera tubes, photomultipliers, switch tubes, magnetrons, hydrogen thyratrons
and imaging equipment to the medical industry. The Company believes the
increased emphasis on containment of medical costs offers significant
opportunities to supply the diagnostic medical imaging market, estimated by the
Company at $900 million. The Company's product line of replacement x-ray tubes
has been expanded to include image intensifiers, camera tubes and related
components. In 1996 the Company purchased two North American x-ray tube
reloading value-added facilities. During 1997, the Company continued its
investment in the medical imaging market and acquired a European value added
facility to supply the industry with reloaded x-ray tubes.

SSC distributes RF transistors and amplifiers, communications modules,
passive components, silicon controlled rectifiers, integrated circuits,
semiconductors, high voltage capacitors, resistors, broadcast amplifiers, and
other RF and microwave semiconductors for avionics, broadcast, communications,
data display and industrial applications.

DPG markets data display and instrumentation CRTs that are used in data
display, marine, medical, radar, and avionic applications. It also distributes
flyback transformers and various components for monitor and terminal repair.

SSD distributes closed-circuit television (CCTV) equipment, as well as
burglar, fire, intercommunication, access control and other security related
products, equipment and accessories, for both initial installation and
replacement. In addition, SSD is an approved repair service manufacturing
organization.

Sales trends for each SBU are summarized and analyzed in Management's
Discussion and Analysis on pages 4-5 of the Annual Report to Stockholders for
the Year Ended May 31, 1997 (Annual Report).

The global market for electron tubes served by EDG, is estimated by the
Company to be more than $2 billion. SSC participates in specialized segments of
the semiconductor market, distributing power semiconductors and RF and
microwave semiconductors and passive components. According to industry
estimates, European, United States and Japan-based factory sales for power
semiconductors approximate $6.5 billion. DPG estimates factory sales of CRTs
in the global market approximate $12 billion. The Company estimates that annual
wholesale sales of CCTV and related security equipment served by SSD,
approximate $975 million.

Sales of solid state components, primarily RF semiconductors, have grown
rapidly in recent years. Semiconductors have been replacing electron tubes in
many applications, such as low power television and radio transmitters.
However, in other applications, including higher power broadcasting and certain
industrial equipment, electron tubes are more suitable than semiconductors due
to the higher power capabilities of tubes and their ability to withstand severe
environmental and other conditions which often damage semiconductors.
Semiconductors, however, continue to expand the range of their applications.
Consequently, many parts of the electron tube market in which the Company
participates, are declining. The Company countered the trend in the electron
tube market through several initiatives employed by EDG, including greater
emphasis on international sales and expansion of the sales force serving the
medical diagnostic imaging replacement market. As a result, EDG sales increased
in each of the last three years, despite an overall declining market. (See
"Management`s Discussion and Analysis of Results of Operations and Financial
Condition - Sales and Gross Margin Analysis, EDG" in the Annual Report.)

The Company has found that a replacement market for power semiconductors
exists and that many of its electron tube customers have semiconductor
requirements as well. In addition SSC's sales to original equipment
manufacturers continue to grow, accounting for approximately 64% of the SBU's
1997 sales. SSC's sales increased 9% in 1997, 30% in 1996 and 24% in 1995. In
October 1996, the SSC business unit acquired Compucon Distributors, Inc., a
distributor of interconnect devices operating in the northeastern United
States. (See "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Sales and Gross Margin Analysis, SSC" in the Annual
Report.)

The Company's sales of CRT's and other display products decreased by
18.7% in 1997, largely attributable to the loss of a customer in Europe. Both
1997 and 1996 sales were affected by product shortages as glass manufacturers
were unable to meet demand. (See "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Sales and Gross Margin
Analysis, DPG" in the Annual Report.)

SSD's sales increased 48% in 1997, 86% in 1996, and 26% in 1995. New
investment and redirection of SSD's field sales force were principally
responsible for these significant sales gains. Additionally, in February 1997,
the Company acquired Burtek Systems Inc., a security systems distributor
operating in Canada, with annual sales of $18 million. (See "Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Sales and Gross Margin Analysis, SSD" in the Annual Report.)

Significant Developments

During the third of quarter of 1997, the Company re-evaluated its reserve
estimates for inventory and accounts receivable in light of changed market
conditions and provided for severance costs associated with a corporate
reorganization. These provisions were recorded as a $7.2 million charge to cost
of sales for additional inventory reserves and a $3.8 million charge to
selling, general and administrative expenses for severance and other costs
related to the corporate reorganization. Net of tax, these charges reduced net
income by $6.7 million.

On February 15, 1997, the Company exchanged $40.0 million of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures (See Note F to the consolidated financial statements in
the Annual Report). The principal purpose of the exchange was to improve the
Company's future liquidity and capital position by refinancing a sufficient
number of the debentures to eliminate sinking fund requirements until December
15, 2004.

Products

The following is a description of the Company's major products, in order
by descending sales value:

Power Amplifier / Oscillator Tubes are vacuum or gas filled tubes used in
applications where current or voltage amplification and/or oscillation is
required. Some areas of use are: induction heating, diathermy equipment, sonic
generators, communications and radar systems and power supplies for voltage
regulation or amplification.

RF Power Transistors are solid-state high-frequency power amplifiers used
in land mobile, aircraft and satellite communications and in many types of
electronic instrumentation.

Cathode Ray Tubes ("CRTs") are vacuum tubes which convert an electrical
signal into a visual image to display information on computer terminals or
televisions. CRTs are used in various environments, including hospitals,
financial institutions, airports and numerous other applications wherever
electronic data is shared by large user groups. The product line includes both
monochrome and color monitors.

Closed-circuit Television ("CCTV") products include cameras, lenses,
monitors, scanners, time lapse recorders and associated accessories. CCTV
products are used in surveillance applications and monitoring hazardous
environments in the workplace.

Magnetrons are high vacuum oscillator tubes which are used to generate
energy at microwave frequencies. The pulsed magnetron is predominantly used to
generate high energy microwave signals for radar applications. Magnetrons are
also used in heating applications such as microwave ovens and by the medical
industry for sterilization.

High Voltage and Power Capacitors are used in industrial, avionics,
medical and broadcast applications for filtering, high-current by-pass, feed-
through capacitance for harmonic attenuation, pulse shaping, grid and plate
blocking, tuning of tank circuits, antenna coupling, and energy discharge.

Planar Triodes are high frequency triodes manufactured using a special
process to enable them to operate at several thousand megahertz (MHz). Aircraft
instrumentation and television translators use planar triodes.

X-ray Tubes are glass and glass/metal vacuum tubes which generate high-
frequency radiation for use in industrial, analytical and medical equipment.
Stationary anode x-ray tubes are used primarily for inspection and non-
destructive testing of solid materials and in crystallography. Rotating anode
x-ray tubes are primarily used in medical applications, including fluoroscopy
and computer-aided tomography (CAT-scan).

Silicon Controlled Rectifiers (SCR's) and Power Semiconductor Modules are
used in many industrial control applications because of their ability to switch
large amounts of power at high speeds. These silicon power devices are capable
of operating at up to 4,000 volts at 2,000 amperes.

Microwave Diodes are specialized diodes intended for use at microwave and
RF frequencies for oscillator, mixer, switching, and power control, and
amplifier applications in broadcast, avionic, telecommunication, medical and
industrial equipment.

Computer Terminal Components are electronic components used in repair of
computer terminals and monitors, including flyback transformers,
semiconductors, power supplies, controls and switches.

Hydrogen Thyratrons are electron tubes capable of high speed and high
voltage switching. They are used in switching of power to radar magnetrons and
lasers.

Thyratrons and Rectifiers are vacuum or gas filled tubes used to control
the flow of electrical current. Thyratrons are used to control ignitrons,
electric motor speed controls, theatrical lighting and machinery such as
printing presses and various types of medical equipment. Rectifiers are used to
restrict electric current flow to one direction in power supply applications.

Camera Tubes are vacuum tubes used to change a visible light image to an
electronic signal which are then transmitted to a monitor for conversion back
to a visible image. Camera tubes are used in broadcast, security and medical
applications.

Industrial Receiving Tubes are vacuum tubes used to regulate or amplify
small amounts of power in a wide variety of electrical and electronic
equipment. Communications, medical instrumentation, consumer electronics, and
industrial controls are typical applications for this product.

Ignitrons are mercury pool tubes used to control the flow of large amounts
of electrical current. Their primary applications are in welding equipment,
power conversion and power rectification equipment.

Distribution and Marketing

The Company buys, warehouses and distributes more than 78,000 types of
tubes and semiconductors ranging in price from $1 to $91,000 for tubes and $.10
to $4,100 for semiconductors and related components. The Company processes
approximately 725 orders per day averaging $1,410 each (for an average total of
$1,020,000 per day). The Company distributes electron tubes, power, RF and
microwave semiconductors and related products purchased from various sources,
including Communication and Power Industries, Inc. (CPI), Covimag S.A., M/A-
COM, Clinton Electronics Corp., SGS THOMSON, Philips, Varian Associates, Burle
Industries, Inc., UTI Technology, Inc., Triton Services, Inc., New Japan Radio
Corp., Sony Corp., Powerex, RF Products, Hi Sharp Electric Co., Pelco, Ericsson
Components AB, Panasonic Industrial Company, Teletube, General Electric, MPD
Inc., Litton Electron Devices, Huber & Suhner Inc., Jennings, Seiko Optical,
Semtech, and CEIEC. No single outside supplier currently accounts for more than
10% of the Company's purchases in any year, other than CPI, which accounted for
approximately 10%, 13% and 18% of purchases in fiscal 1997, 1996 and 1995,
respectively. The Company believes that the loss of any one supplier would not
cause a material adverse impact on its earnings and revenues.

CPI was formerly a business unit of Varian Associates, Inc. (Varian). On
August 14, 1995 Varian sold the assets and technology related to its electron
device business to the newly formed entity, CPI. CPI retained the same
management and operating personnel as formerly employed by Varian. The Company
believes it has broadened its vendor relationships with the formation of CPI,
as the Company is establishing new distribution agreements with other Varian
divisions.

Covimag is the entity formed to acquire the Company's former Brive, France
manufacturing operation. Formal transfer of ownership occurred in January,
1995. Covimag is managed by the same individuals previously employed by the
Company at this facility. The Company has a three year purchase commitment to
acquire various electron tube types at a cost of approximately $11 million per
year, expiring on December 31, 1997. Under a successor agreement, the Company
will negotiate a purchase commitment on an annual basis. Covimag is highly
dependent on the Company, which is its primary customer. Settlement of
purchases under the contract are at standard terms. Except for the supply
contract, the Company has no other financial commitment to or from Covimag.
Relationships under the supply contract are believed by the Company to be
satisfactory.

In addition to the agreement with Covimag, the Company has marketing
distribution agreements with various manufacturers in the tube, semiconductor,
and CCTV industries. The most significant distributor agreement is with CPI
under which the Company is the exclusive distributor of power grid tubes
throughout the world, with the exception of the United States and certain
Eastern European countries where the Company is one of CPI's stocking
distributors.

Customer orders are taken by the regional sales offices and directed to
the Company's headquarters and distribution facility in LaFox, Illinois or to
one of its international distribution centers. The Company utilizes a
sophisticated data processing network which provides on-line, real-time
interconnection of all sales offices and central distribution operations.
Information on stock availability, customers, and competitive market analyses
are instantly obtainable throughout the entire distribution network.

The Company markets its products to manufacturers and end-users in major
industries, including communications, industrial heating, marine, medical care
and avionics. The Company also sells to customers who purchase for resale,
including electronics distributors and service companies. The Company has
supply contracts, generally for a one-year term, with certain customers, and is
committed pursuant to these contracts to maintain minimum inventories so as to
provide product without significant delay. Management believes that for the
past two fiscal years approximately 20% of the Company's sales were made under
such supply contracts. The Company is not dependent on any single customer for
a significant portion of its sales.

The Company emphasizes sales to replacement markets. Some of these markets
may expand as new equipment utilizing electron tubes continues to be sold. For
example, equipment such as video monitors and computer display terminals which
use cathode ray tubes also present expanding market opportunities for
replacement purposes. New communications equipment using microwave devices
such as traveling wave tubes and klystrons and RF transistors continue to be
developed for applications with high power or high-frequency requirements that
tube technology alone can provide.

The Company's backlog of firm orders scheduled for future delivery within
12 months was $49,200,000, $43,400,000, and $46,300,000 as of May 31, 1997,
1996 and 1995, respectively. The Company's backlog primarily consists of
commercial contracts that require future shipping dates, and the 1997 increase
reflects higher contract levels for EDG while the 1996 decline reflects lower
contract levels for DPG. The Company does not believe that the backlog provides
a reliable indicator of future sales levels.

International

International sales, including export sales, represented approximately
49% of the Company's fiscal 1997 sales. These sales were $123,776,000,
$115,136,000, and $96,644,000 in fiscal years 1997, 1996 and 1995,
respectively. Export sales from the United States were $36,325,000,
$37,913,000, and $38,653,000 in 1997, 1996 and 1995. On May 31, 1997, the
Company had 88 locations throughout the world. See Note K of the "Notes to
Consolidated Financial Statements" of the Annual Report for details of the
Company's international operations, including sales, operating income and
identifiable assets.

Manufacturing

The Company distributes its manufactured products principally under the
trade names "National", "Cetron" and "Amperex". Located principally in LaFox,
Illinois, the Company's manufacturing operations, including value-added
services, accounted for approximately 8% of its product distribution
requirements in fiscal 1997. Such manufacturing operations contributed sales of
approximately $20 million in 1997 and $12 million in 1996 and in 1995. The
increase in sales of manufactured products in 1997 is principally due the
acquisition of x-ray tube and image intensifier reloading facilities in fiscal
1996.

The products currently manufactured by the Company include thyratrons and
rectifiers, power tubes, ignitrons, electronic display tubes, phototubes, SCR
assemblies and spark gap tubes. The Company also reloads and refurbishes
medical x-ray tube housings. The materials used in the manufacturing process
consist of glass bulbs and tubing, nickel, stainless steel and other metals,
plastic and metal bases, ceramics, and a wide variety of fabricated metal
components.

Research and Development

The objective of the Company's research and development is to increase the
number of applications for its products and to develop existing technology with
respect to advanced products. The Company emphasizes product development rather
than basic research. The ability of the Company to compete is, in part,
dependent upon its ability to anticipate changing market needs and to provide
the required products.

At present, a staff of 5 persons are involved, on a full- or part-time
basis, in various phases of product development. The Company's expenditures in
this area were $133,000, $166,000, and $229,000 in 1997, 1996 and 1995.

Employees

As of May 31, 1997, the Company employed 728 individuals on a full time
basis. Of these, 465 are located in the United States, including 62 employed in
administrative and clerical positions, 308 in sales and distribution, and 95 in
value-added and product manufacturing. The Company's foreign subsidiaries
employ an additional 263 individuals engaged in administration, sales and
distribution. All of the Company's employees are non-union.

Competition

Although the Company believes it is a significant distributor of electron
tubes and semiconductors in the United States, it competes worldwide with other
general line distributors and manufacturers and other distributors of
electronic components (including original equipment manufacturers), many of
which are substantially larger and have greater resources than the Company. The
Company also competes against manufacturers of semiconductors, which have
replaced electron tubes in many applications.

Patents and Trademarks

The Company acquired certain manufacturing patents and trademark rights in
connection with acquisitions, including the trademarks "National", "Cetron" and
"Amperex". The Company believes that although the patents and trademarks
obtained have value, they will not be determinative of the Company's success,
which depends principally upon its marketing technical support, product
delivery and the quality and economic value of its products.

Item 2. Properties

The Company's corporate facility and largest distribution center is owned,
located on approximately 300 acres in LaFox, Illinois, consisting of a modern,
single and two-story concrete, brick and steel constructed building containing
approximately 255,000 square feet of manufacturing, warehouse and office space.
The Company also owns a four-story building containing approximately 45,000
square feet of warehouse space on 1.5 acres in Geneva, Illinois. The Company's
United Kingdom subsidiary owns a 12,000 square foot single story brick building
in Lincoln, England which it utilizes as a sales office and warehouse hub for
European sales distribution. The Company's Spanish subsidiary owns 3,510 square
feet of office and warehouse space in a 55,000 square foot industrial concrete
building in Madrid, Spain. The Company's Italian subsidiary owns an office and
warehouse facility located in Florence, Italy of approximately 6,400 square
feet in a brick and concrete industrial condominium complex.

The Company also maintains branch sales offices in or near major cities
throughout the world, including 62 locations in North America, 12 in Europe, 9
in the Far East / Pacific Rim and 3 in Latin America. Additional warehouse
space in Geneva, Illinois is also rented on a short-term basis. The Company
leases production facilities in Texas, Virginia and the Netherlands for its
medical tube reloading operation. The Company also leases a facility from a
trust, of which Edward J. Richardson, Chairman of the Board of the Company, is
the principal beneficiary. Such facility is used by SSD as its sales office and
warehouse. Under the terms of this lease, the Company is obligated to make
rental payments of $68,705 per year, expiring in 1999. In the opinion of
management, the lease is on terms no less favorable to the Company than similar
leases which would be available from unrelated third parties.

Item 3. Legal Proceedings

No material developments have occurred in the matter of "Panache
Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd. and Varian
Associates, Inc.", pending in the United States District Court for the Northern
District of Illinois, Eastern Division, docket no. 90 C 6400. The complaint
alleges violations of Sections 1 and 2 of the Sherman Act and Section 7 of the
Clayton Act. As previously reported the matter remains primarily in the
discovery stage and the Court has not determined whether the matter may be
maintained as a class action.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended May 31, 1997.

PART II

Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters

Incorporated herein by reference to pages 8 (for dividend payments), 13
(for dividend restriction) and 17 (for market data) of the Annual Report.

Item 6. Selected Financial Data

Incorporated herein by reference to page 3 of the Annual Report.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Incorporated herein by reference to pages 4 to 6 of the Annual Report

Item 8. Financial Statements and Supplementary Data

Incorporated herein by reference to pages 7 through 16 of the Annual
Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

No event has occurred within the 24 month period prior to the date of the
Company's most recent financial statements, which would require disclosure
under Item 9 of this Report.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information concerning Directors and Executive Officers of the Company is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 7, 1997, under the
captions "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees
and Executive Officers", "ELECTION OF DIRECTORS - Affiliations" and "SECTION 16
FILINGS", which information is incorporated herein by reference.

Item 11. Executive Compensation

Incorporated herein by reference is information concerning executive
compensation contained in the Company's Proxy Statement to be used in
connection with its Annual Meeting of Stockholders scheduled to be held October
7, 1997, under the captions "ELECTION OF DIRECTORS - Directors Compensation"
and "EXECUTIVE COMPENSATION", except for captions "REPORT ON EXECUTIVE
COMPENSATION" and "PERFORMANCE GRAPH".

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information concerning security ownership of certain beneficial owners and
management is contained in the Company's Proxy Statement to be used in
connection with its Annual Meeting of Stockholders scheduled to be held October
7, 1997, under the caption "ELECTION OF DIRECTORS - Information Relating to
Directors, Nominees and Executive Officers" and "PRINCIPAL STOCKHOLDERS", which
information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information concerning certain relationships and related transactions is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 7, 1997, under the
caption "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation", which information is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following consolidated financial statements of the registrant and
its subsidiaries included on pages 7 through 16 of the Annual Report are
incorporated herein by reference:

Filing Method

Report of Independent Accountants E

1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - May 31, 1997 and 1996 E

Consolidated Statements of Operations - Years ended E
May 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows - Years ended E
May 31, 1997, 1996 and 1995

Consolidated Statements of Stockholders' Equity - E
Years ended May 31, 1997, 1996 and 1995

Notes to Consolidated Financial Statements E

The following consolidated financial information for the fiscal years
1997, 1996 and 1995 is submitted herewith:

2. FINANCIAL STATEMENT SCHEDULES:
II. Valuation and Qualifying Accounts E

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore,
have been omitted.

(b) REPORTS ON FORM 8-K.

None.

(c) EXHIBITS

Filing Method

3(a) Restated Certificate of Incorporation of the NA
Company, incorporated by reference to Appendix
B to the Proxy Statement/ Prospectus dated
November 13, 1986, incorporated by reference
to the Company's Registration Statement on
Form S-4 Commission File No. 33-8696.

3(b) By-laws of the Company, as amended. E

4(a) Specimen forms of Common Stock and Class B NA
Common Stock certificates of the Company
incorporated by reference to Exhibit 4(a)
to the Company's Registration Statement on
Form S-1, Commission File No. 33-10834.

4(b) Indenture between the Company and Continental NA
Illinois National Bank and Trust Company of
Chicago (including form of 7 1/4% Convertible
Subordinated Debentures due December 15, 2006)
incorporated by reference to Exhibit 4(b) to
the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1990.

4(b)(1) First Amendment to the Indenture between the NA
Company and First Trust of Illinois, a National
Association, as successor to Continental
Illinois National Bank and Trust Company of
Chicago, dated February 18, 1997, incorporated
by reference to Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended February 28, 1997.

4(c) Indenture between the Company and American NA
National Bank and Trust Company, as Trustee,
for 8 1/4% Convertible Senior Subordinated
Debentures due June 15, 2006 (including form of
8 1/4% Convertible Senior Subordinated
Debentures due June 15, 2006) incorporated by
reference to Exhibit 10 of the Company's
Schedule 13E-4, filed February 18, 1997.

10(a) $35,000,000 Amended and Restated Senior Revolving NA
Credit Note Facility Agreement dated August 20,
1996 with American National Bank and Trust Company
incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1997.

10(b) Industrial Building Lease, dated April 10, 1996 NA
between the Company and the American National
Bank and Trust, as trustee under Trust No. 56120
dated 2-23-83 incorporated by reference to
Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1996.

10(c) Revolving credit agreement and term loan dated NA
February 18, 1997 between Richardson Electronics
Acquisition Corporation and First Chicago NBD
Bank, Canada, together with guarantee of the
Company, incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1997.

10(d) The Corporate Plan for Retirement NA
The Profit Sharing / 401(k) Plan
Fidelity Basic Plan Document No. 07 dated
June 1, 1996, incorporated by reference to Exhibit
10(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1996.

10(e) The Company's Amended and Restated Incentive Stock NA
Option Plan effective April 8, 1987 incorporated
by reference to Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1987.

10(e)(1) First Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 incorporated by reference to
Exhibit 10(l)(1) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1989.

10(e)(2) Second Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 incorporated by reference to
Exhibit 10(l)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended
May 31, 1991.

10(e)(3) Third Amendment to the Company's Amended and NA
Restated Incentive Stock Option Plan effective
April 11, 1989 dated August 15, 1996, incorporated
by reference to the Company's Proxy Statement used
in connection with its Annual Meeting of
Stockholders held October 1, 1996.

10(f) The Company's Amended and Restated Employees Stock NA
Purchase Plan, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 2, 1985.

10(f)(1) First Amendment to Amended and Restated Employees NA
Stock Purchase Plan, incorporated by reference to
Appendix D to the Company's Proxy
Statement/Prospectus dated November 13, 1986
included in its Registration Statement on Form S-4,
Commission File No. 33-8686.

10(f)(2) Second Amendment to Amended and Restated Employees NA
Stock Purchase Plan, incorporated by reference to
Appendix E to the Company's Proxy
Statement/Prospectus dated November 13, 1986
included in its Registration Statement on Form S-4,
Commission File No. 33-8696.

10(f)(3) Third Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(3) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1990.

10(f)(4) Fourth Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(4) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1991.

10(f)(5) Fifth Amendment to Amended and Restated Employees NA
Stock Purchase Plan incorporated by reference to
Exhibit 10(m)(5) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1991.

10(f)(6) Sixth Amendment to Amended and Restated Employees NA
Stock Purchase Plan dated August 15, 1996,
incorporated by reference to the Company's Proxy
Statement used in connection with its Annual
Meeting of Stockholders held October 1, 1996.

10(g) Richardson Electronics, Ltd. Employees 1996 Stock NA
Purchase Plan incorporated by reference to
Appendix A of the Company's Proxy Statement dated
September 3, 1996 for its Annual Meeting of
Stockholders held on October 1, 1996.

10(h) Employees Stock Ownership Plan and Trust Agreement, NA
effective as of June 1, 1987, dated July 14, 1994,
incorporated by reference to Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1994.

10(h)(1) First Amendment to Employees Stock Ownership Plan NA
and Trust Agreement, dated July 12, 1995,
incorporated by reference to Exhibit 10(g)(1) to
the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995.

10(h)(2) Second Amendment to Employees Stock Ownership Plan NA
and Trust Agreement, dated July 12, 1995, dated
April 10, 1996, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 1, 1996.

10(i) Stock Option Plan for Non-Employee Directors NA
incorporated by reference to Appendix A to the
Company's Proxy Statement dated August 30, 1989
for its Annual Meeting of Stockholders held on
October 18, 1989.

10(j) Richardson Electronics, Ltd. 1996 Stock Option Plan NA
for Non-Employee Directors, incorporated by
reference to Appendix C of the Company's Proxy
Statement dated September 3, 1996 for its Annual
Meeting of Stockholders held on October 1, 1996.

10(k) The Company's Employees' Incentive Compensation Plan NA
incorporated by reference to Appendix A to the
Company's Proxy Statement dated August 31, 1990 for
its Annual Meeting of Stockholders held on
October 9, 1990.

10(k)(1) First Amendment to Employees Incentive Compensation NA
Plan incorporated by reference to Exhibit 10(p)(1)
to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1991.

10(k)(2) Second Amendment to Employees Incentive Compensation NA
Plan dated August 15, 1996, incorporated by reference
to the Company's Proxy Statement used in connection
with its Annual Meeting of Stockholders held
October 1, 1996.

10(l) Richardson Electronics, Ltd. Employees' 1994 NA
Incentive Compensation Plan incorporated by reference
to Exhibit A to the Company's Proxy Statement dated
August 31, 1994 for its Annual Meeting of
Stockholders held on October 11, 1994.

10(l)(1) First Amendment to the Richardson Electronics, Ltd. NA
Employees' 1994 Incentive Compensation Plan dated
August 15, 1996, incorporated by reference to the
Company's Proxy Statement used in connection with
its Annual Meeting of Stockholders held
October 1, 1996.

10(m) Richardson Electronics, Ltd. 1996 Incentive NA
Compensation Plan incorporated by reference to
Appendix B of the Company's Proxy Statement dated
September 3, 1996 for its Annual Meeting of
Stockholders held on October 1, 1996.

10(n) Correspondence outlining Agreement between the NA
Company and Arnold R. Allen with respect to
Mr. Allen's employment by the Company, incorporated
by reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K, for the fiscal year
ended May 31, 1985.

10(n)(1) Letter dated February 3, 1992 between the Company NA
and Arnold R. Allen outlining Mr. Allen's engagement
as a consultant by the Company, incorporated by
reference to Exhibit 10(r)(1) to the Company's
Annual Report on Form 10-K, for the fiscal year
ended May 31, 1992.

10(n)(2) Letter dated April 1, 1993 between the Company and NA
Arnold R. Allen regarding Mr. Allen's engagement as
consultant by the Company, incorporated by reference
to Exhibit 10(i)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1994.

10(o) Letter dated January 14, 1992 between the Company NA
and Jacques Bouyer setting forth the terms of
Mr. Bouyer's engagement as a management consultant
by the Company for Europe, incorporated by reference
to Exhibit 10(t)(1) to the Company's Annual Report
on Form 10-K for the fiscal year ended on
May 31, 1992.

10(o)(1) Letter dated January 15, 1992 between the Company NA
and Jacques Bouyer setting forth the terms of
Mr. Bouyer's engagement as a management consultant
by the Company for the United States, incorporated
by reference to Exhibit 10(t)(1) to the Company's
Annual Report on Form 10-K for the fiscal year
ended on May 31, 1992.

10(p) Letter dated January 13, 1994 between the Company NA
and Samuel Rubinovitz setting forth the terms of
Mr. Rubinovitz' engagement as management consultant
by the Company incorporated by reference to Exhibit
10(m) to the Company's Annual Report on Form 10-K
for the fiscal year ended on May 31, 1994.

10(q) Letter dated April 4, 1994 between the Company NA
and Bart F. Petrini setting forth the terms of
Mr. Petrini's employment by the Company,
incorporated by reference to Exhibit 10(o) to
the Company's Annual Report on Form 10-K for
the fiscal year ended on May 31, 1994.

10(r) Letter dated May 20, 1994 between the Company NA
and William J. Garry setting forth the terms of
Mr. Garry's employment by the Company,
incorporated by reference to Exhibit 10(p) to
the Company's Annual Report on Form 10-K for the
fiscal year ended on May 31, 1994.

10(s) Letter dated October 17, 1994 between the Company NA
and Flint Cooper setting forth the terms of
Mr. Cooper's employment by the Company,
incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1994.

10(t) Agreement dated January 16, 1997 between the NA
Company and Dennis Gandy setting forth the terms
of Mr. Gandy's employment by the Company,
incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1997.

10(u) Agreement dated March 21, 1997 between the Company NA
and David Gilden setting forth the terms of
Mr. Gilden's employment by the Company,
incorporated by reference to Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1997.

10(v) The Company's Directors and Officers Liability NA
Insurance Policy issued by Chubb Group of Insurance
Companies Policy Number 8125-64-60A, incorporated
by reference to Exhibit 10(t) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1991.

10(v)(1) The Company's Directors and Officers Liability NA
Insurance Policy renewal issued by Chubb Group of
Insurance Companies Policy Number 8125-64-60E,
incorporated by reference to Exhibit 10(t)(1)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1996.

10(v)(2) The Company's Excess Directors and Officers NA
Liability and Corporate Indemnification Policy
issued St. Paul Mercury Insurance Company Policy
Number 900DX0216, incorporated by reference to
Exhibit 10(t)(2) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1996.

10(v)(3) The Company's Directors and Officers Liability NA
Insurance Policy issued by CNA Insurance Companies
Policy Number DOX600028634, incorporated by
reference to Exhibit 10(t)(3) to the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.

10(w) Distributor Agreement, executed August 8, 1991, NA
between Registrant and Varian Associates, Inc.,
incorporated by reference to Exhibit 10(d) of
the Company's Current Report on Form 8-K for
September 30, 1991.

10(w)(1) Amendment, dated as of September 30, 1991, NA
between Registrant and Varian Associates, Inc.,
incorporated by reference to Exhibit 10(e) of the
Company's Current Report on Form 8-K for
September 30, 1991.

10(w)(2) First Amendment to Distributor Agreement between NA
Varian Associates, Inc. and the Company as of
April 10, 1992, incorporated by reference to
Exhibit 10(v)(5) of the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1992.

10(w)(3) Consent to Assignment and Assignment dated NA
August 4, 1995 between Registrant and Varian
Associates Inc., incorporated by reference to
Exhibit 10(s)(4) of the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1995.

10(w)(4) Final Judgment, dated April 1, 1992, in the matter NA
of "United States of America v. Richardson
Electronics, Ltd.", filed in the United States
District Court for the Northern District of
Illinois, Eastern Division, as Docket No. 91 C 6211
incorporated by reference to Exhibit 10(v)(7) to
the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1992.

10(x) Trade Mark License Agreement dated as of NA
May 1, 1991 between North American Philips
Corporation and the Company incorporated by
reference to Exhibit 10(w)(3) of the Company's
Annual Report on Form 10-K for the fiscal year
ended May 31, 1991.

10(y) Agreement among Richardson Electronics, Ltd., NA
Richardson Electronique S.A., Covelec S.A. (now
known as Covimag S.A.), and Messrs. Denis Dumont
and Patrick Pertzborn, delivered February 23, 1995,
translated from French, incorporated by reference
to Exhibit 10(b) to the Company's Report on Form
8-K dated February 23, 1995.

10(z) Settlement Agreement by and between the United NA
States of America and Richardson Electronics, Ltd.
dated May 31, 1995 incorporated by reference to
Exhibit 10(a) to the Company's Report on Form 8-K
dated May 31, 1995.

10(a)(a) Employment agreement dated as of November 7, 1996 NA
between the Company and Bruce W. Johnson
incorporated by reference to Exhibit (c)(4) of the
Company's Schedule 13 E-4, filed December 18, 1996.

11 Statement re-computation of net income per share. E

13 Annual Report to Stockholders for fiscal year E
ending May 31, 1997 (except for the pages and
information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report to
Stockholders is provided solely for the
information of the Securities and Exchange
Commission and is not deemed "filed" as part of
this Form 10-K).

21 Subsidiaries of the Company. E

23 Consent of Independent Auditors. E

27 Financial Data Schedule. E

SIGNATURES

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.

RICHARDSON ELECTRONICS, LTD.

By:/s/ By:/s/
Edward J. Richardson, Bruce W. Johnson,
Chairman of the Board and President and Chief Operating
Chief Executive Officer Officer

By:/s/
William J. Garry
Vice President and
Date: August 27, 1997 Chief Financial Officer

Pursuant to the requirements 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/ /s/
Edward J. Richardson, Chairman Bruce W. Johnson, President,
of the Board, Chief Executive Chief Operating Officer,
Officer(principle executive and Director
officer) and Director August 27, 1997
August 27, 1997

/s/ /s/
William J. Garry, Vice President Ad Ketelaars, Director
and Chief Financial Officer August 27, 1997
(principal financial and accounting
officer) and Director
August 27, 1997

/s/ /s/
Scott Hodes, Director Samuel Rubinovitz, Director
August 27, 1997 August 27, 1997

/s/ /s/
Arnold R. Allen, Director Kenneth J. Douglas, Director
August 27, 1997 August 27, 1997

/s/ /s/
Jacques Bouyer, Director Harold L. Purkey, Director
August 27, 1997 August 27, 1997

The following portions of the Company's Annual Report to Stockholders for
the Year Ended May 31, 1997 are incorporated by reference. The page numbers as
indicated are the same as the printed copy which was distributed to the
shareholders.

Five-Year Financial Review

Statement of Operations Data Year Ended
May 31
(in thousands, except per share amounts) 1997 (1) 1996 1995 (2)
1994 (3) 1993
---------- ---------- ---------
- - ---------- ----------

Net sales $ 255,139 $ 239,667 $ 208,118
$ 172,094 $ 159,215
Cost of products sold 187,675 169,123 152,785
151,203 111,620
Selling, general and administrative expenses 62,333 52,974 48,674
41,226 38,070
Other expense, net 7,856 5,559 4,028
5,874 5,023
---------- ---------- ---------
- - ---------- ----------
Income (loss) before income taxes
and extraordinary item (2,725) 12,011 2,631
(26,209) 4,502
Income tax provision (benefit) (1,720) 3,900 150
(6,400) 1,700
---------- ---------- ---------
- - ---------- ----------
Income (loss) before extraordinary item (1,005) 8,111 2,481
(19,809) 2,802
Extraordinary gain (loss), net of tax (488) -- 527
- -- --
---------- ---------- ---------
- - ---------- ----------
Net income (loss) $ (1,493) $ 8,111 $ 3,008
$ (19,809) $ 2,802
========== ==========
========== ========== ==========
Income (loss) per share:
Before extraordinary item $ (.08) $ .68 $ .21
$ (1.75) $ .25
Extraordinary gain (loss), net of tax (.04) -- .05
- -- --
---------- ---------- ---------
- - ---------- ----------
Net income (loss) per share $ (.12) $ .68 $ .26
$ (1.75) $ .25
========== ==========
========== ========== ==========
Dividends per common share $ .16 $ .16 $ .16
$ .16 $ .16
========== ==========
========== ========== ==========

Balance Sheet Data May 31
(dollars in thousands) 1997 1996 1995
1994 1993
---------- ---------- ---------
- - ---------- ----------
Receivables $ 53,333 $ 48,232 $ 42,768
$ 34,901 $ 30,267
Inventories 92,194 94,327 81,267
73,863 86,955
Working capital, net 140,821 133,151 106,235
96,494 103,987
Investments 2,152 2,190 7,070
17,836 29,080
Property, plant and equipment, net 17,526 16,054 16,388
16,932 36,242
Total assets 192,514 180,158 173,514
179,467 205,043
Long-term debt 107,275 92,025 79,647
86,421 98,855
Stockholders' equity 59,590 62,792 56,154
52,573 75,417

(1) In 1997, the Company recorded special charges for severance and
other costs related to a corporate reorganization and a re-evaluation
of reserve estimates which increased cost of products sold by
$7,200,000 and selling, general and administrative expenses by
$3,800,000. Net of tax, these charges reduced income by $6,712,000, or
$.56 per share. The Company also recorded an extraordinary loss of
$800,000, less a related tax benefit of $312,000, or $.04 per share,
on the exchange of certain of the Company's debentures. (See Note B to
the Consolidated Financial Statements.)

(2) In 1995, the Company recorded a charge which reduced gross margin
by $4,700,000 and net income by $2,300,000, or $.25 per share, for the
settlement of a claim related to a 1989 contract. (See Note B to the
Consolidated Financial Statements.)

(3) In 1994, cost of products sold included a $26,500,000 provision,
of which $21,400,000 was for the disposition of the Company's
manufacturing operations in Brive, France, and $5,100,000 for
incremental costs related to a provision for the phase-down of
domestic manufacturing operations established in 1991. Net of tax,
these charges reduced results of operations by $19,500,000, or $1.72
per share.

3

Management's Discussion and Analysis

Results of Operations

Sales and Gross Margin Analysis

The Company is a value-added distributor and manufacturer, operating in
one industry segment, electronic components. The marketing and sales structure
of the Company is organized in four strategic business units (SBUs): Electron
Device Group (EDG), Solid State and Components (SSC), Display Products Group
(DPG) and Security Systems Division (SSD). Consolidated sales in fiscal 1997
were a record $255.1 million. Sales by SBU and percent of consolidated sales
are presented in the following table:

Sales
(in thousands) 1997 % 1996 % 1995 %
--------- ----- --------- ----- --------- -----
EDG $113,700 44.6 $109,925 45.8 $105,454 50.7
SSC 74,209 29.1 67,976 28.4 52,409 25.2
DPG 29,377 11.5 36,154 15.1 36,502 17.5
SSD 37,853 14.8 25,612 10.7 13,753 6.6
--------- ----- --------- ----- --------- -----
Consolidated $255,139 100.0 $239,667 100.0 $208,118 100.0
========= ===== ========= ===== ========= =====

Gross margin for each SBU and margin as a percent of sales are shown in
the following table. Gross margin reflects the distribution product margin less
overstock, customer returns and other provisions. Manufacturing variances,
warranty provisions, LIFO provisions and miscellaneous costs are included under
the caption "other".

Gross Margins
(in thousands) 1997 % 1996 % 1995 %
---------- ----- --------- ----- --------- -----
EDG $ 32,220 28.3 $ 33,416 30.4 $ 30,884 29.3
SSC 19,923 26.8 20,840 30.7 16,416 31.3
DPG 8,465 28.8 13,156 36.4 12,463 34.1
SSD 8,267 21.8 5,425 21.2 3,037 22.1
---------- ----- --------- ----- --------- ----
Total 68,875 27.0 72,837 30.4 62,800 30.2
Other (1,411) (2,293) (7,467)
---------- ----- --------- ---- --------- ----
Consolidated $ 67,464 26.4 $ 70,544 29.4 $ 55,333 26.6
========== ===== ========= ==== ========= ====

On a geographic basis, the Company categorizes its sales by destination:
North America, Europe and Rest of World. Sales by geographic area and percent
of consolidated sales follow:

Sales
(in thousands) 1997 % 1996 % 1995 %
--------- ----- --------- ----- --------- -----
North America $153,221 60.1 $139,743 58.3 $123,508 59.4
Europe 55,881 21.9 57,219 23.9 46,071 22.1
Rest of World 46,037 18.0 42,705 17.8 38,539 18.5
--------- ----- --------- ----- --------- -----
Consolidated $255,139 100.0 $239,667 100.0 $208,118 100.0
========= ===== ========= ===== ========= =====

North American sales increased 9.6% in 1997, following a 13.1% increase in
1996. In both years, the sales gains were primarily attributable to SSD, and,
to a lesser extent, SSC and EDG. Sales in Europe declined 2.3% in 1997, after a
24.2% increase in 1996. In 1997, significant sales gains by SSD and SSC were
more than offset by a 32.6% decline in DPG European sales from the loss of a
customer. In 1996, SSD, DPG and SSC all had European sales gains in excess of
50%. Rest of World (ROW) sales increased 7.8% in 1997, following a 10.8% gain
in 1996. In both years, the largest ROW sales gains were achieved by SSD and
SSC.

Sales denominated in currencies other than U. S. dollars were 43%, 42%,and
39% of total sales in 1997, 1996 and 1995, respectively. Exchange rate changes
reduced foreign sales by an average of 2.9% in 1997 and increased foreign sales
by 1.0% in 1996. Gross margin for each geographic area and margin as a percent
of sales are shown in the following table.

Gross Margins
(in thousands) 1997 % 1996 % 1995 %
-------- ----- -------- ----- -------- -----
North America $40,514 26.4 $41,257 29.5 $37,100 30.0
Europe 16,194 29.0 19,186 33.5 14,753 32.0
Rest of World 12,167 26.4 12,394 29.0 10,947 28.4
-------- ----- -------- ----- -------- -----
Total 68,875 27.0 72,837 30.4 62,800 30.2
Other (1,411) (2,293) (7,467)
-------- ----- -------- ----- -------- -----
Consolidated $67,464 26.4 $70,544 29.4 $55,333 26.6
======== ===== ======== ===== ======== =====

Sales and gross margin trends are analyzed for each strategic business
unit in the following sections.

Electron Device Group

The vacuum tube industry in which EDG operates is characterized by mature
products, the emergence of tube rebuilders, and vigorous price competition. The
Company estimates that overall industry sales are declining at a 5% to 6%
annual rate. EDG's sales gains of 3.4% in 1997 and 4.2% in 1996 result from a
significant increase in market share. Foreign sales have accounted for about
56.5% of EDG's sales in each of the last three years.

The medical electronics replacement business is a growth segment of the
vacuum tube industry. Demand for replacements for x-ray, computed tomography
(CT), medical resonance imaging (MRI) and radiation therapy components is
expected to continue its growth in response to the emphasis on controlling
rising medical costs. The Company expanded its medical sales force in 1997 and
1996. In addition, in 1996 the Company acquired x-ray tube and image
intensifier reloading facilities in the United States and in 1997 established a
facility in the Netherlands. Sales in this EDG product line increased 56.5% to
$17.5 million in 1997, following a 110% increase in 1996.

Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales increased to 30.6% in 1997,
compared to 30.4% in 1996 and 29.3% in 1995. Gross margin improvement in 1997
and 1996 resulted from additional focus on pricing policies, emphasis on
proprietary product lines and value-added services.

Solid State and Components

SSC operates in several market segments, including the rapidly growing
wireless telecommunications industry. Sales increased 9.2% in 1997 to $74.2
million, following a 29.7% increase in 1996. 1997 sales were adversely impacted
by the loss of one major franchise, which resulted in a $9.6 million decline in
sales. The Company has been successful in replacing a portion of these sales
with products from other vendors and the acquisition of complimentary product
lines. Excluding this lost franchise, SSC sales increased 30.5% in 1997.
International sales represented 37.6%, 36.3% and 36.2% of SSC's sales in 1997,
1996 and 1995, respectively.

4

Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales were 30.1% in 1997,
compared to 30.7% in 1996 and 31.3% in 1995. The gradual decline in margins
reflects competitive pricing pressures and change in product mix.

Display Products Group

DPG sales declined 18.7% in 1997 and 1.0% in 1996. The 1997 sales decline
is largely attributable to the loss of a major customer in Europe. Sales in
both years were hampered by product shortages, primarily for color CRTs, as
glass manufacturers were unable to meet demand. DPG's product mix had been
shifting from monochrome to higher-priced color CRTs for several years. This
trend was reversed in 1997, as color CRT's represented 15.6% of units sold in
1997, compared to 18.0% in 1996 and 16.0% in 1995. International sales
represented 46.1%, 51.4% and 34.9% of DPG's sales in 1997, 1996 and 1995,
respectively.

Gross margins were affected in 1997 by the special charge for re-
evaluation of overstock provisions, which is described below. Excluding the
special charge, gross margins as a percent of sales were 35.1% in 1997,
compared to 36.4% in 1996 and 34.1% in 1995. The margin trend reflects the
shift in product mix.

Security Systems Division

SSD operates in the rapidly expanding security systems market. In February
1997, the Company acquired Burtek Systems Inc. (Burtek), a Canadian security
systems distributor, with annual sales of $18 million. The acquisition follows
the 1995 domestic expansion of this business when the Company doubled the size
of SSD's sales staff. These investments contributed to the 47.8% growth in
sales in 1997 and the 86.2% sales growth in 1996. International sales
represented 47.7% of SSD's sales in 1997, 38.8% in 1996, and 39.3% in 1995.

Gross margins were 21.8%, 21.2% and 22.1% of sales in 1997, 1996 and 1995.
Inventory turnover rates achieved by SSD are significantly higher than the
Company's other SBU's, which mitigates the effect of lower gross margin rates.

Cost of Sales and Gross Margins

The following table reconciles product margins on distribution activities
to gross margins reported in the Statements of Operations:

(% of sales) 1997 1996 1995
-------- -------- --------
Distribution product margin 29.9 % 31.0 % 30.7 %
Overstock provisions (3.0) (0.1) (0.5)
Customer returns and scrap (0.3) (0.7) (0.6)
Manufacturing and warranty costs (0.1) (0.3) (0.5)
Claim Settlement -- -- (2.2)
Other costs (0.1) (0.5) (0.3)
-------- -------- --------
Gross margin 26.4 % 29.4 % 26.6 %
======== ======== ========

Fluctuations in distribution margins primarily reflect the shift in
product mix as SSD sales have increased relative to total sales. Distribution
margins are also affected by changes in selling prices, product costs, and
foreign exchange rate variations. In conjunction with a corporate
reorganization and review of operations, and in response to changed market
conditions, the Company re-evaluated its reserves for overstock inventory in
the third quarter of 1997. As a result of this review, the Company provided a
$7.2 million charge to cost of sales. Average selling prices, exclude the
effects of foreign currency changes, were unchanged in 1997 and increased 2.4%
in 1996.

In May 1995, the Company paid $4.7 million in return for the release of
monetary claims related to a 1989 contract for certain night-vision tubes. This
charge was included in cost of sales. The original claim was in excess of $11
million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses represented 24.4% of sales in
1997, 22.1% in 1996 and 23.4% in 1995. In 1997, selling, general and
administrative expenses included a $3.8 million special charge for severance
and other costs related to a corporate reorganization. Excluding the special
charge, 1997 expenses increased $5.6 million over 1996, reflecting business
acquisitions and the expansion of the EDG medical and SSC sales forces.
Selling, general and administrative expenses in 1996 increased $4.3 million
over 1995 as a result of expansion of the SSC and SSD sales forces, and
incentive payments on higher gross margins.

Other (Income) Expense

Interest expense increased 15% in 1997, primarily due to higher borrowing
levels. Investment income declined to $.4 million in 1997 from $1.2 million in
1996 and $1.9 million in 1995 as a result of lower investment levels and lower
realized capital gains. Foreign exchange and other expenses primarily reflect
changes in the value of the U. S. dollar relative to foreign currencies. A
general strengthening of the dollar in fiscal 1997 and, to a lesser extent in
1996, resulted in net foreign exchange losses, while the weakening of the
dollar in fiscal 1995 generated exchange gains for the Company.

Income Tax Provision

The effective tax rates were 63.1% in fiscal 1997, 32.5% in 1996 and 5.7%
in 1995. The 1997 rate differs from the statutory rate of 34% due to the
utilization of foreign operating losses where no tax benefit was recorded in
prior years, the Company's Foreign Sales Corporation benefit on export sales,
and state income taxes. The 1995 rate differs from the U. S. statutory rate of
34% as a result of the carryback of a $4.7 million contract settlement to prior
years at a 46% statutory rate. The large fluctuations in the effective tax rate
in 1997 and 1995 reflect the magnitude of the tax preference items in relation
to the net income or loss for the year.

Net Income (Loss) and per Share Data

The comparability of net income (loss) and net income (loss) per share for
1997, 1996 and 1995 is affected by several unusual charges. In 1997, the
special charge for severance and other costs related to a corporate
reorganization and the re-evaluation of certain reserves reduced net income by
$6.7 million, or $.56 per share. In addition, the extraordinary loss resulting
from the exchange of bonds reduced net income by $.5 million, or $.04 per
share. In 1995, the settlement of a 1989 contract dispute resulted in a net
reduction in earnings of $2.3 million, or $.25 per share.

5

Financial Condition

Liquidity

Liquidity is provided by the operating activities of the Company, adjusted
for non-cash items, and is reduced by working capital requirements, debt
service, dividends and capital acquisitions. Cash provided by (used in)
operations was $3.6 million in fiscal 1997, $(7.9) million in 1996 and $(6.7)
million in 1995. Substantial investments in working capital to support rising
sales were made in each year; $7.3 million, $22.0 million and $14.6 million in
1997, 1996 and 1995, respectively. Accounts receivable increases in each year
reflect increases in sales levels. Inventory levels were held constant in 1997,
in spite of higher sales, after large investments made in 1996 and 1995.

The Company's market niche as a distributor of electron tubes and
semiconductors for replacement results in relatively high levels of inventory
due to the nature of the product carried and the markets served. Many of these
products represent trailing-edge technology which may not be available from
other sources, and may not be currently manufactured. Also, in many cases, the
products are components of production equipment for which immediate
availability is critical to the customer. Other working capital requirements in
1995 included $6.3 million for severance and other payments related to the
phase-down of manufacturing operations.

The Company has net operating loss carryforwards of $14.5 million for
U. S. federal and state tax purposes, which may reduce cash outflows in future
years. Current earnings levels, excluding the special charges in 1997, are
sufficient to realize these carryforwards before they expire.

The Company has proposed a plan to the Illinois Environmental Protection
Agency to monitor and process soil and groundwater at the LaFox facility.
Contamination is believed to have resulted from practices previously employed
at the site. The present value of the estimated future remediation costs is $.7
million, and is included in accrued liabilities.

Financing

In the first quarter of fiscal 1997, the Company amended its $25 million
senior revolving credit note agreement due November 30, 1998 to increase the
credit line to $35 million. The loan bears interest at prime or 100 basis
points over the London Inter- Bank Offered Rate (LIBOR), at the Company's
option. Net new borrowings under this line in 1997 were $9.1 million, primarily
for business acquisitions and working capital requirements. $4.7 million
remains available under this line at May 31, 1997 for future requirements.

On February 15, 1997, the Company exchanged $40.0 million of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures (See Note F). The principal purpose of the exchange was
to improve the Company's future liquidity and capital position by refinancing a
sufficient number of the debentures to eliminate sinking fund requirements
until December 15, 2004.

To complete the acquisition of Burtek, a subsidiary of the Company entered
into a revolving credit agreement and term loan aggregating $6.0 million with
an affiliate of the Company's primary bank. The loan is guaranteed by the
Company, bears interest at the Canadian prime rate and matures in November
1998.

In connection with the Company's outstanding convertible debentures,
certain restrictions relate to the purchase of treasury stock and the payment
of cash dividends. At May 31, 1997, $18.3 million was free of such
restrictions. Annual dividend payments approximate $1.9 million. The policy
regarding payment of dividends is reviewed periodically by the Board of
Directors in light of the Company's operating needs and capital structure.

Investments

At May 31, 1997, the market value of the Company's non-current investment
portfolio was $2.2 million. Included in the portfolio are high-yield
investments for which management periodically evaluates the associated market
risk. The investments are being maintained for corporate purposes which may
include short-term operating needs and strategic acquisitions of product lines
or businesses. Cash reserves, investments, funds from operations and credit
lines are expected to be adequate to meet the operational needs and future
dividends of the Company.

Several business acquisitions were made in fiscal 1997. In October 1996,
the SSC business unit acquired Compucon Distributors, Inc., a distributor of
interconnect devices operating in the northeastern United States with annual
sales of $8 million. In February, 1997, the SSD unit acquired Burtek, a
security systems distributor operating in Canada with annual sales of $18
million. The Company also acquired two smaller companies operating in the
wireless communications and diagnostic medical imaging markets, respectively.
Investing activities in 1996 included the acquisition of a medical x-ray tube
reloading facility.

Currency Fluctuations

The Company's foreign denominated assets and liabilities are cash,
accounts receivable, inventory and accounts payable, primarily in member
countries of the European community, and, to a lesser extent, in Canada,
Singapore, Japan and Latin America. The Company monitors its foreign exchange
exposures and may enter into forward contracts to hedge significant
transactions. A portion of the $35 million senior revolving credit note
agreement may be denominated in foreign currencies, at the Company's
discretion. Other tools which may be used to manage foreign exchange exposures
include the use of currency clauses in sales contracts and the use of local
debt to offset asset exposures.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995

Except for the historical information contained herein, the matters
discussed in this Annual Report (including the Annual Report on Form 10-K) are
forward-looking statements relating to future events which involve certain
risks and uncertainties, including those identified herein and in the Annual
Report on Form 10-K.

6

Consolidated Balance Sheets
May 31
(in thousands) 1997 1996
--------- ---------
Assets
Current assets
Cash and equivalents $ 10,012 $ 6,784
Receivables, less allowance of $2,102 and $1,461 53,333 48,232
Inventories 92,194 94,327
Other 10,497 8,062
--------- ---------
Total current assets 166,036 157,405

Investments 2,152 2,190
Property, plant and equipment, net 17,526 16,054
Other assets 6,800 4,509
--------- ---------
Total assets $192,514 $180,158
========= =========
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 12,766 $ 14,503
Accrued liabilities 12,449 9,751
--------- ---------
Total current liabilities 25,215 24,254
Long-term debt 107,275 92,025
Deferred income taxes 434 1,087
--------- ---------
Total liabilities 132,924 117,366

Stockholders' equity
Common Stock, $.05 par value 437 428
Class B Common Stock, convertible, $.05 par value 162 162
Preferred Stock, $1.00 par value -- --
Additional paid-in capital 53,512 52,185
Retained earnings 9,082 12,430
Foreign currency translation adjustment (3,603) (2,413)
--------- ---------
Total stockholders' equity 59,590 62,792
--------- ---------
Total liabilities and stockholders' equity $192,514 $180,158
========= =========
See notes to consolidated financial statements.

7

Consolidated Statements of Operations
Year Ended May 31
(in thousands, except per share amounts) 1997 1996 1995
--------- --------- ---------
Net sales $255,139 $239,667 $208,118
Costs and expenses:
Cost of products sold 187,675 169,123 152,785
Selling, general and administrative
expenses 62,333 52,974 48,674
--------- --------- ---------
250,008 222,097 201,459
--------- --------- ---------
Operating income 5,131 17,570 6,659
Other (income) expense:
Interest expense 7,622 6,624 6,473
Investment income (392) (1,238) (1,863)
Foreign exchange and other 626 173 (582)
--------- --------- ---------
7,856 5,559 4,028
--------- --------- ---------
Income (loss) before income taxes
and extraordinary item (2,725) 12,011 2,631
Income tax provision (benefit) (1,720) 3,900 150
--------- --------- ---------
Income (loss) before extraordinary item (1,005) 8,111 2,481

Extraordinary gain (loss), net of tax (488) -- 527
--------- --------- ---------
Net income (loss) $ (1,493) $ 8,111 $ 3,008
========= ========= =========
Income (loss) per share:
Before extraordinary item $ (.08) $ .68 $ .21
Extraordinary gain (loss), net of tax (.04) -- .05
--------- --------- ---------
Net income (loss) per share $ (.12) $ .68 $ .26
========= ========= =========
Average shares outstanding 11,892 12,002 11,566
========= ========= =========
Dividends per common share $ .16 $ .16 $ .16
========= ========= =========
See notes to consolidated financial statements.

8

Consolidated Statements of Cash Flows
Year Ended May 31
(in thousands) 1997 1996 1995
--------- --------- ---------
Operating Activities:
Net income (loss) $ (1,493) $ 8,111 $ 3,008
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Special charges 11,000 - -
Depreciation 2,627 2,709 2,669
Amortization of intangibles and
financing costs 1,318 360 427
Deferred income taxes (3,305) 2,338 1,310
Stock contribution to employee
ownership plan 800 500 500
--------- --------- ---------
Net adjustments 12,440 5,907 4,906
--------- --------- ---------
Changes in working capital, net of
currency translation effects and
business acquisitions:
Receivables (4,277) (5,310) (7,215)
Inventories 406 (12,920) (5,600)
Other current assets 253 1,567 (429)
Accounts payable (3,719) (3,448) 5,079
Accrued liabilities 28 (1,843) (6,437)
--------- --------- ---------
Net changes in working capital (7,309) (21,954) (14,602)
--------- --------- ---------
Net cash provided by (used in)
operating activities 3,638 (7,936) (6,688)
--------- --------- ---------
Financing Activities:
Proceeds from borrowings 57,890 22,200 8,000
Payments on debt (42,640) (19,679) (6,784)
Proceeds from sale of common stock 536 1,713 145
Cash dividends (1,855) (1,822) (1,779)
--------- --------- ---------
Net cash provided by (used in)
financing activities 13,931 2,412 (418)
--------- --------- ---------
Investing Activities:
Business acquisition (9,902) (1,450) -
Capital expenditures (4,004) (2,352) (2,703)
Sales of investments 3,582 11,425 22,118
Purchases of investments (3,613) (6,660) (11,335)
Other (404) 194 438
--------- --------- ---------
Net cash provided by (used in)
investing activities (14,341) 1,157 8,518
--------- --------- ---------
Increase (decrease) in cash and
equivalents 3,228 (4,367) 1,412

Cash and equivalents at beginning
of year 6,784 11,151 9,739
--------- --------- ---------
Cash and equivalents at end of year $ 10,012 $ 6,784 $ 11,151
========= ========= =========
See notes to consolidated financial statements.

9

Consolidated Statements of Stockholders' Equity

Shares Issued
--------------- Additional
(shares and dollars Class B Par Paid-in Retained Foreign
in thousands) Common Common Value Capital Earnings Currency Total
-------- -------- -------- -------- -------- -------- --------

Balance June 1, 1994 8,056 3,248 $ 565 $ 49,352 $ 4,912 $ (2,256) $ 52,573
Shares contributed to ESOP 133 -- 7 493 -- -- 500
Shares issued under ESPP
and stock option plan 35 -- 1 144 -- -- 145
Conversion of Class B shares
to common shares 1 (1) -- -- -- -- --
Dividends -- -- -- -- (1,779) -- (1,779)
Currency translation -- -- -- -- -- 1,707 1,707
Net income -- -- -- -- 3,008 -- 3,008
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1995 8,225 3,247 573 49,989 6,141 (549) 56,154
Shares contributed to ESOP 69 -- 3 497 -- -- 500
Shares issued under ESPP
and stock option plan 265 -- 14 1,699 -- -- 1,713
Conversion of Class B shares
to common shares 3 (3) -- -- -- -- --
Dividends -- -- -- -- (1,822) -- (1,822)
Currency translation -- -- -- -- -- (1,864) (1,864)
Net income -- -- -- -- 8,111 -- 8,111
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1996 8,562 3,244 590 52,185 12,430 (2,413) 62,792
Shares contributed to ESOP 84 -- 5 795 -- -- 800
Shares issued under ESPP
and stock option plan 74 -- 4 532 -- -- 536
Conversion of Class B shares
to common shares 1 (1) -- -- -- -- --
Dividends -- -- -- -- (1,855) -- (1,855)
Currency translation -- -- -- -- -- (1,190) (1,190)
Net loss -- -- -- -- (1,493) -- (1,493)
-------- -------- -------- -------- -------- -------- --------
Balance May 31, 1997 8,721 3,243 $ 599 $ 53,512 $ 9,082 $ (3,603) $ 59,590
======== ======== ======== ======== ======== ======== ========

See notes to consolidated financial statements.

10

Notes to Consolidated Financial Statements

Note A -- Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the
accounts and operations of the Company and its subsidiaries. All significant
intercompany transactions are eliminated.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company's 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.

Cash Equivalents: The Company considers short-term investments that have a
maturity of three months or less, when purchased, to be cash equivalents. The
carrying amounts reported in the balance sheet for cash and equivalents
approximate the fair market value of these assets.

Inventories: Inventories are stated at the lower of cost or market. Inventory
costs determined using the last-in, first-out (LIFO) method represent 78% of
total inventories at May 31, 1997 and 84% at May 31, 1996. For the remaining
inventories, cost is determined on the first-in, first-out (FIFO) method. If
the FIFO method had been used for all inventories, the cost of inventories
would have been increased by $4,742,000 at May 31, 1997 and $5,707,000 at May
31, 1996. However, as a result of the increase in overstock reserves recorded
in 1997, the LIFO carrying value of all inventories approximated market value
at May 31, 1997. Substantially all inventories represent finished goods held
for sale.

Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Provisions for depreciation are computed principally using the straight-
line method for financial reporting purposes. Property, plant and equipment
consist of the following:

May 31
(in thousands) 1997 1996
-------- --------
Land and improvements $ 2,620 $ 2,624
Buildings and improvements 18,251 18,052
Machinery and equipment 25,098 22,020
-------- --------
Property at cost 45,969 42,696
Accumulated depreciation (28,443) (26,642)
-------- --------
Property, net $17,526 $16,054
======== ========

Foreign Currency Translation: Foreign currency transactions and financial
statements are translated into U. S. dollars at current rates, except that
revenues, costs and expenses are translated at average rates during each
reporting period. Gains and losses resulting from foreign currency
transactions are included in income currently. Foreign currency transaction
gains (losses) reflected in operations were $(563,000), $(228,000), and
$316,000 in 1997, 1996, and 1995, respectively. Gains and losses resulting
from translation of foreign subsidiary financial statements are credited or
charged directly to a separate component of shareholders' equity.

Revenue Recognition: Revenues are recorded upon shipment.

Income Taxes: Deferred tax assets and liabilities are established for
differences between financial reporting and tax accounting of assets and
liabilities and are measured using the marginal tax rates.

Stock-Based Compensation: The Company accounts for its stock option plans in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations. As such,
compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On January 1,
1996, the Financial Accounting Standards Board issued Statement (SFAS) No. 123
"Accounting for Stock-Based Compensation", which requires estimation of the
fair value of options granted to employees. As permitted by SFAS No. 123, the
Company has elected to present this estimated fair value information in Note I,
and to continue to apply APB Opinion No. 25 for the determination of
compensation expense.

Earnings per Share: Earnings per share are based on the weighted average number
of Common and Class B Common shares outstanding and share equivalents that
would arise from the exercise of stock options. The Company's outstanding
convertible debentures were not included as share equivalents because the
effect of conversion would be anti-dilutive.

The Financial Accounting Standards Board has issued SFAS No. 128 "Earnings
per Share", which sets new guidelines for the calculation and presentation of
earnings per share data, but prohibits use of the new guidelines prior to
December 15, 1997. The purpose of the new rule is to make reporting in the
United States consistent with international practices. Under SFAS No. 128, net
income per share as currently reported would be replaced by two amounts: basic
earnings per share, which excludes all common stock equivalents, and diluted
earnings per share, which includes all dilutive common stock equivalents.
Amounts computed using these guidelines do not differ significantly from the
currently reported amounts.

Reclassifications: Certain amounts in the 1995 and 1996 financial statements
have been reclassified to conform to the 1997 presentation.

Note B -- Special Charges and Extraordinary Items

In the third quarter of fiscal 1997, the Company re-evaluated its reserve
estimates in light of changed market conditions and provided for severance and
other costs associated with a Corporate reorganization. Inventory reserve
adjustments of $7,200,000 were included in cost of sales, and provisions for

11

accounts receivable, severance and other costs of $3,800,000 were included in
selling, general and administrative expense. Collectively, these charges
amounted to $11,000,000 pre-tax or $6,712,000, net of tax, reducing earnings
per share by $.56.

Also in the third quarter of fiscal 1997, the Company recorded an $800,000
extraordinary charge for the write-off of unamortized debt issuance costs
associated with the Company's 7 1/4% convertible subordinated debentures, which
were exchanged for a new issue (See Note F). Net of tax, the charge was
$488,000, or $.04 per share.

In 1995 the Company paid $4,700,000 to the U. S. Government in return for
a release of monetary claims in connection with a contract completed in 1989.
Also during fiscal 1995, the Company repurchased $4,910,000 at face value of
its 7 1/4% convertible debentures for $3,956,000. Net of unamortized deferred
financing costs of $90,000, and income taxes of $337,000, an extraordinary gain
of $527,000 was recorded.

Note C -- Acquisitions

Several business acquisitions were made in fiscal 1997. In October 1996,
the SSC business unit acquired Compucon Distributors, Inc., a distributor of
interconnect devices operating in the northeastern United States. In February
1997, the SSD unit acquired Burtek Systems, Inc., a security systems
distributor operating in Canada with annual sales of $18,000,000. The Company
also acquired two smaller companies operating in the wireless communications
and diagnostic medical imaging markets, respectively.

Each of the acquisitions was accounted for by the purchase method, and
accordingly, their results of operations are included in the consolidated
statements of operations from the respective dates of acquisition. The impact
of these acquisitions on results of operations was not significant and would
not have been significant if they had been included for the entire year.

Note D -- Marketing Agreements

The Company is party to several marketing distribution agreements with
various manufacturers in the electron tube and semiconductor businesses. The
most significant is a distribution agreement with Communications and Power
Industries, Inc., formerly the Electron Device Group of Varian Associates, Inc.
Product sales under this distribution agreement accounted for 13%, 15%, and
17%, of net sales in fiscal 1997, 1996, and 1995, respectively.

As part of the divestiture of the Company's Brive, France, manufacturing
operations in 1994, the Company entered into a supply agreement with Covimag,
S. A., the corporation created by the local management group to continue
operating the Brive facility. Under this agreement, the Company must purchase
electron tubes valued at approximately $11,000,000 per year through calendar
1997. Under a successor agreement, the Company will negotiate a purchase
commitment on an annual basis.

Note E -- Investments

SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" requires investments to be classified as trading, available-for-
sale or held-to-maturity. Management has determined these investments are
properly classified as available-for-sale. The investment portfolio at May 31,
1997 and 1996 is stated at fair value based on quoted market prices or dealers'
quotes and consists of securities available-for-sale, as follows. All of the
bonds held by the Company have a maturity of one year or less.

Gross Gross Estimated
Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- -------- -------- --------
At May 31, 1997:
Equity securities $ 1,766 $ 206 $ (190) $ 1,782
Bonds 370 - - 370
-------- -------- -------- --------
Total investments $ 2,136 $ 206 $ (190) $ 2,152
======== ======== ======== ========
At May 31, 1996:
Equity securities $ 1,571 $ 174 $ (29) $ 1,716
Bonds 510 - (36) 474
-------- -------- -------- --------
Total investments $ 2,081 $ 174 $ (65) $ 2,190
======== ======== ======== ========

Interest and dividend income are accrued as earned. Gains and losses are
recognized in income on the investment portfolio when securities are sold or to
reflect a decline in market value estimated by management to be of a permanent
nature. Investment income includes capital gains of $47,000 in 1997, $1,121,000
in 1996 and $1,205,000 in 1995. Of these amounts, sales of equity securities
generated gains of $30,000 , $1,079,000 and $1,044,000, respectively.

Note F -- Debt Financing

Long-term debt consists of the following:

May 31
(in thousands) 1997 1996
--------- ---------
8 1/4% Convertible debentures due June, 2006 $ 40,000 $ -
7 1/4% Convertible debentures due
December, 2006 30,825 70,825
Floating-rate bank term loan due
November, 1998 (6.6% at May 31, 1997) 30,332 21,200
Revolving credit and term loan due
November, 1998 (4.6% at May 31, 1997) 5,704 -
Other 414 -
--------- ---------
Long-term debt $107,275 $ 92,025
========= =========

On February 15, 1997, the Company exchanged $40,000,000 of new 8 1/4%
convertible debentures for an equivalent face value of its outstanding 7 1/4%
convertible debentures. The new debentures are payable at maturity in June,
2006, and are convertible to common stock at $18.00 per share. The principal
purpose of the exchange was to improve the Company's future liquidity and
capital position by refinancing a sufficient number of the 7 1/4% convertible
debentures to eliminate sinking fund requirements until December 15, 2004. The

12

8 1/4% convertible debentures are subordinated to senior debt.

The 7 1/4% convertible debentures are unsecured and subordinated to other
long-term debt, including the 8 1/4% convertible debentures. Each $1,000
debenture is convertible into the Company's Common Stock at any time prior to
maturity at $21.14 per share. The Company is required to make sinking fund
payments of $3,850,000 in 2004 and $6,225,000 in 2005.

The debenture agreements restrict the use of retained earnings for the
payment of dividends or purchase of treasury stock. As of May 31, 1997,
$18,252,000 was free of such restrictions.

In November 1995, the Company entered into a $25,000,000 senior revolving
credit note agreement due November 1998. Subsequent amendments have increased
this line to $35,000,000. Financial covenants under the agreement set benchmark
levels for tangible net worth, debt to tangible net worth ratio and annual debt
service coverage. The loan bears interest at prime or 100 basis points over
LIBOR, at the Company's option.

To complete the acquisition of Burtek, a subsidiary of the Company entered
into a revolving credit and term loan agreement aggregating $6,000,000 with a
Canadian affiliate of the Company's primary bank. The loan is guaranteed by the
Company, bears interest at the Canadian prime rate and matures in November
1998.

During the next five years, maturities of debt are limited to $36,450,000
in 1999. Cash payments for interest were $7,463,000, $6,445,000, and $6,506,000
in 1997, 1996, and 1995, respectively.

In the following table, the fair values of the Company's 7 1/4% and 8 1/4%
convertible debentures are based on quoted market prices. However, trading in
the Company's bonds is infrequent amd therefore, quoted market prices may not
be indicative of the fair market value of the entire issue. The fair values of
the bank term loans are based on carrying value, adjusted for market interest
rate changes.

(in thousands) 1997 1996
------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
8 1/4% Convertible
debentures $ 40,000 $ 31,800 $ - $ -
7 1/4% Convertible
debentures 30,825 24,044 70,825 59,847

Floating-rate bank term loan 30,332 30,330 21,200 21,200
Revolving credit and term loan 5,704 5,704 - -
Other 414 414 - -
--------- --------- --------- ---------
Total $107,275 $ 92,292 $ 92,025 $ 81,047
========= ========= ========= =========

Note G -- Income Taxes
The components of income (loss) before income taxes and extraordinary item
are:

(in thousands) 1997 1996 1995
-------- -------- --------
United States $(4,558) $ 9,954 $ 781
Foreign 1,833 2,057 1,850
-------- -------- --------
Income (loss) before taxes
and extraordinary item $(2,725) $12,011 $ 2,631
======== ======== ========

The provision (credit) for income taxes differs from income taxes computed
at the federal statutory tax rate of 34% as a result of the following items:

1997 1996 1995
------ ------ ------
Federal statutory rate 34.0 % 34.0 % 34.0 %
Effect of:
State income taxes, net of
federal tax benefit 11.3 3.5 (1.4)
FSC benefit on export sales 12.3 (3.2) (10.4)
Realization of tax benefit on
prior years' foreign losses 14.7 (2.5) -
Non-deductible foreign losses (7.5) - 6.8
Claim settlement taxed at 46%
carry back year statutory rate - - (22.8)
Other (1.7) 0.7 (0.5)
------ ------ ------
Effective tax rate 63.1 % 32.5 % 5.7 %
====== ====== ======

In 1995, due to the timing and nature of a claim settlement (see Note B),
the Company utilized a ten-year carryback provision permitted by the Internal
Revenue Service.

In 1994, the Company recorded a provision of $21,400,000 for the
disposition of its Brive, France manufacturing facility. Tax benefits of
$8,000,000 will be realized if the disposition of these French operations is
treated as an ordinary loss for U. S. federal tax purposes. A tax benefit of
$5,000,000 was recorded in 1994 based upon alternative tax strategies. The
Company's U. S. federal tax return has been examined for 1994 and submitted to
the Congressional Joint Committee recommending no change to the Company's
ordinary loss position on this issue.

The provisions (credits) for income taxes before extraordinary item
consist of the following:

(in thousands) 1997 1996 1995
Currently payable: -------- -------- --------
Federal $ 299 $ 1,158 $(1,930)
State - 139 (150)
Foreign 609 274 1,250
-------- -------- --------
Total currently payable 908 1,571 (830)
Deferred:
Federal (2,626) 1,806 1,386
State (441) 498 93
Foreign 439 25 (499)
-------- -------- --------
Total deferred (2,628) 2,329 980
-------- -------- --------
Income tax provision (benefit) $(1,720) $ 3,900 $ 150
======== ======== ========

13

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Non-current deferred tax
assets and liabilities are offset on the balance sheet within tax
jurisdictions. Significant components of the Company's deferred tax assets and
liabilities as of May 31, 1997 and 1996 are as follows:

Balance sheet presentation
--------------------------
Current Noncurrent
(in thousands) Asset (1) Liability
--------- ---------
At May 31, 1997:
Deferred tax assets:
Operating loss carryforward $ - $ 1,778
Intercompany profit in inventory 1,422 -
Inventory valuation 6,312 -
Environmental and other reserves - 1,368
Other, net 14 -
--------- ---------
Deferred tax assets 7,748 3,146
Deferred tax liabilities:
Accelerated depreciation - (3,516)
Other, net - (64)
--------- ---------
Net deferred tax $ 7,748 $ (434)
========= =========
At May 31, 1996:
Deferred tax assets:
Operating loss carryforward $ - $ 1,440
Intercompany profit in inventory 1,611 -
Inventory valuation 3,462 -
Environmental and other reserves - 600
Other, net 17 271
--------- ---------
Deferred tax assets 5,090 2,311
Deferred tax liabilities:
Accelerated depreciation - (3,398)
--------- ---------
Net deferred tax $ 5,090 $ (1,087)
========= =========
(1) Included in other current assets on the balance sheet

Operating loss carryforwards of $14,483,000 for U. S. tax purposes expire
in 2009 and 2010. Net income taxes paid (refunds received) were $523,000,
$(1,112,000), and $(361,000) in 1997, 1996, and 1995, respectively.

Note H -- Accrued Liabilities

Accrued liabilities consist of the following:

May 31
(in thousands) 1997 1996
-------- --------
Compensation and payroll taxes $ 4,320 $ 3,558
Interest 2,849 2,690
Income taxes 712 314
Other accrued expenses 4,568 3,189
-------- --------
Accrued liabilities $12,449 $ 9,751
======== ========

Note I -- Stockholders' Equity

The Company has authorized 30,000,000 shares of Common Stock, 10,000,000
shares of Class B Common Stock, and 5,000,000 shares of Preferred Stock. The
Class B Common Stock has ten votes per share and generally votes together with
the Common Stock. The Class B Common Stock has transferability restrictions;
however, it may be converted into Common Stock on a share-for-share basis at
any time. With respect to dividends and distributions, shares of common stock
and Class B common stock rank equally and have the same rights, except that
Class B common stock is limited to 90% of the amount of common stock cash
dividends.

Total common stock issued and outstanding at May 31, 1997 was 8,721,315
shares. An additional 9,387,743 shares of common stock have been reserved for
future issuance under the Employee Stock Purchase and Option Plans and
potential conversion of the convertible debentures and Class B Common Stock.

The Employee Stock Purchase Plan (ESPP) provides substantially all
employees an opportunity to purchase common stock of the Company at 85% of the
stock price at the beginning of the year or the end of the year, whichever is
lower. The plan has reserved 120,687 shares for future issuance.

The Employees' 1996 Incentive Compensation Plan authorizes the issuance of
up to 800,000 shares as incentive stock options, non-qualified stock options or
stock awards. Under this plan and predecessor plans, 1,939,005 shares are
reserved for future issuance. The Plan authorizes the granting of incentive
stock options at the fair market value at the date of grant. Generally, these
options become exercisable over staggered periods and expire up to ten years
from the date of grant.

Under the 1996 Stock Option Plan for Non-Employee Directors and a
predecessor plan, 400,000 shares have been reserved for future issuance
relating to stock options exercisable based on the passage of time. Each option
is exercisable over a period from its date of grant at the market value on the
grant date and expires after ten years.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its option plans. Accordingly, no compensation expense has been
recognized for the Company's option plans in the accompanying Consolidated
Statement of Operations. Applying SFAS No. 123 requires the calculation of the
fair value of options at the date of grant using certain assumptions. The fair
value of options granted was $3.17 in 1997 and $2.81 in 1996. In addition, the
option value of shares offered under the ESPP was $1.50 in 1997 and $1.14 in
1996. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions

14

used for grants: $.16 annual dividend rate, expected annual standard deviation
of stock price of 40%, risk free interest rate of 5.2% in 1997 and 5.6% in
1996, and weighted average expected life of 6 years. Had compensation expense
for the Company's option plans and stock purchase plan been determined
consistent with SFAS No. 123, the Company's net income (loss) and net income
(loss) per share would have been as follows:

As Reported Pro Forma
---------------- ----------------
Net Income per Net Income per
(Loss) Share (Loss) Share
--------- ------ --------- -------
Fiscal 1997 $ (1,493) $(.12) $ (1,800) $ (.15)
Fiscal 1996 8,111 0.68 7,977 0.66

The effect of applying SFAS No. 123 in this pro forma disclosure is not
indicative of the effects on future years, because SFAS No. 123 does not apply
to grants issued prior to fiscal 1996.

A summary of the share activity and weighted average exercise prices for
the Company's option plans is as follows:

Outstanding Exercisable
Shares Price Shares Price
---------- ----- --------- -----
At June 1, 1994 1,104,111 $8.00 544,137 $8.44
Granted 296,100 4.02
Exercised (9,000) 3.88
Cancelled (57,918) 11.45
----------
At May 31, 1995 1,333,293 6.99 1,055,499 7.02
Granted 263,450 7.40
Exercised (245,141) 5.71
Cancelled (99,758) 9.91
----------
At May 31, 1996 1,251,844 7.10 855,404 7.16
Granted 285,800 8.00
Exercised (33,030) 4.82
Cancelled (15,812) 7.72
----------
At May 31, 1997 1,488,802 7.31 936,112 7.21
==========

The following table summarizes information about stock options outstanding
as of May 31, 1997:

Outstanding Exercisable
Exercise ---------------------- ----------------------
Price Range Shares Price Life Shares Price Life
---------------- ---------- ------- ---- --------- ------- ----
$ 3.75 to $5.25 181,826 $ 4.16 7.1 135,826 $ 4.03 7.1
$ 6.00 to $7.50 563,360 6.66 6.5 371,080 6.41 5.7
$ 8.00 to $8.125 650,053 8.02 6.8 351,643 8.04 4.8
$10.813 to $12.95 93,563 12.45 5.6 77,563 12.79 4.9
--------- --------
Total 1,488,802 7.31 6.7 936,112 7.21 5.5
========= ========

Note J -- Employee Retirement Plans

The Company's domestic employee retirement plans consist of a profit
sharing plan and a stock ownership plan (ESOP). Annual contributions in cash or
Company stock are made at the discretion of the Board of Directors. In
addition, the profit sharing plan has a 401(k) provision whereby the Company
matches 50% of employee contributions up to 4% of base pay. Charges to expense
for discretionary and matching contributions to these plans were $992,000 in
1997, $1,075,000 in 1996 and $745,000 in 1995. Stock contributions to the ESOP
were $800,000, $500,000 and $500,000 in 1997, 1996 and 1995, respectively,
based on the stock price at the date contributed. Shares are included in the
calculation of earnings per share, and dividends are paid to the ESOP from the
date the shares are contributed. Foreign employees are covered by a variety of
primarily government mandated programs.

Note K -- Industry and Market Information

The Company operates in one industry as a distributor of electronic
components, including vacuum tubes, semiconductors and other products. The
Company invoices its customers and ships from two primary geographic locations:
North America (which services the U. S., Canada, Latin America, and the Far
East) and Europe.

(in thousands) 1997 1996 1995
Sales: --------- --------- ---------
North America $223,277 $211,912 $186,103
Less intersegment transfers 18,728 21,778 15,316
--------- --------- ---------
To unaffiliated customers 204,549 190,134 170,787
--------- --------- ---------
Europe 54,946 51,987 49,244
Less intersegment transfers 4,356 2,454 11,913
--------- --------- ---------
To unaffiliate customers 50,590 49,533 37,331
--------- --------- ---------
Consolidated $255,139 $239,667 $208,118
========= ========= =========
Operating income:
North America $ 1,999 $ 13,040 $ 6,187
Europe 4,949 6,263 1,984
Corporate expense (1,817) (1,733) (1,512)
--------- --------- ---------
Consolidated $ 5,131 $ 17,570 $ 6,659
========= ========= =========
Identifiable assets:
North America $148,026 $143,536 $142,031
Europe 34,905 32,794 21,653
Corporate assets 9,583 3,828 9,830
--------- --------- ---------
Consolidated $192,514 $180,158 $173,514
========= ========= =========

Intersegment transfers originate mainly from the United States or Europe
and are accounted for on an "arm's length" basis with profits eliminated in
consolidation. Export sales shipped directly from the United States were
$36,325,000 in 1997, $37,913,000 in 1996, and $38,653,000 in 1995.

Operating income was reduced by $11,000,000 in North America in 1997 for
valuation reserve adjustments, severance and other costs and by $4,700,000 in
North America in 1995 for the payment of a claim settlement, as described in
Note B. Corporate assets consist primarily of cash and investments.

The Company sells its products to companies in diversified industries and
performs periodic credit evaluations of its customers' financial condition.
Terms are generally on open account, payable net 30 days in North America and
Latin America, and vary throughout Europe and the Far East. Estimates of credit
losses are recorded in the financial statements based on periodic reviews of
outstanding accounts and actual losses have been consistently within
management's estimates.

15

Sales by product line and by geographic destination are summarized in
Management's Discussion and Analysis.

Note L - Litigation

On June 19, 1990, the Company was served with a complaint in "Panache
Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd.; Varian
Associates, Inc.; and Varian Supply Company (VASCO - a joint venture between
the Company and Varian Associates, Inc.)", in U. S. District Court for the
Eastern Division of Pennsylvania alleging violations of Sections 1 and 2 of the
Sherman Act and Section 7 of the Clayton Act. This action purports to be a
class action on behalf of all persons and businesses in the U. S. "who
purchased electron power tubes from one or more of the defendant corporations
at any time" since the formation of VASCO. The suit seeks treble damages
alleged to be in excess of $100,000, injunctive relief, and attorneys' fees.
The litigation has been transferred to the U. S. District Court for the
Northern District of Illinois, Eastern Division as cause No. 90C6400, and is in
the discovery stage. The Court has not determined whether the action may be
maintained on behalf of a class. The Company is defending itself against this
action. It is not possible at this time to predict the outcome of this legal
action.

Note M -- Selected Quarterly Financial Data
(Unaudited)

Summarized quarterly financial data for 1997 and 1996 follow. There were
no material fourth quarter adjustments in 1997 or 1996.
Third quarter 1997 results include valuation reserve adjustments and severance
and other costs which reduced gross margin by $7,200,000 and net income by
$6,712,000, or $.56 per share, as described in Note B.

(in thousands, except per
share amounts) First Second Third Fourth
1997: -------- -------- -------- --------
Net sales $57,544 $62,167 $64,163 $71,265
Gross margin 16,783 18,738 11,171 20,772
Net income (loss) before
extraordinary item 1,293 1,932 (6,053) 1,823
Extraordinary loss, net of tax - - (488) -
Net income (loss) 1,293 1,932 (6,541) 1,823
Net income (loss) per share
before extraordinary loss $ .11 $ .16 $ (.50) $ .15
Net income (loss) per share $ .11 $ .16 $ (.54) $ .15
1996:
Net sales $57,201 $61,669 $56,367 $64,430
Gross margin 17,138 17,934 16,816 18,656
Net income 1,730 2,240 1,821 2,320
Net income per share $ .15 $ .19 $ .15 $ .19

Report of Independent Auditors

Stockholders and Directors
Richardson Electronics, Ltd.
LaFox, Illinois

We have audited the accompanying consolidated balance sheets of Richardson
Electronics, Ltd. and subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three years in the period ended May 31, 1997. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Richardson
Electronics, Ltd. and subsidiaries at May 31, 1997 and 1996, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended May 31, 1997, in conformity with generally accepted
accounting principles.

Ernst & Young LLP
/s/

Chicago, Illinois,
July 8, 1997

16

Stockholder Information

Corporate Headquarters
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147-0393
(630) 208-2200
E-Mail:info@rell.com

Annual Meeting
We encourage all stockholders to attend the annual meeting scheduled for
Tuesday, October 7, 1997 at 3:15 p.m. at the Company's corporate offices.
Further details are available in your proxy materials.

Transfer Agent and Registrar
Continental Stock Transfer Company
2 Broadway, 19th Floor
New York, NY 10004

Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, Illinois 60606

Brokerage Reports
Barrington Research
Forum Capital Management
C. L. King & Associates
Smith Barney Shearson

Market Makers
Barrington Research
William Blair & Co.
Cleary Gull Reiland & McDevitt Inc.
Ernst & Company
Herzog, Heine, Geduld, Inc.
C. L. King & Associates
Smith Barney Shearson
Troster Singer Corp.
Wechsler & Krumholz, Inc.

Form 10K and Other Information

A copy of the Company's Annual Report on Form 10K, filed with the Securities
and Exchange Commission is available without charge upon request. All inquiries
should be addressed to the Investor Relations Department, Richardson
Electronics, Ltd., 40W267 Keslinger Road, LaFox, Illinois 60147-0393. Press
releases and other information can be found on the Internet at the Company's
home page at http://www.rell.com.

Market Price of Common Stock

The common stock is traded on the NASDAQ National Market System under the
symbol "RELL". The number of stockholders of Common Stock and Class B Common
Stock at May 31, 1997 was 656 and 35, respectively. The quarterly market price
ranges of the Company's common stock were as follows:

1997 1996
--------------- ---------------
Fiscal Quarters High Low High Low
------ ------ ------ ------
First 10 1/2 9 8 1/8 7
Second 10 7 11 3/4 6 7/8
Third 10 1/4 8 11 1/4 9
Fourth 8 1/4 6 3/4 11 7/8 9 3/4

Corporate Officers and Board of Directors

Corporate Officers

Edward J. Richardson
Chairman of the Board & Chief Executive Officer

Bruce W. Johnson
President and Chief Operating Officer

Charles J. Acurio
Vice President, Display Products Group

Page Y. Chiang
Vice President & Operations Manager, Security Systems Division

Flint Cooper
Executive Vice President & General Manager, Security Systems Division

William J. Garry
Vice President, Finance & Chief Financial Officer

Joseph C. Grill
Vice President, Human Resources

Kathleen M. McNally
Vice President, Marketing Operations

James R. Patterson
Vice President of Sales, Solid State and Components

Bart Petrini
Vice President & General Manager, Electron Device Group

Robert L. Prince
Vice President, Worldwide Sales Administration

Kevin F. Reilly
Vice President & Chief Information Officer

William G. Seils
Senior Vice President, General Counsel & Corporate Secretary

Ron G. Ware
Treasurer

Board of Directors

Edward J. Richardson (1)

Arnold R. Allen
Consultant

Jacques Bouyer (5)
Consultant

Kenneth J. Douglas (2,3)
Chairman of the Board, West Suburban Hospital Medical Center

William J. Garry

Scott Hodes (2,3,4)
Partner, Law Firm of Ross & Hardies

Bruce W. Johnson

Ad Ketelaars (5)
Chief Executive Officer, Enertel

Harold L. Purkey (2)
President, Forum Capital Markets

Samuel Rubinovitz (1,3,4,5)
Consultant

(1) Executive Committee
(2) Audit Committee
(3) Compensation / Stock Option Committee
(4) Executive Oversight Committee
(5) Strategic Planning Committee

17

Richardson Electronics, Ltd. and Subsidiaries
Schedule VIII - Valuation and Qualifying Accounts

COL. A COL. B COL. C COL. D COL. E
ADDITIONS
--------------------------
Balance at (1) Charged (2) Charged Balance at
DESCRIPTION Beginning to Costs to Other Deductions End of
of Period and Expenses Accounts - Describe Period
---------- ------------ ---------- ---------- ----------

Year ended May 31, 1997:
Allowance for sales returns and
doubtful accounts $ 1,461 $ 1,749 $ - $ 1,108 $ 2,102
Other reserves $ 1,539 $ 900 $ - $ 483 $ 1,956

Year ended May 31, 1996:
Allowance for sales returns and
doubtful accounts $ 1,385 $ (42) $ - $ (118) $ 1,461
Other reserves $ 1,728 $ 400 $ - $ 589 $ 1,539

Year ended May 31, 1995:
Allowance for sales returns and
doubtful accounts $ 1,405 $ 199 $ - $ 219 $ 1,385
Assets held for disposition $15,832 $ - $ - $15,832 $ -
Liabilities related to disposition $ 5,568 $ - $ - $ 5,568 $ -
Other reserves $ 2,598 $ - $ - $ 870 $ 1,728

Uncollectible amounts written off, net of recoveries and foreign currency
translation.
Provision for corporate reorganization and increase in EPA groundwater
remediation reserve.
Expenditures made for reserved items
Provision to increase EPA groundwater remediation reserve
Asset write offs and costs incurred for the divestiture of the Company's
Brive, France, manufacturing operations.
Costs incurred for the phase-down of domestic manufacturing and the
disposition of manufactured inventory.