UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)

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

    For the fiscal year ended June 30, 2002

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

For the transition period from _____________________ to ________________________

                          Commission file number 0-6620

                             ANAREN MICROWAVE, INC.
             (Exact name of Registrant as specified in its Charter)

         New York                                       16-0928561
(State of incorporation)                    (I.R.S Employer Identification No.)

        6635 Kirkville Road, East Syracuse, New York       13057
          (Address of principal executive offices)       (Zip Code)

Registrant's telephone number, including area code: 315-432-8909

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Securities Act:

                          Common Stock, $.01 Par Value
                                (Title of Class)

      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. ___


<PAGE>

      The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant, based on the closing sale price of the Common
Stock on August 2, 2002, as reported on the Nasdaq National Market, was
approximately $178,508,000.

      The number of shares of Registrant's Common Stock outstanding on August 2,
2002 was 22,458,620.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant's Proxy Statement for use in connection with
its 2002 Annual Meeting of Shareholders are incorporated into Part III of this
Annual Report on Form 10-K.


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<PAGE>

                                     PART I

Item 1. Business

Forward-Looking Cautionary Statement

      In an effort to provide investors a balanced view of the Company's current
condition and future growth opportunities, this Annual Report on Form 10-K
includes comments by the Company's management about future performance. Because
these statements are forward-looking statements pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, management's
forecasts involve risks and uncertainties, and actual results could differ
materially from those predicted in the forward-looking statements. Among the
factors that could cause actual results to differ materially from those
predicted are the following:

      o     further decline in the general economy, and particularly the
            wireless telecommunications sector;

      o     decreased capital expenditures by wireless service providers;

      o     loss of one or more of a limited number of original equipment
            manufacturers as customers;

      o     costs associated with potential product recalls;

      o     unpredictable difficulties or delays in the development of new
            products;

      o     the unavailability of component parts and services from a limited
            number of suppliers;

      o     the risks associated with any technological market shifts away from
            the Company's technologies and core competencies;

      o     cancellation of existing contracts or orders, or other declines in
            demand for the Company's products;

      o     difficulties in successfully integrating newly acquired businesses
            (including Celeritek Inc. if a transaction were consummated);

      o     increased pricing pressure and increased competition;

      o     the failure of wireless customers' annual procurement forecasts to
            result in future sales;

      o     unanticipated impairments of assets and investment values;

      o     foreign currency fluctuations;

      o     litigation relating to Anaren's ownership interest in Celeritek,
            Inc. or a potential transaction with Celeritek, or involving
            antitrust, intellectual property, product warranty, product
            liability and other issues;

      Anaren disclaims any obligation, unless required by law, to update or
revise any forward looking statement. Readers are advised to carefully review
the risk factors set forth in this Annual Report on Form 10-K filed with the
Securities and Exchange Commission to learn more about the various risks and
uncertainties facing Anaren's business and their potential impact on Anaren's
revenues and earnings.


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<PAGE>

General

      Anaren Microwave, Inc. was incorporated in New York in 1967. The Company's
executive offices are located at 6635 Kirkville Road, East Syracuse, New York
13057. The telephone number of the Company at that location is (315) 432-8909.
The Company's common stock is listed on the Nasdaq National Market under the
symbol "ANEN." Unless the context otherwise provides, the "Company" or "Anaren"
refers to Anaren Microwave, Inc. and its subsidiaries.

Recent Developments

      On August 31, 2001 the Company acquired all of the outstanding stock of
Amitron, Inc. Amitron is based in North Andover, Massachusetts, and is primarily
engaged in the manufacture of precision thick film ceramic components and
circuits for the medical, telecommunications, and defense electronics markets.
Amitron's technology is very complimentary to the Company's proprietary
Multi-Layer Stripline technology (described below). Whereas the Company's
technology is well suited for large scale and high power applications, Amitron's
technology is well suited for miniaturization and low power applications. The
Company believes that Amitron's technology will enable it to increase its
current addressable markets.

      On October 1, 2001, the Company, through its wholly owned subsidiary
Anaren Microwave Europe B.V., acquired all of the outstanding stock of The 5M
Company Europe, B.V. (now named Anaren Europe, B.V.). Anaren Europe, based in
Almelo, Netherlands is a manufacturer of high frequency printed circuit boards.
Anaren Europe's manufacturing technology is very similar to the Company's
Multi-Layer Stripline technology. In addition, Anaren Europe has a unique metal
backing technology that offers performance and cost advantages for high power
applications. The Company believes that this acquisition will enable it to
reduce its manufacturing costs, increase its dollar content in high power
applications and provide customers with a higher level of vendor security with a
second manufacturing facility.

      In March 2002, the Company, through a newly created subsidiary, Anaren
Communication Suzhou Co., Ltd., signed a three-year lease for a 12,300 square
foot manufacturing facility in the Suzhou Industrial Park in Suzhou, China. The
Company has hired a General Manager for the facility and additional staffing
began in early July 2002. The Company presently expects to begin light
manufacturing and assembly at this location during the second quarter of fiscal
2003. It is anticipated that this facility will serve all of the Company's Asian
customers and will concentrate on producing more labor intensive products.
Additionally, it is expected that the Company will use this location to
facilitate procurement of raw materials in Asia, when possible, for the
Company's other subsidiaries.

      On July 11, 2002, the Company filed a Schedule 13D with the Securities and
Exchange Commission to disclose that it has, through open market purchases,
acquired an ownership position of approximately 6.35% of the common stock of
Celeritek, Inc. Anaren believes that a business combination between Anaren and
Celeritek would be in the best interest of the respective shareholders,
customers and employees of both companies and intends to seek a


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negotiated acquisition of Celeritek or take other actions to effect such a
potential transaction, as more fully described in Anaren's Schedule 13D filing.

      On August 2, 2002, Tamer Husseini, Celeritek's Chairman, President and
Chief Executive Officer, Margaret E. Smith, Celeritek's Vice President, Finance
and Chief Financial Officer, and Celeritek's outside counsel met with Anaren's
representatives to discuss Anaren's overtures. During this meeting, Mr. Husseini
stated that Celeritek has adopted a "stand-alone strategy" and indicated that
Celeritek is not interested in negotiating a business combination transaction
between Anaren and Celeritek. Following Mr. Sala's stated rationale as to the
merits of a potential business combination, Celeritek counsel stated that
Celeritek would further consider Anaren's position and contact Anaren during the
week of August 5, 2002. In the evening of August 5, 2002, Anaren was informed by
Celeritek's counsel that Celeritek continues to prefer a stand-alone strategy
but offered Anaren the opportunity to present its position to Celeritek's Board
of Directors, and indicated that if Anaren was willing to enter into a
standstill agreement, Celeritek would consider allowing Anaren to perform
certain due diligence investigation. Anaren's management continues to believe in
the merits of a business combination between Celeritek and Anaren and the
benefits to the shareholders, customers and employees of each Company. Given the
disappointing response from Celeritek, Anaren intends to consider all of the
alternatives available to it, and may pursue one or more of the possible actions
outlined in its Schedule 13D, as amended.

Overview

      The Company is a leading provider of microwave components and assemblies
for the wireless communications, satellite communications and defense
electronics markets. The Company's distinctive manufacturing and packaging
techniques enable it to cost-effectively produce compact, lightweight microwave
products for use in base stations for wireless communications systems, in
satellites and in defense electronics systems.

      Through its focused research and development efforts, Anaren has designed
and continues to design components and subsystems that enable high speed
wireless access to the Internet and other broadband wireless applications, as
well as advanced radar and receiver applications for defense electronics
subsystem applications. In addition, the Company is developing and producing a
diverse set of products and technologies to support the latest generation of
wireless communications systems. The Company's customer base includes leading
global original equipment manufacturers that serve the wireless, satellite and
defense electronics markets, including:

      o     Ericsson

      o     Lucent Technologies

      o     Motorola

      o     Nokia

      o     Nortel Networks

      o     Powerwave Technologies

      o     Boeing, Inc.

      o     ITT Aerospace/Communications

      o     Lockheed Martin

      o     TRW

      o     Northrop Grumman

      o     Raytheon

Industry Background

      Worldwide demand for integrated voice, data and video communications
services continues to grow. The volume of high-speed data traffic across global
communications


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networks has grown as the public Internet and private business intranets have
become essential for daily communications and electronic commerce. The number of
persons using the Internet to buy and sell goods and services also is expected
to continue to grow. Servicing the increasing demand for higher bandwidth
content and applications requires cost-effective and high-speed connections.
Wireless communications provide an advantageous access solution for high-speed
Internet and multimedia services. This is underscored by the increasing number
of wireless subscribers worldwide.

      Despite this continued growth in customer demand, expenditures for capital
infrastructure equipment by service providers began to decline rapidly during
the first quarter of calendar year 2001. This severe market downturn has had a
negative impact on all of the Company's wireless product lines, and it appears
that these unfavorable wireless market conditions will continue for an uncertain
time period.

A Wireless Network

      A typical mobile or fixed wireless communications system comprises a
geographic region containing a number of cells, each of which contains one or
more base stations, which are linked in a network to form a service provider's
coverage area. Each base station houses the equipment that receives incoming
telephone calls from the switching offices of the local wire-based telephone
company and broadcasts calls to the wireless users within the cell. A base
station can process a fixed number of radio channels through the use of multiple
transceivers, power amplifiers and tunable filters, along with an antenna to
transmit and receive signals to and from the wireless user.

Mobile Wireless Communications

      The demand for mobile communications has grown significantly during the
past decade and has been fueled by a number of factors including:

      o     decreasing prices for wireless handsets and airtime;

      o     more favorable global communications regulatory environment;

      o     increasing competition among service providers; and

      o     greater availability of services and frequency spectrum.

      Additionally, many developing countries are installing wireless networks
as an alternative to installing, expanding or upgrading traditional wire-based
networks.

      Service providers are striving to keep up with the demand for mobile
wireless services by increasing the capacity of their existing base stations and
by adding more base stations to increase the number of frequency channels in
their networks. Cellular service providers are upgrading their voice networks to
digital networks, which allow more data to be transmitted to


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users at acceptable speed. With the broader bandwidth technology, service
providers are able to offer additional services including real-time web/e-mail
access.

Wireless Local Area Networking

      Wireless local area networks are flexible data communication systems that
can either replace or extend wired communication systems. Using radio frequency
technology wireless local area networks transmit and receive data over the air
without wired cabling. A wireless local area network provides all the features
and benefits of traditional local area network technologies like Ethernet, with
lower installation costs and increased flexibility.

      Wireless local area network technology is now in the process of widespread
deployment and accelerated development for low-cost, interoperable products.
Wireless local area network technology provides data rates to rapidly transfer
large data files, access the web, and support wireless video conferencing from
mobile platforms including palm personal computers and laptops. The flexibility
that the wireless local area network, standards offer the business and consumer
user is expected to lead to applications such as wireless home multimedia,
wireless roadside assistance, wireless e-business, wireless printers and
scanners.

Satellite Communications

      Satellite communications currently serve several business and consumer
markets. Current satellite services include direct to home television, direct to
home Internet access, business to business data transmission, regional and
worldwide telephone services, worldwide paging, and military communication
command and control. New services are being planned to offer high-speed Internet
access, videoconferencing, large scale data transmission and other multimedia
applications. These new services will have significantly greater information
content and will therefore require the allocation of significantly more
bandwidth than many current applications. These large bandwidth allocations are
not available at the operating frequencies of current satellite systems. To
address this problem, regulatory agencies around the world have allocated
additional frequency spectrum for two-way transmission. The proposed systems to
deliver these broadband services are significantly more complex and will
therefore require design advances in on-board signal processing, on-board
re-configuration of multi-beam antennas, power handling and low-cost user
equipment.

      As demand for Internet access and other data-driven applications expands
and as both commercial and residential consumers are increasingly seeking
efficient and effective means of access, satellite service providers are
entering the broadband wireless market. Some of the advantages of satellite
communications for this market are: global access to an existing satellite
infrastructure, the ability to cover large geographic areas, scalable deployment
and the ability to quickly reallocate capacity.


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<PAGE>

Defense Electronics

      There continues to be a shift in defense spending away from the
development of new platforms and into technologies that improve the performance
and survivability of existing platforms. As a result, funding for advanced radar
systems, advanced jamming systems and smart munitions has continued. These
technologies enable the detection, identification, deception and elimination of
missile systems.

The Anaren Solution

      The Company's technology addresses the demands of the wireless market for
high quality products manufactured in volume with continuous improvements in
performance and cost. The Company also provides the satellite market with
enabling technologies that increase network capacity and flexibility, allowing
for increased revenue generation. The Company's proprietary Multi-Layer
Stripline and ceramic circuit technologies, which are described more fully
below, allow the Company to provide compact, light weight, cost-effective, and
highly integrated microwave components, assemblies and subsystems. The Company's
solution includes:

      Broad Array of Standard and Customized Products. The Company offers a
broad array of standard and custom microwave products to the mobile and wireless
networking, satellite communications and defense electronics markets. The
technologies underlying the Company's product portfolio allow the Company to
address the new wireless data communications products being developed by its
existing and potential customers with limited incremental investment. As the
original equipment manufacturers in the wireless communications industry have
been reducing the number of their suppliers, the Company believes that its
expanding product portfolio has helped the Company become a strategic supplier
to many of these original equipment manufacturers.

      Advanced Microwave Design and Manufacturing Capabilities. The engineering
and design staff of 124 engineers as of June 30, 2002 works with customers of
the Company to develop product solutions. Anaren's engineers collaborate with
customers to develop products that provide state-of-the-art performance and that
can be manufactured in significant volume with excellent quality and
reliability. The Company has consistently met the stringent requirements of the
wireless and satellite communications markets due to the Company's strengths in
advanced packaging and interconnecting of radio, microwave and extremely high
frequency signals, and the Company's ability to produce small, light weight,
cost-effective and efficient microwave components and assemblies.

      Rapid Product Development. Anaren's integrated design and manufacturing
facilities allow it to produce custom solutions from concept to product delivery
in a matter of days. With its Multi-Layer Stripline technology, design
libraries, manufacturing experience and investment in automation, the Company
can facilitate a rapid transition from development to production, thereby
offering its customers a complete turnkey solution and allowing them to bring
their products to market faster.


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      Strong Customer Relationships. The Company believes that it has become an
integral part of its key customers' operations by working closely with them
through the entire development and production process. The Company assigns a
project engineer to each customer to ensure a high level of responsiveness and
customer service. The project engineer and a design team assist customers from
the conceptual, system level design stages through the development and
manufacturing process. By maintaining close contact with the customers' design
engineering, manufacturing, purchasing and project management personnel, the
Company can better understand their needs, rapidly develop customer-specific
solutions and more effectively design the Company's solutions into the
customers' systems and networks. The Company believes that the strength of its
customer support and depth of its customer relationships provide the Company a
competitive advantage.

Technology

      Traditional stripline technology consists of circuit runs etched on
dielectric sheets, or thin teflon layers, which are then sandwiched in a
precision machined aluminum case. The case provides grounding on the top and
bottom, and also provides a structure on the edge for mounting connectors.
Integration is achieved through connecting multiple stripline components via
numerous cables.

      Multi-Layer Stripline technology is a technique of processing stripline
circuits, in which multiple layers of etched stripline circuits are laminated
together in a manner that is similar to printed circuit board manufacturing, but
with superior microwave characteristics. Similar to traditional printed circuit
board manufacturing, holes are used to interconnect layers. The Company's
proprietary techniques enable it to implement multi-layer connections that
perform optimally at microwave frequencies. Unlike traditional printed circuit
board manufacturing, simply connecting the appropriate points on the multi-layer
board does not ensure adequate performance. In order to achieve optimal
microwave performance on a consistent basis, material and process variations
must be tightly controlled and the circuit design must take into consideration
variations in the manufacturing process. The Company's microwave design
engineering staff has developed proprietary modeling techniques and component
design libraries that allow for consistent and efficient design and production
of complex microwave products.

      Anaren's microwave antenna beamforming technology, coupled with the
Multi-Layer Stripline manufacturing process, produces light weight,
cost-effective beamforming assemblies for communication satellites. These
beamforming assemblies provide multibeam coverage where the size and direction
of beams is fixed. Additionally, the Company is utilizing its Multi-Layer
Stripline technology and microwave design experience to develop cost-effective
solutions for wireless high data rate transmission applications, such as
wireless local area networking. In addition, the Company has recently introduced
several new products that incorporate active devices into the passive
Multi-Layer Stripline technology. Active devices require voltage and current to
operate and are typically based on silicon, germanium or gallium arsenide semi
conductor technologies. Active devices are frequently used for amplification,
switching and modulation of radio frequency signals. Passive multi-layer strip
line technology is based on high frequency printed circuit board materials and
is an excellent integration platform for active devices.


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<PAGE>

      Active devices require voltage and current to operate and are typically
manufactured from silicon, germanium or gallium arsenide materials. Active
devices are frequently used for amplification, switching and modulation of radio
frequency signals. Passive multi-layer stripline technology utilize high
frequency printed circuit board materials and is an excellent integration
platform for active devices.

      The Company's etched thick film technology allows for high frequency
performance similar to that of thin film with reduced costs characteristic of
thick film processing. The Company's investment into low temperature co-fired
ceramic capability will result in the ability to build multi-layer ceramic
circuits which fully leverage Anaren's microwave design competence.

Strategy

      The Company's strategy is to continue to use its proprietary Multi-Layer
Stripline technology, extensive microwave design libraries and turnkey design,
development and manufacturing capabilities to further expand its penetration in
the wireless and satellite communications markets. Key components of the
Company's strategy include the following:

      Pursue New Wireless Markets. The Company has successfully penetrated the
mobile wireless market and intends to use its market position to pursue other
wireless markets. The Company also intends to offer additional products and
technologies to address existing and developing wireless markets.

      Increase Component Integration and Value Added Content. The Company plans
to continue to increase the value of its products in wireless and satellite
communications systems. The Company intends to expand its component offerings to
enable the Company to increase the number of its products in each base station.
In addition, with its Multi-Layer Stripline and ceramic circuit manufacturing
technology, the Company intends to continue to increase the functionality of its
products, thereby enabling its customers to continue to reduce the size and cost
of their platforms, while the Company increases its content value.

      Strengthen and Expand Customer Relationships. Today, a limited number of
large systems manufacturers drives the wireless and satellite communications
markets. The Company has developed, and plans to continue to expand, customer
relationships with many of these manufacturers, including Ericsson, Lucent,
Motorola, Nokia, Nortel Networks and Powerwave for wireless communications and
Boeing, Lockheed Martin, Raytheon and TRW for satellite communications. The
Company intends to further strengthen its customer relationships by offering
complete outsourcing solutions, from research and development through product
design and production, thereby increasing the customers' reliance on the
Company.

      Enhance Technology Leadership in Wireless Communications. The Company
intends to use its technological leadership in the mobile wireless and satellite
markets to extend its competitive advantage. Anaren plans to pursue further
technological advances through continued investment in research and development.
The Company will seek to advance its


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leadership in wireless technology by developing next generation products for the
mobile and wireless networking markets. In addition, the Company will build upon
its relationships with key wireless original equipment manufacturers in order to
develop state-of-the-art wireless products.

      Expand Its Business through Strategic Acquisitions. The Company intends to
continue to make opportunistic acquisitions of companies, product lines and
technologies that complement its business. Amitron's technology and unique
processing capabilities provide performance advantages for high frequency and
medical applications and represents another strategic acquisition for the
Company. Amitron also provides a platform to implement low temperature co-fired
ceramic technology, which the Company believes has application in high frequency
electronics. By expanding its product offerings, the Company expects to better
serve the needs of its customers. The Company intends to use its existing
customer relationships and distribution channels to sell these additional
products.

Products

Wireless Communications

      The Company provides microwave components, assemblies and subsystems to
leading wireless infrastructure equipment manufacturers. Traditionally, all of
the signal distribution, or combining and splitting, within a base station has
been accomplished with discrete signal distribution components and coaxial
cables. Through the use of its Multi-Layer Stripline and ceramic technologies,
the Company provides microwave components, assemblies and subsystems that
eliminate the need for discrete components and interconnecting cables. These
integrated assemblies, which range from simple splitting and combining networks
to complete microwave backplanes, distribute microwave signals throughout the
base stations, from reception at the antenna, to multiple radios, to multiple
amplifiers, and back to the antenna for transmission.

      The Company has developed its product offerings to enable customers to
reduce the size and cost, while enhancing the performance, of their equipment.
The Company continually invests capital and resources to enhance existing
products as well as develop new products to address the latest market demands.
The Company has developed and continues to market a full line of standard
products, as well as custom products, to wireless original equipment
manufacturers. A brief description of the Company's major product categories is
as follows:

Component Products

      Xinger(R) Surface Mount Components. The Company's Xinger(R) line of
products are off-the-shelf surface mount microwave components which provide
passive microwave signal distribution functions. They were originally developed
to provide a low-cost signal distribution component, which could be placed on
standard printed circuit boards with automated production equipment. The primary
application of these products is in radio frequency power amplifiers, but they
are also found in low-noise amplifiers and radios. Based on market intelligence
and


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information from original equipment manufacturers and base station
manufacturers, the Company believes it is currently the market leader in this
product area, supplying industry leading original equipment manufacturers such
as Ericsson, Lucent, Motorola and Nokia, as well as leading power amplifier
manufacturers such as Powerwave Technologies and Spectrian. The Company is
investing to expand this product line, as well as expand its addressable market.

      Ferrite Products. The Company's ferrite components are widely used in
various wireless and defense applications. They are a key component in base
station amplifiers, and their primary function is to protect the sensitive
electronics from damage by isolating them electronically from potentially
harmful signal levels. The Company recently introduced a new "Xinger(R)
Circulator" product line integrating the Company's ferrite technology with its
Xinger(R) technology. This product line offers ferrite product performance in a
surface mountable Xinger(R) package for automated insertion.

      Resistive Products. The Company's resistive product line includes
resistors, power terminations, and attenuators for use in high power wireless
and medical imaging applications. They are typically found in power amplifiers
and used in conjunction with ferrite products as well as Xinger(R) surface mount
components.

      AdrenaLine Power Splitting and Combining Networks. The Company developed
the AdrenaLine product line to provide a low-cost, high-performance network to
combine individual power modules. These products enable the Company's customers
to produce smaller, lower cost, more efficient power amplifiers. AdrenaLine
supports all major wireless standards and frequencies.

      Custom Splitting and Combining Products. In addition to its standard
products, the Company offers a wide range of custom splitting solutions. These
custom solutions are typically used to distribute signals to and from radio
transceivers and power amplifiers. The Company's custom products offer
consistent performance and can be designed in unique configurations, allowing
base station designers an opportunity to greatly reduce space, complexity and
cost while enhancing performance.

      Custom Radio Frequency Backplane Assemblies. The Company's radio frequency
backplanes provide efficient connections of microwave signals between subsystems
in wireless base stations. Radio frequency backplanes are similar to the
motherboard in a personal computer, which efficiently connects signals between
multiple subsystems. These assemblies range from radio frequency-only to fully
integrated radio frequency, direct current power, and signal routing solutions.
They are typically used in conjunction with radio transceivers and radio
frequency power amplifiers.

      Hybrid Matrix Assemblies. The Company's hybrid matrix assemblies allow
customers to effectively reduce the number of amplifiers in their base stations.
Base station amplifier systems are designed to handle peak usage, when maximum
calls are made over a network. Due to the sector coverage of typical base
stations, some amplifiers are heavily used while others are not. The Company's
matrices allow the spreading of high usage volume over all base station
amplifiers, permitting a reduction in the total number of amplifiers needed.


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      High Frequency Printed Circuit Boards. Anaren also offers high frequency
circuit board manufacturing capability in its Almelo, The Netherlands facility.
The Company's proprietary metal backing technology is particularly advantageous
for high power applications where thermal management is paramount, such as
basestation amplifiers.

      High Frequency Etched Thick Film and LTCC Circuits. The Company's ceramic
capabilities include etched thick film circuits and low temperature co-fired
ceramic built to customer specifications. These circuits are suitable for
wireless, defense, aerospace, and medical applications.

Space and Defense

      The Company is a supplier of passive beamforming networks for use in
multi-beam antennas critical to the success of communications satellites. The
Company's Multi-Layer Stripline technology enables the Company to provide
customers with highly complex beamforming networks that maintain high
performance, while reducing size and weight. Each of these products is
specifically designed for a particular satellite program, and each design
determines the number, size and quality of beams that are produced from the
satellite's antenna. Multi-Layer Stripline technology can be used at extremely
high microwave frequencies, making it well positioned to support the customers'
requirements for the next generation of satellite programs.

      The Company is also a supplier of electronic subsystems and passive feed
networks to the defense electronics market. The electronic subsystems sold by
the Company utilize several technologies including Multi-Layer Stripline,
application specific integrated circuits and signal processing technologies.

      A brief description of the Company's major product categories is as
follows:

      Passive Beamformers. These passive beamformers determine the number, size
and quality of beams that are produced from an antenna array. These products are
essential to allowing satellite communications providers the most efficient use
of their allocated spectrum.

      Switch Matrices. Switch matrices route radio frequency signals from a
single location to one or multiple end user locations. These products allow
satellite operators to allocate satellite capacity as required, thereby
increasing utilization and revenue generation.

      Radar Feed Networks. Radar feeds are power dividers that distribute radio
frequency energy to the antenna elements of the radar. The power dividers are
frequently arranged to provide two or three inputs and several thousand outputs.

      Defense Radar Countermeasure Subsystems. Defense radar countermeasure
subsystems digitally measure, locate and counter enemy radar systems.


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<PAGE>

Customers

      During the fiscal year ended June 30, 2002, approximately 65.0% of the
Company's sales were to customers in the wireless markets and approximately
35.0% of its sales were to customers in the space and defense markets. The
Company had one customer who accounted for more than 10.0% of net sales.
Approximately 16% of net sales were to Boeing, Inc. through the Company's Space
and Defense group.

      Wireless Communications. The Company sells its standard line of Xinger(R)
components to leading original equipment manufacturers and a broad range of
other wireless equipment contract manufacturers. In addition, the Company sells
its custom wireless products to major wireless infrastructure original equipment
manufacturers. In general, customers have purchased the Company's products
directly from the Company or through distributors or sales representatives. The
following is a list of the Company's customers who generated $500,000 or more in
revenues in the fiscal year ended June 30, 2002:

      o     Avnet

      o     BFI Optilas

      o     Cana

      o     Celestica Corp.

      o     ElektroMekan AB

      o     Ericsson

      o     Knowles Electronics

      o     Lucent Technologies

      o     Motorola

      o     Nokia

      o     Nortel Networks

      o     Pacesetter, Inc.

      o     Plexus Southern California

      o     Powerwave Technologies

      o     Richardson Electronics Inc.

      o     Sanmina

      o     Venture Manufacturing

      Space and Defense. The Company currently sells satellite communications
subsystems to many of the world's leading satellite manufacturers. Subsystems
produced by the Company are found on communications satellites. The Company is
actively involved in developing products for major satellite programs. The
Company also sells defense electronics products to prime contractors serving the
United States and foreign governments. The following is a list of the customers
who generated $500,000 or more in revenues in the fiscal year ended June 30,
2002:

      o     Boeing Inc.

      o     FR Aviation

      o     Lockheed Martin

      o     Raytheon

      o     Thales Defense, Ltd.


                                       14
<PAGE>

Sales and Marketing

      The Company markets its products worldwide to original equipment
manufacturers in wireless and satellite markets and prime contractors in defense
markets primarily through a sales and marketing force of 43 people as of June
30, 2002. The Company has regional sales offices located in Sacramento,
California; Raleigh, North Carolina; Waterloo, England; and Suzhou, China. In
addition, as of June 30, 2002, the Company had contracts with two major
distributors, Avnet and Richardson, and with 20 manufacturers' representatives
in the United States and 15 international representatives located in Western
Europe, the Middle East and Asia. As part of its marketing efforts, the Company
advertises in major trade publications, attends major industry shows and
maintains a website on the Internet. The Company has also invested significantly
in its Internet website which contains an electronic version of its entire
catalog. In addition, the website enables users to download important device
parameter files. These files contain the performance information for the catalog
parts in a format which is compatible with commonly used computer aided
design/computer aided modeling, or CAD/CAM equipment. The Company also provides
mechanical drawings and applications notes for proper use of the parts. This
service allows designers to get the information they require and to easily
incorporate the Company's parts into their designs.

      After identifying key potential customers, the Company makes sales calls
with its own sales, management and engineering personnel and its manufacturers'
representatives. To promote widespread acceptance of the Company's products and
provide customers with support for their wireless communications needs, the
sales and engineering teams work closely with the customers to develop solutions
tailored for their wireless requirements. The Company believes that its customer
engineering support team, comprised of 124 design and engineering professionals
as of June 30, 2002, is a key competitive advantage.

      The Company uses distributors for its standard products, most notably the
Xinger(R) line of surface mount components. In the United States, Canada, Asia
and most of Europe, the Company has agreements with Richardson and Avnet, which
operates under the name of BFI Optilas in Europe. The Scandinavian countries are
handled by E.G. Components, Inc., a subsidiary of Elektronikgruppen.
Distribution has become an important part of the sales efforts by providing the
Company with a larger sales force to promote its catalog offerings. The Company
is also seeing a trend on the part of its customers to consolidate their
material handling activities, including purchasing, warehousing, and
fulfillment. The result is that many original equipment manufacturers are
outsourcing all or part of these activities to large distribution firms like
Avnet.

Backlog

      The Company's backlog of orders for the Wireless group was $10.4 million
and $6.8 million as of June 30, 2002 and 2001, respectively. Backlog for the
Wireless group primarily represents firm orders for surface mount products
(i.e., orders for a fixed quantity of component products) and signed purchase
orders (i.e., orders for specific custom sub-assemblies) for custom components
due to ship within the next four to six weeks. However, backlog is not
necessarily indicative of future sales. Accordingly, the Company does not
believe that its backlog as of any


                                       15
<PAGE>

particular date is representative of actual sales for any succeeding period.
Typically, large original equipment manufacturers including Ericsson, Lucent,
Motorola, Nokia and Nortel, who use the Company's surface mount and custom
products, negotiate set prices for estimated annual volumes. The Company
receives weekly orders one week prior to shipment. The Company does not
recognize backlog until it has received a firm order.

      As part of the Company's close working relationships with major wireless
communications customers, the customers expect the Company to respond quickly to
changes in the volume and delivery schedule of their orders and, if necessary,
to inventory products at the facilities of the Company for just-in-time
delivery. Therefore, although contracts with these customers typically specify
aggregate dollar volumes of products to be purchased over an extended time
period, these contracts also provide for delivery flexibility, on short notice.
In addition, these customers may cancel or defer orders without significant
penalty.

      Backlog of orders for the Space and Defense group was $33.5 million and
$37.2 million as of June 30, 2002 and 2001, respectively. During fiscal year
2003, the Company expects to ship between $27.0 million and $29.0 million of its
backlog existing at June 30, 2002. All of the orders included in the Space and
Defense group backlog are covered by signed contracts or purchase orders.
However, backlog is not necessarily indicative of future sales. Accordingly, the
Company does not believe that its backlog as of any particular date is
representative of actual sales for any succeeding period.

Research and Development

      The Company's research and development efforts are focused on the design,
development and engineering of both products and manufacturing processes. The
Company intends to focus its future research and development efforts on next
generation products and technologies. The current development efforts of the
Company include:

      o     advanced Multi-Layer Stripline manufacturing processes for use in
            low-cost, light weight satellite and wireless applications;

      o     products for use in mobile and fixed wireless applications;

      o     advanced manufacturing technology to produce microwave stripline
            structures for broadband millimeter wave, or extremely high
            frequency, communications satellite applications;

      o     advanced low temperature co-fired ceramic for use in low-cost, light
            weight satellite and wireless applications; and

      o     Miniature components for wireless networking and subscriber
            applications

      These activities include customer-funded design and development, as well
as efforts funded directly by the Company. Research and development expenses
funded by the Company


                                       16
<PAGE>

were $6.3 million in fiscal 2002, $5.0 million in fiscal 2001 and $3.8 million
in fiscal 2000. Research and development costs are charged to expense as
incurred.

      In addition, the Company's net sales included approximately $1.1 million
for fiscal year 2002, approximately $4.6 million for fiscal 2001 and
approximately $5.1 million in fiscal 2000 attributable to payments by customers
for the design and development of products within the Space and Defense group to
meet their specific requirements. In any given year, the amount of customer
funding for design and development can vary widely depending upon the status of
particular contracts. The Company is typically not restricted in the use of
technologies developed through customer funding for other applications.

Manufacturing

      The Company continues to invest in the advancement of its proprietary
Multi-Layer Stripline manufacturing processes and in the automation of the
manufacturing processes of products for the Wireless group. Automation is
critical in meeting the customers' demands for lower prices, high quality and
on-time delivery. The Company is also investing to reduce the size of its
products to increase its addressable markets including local area networking and
wireless subscriber applications.

      In fiscal 2001, the Company completed a major renovation and upgrade to
its manufacturing facility, located at the headquarters in East Syracuse, New
York, to increase current capacity and improve response time to its customers.
Toward this end, the Company has continued to invest in automated design and
manufacturing equipment to reduce production times. The Company also reorganized
its manufacturing and engineering facility in East Syracuse to allocate more
space and provide for a better workflow for the Wireless group. Additionally,
the Company has created specialized work areas and manufacturing cells required
by its Space and Defense group to meet the demanding specifications of the
Company's space customers. The Company's East Syracuse facility has been ISO
9001 certified since July 1999.

      During fiscal 2002, the Company completed the consolidation of its New
Jersey based subsidiary, Anaren Power Products, Inc., into its East Syracuse,
New York operation. In March of 2002, the Company opened a facility in Suzhou,
China for the purpose of serving a growing customer base in the Asia-Pacific
region. This location will serve as a light manufacturing operation supporting
all of the Company's wireless business interests.

      The Company manufactures its products from standard components, as well as
from items which are manufactured by vendors to its specifications. A majority
of the Company's commercial and defense electronics assemblies and subsystem
products contain proprietary Multi-Layer Stripline technology which is designed
and tested by engineers and technicians employed by the Company and is
manufactured primarily at the Company's East Syracuse facility.

      The raw materials utilized in the various product areas are generally
accessible and common to both of the Company's business segments. The Company
purchases most of its raw materials from a variety of vendors and most of these
raw materials are available from a number


                                       17
<PAGE>

of sources. During fiscal year 2002, the Company had one vendor from which it
purchased more than 10.0% of its total raw materials, but the Company believes
that alternate sources of supply are generally available for these and other raw
materials.

Competition

      The microwave component and subsystems industry is highly competitive. The
Company competes against many companies, both foreign and domestic, many of
which are larger and have greater financial and other resources. Direct
competitors of the Company in the wireless market include KDI, M/A-com, a
division of Tyco International, Merrimac Industries, Filtronic PLC, Radiall
Smith Industries and Mini-Circuits. As a direct supplier to original equipment
manufacturers, the Company also faces significant competition from the in-house
capabilities of its customers. Recently, however, in the wireless market many of
the original equipment manufacturers are outsourcing more design and production
work, thereby freeing up their internal resources for other use. Thus, internal
customer competition exists predominantly in the Company's satellite business.

      In the wireless market, the overall weak market conditions and reduction
in demand for wireless infrastructure equipment have resulted in increased price
pressure from the Company's customers. It is anticipated that this pricing
pressure will continue until the overall wireless market conditions improve.

      The principal competitive factors in both the foreign and domestic markets
are technical performance, reliability, ability to produce in volume, on-time
delivery and price. Based on these factors, the Company believes that it
competes favorably in its markets. The Company feels that it is particularly
strong in the areas of technical performance and on-time delivery in the
wireless marketplace.

Government Regulation

      The Company's products are incorporated into wireless communications
systems that are subject to regulation domestically by the Federal
Communications Commission and internationally by other government agencies. In
addition, because of its participation in the defense industry, the Company is
subject to audit from time to time for compliance with government regulations by
various governmental agencies. The Company is also subject to a variety of
local, state and federal government regulations relating to environmental laws,
as they relate to toxic or other hazardous substances used to manufacture the
Company's products. The Company believes that it operates its business in
material compliance with applicable laws and regulations. However, any failure
to comply with existing or future laws or regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Intellectual Property

      The Company's success depends to a significant degree upon the
preservation and protection of its product and manufacturing process designs and
other proprietary technology. To


                                       18
<PAGE>

protect its proprietary technology, the Company generally limits access to its
technology, treats portions of such technology as trade secrets, and obtains
confidentiality or non-disclosure agreements from persons with access to the
technology. The Company's agreements with its employees prohibit them from
disclosing any confidential information, technology developments and business
practices, and from disclosing any confidential information entrusted to the
Company by other parties. Consultants engaged by the Company who have access to
confidential information generally sign an agreement requiring them to keep
confidential and not disclose any non-public confidential information. The
Company has four patents and has filed eight other patent applications that are
currently pending before the United States Patent and Trademark Office to
protect both the construction and product design of its products. The Company
plans to pursue intellectual property protection in foreign countries, primarily
in the form of international patents, in instances where the technology covered
is considered important enough to justify the added expense.

Employees

      As of June 30, 2002, the Company employed 643 full-time people including
17 temporary employees. Of these employees, 124 were members of the engineering
staff, 435 were in manufacturing, 43 were in sales and marketing positions, and
41 were in management and support functions. None of these employees are
represented by a labor union, and the Company has not experienced any work
stoppages. The Company considers its employee relations to be excellent.

Item 2. Properties

      The principal facility of the Company is a 105,000 square foot building,
which the Company owns, located on a 30 acre parcel in East Syracuse, New York.
The building currently houses a substantial portion of the Company's marketing,
manufacturing, administrative, research and development, systems design and
engineering activities.

      The Company leases a 20,000 square foot building in Frimley, England.
Annual rental cost of this facility is approximately $370,000 and the Company is
currently subletting the building. During the fiscal year ended June 30, 2002,
payments to the Company under this sublease were at more than 90.0% of the full
lease value. The existing lease term on this building runs to 2014. There is no
assurance that the Company will be able to continuously sublet the building
during the remaining lease term so as to offset its rental cost in whole or in
part.

      The Company also leases a 15,700 square foot facility in Bohemia, New
York, which houses the production, engineering and administrative functions of
its subsidiary RF Power Components, Inc. pursuant to a lease that expires in
June, 2003. Annual rent for this facility is approximately $132,000.

      Effective August 31, 2001, the Company signed a five year lease with an
option for five additional years for approximately 20,000 square feet in North
Andover, Massachusetts, which currently houses the acquired business of Amitron.
Annual rent for this facility is approximately $155,000.


                                       19
<PAGE>

      The Company also leases a 45,000 square foot facility in Almelo, The
Netherlands, which houses Anaren Europe which was acquired effective October 1,
2001. Annual rent for this facility is approximately $182,000 and the lease
expires in December 2003.

      In March 2002, the Company signed a lease for a 12,300 square foot
facility in Suzhou, China to begin light manufacturing and assembly activities
for its Asian customers. This facility has an annual rent of $21,400 and expires
in 2005, and may be renewed for an additional three year period. Additionally,
the Company has an option to lease the second floor of this facility
(approximately 12,300 square feet) at a slightly reduced rate per square foot.
This option is available until March 2003.

      Management considers the foregoing facilities adequate for the current and
anticipated short-term future requirements of the Company and expects that
suitable additional space will be available to the Company, as needed, at
reasonable commercial terms.

Item 3. Legal Proceedings

      There are no material pending legal proceedings against the Company or any
of its subsidiaries.

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

      During the fourth quarter of the fiscal year ended June 30, 2002, there
were no matters submitted to a vote of security holders.

Item 4A. Executive Officers of the Registrant

      Executive officers of the Company, their respective ages as of June 30,
2002, and their positions held with the Company are as follows:

Name                                    Age     Position

Lawrence A. Sala..........................39    President, Chief Executive
                                                  Officer, Chairman and Director
Carl W. Gerst, Jr.........................64    Chief Technical Officer, Vice
                                                  Chairman and Director
Gert R. Thygesen..........................47    Vice President, Technology
Joseph E. Porcello........................50    Vice President, Finance,
                                                  Treasurer
Mark P. Burdick...........................44    Vice President and General
                                                  Manager
Timothy P. Ross...........................43    Vice President, Business
                                                  Development
Thomas J. Passaro, Jr.....................41    Vice President and President of
                                                  RF Power
Raymond Simione...........................61    Vice President and President of
                                                  Amitron
Rutger Theunissen.........................34    Managing Director of Anaren
                                                  Europe
Stanley S. Slingerland....................54    Vice President, Human Resources


                                       20
<PAGE>

      Lawrence A. Sala joined the Company in 1984. He has been President since
May 1995, has served as Chief Executive Officer since September 1997, and has
been Chairman of the Board of Directors since November 2001. Mr. Sala became a
member of the Board of Directors of the Company in 1995. He holds a bachelor's
degree in computer engineering, a master's degree in electrical engineering and
a master's degree in business administration, all from Syracuse University.

      Carl W. Gerst, Jr. has been a member of the Board of Directors of the
Company since 1968. Mr. Gerst has served as Chief Technical Officer and Vice
Chairman of the Board since May 1995 and served as Treasurer from May 1992 to
November 2001. Mr. Gerst previously served as Executive Vice President of the
Company from its founding until May 1995. He holds a bachelor's degree from
Youngstown University and a master's degree in business administration from
Syracuse University.

      Gert R. Thygesen joined the Company in 1981 and has served as Vice
President of Technology since September 2000. He previously served as Vice
President, Operations since April 1995 and as Operations Manager of the Company
from 1992 until 1995 and as Program Manager, Digital RF Memories & Advanced
Systems, from 1988 to 1992. Mr. Thygesen holds a bachelor of science degree and
a master's degree in electrical engineering from Aalborg University Center,
Denmark.

      Joseph E. Porcello joined the Company in 1977 and has served as Vice
President, Finance, since May 1995 and Treasurer since November 2001. He
previously served as the Company's Controller from 1981 to 1999. Mr. Porcello
holds a bachelor's degree from the State University of New York at Buffalo and
is a certified public accountant.

      Mark P. Burdick has been with the Company since 1978 and has served as
Vice President and General Manager since September, 2000. He served as Vice
President and General Manager, Wireless Group since November 1999, as Business
Unit Manager -- Commercial Products from 1994 to 1999, and as Group Manager for
Defense Radar Countermeasure Subsystems from 1991 to 1994. Mr. Burdick holds a
bachelor of science in electrical engineering from the Rochester Institute of
Technology, and a Master's of Business Administration from the University of
Rochester.

      Timothy P. Ross has been with the Company since 1982 and has served as
Vice President -- Business Development since September, 2000. He served as Vice
President and General Manager, Space and Defense Group, of the Company since
November 1999. Mr. Ross served as Business Unit Manager -- Satellite
Communications of the Company from 1995 to 1999 and as a Program Manager from
1988 to 1995. Mr. Ross holds an associate's degree in engineering science, a
bachelor of science in electrical engineering from Clarkson University, and a
Master's in Business Administration from the University of Rochester.

      Thomas J. Passaro, Jr. joined the Company in February 2000 in connection
with the acquisition of RF Power. He serves as a Vice President of the Company
and as President of RF Power. Mr. Passaro, a co-founder of RF Power, served as
its President from June 1998 to February 2000 and as its Vice President from
1988 to June 1998.


                                       21
<PAGE>

      Raymond C. Simione joined the Company in August 2001 with the acquisition
of Amitron. He serves as a Vice President of the Company and as President of
Amitron. Mr. Simione was one of the founders of Amitron in 1985 and has served
as its President since the founding. Mr. Simione holds an associate degree in
electrical engineering from Lowell Technical Institute and a bachelor of science
in industrial engineering from Merrimac College.

      Rutger Theunissen joined the Company in May 2002 as the Managing Director
of Anaren Europe, The Netherland subsidiary acquired by the Company as of
October 1, 2001. Prior to joining Anaren, Mr. Theunissen was a strategic
purchaser for Philips Electronics from 1996 to 1998 and the Global Purchasing
Manager for Philips Electronics from 1998 to 2000. Mr. Theunissen holds a
bachelor's degree in chemical technology from the Delft University of Technology
and a Master's in Business Administration from INSEAD in France.

      Stanley S. Slingerland joined the Company in 1980 and has served as Vice
President, Human Resources since November 1996. He previously served as Human
Resource Manager of the Company until 1996. Mr. Slingerland holds a bachelor's
degree from Hope College. Effective July 12, 2002, Mr. Slingerland retired from
the Company.

      Each executive officer is elected annually by the Board of Directors of
the Company and serves at the pleasure of the Board.


                                       22
<PAGE>

                                     PART II

Item 5. Market For the Company's Common Stock and Related Stockholder Matters

      The common stock of the Company is quoted on The Nasdaq National Market
under the symbol "ANEN." The following table sets forth the range of quarterly
high and low sales prices reported on The Nasdaq National Market for the
Company's common stock for the quarters indicated. Quotations represent prices
between dealers and do not include retail mark-ups, mark- downs or commissions.
Prices set forth below have been adjusted to reflect a two-for-one stock split
effectuated in the form of a stock dividend paid on November 27, 2000.

<TABLE>
<CAPTION>
                                 Fiscal 2002                                         Fiscal 2001
                                   Quarter                                              Quarter
               -----------------------------------------------         -------------------------------------------
                  1st          2nd          3rd          4th             1st         2nd         3rd         4th
<S>             <C>          <C>          <C>          <C>             <C>         <C>         <C>         <C>
High            $26.010      $19.330      $19.630      $16.100         $71.375     $77.000     $66.500     $25.490

Low             $15.000      $13.500      $11.920       $7.640         $31.500     $34.625     $11.438     $10.000
</TABLE>

      The Company had approximately 423 holders of record of its common stock at
August 2, 2002.

      The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support the
development of its business and does not anticipate paying cash dividends for
the foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Board of Directors after taking into account various factors,
including the Company's financial condition, operating results and current and
anticipated cash needs. Although there are no direct restrictions on payments of
cash dividends under the Company's bank credit facility, the Company is required
to maintain a certain level of tangible net worth. This requirement may restrict
the ability of the Company to pay cash dividends in the future.

Item 6. Selected Consolidated Financial Data

      The selected consolidated financial data set forth below with respect to
the Company's statements of income for each of the years in the three year
period ended June 30, 2002, and with respect to the balance sheets at June 30,
2001 and 2002, are derived from the consolidated financial statements that have
been audited by KPMG LLP, independent auditors, which are included elsewhere in
this Annual Report on Form 10-K, and are qualified by reference to such
consolidated financial statements. The statements of income data for the years
ended June 30, 1998 and June 30, 1999, and the balance sheet data at June 30,
1998, June 30, 1999 and June 30, 2000, are derived from audited consolidated
financial statements not included in this Annual Report on Form 10-K. The
following selected financial data should be read in conjunction with the
consolidated financial statements for the Company and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
operations included elsewhere herein.


                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                       Years Ended
                                                   June 30,   June 30,    June 30,     June 30,    June 30,
                                                     2002       2001        2000         1999        1998
                                                   --------   --------    --------     --------    --------

                                                           (In thousands, except per share data)
<S>                                                <C>         <C>         <C>         <C>         <C>
Statement of Income Data:
Net sales                                          $ 73,568    $ 84,825    $ 60,172    $ 45,739    $ 37,449
Cost of sales                                        51,369      52,527      35,074      27,711      23,571
                                                   --------    --------    --------    --------    --------

Gross profit                                         22,199      32,298      25,098      18,028      13,878
                                                   --------    --------    --------    --------    --------

Operating expenses:
         Marketing                                    7,256       6,584       5,434       4,177       3,998
         Research and development                     6,283       5,023       3,816       2,835       1,380
         General and administrative                   8,105       8,392       4,394       3,220       2,873
         Restructuring                                   --         688          --          --          --
         Fire related                                   711          --          --          --          --
                                                   --------    --------    --------    --------    --------
         Total operating expenses                    22,355      20,687      13,644      10,232       8,251
                                                   --------    --------    --------    --------    --------

Operating income (loss)                                (156)     11,611      11,454       7,796       5,627
                                                   --------    --------    --------    --------    --------

Other income (expense):
         Interest expense                              (149)       (159)        (66)        (38)        (82)
         Other, primarily interest income             3,932       7,162       3,316       1,396         922
                                                   --------    --------    --------    --------    --------
         Total other income                           3,783       7,003       3,250       1,358         840
                                                   --------    --------    --------    --------    --------

Income before income taxes
  and extraordinary item                              3,627      18,614      14,704       9,154       6,467
Income taxes                                           (405)      6,400       5,063       2,204       2,330
                                                   --------    --------    --------    --------    --------
Income before extraordinary item                      4,032      12,214       9,641       6,950       4,137
Extraordinary item-gain on acquisition                3,407
                                                   --------    --------    --------    --------    --------
Net income                                         $  7,439    $ 12,214    $  9,641    $  6,950    $  4,137
                                                   ========    ========    ========    ========    ========

Basic earnings per share:
  Net income before extraordinary item             $    .18    $    .55    $    .54    $    .42    $    .28
Extraordinary item - gain on acquisition                .15          --          --          --          --
                                                   --------    --------    --------    --------    --------
Net income                                         $    .33    $    .55    $    .54    $    .42    $    .28
                                                   ========    ========    ========    ========    ========

Diluted earnings per share:
  Net income before extraordinary item             $    .17    $    .52    $    .50    $    .40    $    .26
  Extraordinary item - gain on acquisition              .15          --          --          --          --
                                                   --------    --------    --------    --------    --------
  Net income                                       $    .32    $    .52    $    .50    $    .40    $    .26
                                                   ========    ========    ========    ========    ========

Shares used in computing net earnings per share:
  Basic                                              22,323      22,134      17,978      15,566      14,952
  Diluted                                            23,090      23,455      19,299      17,310      15,711
</TABLE>


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                               Years Ended
                                             June 30,  June 30,   June 30,    June 30,   June 30,
                                               2002      2001       2000       1999        1998
                                             --------  --------   --------    --------   --------
                                                   (In thousands, except per share data)
<S>                                         <C>        <C>        <C>        <C>        <C>
Balance Sheet Data:
Cash and cash equivalents                   $ 12,565   $ 11,748   $  6,179   $ 13,482   $ 11,249
Working capital                              143,487    146,677    106,271     39,053     38,965

Total assets                                 221,586    209,055    189,696     58,467     50,903
Long-term debt, less current installments         --         --         --         --         --
Stockholders' equity                         209,553    199,454    179,572     51,845     45,506
</TABLE>

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

      The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the consolidated
financial statements and the notes thereto appearing elsewhere in this Form
10-K. The following discussion, other than historical facts, contains
forward-looking statements that involve a number of risks and uncertainties. The
Company's results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including factors
described elsewhere in this Annual Report on Form 10-K.

Overview

      The Company designs, develops, and markets integrated microwave
components, assemblies, and subsystems for the wireless communications,
satellite communications, and defense electronics markets. The Company uses its
proprietary Multi-Layer Stripline technology to generate compact, lightweight,
and cost-effective products for use in these markets. The Company offers its
integrated assemblies and high-end subsystems to leading wireless communications
equipment manufacturers such as Ericsson, Motorola, Lucent Technologies, and
Nortel Networks and to satellite communications companies such as Boeing, Inc.
and Lockheed Martin.

      The Company operates predominantly in the wireless communications,
satellite communications, and defense electronics markets. The two reporting
segments of the Company are the Wireless group and the Space and Defense group.
These groups have been determined based upon the nature of the products and
services offered, customer base, technology, availability of discrete internal
financial information, homogeneity of products, and delivery channel, and are
consistent with the way the Company organizes and evaluates financial
information internally for making operating decisions and assessing performance.

      The Company generally recognizes sales at the time products are shipped to
customers, provided that persuasive evidence of an arrangement exists, the sales
price is fixed or easily determinable, collectibility is reasonably assured and
title and risk of loss have passed to the


                                       25
<PAGE>

customer. Title and the risks and rewards of ownership of products are generally
transferred at the time of shipment. Payments received from customers in advance
of products delivered are recorded as customer advance payments until earned. A
small percentage of sales are derived from long-term fixed-price contracts for
the sale of large space and defense electronics products. Sales and estimated
profits under long-term contracts are recognized using the percentage of
completion method of accounting on a units-of-delivery basis. Profit estimates
are revised periodically based upon changes in sales value and costs at
completion. Any losses on these contracts are recognized in the period in which
such losses are determined.

      Effective July 1, 2001, the Company adopted Financial Accounting Standard
Board (FASB) Statement No. 141 - Business Combinations and Statement No. 142 -
Goodwill and Other Intangibles. As a result of the adoption of these new
standards and in conjunction with the completion of goodwill impairment reviews
by an outside appraisal firm, the Company ceased amortization of the goodwill
recorded as part of its previous acquisition transactions. If the Company had
discontinued amortization of goodwill at the beginning of the first quarter of
the prior fiscal year (2001), net earnings and basic and diluted earnings per
share would have been increased by $1,553,042 or $.07 per share for the year
ended June 30, 2001.

      On August 31, 2001, the Company acquired all of the outstanding capital
stock of Amitron, Inc. Amitron is based in North Andover, Massachusetts and is
primarily engaged in the design and manufacture of ceramic components and
circuits for the medical, telecommunications and defense electronics markets.
The aggregate purchase consideration was $11,693,256, consisting of cash of
$9,919,664 (including cash direct acquisition costs), non-cash direct
acquisition costs in the form of stock options for service of $18,183, and
95,704 shares of the Company's common stock with an aggregate value of
$1,755,409. The acquisition was accounted for under the purchase method of
accounting for business combinations.

      Effective October 1, 2001 the Company acquired all of the outstanding
capital stock of The 5M Company Europe, B.V., a manufacturer of microwave
circuits based in Almelo, The Netherlands. The Company's name was subsequently
changed to Anaren Europe, B.V. Anaren Europe's manufacturing technology is
similar to the Company's Multi-Layer Stripline technology. This manufacturing
technology utilizes a unique metal backing technology which offers both cost and
performance advantages for high power applications. The aggregate purchase
consideration for this transaction was $4,088,547, consisting of cash of
$3,869,823 (including direct acquisition costs), and Company stock options with
an aggregate fair value of $218,724. The acquisition was accounted for under the
purchase method of accounting for business combinations.

      In January 2002, Anaren Europe completed the reconstruction of its factory
due to a fire in July 2001, which partially destroyed this facility. As of July
2002, Anaren Europe's facility is fully operational and the Company is actively
engaged in rebuilding its customer base. As a result of the fire, Anaren Europe
received an insurance settlement through its property and business interruption
insurance policies of approximately $16.0 million in December 2001 to offset
expenses incurred in out-sourcing production, cleaning the facility and
equipment and repairing equipment damaged but not destroyed in the fire, and to
recognize the replacement cost to be received for inventory and equipment
destroyed by the fire.


                                       26
<PAGE>

      As a result of the fire and the subsequent insurance claim, the value of
Anaren Europe's assets at the time of purchase was significantly higher than the
consideration paid by Anaren. This situation resulted in significant negative
goodwill being generated by the transaction, which, under current accounting
convention, was first offset by writing down the acquired long-lived assets to
zero and then by recognizing an "extraordinary gain" of $3,407,000, or $0.15 per
share, in the second quarter ended December 31, 2001.

      In March 2002, the Company, through a newly created subsidiary, Anaren
Communication Suzhou Co., Ltd., signed a three-year lease for a 12,300 square
foot manufacturing facility in Suzhou Industrial Park in Suzhou, China. The
Company has hired a General Manager for the facility and additional staffing
began in early July 2002. The Company presently expects to begin light
manufacturing and assembly at this location during the second quarter of fiscal
2003. It is anticipated that this facility will serve all of the Company's Asian
customers and will concentrate on producing more labor intensive products.
Additionally, it is expected that the Company will use this location to
facilitate procurement of raw materials in China, when possible, for the
Company's other subsidiaries.

Results of Operations

      The following table sets forth the percentage relationships of certain
items from the Company's consolidated statements of operations as a percentage
of net sales for the periods indicated:

                                                       Years Ended June 30,
                                                    --------------------------
                                                    2002       2001       2001
                                                    ----       ----       ----
Net sales .....................................    100.0%     100.0%     100.0%
Cost of sales .................................     69.8       61.9       58.3
                                                   -----      -----      -----
Gross profit ..................................     30.2       38.1       41.7
                                                   -----      -----      -----
Operating expenses:
     Marketing ................................      9.9        7.8        9.0
     Research and development .................      8.5        5.9        6.3
     General and administrative ...............     11.0        9.9        7.3
     Restructuring ............................       --        0.8         --
     Fire related .............................      1.0         --         --
                                                   -----      -----      -----
         Total operating expenses .............     30.4       24.4       22.6
                                                   -----      -----      -----
Operating income ..............................     (0.2)      13.7       19.1
                                                   -----      -----      -----
Other income (expense):
     Interest expense .........................     (0.2)      (0.2)      (0.1)
     Other, primarily interest income .........      5.3        8.4        5.5
                                                   -----      -----      -----
         Total other income ...................      5.1        8.2        5.4
                                                   -----      -----      -----
Income before income taxes and
  extraordinary item ..........................      4.9       21.9       24.5
Income taxes ..................................     (0.6)       7.5        8.4
                                                   -----      -----      -----
Net income before extraordinary item % ........      5.5%      14.4%      16.1%

Extraordinary item - gain on acquisition ......      4.6         --         --
                                                   -----      -----      -----
Net income ....................................     10.1%      14.4%      16.1%
                                                   =====      =====      =====


                                       27
<PAGE>

      The following table sets forth the Company's net sales by industry segment
for the periods indicated:

                                       Years Ended June 30,
                                       --------------------
                                    2002       2001       2000
                                    ----       ----       ----
                                          (In thousands)
Wireless .......................   $47,497   $61,710    $38,807
Space & Defense ................    26,071    23,115     21,365
                                   -------   -------    -------
                                   $73,568   $84,825    $60,172
                                   =======   =======    =======

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001

Net Sales. Net sales decreased $11.2 million, or 13.3%, to $73.6 million for the
year ended June 30, 2002 compared to $84.8 million for the previous year. This
decrease was caused by a 23.0% drop in Wireless sales, which was partially
offset by a 12.8% rise in sales of Space and Defense products.

The $14.2 million decrease in sales of Wireless products, which consist of
standard surface mount components and custom subassemblies for use in building
wireless base station equipment, was caused by a rapid downturn in capital
expenditures for wireless infrastructure equipment which began in the latter
part of fiscal 2001. This downturn resulted in numerous reductions in customer
demand forecasts and delivery push outs beginning in March 2001 and continuing
through fiscal 2002. This market downturn has affected all of the Company's
Wireless product lines and has most severely affected sales of Wireless standard
components. The downturn in Wireless market sales was somewhat offset by the
inclusion of $8.4 million in sales in fiscal 2002 from Anaren Europe and
Amitron, the Company's fiscal 2002 acquisitions. Although delivery push outs
have stopped and the Company saw a $2.7 million increase in Wireless sales from
quarter two to quarters three and a $1.6 million increase from quarter three to
quarter four, the worldwide Wireless market downturn is expected to continue for
an uncertain period.

Space and Defense products consist of custom components and assemblies for
communication satellites and defense radar countermeasures subsystems for the
military. Sales in the Space and Defense group rose $3.0 million, or 12.8%, in
fiscal 2002, compared to the prior fiscal year. This increase in shipments
resulted from factory production shipments for the Boeing Spaceway program. This
satellite program, which entered full factory production in the fourth quarter
of fiscal 2001, is expected to place Space and Defense shipments in the $7.0 -
$7.5 million range, quarterly, through the remainder of calendar 2002.

Gross Profit. Cost of sales consists primarily of engineering design costs,
material, material fabrication costs, assembly costs and test costs. Gross
profit for fiscal 2002 was $22.2 million (30.2% of net sales), down from $32.3
million (38.1% of net sales) for the prior year. The decrease in gross margin
resulted from the decline in sales volume, which caused under absorption of
factory overhead compared to the previous year. Presently, the Company expects
gross margins to remain at or below current levels in fiscal 2003 and not to
improve significantly without an increase in sales volume, both domestically and
at Anaren Europe in The Netherlands.

Marketing. Marketing expenses consist mainly of employee related expenses,
commissions paid to sales representatives, trade show expenses, advertising
expenses and related travel expenses. Marketing expenses increased 10.1% to $7.3
million (9.9% of net sales) for fiscal 2002 from


                                       28
<PAGE>

$6.6 million (7.8% of net sales) for fiscal 2001. Marketing expenses increased
due to the addition of new east and west coast marketing offices and the
additional marketing expenses associated with the Company's acquired businesses,
Amitron and Anaren Europe, which amounted to approximately $1.0 million in
fiscal 2002.

Research and Development. Research and development expenses consist of material
and salaries and related overhead costs of employees engaged in ongoing
research, design and development activities associated with new products and
technology development. Research and development expenses increased 25.1% to
$6.3 million (8.5% of net sales) in fiscal 2002 from $5.0 million (5.9% of net
sales) for fiscal 2001. Research and development expenditures are supporting
further development of wireless infrastructure products and new wireless
networking product opportunities with a renewed emphasis on developing new
standard surface mount wireless products. Despite the current wireless market
downturn, the Company does not expect to reduce its current research and
development efforts in the near term and is presently working on a number of new
standard wireless products.

General and Administrative. General and administrative expenses consist of
employee related expenses, professional services, goodwill (in fiscal 2001) and
intangible amortization, travel related expenses and other corporate costs.
General and administrative expenses decreased 3.4% to $8.1 million (11.0% of net
sales) for fiscal 2002 from $8.4 million (9.9% of net sales) for fiscal 2001.
General and administrative expenses have decreased primarily due to the adoption
of FASB Statement No. 142 which eliminated the amortization of goodwill starting
in the first quarter of fiscal 2002. The elimination of goodwill reduced general
and administrative expenses by $1.6 million in the current year compared to last
year. This elimination of goodwill amortization was partially offset by an
increase in identifiable intangible amortization of $356,000 in fiscal 2002
associated with the Company's acquisition of Amitron. Additionally, general and
administrative expense for fiscal 2002 includes ten months and nine of expense
for Amitron and Anaren Europe, respectively, which amounted to approximately
$2.0 million in the aggregate.

Operating Income. Operating income decreased $11.8 million to an operating loss
of $156,000 (0.2% of net sales) for fiscal 2002, from an operating profit of
$11.6 million (13.7% of net sales) for fiscal 2001. On a reporting segment
basis, the Wireless operating loss was $7.9 million for fiscal 2002, down 219.0%
or $14.5 million from $6.6 million operating income in fiscal 2001. The
principal reason for the decrease in Wireless operating income in fiscal 2002
compared to fiscal 2001 was the 23.0% decrease in wireless sales year over year
due to the large decrease in Wireless base station equipment demand worldwide,
which began in the last half of fiscal 2001 and continues at the present time.
The large decline in sales levels in the Wireless segment resulted in
significant under absorption of fixed overhead within the group during the
current fiscal year. Additionally, operating income in the Wireless sector was
further decreased by the $4.4 million operating loss at Anaren Europe in fiscal
2002 due to the fire recovery costs and the low level of sales caused by the
fire.

Space and Defense operating income rose $2.7 million, or 52.5%, for fiscal 2002
compared to fiscal 2001. This increase resulted from a $3.0 million rise in
Space and Defense revenues year over year, due to the Spaceway Program entering
full production at the end of fiscal year 2001.


                                       29
<PAGE>

This increase in revenue resulted in better absorption of fixed overhead in
fiscal 2002 compared to the previous year. Additionally, cost reduction and
efficiency efforts in this segment were successful in reducing the overall cost
of operations in fiscal 2002 compared to the prior year.

Other Income. Other income is primarily interest income received on invested
cash balances and income from debt extinguishment due to leased equipment
destroyed in the Anaren Europe July 2001 fire. Other income decreased 45.1% to
$3.9 million (5.3% of net sales) for the year ended June 30, 2002 from $7.2
million (8.4% of net sales) for the same period last year. This decrease was
caused mainly by the decline in market interest rates over the last 12 months
brought about by reductions in the Federal Fund rates, and the use of
approximately $12.1 million in cash to complete the acquisitions of Amitron and
Anaren Europe. Interest income will fluctuate based on the level of interest
rates and the level of investible cash balances. During the fourth quarter of
fiscal 2002, the Company recorded an other income item amounting to
approximately $194,000 representing the remaining principal balance on a
capitalized lease obligation which was no longer payable by the Company. The
equipment leased by the Company was destroyed in the July 2001 fire.

Interest Expense: Interest expense primarily represents loan interest,
commitment fees and interest incurred on certain deferred obligations. Interest
expense for fiscal 2002 was $149,000 (0.2% of net sales) compared to $160,000
(0.2% of net sales) for fiscal 2001.

Income Taxes. The tax benefit for fiscal 2002 was $405,000 ((0.6)% of net
sales). This compared to tax expense of $6.4 million (7.5% of net sales) for
fiscal 2001, representing an effective tax rate of 34.4%. During the fourth
quarter, the Company finalized an analysis of certain available research credits
and export tax benefits and recorded a tax benefit of $857,000. In addition, the
Company's effective tax rate decreased as a direct result of the increased
proportion of federally exempt state municipal bond income in relation to income
before taxes. Going forward the Company's effective tax rate will be impacted by
the levels of tax credits, export tax benefits, nontaxable interest income and
the income/loss generated by the foreign subsidiaries in relation to income
before taxes.

Extraordinary gain. The extraordinary gain in fiscal 2002 of $3.4 million (4.6%
of net sales) resulted from the purchase of Anaren Europe. As a result of the
fire and the subsequent insurance settlement, the value of the Anaren Europe
assets at the time of purchase was significantly higher than the consideration
paid by Anaren. This situation resulted in significant negative goodwill being
generated by the transaction, which, under current accounting convention, was
first offset by writing down the acquired fixed assets to zero and then by
recognizing an "extraordinary gain" of $3,407,000, or $0.15 per share, in the
second quarter of fiscal 2002.


                                       30
<PAGE>

Year Ended June 30, 2001 (Fiscal 2001) Compared to Year Ended June 30, 2000
(Fiscal 2000)

Net Sales. Net sales for fiscal 2001 were $84.8 million, up 41.0% over net sales
of $60.2 million in fiscal 2000. The increase was the result of a 59.0% rise in
Wireless sales and an 8.2% increase in shipments of Space and Defense products.

The increase in the sale of Wireless products amounted to $22.9 million and
reflects mainly the addition of sales the Company's two acquisitions, Anaren
Power Products and RF Power, whose combined sales were $24.1 million for fiscal
2001. Wireless product sales growth, after adjusting for these acquisitions, was
approximately 12.4%, or $4.1 million, in fiscal 2001 compared to the prior year
sales.

During the latter part of fiscal 2001, the Company saw a rapid downturn in
expenditures for capital infrastructure by service providers. This resulted in
an increasing number of reductions in customer demand forecasts and delivery
pushouts beginning toward the end of February 2001 and continuing through June
2001. This severe market downturn had a negative impact on all of the Company's
Wireless product lines that continues at present.

Sales in the Space and Defense group rose $1.8 million, or 8.2%, in fiscal 2001
compared to the prior fiscal year. This small increase in shipments resulted
from the first pre-production engineering hardware shipments and initial
production shipments for the Boeing Spaceway program. This program, which had
been in an engineering design phase for the preceding year and a half, entered
full factory production in the fourth quarter of fiscal 2001.

Gross Profit. Gross profit for fiscal 2001 was $32.3 million (38.1% of net
sales), up $7.2 million from $25.1 million (41.7% of net sales) for fiscal 2000.
Gross profit increased significantly due to the absolute increase in sales in
fiscal 2001 compared to fiscal 2000. The rise in sales volume did not result in
further improvement in gross margin as a percent of sales, year over year, as
the gross margin at the Company's new subsidiaries, which provided the majority
of the fiscal 2001 sales growth, were below those of its main plant operations
in East Syracuse, New York. Additionally, gross profit improvement was further
hindered by the decline in shipments in the second half of fiscal 2001 due to
the downturn in capital spending for wireless infrastructure equipment. In light
of the lower sales levels, the Company took action to consolidate its
operations, reduced its personnel levels by over 25.0% from their peak in
February 2001, and decreased other indirect costs.

Marketing. Marketing expenses increased 21.1% to $6.6 million (7.8% of net
sales) for fiscal 2001 from $5.4 million (9.0% of net sales) for fiscal 2000.
This increase was a result of the continuing expansion of the marketing and
sales organization to support the Company's expanding commercial markets, as
well as eleven and eight months of expense for Anaren Power Products and RF
Power, respectively, not included in fiscal 2000 expenses.

Research and Development. Research and development expenses increased 31.6% to
$5.0 million (5.9% of net sales) in fiscal 2001 from $3.8 million (6.3% of net
sales) for fiscal 2000. Research and development expenditures expanded to
support further development of wireless infrastructure products and new
broadband fixed wireless product opportunities. The inclusion of Anaren Power
Products and RF Power in the Company's research and development expense in
fiscal 2001 accounted for approximately $438,000 in additional expenses.


                                       31
<PAGE>

General and Administrative. General and administrative expenses increased 91.0%
to $8.4 million (9.9% of net sales) for fiscal 2001 from $4.4 million (7.3% of
net sales) for fiscal 2000. General and administrative expenses increased due to
the hiring of additional personnel to support the Company's corporate
acquisition activity, a rise in professional fees due to the Company's growth,
and amortization of goodwill expense related to acquisitions. Additionally, the
fiscal 2001 expense includes 11 and eight months general and administrative
expense for Anaren Power Products and RF Power, respectively, not included in
fiscal 2000.

Restructuring. Restructuring expense consists of severance pay, vacation pay,
abandoned equipment and leasehold impairment charges and accrued noncancellable
lease obligation expenses related to the closure of Anaren Power Products' New
Jersey facility and relocation of its operations to East Syracuse, New York.
Restructuring expenses were $688,000 (0.8% of net sales) in fiscal 2001 compared
to no restructuring expense in fiscal 2000.

Operating Income. Operating income increased 1.3% to $11.6 million (13.7% of net
sales) for fiscal 2001, compared to $11.5 million (19.1% of net sales) for
fiscal 2000. On a reporting segment basis Wireless operating income was $6.6
million for fiscal 2001, down 21.4% from $8.4 million for fiscal 2000. The main
reason for the decline in Wireless operating income was the sudden drop in
worldwide demand for wireless infrastructure equipment which resulted in a
severe decline in Company Wireless sales in the latter part of fiscal 2001.
These significantly lower sales levels, coupled with the restructuring charge
related to the closing of Anaren Power Products' New Jersey facility and
relocation of its ferrite production to the Company's East Syracuse, New York
facility, caused steep declines in Wireless operating income which culminated in
a Wireless operating loss in the fourth quarter.

Space and Defense operating income rose 64.2% to $5.1 million in fiscal 2001,
compared to $3.1 million in fiscal 2000. This increase resulted from a $1.9
million rise in revenue for this segment in fiscal 2001, as well as a much more
profitable product mix for fiscal 2001 compared to the previous fiscal year
which allowed the Company to ship more product with a lower head count within
the segment.

Interest Expense. Interest expense for fiscal 2001 was $160,000 (0.2% of net
sales) compared to $66,000 (0.1% of net sales) for fiscal 2000. The increase in
interest expense was caused by the addition of interest bearing obligations of
RF Power.

Other Income. Other income increased 116.0% to $7.2 million (8.4% of net sales)
for fiscal 2001 from $3.3 million (5.5% of net sales) for fiscal 2000 due to the
income received on the $112 million of net proceeds raised through the Company's
follow-on offering completed in April 2000.

Income Taxes. Income tax expense for fiscal 2001 was $6.4 million (7.5% of net
sales), representing an effective tax rate of 34.4%. This compared to $5.1
million (8.4% of net sales) for fiscal 2000, also representing an effective tax
rate of 34.4%.


                                       32
<PAGE>

Critical Accounting Policies

The methods, estimates and judgments management uses in applying the Company's
most critical accounting policies have a significant impact on the results
reported in the Company's financial statements. The U.S. Securities and Exchange
Commission has defined the most critical accounting policies as the ones that
are most important to the portrayal of Anaren's financial condition and results,
and requires management to make the most difficult and subjective judgments,
often as a result of the need to make estimates of matters that are inherently
uncertain. Based on this definition, the Company's most critical policies
include: valuation of accounts receivable, which impacts general and
administrative expense; valuation of inventory, which impacts cost of sales and
gross margin; the assessment of recoverability of goodwill and other intangible
assets, which impacts write-offs of goodwill and intangibles; and accounting for
income taxes, which impacts valuation allowance and the effective tax rate.
Management reviews the estimates, including, but not limited to, allowance for
doubtful accounts, inventory reserves and income tax valuations on a regular
basis and makes adjustments based on historical experiences, current conditions
and future expectations. The reviews are performed regularly and adjustments are
made as required by current available information. The Company believes these
estimates are reasonable, but actual results could differ from these estimates.

The Company states inventories at the lower of cost or market, using a standard
cost methodology to determine the cost basis for the inventory. This method
approximates actual cost on a first-in-first-out basis. The recoverability of
inventories is based on the types and levels of inventory held, forecasted
demand, pricing, competition and changes in technology. The Company's accounts
receivable represent those amounts, which have been billed to our customers but
not yet collected. The Company analyzes various factors including historical
experience, credit worthiness of customers and current market and economic
conditions. The allowance for doubtful accounts balance is established based on
the portion of those accounts receivable which are deemed to be potentially
uncollectible. Changes in judgments on these factors could impact the timing of
costs recognized.

The Company records valuation allowances to reduce deferred tax assets when it
is more likely than not that some portion of the amount may not be realized. The
Company evaluates the need for valuation allowances on a regular basis and
adjust as needed. These adjustments, when made, would have an impact on the
Company's financial statements in the period that they were recorded.


                                       33
<PAGE>

Intangible assets with estimable useful lives are amortized to their residual
values over those estimated useful lives in proportion to the economic benefit
consumed.

Goodwill is tested annually for impairment by the Company at the reporting unit
level, by comparing the fair value of the reporting unit with its carrying
value. Valuation methods for determining the fair value of the reporting unit
include reviewing quoted market prices and discounted cash flows. If the
goodwill is indicated as being impaired (the fair value of the reporting units
is less than the carrying amount), the fair value of the reporting unit is then
allocated to its assets and liabilities in a manner similar to a purchase price
allocation in order to determine the implied fair value of the reporting unit
goodwill. This implied fair value of the reporting unit goodwill is then
compared with the carrying amount of the reporting unit goodwill and, if it is
less, the Company would then recognize an impairment loss.

The projection of future cash flows for the goodwill impairment analysis
requires significant judgments and estimates with respect to future revenues
related to the assets and the future cash outlays related to those revenues.
Actual revenues and related cash flows or changes in anticipated revenues and
related cash flows could result in changes in this assessment and result in an
impairment charge. The use of different assumptions could increase or decrease
the related impairment charge.

Liquidity and Capital Resources

Net cash provided by operations for the years ended June 30, 2002 and 2001 were
$17.1 million and $16.7 million, respectively. The positive cash flow from
operations in both fiscal 2002 and 2001 was due to the net income attained in
both years and, in fiscal 2002, to the large amount of cash received in the
second and third quarters ($10.7 million) from the Anaren Europe insurance
settlement. Additionally, the increase in cash generated by operations in fiscal
2001 was augmented by $5.4 million generated by tax benefits related to the
exercise of stock options by employees compared to $461,000 in fiscal 2002.

Net cash used in investing activities in fiscal 2002 consists of funds used to
purchase capital equipment and cash used to purchase the capital stock of
Amitron in August 2001 and Anaren Europe in October 2001. Capital equipment
placed in service amounted to $9.8 million, including $5.8 million at Anaren
Europe, in the year ended June 30, 2002 compared to $8.0 million in the
previous fiscal year. Additionally, the Company expended $9.9 million in cash to
purchase all the capital stock of Amitron. Funds for this transaction were
obtained through the proceeds of matured marketable debt securities in the
amount of $13.3 million. In October 2001, the Company expended $3.9 million in
cash to purchase the capital stock of Anaren Europe. Funds for this transaction
came from the Company's operating cash account. Additionally, the Company
expended $5.2 million in fiscal 2002 to purchase common stock of Celeritek, Inc.
Funds for these purchases came from the Company's operating cash account.

The majority of the cash used in investing activities in fiscal 2001 was the
$17.9 million used to purchase the assets of Ocean Microwave, Inc. Funds for
this transaction were obtained through the proceeds of matured marketable debt
securities in the amount of $18.5 million.


                                       34
<PAGE>

Net cash used by financing activities was $1.6 million in fiscal 2002 and
consisted of $2.0 million used to pay off loans of Amitron and Anaren Europe,
reduced by $399,000 generated from the exercise of stock options. In the prior
year funds generated by financing activities amounted to $1.2 million and
consisted of $2.9 million generated through the exercise of stock options, and
$408,000 used to pay off loans of Ocean Microwave which were assumed as part of
the asset purchase.

Additionally, during the fourth quarter of fiscal 2001, $1.3 million was used to
repurchase 117,000 shares of the Company's common stock. The purchases were made
under a 2.0 million share repurchase program authorized by the Board of
Directors. No repurchases of the Company's shares took place in fiscal 2002.

The Company has a credit facility providing an unsecured $10 million working
capital revolving line of credit bearing interest at the LIBOR interest rate
plus one hundred twenty-five basis points and maturing December 31, 2006. The
terms of the credit facility require maintenance of a minimum tangible net
worth, ratio of cash flows to maturities, and leverage ratio as defined in the
applicable loan agreement. The Company believes that it was in compliance with
all restrictions and covenants at June 30, 2002. At June 30, 2002, $0 was
outstanding under the credit facility. The Company believes that its cash
requirements for the foreseeable future will be satisfied by currently invested
cash balances, expected cash flows from operations, and funds available under
the credit facility.

Disclosures About Contractual Obligations and Commercial Commitments

Accounting standards require disclosure concerning the Company's obligations and
commitments to make future payments under contracts, such as debt and lease
agreements, and under contingent commitments, such as debt guarantees. The
Company's obligations and commitments are as follows:

<TABLE>
<CAPTION>
                                               Less
                                  Total      Than 1 Yr.   2 - 3 Yrs.   4 - 5 Yrs.  Over 5 Yrs.
                                  -----      ----------   ----------   ---------   ----------
                                                 Payment Due by Period
                                                 ---------------------
<S>                             <C>          <C>          <C>          <C>          <C>
Contractual obligations
-----------------------
Long term debt                  $       --   $       --   $       --   $       --   $       --
Operating leases - facilities    6,023,091      994,409    1,341,155    1,021,325    2,666,202
Deferred compensation              526,808       65,000      130,000      130,000      201,808
Lines of credit                         --           --           --           --           --
</TABLE>

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." FASB 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. FASB 143 is required for adoption for fiscal
years beginning after June 14, 2002. The Company has reviewed the provisions of
FASB 143, and believes that upon adoption, the Statement will not have a
significant effect on its consolidated financial statements.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment of
Disposal of Long-Lived Assets." FASB 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. FASB 144 is required for adoption for fiscal years beginning
after December 15, 2001 and interim periods within those fiscal years. The
Company has reviewed the provisions of FASB 144, and believes that upon
adoption, the Statement will not have a significant effect on its consolidated
financial statements.


                                       35
<PAGE>

In April 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS
145). SFAS 145 is required for adoption for fiscal years beginning after May 15,
2002, with early adoption of the provisions related to the rescission of
Statement 4 encouraged. The Company has reviewed the provisions of SFAS 145, and
believes that upon adoption, the Statements will not have a significant effect
on its consolidated financial statements.

In July 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, Accounting for Restructuring Costs
(SFAS 146). SFAS 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines, terminating
employees and contracts, and relocating plant facilities or personnel. Under
SFAS 146, a company will record a liability for a cost associated with an exit
or disposal activity when that liability is incurred and can be measured at fair
value. SFAS 146 will require a company to disclose information about its exit
and disposal activities, the related costs, and changes in those costs in the
notes to the interim and annual financial statements that include the period in
which an exit activity is initiated and in any subsequent period until the
activity is completed. SFAS 146 is effective prospectively for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
Under SFAS 146, a company may not restate its previously issued financial
statements and the new Statement grandfathers the accounting for liabilities
that a company had previously recorded under EITF Issue 94-3.

Quantitative and Qualitative Disclosures About Market Risk

The following discusses the Company's possible exposure to market risk related
to changes in interest rates, equity prices and foreign currency exchange rates.
This discussion contains forward-looking statements that are subject to risks
and uncertainties. Results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including
factors described elsewhere in this Annual Report on Form 10K.

As of June 30, 2002, the Company had cash, cash equivalents and marketable
securities of $124.9 million, of which approximately $108.5 million consisted of
highly liquid investments in marketable debt securities and $3.8 million
consisted of marketable equity securities. The marketable debt securities at
date of purchase normally have maturities between one and 18 months, are exposed
to interest rate risk and will decrease in value if market interest rates
increase. A hypothetical decrease in market interest rate of 10.0% from June 30,
2002 rates, or 0.3%, would have reduced net income and cash flow by
approximately $328,000, or $0.014 per share for the year. Due to the relatively
short maturities of the securities and its ability to hold those investments to
maturity, the Company does not believe that an immediate decrease in interest
rates would have a significant effect on its financial condition or results of
operations. Over time, however, declines in interest rates will reduce the
Company's interest income.

The Company currently owns equity investments held for sale with a market value
of approximately $3.8 million. Fluctuations in market value of these securities
are charged to stockholders' equity monthly. A theoretical 10.0% decline in
market value of these securities would result in a $380,000 reduction in
stockholders' equity.

All of the Company's sales from its domestic U.S. subsidiaries to foreign
customers are denominated in United States dollars and, accordingly are not
exposed to foreign currency exchange risk. Sales of the Company's Netherlands
subsidiary, Anaren Europe, are denominated in Euros to European customers and
United States dollars to U.S. customers. Sales to U.S. customers by Anaren
Europe denominated in United States dollars would be subject to currency
exchange losses. At present, due to the fire at Anaren Europe, sales of that
subsidiary to U.S. customers in U.S. dollars subject to possible currency losses
are less than $100,000 per quarter and thus any possible losses due to currency
fluctuations would not be material to the operating results of the Company until
such time as Anaren Europe's sales increase significantly.


                                       36
<PAGE>

Item 8. Financial Statements and Supplementary Data

The financial statements and financial statement schedules called for by this
Item are provided under "Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K," which information is incorporated herein by reference.

The unaudited supplementary financial information required by this Item is
contained in note 23 to the consolidated financial statements of the Company
which are included elsewhere in this Annual Report on Form 10-K.

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

None.


                                       37
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of Registrant

Information required by this Item concerning directors of the Company is
contained in the Company's proxy statement filed with respect to the 2002 Annual
Meeting of Shareholders and is incorporated by reference herein. The information
regarding executive officers of the Company required by this Item is included in
Item 4A hereof.

Item 11. Executive Compensation

      Information required by this Item is contained in the Company's proxy
statement filed with respect to the 2002 Annual Meeting of Shareholders and is
incorporated by reference herein.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      Information required by this Item is contained in the Company's proxy
statement filed with respect to the 2002 Annual Meeting of Shareholders and is
incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions

      Information required by this Item is contained in the Company's proxy
statement filed with respect to the 2002 Annual Meeting of Shareholders and is
incorporated by reference herein.


                                       38
<PAGE>

                                     PART IV

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

(a) 1. and 2. Financial Statements and Schedules:

                  Reference is made to the Index of Financial Statements
                  hereinafter contained

            3.    Exhibits:

                  Reference is made to the list of Exhibits hereinafter
                  contained

(b) Current Reports on Form 8-K:

                  The Company was not required to file a Current Report on Form
                  8-K during the quarter ended June 30, 2002.

(c) Exhibits:

      Index to Exhibits

Exhibit No.                        Description
-----------                        -----------

     3.1          Certificate of Incorporation, as amended (1)

     3.2          Restated By-Laws (2)

     4.1          Specimen Certificate of Common Stock (3)

     4.2          Shareholder Protection Rights Agreement dated as of April 20,
                  2001, between the Company and American Stock Transfer & Trust
                  Company, including forms of Rights Certificate and Election to
                  Exercise (4)

     10.1         Employment Agreement, dated as of July 1, 2001, between the
                  Company and Lawrence A. Sala (5)

     10.2         Pension Plan and Trust (6)

     10.3         Anaren Microwave, Inc. Incentive Stock Option Plan, as
                  amended (7)

     10.4         Anaren Microwave, Inc. 1989 Non-statutory Stock Option Plan,
                  as amended (8)

     10.5         Credit Facility Agreement, dated as of December 23, 1997,
                  between the Company and Manufacturers and Traders Trust
                  Company, together with the Revolving Credit Note dated
                  December 23, 1997 executed by the Company in favor of
                  Manufacturers and Traders Trust Company (9)


                                       39
<PAGE>

     10.8         Amendment dated January 1, 2002 to Credit Facility Agreement,
                  dated as of December 23, 1997, between the Company and
                  Manufacturers and Traders Trust Company. (10)

     10.8         Anaren Microwave, Inc. Incentive Stock Option Plan for Key
                  Employees (11)

     10.9         Anaren Microwave, Inc. Stock Option Plan (12)

     10.10        Employment Agreement, dated as of February 29, 2000, between
                  the Company and Thomas J. Passaro, Jr. (13)

     10.11        Form of Change of Control Agreements dated March 15, 2002 with
                  Joseph Porcello, Mark Burdick, Timothy Ross, Stanley
                  Slingerland and Gert Thygesen

     10.12        Employment Agreement, dated as of April 25, 2002, between the
                  Company and Rutger Theunissen

     10.13        Employment Agreement, dated as of August 31, 2001, between the
                  Company and Raymond C. Simione

     21           Subsidiaries of the Company

     23           Consent of KPMG LLP

----------
(1)   (A) Restated Certificate of Incorporation of the Company, filed on August
      11, 1967, is incorporated herein by reference to Exhibit 3(a) to Company's
      Registration Statement on Form S-1 (Registration No. 2-42704); (B)
      Amendment, filed on December 19, 1980, is incorporated herein by reference
      to Exhibit 4.1(ii) to the Company's Registration Statement on Form S-2
      (Registration No. 2-86025); (C) Amendment, filed on March 18, 1985, is
      incorporated herein by reference to Exhibit 3.1 to the Company's Annual
      Report on Form 10-K (Commission File No. 0-6620) for the fiscal year ended
      June 30, 1987; (D) Amendment, filed on December 14, 1987, is incorporated
      herein by reference to Exhibit 4(a)(iv) to the Company's Registration
      Statement on Form S-8 (Registration No. 33-19618); (E) Amendment, filed on
      April 8, 1999, is incorporated herein by reference to Exhibit 3.1 to the
      Company's Annual Report on Form 10-K (Commission File No. 0-6620) for the
      fiscal year ended June 30, 1999; (F) Amendment, filed on February 8, 2000,
      is incorporated herein reference to Exhibit 4.1 to the Company's
      Registration Statement on Form S-3 (Registration No. 333-31460) filed with
      the Securities and Exchange Commission on March 2, 2000; and (G)
      Amendment, filed on November 22, 2000, is incorporated by reference to
      Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q (Commission
      File No. 0-6620) for the three months ended December 31, 2000.


                                       40
<PAGE>

(2)   Incorporated herein reference to Exhibit 4.2 to the Company's Registration
      Statement on Form S-3 (Registration No. 333-31460) filed with the
      Securities and Exchange Commission on March 2, 2000.

(3)   Incorporated herein reference to Exhibit 4.3 to the Company's Registration
      Statement on Form S-3 (Registration No. 333-31460) filed with the
      Securities and Exchange Commission on March 2, 2000.

(4)   Incorporated herein by reference to Exhibits 4.1 and 4.2 to the Company's
      Registration Statement on Form 8-A (Commission File No. 0-6620) filed with
      the Securities and Exchange Commission on April 26, 2001.

(5)   Incorporated herein by reference to Exhibit 10.1 to the Company's Annual
      Report on Form 10-K (Commission File No. 0-6620) for the fiscal year ended
      June 30, 2001.

(6)   Incorporated herein by reference to Exhibit 4(b) to the Company's
      Registration Statement on Form S-8 (Registration No. 33-19618).

(7)   Incorporated herein by reference to Appendix A to the Company's definitive
      proxy statement for its 1998 annual meeting of the shareholders
      (Commission File No. 0-6620), filed with the Securities and Exchange
      Commission on September 25, 1998.

(8)   Incorporated herein by reference to Appendix B to the Company's definitive
      proxy statement for its 1998 annual meeting of the shareholders
      (Commission File No. 0-6620), filed with the Securities and Exchange
      Commission on September 25, 1998.

(9)   Incorporated herein by reference to Exhibit 10.13 to the Company's
      Quarterly Report on Form 10-Q for the three months ended December 31,
      1997.

(10)  Incorporated herein by reference to Exhibit 10.1 to the Company's
      Quarterly Report on Form 10-Q for the three months ended December 31,
      2001.

(11)  Incorporated herein by reference to Appendix A to the Company's definitive
      proxy statement for its 2000 annual meeting of the shareholders
      (Commission File No. 0-6620), filed with the Securities and Exchange
      Commission on September 18, 2000.

(12)  Incorporated herein by reference to Appendix B to the Company's definitive
      proxy statement for its 2000 annual meeting of the shareholders
      (Commission File No. 0-6620), filed with the Securities and Exchange
      Commission on September 18, 2000.

(13)  Incorporated herein by reference to Exhibit 10.10 to the Company's Annual
      Report Form 10-K (Commission File No. 0-6620) for the fiscal year ended
      June 30, 2000.


                                       41
<PAGE>

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

                             Anaren Microwave, Inc.

                             /s/ Lawrence A. Sala
                             --------------------------------------
                             Name:  Lawrence A. Sala
                             Title: President and Chief Executive Officer

Date: August 6, 2002

      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:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                Signature                                     Title                                 Date
--------------------------------------------------------------------------------------------------------------------

        <S>                                <C>                                                 <C>
                                           President, Chief Executive Officer and              August 6, 2002
        --------------------------
             Lawrence A. Sala              Chairman of the Board, Director
                                           (Principal Executive Officer)
--------------------------------------------------------------------------------------------------------------------

                                           Vice President of Finance and Treasurer             August 6, 2002
        --------------------------
            Joseph E. Porcello             (Principal Financial and
                                           Accounting Officer)
--------------------------------------------------------------------------------------------------------------------

                                           Chief Technical Officer,                            August 6, 2002
        --------------------------
            Carl W. Gerst, Jr.             Vice Chairman of the Board and Director
--------------------------------------------------------------------------------------------------------------------

                                           Director                                            August 6, 2002
        --------------------------
            Herbert I. Corkin
--------------------------------------------------------------------------------------------------------------------

                                           Director                                            August 6, 2002
        --------------------------
               Dale F. Eck
--------------------------------------------------------------------------------------------------------------------

                                           Director                                            August 6, 2002
        --------------------------
            Matthew S. Robison
--------------------------------------------------------------------------------------------------------------------

                                           Director                                            August 6, 2002
        --------------------------
              David Wilemon
--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       42

<PAGE>

                             ANAREN MICROWAVE, INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                             June 30, 2002 and 2001

                   (With Independent Auditors' Report Thereon)
<PAGE>

                             ANAREN MICROWAVE, INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                                      Index

                                                                            Page

Independent Auditors' Report                                                   1

Consolidated Balance Sheets as of June 30, 2002 and 2001                       2

Consolidated Statements of Income for the years
  ended June 30, 2002, 2001, and 2000                                          3

Consolidated Statements of Stockholders' Equity and
  Comprehensive Income for the years ended
  June 30, 2002, 2001, and 2000                                                4

Consolidated Statements of Cash Flows for the years
  ended June 30, 2002, 2001, and 2000                                          5

Notes to Consolidated Financial Statements                                     6
<PAGE>

                          Independent Auditors' Report

The Board of Directors
Anaren Microwave, Inc.:

We have audited the consolidated financial statements of Anaren Microwave,  Inc.
and  subsidiaries  as  listed  in the  accompanying  index.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Anaren Microwave,
Inc.  and  subsidiaries  as of June 30, 2002 and 2001,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended June 30, 2002, in conformity with accounting principles generally accepted
in the United States of America.

                                                       /s/ KPMG LLP

Syracuse, New York
August 5, 2002
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                             June 30, 2002 and 2001

                     Assets                            2002            2001
                                                   ------------    ------------
Current assets:
    Cash and cash equivalents                      $ 12,565,424      11,748,542
    Securities available for sale (note 4)            3,820,942              --
    Securities held to maturity (note 4)             98,955,299     108,557,983
    Receivables, less allowance for doubtful
       accounts of $529,000 and $195,000
       in 2002 and 2001, respectively                13,106,583      11,504,168
    Inventories (note 5)                             20,119,433      18,566,977
    Accrued interest receivable                       1,206,396       1,304,877
    Refundable income taxes                                  --          53,804
    Prepaid expenses                                    941,691         569,242
    Deferred income taxes (note 19)                   1,356,294         956,759
    Other current assets                                188,482       1,156,158
                                                   ------------    ------------
           Total current assets                     152,260,544     154,418,510
Securities held to maturity (note 4)                  9,564,558      11,725,960
Property, plant, and equipment, net (note 6)         26,592,375      18,805,901
Goodwill (note 3)                                    30,715,861      23,410,534
Deferred income taxes (note 19)                              --         263,348
Patent, net of accumulated amortization
    of $215,613 and $143,742 in 2002
    and 2001, respectively (note 1)                     359,353         431,223
Other intangible assets, net of accumulated
    amortization of $356,390 at June 30, 2002         2,093,610              --
                                                   ------------    ------------
                                                   $221,586,301     209,055,476
                                                   ============    ============
       Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable                               $  5,046,048       2,985,793
    Accrued expenses (note 7)                         2,766,350       2,966,258
    Income taxes payable                                530,857         938,984
    Customer advance payments                           244,831         767,790
    Other current liabilities (note 9)                  185,725          65,000
                                                   ------------    ------------
           Total current liabilities                  8,773,811       7,723,825
Deferred income taxes (note 19)                       1,357,359              --
Postretirement benefit obligation (note 18)           1,440,085       1,391,496
Other liabilities (note 9)                              461,808         486,380
                                                   ------------    ------------
           Total liabilities                         12,033,063       9,601,701
                                                   ------------    ------------
Commitments and concentrations
    (notes 20, 21, and 22)
Stockholders' equity:
    Common stock, $0.01 par value. Authorized
       200,000,000 shares (notes 11 and 16);
       issued 25,636,442 and 25,496,238
       in 2002 and 2001, respectively                   256,364         254,962
    Additional paid-in capital                      168,901,645     166,051,341
    Unearned compensation (note 14)                  (1,086,669)     (1,723,377)
    Retained earnings                                47,082,597      39,643,487
    Accumulated other comprehensive loss
       (note 15)                                       (828,061)             --
                                                   ------------    ------------
                                                    214,325,876     204,226,413
    Less cost of 3,177,822 treasury shares            4,772,638       4,772,638
                                                   ------------    ------------
           Total stockholders' equity               209,553,238     199,453,775
                                                   ------------    ------------
                                                   $221,586,301     209,055,476
                                                   ============    ============

See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                        Consolidated Statements of Income

                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                        2002            2001            2000
                                                    ------------    ------------    ------------
<S>                                                 <C>               <C>             <C>
Net sales                                           $ 73,568,319      84,825,275      60,171,836
Cost of sales                                         51,369,597      52,526,584      35,074,116
                                                    ------------    ------------    ------------
           Gross profit                               22,198,722      32,298,691      25,097,720
                                                    ------------    ------------    ------------
Operating expenses:
    Marketing                                          7,255,465       6,584,090       5,433,627
    Research and development                           6,282,846       5,022,882       3,815,862
    General and administrative                         8,105,264       8,392,118       4,394,099
    Restructuring (note 8)                                    --         688,337              --
    Fire related (note 2)                                711,400              --              --
                                                    ------------    ------------    ------------
           Total operating expenses                   22,354,975      20,687,427      13,643,588
                                                    ------------    ------------    ------------
           Operating income (loss)                      (156,253)     11,611,264      11,454,132
                                                    ------------    ------------    ------------
Other income (expense):
    Interest expense                                    (149,257)       (159,506)        (65,999)
    Other, primarily interest income                   3,932,376       7,162,210       3,315,666
                                                    ------------    ------------    ------------
           Total other income                          3,783,119       7,002,704       3,249,667
                                                    ------------    ------------    ------------
           Income before income taxes                  3,626,866      18,613,968      14,703,799

Income tax expense (benefit) (note 19)                  (405,000)      6,400,000       5,063,000
                                                    ------------    ------------    ------------
           Income before extraordinary item            4,031,866      12,213,968       9,640,799
Extraordinary item - gain on acquisition (note 2)      3,407,244              --              --
                                                    ------------    ------------    ------------
           Net income                               $  7,439,110      12,213,968       9,640,799
                                                    ============    ============    ============
Basic net income per common and common
    equivalent share:
       Income before extraordinary item             $       0.18            0.55            0.54
       Extraordinary item - gain on acquisition             0.15              --              --
                                                    ------------    ------------    ------------
           Net income                               $       0.33            0.55            0.54
                                                    ============    ============    ============
Diluted net income per common and common
    equivalent share:
       Income before extraordinary item             $       0.17            0.52            0.50
       Extraordinary item - gain on acquisition             0.15              --              --
                                                    ------------    ------------    ------------
           Net income                               $       0.32            0.52            0.50
                                                    ============    ============    ============
Shares used in computing net income per
    common and common equivalent share:
       Basic                                          22,322,546      22,133,585      17,977,782
       Diluted                                        23,089,553      23,455,244      19,299,460
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

    Consolidated Statements of Stockholders' Equity and Comprehensive Income

                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                           Common stock   Additional
                                           Comprehensive   ------------     paid-in       Unearned
                                               Income         Amount        capital     compensation
                                           -------------   ------------   ------------  ------------
<S>                                         <C>              <C>          <C>             <C>
Balance at June 30, 1999                                     $196,631     37,338,383             --
    Net income                                                     --             --             --
    Stock options exercised (note 13)                           4,698      1,459,929             --
    Tax benefit from exercise
       of stock options (note 19)                                  --      2,513,788             --
    Issuance of restricted stock (note 14)                        720        893,280       (894,000)
    Amortization of unearned
       compensation (note 14)                                      --             --        170,288
    Issuance of stock in connection
       with acquisition (note 2)                                  705      1,743,962             --
    Sale of common stock (note 11)                             46,890    112,147,825             --
    Dividends to stockholders (note 12)                            --             --             --
                                                             --------   ------------     ----------
Balance at June 30, 2000                                      249,644    156,097,167       (723,712)
    Net income                                                     --             --             --
    Purchase of treasury stock                                     --             --             --
    Stock options exercised (note 13)                           5,009      2,882,102             --
    Tax benefit from exercise
       of stock options (note 19)                                  --      5,375,231             --
    Issuance of restricted stock (note 14)                        309      1,524,791     (1,525,100)
    Amortization of unearned
       compensation (note 14)                                      --             --        525,435
    Stock options granted for services
       (note 13)                                                   --        172,050             --
                                                             --------   ------------     ----------
Balance at June 30, 2001                                      254,962    166,051,341     (1,723,377)

Comprehensive income (loss):
    Net income                                $7,439,110           --             --             --
    Other comprehensive income (loss):
       Foreign currency translation
         adjustment                              687,667           --             --             --
       Minimum pension liability
         adjustment, net of tax of $54,737      (106,254)          --             --             --
       Unrealized loss on securities
         available-for-sale                   (1,409,474)          --             --             --
                                              ----------
              Other comprehensive loss          (828,061)          --             --             --
                                              ----------
              Total comprehensive income       6,611,049
                                              ==========
    Stock options exercised (note 13)                             445        398,273             --
    Tax benefit from exercise
       of stock options (note 19)                                            460,672             --
    Issuance of stock in connection
       with acquisition (note 2)                                  957      1,754,452             --
    Stock options granted in connection
       with acquisition (note 2)                                   --        218,724             --
    Amortization of unearned
       compensation (note 14)                                      --             --        636,708
    Stock options granted for services
       (note 13)                                                   --         18,183             --
                                                             --------   ------------     ----------
Balance at June 30, 2002                                      256,364    168,901,645     (1,086,669)
                                                             ========   ============     ==========

<CAPTION>
                                                             Accumulated
                                                                other        Treasury stock      Total
                                               Retained     comprehensive    --------------   stockholders'
                                               earnings     loss (note 15)       Amount          equity
                                             ------------   --------------   --------------   ------------
<S>                                            <C>           <C>             <C>               <C>
Balance at June 30, 1999                       17,791,467              --    $ (3,480,983)     51,845,498
    Net income                                  9,640,799              --              --       9,640,799
    Stock options exercised (note 13)                  --              --              --       1,464,627
    Tax benefit from exercise
       of stock options (note 19)                      --              --              --       2,513,788
    Issuance of restricted stock (note 14)             --              --              --              --
    Amortization of unearned
       compensation (note 14)                          --              --              --         170,288
    Issuance of stock in connection
       with acquisition (note 2)                       --              --              --       1,744,667
    Sale of common stock (note 11)                     --              --              --     112,194,715
    Dividends to stockholders (note 12)            (2,747)             --              --          (2,747)
                                             ------------    ------------    ------------    ------------
Balance at June 30, 2000                       27,429,519              --      (3,480,983)    179,571,635
    Net income                                 12,213,968              --              --      12,213,968
    Purchase of treasury stock                         --              --      (1,291,655)     (1,291,655)
    Stock options exercised (note 13)                  --              --              --       2,887,111
    Tax benefit from exercise
       of stock options (note 19)                      --              --              --       5,375,231
    Issuance of restricted stock (note 14)             --              --              --              --
    Amortization of unearned
       compensation (note 14)                          --              --              --         525,435
    Stock options granted for services
       (note 13)                                       --              --              --         172,050
                                             ------------    ------------    ------------    ------------
Balance at June 30, 2001                       39,643,487              --      (4,772,638)    199,453,775

Comprehensive income (loss):
    Net income                                  7,439,110              --              --       7,439,110
    Other comprehensive income (loss):
       Foreign currency translation
         adjustment                                    --              --              --              --
       Minimum pension liability
         adjustment, net of tax of $54,737             --              --              --              --
       Unrealized loss on securities
         available-for-sale                            --              --              --              --

              Other comprehensive loss                 --        (828,061)             --        (828,061)

              Total comprehensive income

    Stock options exercised (note 13)                  --              --              --         398,718
    Tax benefit from exercise
       of stock options (note 19)                      --              --              --         460,672
    Issuance of stock in connection
       with acquisition (note 2)                       --              --              --       1,755,409
    Stock options granted in connection
       with acquisition (note 2)                       --              --              --         218,724
    Amortization of unearned
       compensation (note 14)                          --              --              --         636,708
    Stock options granted for services
       (note 13)                                       --              --              --          18,183
                                             ------------    ------------    ------------    ------------
Balance at June 30, 2002                       47,082,597        (828,061)   $ (4,772,638)    209,553,238
                                             ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        4
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                    Years ended June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                         2002             2001            2000
                                                                     ------------    ------------    ------------
<S>                                                                  <C>               <C>              <C>
Cash flows from operating activities:
    Net income                                                       $  7,439,110      12,213,968       9,640,799
    Adjustments to reconcile net income to net cash
       provided by operating activities:
         Depreciation and amortization of plant and
            equipment                                                   3,844,834       2,775,594       1,768,234
         Amortization of intangibles                                      428,261       1,624,913         245,667
         Provision for doubtful accounts                                  334,000         140,000              --
         Deferred income taxes                                         (1,863,179)       (347,025)       (120,900)
         Unearned compensation                                            636,708         525,435         170,288
         Tax benefit from exercise of stock options                       460,672       5,375,231       2,513,788
         Extraordinary gain on acquisition                             (3,407,244)             --              --
         Changes in operating assets and liabilities, net
            of business acquisitions:
              Receivables                                                 272,979         836,617      (3,722,212)
              Refundable income taxes                                      53,804         636,925         (56,360)
              Inventories                                                 159,164      (4,184,124)     (2,527,080)
              Accrued interest receivable                                 486,484         816,173      (1,537,683)
              Prepaid expenses                                           (372,449)         89,550        (399,468)
              Insurance receivable                                     10,749,113              --              --
              Other assets                                              1,004,493        (607,052)       (137,428)
              Accounts payable                                             62,622      (3,376,398)        179,239
              Income taxes payable                                       (408,127)        315,553         151,241
              Accrued expenses                                         (2,286,370)        537,628         169,792
              Customer advance payments                                  (522,959)        165,833         253,503
              Postretirement benefit obligation                          (112,402)         66,518          46,409
              Other liabilities                                            96,153        (947,222)        138,923
                                                                     ------------    ------------    ------------
                 Net cash provided by operating activities             17,055,667      16,658,117       6,776,752
                                                                     ------------    ------------    ------------
Cash flows from investing activities:
    Capital expenditures                                               (9,809,078)     (7,975,512)     (6,022,444)
    Net (purchases) sales of marketable debt and equity securities      6,533,670      13,517,619    (113,820,158)
    Purchase of businesses, net of cash acquired (note 2)             (12,073,362)    (17,818,476)     (7,510,093)
                                                                     ------------    ------------    ------------
                 Net cash used in investing activities                (15,348,770)    (12,276,369)   (127,352,695)
                                                                     ------------    ------------    ------------
Cash flows from financing activities:
    Payments on notes and line of credit                               (1,976,400)       (407,864)       (383,026)
    Stock options exercised                                               398,718       2,887,111       1,464,627
    Proceeds from sale of common stock, net (note 11)                          --              --     112,194,715
    Purchase of treasury stock                                                 --      (1,291,655)             --
    Dividends to stockholders (note 12)                                        --              --          (2,747)
                                                                     ------------    ------------    ------------
                 Net cash provided by (used in)
                    financing activities                               (1,577,682)      1,187,592     113,273,569
                                                                     ------------    ------------    ------------
Effect of exchange rates                                                  687,667              --              --
                                                                     ------------    ------------    ------------
                 Net increase (decrease) in cash and
                    cash equivalents                                      816,882       5,569,340      (7,302,374)
Cash and cash equivalents at beginning of year                         11,748,542       6,179,202      13,481,576
                                                                     ------------    ------------    ------------
Cash and cash equivalents at end of year                             $ 12,565,424      11,748,542       6,179,202
                                                                     ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        5
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(1)   Summary of Significant Accounting Policies

      (a)   Principles of Consolidation

            The consolidated financial statements include the accounts of Anaren
            Microwave, Inc. and its wholly owned subsidiaries (the Company). All
            significant   intercompany   balances  and  transactions  have  been
            eliminated in consolidation.

      (b)   Operations

            The Company is engaged in the design,  development,  and manufacture
            of microwave components, assemblies, and subsytems which receive and
            analyze radar signals and other microwave transmissions. Its primary
            products   include   devices  and  systems   used  in  the  wireless
            communications,  satellite  communications,  and defense electronics
            markets.

      (c)   Sales Recognition

            The Company  generally  recognizes  sales at the time  products  are
            shipped to customers. Payments received from customers in advance of
            products  delivered are recorded as customer  advance payments until
            earned.  A small  percentage  of sales are  derived  from  long-term
            fixed-price  contracts  for the  sale of  large  space  and  defense
            electronics  products.  Sales and estimated  profits under long-term
            contracts are recognized  using the percentage of completion  method
            of accounting on a  units-of-delivery  basis.  Profit  estimates are
            revised  periodically based upon changes in sales value and costs at
            completion.  Any losses on these  contracts  are  recognized  in the
            period in which such losses are determined.

      (d)   Cash Equivalents

            Cash  equivalents of $9,608,324 and $11,668,663 at June 30, 2002 and
            2001,  respectively,  consist of  certificates  of deposit and money
            market  instruments  having maturities of three months or less. Cash
            equivalents are stated at cost which approximates fair value.

      (e)   Marketable Securities

            The Company  classifies its securities as either  available for sale
            or held to  maturity,  as the Company  does not hold any  securities
            considered to be trading. Held to maturity securities are those debt
            securities  for which the  Company has the  positive  intent and the
            ability to hold until maturity. All other securities not included in
            held to maturity are classified as available for sale.

            Held  to  maturity   securities  are  recorded  at  amortized  cost.
            Available for sale securities are recorded at fair value. Unrealized
            holding  gains  and  losses,  net  of the  related  tax  affect,  on
            available  for sale  securities  are excluded  from earnings and are
            reported as  accumulated  other  comprehensive  income or loss until
            realized.

            A decline  in the fair  value of any  available  for sale or held to
            maturity security,  that is deemed other than temporary,  is charged
            to earnings  resulting in the  establishment of a new cost basis for
            the security,  and dividend and interest  income are recognized when
            earned.

                                                                     (Continued)


                                       6
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      (f)   Inventories

            Inventories  are stated at the lower of cost or  market,  cost being
            determined   on  a  first-in,   first-out   basis.   Work-in-process
            inventories  related  to  fixed-price  contracts  are  stated at the
            accumulated  cost of material,  labor, and  manufacturing  overhead,
            less the estimated cost of units delivered.

      (g)   Property, Plant, and Equipment

            Property,  plant, and equipment are stated at cost.  Depreciation of
            land  improvements and buildings is calculated by the  straight-line
            method over an  estimated  service life of 25 years.  Machinery  and
            equipment  are  depreciated  primarily by the  straight-line  method
            based on estimated useful lives of 5 to 10 years.

      (h)   Goodwill

            Prior  to the  adoption  of  SFAS  142,  as  discussed  in  note  3,
            long-lived assets, such as property, plant, and equipment,  goodwill
            and other  intangibles  were evaluated for impairment when events or
            changes in  circumstances  indicated that the carrying amount of the
            assets may not be  recoverable  through the  estimated  undiscounted
            future cash flows from the use of these assets. When such impairment
            existed, the related assets were written down to their fair value.

            Upon  adoption  of SFAS 142,  effective  July 1, 2001,  goodwill  is
            tested  annually for  impairment  at the  reporting  unit level,  by
            comparing  the fair value of the  reporting  unit with its  carrying
            value.  Valuation  methods  for  determining  the fair  value of the
            reporting unit include reviewing quoted market prices and discounted
            cash flows. If the goodwill is indicated as being impaired, the fair
            value of the  reporting  unit is then  allocated  to its  assets and
            liabilities in a manner  similar to a purchase  price  allocation in
            order to  determine  the implied  fair value of the  reporting  unit
            goodwill.  This implied fair value of the reporting unit goodwill is
            then  compared  with  the  carrying  amount  of the  reporting  unit
            goodwill,  and if it is less,  the Company  would then  recognize an
            impairment loss. No impairment losses were recorded through June 30,
            2002.

      (i)   Patent

            During fiscal 1999, the Company  purchased a patent for $325,000 and
            150,000 stock options  which were  subsequently  exercised in fiscal
            2000. The stock options were valued at $249,965 as discussed in note
            12. The patent is being amortized on a straight-line  basis over its
            remaining life of 8 years.

      (j)   Net Income Per Share

            Basic  income per share is based on the weighted  average  number of
            common shares outstanding.  Diluted income per share is based on the
            weighted  average  number of common shares  outstanding,  as well as
            dilutive  potential  common  shares which,  in the  Company's  case,
            comprise shares issuable under the stock option and restricted stock
            plans  described in notes 13 and 14. The weighted  average number of
            common shares  utilized in the calculation of the diluted income per
            share does not include antidilutive shares aggregating 1,126,550 and
            886,976 at June 30, 2002 and 2001, respectively.  The treasury stock
            method is used to calculate  dilutive shares which reduces the gross
            number of dilutive shares by the number of shares  purchasable  from
            the proceeds of the options assumed to be exercised.

                                                                     (Continued)


                                       7
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

            The weighted  average  number of common shares  outstanding  for the
            basic income per share calculation was 22,322,546,  22,133,585,  and
            17,977,782  for 2002,  2001,  and 2000,  respectively.  For  diluted
            earnings per share  purposes,  these balances  increased by 767,000,
            1,321,659,   and  1,321,678   shares  for  2002,   2001,  and  2000,
            respectively,  due to the effect of common  equivalent  shares which
            were issuable under the Company's stock option and restricted  stock
            plans.

      (k)   Research and Development Costs

            Research and development costs are charged to expense as incurred.

      (l)   Income Taxes

            The Company  utilizes the asset and  liability  method of accounting
            for  income  taxes.  Under  this  method,  deferred  tax  assets and
            liabilities   are  recognized   for  the  future  tax   consequences
            attributable to differences between the financial statement carrying
            amounts of existing assets and liabilities and their  respective tax
            bases  and  tax  credit  carryforwards.   Deferred  tax  assets  and
            liabilities are measured using enacted tax rates.

      (m)   Financial Instruments

            The  Company's  financial  instruments,  which include cash and cash
            equivalents,  receivables,  and accounts payable, are stated at cost
            which  approximates  fair  value at June  30,  2002  and  2001.  The
            Company's  available for sale equity  securities are stated at their
            fair value,  as determined by quoted market prices an June 30, 2002.
            The Company's  marketable  debt  securities  are stated at amortized
            cost, and their fair values,  as determined by quoted market prices,
            are presented in note 4.

      (n)   Stock-based Compensation

            The Company measures compensation expense for its stock option-based
            employee compensation plans using the intrinsic value method and has
            provided pro forma  disclosures  of the effect on net income and net
            income per share as if the fair value-based  method had been applied
            in measuring compensation expense.

            Upon  issuance  of  shares  of  stock   pursuant  to  the  Company's
            Restricted Stock Program, an unearned compensation charge equivalent
            to the market value of the shares on the date of grant is charged to
            stockholders'  equity  and  is  amortized  over  the  related  share
            restriction period.

      (o)   Use of Estimates

            The preparation of consolidated  financial  statements in conformity
            with generally accepted accounting principles requires management to
            make estimates and assumptions  that affect the reported  amounts of
            certain assets and liabilities  and disclosure of contingent  assets
            and  liabilities  at the date of the  financial  statements  and the
            reported amounts of sales and expenses during the reporting  period.
            Actual results could differ from those estimates.

                                                                     (Continued)


                                       8
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      (p)   Recent Pronouncements

            In August 2001,  the  Financial  Accounting  Standards  Board (FASB)
            issued  Statement  of  Financial   Accounting   Standards  No.  143,
            Accounting for Asset  Retirement  Obligations  (SFAS 143).  SFAS 143
            addresses   financial   accounting  and  reporting  for  obligations
            associated with the retirement of tangible long-lived assets and the
            associated asset retirement costs. SFAS 143 is required for adoption
            for fiscal  years  beginning  after June 15,  2002.  The Company has
            reviewed  the  provisions  of  SFAS  143,  and  believes  that  upon
            adoption,  the Statement  will not have a significant  effect on its
            consolidated financial statements.

            In August 2001,  the  Financial  Accounting  Standards  Board (FASB)
            issued  Statement  of  Financial   Accounting   Standards  No.  144,
            Accounting  for the  Impairment  of Disposal of  Long-Lived  Assets.
            (SFAS 144).  SFAS 144 addresses  financial  accounting and reporting
            for the impairment of long-lived assets and for long-lived assets to
            be disposed  of. SFAS 144 is required  for adoption for fiscal years
            beginning  after December 15, 2001 and interim  periods within those
            fiscal years.  The Company has reviewed the  provisions of SFAS 144,
            and  believes  that upon  adoption,  the  Statement  will not have a
            significant effect on its consolidated financial statements.

            In April 2002,  the  Financial  Accounting  Standards  Board  (FASB)
            issued  Statement  of  Financial   Accounting   Standards  No.  145,
            Rescission of FASB  Statements No. 4, 44, and 64,  Amendment of FASB
            Statement No. 13, and Technical  Corrections (SFAS 145). SFAS 145 is
            required for adoption for fiscal years beginning after May 15, 2002,
            with early adoption of the  provisions  related to the rescission of
            Statement 4 encouraged.  The Company has reviewed the  provisions of
            SFAS 145, and believes that upon adoption,  the Statements  will not
            have a significant effect on its consolidated financial statements.

            In July 2002, the Financial Accounting Standards Board (FASB) issued
            Statement of Financial  Accounting Standards No. 146, Accounting for
            Restructuring Costs (SFAS 146). SFAS 146 applies to costs associated
            with an exit activity  (including  restructuring) or with a disposal
            of long-lived  assets.  Those activities can include  eliminating or
            reducing  product lines,  terminating  employees and contracts,  and
            relocating plant facilities or personnel.  Under SFAS 146, a company
            will  record  a  liability  for a cost  associated  with  an exit or
            disposal  activity  when  that  liability  is  incurred  and  can be
            measured at fair value.  SFAS 146 will require a company to disclose
            information  about its exit and  disposal  activities,  the  related
            costs,  and  changes in those  costs in the notes to the interim and
            annual financial statements that include the period in which an exit
            activity  is  initiated  and  in any  subsequent  period  until  the
            activity is completed.  SFAS 146 is effective prospectively for exit
            or disposal  activities  initiated  after  December 31,  2002,  with
            earlier  adoption  encouraged.  Under  SFAS 146,  a company  may not
            restate  its  previously  issued  financial  statements  and the new
            Statement grandfathers the accounting for liabilities that a company
            had previously recorded under EITF Issue 94-3.

      (q)   Reclassifications

            Certain 2001 amounts have been reclassified to conform with the 2002
            presentation.

                                                                     (Continued)


                                       9
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(2)   Acquisitions

      On February 29, 2000, the Company acquired all of the outstanding stock of
      RF Power  Components,  Inc (RF Power).  RF Power is based in Bohemia,  New
      York, and is primarily engaged in the manufacture of electronic  products,
      including power resistors,  attenuators and couplers.  The transaction was
      accounted  for  using  the  purchase  method of  accounting  for  business
      combinations and  accordingly,  the results of operations of RF Power have
      been included in the Company's consolidated financial statements since the
      date of acquisition.

      The purchase price was $7,749,294 in cash,  including  direct  acquisition
      costs,  and 70,552 shares of the Company's  common stock with an aggregate
      value of  $1,744,667.  The purchase  price was allocated in the net assets
      acquired and liabilities assumed based upon respective fair market values.
      The fair  market  values  of plant and  equipment  were  determined  by an
      independent  valuation  which  also  validated  the non  existence  of any
      identifiable  intangible assets.  The excess  consideration over such fair
      values is recorded as goodwill and is being  amortized on a  straight-line
      basis over 15 years.  The  allocation of the purchase  price to the assets
      acquired and liabilities assumed follows:

                Cash ........................   $   239,201
                Accounts receivable .........     1,520,752
                Inventories .................     1,473,123
                Prepaid expenses ............        34,966
                Refundable income taxes .....       172,523
                Plant and equipment .........       478,599
                Deposits and other assets ...       369,193
                Deferred income taxes .......       331,434
                Accounts payable ............    (1,291,342)
                Accrued expenses ............      (300,687)
                Line of credit indebtedness..      (383,026)
                Other liabilities ...........      (971,679)
                Goodwill ....................     7,820,904
                                                -----------
                                                $ 9,493,961
                                                ===========

      On July 31, 2000, the Company acquired substantially all the net assets of
      Ocean  Microwave  Corporation  (Ocean).  Ocean was based in  Neptune,  New
      Jersey,  and was  primarily  engaged  in the  design  and  manufacture  of
      isolator  and  circulator  components.  The  acquired  Ocean  business  is
      conducted  from the  Company's  subsidiary,  Anaren Power  Products,  Inc.
      (APPI).  The  transaction  was accounted for using the purchase  method of
      accounting  for business  combinations  and,  accordingly,  the results of
      operations  of APPI  have  been  included  in the  Company's  consolidated
      financial statements since the date of acquisition.

      The purchase price was  $17,990,526,  including direct  acquisition  costs
      (note 13), which was allocated to the net assets  acquired and liabilities
      assumed based upon respective  fair market values.  The fair market values
      of plant and equipment were  determined by an independent  valuation which
      also validated the nonexistence of any identifiable intangible assets. The
      excess consideration over such fair values is recorded as goodwill and was
      assigned to the Company's Wireless segment. The allocation of the purchase
      price to the assets acquired and liabilities assumed follows:

          Accounts receivable                            $  1,488,092
          Inventories                                       1,997,728
          Plant and equipment                                 269,390
          Other assets                                         42,485
          Accounts payable                                 (2,531,384)
          Accrued expenses                                   (184,389)
          Notes payable                                      (407,864)
          Goodwill                                         17,316,468
                                                         ------------
                                                         $ 17,990,526
                                                         ============

      On August 31, 2001 the Company  acquired all of the  outstanding  stock of
      Amitron,  Inc.  Amitron is based in North Andover,  Massachusetts,  and is
      primarily  engaged in the  manufacture  of  precision  thick film  ceramic
      components and circuits for the medical,  telecommunications,  and defense
      electronics  markets.  Amitron's  technology is very  complimentary to the
      Company's  multi-layer   stripline   technology.   Whereas  the  Company's
      multi-layer  stripline  technology is well suited for large scale and high
      power   applications,    Amitron's   technology   is   well   suited   for
      miniaturization  and low power  applications.  The  Company  believes  the
      Amitron's technology will enable it to significantly  increase its current
      addressable  markets. The transaction was accounted for using the purchase
      method of  accounting  for business  combinations  and,  accordingly,  the
      results of  operations  of Amitron  have been  included  in the  Company's
      consolidated financial statements since the date of acquisition.

                                                                     (Continued)


                                       10
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The  aggregate   purchase   consideration  for  Amitron  was  $11,693,256,
      consisting  of cash  of  $9,919,664  (including  cash  direct  acquisition
      costs),  noncash direct acquisition costs in the form of stock options for
      services of $18,183 and 95,704 shares of the  Company's  common stock with
      an aggregate value of $1,755,409.  The purchase price was allocated to the
      net assets  acquired and  liabilities  assumed based upon  respective fair
      market  values.  The  fair  market  values  of  plant  and  equipment  and
      identifiable   intangible   assets  were   determined  by  an  independent
      valuation. The indentifiable intangible assets aggregating $2,450,000 with
      a weighted  average  useful  life of  approximately  seven  years  include
      customer  base of  $1,350,000  (six-year  weighted  average  useful life),
      favorable lease of $600,000 (ten-year weighted average useful life), trade
      name  of  $320,000   (three-year   weighted   average  useful  life),  and
      noncompetition  agreements of $180,000  (five-year weighted average useful
      life).  The excess  consideration  over such fair  values is  recorded  as
      goodwill and was assigned to the Company's Wireless segment.

      The allocation of the purchase  consideration  to the assets  acquired and
      liabilities assumed follows:

          Cash                                           $     12,844
          Accounts receivable                               1,309,618
          Other receivables                                     2,258
          Inventories                                       1,081,360
          Plant and equipment                               1,822,230
          Other assets                                         36,818
          Accounts payable                                   (228,751)
          Accrued expenses                                   (430,448)
          Loans payable                                      (716,154)
          Net deferred tax liability                         (951,846)
          Intangible assets                                 2,450,000
          Goodwill                                          7,305,327
                                                         ------------
                                                         $ 11,693,256
                                                         ============

      On October 1, 2001,  the  Company,  through  its wholly  owned  subsidiary
      Anaren Microwave Europe B.V., acquired all of the outstanding stock of The
      5M Company  Europe B.V. (now named Anaren  Europe,  B.V.).  Anaren Europe,
      based in Almelo,  Netherlands  is a  manufacturer  of microwave  circuits.
      Anaren Europe's manufacturing  technology is very similar to the Company's
      multi-layer stripline technology.  In addition, Anaren Europe has a unique
      metal backing  technology that offers  performance and cost advantages for
      high power  applications.  The Company believes that this acquisition will
      enable it to reduce its manufacturing costs in Europe, increase its dollar
      content in high power  applications  and provide  customers  with a higher
      level of vendor  security  with a second  manufacturing  facility.  Anaren
      Europe has recently  completed the rebuilding of its factory due to a fire
      that occurred in July 2001.  The  transaction  was accounted for using the
      purchase method of accounting for business  combinations and, accordingly,
      the  results of  operations  of Anaren  Europe  have been  included in the
      Company's consolidated financial statements since the date of acquisition.

      The  purchase  consideration  for Anaren  Europe was  $3,869,823  in cash,
      including  direct  acquisition  costs,  and Company  stock options with an
      aggregate  fair  value of  $218,724.  The fair  values of Anaren  Europe's
      assets   acquired   and   liabilities   assumed   exceeded   the  purchase
      consideration and the negative goodwill served to reduce the fair value of
      purchased  equipment to zero with the  remaining  excess  recognized as an
      extraordinary gain.

                                                                     (Continued)


                                       11
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The  allocation  of the  purchase  consideration  to the assets  acquired,
      liabilities assumed, and extraordinary gain follows:

          Cash                                           $  1,703,281
          Accounts receivable                                 899,776
          Insurance receivable                             10,749,113
          Other receivables                                   385,745
          Inventories                                         630,260
          Accounts payable                                 (1,768,882)
          Accrued expenses                                 (1,656,014)
          Notes payable                                      (856,978)
          Long term debt                                     (403,268)
          Net deferred tax liability                       (2,187,242)
          Extraordinary gain                               (3,407,244)
                                                         ------------
                                                         $  4,088,547
                                                         ============

      The Anaren Europe fire loss in July 2001 was subject to property, casualty
      and business interruption  insurance. As of December 31, 2001, the Company
      settled  the  insurance  claim  and an  insurance  receivable  aggregating
      $10,749,113 is reflected in the  allocation of the Anaren Europe  purchase
      price as of October 1, 2001.  During the year ended June 30, 2002,  Anaren
      Europe recognized  incremental  outsourcing costs aggregating  $555,120 in
      cost of sales,  and fire  related  cleaning  and  remediation  expenses of
      $711,400 in operating expenses.

      The  following  unaudited  pro forma  financial  information  presents the
      combined results of operations of the Company,  RF Power,  Ocean,  Amitron
      and Anaren  Europe as if the  acquisitions  took place as of July 1, 1999.
      The pro forma  information  includes  certain  adjustments,  including the
      amortization of goodwill and  intangibles,  reduction of interest  income,
      and  certain  other  adjustments,  together  with the  related  income tax
      effects. The pro forma financial  information does not necessarily reflect
      the results of  operations  that would have  occurred had the Company,  RF
      Power, Ocean, Amitron and Anaren Europe constituted a single entity during
      such periods.

                                                  Years ended
                                ----------------------------------------------
                                June 30, 2002    June 30, 2001   June 30, 2000
                                -------------    -------------   -------------
                                 (unaudited)      (unaudited)     (unaudited)
      Net sales                  $75,900,631      106,745,701      95,124,100
      Insurance recoveries        15,999,972               --              --
      Net income                  12,874,677       11,948,196       8,629,746
      Earnings per share:
          Basic                          .57              .53             .47
          Diluted                        .55              .50             .44

      For purposes of the pro forma financial information,  the July 2001 Anaren
      Europe fire loss  insurance  recoveries  have been reflected in operations
      versus the  recognition as a  pre-acquisition  contingency in the purchase
      price  allocation  as  previously  discussed.  The pro  forma  information
      reflects  insurance  recoveries of $15,999,972 for the year ended June 30,
      2002.

                                                                     (Continued)


                                       12
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The pro forma information  reflects no goodwill  amortization for the year
      ended  June  30,  2002  due to the  adoption  of SFAS  142,  Goodwill  and
      Intangible Assets, by the Company.  The pro forma information does reflect
      goodwill amortization  aggregating $1,649,245 and $1,675,823 for the years
      ended June 30, 2001 and 2000, respectively,  related to acquisitions which
      occurred prior to the adoption of SFAS 142.

(3)   Adoption of Accounting Pronouncements

      In July 2001,  the  Financial  Accounting  Standards  Board (FASB)  issued
      Statement of Financial  Accounting Standards No. 141 (SFAS 141), "Business
      Combinations"   which   supersedes   APB   Opinion   No.   16,   "Business
      Combinations".  SFAS No. 141 eliminates the pooling-of-interests method of
      accounting for business  combinations  and modifies the application of the
      purchase  accounting method.  The elimination of the  pooling-of-interests
      method is effective for  transactions  initiated  after June 30, 2001. The
      remaining  provisions  of SFAS  No.  141 are  effective  for  transactions
      accounted for using the purchase  method that are completed after June 30,
      2001.  The Company  adopted SFAS No 141 during the first quarter of fiscal
      2002 (effective  July 1, 2001).  Adoption of the Statement did not have an
      impact  on  the  Company,   as  the  Company  has  not   historically  had
      pooling-of-interest  transactions and business combinations  subsequent to
      June 30, 2001 (note 2) were accounted for under the purchase method.

      During the first  quarter of fiscal 2002  (effective  July 1,  2001),  the
      Company adopted Statement of Financial  Accounting Standards No. 142 (SFAS
      142),  "Goodwill and Intangible Assets",  which supercedes APB Opinion No.
      17, "Intangible  Assets".  SFAS No. 142 eliminates the current requirement
      to amortize goodwill and indefinite-lived intangible assets, addresses the
      amortization  of  intangible  assets with a defined life and addresses the
      impairment  testing and recognition of goodwill and intangible assets. The
      following  information  describes the impact that the adoption of SFAS No.
      142 had on the Company for the fiscal years ended June 30:

      Intangible Assets:

      Intangible assets as of June 30, 2002 are as follows:

                                             Gross Carrying      Accumulated
                                                 Amount         Amortization
                                             --------------     -------------
      Patent                                   $  574,966         $215,613
      Customer Base                             1,350,000          187,500
      Trade Name                                  320,000           88,890
      Non-Competition Agreements                  180,000           30,000
      Favorable Lease                             600,000           50,000
                                               ----------         --------
      Total                                    $3,024,966         $572,003
                                               ==========         ========


      Intangible asset  amortization  expense for the years ended June 30, 2002,
      2001,  and 2000  aggregated  $428,261,  71,871 and  $71,871  respectively.
      Amortization  expense related to intangible assets for the next five years
      is as follows:

      Year Ending June 30,

                      2003                                   $499,539
                      2004                                   $499,539
                      2005                                   $410,645
                      2006                                   $392,871
                      2007                                   $362,879

      Goodwill:

      The changes in the carrying amount of goodwill for the years ended June 30
      are as follows:

                                      Fiscal          Fiscal          Fiscal
                                       2002            2001            2000
                                      ------          ------          ------

Goodwill as of July 1             $23,410,534      $ 7,647,108               --

Goodwill acquired                   7,305,327       17,316,468        7,820,904

Goodwill amortization                      --       (1,553,042)        (173,796)
                                  -----------      -----------      -----------
Goodwill as of June 30            $30,715,861      $23,410,534      $   164,108
                                  ===========      ===========      ===========

      In  connection  with the adoption of SFAS 142, the Company  completed  the
      transitional  impairment  assessment  within six  months  from the date of
      adoption  as  allowed  by the  Standard.  As a  result  of the  impairment
      assessment,  no goodwill  impairment  was found and no current asset write
      down is required.

      The impact that the  adoption  of SFAS 142 had on net income and  earnings
      per share for the years ended June 30 are presented as follows:

                                          2002           2001          2000
                                        ---------     ----------     ---------
Net income                              7,439,110     12,213,968     9,640,799
Add back Goodwill amortization                 --      1,553,042       173,796
                                        ---------     ----------     ---------
Adjusted net income                     7,439,110     13,767,010     9,814,595
                                        =========     ==========     =========

Basic earnings per share:
  Net income                                $0.33          $0.55         $0.54
  Goodwill amortization                        --           0.07          0.01
                                            -----          -----         -----
  Adjusted net income                       $0.33          $0.62         $0.55
                                            =====          =====         =====

Diluted earnings per share:
  Net income                                $0.32          $0.52         $0.50
  Goodwill amortization                        --           0.07          0.01
                                            -----          -----         -----
  Adjusted net income                       $0.32          $0.59         $0.51
                                            =====          =====         =====

(4)   Securities

      The amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>
                                                        June 30, 2002
                                   ----------------------------------------------------------
                                                     Gross          Gross
                                     Amortized     unrealized     unrealized         Fair
                                       cost          gains          losses           value
                                   ------------   ------------   ------------    ------------
<S>                                <C>            <C>            <C>             <C>
Securities available for sale:
    Common stock                   $  5,230,416             --     (1,409,474)      3,820,942
                                   ------------   ------------   ------------    ------------
              Total securities
                available for
                sale               $  5,230,416             --     (1,409,474)      3,820,942
                                   ============   ============   ============    ============

Securities held to maturity:
    Municipal bonds                $ 62,223,440        175,344             --      62,398,784
    Corporate bonds                  20,800,237         18,566             --      20,818,803
    Zero coupon bonds                 1,496,180          1,869             --       1,498,049
    Tax free auction securities      24,000,000             --             --      24,000,000
                                   ------------   ------------   ------------    ------------
              Total securities
                held to maturity   $108,519,857        195,779             --     108,715,636
                                   ============   ============   ============    ============
</TABLE>

                                                                     (Continued)


                                       13
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                        June 30, 2001
                                   ----------------------------------------------------------
                                                     Gross          Gross
                                     Amortized     unrealized     unrealized         Fair
                                       cost          gains          losses           value
                                   ------------   ------------   ------------    ------------
<S>                                <C>            <C>            <C>             <C>
Municipal bonds                    $ 56,719,914        120,478             --      56,840,392
Commercial paper                        976,483            824             --         977,307
Corporate bonds                      19,527,093        224,451             --      19,751,544
Medium and short-term notes           4,991,859         36,741             --       5,028,600
Euro dollar bonds                    10,418,904         87,683             --      10,506,587
Zero coupon bonds                     4,939,275          7,200             --       4,946,475
Tax free auction securities          17,600,262                          (262)     17,600,000
Asset backed securities               5,110,153         39,892             --       5,150,045
                                   ------------   ------------   ------------    ------------

              Total                $120,283,943        517,269           (262)    120,800,950
                                   ============   ============   ============    ============
</TABLE>

      Marketable  debt  securities are classified as either current or long-term
      assets in the  accompanying  consolidated  balance sheets based upon their
      maturity dates.

      On July 11, 2002, the Company filed a Schedule 13D with the Securities and
      Exchange   Commission  to  disclose  that  it  has,  through  open  market
      purchases,  acquired an ownership  position of approximately  6.35% of the
      common  stock  of  Celeritek,   Inc.   Anaren  believes  that  a  business
      combination  between Anaren and Celeritek would be in the best interest of
      the respective shareholders, customers and employees of both companies and
      intends  to seek a  negotiated  acquisition  of  Celeritek  or take  other
      actions to effect such a potential transaction, as more fully described in
      Anaren's Schedule 13D filing.

(5)   Inventories

      Inventories at June 30 are summarized as follows:

                                                2002               2001
                                            -----------        -----------
      Component parts                       $ 9,086,987          9,995,712
      Work-in-process                         6,179,545          4,497,996
      Finished goods                          4,852,901          4,073,269
                                            -----------        -----------
                                            $20,119,433         18,566,977
                                            ===========        ===========

                                                                     (Continued)


                                       14
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(6)   Property, Plant, and Equipment

      Components  of property,  plant,  and  equipment at June 30 consist of the
      following:

                                                           2002         2001
                                                       -----------   -----------
      Land and land improvements                       $ 1,595,821     1,595,821
      Buildings and improvements                        12,022,768     9,095,944
      Machinery and equipment                           47,720,881    39,213,503
      Construction in process                              236,028       155,899
                                                       -----------   -----------
                                                        61,575,498    50,061,167

      Less accumulated depreciation and amortization    34,983,123    31,255,266
                                                       -----------   -----------
                                                       $26,592,375    18,805,901
                                                       ===========   ===========

(7)   Accrued Expenses

      Accrued expenses at June 30 consist of the following:

                                                           2002         2001
                                                        ----------   ----------
      Compensation                                      $1,045,085      989,499
      Commissions                                          573,325      790,609
      Restructuring (note 8)                                    --      307,843
      Accrued pension cost (note 17)                       535,874      401,032
      Other                                                612,066      477,275
                                                        ----------   ----------
                                                        $2,766,350    2,966,258
                                                        ==========   ==========

(8)   Restructuring

      In May 2001,  the Company  committed to a plan for the  relocation  of its
      Anaren  Power  Products,   Inc.  subsidiary  to  its  Syracuse,  New  York
      headquarters  to be completed in June 2001. In connection  with this plan,
      as of June 30,  2001,  the  Company  recognized  restructuring  charges as
      follows:

      Employee termination benefits                               $297,443
      Noncancelable lease obligation                               216,116
      Leasehold and equipment impairment                           174,778
                                                                  --------
                                                                  $688,337
                                                                  ========

                                                                     (Continued)


                                       15
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      Employee  termination  benefits  related to the announced  termination  of
      approximately  60  salaried  and hourly  employees.  Such  costs  included
      severance  payments and costs  associated with the accelerated  vesting of
      employee  vacation  benefits.   The  noncancelable   lease  obligation  is
      reflected  based upon  estimated  discounted  noncancelable  cash outlays,
      including   estimated  broker  commissions  to  sublease.   Leasehold  and
      equipment impairment charges related to abandoned assets were reflected as
      a reduction of the related assets.

      As of June 30, 2001,  cash  payments of $205,716 were made relating to the
      employee termination benefits, leaving a restructuring accrual of $307,843
      at June 30, 2001 (note 7).

      As of June 30, 2002,  the  restructuring  accrual was $0 as the  remaining
      restructuring cash outlays were made during the current year.

(9)   Other Liabilities

      Other liabilities as of June 30 consist of the following:

                                                    2002            2001
                                                  --------        --------
      Deferred compensation                        526,808         551,380
      Other                                        120,725              --
                                                  --------        --------
                                                   647,533         551,380

      Less current portion                         185,725          65,000
                                                  --------        --------
                                                  $461,808         486,380
                                                  ========        ========

      During fiscal 1998, the Company  implemented a deferred  compensation plan
      for one employee.  Under the plan,  the Company will pay $65,000  annually
      for  fifteen  years  upon the  employee's  retirement  or, in the event of
      death, to the employee's beneficiary. During fiscal 2002, the employee was
      deceased  and  the  annual  compensation  is  being  paid  to  the  former
      employee's beneficiary.

(10)  Long-term Debt

      The Company has a $10,000,000  unsecured working capital revolving line of
      credit bearing interest at prime (4.75% at June 30, 2002) through December
      31, 2006. The terms of the revolving line of credit require maintenance of
      a minimum  tangible net worth,  ratio of cash flow to current  maturities,
      and leverage ratio, as defined.  There were no borrowings against the line
      of credit in fiscal 2002 and 2001.

      Cash payments for annual fees relating to  maintaining  the line of credit
      were $37,500,  $37,500,  and $38,779  during fiscal 2002,  2001, and 2000,
      respectively.

(11)  Common Stock

      During the third and fourth quarters of fiscal 2000, the Company completed
      the sale of an additional 4,689,000 shares of its common stock in a public
      offering for $112,194,715, net of issuance costs.

                                                                     (Continued)


                                       16
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      On December 2, 2000, the Company's  shareholders  approved an amendment to
      the Certificate of Incorporation to increase the total number of shares of
      common stock from 25,000,000 to 200,000,000.

(12)  Stock Split

      On February 19, 2000, the Company's board of directors  authorized a 3 for
      2 stock  split in the form of a stock  dividend  paid on June 12,  2000 to
      shareholders  of record on May 12,  2000.  The issuance of cash in lieu of
      fractional  shares has been  reflected  as a cash  dividend and charged to
      retained  earnings  during fiscal 2000. On November 2, 2000, the Company's
      board of  directors  authorized a two for one stock split in the form of a
      stock  dividend  paid on November  27, 2000 to  shareholders  of record on
      November 17, 2000.

      All share and per share data in these  consolidated  financial  statements
      and footnotes have been retroactively  restated as if the stock splits had
      occurred as of the earliest period presented.

(13)  Stock Option Plans

      Under the Company's Key Employee Incentive Stock Option Plan (Key Employee
      Plan),  2,050,200 shares of common stock were reserved for the granting of
      options to  eligible  employees.  Options  are granted at a price not less
      than fair market value of shares at the date of grant,  become exercisable
      20% six  months  from the date of grant and 20% per year  thereafter,  and
      must be exercised within ten years of the date of grant.

      In November 2000, the Company  established the  Company-Wide  Stock Option
      Plan  (Company-Wide  Plan) reserving  1,000,000 shares of common stock for
      the granting of incentive stock options to eligible employees. All Company
      employees  are eligible to  participate  in the  Company-Wide  Plan in any
      given  fiscal year,  except for  employees  who have been granted  options
      under the Key Employee Plan in any given fiscal year.  Options are granted
      at a price  not less than the fair  market  value of shares at the date of
      grant,  become  exercisable 36 months from the date of grant,  and must be
      exercised within five years of the date of grant.

      The Company also has a Non-Statutory  Stock Option Plan (NSO) which allows
      for the granting of options to Board members and  nonemployees.  Under the
      Plan,  500,000  shares of common  stock were  reserved for the granting of
      options at prices to be determined by the Board (options  granted to Board
      members may not be less than the fair market  value on the date of grant).
      Options become  exercisable  immediately and must be exercised within five
      years of the date of grant.

      In connection  with the  acquisition  of Ocean as discussed in note 2, the
      Company  issued  5,000 NSO's to a  nonemployee  for  services  provided in
      brokering the transaction. The stock options were valued at $172,050 using
      the Black-Scholes model as of November 2, 2000 (the date of grant), became
      exercisable on the date of grant,  and must be exercised within five years
      of the date of grant.  The option  value is  included  with  Ocean  direct
      acquisition costs.

                                                                     (Continued)


                                       17
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      Information  for the three years ended June 30, 2002 with respect to these
      plans are as follows:

<TABLE>
<CAPTION>
                                                 Shares
                     ------------------------------------------------------------------                    Weighted
                                 ISO                                                                        average
                     -----------------------------                                                         exercise
                     Key Employee   Company-Wide      NSO          Other        Total      Option price      price
                     ------------   ------------    -------       -------     ---------   --------------  -----------
<S>                   <C>             <C>           <C>           <C>         <C>         <C>                <C>
Outstanding at
    June 30, 1999     1,532,100            --       132,000       150,000     1,814,100   $0.46 to 8.36       4.00
      Issued            680,500            --       112,500            --       793,000    7.65 to 54.00     14.29
      Exercised        (372,300)           --       (97,500)           --      (469,800)   0.46 to 8.67       3.12
      Canceled          (64,200)           --            --            --       (64,200)   2.17 to 7.04       4.38
                      ---------       -------       -------       -------     ---------   --------------     -----
Outstanding at
    June 30, 2000     1,776,100            --       147,000       150,000     2,073,100    0.46 to 54.00      8.13
      Issued            625,500        45,900        80,000            --       751,400    14.70 to 62.44    50.40
      Exercised        (331,900)           --       (19,000)     (150,000)     (500,900)   0.46 to 13.42      5.78
      Canceled          (19,500)       (2,900)           --            --       (22,400)   4.63 to 53.00     21.81
                      ---------       -------       -------       -------     ---------   --------------     -----
Outstanding at
    June 30, 2001     2,050,200        43,000       208,000            --     2,301,200    1.38 to 62.44     22.31
      Issued            506,850        98,300        87,500            --       692,650    12.63 to 19.21    16.43
      Exercised         (18,500)           --       (26,000)           --       (44,500)   1.38 to 12.42      8.96
      Expired                --            --       (13,000)           --       (13,000)   19.21 to 53.00    45.20
      Canceled         (368,300)       (9,400)      (65,000)           --      (442,700)   12.42 to 53.00    48.51
                      ---------       -------       -------       -------     ---------   --------------     -----
Outstanding at
    June 30, 2002     2,170,250       131,900       191,500            --     2,493,650    1.38 to 62.44
                      =========       =======       =======       =======     =========   ==============
Shares exercisable
    at June 30,
    2002                841,180            --       191,500            --     1,032,680    1.38 to 62.44

Shares available
    for grant at
    June 30, 2002     1,251,250       868,100       238,000            --     2,357,350
</TABLE>

      The following  table  summarizes  significant  ranges of  outstanding  and
      exercisable options at June 30, 2002:

<TABLE>
<CAPTION>
                    Options outstanding                                Options exercisable
---------------------------------------------------------------    ---------------------------
                                  Weighted
                                  average          Weighted                       Weighted
   Range of                       remaining         average                        average
exercise prices     Shares      life in years    exercise price      Shares     exercise price
---------------    ---------    -------------    --------------    ----------   --------------
<S>                <C>              <C>              <C>           <C>             <C>
$ 1.00 to 5.00       359,700        3.92              2.12           347,700        2.06
  5.01 to 15.00    1,459,100        6.69             10.89           552,000        9.32
 15.01 to 40.00      398,050        7.89             22.37            68,560       24.58
 40.01 to 65.00      276,800        7.50             53.14            64,420       53.19
                   ---------                                       ---------
                   2,493,650                                       1,032,680
                   =========                                       =========
</TABLE>

                                                                     (Continued)


                                       18
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The per share weighted  average fair value of stock options granted during
      fiscal  years  2002,  2001,  and  2000 was  $11.37,  $32.74,  and  $28.73,
      respectively.  The fair  value of  options  at the date of the  grant  was
      estimated using the Black-Scholes model with the following assumptions for
      the respective fiscal year:

                                                    2002       2001       2000
                                                   ------     ------     ------
      Expected option life - key employee plan         5          5          5
      Expected option life - company-wide plan         3         --         --
      Weighted average risk-free interest rate      4.00%      6.00%      6.00%
      Weighted average expected volatility         92.00%     74.00%     69.00%
      Expected dividend yield                       0.00%      0.00%      0.00%

      Stock-based  compensation  costs  would  have  reduced  pretax  income  by
      $9,183,657,  $7,830,825,  and  $3,034,635 in fiscal 2002,  2001, and 2000,
      respectively ($8,837,767,  $7,474,580, and $2,884,865 after tax and $0.40,
      $0.33, and $0.16 per share in fiscal 2002,  2001, and 2000,  respectively)
      if the fair values of options  granted in that year had been recognized as
      compensation  expense on a straight-line  basis over the vesting period of
      the grant.  The pro forma effect on net income for fiscal 2002,  2001, and
      2000 is not representative of the pro forma effect on net income in future
      years because it does not take into  consideration pro forma  compensation
      expense related to grants made prior to fiscal 1996.

(14)  Restricted Stock Program

      As of June 30, 2002 and 2001,  the Company has issued  shares  aggregating
      102,976 under its Restricted Stock Program. The shares of restricted stock
      vest over a period of 42 to 48 months.  For the years  ended June 30, 2002
      and 2001, the Company recognized  compensation expense associated with the
      lapse of restrictions aggregating $636,708 and $525,435, respectively.

(15)  Accumulated Other Comprehensive Income (Loss)

      The   cumulative   balance  of  each   component  of   accumulated   other
      comprehensive income (loss) is as follows:

<TABLE>
<CAPTION>
                                                                            Unrealized
                                 Foreign currency    Minimum pension       gain/(loss) on       Accumulated other
                                   translation          liability            securities           comprehensive
                                    adjustment          adjustment       available for sale       income (loss)
                                 ----------------    ---------------     -------------------    -----------------
<S>                                   <C>                <C>                  <C>                  <C>
Balances at June 30, 2001            $     --                  --                   --                   --
Current period change                 687,667            (106,254)           (1,409,474)           (828,061)
                                     --------            --------            ----------             --------
Balances at June 30, 2002            $687,667            (106,254)           (1,409,474)           (828,061)
                                     ========            ========            ==========             ========
</TABLE>

                                                                     (Continued)


                                       19
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(16)  Shareholder Protection Rights Plan

      In April 2001,  the board of directors  adopted a  Shareholder  Protection
      Rights Plan. The plan provides for a dividend distribution of one right on
      each outstanding share of the Company's stock, distributed to shareholders
      of record on April 27, 2001. The rights will be exercisable and will allow
      the shareholders to acquire common stock at a discounted price if a person
      or group acquires 20% or more of the  outstanding  shares of common stock.
      Rights  held by  persons  who exceed the 20%  threshold  will be void.  In
      certain circumstances, the rights will entitle the holder to buy shares in
      an acquiring entity at a discounted  price. The board of directors may, at
      its  option,  redeem  all rights for $0.001 per right at any time prior to
      the rights becoming exercisable. The rights will expire on April 27, 2011,
      unless earlier redeemed, exchanged or amended by the Board.

(17)  Employee Benefit Plans

      The Company has a  noncontributory  defined  benefit pension plan covering
      substantially all of its employees. Effective August 15, 2000 the plan was
      closed for new participants.  Benefits under this plan generally are based
      on the employee's years of service and  compensation.  The following table
      presents  the changes in the  defined  benefit  pension  plan and the fair
      value of the Plan's assets for the years ended June 30:

<TABLE>
<CAPTION>
                                                     2002           2001           2000
                                                  -----------    -----------    -----------
<S>                                               <C>              <C>            <C>
Change in benefit obligation:
    Benefit obligation at beginning of year       $ 6,562,855      5,908,615      6,087,651
    Service cost                                      213,839        204,440        198,174
    Interest cost                                     469,017        437,762        403,830
    Actuarial loss (gain)                             281,005        237,835       (619,854)
    Benefits paid                                    (249,356)      (225,797)      (161,186)
                                                  -----------    -----------    -----------
    Benefit obligation at end                     $ 7,277,360      6,562,855      5,908,615
                                                  ===========    ===========    ===========
Change in plan assets:
    Fair value of plan assets at beginning of
      year                                        $ 6,237,552      5,744,994      5,626,769
    Actual return on plan assets                      (85,062)       718,355        241,093
    Employer contributions                            203,824             --         38,318
    Benefits paid                                    (249,356)      (225,797)      (161,186)
                                                  -----------    -----------    -----------
    Fair value of plan assets at end of year      $ 6,106,958      6,237,552      5,744,994
                                                  ===========    ===========    ===========

Funded status                                     $(1,170,402)      (325,303)      (163,621)
Unrecognized net loss (gain)                          743,618       (155,335)      (155,534)
Unrecognized net obligation existing at initial
    application                                         9,463         18,929         28,395
Unrecognized prior service cost                        42,438         60,677         78,916
Adjustment required to recognize minimum
    liability                                        (160,991)            --             --
                                                  -----------    -----------    -----------
              Accrued pension cost (note 7)       $  (535,874)      (401,032)      (211,844)
                                                  ===========    ===========    ===========
</TABLE>

                                                                     (Continued)


                                       20
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      Components of net periodic pension cost for the years ended June 30 are as
      follows:

<TABLE>
<CAPTION>
                                                   2002           2001          2000
                                                 ---------     ---------     ---------
<S>                                              <C>             <C>           <C>
Service cost                                     $ 213,839       204,440       198,174
Interest cost                                      469,017       437,762       403,830
Actual return on plan assets                        85,062      (718,355)     (241,093)
Amortization of prior service cost                  18,239        18,239        18,239
Deferral of gain (loss)                           (617,948)      237,636      (230,093)
Amortization of net obligation at transition         9,466         9,466         9,466
                                                 ---------     ---------     ---------
              Net periodic pension cost          $ 177,675       189,188       158,523
                                                 =========     =========     =========
Weighted average assumptions:
    Discount rate at year-end                         7.00%         7.25%         7.50%
    Rate of increase in compensation levels at
      year end                                        4.00%         4.00%         4.00%
    Expected return on plan assets during the
      year                                            8.50%         8.50%         8.50%
</TABLE>

      Plan assets consist principally of equity securities,  and U.S. government
      and corporate obligations.

      The Company  maintains a voluntary  contributory  salary  savings  plan to
      which  participants may contribute up to 15% of their total  compensation.
      The Company's matching  contribution is 50% (75% effective August 2000) of
      the participants'  contribution up to a maximum of 5% of the participants'
      compensation.  During fiscal 2002, 2001, and 2000, the Company contributed
      $550,094, $491,550, $249,324, respectively, to this plan.

      The  Company  maintains  a profit  sharing  plan which  provides an annual
      contribution by the Company based upon a percentage of operating earnings,
      as defined.  Eligible  employees  are  allocated  amounts under the profit
      sharing   plan  based  upon  their   respective   earnings,   as  defined.
      Contributions under the plan were approximately  $549,693,  $300,390,  and
      $331,000 in fiscal 2002, 2001, and 2000,  respectively.  While the Company
      intends to continue this plan, it reserves the right to terminate or amend
      the Plan at any time.

(18)  Postretirement Benefits

      The Company  provides  medical  coverage  for current and future  eligible
      retirees  of  the  Company  plus  their  eligible  dependents.   Employees
      generally  become eligible for retiree  medical  coverage by retiring from
      the  Company  after  attaining  at least  age 55 with 15 years of  service
      (active  employees  at June 27,  1993  were  eligible  by  retiring  after
      attaining at least age 55 with 10 years of service).  Retirees at June 27,
      1993 pay  approximately  $30 per month for health  care  coverage  and the
      Company is responsible for paying the remaining costs. For this group, any
      increase  in health care  coverage  costs for  retired  employees  will be
      shared by the  Company  and  retirees on a  fifty-fifty  basis,  while any
      increase in coverage costs for retiree  dependents will be totally paid by
      the retirees.  For eligible  employees  retiring  after June 26, 1993, the
      Company  contributes a fixed dollar amount towards the cost of the medical
      plan. Any future cost increases for the retiree  medical program for these
      participants will be charged to the retiree.

                                                                     (Continued)


                                       21
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The following  table  presents the changes in the  postretirement  benefit
      obligation and the funded status of the Plan at June 30:

<TABLE>
<CAPTION>
                                             2002            2001           2000
                                          -----------    -----------    -----------
<S>                                       <C>              <C>            <C>
Benefit obligation at beginning of year   $ 1,528,610      1,213,601      1,363,290
Service cost                                   46,969         43,040         28,845
Interest cost                                 111,832        105,780         87,539
Plan participants' contributions               39,816         39,274         32,601
Actuarial loss (gain)                         143,554        248,491       (196,098)
Benefits paid                                (150,028)      (121,576)      (102,576)
                                          -----------    -----------    -----------
Benefit obligation at end of year         $ 1,720,753      1,528,610      1,213,601
                                          ===========    ===========    ===========
Fair value of plan assets                 $        --             --             --
                                          ===========    ===========    ===========

Funded status                              (1,720,753)    (1,528,610)    (1,213,601)
Unrecognized actuarial loss (gain)            280,668        137,114       (111,377)
                                          -----------    -----------    -----------
    Accrued postretirement benefit
      cost                                $(1,440,085)    (1,391,496)    (1,324,978)
                                          ===========    ===========    ===========
</TABLE>

      Net  periodic   postretirement   benefit  cost   includes  the   following
      components:

                                              2002          2001          2000
                                            --------      --------      --------
Service cost                                $ 46,969        43,040        28,845
Interest cost                                111,832       105,780        87,539
                                            --------      --------      --------
   Net periodic postretirement
     benefit cost                           $158,801       148,820       116,384
                                            ========      ========      ========

      The weighted  average  discount rate used in determining  the  accumulated
      postretirement  benefit obligation was 7.00%,  7.25%, and 7.5%, at the end
      of fiscal 2002, 2001, and 2000,  respectively.  For measurement  purposes,
      the annual rate of  increase  in the per capita  cost of covered  benefits
      (i.e., health care cost trend rate) was assumed to be 5.0% for 2002, 2001,
      and 2000;  the rate is  assumed to remain at 5.0%  thereafter.  The health
      care cost  trend  rate  assumption  may have a  significant  effect on the
      amounts  reported.  A  one-percentage  point change in assumed health care
      cost trend rates would have the following effects:

                                                   1% increase      1% decrease
                                                   -----------      -----------
      Effect on total of service and
        interest cost components                     $ 3,154          (4,729)
      Effect on postretirement
        benefit obligation                            43,501         (65,230)

                                                                     (Continued)


                                       22
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(19)  Income Taxes

      The following table presents the Domestic and Foreign components of income
      (loss)  before  income  taxes  and  extraordinary  item  and  the  expense
      (benefit) for income taxes from continuing operations:

                                                   Years ended
                                                     June 30,
                                       2002            2001            2000
                                    -----------    ------------    ------------
Income (loss) before income taxes
  and extraordinary item:
      Domestic                      $ 7,947,190      18,613,968      14,703,799
      Foreign                        (4,320,324)             --              --
                                    -----------    ------------    ------------
                                    $ 3,626,866      18,613,968      14,703,799
                                    ===========    ============    ============
Income tax expense (benefit)
  consists of:
    Current:
      Federal                         1,407,316       6,151,164       5,053,669
      State and local                    74,230         595,861         130,231
      Foreign                                --              --              --
                                    -----------    ------------    ------------

              Total current         $ 1,481,546       6,747,025       5,183,900
                                    ===========    ============    ============
Deferred:
    Federal                            (306,857)       (333,599)       (180,715)
    State and local                       4,793         (13,426)         59,815
    Foreign                          (1,584,482)             --              --
                                    -----------    ------------    ------------
              Total deferred        $(1,886,546)       (347,025)       (120,900)
                                    ===========    ============    ============
              Total income taxes    $  (405,000)      6,400,000       5,063,000
                                    ===========    ============    ============

                                                                     (Continued)


                                       23
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      A reconciliation of the expected consolidated income tax expense, computed
      by applying the U.S.  Federal  corporate  income tax rate of 34% to income
      before  income  taxes  and  extraordinary  item,  to  income  tax  expense
      (benefit), is as follows:

<TABLE>
<CAPTION>
                                               2002          2001            2000
                                           -----------    -----------    -----------
<S>                                        <C>              <C>            <C>
Expected consolidated income tax expense   $ 1,233,134      6,328,749      4,999,292
State taxes, net of Federal benefit             52,156        384,407        125,430
Nontaxable interest income                    (867,624)      (815,095)      (265,708)
Nondeductible goodwill                              --        177,276         59,092
Export tax benefits                           (238,000)            --             --
Research credits                              (591,038)            --             --
Other, net                                       6,372        324,663        144,894
                                           -----------    -----------    -----------
                                           $  (405,000)     6,400,000      5,063,000
                                           ===========    ===========    ===========
</TABLE>

      The tax effects of  temporary  differences  that give rise to the deferred
      tax assets and  deferred  tax  liabilities  at June 30,  2002 and 2001 are
      presented below:

                                                      2002             2001
                                                   -----------      -----------
Deferred tax assets:
    Inventories                                    $ 1,082,273          619,956
    Deferred compensation                              246,063          230,377
    Retirement benefits                                 86,086           74,939
    Postretirement benefits                            547,232          528,768
    Restricted stock                                   506,323          264,375
    Nondeductible reserves                             176,700          261,865
    Federal and state tax credit
      carryforwards                                    710,734          605,664
    Foreign and state net
      operating loss carryforwards                   2,439,857           79,580
    Other                                               21,674           43,345
                                                   -----------      -----------
         Total deferred tax assets                   5,816,942        2,708,869
                                                   -----------      -----------
Deferred tax liabilities:
    Plant and equipment, principally due
      to differences in depreciation                (2,875,725)      (1,488,762)
    Intangible assets including goodwill              (923,451)              --
    Reinvestment reserve                            (2,073,568)              --
                                                   -----------      -----------
         Net deferred tax liabilities               (5,872,744)      (1,488,762)
                                                   -----------      -----------
         Net deferred taxes                        $   (55,802)       1,220,107
                                                   ===========      ===========

      Under the  income  tax law of the  Netherlands,  the gain  related  to the
      insurance  claim on the assets of Anaren Europe  destroyed in the fire (as
      discussed at Note 2) can be deferred until replacement assets are acquired
      by Anaren Europe.  At June 30, 2002, Anaren Europe has not replaced all of
      the  destroyed  assets  and  has a  "reinvestment  reserve"  deferred  tax
      liability  related  to  the  remaining  deferred  gain.  At the  time  the
      replacement assets are acquired,  the deferred gain will reduce the income
      tax basis in the replacement assets.

                                                                     (Continued)


                                       24
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      In addition to the net deferred taxes above,  at June 30, 2002 the Company
      has recorded a deferred tax asset of $54,737 relating to a minimum pension
      liability   and  the   associated   tax  benefit  has  been   recorded  in
      stockholders'  equity.  At June 30, 2002,  the Company has net  unrealized
      losses on securities  available-for-sale of $1,409,474. If realized, these
      losses would be  characterized  for income tax purposes as capital losses,
      which  may only be used to  offset  capital  gains.  As a  result  of this
      limitation,  management  does not  believe it is more  likely than not the
      Company  will be able to utilize the capital  losses and  therefore no tax
      benefit has been recorded in stockholders' equity.

                                                 2002              2001
                                              -----------      -----------
      Presented as:
          Current deferred tax asset          $ 1,356,294          956,759
          Long-term deferred tax
            asset (liability)                  (1,357,359)         263,348
                                              -----------      -----------
                                              $    (1,065)       1,220,107
                                              ===========      ===========

      In  assessing  the  realizability  of  deferred  tax  assets,   management
      considers  whether it is more likely than not that some  portion or all of
      the deferred tax assets will not be realized.  The ultimate realization of
      deferred tax assets is dependent  upon the  generation  of future  taxable
      income  during the periods in which  those  temporary  differences  become
      deductible.  Management  considers the scheduled  reversal of deferred tax
      liabilities,  projected future taxable income, and tax planning strategies
      in making  this  assessment.  Based upon the level of  historical  taxable
      income and projections  for future taxable  income,  with the exception of
      the deferred tax asset related to the net unrealized  losses on securities
      available  for sale as  discussed  above,  management  believes it is more
      likely than not the Company  will  realize the  benefits of the  remaining
      deferred tax assets.

      At June 30, 2002,  the Company has Federal and State credit  carryforwards
      of  $997,220,  the  majority  of which  expire at various  dates from 2015
      through  2022.  At June 30,  2002,  the Company has foreign net  operating
      losses of $6,944,946  which may be carried forward  indefinitely.  At June
      30,  2002,  the Company has a state net  operating  loss  carryforward  of
      $699,376 which expires in 2007.

      The tax  benefit  associated  with  the  exercise  of  stock  options  and
      disqualifying dispositions by employees reduced taxes payable by $460,672,
      $5,375,231,  and $2,513,788 in fiscal 2002, 2001, and 2000,  respectively.
      Such benefits are reflected as additional paid-in capital.

      Cash payments for income taxes (net of refunds  received) were $1,387,200,
      $419,316, and $2,575,231 in fiscal 2002, 2001, and 2000, respectively.

(20)  Segment and Related Information

      Segments

      The  Company  operates  predominately  in  the  wireless   communications,
      satellite  communications and space and defense electronics  markets.  The
      Company's two reportable segments are the wireless group and the space and
      defense group.  These segments have been determined  based upon the nature
      of  the  products  and  services  offered,   customer  base,   technology,
      availability of discrete internal  financial  information,  homogeneity of
      products,  and  delivery  channel,  and are  consistent  with  the way the
      Company  organizes  and evaluates  financial  information  internally  for
      purposes of making operating decisions and assessing performance.

                                                                     (Continued)


                                       25
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      The wireless segment designs, manufactures and markets commercial products
      used mainly by the wireless  communications  market. The space and defense
      segment of the  business  designs,  manufactures  and markets  specialized
      products for the radar and satellite  communications  markets. The revenue
      disclosures for the Company's reportable segments depict products that are
      similar in nature.

      The  following  table  reflects  the  operating  results  of the  segments
      consistent with the Company's  internal financial  reporting process.  The
      following results are used in part, by management,  both in evaluating the
      performance of, and in allocating resources to, each of the segments:

<TABLE>
<CAPTION>
                                                Space and    Corporate and
                                    Wireless     defense      unallocated    Consolidated
                                  -----------   ----------   -------------   ------------
<S>                               <C>           <C>           <C>             <C>
Net sales:
    2002                          $47,497,015   26,071,304            --      73,568,319
    2001                           61,709,080   23,116,195            --      84,825,275
    2000                           38,806,936   21,364,900            --      60,171,836

Operating income (loss):
    2002                           (7,872,292)   7,716,043            --        (156,249)
    2001                            6,550,461    5,060,803            --      11,611,264
    2000                            8,372,808    3,081,324            --      11,454,132

Goodwill and intangible assets:
    June 30, 2002                  33,168,824           --            --      33,168,824
    June 30, 2001                  23,858,758           --            --      23,858,758

Identifiable assets:*
    June 30, 2002                  19,147,586   14,096,923   155,708,568     188,953,077
    June 30, 2001                  17,617,672   12,453,474   155,125,572     185,196,718

Depreciation:**
    2002                            2,662,683    1,182,151            --       3,844,834
    2001                            1,629,113    1,146,481            --       2,775,594
    2000                              944,061      824,173            --       1,768,234

Goodwill and intangibles
  amortization:***
    2002                              428,261           --            --         428,261
    2001                            1,624,913           --            --       1,624,913
    2000                              245,667           --            --         245,667
</TABLE>

                                                                     (Continued)


                                       26
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

      *     Segment  assets  primarily  include  receivables,  inventories,  and
            property, plant, and equipment related to business acquisitions. The
            Company does not  segregate  other assets on a products and services
            basis  for  internal  management  reporting  and,  therefore,   such
            information  is not  presented.  Assets  included in  corporate  and
            unallocated  principally are cash and cash  equivalents,  marketable
            debt  securities,  other  receivables,  prepaid  expenses,  deferred
            income  taxes,  and  property,  plant and  equipment not specific to
            business acquisitions.

      **    Depreciation  expense  related to  acquisition - specific  property,
            plant,  and equipment is included in the segment  classification  of
            the acquired business.  Depreciation expense related to non business
            combination assets is allocated  departmentally based on an estimate
            of  capital  equipment  employed  by each  department.  Depreciation
            expense  is then  further  allocated  within  the  department  as it
            relates to the specific business segment impacted by the consumption
            of the capital  resources  utilized.  Due to the  similarity  of the
            property,  plant,  and  equipment  utilized,  the  Company  does not
            specifically  identify these assets by individual  business  segment
            for internal reporting purposes.

      ***   Amortization  of  goodwill  prior  to the  adoption  of SFAS 142 and
            identifiable  intangible assets arising from business  combinations,
            and patent  amortization,  is allocated to the segments based on the
            segment classification of the acquired or applicable operation.

      Geographic Information

      Net sales by geographic region are as follows:

                                                  Other foreign     Consolidated
                 United States      Canada          countries        net sales
                 -------------     ---------      -------------     ----------
        2002      $51,922,978      1,752,361       19,892,980       73,568,319
        2001       63,223,230      4,232,851       17,369,194       84,825,275
        2000       45,251,267      5,471,193        9,449,376       60,171,836

      Customers

      In 2002, sales to one customer (approximately $11,791,000,  related to the
      space and defense  electronics  segment)  exceeded 10% of consolidated net
      sales.  In  2001,  sales  to  two  customers  (approximately  $13,012,000,
      relating to the wireless segment, and approximately $9,422,000, related to
      the space and defense  electronics  segment)  exceeded 10% of consolidated
      net sales.  In 2000,  sales to two customers  (approximately  $10,300,000,
      relating to the wireless  segment,  and $7,000,000,  relating to the space
      and defense electronics segment) exceeded 10% of consolidated net sales.

                                                                     (Continued)


                                       27
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(21)  Commitments

      The  Company is  obligated  under  operating  leases for three  buildings.
      Future minimum payments under the  noncancelable  operating leases for the
      next five years and thereafter are summarized as follows:

      Year ending June 30:
          2003                                                  $  994,409
          2004                                                     725,890
          2005                                                     615,265
          2006                                                     591,439
          2007                                                     429,886
          Thereafter                                             2,666,202
                                                                ----------
                                                                 6,023,091
          Less sublease income                                     399,930
                                                                ----------
                                                                $5,623,161
                                                                ==========

      Rent  expense  for the  years  ended  June 30,  2002,  2001,  and 2000 was
      $811,294,  $616,422, and $427,890,  respectively.  Rent expense for fiscal
      2002, 2001, and 2000 was offset by sublease income of $376,678,  $367,566,
      and $329,698, respectively.

(22)  Concentrations

      The  Company and others,  which are engaged in  supplying  defense-related
      equipment to the United States Government (the Government), are subject to
      certain  business  risks  peculiar to the defense  industry.  Sales to the
      Government  may be affected  by changes in  procurement  policies,  budget
      considerations,   changing   concepts  of  national   defense,   political
      developments abroad, and other factors.  Sales to the Government accounted
      for  approximately  15%, 9%, and 13% of  consolidated  net sales in fiscal
      2002, 2001, and 2000,  respectively.  While management believes there is a
      high probability of continuation of the Company's current  defense-related
      programs, it continues to reduce its dependence on sales to the Government
      through development of its commercial electronics business.

                                                                     (Continued)


                                       28
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

(23)  Quarterly Financial Data (Unaudited)

      The  following  table sets forth  certain  unaudited  quarterly  financial
      information for the years ended June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                  2002 quarter ended
                                            -------------------------------------------------------------
                                              Sept. 30          Dec. 31         March 31        June 30
                                            -----------       ----------       ----------      ----------
<S>                                         <C>               <C>              <C>             <C>
Net sales                                   $15,001,191       17,244,979       19,821,239      21,500,910
Cost of sales                                 9,870,138       12,777,227       13,450,520      15,271,712
Income (loss) before extraordinary item       1,374,484         (351,643)         996,328       2,012,696
Extraordinary item - gain on
    acquisition                                      --        3,407,244               --              --
Net income                                    1,374,484        3,055,601          996,328       2,012,696
Net income (loss) per common and
    common equivalent share:
      Basic income (loss) per share:
          Income (loss) before
            extraordinary item                     0.06            (0.02)            0.04            0.09
          Extraordinary item - gain on
            acquisition                              --             0.15               --              --
          Net income                               0.06             0.13             0.04            0.09
      Diluted income (loss) per share:
          Income (loss) before
            extraordinary item                     0.06            (0.02)            0.04            0.09
          Extraordinary item - gain on
            acquisition                              --             0.15               --              --
          Net income                               0.06             0.13             0.04            0.09
</TABLE>

                                                                     (Continued)


                                       29
<PAGE>

                     ANAREN MICROWAVE, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                          June 30, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                     2001 quarter ended
                                   -----------------------------------------------------
                                     Sept. 30      Dec. 31       March 31      June 30
                                   -----------    ----------    ----------    ----------
<S>                                <C>            <C>           <C>           <C>
Net sales                          $22,223,974    25,188,261    21,716,061    15,696,978
Cost of sales                       13,397,703    15,117,855    14,042,456     9,968,570
Net income                           3,981,086     4,294,505     2,751,806     1,186,570
Net income per common and common
    equivalent share:
      Basic                               0.18          0.19          0.12          0.05
      Diluted                             0.17          0.18          0.12          0.05
</TABLE>

      Income per share  amounts  for each  quarter  are  required to be computed
      independently. As a result, their sum does not necessarily equal the total
      year income per share amounts.


                                       30