SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996
                                       OR
[ ]              TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
          For the transition period from ____________ to ____________.

                         Commission file number: 0-21528

                             BELL MICROPRODUCTS INC.
             (Exact name of registrant as specified in its charter)

             California                                         94-3057566
    (State or other jurisdiction                             (I.R.S. Employer
 of incorporation or organization)                        Identification Number)

              1941 Ringwood Avenue, San Jose, California 95131-1721
           (Address of principal executive office, including zip code)

       Registrant's telephone number, including area code: (408) 451-9400

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                               Yes    X      No
                                    -----        -----
         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of the  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. [ ]

  The aggregate market value of the voting stock held by  non-affiliates  of the
registrant,  as of February 28, 1997, was  approximately  $67,591,989 based upon
the last sale price reported for such date on the Nasdaq  National  Market.  For
purposes  of this  disclosure,  shares  of Common  Stock  held by  officers  and
directors  of the  Registrant  have been  excluded  because  such persons may be
deemed to be affiliates. This determination is not necessarily conclusive.

         The number of shares of  Registrant's  Common Stock  outstanding  as of
February 28, 1997 was 8,481,979.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive  Proxy Statement for the Company's  Annual Meeting of
Shareholders to be held on May 21, 1997 are  incorporated by reference into Part
III of this Form 10-K

         Index of Exhibits appears on Pages 42, 43 and 44.

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


<PAGE>

                                     PART I

ITEM 1:  Business

         Founded in 1987, Bell  Microproducts  Inc. (the "Company")  markets and
distributes a select group of  semiconductor  and computer  products to original
equipment   manufacturers   ("OEMs")   and   value-added   resellers   ("VARs").
Semiconductor  products include memory,  logic  microprocessors,  peripheral and
specialty  components.  Computer  products include disk, tape and optical drives
and  subsystems,  drive  controllers,  computers and board-level  products.  The
Company also provides a variety of manufacturing and value-added services to its
customers,  including the  manufacturing  of board-level and systems products to
customer  specifications,  as well as certain types of components  and subsystem
testing services, systems integration and disk drive formatting and testing, and
the packaging of electronic component kits to customer specifications.

         The following  information contains  forward-looking  statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Exchange Act of 1934. To the extent there are discussions  regarding
financial projections, information, or expectations about the Company's products
or  markets,   or  other  statements  about  the  future,   the  statements  are
forward-looking  and are  subject  to a number of risks and  uncertainties  that
could  cause  actual  results to differ  materially  from the  statements  made,
including in particular  those factors  described  under "Risk  Factors"  below.
Reference  should also be made to other documents the Company files from time to
time with the Securities and Exchange  Commission.  These  documents may contain
and identify other important  factors or information that could cause the actual
events  or  results  to  differ   materially   from  those   contained   herein.
Forward-looking  statements are indicated by an asterisk  immediately  following
the relevant statement.

Products and Services

   Semiconductor Products

         The  Company  distributes  a  broad  range  of  semiconductor  products
including memory,  logic,  microprocessor,  peripheral and specialty components.
The products distributed primarily are advanced integrated circuits, critical to
the  performance of the customer's  products  utilizing  these  components.  The
Company's customer base for its semiconductor products comprises primarily small
and medium-sized OEMs, including  manufacturers of computer and office products,
industrial  equipment  (including machine tools,  factory automation and robotic
equipment),  scientific and medical instruments and telecommunications products.
The Company's principal suppliers of semiconductor products in 1996 included IBM
Microelectronics,  Cypress Semiconductor,  Sony Electronics,  OKI Semiconductor,
NEC Electronics and Fujitsu Microelectronics. In addition, in the second half of
1996 the  Company  became  a  national  distributor  of  Harris  Semiconductor's
digital, linear and power integrated circuits.

   Computer Products

         While a substantial portion of the Company's sales of computer products
in 1996 was  attributable to hard disk drives,  the Company's  computer  product
sales also  included  optical  disk  drives,  imaging  products  and  solutions,
networking products, computers,  motherboards and value-added products. Based on
a  comparison  of its product  lines with product  lines  offered by other major
industrial  electronics  distributors,  the Company believes that its breadth of
product  offerings for mass storage computer  products is among the strongest in
the industry.  The Company  distributes  these products  primarily to industrial
OEMs, hardware integrators, VARs and dealers.

         Disk Drives and Tape Drives. The Company sells floppy, hard and optical
disk and tape drives to a wide range of  customers,  including  industrial  OEMs
(some of which produce computer, office, medical and


                                      -1-
<PAGE>


telecommunications  products),  as  well as  integrators  and  manufacturers  of
computers  based on the UNIX,  DOS/Windows and Macintosh  operating  systems and
frequently markets subsystems to integrators and VARs. To serve these customers,
Bell Microproducts  offers a full range of products from the industry leaders in
mass  storage  such  as  Adaptec  Inc.,  Exabyte  Corporation,  IBM,  Micropolis
Corporation,  Quantum Corporation,  Seagate Technology, Sun Microelectronics,  a
division of Sun Microsystems Inc., TEAC and Unisys Corporation.

         Optical and  Imaging  Solutions.  The Company  markets a broad range of
product  lines and  solutions  to optical  mass  storage and imaging  customers,
including optical disk drives,  scanner,  memory,  computer,  "jukebox" (robotic
media  changers)  and software  products for these  applications.  Product lines
represented include Philips Laser Magnetic Storage,  Sony Electronics,  Maxoptix
Corporation, Panasonic Communications and Systems and Ricoh Corporation, as well
as  software  drivers  for  most  operating  systems.  The  Company  also  sells
specialized software for imaging applications.

         Networking  Products.  The Company sells specialized  products and mass
storage memory and memory systems products including full "plug and play" (ready
for  immediate   installation)   tape,  optical  (including  jukebox)  and  RAID
(Redundant   Array  of  Inexpensive   Disks)   solutions  for  OEMs,   VARs  and
sophisticated   end  users.   These  solutions  are  configured  using  standard
components from the Company's inventory.

         Computers.    Bell   Microproducts   delivers   standard   and   custom
configurations  of  motherboards,  computers and file servers to the VAR and OEM
markets, including medical,  commercial and test system OEMs and vertical market
VARs. The principal motherboard suppliers are First International Computer (FIC)
and Sun Microelectronics. The Company's principal computer suppliers are Diamond
Flower Electric Instrument Company and Everex.

   Value-Added Services

         The Company  provides  the  following  services  through  its  contract
manufacturing division:

         Contract  Manufacturing.  The Company produces board-level products for
customers on a turnkey basis. Contract manufacturing operations involve building
board-level  products  to  customer  specifications,  utilizing  franchised  and
non-franchised  products and  materials.  Under these  turnkey  agreements,  the
Company  procures  the  required  raw  materials,  manages the assembly and test
operations,  and supplies circuit boards to the customer's delivery schedule and
quality requirements.

         The  capabilities  of the Company's  manufacturing  division  (Quadrus)
include automated  advanced surface mount technology (SMT) and  pin-through-hole
(PTH) assembly  capabilities,  complete with advanced  in-circuit and functional
test capabilities and ISO 9002 certification.  Quadrus utilizes the ASK Computer
materials  requirements  planning  (MRP)  system to manage its  inventories.  By
capitalizing  on its strengths as a distributor,  including its strong  customer
relations,  expertise in materials acquisition and inventory management, coupled
with a complete  in-house  kitting and  turnkey  manufacturing  capability,  the
Company  offers its  customers  high  quality  products and service as well as a
single source for their product, materials, assembly and test requirements.

         Subsystems  Integration.  Subsystems integration is a service where the
Company provides a turnkey solution to a customer's specification by integrating
such high technology  products as disk, tape and optical drives with passive and
electromechanical  products,  including  power supplies,  enclosures,  interface
electronics, cables and connectors.

         Kitting. Kitting of customer component product requirements is provided
to a select  customer  base.  Kitting is a service  where the Company  purchases
materials  according to the customer's  specifications  and provides them to the
customer in kit form, ready for the assembly process.

                                      -2-
<PAGE>
Distribution Operations

         The majority of the products sold by Bell  Microproducts'  distribution
division are purchased pursuant to authorized distributor agreements. Authorized
distributor agreements generally establish marketing  relationships with product
manufacturers,  provide for joint sales and  marketing  programs  and  generally
provide the Company price  protection  and limited  inventory  rotation  rights.
These   agreements   are  typically  for  renewable   terms  of  one  year,  are
non-exclusive,  and  authorize  the Company to sell  through  most or all of its
sales and distribution centers all or a portion of the products produced by that
manufacturer.

         The  Company  manages the  quality  and  quantity  of its  distribution
inventory  through  its  asset  management   group,   which  seeks  to  maximize
responsiveness  to  customer  requirements  while  optimizing  inventory  turns.
Inventory  management  is critical to a  distributor's  business.  The Company's
strategy  is to focus  on a high  number  of  resales  or  "turns"  of  existing
inventory to reduce exposure due to product  obsolescence and changing  consumer
demands.  The Company's IBM RS6000  computer  system  facilitates the control of
purchasing  and  inventory,   accounts  payable,  shipping  and  receiving,  and
invoicing and collection  information for the Company's  distribution  business.
Each of the Company's  sales centers is  electronically  linked to the Company's
central computer system which provides fully integrated  on-line  real-time data
with respect to the Company's  inventory levels.  Inventory turns are tracked by
line item, and the Company's inventory management system provides information to
assist in making  purchasing  decisions and  decisions as to which  inventory to
exchange with suppliers under stock rotation  programs.  This system enables the
Company to effectively  manage its inventory and to respond  quickly to customer
requirements.  The asset management group also monitors  supplier stock rotation
programs,  inventory  price  protection,  rejected  material  and other  factors
related to inventory  quality and  quantity.  In  addition,  in 1996 the Company
implemented a technology that enables its customers to submit bills of materials
(BOMs),  verify  product  availability  and obtain  current  quotes  through the
Internet.

Backlog

         The Company does not believe  that  information  concerning  backlog is
material to an understanding of its business,  as the Company's  objective is to
ship orders on the same day they are received  unless the customer has requested
a specific future delivery date on an order. Additionally, it is common industry
practice  for  customers,  in most cases,  to be able to  re-schedule  or cancel
orders with future delivery dates without penalties.

Marketing and Sales

         The semiconductor and computer products industries are characterized by
rapid technological  advances and a constant flow of new products. The resulting
shorter product life cycles have necessitated  compressed design and development
cycles, more rapid production build-up and quick response to major technological
shifts.  To react to these factors,  manufacturers  are focusing on and devoting
significant  resources to their core areas of expertise  including  research and
product design and development, and are increasingly outsourcing their marketing
and manufacturing requirements.

         Over the past two  decades the growth in the  electronics  distribution
industry  reflects a gradual trend among electronics  manufacturers  towards the
use of distributors, particularly for servicing medium and smaller size OEMs and
VARs. As a result of these trends,  distributors such as Bell Microproducts Inc.
have successfully  expanded their customer lists and line cards and consequently
achieved increased revenues.

                                      -3-
<PAGE>
Strategy

         The  Company's  business  strategy is designed to benefit from industry
trends  toward   increasing  use  of   distributors   and  the   outsourcing  of
manufacturing requirements. The Company seeks to maintain its position as one of
the most efficient and productive  distributors  in the industry.  The Company's
strategy includes the following key elements:

         Focus on Select Product Offerings. The Company's product strategy is to
focus its line card on a select group of  semiconductor  and computer  products,
including a particularly strong line of mass storage products,  with the goal of
achieving a leadership  position in the major  markets for such  products.  This
approach allows the Company to provide more knowledgeable  service and technical
support to its customers than it could if it offered a more  extensive  array of
products.  The Company  also  believes  that this  approach  should  allow it to
develop close working relationships with suppliers and to strengthen its ability
to obtain favorable product allocations in times of shortage of supply.

         Expand  Operating  Profit.  The Company seeks to maximize its operating
profit through two aspects of its sales,  marketing and product strategies:  (i)
increasing  distribution  of  relatively  high gross  margin  products,  such as
semiconductors with leading edge technology content and (ii) selling high volume
products,  thereby  enhancing  productivity and allowing the Company to increase
gross profit while controlling operating expenses.

         Provide  National Major Market  Distribution.  The Company  focuses its
marketing  and sales  strategy  on the  largest  U.S.  markets  with the goal of
maximizing  productivity  per sales  office.  With its 19 sales  locations,  the
Company  addresses what it believes  constitutes  many of the largest sectors of
the  national  market for  semiconductor  and  computer  products.  The  Company
continues to evaluate potential expansion into additional markets.

         Realize Synergies Between Contract Manufacturing and Distribution.  The
Company seeks to take advantage of synergies and efficiencies arising out of the
combination of distribution and contract manufacturing in a single organization.
Through its distribution  arm, the Company  provides its contract  manufacturing
operation  access to preferred  component  purchasing,  as well as a substantial
sales force that would be difficult for a stand alone contract  manufacturer  of
comparable size to support.

Employees

         At December 31, 1996, the Company had a total of 650 employees. None of
the Company's  employees is  represented  by a labor union.  The Company has not
experienced any work stoppages and considers its relations with its employees to
be good.  The Company's  future  success will depend in part upon its continuing
ability to attract and retain highly qualified  personnel.  Competition for such
employees  is intense and there can be no  assurance  that the  Company  will be
successful in attracting  and retaining such  personnel.  Failure to attract and
retain highly  qualified  personnel could have a material  adverse effect on the
Company's results of operations.

Risk Factors

Potential Fluctuations in Quarterly Operating Results

         The Company's quarterly operating results have in the past and could in
the future fluctuate  substantially.  The Company's expense levels are based, in
part, on expectations  of future sales. If sales in a particular  quarter do not
meet  expectations,  operating  results  could be  adversely  affected.  Factors
affecting  quarterly  operating  results  include the loss of key  suppliers  or
customers,  price  competition,  problems  incurred in managing  inventories  or
receivables, the timing or cancellation of orders from major customers, a change
in the product mix sold by the Company, customer

                                      -4-
<PAGE>

demand,  availability  of products from  suppliers,  management  of growth,  the
percent of revenue derived from distribution versus contract manufacturing,  the
Company's ability to collect accounts  receivable,  price decreases on inventory
that is not price protected,  the timing or cancellation of purchase orders with
or from  suppliers,  and the timing of expenditures in anticipation of increased
sales and customer  product  delivery  requirements.  Price  competition  in the
industries  in which the Company  competes is intense and could  result in gross
margin   declines,   which  could  have  an  adverse  impact  on  the  Company's
profitability.  Due in part to supplier  rebate  programs and increased sales by
the Company near the end of each quarter, a significant portion of the Company's
gross profit has  historically  been earned by the Company in the third month of
each quarter.  Failure to receive products from its suppliers in a timely manner
or the discontinuance of rebate programs could have a material adverse effect on
the Company's results of operations in a particular  quarter. In various periods
in the past, the Company's  operating results have been affected by all of these
factors.  In particular,  price fluctuations in the disk drive and semiconductor
industries  have affected the Company's  gross  margins in recent  periods.  The
Company  has  recently  experienced  rapid  sales  growth  and  there  can be no
assurance  that such sales  growth  will  continue or that such sales and profit
levels  will be  maintained.  The  Company's  cash  requirements  will depend on
numerous  factors,  including  the rate of  growth  of its  sales.  The  Company
believes that its working capital,  including its existing credit facility, will
be sufficient to meet the Company's  short term capital  requirements.  However,
the Company  may seek  additional  debt or equity  financing  to fund  continued
growth.

Dependence on Suppliers

         A select  number of suppliers  represent a  significant  portion of the
Company's sales. For the year ended December 31, 1996, Quantum provided products
which  represented 37% of the Company's  sales.  For the year ended December 31,
1995,   Quantum  and  IBM  provided   products  that  represented  25%  and  11%
respectively,  of the Company's sales. The Company's distribution agreement with
Quantum  is  cancelable  upon  90  days  notice.   In  the  past,   distribution
arrangements with significant suppliers have been terminated and there can be no
assurance  that,  in the  future,  one or  more  of  the  Company's  significant
distributor  relationships will not be terminated.  The loss of Quantum,  IBM or
any significant supplier or the shortage or loss of any significant product line
could  materially  adversely  affect the  Company.  As the  Company  enters into
distribution  arrangements with new suppliers,  other competitive  suppliers may
terminate their distribution  arrangements with the Company with minimal notice.
In the first quarter of 1996,  Hitachi America Ltd.  terminated its distribution
agreement  with the Company.  This  supplier  accounted for  approximately  $1.7
million and $297,000 of the Company's sales and gross profit, respectively,  for
the quarter ended December 31, 1995. To the extent that the Company is unable to
enter into or maintain  distribution  arrangements  with  leading  suppliers  of
components,  the  Company's  sales and  operating  results  could be  materially
adversely affected.

         The  Company's  authorized  distributor  agreements  may be canceled by
either  party  on  short  notice  and  generally  provide  for a  return  of the
manufacturer's  inventory  upon  cancellation.  Such  agreements  also generally
provide the Company  with price  protection  and  limited  inventory  protection
rights. There can be no assurance that such agreements will not be canceled,  or
that price  protection  and inventory  rotation  policies will provide  complete
protection or will not be changed in the future. If the Company were to purchase
significant  amounts of products on terms that do not  include  effective  price
protection  or inventory  rotation  rights,  the Company  would bear the risk of
obsolescence  and  price  fluctuation  for those  products.  In  particular,  in
February 1996 the Company  reported fourth quarter 1995 charges of $1.6 million,
net of tax, related to inventory valuation issues of certain DRAM products.  The
price  levels  of  such  DRAM  products  had  fallen  significantly,   requiring
revaluation  of  inventory  and these  products  were not  subject  to the price
protection  and  inventory  rotation  rights  normally  applicable to components
purchased  from the Company's  franchised  suppliers.  There can be no assurance
that the  Company  will not have to take  additional  charges to earnings in the
future due to inventory  valuation  issues,  which could have a material adverse
effect on the Company's results of operations.

                                      -5-
<PAGE>
Dependence on the Personal Computer Industry

         Many of the products the Company sells are used in the  manufacture  or
configuration of personal  computers.  These products are characterized by rapid
technological  change,  short product life cycles and intense  competition.  The
personal computer  industry has experienced  significant unit volume growth over
the  past  three  years,  which  has in turn  increased  demand  for many of the
products distributed by the Company,  however, any slowdown in the growth of the
personal  computer  industry,  or  growth  at less than  expected  rates,  could
adversely  affect the  Company's  ability to  continue  its revenue  growth.  In
addition,  many of the Company's customers in the personal computer industry are
subject to the risks of significant shifts in demand and severe price pressures,
which may increase the risk that the Company may not be able to collect accounts
receivable owed by some of its customers. To the extent the Company is unable to
collect its accounts  receivable,  the Company's  results of operations would be
adversely affected.

         The Company faces certain  industry-related  risks.  To the extent that
its suppliers do not maintain their product leadership,  the Company's operating
results could be materially adversely affected. Moreover, the increasingly short
product life cycles  experienced  in the  electronics  industry may increase the
Company's exposure to inventory obsolescence and the possibility of fluctuations
in operating  results.  Other factors  adversely  affecting the semiconductor or
computer  industries in general,  including  trade barriers which may affect the
Company's supply of products from its Japanese suppliers,  could have a material
adverse effect on the Company's operating results.

Cyclical Nature of the Semiconductor and Disk Drive Industries

         Semiconductors  and disk drives have represented a significant  portion
of the Company's  sales and the Company  believes they will continue to do so in
future  periods.*  Both the  semiconductor  and the disk drive  industries  have
historically  been  characterized  by  fluctuations in product supply and demand
and,  consequently,  severe fluctuations in price. In the event of excess supply
of disk drives or  semiconductors,  the Company's gross margins may be adversely
affected. In the event of a shortage of supply of disk drives or semiconductors,
the  Company's  results  of  operations  will  depend on the  amount of  product
allocated  to the  Company  by its  suppliers  and the  timely  receipt  of such
allocations. Additionally,  technological changes that affect the demand for and
prices of the  products  distributed  by the  Company  may  further  affect  the
Company's  gross margins.  Although the Company's  agreements with its suppliers
provide the Company with limited price  protection  and certain  rights of stock
rotation,  rapid  price  declines  or a  shortfall  in demand for disk drives or
semiconductor  products could have an adverse  effect on the Company's  sales or
gross margins.

Competition

         The distribution industry is highly competitive. In the distribution of
semiconductor and computer  products,  the Company  generally  competes for both
supplier and customer  relationships with numerous local,  regional and national
authorized and  unauthorized  distributors and for customer  relationships  with
semiconductor  and computer  product  manufacturers,  including  some of its own
suppliers.  Many of the  Company's  distribution  competitors  are larger,  more
established  and have greater  name  recognition  and  financial  and  marketing
resources  than  the  Company.   The  Company   believes  that  competition  for
distribution  customers is based on product  lines,  customer  service,  product
availability,   competitive  pricing  and  technical  information,  as  well  as
value-added  services  including  kitting  and  turnkey  assembly.  The  Company
believes that it competes favorably with respect to these factors.  There can be
no assurance that the Company will be able to compete successfully with existing
or new competitors. Failure to do so would have a material adverse effect on the
Company's results of operations.

         Contract  manufacturing  and  other  value-added  services  are  highly
competitive  and are based  upon  technology,  quality,  service,  price and the
ability to deliver  finished  products on an expeditious and reliable basis. The
Company

                                      -6-
<PAGE>


believes  it  competes  favorably  with  respect to such  factors.  The  Company
attempts to focus on markets where it has advantages in flexibility, service and
high component  content of the total price.  In this area, the Company  competes
with many contract  manufacturers  and other  distributors,  as well as with the
in-house  manufacturing  capabilities  of its existing and potential  customers.
Many of the Company's  competitors are larger, more established and have greater
name  recognition  and financial and marketing  resources than the Company.  The
Company also faces significant  offshore  competition in turnkey  manufacturing.
Although such competitors may offer lower bid prices,  the Company believes that
offshore  manufacturing is often less attractive due to the additional costs and
risks associated with utilizing offshore  services,  such as delays in shipping,
long lead items,  shipping and insurance  costs,  inflexibility  with respect to
production and engineering changes, high cancellation charges, uncertain product
quality and difficulty in communication.

         Both  distribution  and contract  manufacturing  businesses  are highly
competitive,  and there can be no  assurance  that the  Company  will be able to
compete  successfully  with existing or new competitors.  Failure to do so would
have a material adverse effect on the Company's operating results.

Short History of Profitability in Contract Manufacturing

         The Company's revenues from its contract  manufacturing  operations are
likely to depend on the  availability  of  necessary  components,  from a single
source  or  otherwise,  whose  lack  of  availability  could  delay  or  curtail
production and shipment of assemblies  utilizing such components.  Manufacturing
sales levels and profitability increased in 1996 as compared to prior years. Due
to the highly competitive nature of the contract manufacturing  industry,  there
can be no assurance that this trend will continue, that higher sales levels will
in fact result in  increased  profitability  or that the Company will be able to
successfully  manage the  expanded  operations,  retain  existing  customers  or
attract new contract manufacturing  customers sufficient to support its expected
expanded level of  operations.  Failure to do so could have an adverse effect on
the Company's operating results. The Company's contract  manufacturing  division
has been  dependent  historically  on a relatively  limited  customer  base. Any
significant  rescheduling or cancellation of orders from these customers, or the
lack of financial  strength of these  customers,  could have a material  adverse
effect on the results of operations of the contract  manufacturing  division and
on the profitability of the Company.

Management of Growth

         The Company has grown  rapidly in recent years,  with sales  increasing
from  $125.3  million  in 1993 to $483.3  million in 1996,  and this  growth has
placed, and continues to place a strain on the Company's  management,  financial
and operational resources.  The Company intends to continue to pursue its growth
strategy  through  increasing  sales  of  existing  and new  product  offerings,
increasing   geographical   sales  coverage,   and  possibly  through  strategic
acquisitions.*  The Company  also plans to expand its  corporate  offices into a
second  building  in April  1997,  and to relocate  its  contract  manufacturing
division,  which will expand its facilities and enable  increased  manufacturing
capacity.*  This expected  growth may require  additional  equipment,  increased
personnel,   expanded   information   systems  and   additional   financial  and
administrative  control  procedures.* There can be no assurance that the Company
will be able to  attract  and retain  qualified  personnel  or  further  develop
accounting and control systems and  successfully  manage  expanding  operations,
including  an  increasing  number of supplier  and  customer  relationships  and
geographically dispersed locations.  Further, there can be no assurance that the
Company  will be able to  sustain  its  recent  rate of growth or  continue  its
profitable operations.

Hazardous Materials

         The Company uses small quantities of certain hazardous materials in its
contract  manufacturing  operations.  As a result,  the  Company  is  subject to
stringent Federal,  state and local regulations  governing the storage,  use and
disposal

                                      -7-
<PAGE>


of such materials.  Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed by
state and Federal  regulations,  there is  nevertheless  the risk of  accidental
contamination  or injury  from these  materials.  To date,  the  Company has not
incurred  substantial  expenditures  for  preventative  action  with  respect to
hazardous  materials  or for  remedial  action  with  respect  to any  hazardous
materials accident. In the event of such an accident,  the Company could be held
liable for any damages that result. The liability in the event of an accident or
the costs of such remedial  actions could have a material  adverse effect on the
Company's financial condition and results of operations.


<TABLE>

ITEM 2:  Properties

<CAPTION>
                                                                            Square
    Location                  Type                  Principal Use           Footage                 Ownership
------------------    ---------------------    ------------------------    -----------   ---------------------------------
<S>                   <C>                      <C>                         <C>           <C>
San Jose, CA          Office, warehouse        Headquarters,               34,000        Leased   until   May  1999  with
                                               distribution center                       option to extend one year.
                                               (Bldg. One)

San Jose, CA          Office                   Headquarters (Bldg. Two)    15,657        Leased until  December 2002 with
                                                                                         five one-year options to extend.

San Jose, CA          Office, plant &          Contract Manufacturing      60,958        Termination  notice tendered and
                      warehouse                                                          effective April 7, 1997.

San Jose, CA          Office, plant &          Contract Manufacturing      141,520       Leased   from   March   1997  to
                      warehouse                                                          February 2006.

</TABLE>

         The Company also leases sales and/or warehouse locations in Irvine, San
Diego, San Jose (Capitol  Avenue),  Glendale and Westlake  Village,  California;
Alamonte  Springs and Deerfield  Beach,  Florida;  Marietta,  Georgia;  Chicago,
Illinois; Overland Park, Kansas; Columbia, Maryland;  Billerica,  Massachusetts;
Eden Prairie,  Minnesota;  Clifton, New Jersey;  Smithtown, New York; Richardson
and Austin, Texas; Centerville, Utah; Herndon, Virginia and Redmond, Washington.


ITEM 3:  Legal Proceedings

         The  Company is not a party to,  nor is its  property  subject  to, any
material pending legal proceedings.


ITEM 4:  Submission of Matters to a Vote of Security Holders

         None.

                                      -8-
<PAGE>

                                     PART II

ITEM 5:  Market for Registrant's Common Equity and Related Stockholder Matters

         The  Company's  Common  Stock is traded on the Nasdaq  National  Market
under the  symbol  "BELM."  The  following  table  sets  forth  for the  periods
indicated  the high and low sale  prices  of the  Common  Stock as  reported  by
Nasdaq.

                                                               High      Low
                                                              ------    -----
Fiscal 1995

    First Quarter .....................................       $14.25    $8.00

    Second Quarter ....................................        10.50     8.00

    Third Quarter .....................................        13.50     9.63

    Fourth Quarter ....................................        12.25     7.00

Fiscal 1996

    First Quarter .....................................       $ 8.25    $5.88

    Second Quarter ....................................         9.88     6.63

    Third Quarter .....................................         8.13     5.75

    Fourth Quarter ....................................         8.88     6.75

Fiscal 1997

    First Quarter (through February 28, 1997) .........       $12.25    $8.63


         On  February  28,  1997,  the last sale  price of the  Common  Stock as
reported by Nasdaq was $10.88 per share.

         As of February 28, 1997 there were  approximately 322 holders of record
of the Common Stock (not including shares held in street name).

         To date,  the Company has paid no cash  dividends to its  shareholders.
The Company has no plans to pay cash dividends in the near future. The Company's
line of credit agreement  prohibits the Company's  payment of dividends or other
distributions  on any of its shares  except  dividends  payable in the Company's
capital stock.

                                       -9-
<PAGE>

<TABLE>

ITEM 6:  Selected Financial Data

                                                 BELL MICROPRODUCTS INC.
                                                 SELECTED FINANCIAL DATA
                                     (in thousands, except earnings per share data)

<CAPTION>

                                                       1996            1995          1994(1)            1993(2)              1992
                                                    ---------       ---------       ---------          ---------          ---------
<S>                                                 <C>             <C>             <C>                <C>                <C>
Statement of Operations Data:
Sales ........................................      $ 483,316       $ 346,291       $ 250,753          $ 125,303          $  65,512
Cost of sales.................................        425,258         305,696         217,277            107,999             55,424
                                                    ---------       ---------       ---------          ---------          ---------
  Gross profit ...............................         58,058          40,595          33,476             17,304             10,088
Marketing, general and
  administrative expenses ....................         41,008          30,352          23,258             13,200              8,769
                                                    ---------       ---------       ---------          ---------          ---------
  Income from operations .....................         17,050          10,243          10,218              4,104              1,319
Interest expense..............................         (3,495)         (3,473)         (1,691)              (501)              (316)
                                                    ---------       ---------       ---------          ---------          ---------
  Income before income taxes .................         13,555           6,770           8,527              3,603              1,003
Provision for income taxes ...................          5,693           2,768           3,471              1,549                452
                                                    ---------       ---------       ---------          ---------          ---------
Net income ...................................      $   7,862       $   4,002       $   5,056          $   2,054          $     551
                                                    =========       =========       =========          =========          =========
Earnings per share............................      $     .92       $     .48       $     .86          $     .45          $     .14
                                                    =========       =========       =========          =========          =========
Weighted average common shares and
  equivalents (3).............................          8,511           8,350           5,878              4,515              3,818

                                                                                   As of December 31,
                                                    -------------------------------------------------------------------------------
                                                      1996            1995            1994(1)            1993(2)            1992
                                                    ---------       ---------       ---------          ---------          ---------
Balance Sheet Data:
Working capital ..............................      $ 105,958       $ 106,914       $  52,230          $  17,400          $   8,106
Total assets..................................        175,680         157,277         122,502             51,253             27,985
Total long-term debt .........................         50,885          59,453           6,059              1,130                111
Total shareholders' equity ...................         71,127          62,462          56,465             18,351              8,507

<FN>
--------------------

(1)  1994  Statement  of  Operations  Data and  Balance  Sheet Data  reflect the
     effects of the  purchase of Vantage  Components,  Inc. on May 26, 1994 (see
     Note 11 of Notes to Financial Statements).

(2)  1993  Statement  of  Operations  Data and  Balance  Sheet Data  reflect the
     effects of the purchase of certain  assets of Adlar  Turnkey  Manufacturing
     Corporation ("ATMC") on April 7, 1993.

(3)  See Note 2 of Notes to Financial Statements.
</FN>
</TABLE>


<PAGE>


ITEM 7:  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         For an  understanding  of the  significant  factors that influenced the
Company's  performance  during the past three years,  the  following  discussion
should  be read in  conjunction  with the  financial  statements  and the  other
information appearing elsewhere in this report.

         The following  information contains  forward-looking  statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Exchange Act of 1934. To the extent there are discussions  regarding
financial projections, information, or expectations about the Company's products
or  markets,   or  other  statements  about  the  future,   the  statements  are
forward-looking  and are  subject  to a number of risks and  uncertainties  that
could  cause  actual  results to differ  materially  from the  statements  made,
including in particular  the factors  discussed  under "Risk  Factors" in Item 1
hereof.  Reference  should also be made to documents the Company files from time
to time with the Securities and Exchange Commission. These documents may contain
and identify important factors or information that could cause the actual events
or results to differ  materially  from those contained  herein.  Forward-looking
statements  are  indicated  by an asterisk  immediately  following  the relevant
statement.

<TABLE>
Results of Operations

         The following  table sets forth certain  financial data as a percentage
of total Company sales for the periods indicated:

<CAPTION>

                                                                                                    Year Ended December 31,
                                                                                      ----------------------------------------------
                                                                                      1996                1995               1994
                                                                                      -----               -----              -----
<S>                                                                                   <C>                 <C>                <C>
Sales
     Distribution ......................................................               80.9%               85.7%              88.1%
     Manufacturing .....................................................               19.1%               14.3%              11.9%
                                                                                      -----               -----              -----
          Total Company ................................................              100.0%              100.0%             100.0%
                                                                                      -----               -----              -----
Cost of sales
     Distribution ......................................................               71.4%               75.6%              76.3%
     Manufacturing .....................................................               16.6%               12.7%              10.3%
                                                                                      -----               -----              -----
          Total Company ................................................               88.0%               88.3%              86.6%
                                                                                      -----               -----              -----
                Gross profit ...........................................               12.0%               11.7%              13.4%
Marketing, general and administrative expenses .........................                8.5%                8.8%               9.3%
                                                                                      -----               -----              -----
Income from operations .................................................                3.5%                2.9%               4.1%
Interest expenses ......................................................               (0.7%)              (1.0%)             (0.7%)
Income before income taxes .............................................                2.8%                1.9%               3.4%
Provision for income taxes .............................................                1.2%                0.8%               1.4%
                                                                                      -----               -----              -----
Net income .............................................................                1.6%                1.1%               2.0%
                                                                                      =====               =====              =====

</TABLE>


YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

         Net sales were $483.3  million for the year ended  December  31,  1996,
which  represented an increase of $137.0 million or 40% over 1995.  Distribution
sales  increased by $94.6  million,  while sales through the Company's  contract
manufacturing  division (Quadrus)  increased by approximately $42.4 million over
1995.  Substantially the entire increase in distribution  sales was attributable
to computer products with the expansion of unit sales in existing product


                                      -11-
<PAGE>


lines due to increased demand for mass storage products,  a larger proportion of
value-added  and  subsystem  sales and the expansion of the customer base due to
the addition of sales and marketing  resources.  Semiconductor  sales  decreased
slightly  in  1996  from  1995  primarily  due to  decreased  DRAM  unit  sales,
industry-wide  price declines in memory products and the  discontinuation of the
distribution  agreement with Hitachi America Ltd.  Manufacturing sales growth in
1996 was primarily a result of increased sales to existing customers, enabled by
increased manufacturing equipment capacity.

         The Company has grown  rapidly in recent years,  with sales  increasing
from  $125.3  million  in 1993 to $483.3  million in 1996,  and this  growth has
placed, and continues to place a strain on the Company's  management,  financial
and operational resources.  The Company intends to continue to pursue its growth
strategy  through  increasing  sales  of  existing  and new  product  offerings,
increasing   geographical   sales  coverage,   and  possibly  through  strategic
acquisitions.*  The Company  also plans to expand its  corporate  offices into a
second  building  in April  1997,  and to relocate  its  contract  manufacturing
division,  which will expand its facilities and enable  increased  manufacturing
capacity.*  This expected  growth may require  additional  equipment,  increased
personnel,   expanded   information   systems  and   additional   financial  and
administrative  control  procedures.* There can be no assurance that the Company
will be able to  attract  and retain  qualified  personnel  or  further  develop
accounting and control systems and  successfully  manage  expanding  operations,
including  an  increasing  number of supplier  and  customer  relationships  and
geographically dispersed locations.  Further, there can be no assurance that the
Company  will be able to  sustain  its  recent  rate of growth or  continue  its
profitable operations.

         The Company's gross profit for 1996 was $58.1 million,  which was $17.5
million,  or 43% higher than 1995.  Of the total gross  profit  increase,  $11.4
million was  attributable  to the  distribution  division,  and $6.1 million was
generated through the Company's contract manufacturing division. As a percentage
of sales,  gross  margin  was 12.0% in 1996 as  compared  to 11.7% in 1995.  The
increase in total Company gross margin was primarily a result of increased gross
margin in the contract  manufacturing  division to 13.0% in 1996, as compared to
11.8% in 1995. The increase in contract manufacturing gross margin was primarily
attributable  to  decreased   material  costs,  most  significantly  for  memory
products. In the distribution  division,  margins in 1996 were 11.8% compared to
11.7% in 1995.  The  increase  in  gross  margin  was  primarily  a result  of a
decreased  dependence by the Company on sales of DRAM memory product,  which was
partially  reduced  by a  greater  proportion  of  computer  product  sales as a
percentage of total Company sales, which contributed lower margins.

         Marketing,  general  and  administrative  expenses  increased  to $41.0
million in 1996 from $30.4  million in 1995,  an increase of $10.6  million,  or
35%, but  decreased as a percentage  of sales to 8.5% from 8.8%.  The decline in
marketing,  general and  administrative  expenses as a  percentage  of sales was
primarily  attributable  to the  Company's  successful  efforts to control costs
while  increasing  sales,  and a higher  proportion  of sales from large  volume
orders,  particularly  for hard disk drives and certain  semiconductor  devices,
both of which resulted in lower operating expenses as a percentage of sales. The
increase in expenses was  attributable to increased sales volume,  the Company's
continuing effort to expand its sales and marketing  organization,  the addition
of  operating  expenses  related  to the  contract  manufacturing  division  and
increases  to bad debt  expenses  due to  increased  sales  volumes and changing
market conditions.

         Interest  expense  remained  unchanged  at $3.5  million in 1996 versus
1995, despite record sales growth over the same period. This was attributable to
the Company's  efforts to manage  working  capital by decreasing  its days sales
outstanding  on  accounts   receivable,   increasing  its  inventory  turns  and
negotiating more favorable payment terms with certain suppliers.

                                      -12-

<PAGE>

         The  Company's  effective  income tax rate  increased  to 42.0% in 1996
compared to 40.9% in 1995,  primarily  due to the increased  Federal  income tax
rate, related to increased earnings.

         Net income increased to $7.9 million in 1996 from $4.0 million in 1995.
The  increase  in net  income  was  primarily  the  result of sales  growth  and
increased gross margins, partially offset by increased operating expenses.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

         Net sales were $346.3  million for the year ended  December  31,  1995,
which  represented  an increase of $95.5 million or 38% over 1994.  Distribution
sales  increased by $75.8  million,  and sales  through the  Company's  contract
manufacturing  division  (Quadrus)  increased by approximately  $20 million over
1994.  Substantially all of the increase in distribution  sales was attributable
to the expansion of unit sales in existing  product lines due to the addition of
sales and marketing  resources,  the addition of new lines, the expansion of the
customer base and the  acquisition of Vantage in May 1994.  Semiconductor  sales
increased  slightly from 1994,  while computer  product sales increased over $65
million.  Semiconductor  sales were adversely  affected by lower  allocations of
memory  products from a major  supplier.  Across all other  semiconductor  lines
combined, sales increased over $25 million in 1995 compared to 1994, as a result
of  sales  growth  in  existing   products   lines,   the  addition  of  Cypress
Semiconductor  Corporation as a new supplier in October 1994 and the acquisition
of Vantage in May 1994.  Computer  product  sales growth in 1995 was  positively
affected by higher unit sales and a larger proportion of high capacity hard disk
drives which commanded higher average selling prices, as well as the addition of
new product lines. Contract manufacturing sales increased in 1995 as a result of
increased   sales  to  new  and   existing   customers,   enabled  by  increased
manufacturing equipment capacity.

         The Company's  gross profit for 1995 was $40.6 million,  which was $7.1
million,  or 21% higher than 1994.  Of this total gross  profit  increase,  $5.3
million was  attributable to distribution  sales, and $1.8 million was generated
through the Company's contract manufacturing division. As a percentage of sales,
gross  margin was 11.7% in 1995 as  compared to 13.4% in 1994.  The  decrease in
gross  margin  was  primarily  attributable  to fourth  quarter  charges of $2.5
million   related  to  the  write-down  of  certain  DRAM   inventories  in  the
distribution segment of the business, as well as an increase in computer product
sales as a percentage of total Company  sales,  which  typically  generate lower
margins.  Gross  margin,  as a  percentage  of sales,  decreased in the contract
manufacturing  division  in 1995,  primarily  due to the  Company's  efforts  to
increase market penetration in this segment, including initial startup costs for
new customers.

         Marketing,  general  and  administrative  expenses  increased  to $30.4
million in 1995 from $23.3 million in 1994, an increase of $7.1 million, or 30%,
but  decreased  as a  percentage  of sales to 8.8% from  9.3%.  The  decline  in
marketing,  general and  administrative  expenses as a  percentage  of sales was
primarily  attributable  to the  Company's  successful  efforts to control costs
while  increasing  sales,  and a higher  proportion  of sales from large  volume
orders,  particularly  for hard disk drives and certain  semiconductor  devices,
both of which resulted in lower operating expenses as a percentage of sales. The
increase in expenses was attributable to the acquisition of Vantage in May 1994,
the Company's continuing effort to expand its sales and marketing  organization,
the  addition  of  operating  expenses  related  to the  contract  manufacturing
division,  as  well as an  increase  in the  Company's  allowance  for  doubtful
accounts,  principally  for a customer  which filed for bankruptcy in the fourth
quarter of 1995.

         Interest expense increased in 1995 to $3.5 million from $1.7 million in
1994. The increase in interest  expense was due to increased bank  borrowings to
fund the Company's working capital needs.

         The Company's  effective income tax rate remained  relatively stable at
40.9% in 1995 compared to 40.7% in 1994.

                                      -13-

<PAGE>

         Net income  decreased  to $4.0  million  for 1995 from $5.1  million in
1994.  The  decrease in net income is  primarily  the result of the  decrease in
gross margin percentage and increased operating and interest expenses.

INFLATIONARY IMPACT

         Since the  inception of  operations,  inflation  has not  significantly
affected the operating results of the Company.  However,  inflation and changing
interest  rates have had a  significant  effect on the  economy  in general  and
therefore could affect the operating results of the Company in the future.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company has funded its working  capital  requirements  principally
through  borrowings  under bank lines of credit and sales of equity  securities.
Working  capital  requirements  have  included  the  financing  of  increases in
inventory  and accounts  receivable  resulting  from sales  growth.  The Company
completed the initial public offering of its Common Stock in June 1993,  selling
1.2 million  shares for net  proceeds  of $7.6  million.  In  November  1994 the
Company  completed a public offering of approximately  2.6 million shares of its
Common Stock for net proceeds of $27.3 million.

         On June 25, 1996, the Company  entered into an amendment to the Amended
and Restated Syndicated Credit Agreement arranged by Sumitomo Bank of California
("Sumitomo  Bank") as Agent.  The amendment  increased the Company's $70 million
revolving line of credit to $80 million. The syndicate includes Sumitomo Bank of
California,  Union Bank,  The First  National  Bank of Boston,  Comerica  Bank -
California  and  The  Sumitomo  Bank,  Limited.  At the  Company's  option,  the
borrowings  under the line of credit will bear interest at Sumitomo Bank's prime
rate or the adjusted LIBOR rate plus 1.625%.  At December 31, 1996, the interest
rate was 8.25%. The revolving line of credit has a final payment due date of May
31,  1998.  The  revolving  line of credit  requires the Company to meet certain
financial  tests  and  to  comply  with  certain  other   covenants,   including
restrictions  on  incurrence  of  debt  and  liens,   restrictions  on  mergers,
acquisitions,  asset  dispositions,  declaration  of dividends,  repurchases  of
stock,  making investments and  profitability.  Obligations of the Company under
the revolving line of credit are secured by  substantially  all of the Company's
assets. The balance  outstanding on the revolving line of credit at December 31,
1996 was  approximately  $45.9  million.  The  Company  intends to  utilize  its
revolving  line of credit  to fund  future  working  capital  requirements.  The
Company is in  compliance  with its bank  convenants,  however,  there can be no
assurance that the Company will be in compliance  with its bank covenants in the
future.  If the Company does not remain in compliance  with the covenants in its
Amended  and  Restated  Syndicated  Credit  Agreement  and is unable to obtain a
waiver of noncompliance  from its banks, the Company's  financial  condition and
results of  operations  would be  materially  adversely  affected.  The  Company
evaluates  potential  acquisitions from time to time and may utilize its line of
credit to acquire complementary  businesses,  provided consent from its banks is
obtained.

         The Company's  accounts  receivable and  inventories as of December 31,
1996 have increased to $70.7 million and $78.7 million, respectively, from $65.3
million and $70.3 million,  respectively, as of December 31, 1995 primarily as a
result  of  the  Company's  increased  sales.  The  Company's  accounts  payable
increased to $45.7 million in 1996 from $31.6 million in 1995,  primarily due to
the Company's  efforts to negotiate  more  favorable  payment terms with certain
suppliers, as well as timing issues related to inventory receipts and payments.

         The net amount of cash  provided by  operating  activities  in 1996 was
$13.8 million.  The net amount of cash used in financing  activities in 1996 was
$9.5 million, principally for repayments against the Company's revolving line of
credit with its banks.  The net amount of cash used in investing  activities  in
1996 was approximately $1.1 million, principally for the acquisition of property
and equipment.

                                      -14-
<PAGE>

         The Company's  results of operations for any  particular  period may be
adversely  affected by numerous  factors,  such as the loss of key  suppliers or
customers,  price  competition,  problems  incurred in managing  inventories  or
receivables, the timing or cancellation of orders from major customers, a change
in the  product  mix  sold by the  Company,  customer  demand,  availability  of
products from  suppliers,  management of growth,  the percent of revenue derived
from  distribution  versus  contract  manufacturing,  the  Company's  ability to
collect  accounts  receivable,  price  decreases on inventory  that is not price
protected, the timing or cancellation of purchase orders with or from suppliers,
and the timing of  expenditures  in anticipation of increased sales and customer
product delivery requirements.  Price competition in the industries in which the
Company  competes is intense and could  result in gross margin  declines,  which
could have an adverse impact on the Company's profitability.  In various periods
in the past, the Company's  operating results have been affected by all of these
factors.  In particular,  price fluctuations in the disk drive and semiconductor
industries  have affected the Company's  gross  margins in recent  periods.  The
Company  has  recently  experienced  rapid  sales  growth  and  there  can be no
assurance  that such sales  growth  will  continue or that such sales and profit
levels  will be  maintained.  The  Company's  cash  requirements  will depend on
numerous  factors,  including  the rate of  growth  of its  sales.  The  Company
believes that its working capital,  including its existing credit facility, will
be sufficient to meet the Company's  short term capital  requirements.  However,
the Company  may seek  additional  debt or equity  financing  to fund  continued
growth.


ITEM 8:  Financial Statements and Supplementary Data

         The financial  statements,  together  with the report  thereon of Price
Waterhouse LLP, independent accountants, are included in Item 14 hereof.


ITEM 9:  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.

                                      -15-

<PAGE>


                                    PART III


         Pursuant to Paragraph  G(3) of the General  Instructions  to Form 10-K,
portions of the information  required by Part III of Form 10-K are  incorporated
by reference from the Company's  Proxy Statement to be filed with the Commission
in  connection  with  the  1997  Annual  Meeting  of  Shareholders  (the  "Proxy
Statement").


ITEM 10:   Directors and Executive Officers of the Registrant


          (a)       Information  concerning  directors of the Company appears in
                    the  Company's  Proxy  Statement,  under Item 1 "Election of
                    Directors."   This   portion  of  the  Proxy   Statement  is
                    incorporated herein by reference.

          (b)       Executive Officers Of The Registrant

<TABLE>

                    The following table and descriptions  identify and set forth
                    information regarding the Company's five executive officers:

<CAPTION>

                       Name                                  Age   Position
                       ----                                  ---   --------
                      <S>                                    <C>   <C>
                       W. Donald Bell....................    59    President, Chief Executive Officer and
                                                                   Chairman of the Board
                       Remo E. Canessa...................    39    Chief Financial Officer, Vice President of Finance,
                                                                   Corporate Controller and Secretary
                       William Murphy....................    46    Senior Vice President of Industrial Sales
                       Philip M. Roussey.................    54    Senior Vice President of Computer Products Marketing
                       Robert J. Sturgeon................    43    Vice President of Operations
                    </TABLE>

                         W.  Donald  Bell has been  President,  Chief  Executive
                    Officer and  Chairman of the Board of the Company  since its
                    inception in 1987.  Mr. Bell has over 30 years of experience
                    in the  electronics  industry.  Mr.  Bell was  formerly  the
                    President  of Ducommun  Inc.  and its  subsidiary,  Kierulff
                    Electronics  Inc., as well as Electronic  Arrays Inc. He has
                    also held senior  management  positions at Texas Instruments
                    Incorporated,  American  Microsystems and other  electronics
                    companies.  He is a  member  of the  Board of  Directors  of
                    Control Data Systems Inc.

                         Remo E. Canessa has been Chief Financial Officer,  Vice
                    President of Finance and Secretary of the Company since July
                    1995.  Since  November  1993 Mr.  Canessa  has served as the
                    Company's  Corporate  Controller.  From  1989  to  1993  Mr.
                    Canessa was Headquarters Controller of Ampex Corporation,  a
                    developer,  manufacturer  and distributor of audio and video
                    recording equipment and mass data storage devices.  Prior to
                    that time, Mr. Canessa was Corporate  Controller of Geoworks
                    Inc.,   and  also  held   positions   at  Dialogic   Systems
                    Corporation  and  Arthur  Andersen  & Co. He is a  Certified
                    Public Accountant in the State of California.

                                      -16-
<PAGE>



                         William A.  Murphy has been Senior  Vice  President  of
                    Sales for the Industrial Division of Bell Microproducts Inc.
                    since June 1995.  From 1985 to 1995 Mr.  Murphy held various
                    senior management positions at Pioneer Standard Electronics,
                    including  Regional  Vice  President  for the South  Central
                    United  States,  Area Vice  President for the Western United
                    States  and  Canada,  and Vice  President  of  National  and
                    Strategic  Accounts for North  America.  Prior to that time,
                    Mr.  Murphy held various  sales  management  and  operations
                    positions at Texas Instruments and Kierulff Electronics.

                         Philip M.  Roussey has been Senior  Vice  President  of
                    Computer Products  Marketing since March 1993. Prior to that
                    time, he was the Company's Vice President of Marketing since
                    its  inception in 1987.  Prior to joining the  Company,  Mr.
                    Roussey  was  Corporate   Vice  President  of  Marketing  at
                    Kierulff Electronics during 1987, and from 1982 to 1986, Mr.
                    Roussey  held the  position  of Vice  President  of Computer
                    Products at Kierulff Electronics.

                         Robert  J.   Sturgeon   has  been  Vice   President  of
                    Operations since 1992. Mr. Sturgeon was formerly Director of
                    Information Services for Disney Home Video from January 1991
                    to February 1992. Prior to that time, Mr. Sturgeon served as
                    Management   Information   Services   ("MIS")  Director  for
                    Paramount  Pictures,  Home Video  Division from June 1989 to
                    January 1991 and as a Marketing  Manager for MTI Systems,  a
                    division of Arrow  Electronics  Inc.,  from  January 1988 to
                    June 1989.  Other  positions  Mr.  Sturgeon has held include
                    Executive   Director  of  MIS  for  Ducommun  where  he  was
                    responsible   for   ten   divisions,    including   Kierulff
                    Electronics.


          (c)       Information  concerning Compliance with Section 16(a) of the
                    Securities  Exchange  Act of 1934  appears in the  Company's
                    Proxy Statement,  under the heading "Compliance with Section
                    16(a)  of  the  Securities  Exchange  Act of  1934,"  and is
                    incorporated herein by reference.


ITEM 11:   Executive Compensation

         Information  concerning executive compensation appears in the Company's
Proxy Statement, under the caption "Executive Compensation," and is incorporated
herein by reference.


ITEM 12:   Security Ownership of Certain Beneficial Owners and Management

         Information  concerning  the security  ownership of certain  beneficial
owners and management  appears in the Company's  Proxy  Statement,  under Item 1
"Election of Directors," and is incorporated herein by reference.


ITEM 13:   Certain Relationships and Related Transactions

         Information  concerning certain  relationships and related transactions
appears in the Company's Proxy Statement,  under Item 1 "Election of Directors,"
and is incorporated herein by reference.

                                      -17-
<PAGE>


                                     PART IV

ITEM 14:  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)      The following documents are filed as part of this Form 10-K:

         (1)      Financial Statements                                Form 10-K
                                                                     Page Number
                                                                     -----------

                  Report of Independent Accountants                      F-1

                  Balance Sheets at December 31, 1996
                    and 1995                                             F-2

                  Statements of Operations for the years
                    ended December 31, 1996, 1995 and 1994               F-3

                  Statements of Shareholders' Equity for the years
                    ended December 31, 1996, 1995 and 1994               F-4

                  Statements of Cash Flows for the years ended
                    December 31, 1996, 1995 and 1994                     F-5

                  Notes to Financial Statements                          F-6

         (2)      Financial Statement Schedule

                  II  -  Valuation and Qualifying Accounts and Reserves  S-1

         Schedules  not listed  above  have been  omitted  because  they are not
required or the information  required to be set forth therein is included in the
Financial Statements or Notes to Financial Statements.

         (3)      Exhibits

         Number   Description of Document
         ------   -----------------------


         2.1      Agreement and Plan of  Reorganization  dated as of February 2,
                  1994  between  Registrant,   Bell  Microproducts   Acquisition
                  Corporation,   a  New  York   corporation   and   wholly-owned
                  subsidiary  of  Registrant,  Vantage  Components  Inc.,  a New
                  Jersey  corporation,  Vantage  Components,  Inc.,  a New  York
                  corporation,  Vantage Components of Maryland, Inc., a Maryland
                  corporation   and   Vantage   Components   of  MA,   Inc.,   a
                  Massachusetts corporation (1)

         2.2      Amendment No. 1 to Agreement and Plan of Reorganization  dated
                  as of February 2, 1994 between Registrant,  Bell Microproducts
                  Acquisition   Corporation,   a  New   York   corporation   and
                  wholly-owned  subsidiary of  Registrant,  Vantage  Components,
                  Inc., a New Jersey corporation, Vantage Components Inc., a New
                  York  corporation,  Vantage  Components  of Maryland,  Inc., a
                  Maryland  corporation  and Vantage  Components  of MA, Inc., a
                  Massachusetts corporation (2)

         3.1      Amended and Restated  Articles of  Incorporation of Registrant
                  (3)


                                      -18-
<PAGE>


         (3)      Exhibits Continued

         Number   Description of Document
         ------   -----------------------

         3.2      Amended and Restated Bylaws of Registrant (4)

         4.1      Specimen Common Stock Certificate of the Registrant (4)

         4.2      Amended and Restated  Registration Rights Agreement dated June
                  11,  1992  between  Registrant  and  certain  investors  named
                  therein, as amended (1)

         4.3      Warrant issued to Sutro & Co. Incorporated (2)

         10.1     1988 Incentive Stock Plan, as amended through May 23, 1996 (6)

         10.2     The form of Option  Agreement  used  under the 1988  Incentive
                  Stock Plan (5)

         10.3     Employee Stock Purchase Plan, as amended  through May 23, 1996
                  (6)

         10.4     The form of Option  Agreement  used under the  Employee  Stock
                  Purchase Plan (5)

         10.5     1993 Director  Stock Option Plan,  as amended  through May 24,
                  1995 (5)

         10.6     The form of Option  Agreement  used  under  the 1993  Director
                  Stock Option Plan (5)

         10.7     Registrant's 401(k) Plan (4)

         10.8     Lease dated March 17, 1992 for Registrant's facilities at 1941
                  Ringwood Avenue, Suite 100, San Jose, California (4)

         10.9     Lease dated April 15, 1993 for Registrant's facilities at 2350
                  Lundy Place, San Jose, California (1)

         10.10    Amended and Restated Asset Purchase  Agreement  dated February
                  26, 1993 by and between  Registrant,  Barclay  Financial Group
                  and Adlar Turnkey Manufacturing Company, as amended (4)

         10.11    Form of  Convertible  Note  issued by  Registrant  in favor of
                  Barclay Financial Group (4)

         10.12    Amended and Restated Credit Agreement dated as of May 23, 1995
                  by and  among the  Registrant,  the Banks  named  therein  and
                  Sumitomo  Bank of  California,  as  Agent  for the  Banks,  as
                  amended (2)

         10.13    First   Amendment  to  Second  Amended  and  Restated   Credit
                  Agreement  dated  as  of  June  25,  1996  by  and  among  the
                  Registrant,  the Banks  named  therein  and  Sumitomo  Bank of
                  California, as Agent for the Banks(7)

         10.14    Second   Amendment  to  Second  Amended  and  Restated  Credit
                  Agreement  dated as of  September  30,  1996 by and  among the
                  Registrant,  the Banks  named  therein  and  Sumitomo  Bank of
                  California, as Agent for the Banks(8)

         10.15    Standard  Distributor  Agreement  dated  June  1,  1990 by and
                  between Quantum Corporation and Registrant (4)


                                      -19-
<PAGE>

         (3)      Exhibits Continued

         Number   Description of Document
         ------   -----------------------

         10.16    Form of Indemnification Agreement (4)

         10.17    IBM  Authorized  Distributor  Agreement  dated  May  17,  1993
                  between IBM Corporation and Registrant (4)

         10.18    Sublease  dated   November  12,  1996  for  the   Registrant's
                  facilities at 2020 South Tenth Street,  San Jose,  California,
                  and related exhibits

         10.19*   Employment Agreement dated as of December 10, 1996 between the
                  Registrant  and  W.  Donald  Bell,  the   Registrant's   Chief
                  Executive Officer

         10.20    Form of Management  Retention Agreement between the Registrant
                  and the following  executive  officers of the  Registrant:  W.
                  Donald  Bell,  Remo E.  Canessa,  William  Murphy,  Philip  M.
                  Roussey and Robert J. Sturgeon

         21.1     Subsidiaries of the Registrant

         23.1     Consent of Price Waterhouse LLP

         24.1     Power of Attorney (contained on page 22)

-----------------------
         *    Confidential  treatment  has  been  requested for portions of this
              document.

         (1)  Incorporated  by reference to exhibit filed with the  Registrant's
              Report on Form 10-K for the fiscal  year ended  December  31, 1993
              filed on March 31, 1994.

         (2)  Incorporated  by reference to exhibit filed with the  Registrant's
              Registration Statement on Form S-1 (File No. 33-79692) in the form
              declared effective on November 1, 1994.

         (3)  Incorporated  by reference to exhibit filed with the  Registrant's
              Registration  Statement on Form S-8 (File No.  33-66580)  filed on
              July 29, 1993.

         (4)  Incorporated  by reference to exhibit filed with the  Registrant's
              Registration  Statement on Form S-1 (File No.  33-60954)  filed on
              April 14, 1993 and which became effective on June 14, 1993.

         (5)  Incorporated  by reference to exhibit filed with the  Registrant's
              Registration  Statement on Form S-8 (File No.  33-83398)  filed on
              August 29, 1994.

         (6)  Incorporated  by reference to exhibit filed with the  Registrant's
              Registration  Statement on Form S-8 (File No.  333-10837) filed on
              August 26, 1996.

         (7)  Incorporated  by reference to exhibit filed with the  Registrant's
              Report on Form 10-Q for the quarter ended June 30, 1996.

         (8)  Incorporated  by reference to exhibit filed with the  Registrant's
              Report on Form 10-Q for the quarter ended September 30, 1996.

                                      -20-
<PAGE>


(b)      No reports on Form 8-K were filed during the last quarter of the fiscal
         year ended December 31, 1996.

(c)      Exhibits. See Item 14(a) above.

(d)      Financial Statements Schedules. See Item 14(a) above.


                                      -21-
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 26, 1997.


                                    BELL MICROPRODUCTS INC.


                           By:    /s/ Remo E. Canessa
                               ------------------------------------------------
                                  Remo E. Canessa
                                  Chief Financial Officer,
                                  Vice President of Finance,
                                  Corporate Controller and Secretary
                                  (Principal Financial and Accounting Officer)


                                POWER OF ATTORNEY

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears  below  constitutes  and appoints W. Donald Bell and Remo E. Canessa and
each of them, jointly and severally, his attorneys-in-fact, each with full power
of  substitution,  for  him in any  and  all  capacities,  to  sign  any and all
amendments  to this  Report on Form 10-K,  and to file the same,  with  exhibits
thereto and other  documents in connection  therewith,  with the  Securities and
Exchange  Commission,  hereby  ratifying  and  confirming  all that each of said
attorneys-in-fact,  or his substitute or substitutes, may do or cause to be done
by virtue hereof.

<TABLE>

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report on Form 10-K has been  signed  below by the  following  persons  on
behalf of the Registrant and in the capacities and on the dates indicated:

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

<S>                                 <C>                                                          <C>
    /s/ W. Donald Bell              Chairman of the Board, President and Chief Executive         March 26, 1997
-------------------------------     Officer (Principal Executive Officer)
(W. Donald Bell)


    /s/ Remo E. Canessa             Chief Financial Officer, Vice President of Finance,          March 26, 1997
-------------------------------     Corporate Controller and Secretary (Principal Financial
(Remo E. Canessa)                   and Accounting Officer)


    /s/ Jon H. Beedle               Director                                                     March 26, 1997
-------------------------------
(Jon H. Beedle)


    /s/ Glenn E. Penisten           Director                                                     March 26, 1997
-------------------------------
(Glenn E. Penisten)


    /s/ Gordon A. Campbell          Director                                                     March 26, 1997
-------------------------------
(Gordon A. Campbell)


    /s/ Edward L. Gelbach           Director                                                     March 26, 1997
-------------------------------
(Edward L. Gelbach)

</TABLE>

                                      -22-
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders and Board of Directors of
Bell Microproducts Inc.

         In our opinion,  the financial statements listed in the index appearing
under  Item  14 (a) (1) and (2) on  page  18  present  fairly,  in all  material
respects, the financial position of Bell Microproducts Inc. at December 31, 1996
and 1995,  and the results of its  operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.



PRICE WATERHOUSE  LLP
San Jose, California
February 13, 1997


                                      F-1
<PAGE>


<TABLE>
                                                       BELL MICROPRODUCTS INC.
                                                           BALANCE SHEETS
                                                (in thousands, except per share data)


<CAPTION>
                                                                                                               December 31,
                                                                                                         ---------------------------
                                                                                                           1996              1995
                                                                                                          --------          --------
<S>                                                                                                       <C>               <C>
ASSETS
Current assets:
     Cash                                                                                                 $  5,682          $  2,489
     Accounts receivable, net of allowance for doubtful accounts
        of $4,228 and $3,300                                                                                70,686            65,266
     Inventories (Note 3)                                                                                   78,659            70,262
     Deferred and refundable income taxes (Note 7)                                                           3,714             3,418
     Prepaid expenses                                                                                          885               841
                                                                                                          --------          --------
            Total current assets                                                                           159,626           142,276

Property and equipment, net (Notes 3 and 8)                                                                  9,006             7,861
Goodwill                                                                                                     6,685             6,987
Other assets                                                                                                   363               153
                                                                                                          --------          --------
     Total assets                                                                                         $175,680          $157,277
                                                                                                          ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
     Notes payable, current portion                                                                       $    294          $     15
     Accounts payable                                                                                       45,725            31,596
     Other accrued liabilities                                                                               6,271             2,705
     Current portion of capitalized lease obligations (Note 8)                                               1,378             1,046
                                                                                                          --------          --------
            Total current liabilities                                                                       53,668            35,362

Line of credit (Note 4)                                                                                     45,900            54,500
Notes payable, less current portion (Note 11)                                                                 --                 294
Capitalized lease obligations, less current portion (Note 8)                                                 4,985             4,659
                                                                                                          --------          --------
     Total liabilities                                                                                     104,553            94,815
                                                                                                          --------          --------

Commitments and contingencies (Note 8)
Shareholders' equity (Notes 5 and 6):
     Preferred Stock, $0.01 par value, 10,000 shares authorized;
         none issued and outstanding                                                                          --                --
     Common Stock, $0.01 par value, 20,000 shares authorized;
         8,445 and 8,323 shares issued and outstanding                                                      51,644            50,841
     Retained earnings                                                                                      19,483            11,621
                                                                                                          --------          --------
            Total shareholders' equity                                                                      71,127            62,462
                                                                                                          --------          --------
     Total liabilities and shareholders' equity                                                           $175,680          $157,277
                                                                                                          ========          ========


<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>


                                                                F-2
<PAGE>

<TABLE>
                                                       BELL MICROPRODUCTS INC.
                                                      STATEMENTS OF OPERATIONS
                                                (in thousands, except per share data)


<CAPTION>
                                                                                                Year Ended December 31,
                                                                                ----------------------------------------------------
                                                                                  1996                1995                  1994
                                                                                  ----                ----                  ----

<S>                                                                             <C>                  <C>                  <C>
Sales                                                                           $ 483,316            $ 346,291            $ 250,753
Cost of sales                                                                     425,258              305,696              217,277
                                                                                ---------            ---------            ---------

     Gross profit                                                                  58,058               40,595               33,476
Marketing, general and administrative expenses                                     41,008               30,352               23,258
                                                                                ---------            ---------            ---------

Income from operations                                                             17,050               10,243               10,218

Interest expense                                                                   (3,495)              (3,473)              (1,691)
                                                                                ---------            ---------            ---------

Income before income taxes                                                         13,555                6,770                8,527
Provision for income taxes (Note 7)                                                 5,693                2,768                3,471
                                                                                ---------            ---------            ---------

Net income                                                                      $   7,862            $   4,002            $   5,056
                                                                                =========            =========            =========

Earnings per share (Note 2)                                                     $    0.92            $    0.48            $    0.86
                                                                                =========            =========            =========
Weighted average common shares
     and equivalents (Note 2)                                                       8,511                8,350                5,878
                                                                                =========            =========            =========



<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>



                                                                F-3
<PAGE>

<TABLE>
                                                       BELL MICROPRODUCTS INC.
                                                 STATEMENTS OF SHAREHOLDERS' EQUITY
                                                           (in thousands)


<CAPTION>
                                                                                        Common Stock
                                                                                    --------------------       Retained
                                                                                    Shares        Amount       Earnings       Total
                                                                                    ------        ------       --------       -----
<S>                                                                                  <C>         <C>           <C>           <C>
Balance at December 31, 1993                                                         4,867       $15,788       $ 2,563       $18,351

Issuance of Common Stock in secondary public offering, net
of issuance costs of $2,284                                                          2,573        27,300          --          27,300
Issuance of Common Stock for acquisition of Vantage
  Components, Inc.                                                                     489         5,015          --           5,015
Exercise of stock options, including related tax benefit
  of $127                                                                               74           388          --             388
Issuance of Common Stock under Stock Purchase Plan                                      44           355          --             355
Net Income                                                                            --            --           5,056         5,056
                                                                                   -------       -------       -------       -------

Balance at December 31, 1994                                                         8,047        48,846         7,619        56,465

Exercise of stock options, including related tax benefit
  of $181                                                                              103           749          --             749
Issuance of Common Stock under Stock Purchase Plan                                      66           473          --             473
Conversion of note payable to Common Stock                                             107           773          --             773
Net Income                                                                            --            --           4,002         4,002
                                                                                   -------       -------       -------       -------
Balance at December 31, 1995                                                         8,323        50,841        11,621        62,462

Exercise of stock options, including related tax benefit
  of $159                                                                               26           202          --             202
Issuance of Common Stock under Stock Purchase Plan                                      96           601          --             601
Net Income                                                                            --            --           7,862         7,862
                                                                                   -------       -------       -------       -------
Balance at December 31, 1996                                                         8,445       $51,644       $19,483       $71,127
                                                                                   =======       =======       =======       =======


<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>



                                                                F-4
<PAGE>

<TABLE>
                                                       BELL MICROPRODUCTS INC.
                                                      STATEMENTS OF CASH FLOWS
                                                     Increase (Decrease) in Cash
                                                           (in thousands)

<CAPTION>
                                                                                                    Year Ended December 31,
                                                                                     -----------------------------------------------

                                                                                      1996               1995                1994
                                                                                      ----               ----                ----
<S>                                                                                  <C>                <C>                <C>
Cash flows from operating activities:
     Net income                                                                      $  7,862           $  4,002           $  5,056
     Adjustments to reconcile net income to
        net cash provided by (used in) operating
        activities:
     Depreciation and amortization                                                      2,569              1,659                801
     Change in deferred and refundable income taxes                                      (296)            (2,020)              (718)
     Changes in assets and liabilities:
          Accounts receivable                                                          (5,420)           (13,431)           (21,071)
          Inventories                                                                  (8,397)           (13,236)           (30,524)
          Prepaid expenses                                                                (44)              (294)              (346)
          Other assets                                                                   (210)                49                (67)
          Accounts payable                                                             14,129             (3,483)            12,941
          Other accrued liabilities                                                     3,566                795               (719)
                                                                                     --------           --------           --------

Net cash provided by (used in) operating activities                                    13,759            (25,959)           (34,647)
                                                                                     --------           --------           --------
Cash flows from investing activities:
     Acquisition of property and equipment, net                                        (1,120)            (1,160)              (933)
     Acquisition of Vantage Components Inc., net of cash
        acquired (Note 11)                                                               --                 --               (4,688)
                                                                                     --------           --------           --------

Net cash used in investing activities                                                  (1,120)            (1,160)            (5,621)
                                                                                     --------           --------           --------
Cash flows from financing activities:
     Net borrowings/repayments under line of credit                                    (8,600)            33,000              8,500
     Net borrowings/repayments under term loan                                           --               (5,000)             5,000
     Proceeds from issuance of Common Stock                                               803              1,222             27,916
     Principal payments on long-term liabilities                                       (1,649)            (1,016)              (274)
                                                                                     --------           --------           --------

Net cash provided by (used in) financing activities                                    (9,446)            28,206             41,142
                                                                                     --------           --------           --------

Net increase in cash                                                                    3,193              1,087                874

Cash at beginning of period                                                             2,489              1,402                528
                                                                                     --------           --------           --------

Cash at end of period                                                                $  5,682           $  2,489           $  1,402
                                                                                     ========           ========           ========

Supplemental disclosures of cash flow information:
     Cash paid during the period for:
          Interest                                                                   $  3,355           $  3,380           $  1,558
          Income taxes                                                               $  5,744           $  4,282           $  4,143
     Obligations incurred under capital leases                                       $  2,292           $  5,254           $    768

     Assets acquired in exchange for notes payable
                                                                                     $   --             $   --             $    750
     Common Stock issued for the acquisition of Vantage
       Components, Inc.                                                              $   --             $   --             $  5,015
     Common Stock on conversion of note payable                                      $   --             $    773           $   --



<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>



                                                                F-5
<PAGE>

                             BELL MICROPRODUCTS INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - THE COMPANY:

         Bell Microproducts Inc. (the Company) was incorporated in California on
October 23, 1987 and commenced  operations in January 1988. The Company operates
in two industry  segments:  as a contract  manufacturer  and as a distributor of
semiconductor and computer products to original equipment  manufacturers (OEMs),
value added resellers (VARs) and dealers.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

         Revenues are  recognized  when  products are  shipped.  Provisions  for
estimated losses on returns and for expected  warranty costs are recorded at the
time of sale.

Inventories

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

Property and Equipment

         Property  and   equipment   are  stated  at  cost.   Depreciation   and
amortization is computed using the straight-line method based upon the estimated
useful lives of the assets which range from three to five years. Amortization of
leasehold  improvements  is  computed  using the  straight-line  method over the
shorter of the estimated life of the asset or the lease term.

Goodwill

         Assets  and   liabilities   acquired  in   connection   with   business
combinations  accounted  for under the  purchase  method are  recorded  at their
respective fair values.  The excess of the purchase price over the fair value of
the assets  acquired is amortized on a  straight-line  basis over a  twenty-five
year  period.  Accumulated  amortization  equaled  $799,000  and  $497,000 as of
December 31, 1996 and 1995,  respectively.  The Company periodically reviews the
recoverability of goodwill based on estimated future cash flows.

Income Taxes

         The Company accounts for income taxes in accordance with the provisions
of Statement  of Financial  Accounting  Standards  No. 109 (SFAS 109).  SFAS 109
requires,  among other  things,  that  deferred  income  taxes be  provided  for
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities as part of the income tax provisions.

Earnings Per Share

         Earnings  per share is computed  using the weighted  average  number of
common and common  equivalent  shares  ("weighted  average shares")  outstanding
during the period.  Common  equivalent  shares consist of the dilutive effect of
stock options and warrants using the treasury stock method.


                                      F-6
<PAGE>


Disclosures About Fair Value of Financial Instruments

         Financial  instruments  that  are  subject  to  fair  value  disclosure
requirements are carried in the financial statements at amounts that approximate
fair value.

Concentration of Credit and Other Risks

         Financial   instruments  which  potentially   subject  the  Company  to
concentrations of credit risk consist  principally of accounts  receivable.  The
Company's  accounts  receivable are derived from sales to OEMs, VARs and dealers
located  primarily in the United  States.  The Company  performs  ongoing credit
evaluations of its customers,  and generally  does not require  collateral.  The
Company  maintains  reserves for estimated credit losses.  Two vendors accounted
for 53%, 40% and 48% of the Company's  distribution  inventory  purchases during
1996,  1995 and  1994,  respectively.  One such  vendor  has  obtained  a second
priority  lien  against  the  Company's  inventories  to secure  payment  on the
Company's purchase of goods.

Management Estimates

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

NOTE 3 - BALANCE SHEET COMPONENTS:

                                                              December 31,
                                                       -----------------------
                                                           1996         1995
                                                           ----         ----
                                                             (in thousands)
         Inventories:
            Work-in-process                             $  9,146     $  5,264
            Purchased components and materials            69,513       64,998
                                                        --------     --------
                                                        $ 78,659     $ 70,262
                                                        ========     ========
         Property and equipment:
            Warehouse equipment                         $    195     $    134
            Manufacturing and test equipment               9,070        7,452
            Furniture and fixtures                         1,147          941
            Computer and other equipment                   3,212        1,695
                                                        --------     --------
                                                          13,624       10,222
            Less: accumulated depreciation and
               amortization                               (4,618)      (2,361)
                                                        ========     ========
                                                        $  9,006     $  7,861
                                                        ========     ========

NOTE 4 - LINE OF CREDIT AND TERM LOAN:

         On May 5, 1994, the Company entered into an Amended and Restated Credit
Agreement  with  Sumitomo  Bank  of  California  ("Sumitomo  Bank")  and  a  new
participating  bank, Union Bank, which increased the Company's revolving line of
credit to $25 million. On May 26, 1994, the banks also provided a five year term
loan of $5 million. On August 29, 1994, the Company entered into an amendment to
the Amended and Restated Credit  Agreement which increased the revolving line of
credit to $35 million.

         On May 23,  1995,  the Company  entered  into an Amended  and  Restated
Syndicated Credit Agreement,  arranged by Sumitomo Bank of California ("Sumitomo
Bank") as Agent,  which  increased the Company's $35 million  revolving  line of
credit and $5 million term loan  facilities to $70 million.  This  agreement was
amended on June 25,  1996,  to



                                      F-7
<PAGE>

increase the line of credit to $80 million and extend the  maturity  date to May
31, 1998. The syndicate includes Sumitomo Bank of California and Union Bank, The
First National Bank of Boston, Comerica Bank - California and The Sumitomo Bank,
Limited.  At the Company's option,  the borrowings under the line of credit will
bear  interest at Sumitomo  Bank's  prime rate or the  adjusted  LIBOR rate plus
1.625%.  At December 31, 1996 the interest rate was 8.25%. The revolving line of
credit  requires the Company to meet certain  financial tests and to comply with
certain other covenants, including restrictions on incurrence of debt and liens,
restrictions  on  mergers,  acquisitions,  asset  dispositions,  declaration  of
dividends,  repurchases of stock,  making  investments  and  profitability.  The
Company  is in  compliance  with its bank  covenants,  however,  there can be no
assurance  that the Company will be in compliance in the future.  Obligations of
the Company under the revolving line of credit are secured by substantially  all
of the Company's assets. The balance outstanding on the revolving line of credit
at December 31, 1996 was approximately $45.9 million.

NOTE 5 - SHAREHOLDERS' EQUITY:

         On June 15,  1993,  the Company  completed an initial  public  offering
(Offering) of 1,500,000  shares of Common Stock,  1,200,000 shares being sold by
the  Company  and  300,000  shares  being  sold  by  certain  of  the  Company's
shareholders,  at a price of $7.50 per share.  Upon the closing of the Offering,
5,106,000  shares of convertible  Preferred  Stock were converted into 2,042,400
shares of Common Stock.

         The Company sold to Sutro & Co. Incorporated, the Representative of the
Underwriters  (Representative)  of the initial public offering,  for $1,050, the
Representative's  Warrants to purchase from the Company up to 105,000  shares of
Common Stock at an exercise price equal to $9.00 per share. The Representative's
Warrants are exercisable for a period of four years, beginning June 14, 1994.

         On November 1, 1994, the Company  completed a secondary public offering
of 2,859,570 shares of Common Stock,  2,573,277 shares being sold by the Company
and 286,293  shares being sold by certain of the  Company's  shareholders,  at a
price of $11.50 per share.

NOTE 6 - STOCK-BASED COMPENSATION PLANS:

         At December 31, 1996,  the Company had three  stock-based  compensation
plans which are described  below. The Company applies APB Opinion 25 and related
interpretations in accounting for its plans.  Accordingly,  no compensation cost
has  been  recognized  for  its  plans,  all  of  which  are  fixed  plans.  Had
compensation  cost for the Company's three stock-based  compensation  plans been
determined  based on the fair  value at the grant  dates for  awards in 1995 and
1996 under those plans  consistent  with the provisions of Financial  Accounting
Standards No. 123, "Accounting for Stock-Based Compensation",  the Company's net
income and earnings per share would have been reduced as presented below:

                                                      1996              1995
                                                      ----              ----
          Net income:
               As reported                           $7,862            $4,002
               Pro forma                              7,206             3,696
          Earnings per share
               As reported                             0.92              0.48
               Pro forma                               0.85              0.44

         Because additional stock options and stock purchase rights are expected
to be granted  each year and these only  include  the effect of options  granted
subsequent  to  December  31,  1994,  the above pro  forma  disclosures  are not
representative  of pro forma  effects on reported  financial  results for future
years.


                                      F-8
<PAGE>

Stock Option Plans

         The Company has two fixed stock option plans.  The Amended and Restated
1988 Incentive Stock Plan (the Plan) provides for the grant of stock options and
stock purchase rights to employees,  directors and consultants of the Company at
prices not less than the fair value of the Company's Common Stock at the date of
grant for incentive stock options and prices not less than 85% of the fair value
of the Company's Common Stock for nonstatutory  stock options and stock purchase
rights.  Since  inception,  the Company has reserved  2,224,104 shares of Common
Stock for issuance under the Plan.

         The options  lapse five years  after the date of grant or such  shorter
period as may be provided for in the stock option agreement. All options granted
vest over four years. If an optionee  ceases to be employed by the Company,  the
optionee  may,  within one month (or such other period of time, as determined by
the Board of Directors,  but not exceeding three months) exercise options to the
extent vested.

         As part of the Plan,  in March 1993,  the Board of Directors  adopted a
Management  Incentive  Program (the  "Program")  for key  employees.  Under this
Program,  options for 339,000 shares, 224,000 shares and 30,000 shares of Common
Stock were granted in 1996, 1995 and 1994,  respectively.  The Program  provides
for  ten-year  option  terms with  vesting at the rate of 1/10th per year,  with
potential for accelerated  vesting based upon attainment of certain  performance
objectives.  The options lapse ten years after the date of grant or such shorter
period as may be provided for in the stock option agreement.

         On February 7, 1996,  the Board of  Directors  offered  employees  with
options  under the Plan the  opportunity  to exchange  existing  options for new
options at an exercise  price of $6.50,  the fair market value of the  Company's
Common Stock on the date of the  exchange.  Any vesting in the canceled  options
was lost,  and the new  options  were  subject to the normal  four-year  vesting
schedule under the Plan. Of the  approximate  950,000 stock options  outstanding
eligible for exchange, 640,900 stock options were exchanged for new options.



                                      F-9
<PAGE>

<TABLE>
The following table presents activity under the Plan:

<CAPTION>
                                                                                      Options outstanding
                                                                                 -----------------------------
                                                           Options                                 Weighted
                                                        available for                              average
                                                            grant                 Shares        exercise price
                                                            -----                 ------        --------------
<S>                                                     <C>                      <C>                <C>
Balance at December 31, 1993                               118,044                 585,638          $ 6.22

Increase in options available for grant                    206,714                    --
Options granted                                           (388,800)                388,800          $10.70
Options exercised                                             --                   (71,225)         $ 3.68
Options canceled                                           173,325                (173,325)         $ 8.22
                                                        ----------              ----------          ------
Balance at December 31, 1994                               109,283                 729,888          $ 8.36

Increase in options available for grant                    435,000                    --
Options granted                                           (516,800)                516,800          $10.19
Options exercised                                             --                  (105,798)         $ 5.44
Options canceled                                           181,260                (181,260)         $ 9.21
                                                        ----------              ----------          ------
Balance at December 31, 1995                               208,743                 959,630          $ 9.50

Increase in options available for grant                    300,000                    --
Options granted                                         (1,126,800)              1,126,800          $ 6.99
Options exercised                                             --                   (22,530)         $ 1.94
Options canceled                                           842,900                (842,900)         $ 9.88
                                                        ----------              ----------          ------
Balance at December 31, 1996                               224,843               1,221,000          $ 7.06
                                                        ==========              ==========          ======

</TABLE>

         At December 31, 1996, 115,450 options were exercisable under this Plan.

         In March 1993, the Company  adopted the 1993 Director Stock Option Plan
(the "Director Plan") which initially  provided for the grant of an aggregate of
90,000  options for the purchase of the Company's  Common  Stock.  The number of
shares was  increased  in May 1994 to 120,000  and  increased  to 145,000 in May
1995.  75,000  options  available  under the Director Plan were granted in March
1993 at an exercise price of $8.00 per share and during 1996, 20,000 shares were
granted  at an  exercise  price of $7.00 per share.  In  February  1996,  10,000
options were canceled. These options vest annually at the rate of 1/3 and have a
ten-year life.

         For the fixed stock option  plans,  the fair value of each option grant
used for  calculating  pro forma net  income is  estimated  on the date of grant
using  the  Black-Scholes  multiple  option-pricing  model  with  the  following
weighted  average  assumptions  used for grants in 1995 and 1996,  respectively;
expected volatility of 35% and 35%; risk free interest rate of 6.0% and 6.0% and
expected  lives of 4.70 and 4.19 years.  The Company has not paid  dividends and
assumed no  dividend  yield.  The  weighted  average  fair value of those  stock
options granted in 1995 and 1996 was $3.87 and $2.00, respectively.



                                      F-10
<PAGE>

<TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1996.

<CAPTION>
                                            OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
                          ---------------------------------------------------------   -----------------------------------------
                            Number of
                              Shares
                           Outstanding                                                  Number of Shares
                              As of          Weighted Average          Weighted          Exercisable As           Weighted
 Range of Exercise         December 31,          Remaining              Average          of December 31,           Average
       Prices                  1996          Contractual Life       Exercise Price             1996             Exercise Price
---------------------     ---------------    ------------------    ----------------     ------------------     ----------------
<S>                        <C>                     <C>                   <C>                 <C>                  <C>
$ 0.63  -  $ 1.25             16,150               0.49 years            $  0.70              15,450              $  0.68
$ 6.50  -  $ 7.00            774,200               6.11                     6.56              12,150                 7.00
$ 7.25  -  $ 8.38            337,000               5.21                     7.71             128,650                 7.80
$ 8.63  -  $10.00            162,450               4.02                     8.73              13,900                 9.07
$11.00  -  $12.75             11,200               2.70                    11.92               5,300                11.90
                           ---------               ----                  -------             -------              -------
$ 0.63  -  $12.75          1,301,000               5.52                  $  7.10             175,450              $  7.34
                           =========               ====                  =======             =======              =======
</TABLE>


Employee Stock Purchase Plan

         The Company has reserved for issuance to all eligible  employees  under
its Employee  Stock  Purchase Plan 380,000  shares of Common  Stock.  Sales made
through  this plan  will be at the  lower of 85% of market  price at the date of
purchase or on the first day of each six-month  offering period.  224,524 shares
have been issued under this plan as of December 31, 1996. The fair value of each
purchase  right is estimated on the  beginning of the offering  period using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions used in 1995 and 1996, respectively;  expected volatility of 35% and
35%; risk free  interest  rate of 5.48% and 5.64% and expected  lives of 0.5 and
0.5 years. The Company has not paid dividends and assumed no dividend yield. The
weighted  average fair value of those  purchase  rights granted in 1995 and 1996
was $2.59 and $1.82, respectively.

NOTE 7 - INCOME TAXES:

         The provision for income taxes  consists of the following for the years
ended December 31 (in thousands):

                                        1996             1995             1994
                                        ----             ----             ----
Current:
     Federal                          $ 5,893          $ 2,716          $ 3,281
     State                              1,495              424              908
                                      -------          -------          -------
                                        7,388            3,140            4,189
Deferred:
     Federal                           (1,382)            (284)            (411)
     State                               (313)             (88)            (307)
                                      -------          -------          -------
                                      $ 5,693          $ 2,768          $ 3,471
                                      =======          =======          =======


                                      F-11
<PAGE>

Deferred tax  (liabilities)  assets  comprise  the  following at December 31 (in
thousands):

                                                    1996       1995        1994
                                                    ----       ----        ----

Basis differential in assets                      $  (110)   $  (118)   $  (127)
Depreciation                                         (621)      (201)       (87)
                                                  -------    -------    -------
     Gross deferred tax liabilities                  (731)      (319)      (214)
                                                  -------    -------    -------

Bad debt, sales and warranty reserves               1,922      1,351        575
Inventory reserves and basis differences            1,756        495        733
Compensation accruals and reserves                    128        110         33
State taxes, net of federal benefit                   391         67        207
Other                                                 248         66         64
                                                  -------    -------    -------
     Gross deferred tax assets                      4,445      2,089      1,612
                                                  -------    -------    -------

     Net deferred tax asset                       $ 3,714    $ 1,770    $ 1,398
                                                  =======    =======    =======


         The net deferred tax asset represents temporary  differences for future
tax deductions which can generally be realized by carryback to taxable income in
prior years.

         The  provisions  for income  taxes differ from the amount of income tax
determined by applying the applicable U.S.  statutory income tax rate to pre-tax
income as follows:

                                            Year Ended December 31,
                                      ---------------------------------------
                                       1996              1995           1994
                                       ----              ----           ----

Federal statutory rate                35.0%              34.0%         34.0%
State income taxes, net of
Federal tax                            5.7%               3.3%          4.7%
    benefit and credits
Other                                  1.3%               3.6%          2.0%
                                      ----                ----         ----

                                      42.0%               40.9%        40.7%
                                      ====                ====         ====


NOTE  8 - COMMITMENTS AND CONTINGENCIES:

         The Company leases its facilities  under  cancelable and  noncancelable
operating lease agreements.  The leases expire at various times through 2006 and
contain  renewal  options.  Certain of the  leases  require  the  Company to pay
property taxes, insurance, and maintenance costs.

         The Company leases certain equipment under capitalized leases with such
equipment amounting to $8,698,000 less accumulated depreciation of $2,335,000 at
December 31, 1996 and $6,524,000  less  accumulated  depreciation of $913,000 at
December 31, 1995.  Amortization expense on assets subject to capitalized leases
was  $1,307,000,  $696,000,  and $180,000 for the years ended December 31, 1996,
1995 and 1994,  respectively.  The  capitalized  lease terms range from three to
five years.



                                      F-12
<PAGE>

The following is a summary of commitments under leases:


                                                Capitalized            Operating
    Year ending December 31,                      leases                 leases
    ------------------------                      ------                 ------
                                                         (in thousands)

   1997                                           $ 1,863             $ 2,041
   1998                                             1,872               1,920
   1999                                             1,824               1,381
   2000                                             1,507                 954
   2001                                               488                 920
   2002 and beyond                                   --                 2,866
                                                  -------             -------

   Total minimum lease payments                   $ 7,554             $10,082
                                                                      =======

   Less:  imputed interest                         (1,191)
                                                  -------

   Present value of minimum lease payments        $ 6,363
                                                  =======


         Total operating lease expense was $1,272,000, $1,167,000 and $1,052,000
for the years ended December 31, 1996, 1995 and 1994, respectively.

         On May 10, 1996, the Company entered into an agreement with a financial
institution  to  provide  inventory   flooring  financing  to  selected  Company
customers.  Under  this  agreement,  should a customer  default  on its  payment
obligations, the Company is obligated to repurchase any unsold inventory. Due to
the rapid turnover of inventory  sold in conjunction  with the agreement and the
timely customer payment history  experienced to date,  management  estimates its
exposure at December 31, 1996 to be immaterial.

         The  Company is subject to legal  proceedings  and claims that arise in
the normal course of business.  Management believes that the ultimate resolution
of such  matters  will not  have a  material  adverse  affect  on the  Company's
financial position or results of operations.

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES:

         The Company has entered into a  manufacturing  agreement  with Pinnacle
Systems,  Inc.  ("Pinnacle")  providing  for the  performance  by the  Company's
manufacturing  division  of  value-added  turnkey  services  for  Pinnacle.  The
agreement term is  automatically  renewed for successive one year periods unless
terminated by either party on 90 days' written notice. Company sales to Pinnacle
totaled $9,692,000, $13,461,000, and $3,856,000 for the years ended December 31,
1996,  1995,  and 1994,  respectively.  The  accounts  receivable  balance  from
Pinnacle was $202,000 and $3,798,000 at December 31, 1996 and December 31, 1995,
respectively.  The Company has purchased approximately  $350,000,  $576,000, and
$121,000  of  inventory  from  Pinnacle  in 1996,  1995 and 1994,  respectively.
Inventory on hand at December 31, 1996  purchased  under  contract with Pinnacle
totaled $914,000. Glenn E. Penisten, a director of the Company, is a director of
Pinnacle.  The agreement was entered into in the ordinary course of business and
the Company  believes that it has terms no less favorable than reasonably  could
be expected to be obtained from unaffiliated parties.

         In May 1994, the Company  entered into a  manufacturing  agreement with
Reply  Corporation  ("Reply")  providing  for the  performance  by the Company's
manufacturing  division of value-added turnkey services for Reply. The agreement
term is automatically  renewed for successive one year periods unless terminated
by either party on 90 days'



                                      F-13
<PAGE>

written notice. Sales to Reply totaled approximately $2,594,000,  $3,144,000 and
$2,086,000 during 1996, 1995, and 1994,  respectively.  The accounts  receivable
balance  from Reply was  $413,000 at December  31, 1996 and $742,000 at December
31, 1995. The Company has purchased approximately $167,000, $66,000 and $342,000
of inventory from Reply in 1996, 1995, and 1994, respectively. Inventory on hand
at December 31, 1996 purchased under contract with Reply totaled $270,000. Glenn
E. Penisten and Gordon A. Campbell,  directors of the Company,  are directors of
Reply. The agreement was entered into in the ordinary course of business and the
Company  believes that it has terms no less favorable than  reasonably  could be
expected to be obtained from unaffiliated parties.

NOTE 10 - SALARY SAVINGS PLAN:

         In April  1990,  the Company  adopted a Section  401(k) Plan (the Plan)
which provides  participants  an opportunity to accumulate  funds for retirement
and hardship.  Under the terms of the Plan, eligible participants may contribute
up to 15% of their eligible  earnings to the Plan. The Company may elect to make
matching contributions equal to a discretionary  percentage, to be determined by
the Company,  of  participants'  contributions  up to the  statutory  maximum of
participants'  eligible earnings.  The Company has not made contributions to the
Plan.

NOTE 11 - ACQUISITIONS:

         On  May  26,  1994,  the  Company  acquired  Vantage  Components,  Inc.
(Vantage) for a purchase price of $11,806,000, which included cash of $5,300,000
(funded via Bell  Microproducts'  line of credit and term loan facilities),  the
issuance of 489,281 shares of Bell  Microproducts  Common Stock, the issuance of
promissory  notes totaling  $750,000 and acquisition  costs. The acquisition was
accounted  for as a purchase.  The purchase  price was allocated to the acquired
assets and  liabilities  based upon  management's  estimate of their fair market
values as of the acquisition date as follows (in thousands):

              ---------------------------------------------------------------
              Cash..............................................     $ 1,371
              Accounts receivable...............................       4,948
              Inventories.......................................       4,527
              Equipment and other assets........................         119
              Goodwill..........................................       7,063
              Accounts payable..................................      (3,500)
              Line of credit....................................      (1,900)
              Note payable to bank..............................         (23)
              Other accrued liabilities.........................        (799)
                                                                     -------
                                                                     $11,806
                                                                     =======
              ---------------------------------------------------------------

         The results of operations of Vantage,  predominantly  a distributor  of
semiconductor products, have been included with those of the Company for periods
subsequent  to the date of  acquisition.  Vantage had sales of $34.2 million and
net income of $776,000 for its fiscal year ended February 28, 1994.


                                      F-14
<PAGE>

         Set  forth  below  is the  unaudited  pro  forma  combined  summary  of
operations  of the Company and Vantage for the year ended  December  31, 1994 as
though the  acquisition  had been made on January 1, 1994 (in thousands,  except
per share data):

              ------------------------------------------------------------------
              (Unaudited)                               Year ended December 31,
                                                        ------------------------
                                                                 1994
                                                        -----------------------
              Sales........................................... $263,460
              Net income......................................    4,984
              Earnings per share..............................    $0.80

              Weighted average common shares and equivalents..    6,245

              ------------------------------------------------------------------

         The unaudited pro forma combined summary of operations includes: 1) the
amortization  of goodwill  over a  twenty-five  year period,  2) the  additional
interest  expense on debt incurred in connection  with the acquisition as if the
debt had been outstanding from the beginning of the period presented, and 3) the
elimination of Vantage's sales and related incremental costs associated with the
distribution  of certain  products,  as a  relationship  with a key supplier was
terminated in connection with the Company's acquisition of Vantage.

         The unaudited pro forma combined summary of operations does not purport
to be indicative of the results which  actually  would have been obtained if the
acquisitions  had been made at the  beginning of 1994 or of those  results which
may be obtained in the future.



                                      F-15
<PAGE>

NOTE 12 - BUSINESS SEGMENT INFORMATION:
<TABLE>

         Operating  results  and  other  financial  data are  presented  for the
principal  business  segments of the Company  for the years ended  December  31,
1996, 1995 and 1994 as follows:
<CAPTION>
                                                              Distribution       Manufacturing        Eliminations      Consolidated
                                                              ------------       -------------        ------------      ------------
<S>                                                              <C>                <C>                 <C>               <C>
1996
Sales to customers ...................................           $391,187           $ 92,129            $   --            $483,316
Intersegment sales ...................................              4,855                282              (5,137)             --
                                                                 --------             ------            --------          --------
Revenue ..............................................            396,042             92,411              (5,137)          483,316
Operating profit .....................................             11,556              5,494                --              17,050
Identifiable assets ..................................            172,755             39,326             (36,401)          175,680
Depreciation and amortization ........................                683              1,886                --               2,569
Capital asset additions ..............................                487              2,925                --               3,412

1995
Sales to customers ...................................           $296,633           $ 49,658            $   --            $346,291
Intersegment sales ...................................              7,090                495              (7,585)             --
                                                                 --------             ------            --------          --------
Revenue ..............................................            303,723             50,153              (7,585)          346,291
Operating profit .....................................              7,559              2,684              10,243
Identifiable assets ..................................            152,584             39,316             (34,623)          157,277
Depreciation and amortization ........................                605              1,054                --               1,659
Capital asset additions ..............................                402              6,012                --               6,414

1994
Sales to customers ...................................           $220,883           $ 29,870            $   --            $250,753
Intersegment sales ...................................              4,762                 24              (4,786)             --
                                                                 --------             ------            --------          --------
Revenue ..............................................            225,645             29,894              (4,786)          250,753
Operating profit .....................................             10,991               (773)             10,218
Identifiable assets ..................................            117,870             18,615             (13,983)          122,502
Depreciation and amortization ........................                392                409                --                 801
Capital asset additions ..............................                636              1,147                --               1,783

</TABLE>

         Revenue and operating profit by business segment includes both sales to
customers,   as  reported  in  the  Company's  statements  of  operations,   and
intersegment sales, which are transferred at cost.


                                      F-16
<PAGE>

<TABLE>

NOTE 13 - SELECTED UNAUDITED QUARTERLY FINANCIAL DATA:

                                              (in thousands, except per share amounts)

<CAPTION>
                                                                               Quarter Ended
                               -----------------------------------------------------------------------------------------------------
                                 Mar. 31,    June 30,     Sept. 30,    Dec. 31,    Mar. 31,     June 30,    Sept. 30,     Dec. 31,
                                  1995         1995         1995         1995        1996         1996         1996         1996
                                  ----         ----         ----         ----        ----         ----         ----         ----
<S>                            <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Sales ......................   $  72,927    $  80,529    $  89,213    $ 103,622    $ 115,431    $ 113,644    $ 118,018    $ 136,222
Cost of sales ..............      63,816       70,117       77,472       94,291      101,809       99,020      103,855      120,574
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Gross profit ...............       9,111       10,412       11,741        9,331       13,622       14,624       15,648
Marketing, general
  and administrative
  expenses .................       6,434        6,848        7,177        9,893        9,759       10,518        9,896       10,835
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Income (loss) from
  operations ...............       2,677        3,564        4,564         (562)       3,863        4,106        4,267        4,813
Interest expense ...........        (703)        (718)        (921)      (1,130)        (995)        (909)        (767)        (822)
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Income (loss) before
  income taxes .............       1,974        2,846        3,643       (1,692)       2,868        3,197        3,500        3,991
Provision for income
  taxes ....................         839        1,225        1,548         (844)       1,205        1,343        1,470        1,676
                               ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net income (loss) ..........   $   1,135    $   1,621    $   2,095    $    (848)   $   1,663    $   1,854    $   2,030    $   2,315
                               =========    =========    =========    =========    =========    =========    =========    =========

Net income (loss)
  per share ................   $    0.14    $    0.20    $    0.25    $   (0.10)   $    0.20    $    0.22    $    0.24    $    0.27
                               =========    =========    =========    =========    =========    =========    =========    =========

Weighted average
  common shares
  and equivalents ..........       8,269        8,233        8,499        8,282        8,423        8,539        8,531        8,552
                               =========    =========    =========    =========    =========    =========    =========    =========
</TABLE>

         During  the  fourth  quarter of 1995 the  Company  recorded  charges of
approximately  $2,500,000 related to the write-down of certain DRAM inventories.
During the fourth  quarter of 1995 the Company also  increased its allowance for
doubtful  accounts,  primarily for a customer which filed for bankruptcy  during
the  quarter.  The  fourth  quarter  of  1995  also  reflects  decreases  in the
applicable  effective  full  year  tax  rates,  partially  attributable  to  the
recognition of certain  investment tax credits for equipment  purchased.  During
the  fourth  quarter of 1996,  the  Company  began  capitalizing  certain  labor
overhead  costs  related  to its  manufacturing  activities.  The  impact was an
increase to net income in the fourth quarter of 1996, of approximately $217,000.




                                      F-17


<PAGE>

                                                                     SCHEDULE II

                             BELL MICROPRODUCTS INC.

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                         ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                 (in thousands)

                                          Additions
                            Balance at    Charged to
                           Beginning of   Costs and   Deductions-    Balance at
 Year Ended December 31,      Period       Expenses   Write-offs   End of Period
 -----------------------      ------       --------   ----------   -------------

     1996                    $ 3,300      $ 5,035     $ (4,107)      $ 4,228

     1995                      1,550        2,427         (677)        3,300

     1994                        736        1,277         (463)        1,550




                                      S-1

<PAGE>


                                INDEX TO EXHIBITS

                                                                     Sequential
Number    Description of Document                                    Page Number
------    -----------------------                                    -----------

2.1      Agreement and Plan of Reorganization  dated as of February 2,
         1994  between  Registrant,   Bell  Microproducts  Acquisition
         Corporation,   a  New  York   corporation  and   wholly-owned
         subsidiary  of  Registrant,  Vantage  Components  Inc., a New
         Jersey  corporation,  Vantage  Components,  Inc.,  a New York
         corporation, Vantage Components of Maryland, Inc., a Maryland
         corporation   and  Vantage   Components   of  MA,   Inc.,   a
         Massachusetts corporation (1)

2.2      Amendment No. 1 to Agreement and Plan of Reorganization dated
         as of February 2, 1994 between Registrant, Bell Microproducts
         Acquisition   Corporation,   a  New  York   corporation   and
         wholly-owned  subsidiary of Registrant,  Vantage  Components,
         Inc., a New Jersey  corporation,  Vantage  Components Inc., a
         New York corporation, Vantage Components of Maryland, Inc., a
         Maryland  corporation  and Vantage  Components of MA, Inc., a
         Massachusetts corporation (2)

3.1      Amended and Restated  Articles of Incorporation of Registrant
         (3)

3.2      Amended and Restated Bylaws of Registrant (4)

4.1      Specimen Common Stock Certificate of the Registrant (4)

4.2      Amended and Restated Registration Rights Agreement dated June
         11,  1992  between  Registrant  and certain  investors  named
         therein, as amended (1)

4.3      Warrant issued to Sutro & Co. Incorporated (2)

10.1     1988  Incentive  Stock Plan, as amended  through May 23, 1996
         (6)

10.2     The form of Option  Agreement  used under the 1988  Incentive
         Stock Plan (5)

10.3     Employee Stock Purchase Plan, as amended through May 23, 1996
         (6)

10.4     The form of Option  Agreement  used under the Employee  Stock
         Purchase Plan (5)

10.5     1993 Director  Stock Option Plan, as amended  through May 24,
         1995 (5)

10.6     The form of Option  Agreement  used  under the 1993  Director
         Stock Option Plan (5)

10.7     Registrant's 401(k) Plan (4)

10.8     Lease  dated March 17, 1992 for  Registrant's  facilities  at
         1941 Ringwood Avenue, Suite 100, San Jose, California (4)

10.9     Lease  dated April 15, 1993 for  Registrant's  facilities  at
         2350 Lundy Place, San Jose, California (1)

10.10    Amended and Restated Asset Purchase  Agreement dated February
         26, 1993 by and between  Registrant,  Barclay Financial Group
         and Adlar Turnkey Manufacturing Company, as amended (4)

10.11    Form of  Convertible  Note issued by  Registrant  in favor of
         Barclay Financial Group (4)

<PAGE>
                                                                     Sequential
Number    Description of Document                                    Page Number
------    -----------------------                                    -----------

10.12    Amended and  Restated  Credit  Agreement  dated as of May 23,
         1995 by and among the Registrant, the Banks named therein and
         Sumitomo  Bank of  California,  as Agent  for the  Banks,  as
         amended (2)

10.13    First   Amendment  to  Second  Amended  and  Restated  Credit
         Agreement  dated  as of  June  25,  1996  by  and  among  the
         Registrant,  the Banks  named  therein and  Sumitomo  Bank of
         California, as Agent for the Banks(7)

10.14    Second  Amendment  to  Second  Amended  and  Restated  Credit
         Agreement  dated as of  September  30,  1996 by and among the
         Registrant,  the Banks  named  therein and  Sumitomo  Bank of
         California, as Agent for the Banks(8)

10.15    Standard  Distributor  Agreement  dated  June 1,  1990 by and
         between Quantum Corporation and Registrant (4)

10.16    Form of Indemnification Agreement (4)

10.17    IBM  Authorized  Distributor  Agreement  dated  May 17,  1993
         between IBM Corporation and Registrant (4)

10.18    Sublease  dated  November  12,  1996  for  the   Registrant's
         facilities at 2020 South Tenth Street, San Jose,  California,
         and related exhibits.

10.19*   Employment  Agreement  dated as of December  10, 1996 between
         the  Registrant and W. Donald Bell,  the  Registrant's  Chief
         Executive Officer

10.20    Form of Management Retention Agreement between the Registrant
         and the following  executive  officers of the Registrant:  W.
         Donald  Bell,  Remo E.  Canessa,  William  Murphy,  Philip M.
         Roussey and Robert J. Sturgeon.

21.1     Subsidiaries of the Registrant

23.1     Consent of Price Waterhouse LLP

24.1     Power of Attorney (contained on page 22)

----------------

*        Confidential  treatment  has been  requested  for portions of
         this document.

(1)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Report on Form 10-K for the  fiscal  year ended
         December 31, 1993 filed on March 31, 1994.

(2)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Registration  Statement  on Form S-1  (File No.
         33-79692) in the form declared effective on November 1, 1994.

(3)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Registration  Statement  on Form S-8  (File No.
         33-66580) filed on July 29, 1993.

(4)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Registration  Statement  on Form S-1  (File No.
         33-60954) filed on April 14, 1993 and which became  effective
         on June 14, 1993.

(5)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Registration  Statement  on Form S-8  (File No.
         33-83398) filed on August 29, 1994.

(6)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Registration  Statement  on Form S-8  (File No.
         333-10837) filed on August 26, 1996.

(7)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Report on Form 10-Q for the quarter  ended June
         30, 1996.

(8)      Incorporated   by  reference   to  exhibit   filed  with  the
         Registrant's  Report  on  Form  10-Q  for the  quarter  ended
         September 30, 1996.