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

                       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 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ____________ TO _____________
                         COMMISSION FILE NUMBER: 0-24244

                              CHS ELECTRONICS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              FLORIDA                                 87-0435376
  (STATE OR OTHER JURISDICTION OF       (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
   INCORPORATION OR ORGANIZATION)

           2153 N.W. 86TH AVENUE
              MIAMI, FLORIDA                            33122
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)

                  REGISTRANT'S TELEPHONE NUMBER: (305) 716-8273

              SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:

        TITLE OF EACH CLASS       NAME OF EACH EXCHANGE ON WHICH REGISTERED
               NONE                                 NONE

              SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:

                         COMMON STOCK, PAR VALUE $0.001
                                (TITLE OF CLASS)

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

      The aggregate market value of the registrant's voting stock held by
non-affiliates computed by reference to the high and low sales prices in the
Nasdaq National Market on March 26, 1997, was approximately $153,876,780. As of
March 26, 1997, the registrant had outstanding 14,690,010 shares of Common
Stock, par value $0.001.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Incorporated herein by this reference is the definitive proxy or
information statement for the 1996 Annual Meeting of Shareholders to be filed by
the Company with the Commission under Regulation 14A or Regulation 14C.

<PAGE>

                                     PART I

ITEM. 1  BUSINESS

      GENERAL

      CHS Electronics, Inc. ("CHS" or the "Company") is a leading international
distributor of microcomputer related products, networking products and software.
As of March 31, 1997 CHS operates in 30 countries across three regions,
including Western Europe, Eastern Europe and Latin America and services an
active customer base of greater than 66,000 resellers. Most of the products sold
by the Company in a location are manufactured by approximately 35 vendors
including such market leaders as Hewlett-Packard, Seagate, Microsoft, Novell,
IBM, Acer, Creative Labs, 3Com, Canon, Epson and Intel. The Company is a focused
distributor, as opposed to a broadline distributor, and seeks to represent
leading vendors within specific product categories. CHS believes that it is the
fourth largest distributor of microcomputer related products in the world, the
second largest in Europe and the largest distributor in Latin America and
Eastern Europe. The Company has no significant sales in the United States.

      The large number and diversity of resellers make it cost efficient for
vendors to outsource to distributors such as the Company some portion of their
distribution, credit, inventory, marketing and customer support requirements.
Similarly, due to the large number of product vendors, resellers generally
cannot efficiently establish direct purchasing relationships with each vendor
and instead rely on distributors to satisfy their product, financing, marketing
and technical support needs. The Company believes that the computer distribution
industry is consolidating as access to financial resources and economies of
scale become more critical and as certain vendors limit the number of authorized
distributors of their respective products.

      CHS operates under a decentralized structure which delegates to managers
familiar with the customs and needs of a particular country the authority to
make daily decisions necessary to satisfy the particular demands of their
respective markets. As compared to certain competitors which operate under a
more centralized system, the Company believes that its business model of focused
distribution through full service local facilities integrating warehousing,
purchasing, sales, credit and accounting services provides competitive and
operating advantages.

      The Company's operating results have increased significantly in the
three-year period ended December 31, 1996, with net sales increasing from $359
million in 1994 to $1.855 billion in 1996 and operating earnings increasing from
$3.4 million in 1994 to $28.9 million in 1996.

      The world headquarters of the Company is located at 2153 N.W. 86th
Avenue, Miami, Florida 33122, where its telephone number is (305) 716-8273.

      RECENT DEVELOPMENTS

      On October 4, 1996, the Company completed the acquisition of the assets
and the assumption of the liabilities of the distribution businesses of Merisel,
Inc. ("Merisel") in Austria, France, Germany, Great Britain and Switzerland,
including Merisel's European Distribution Center in The Netherlands. The Company
also acquired Merisel's export operations serving Latin America from Miami,
Florida and a distribution business in Mexico. The purchase price, as

                                       2
<PAGE>

adjusted, was approximately $148 million and was funded through cash of $30
million, factoring proceeds of $55 million and $63 million in asset
securitization borrowings.

      On March 20, 1997, the Company completed its acquisition of the operations
of Frank & Walter Computer GmbH ("F&W"), the fourth largest computer distributor
in Germany, for 2.2 million unregistered shares of the Company's common stock.
The Company intends to combine the operations of F&W, a privately held company
based in Brunschwaig, which had 1996 sales of $686 million, with its operation
in Germany, which had 1996 sales (including the sales on a pro forma basis of
the German operations recently acquired from Merisel) of $606 million. Carsten
Frank, the founder of F&W, will also become a CHS executive vice president
responsible for Europe.

      F&W has approximately 10,000 active dealers and is one of the largest
distributors of Western Digital and Seagate products in the world. The company,
which employs about 400 and operates principally within Germany, is focused on
distribution to smaller dealers in central Germany. CHS operations in Germany
employ 350, have approximately 4,600 active dealers in Germany and have focused
on distribution to medium and large resellers in the north and south of the
country.

      INDUSTRY

      Historically, there have been two types of companies within the
microcomputer products industry: those that sell directly to the end-user
("resellers") and those that sell to resellers ("distributors"). Distributors
generally purchase a wide range of products in bulk directly from manufacturers
and then ship products in smaller quantities to many different types of
resellers, which typically include dealers, value-added resellers ("VARs"),
system integrators, mail order resellers, computer products superstores and mass
merchants.

      The Company believes that the microcomputer products industry is
well-suited for distribution. The large number and diversity of resellers make
it cost efficient for vendors to outsource to distributors some portion of their
distribution, credit, inventory, marketing and customer support requirements.
Similarly, due to the large number of microcomputer product manufacturers,
resellers often cannot efficiently establish direct purchasing relationships
with each vendor and instead rely on distributors, such as the Company, to
satisfy a significant portion of their product, financing, marketing and
technical support needs.

      The Western European, Eastern European and South American markets are each
highly fragmented. Different languages, cultures and technological factors
require both local management teams and products which meet the requirements of
the specific area. Localization requires separate manuals, approvals of safety
factors by local authorities, microcode which permit the generation of
characters in local languages, appropriate electrical connectors and proper
voltage ratings. As a result, vendors depend heavily on distributors such as the
Company to meet the demands of each locale.

      STRATEGY

      To achieve its objective of strengthening its position as a leading
distributor of microcomputer products in Western Europe, Eastern Europe and
South America, the Company

                                       3
<PAGE>

has adopted a strategy of operating a focused distribution model, further
developing international markets and growing through acquisitions.

/bullet/    GROW THROUGH ACQUISITIONS. During the period beginning
            January 1, 1994 and ended March 31, 1997, the Company acquired 35
            companies, including F&W in Germany and seven from Merisel in Europe
            and Latin America. The Company generally seeks acquisition
            candidates that have strong entrepreneurial management teams and
            experience in the local market and that could benefit from the
            economies of scale that the Company provides through its focused
            product lines. A major portion of the Company's growth is
            attributable to acquisitions and the Company intends to continue its
            practice of making targeted purchases of high quality distributors
            in selected markets. In order to reduce financial risk and incent
            operating performance, in many cases the Company structures an
            acquisition with an earnout component based on the performance of
            the acquired company and generally payable in shares of its Common
            Stock one year subsequent to the acquisition. The Company also makes
            select acquisitions using cash or stock without such earnout
            component. These local distributors are attracted to combining with
            CHS in order to gain personal financial liquidity, access to key
            product lines provided by CHS and enhanced vendor credit facilities.
            After an acquisition, the new CHS subsidiary adopts the policies and
            financial reporting procedures of the Company but operates as a
            relatively autonomous business unit, consistent with the Company's
            decentralized structure. The Company believes its acquisition
            strategy is advantageous to its vendors because, through their
            relationship with CHS, vendors gain entry into new markets with
            established local distribution companies and in many cases
            substitute the creditworthiness of CHS for that of the local
            distributor.

/bullet/    OPERATE A FOCUSED DISTRIBUTION MODEL. The Company's strategy is to
            be a focused distributor by dealing in each location with a limited
            and select group of high quality branded vendors in each major
            product category, such as Hewlett-Packard for printers, Microsoft
            for software, Novell for networking, Seagate for mass storage and
            Hewlett-Packard and IBM for personal computers. Additionally, the
            Company seeks to be a significant distributor for each of its major
            vendors and establish a partnering relationship with them. The
            Company believes that this focused strategy enables it to respond
            more quickly to customer requests and gives it greater availability
            of products, access to new products and better pricing. The Company
            believes this strategy also enables it to develop greater expertise
            in the sale and servicing of the products of these vendors. The
            Company believes that its focused distribution model also results in
            more effective asset management. Generally, products from leading
            vendors are in greater demand, resulting in higher more efficient
            inventory management, including greater inventory turns, lower
            working capital requirements and fewer stock keeping units ("SKUs").
            CHS generally maintains up to 4,000 SKU's per location while
            broadline distributors typically carry greater than 15,000 SKU's.

/bullet/    FURTHER DEVELOP AND PENETRATE INTERNATIONAL MARKETS. The Company has
            focused its activities on the distribution of microcomputer products
            in Western Europe and the emerging markets of Eastern Europe and
            South America, regions which it believes are underserved with
            respect to the distribution of microcomputer

                                       4
<PAGE>

            products and therefore provide significant growth opportunities. The
            Company believes that the markets in Western Europe, Eastern Europe
            and Latin America are complex due to the diversity of language,
            regulatory, technical and other factors and provide increased
            opportunities for CHS to add value to its relationships with its
            vendors and customers because of the presence of its knowledgeable
            local management. The Company attempts to limit its exposure to
            declines in any one area or economy by its presence in a large
            number of markets.

      PRODUCTS AND CUSTOMERS

       The Company's sales consist of microcomputer-related hardware and
software products such as local area networks, disk drives, microcomputers and
printers to an active customer base, as of March 31, 1997, of more than 66,000
value-added resellers and computer retailers. The Company's products also
include components such as random access memory chips, central processing units
and integrated circuit boards. For the quarter ended December 31, 1996 (which
includes the Merisel companies), the Company's product mix by category was
printers (28%), personal computers (22%), software (18%), mass storage (10%),
networking (8%), semiconductors (4%) and peripherals and other (10%).

      The Company purchases its products directly from hardware manufacturers
and software publishers in large quantities and distinguishes itself from
broadline distributors by being a focused distributor. The Company focuses on a
small number of leading vendors in each product category and on a small number
of high volume items of that manufacturer or publisher. As a result the Company
carries fewer individual products than the broadline distributors and works with
fewer vendors. A Company operation will typically deal with 25 - 35 vendors and
have between 1,000 and 4,000 inventory items in stock as compared to broadline
distributors that may deal with more than 500 vendors and have over 15,000
products in stock.

      The Company's customers typically rely on distributors as their principal
source of microcomputer related products and financing. The Company's backlog of
orders is not considered material to an understanding of its business. No single
customer accounted for more than one percent of the Company's net sales during
1996.

      VENDOR RELATIONS

      The Company obtains its products from its vendors under non-exclusive
distribution agreements, which are subject to renewal annually and may be
cancelled by either party on short notice. Under these agreements, the Company
has the right to purchase products at discounts from the list prices. The
amounts of the discounts are determined each year at the time of renewal on the
basis of the projected sales of the Company for the following year and vary for
each vendor. The Company is not required to make additional product payments if
it fails to achieve its projected sales level for the year, but its product
discounts in the following year may be reduced because of the lower sales
levels.

      The Company's agreements with vendors typically provide a form of price
protection specifying that if the list price of a product is reduced by the
vendor, the Company will receive a credit in the amount of the reduction for
each item of the product in inventory.

                                       5
<PAGE>

      The Company also has stock rotation arrangements with substantially all of
its vendors. Stock rotation permits the Company to return inventory for full
credit in an amount equal to a certain percentage of the Company's purchases
from the supplier over a specific period. In certain cases, the Company must
purchase inventory at least equal in value to that returned. These agreements
permit the Company to maintain higher inventory levels while limiting the amount
of committed working capital related to slow-moving items.

      Generally, the Company's vendors have the right to terminate the
distribution agreement on short notice to the Company. In some cases, the
Company must be given a reasonable opportunity to cure any violation of the
agreement before it may be terminated. The Company similarly has the right to
terminate its distribution agreements on short notice to the vendor. The Company
is of the opinion that its relationships with its vendors are good, and has no
reason to believe that its current distribution agreements will be terminated or
not renewed in the foreseeable future.

      SALES, MARKETING AND CUSTOMER SUPPORT

      SALES. The Company markets its products to resellers, who either package
the Company's products with other computer equipment, or sell the products on an
individual basis to end users. As of March 31, 1997, the Company distributed
products to approximately 34,000 active resellers in Western Europe, 24,000 in
South America and 8,000 in Eastern Europe.

      In order to effectively address individual customs, practices and business
conventions within countries, each subsidiary of the Company maintains general
autonomy with respect to sales, marketing and customer support. Oversight and
strategic direction is provided by senior management of the Company.

      Each operation maintains a sales staff organized to interface effectively
with its respective customer base. As of December 31, 1996, approximately 46% of
the Company's employees were involved with sales activities.

      The Company's customers typically place orders with a sales
representative. Almost all orders are for pickup or next day delivery. The
Company's computer systems generally allow the salesperson to check customer
credit limits, current inventory levels and pricing.

      MARKETING. The Company utilizes a variety of programs to market its
vendors' products, including direct mailings, periodic advertising by
facsimiles, advertisements in industry trade publications, product brochures,
seminars and participation in select trade shows. Marketing programs are
effectuated at the subsidiary level and are designed to build awareness of the
Company, its products and their collective capability. Each operating subsidiary
maintains staff to provide marketing support.

      Funds for the Company's advertising budget generally are obtained from
cooperative advertising reimbursements and market development funds provided by
vendors. Cooperative reimbursements typically have represented approximately 1%
to 2% of the dollar amount of products purchased from those major vendors.
Marketing programs designed for cooperative reimbursement are vendor and product
specific and are designed with vendor approval. Market development funds are
provided to create market awareness of vendors' products. Cooperative

                                       6
<PAGE>

advertising reimbursements and market development funds are recorded in the
Company's financial statements as a reduction to selling, general and
administrative expenses.

      CUSTOMER SUPPORT. Under several vendor agreements, the Company is required
to maintain a staff of qualified and trained sales, repair, and support
employees who are able to provide information and advice to resellers, train
resellers on the supplier's products, their applications, configurations with
other computer products, and installation and support requirements. Generally,
however, vendor warranty service is provided by the vendor. The employees of the
Company fulfilling these functions are required to complete training courses
provided by the vendor.

      In addition, the Company supports all products with a full manufacturer's
warranty and maintains an industry standard return policy, similar to that of
its competitors.

      INTERNAL AUDIT FUNCTION

      The Company currently maintains three internal auditors on its staff, two
for Europe and one for South America. These auditors report directly to the
President and the Chief Financial Officer of the Company and to the Audit
Committee of the Board of Directors. The Company intends to expand its internal
audit staff.

      COMPETITION

      The Company operates in an industry which is characterized by intense
competition based on price, product availability, provision of credit to
customers, delivery time, customer support services, and breadth of product
line. Competitors exist in a variety of forms including direct sales by vendors,
mail order sales, international distributors, and local distributors. Some of
the Company's competitors have greater financial and administrative resources
than the Company. The Company believes availability of product is a key element
of competitiveness and attempts to differentiate itself from its competition by
providing a select number of name brands in each product line and maintaining a
sufficient inventory of select products to meet demand. The Company enhances its
competitive position by providing responsive customer service through support
and employee training programs. The Company believes that its vendors and their
products are respected in the industry for high quality and performance. Vendor
contracts frequently limit sales of their products to specific geographic areas.
Although these restrictions limit the ability of the Company's subsidiaries to
sell outside of their jurisdictions, competition in the subsidiary's area is
also reduced.

      EMPLOYEES

      At December 31, 1996, the Company employed 2,296 full-time employees, of
whom 252 were located in the United States. Of the total number of employees,
1,053 worked in marketing and sales, 388 worked in warehousing and delivery and
855 were employed in other positions including administration. Employees in
certain countries are represented by labor councils mandated by government
regulations which determine compensation and benefits. With these exceptions,
none of the Company's employees are represented by unions. Severance costs
associated with termination of employment in many countries are higher than in
the United States. There has been no disruption of operations due to a labor
dispute. Management considers its employee relations to be good.

                                       7
<PAGE>

      REORGANIZATION

      In December, 1993, CHS commenced its operations as an international
distributor of microcomputer products, networking products and software. On
March 14, 1996, the Company reincorporated from Utah to Florida and effectuated
a one-for-two reverse stock split.

      ACQUISITIONS FROM COMTRAD

      The Company has grown significantly in the last three years including
acquisitions from Comtrad Holdings, Inc. ("CHI") and Comtrad, Inc. (a
wholly-owned subsidiary of CHI), which collectively beneficially owned
approximately 26% of the Company's outstanding Common Stock as of March 31,
1997 (except as otherwise noted, CHI and Comtrad are collectively referred to
herein as "Comtrad"). Pursuant to the Company's acquisition strategy prior to
April 1996, acquisitions were originally made by Comtrad rather than the
Company. The entities were then operated as subsidiaries of Comtrad until such
time as the Company deemed their operating controls and financial reporting
capabilities consistent with those of the Company. The Company acquired
Comtrad-owned entities after completing its own evaluations (which for
significant acquisitions involved the consideration of a valuation report
prepared by an independent third party), and the affirmative vote of an
independent director of the Company. The Company does not intend to use this
strategy in the future. Comtrad has also agreed not to engage in businesses
competitive with the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations"

      The founder, chairman, chief executive officer and controlling shareholder
of Comtrad is Claudio Osorio who is also the founder, Chairman and Chief
Executive Officer of CHS. Under his employment agreement with the Company, Mr.
Osorio is required to devote his full time and attention to the affairs of CHS.

ITEM 2. PROPERTIES

      The corporate headquarters of the Company is located at 2153 N.W. 86th
Avenue, Miami, Florida, which is also the principal operational facility for CHS
Promark. Approximately 1,200 square feet of this facility is allocated to the
Company's offices and the remaining 32,800 square feet are used as
administrative, service, and warehouse space for CHS Promark. This facility is
leased from an unrelated third party for a term expiring in June 1999, at a
present lease rate of $19,045 per month.

                                       8
<PAGE>

      The Company's other facilities are described below:

     COUNTRY                SQUARE FEET           LEASE EXPIRATION
     -------                -----------           ----------------

   Argentina                    9,469                     *
   Austria                      6,994                    2000
   Belgium                     46,354                 2001-2003
   Brazil                      16,100                    2001
   Bulgaria                     3,443                    1997
   Chile                       16,140                    2005
   Colombia                       430                     *
                               22,976                 1997-2000
   Croatia                      1,300                    2000
   Czech Republic              25,469                     *
                               11,029                   *1998
   Ecuador                      5,855                    1999
   Estonia                     11,580                    2005
   Finland                     22,596                    1999
   France                     128,980                 1998-2001
   Germany                    103,208                 1997-2010
   Hungary                     39,565                    2006
   Latvia                       2,873                    2002
   Lithuania                      739                     *
   Mexico                      24,593                 1997-2000
   The Netherlands**          198,522                    2005
   Peru                         6,133                 2000-2001
   Poland                      28,421                    1997
   Portugal                    12,500                    2002
   Russia                      38,230                    2000
   Slovakia                     4,745                    1997
   Sweden                      11,840                    1998
   Switzerland                 3,000(1)                  2001
                              45,902(2)               1998-2000
   United Kingdom             135,207                 2003-2016
                               10,000                     *
   United States              18,300(3)               1998-2000
                             101,882(4)               1997-2002
   Uruguay                      8,608                    1999
   Venezuela                    8,178                 1997-2001

--------------------
*   Owned facility
**  The Company anticipates that its Helmond warehouse facility will be sold
    prior to April 15, 1997.
(1) CHS Finance Facility
(2) CHS Switzerland Facilities
(3) CHS BEK Facility
(4) CHS Latin America Facilities

            In each of the countries, the size set forth above includes sales,
administrative and warehousing functions and may be composed of multiple
facilities. The Company considers its existing facilities to be adequate for its
foreseeable needs.

                                       9
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      The Company is involved in litigation relating to claims arising out of
its operations in the normal course of business. The Company is not currently
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on the Company.

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

      None

                                       10
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

      The following table sets forth for the periods indicated the high and low
closing sales prices of the Company's Common Stock (symbol: CHSE) from January
1, 1995 through April 16, 1995 in the over-the-counter market, from April 17,
1995 through June 6, 1996 on the Nasdaq Small-Cap Market and thereafter on the
Nasdaq National Market. The Company effected a one-for-two reverse stock split
on March 14, 1996. All prices for the period prior to the effective date of the
one-for-two reverse stock split have been adjusted by a factor of two to reflect
the effect of the reverse stock split. Such prices are based on inter-dealer bid
and asked prices, without markup, markdown, commissions, or adjustments and may
not represent actual transactions.

                                                    HISTORIC PRICES
FISCAL                                          ----------------------
 YEAR     PERIOD                                  HIGH         LOW
------    ------                                ---------   ----------

 1995     First Quarter.....................    $  8-1/2     $  6
          Second Quarter....................      11-1/4        8
          Third Quarter.....................      11-1/2        7
          Fourth Quarter....................      11-1/2        7

 1996     First Quarter......................    $ 16-1/2     $  8
          Second Quarter.....................      18-1/2        9-7/8
          Third Quarter......................      14-1/2       10
          Fourth Quarter.....................      19-1/2       10-1/4


      The last reported sale price of the Common Stock as reported on the Nasdaq
National Market on March 26, 1997 was $18 per share. As of March 26, 1997,
the outstanding Common Stock was held of record by 196 shareholders. The Company
believes that it has in excess of 400 beneficial owners.

      The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future, but intends instead
to retain any future earnings for reinvestment in its business. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, capital requirements and such other factors as the Board of
Directors deems relevant. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."

                                       11
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

      The following tables set forth certain financial data for each year in the
five year period ended December 31, 1996. The information presented as of and
for the years ended December 31, 1993, 1994, 1995 and 1996, is derived from the
audited consolidated financial statements of the Company, which statements have
been audited by Grant Thornton LLP, independent public accountants. The
information presented below as of and for the year ended December 31, 1992 is
derived from the audited financial statements of the Predecessor (the German
entity acquired by the Company in December, 1993). The following data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere herein.

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                       PREDECESSOR(1)                   THE COMPANY
                                       --------------    ----------------------------------------------
                                                              TWELVE MONTHS ENDED DECEMBER 31,
                                       ----------------------------------------------------------------
                                           1992            1993        1994        1995         1996
                                       -----------       --------    --------    --------    ----------
                                                                                 RESTATED
                                               (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<S>                                    <C>               <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Net sales ...........................     $ 79,884       $146,408    $359,169    $936,703    $1,855,540
Cost of goods sold ..................       72,706        136,968     333,983     868,716     1,724,432
                                          --------       --------    --------    --------    ----------
Gross profit ........................        7,178          9,440      25,186      67,987       131,108

Operating expenses ..................        5,100          9,075      21,798      57,188       102,235
                                          --------       --------    --------    --------    ----------

Operating earnings ..................        2,078            365       3,388      10,799        28,873
Interest income .....................          (97)          (229)       (250)     (1,757)       (3,199)

Interest expense ....................          363          1,076       2,070       6,454        11,712
                                          --------       --------    --------    --------    ----------
Earnings (loss) before income taxes
  and minority interest .............        1,812           (482)      1,568       6,102        20,360

Income tax expense ..................          656            241         603       1,797         6,086
Minority interest ...................           --             --          --          --         2,108
                                          --------       --------    --------    --------    ----------
Net earnings (loss) .................        1,156           (723)        965       4,305        12,166

Net earnings (loss) per share .......          N/A           (.32)        .21         .59          1.16
Weighted average shares outstanding
primary .............................          N/A          2,269       4,693       7,283        10,438

OTHER DATA:
Number of countries .................            1              2          10          15            28
Inventory turns .....................           17             23          10          10            10
Days receivable .....................           32             31          32          35            36
</TABLE>

<TABLE>
<CAPTION>
                                  PREDECESSOR                    THE COMPANY
                                  -----------   --------------------------------------------
                                                        AT DECEMBER 31,
                                  ----------------------------------------------------------
BALANCE SHEET DATA:                  1992          1993       1994        1995        1996
                                  -----------   ---------    -------     --------   --------
                                                             RESTATED    RESTATED
<S>                               <C>             <C>        <C>         <C>        <C>
Cash and cash equivalents.......        210          603       8,368      11,171      35,137
Working capital (deficit).......        662        (1426)     14,004       9,843      31,506
Total assets....................     16,013       29,058     164,468     265,804     861,949
Notes payable...................      2,988        6,949      15,198      46,438     155,932
Long term debt..................          -            -       8,104       8,801      45,327
Shareholders' equity............        988        1,930      19,870      29,892     104,533
<FN>
---------------------

(1)  In December 1993, the Company acquired its operating subsidiary in Germany.
     The Predecessor information provided represents the operations of this
     acquired company prior to the acquisition and is derived from the financial
     statements of the acquired company.
</FN>
</TABLE>

                                       13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO CONTAINED
ELSEWHERE HEREIN.

"FORWARD-LOOKING" INFORMATION

      This Form 10-K contains certain "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which represent the Company's expectations of beliefs,
including, but not limited to, statements concerning gross margins and sales of
the Company's products. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important
factors, including the level of acquisition opportunities available to the
Company and the Company's ability to efficiently price and negotiate such
acquisitions on a favorable basis, the financial condition of the Company's
customers, the failure to properly manage growth and successfully integrate
acquired companies and operations, changes in economic conditions, demand for
the Company's products and changes in competitive environment.

      The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

OVERVIEW

      The Company's net sales and net earnings have grown substantially during
the past several years, in part due to acquisitions. In 1995 and 1996 the
Company made acquisitions from unrelated parties as shown in the table below,
captioned "CHS Direct Acquisitions," which table indicates the service areas of
the operations acquired and the acquisition date. These acquisitions have been
included in the Company's financial statements from the date the entity was
acquired.

      In addition, in March 1996, the Company acquired six entities from
Comtrad, then a majority owner of the Company, which were recorded in a manner
similar to a pooling of interests. Accordingly, these acquisitions have been
included in the Company's financial statements from the date the entity was
acquired by Comtrad. The Company recorded the cost of such acquisitions from
Comtrad at Comtrad's cost basis. The Company recorded goodwill with

                                       14
<PAGE>

respect to these acquisitions if Comtrad recorded goodwill when it purchased the
subject entity, or later, if contingent consideration was paid. Such goodwill is
being amortized over 20 years. As a result of both the CHS direct acquisitions
and the acquisitions from Comtrad, the Company expects the amortization of
goodwill to be approximately $4 million in 1997 as compared to approximately $1
million in 1996. The table below, captioned "CHS Acquisitions from Comtrad,"
sets forth acquisitions from Comtrad in the three years ended December 31, 1996,
the service areas of the operations acquired, the assumed date of the
acquisition by Comtrad (which is the date the results of operations were
initially included in the Company's financial statements) and the Company
acquisition date.

                           CHS DIRECT ACQUISITIONS

     SUBSIDIARY (1)             SERVICE AREA            CHS ACQUISITION DATE
     --------------             ------------            --------------------
     CHS Merisel UK             UK                          September 1996
     CHS Merisel France         France                      September 1996
     CHS Merisel Switzerland    Switzerland                 September 1996
     CHS Merisel Germany        Germany                     September 1996
     CHS Merisel Austria        Austria                     September 1996
     CHS Merisel Latin America  Latin America               September 1996
     CHS Merisel Mexico         Mexico                      September 1996
     CHS Ecuador(2)             Ecuador                     June 1996
     CHS Russia                 Russia                      June 1996
     CHS Switzerland            Switzerland                 April 1996
     CHS Peru(3)                Peru                        March 1996
     CHS Hungary(4)             Hungary                     February 1996
     CHS Czechia (84%)          Czech Republic              October 1995

                                       15
<PAGE>

                        CHS ACQUISITIONS FROM COMTRAD

                                      COMTRAD ACQUISITION     CHS ACQUISITION
 SUBSIDIARY(1)     SERVICE AREA               DATE                  DATE
 -------------     ------------       -------------------     ---------------
CHS Croatia        Croatia              September 1994           March 1996
CHS Romania(5)     Romania              September 1994           March 1996
CHS Bulgaria       Bulgaria             September 1994           March 1996
CHS Baltic         Lithuania,           September 1994           March 1996
                   Latvia and
                   Estonia
CHS Slovakia       Slovakia               January 1994           March 1996
CHS Brazil         Brazil                November 1994           March 1996
CHS Poland         Poland                November 1995        December 1995
CHS Sweden         Sweden                    July 1995        December 1995
CHS Finland        Finland                   July 1995        December 1995
CHS Czechia (16%)  Czech Republic         January 1993         October 1995
CHS BEK            South America             July 1995         October 1995
CHS Portugal       Portugal               January 1993           April 1995
CHS England        England              September 1994           April 1995
CHS France         France               September 1994           April 1995
CHS Belgium        Belgium and          September 1994           April 1995
                   Luxembourg
CHS Promark        South America(6)          July 1994            July 1994

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

(1)   The names are those by which the Company refers to its subsidiaries and
      are not necessarily the legal names of the entities.
(2)   The Company owns 51% of CHS Ecuador.
(3)   The Company owns 60% of CHS Peru.
(4)   The Company owns 51% of CHS Hungary.
(5)   Transferred back to Comtrad as of October 31, 1996 in exchange for a
      payment of $523,000 from Comtrad to CHS.
(6)   Included operating subsidiaries in Argentina, Chile, Colombia and
      Venezuela.

RESULTS OF OPERATIONS

      The following table sets forth, for the periods presented, the percentage
of net sales represented by certain items in the Company's Consolidated
Statements of Operations:

                                       16
<PAGE>

                                            YEAR ENDED DECEMBER 31
                                       -------------------------------
                                        1994        1995         1996
                                       ------      ------       ------
Net sales                              100.0%      100.0%       100.0%
Cost of goods sold                      93.0        92.7         92.9
                                       -----       -----        -----
Gross profit                             7.0         7.3          7.1
Operating expenses                       6.1         6.1          5.5
                                       -----       -----        -----
Operating earnings                        .9         1.2          1.6
Interest income                          (.1)        (.1)         (.1)
Interest expense                          .6          .6           .6
                                       -----       -----        -----
Earnings before income taxes              .4          .7          1.1
Income tax expense                        .1          .2           .3
Minority interest                         --          --           .1
                                       -----       -----        -----
Net earnings                              .3          .5           .7
                                       =====       =====        =====

1996 COMPARED TO 1995

      NET SALES. Net sales increased $918.8 million, or 98.1%, from $936.7
million in 1995 to $1.855 billion in 1996 due principally to acquisitions and,
to a lesser extent, internal growth. Of the increase in net sales, subsidiaries
acquired in late 1995 or 1996 contributed $640.7 million. Net comparable sales
of subsidiaries consolidated for both 1995 and 1996 grew $278.1 million or
29.7%. This growth is attributed to increased consumer demand for microcomputer
products offered by the Company and the expansion of sales by the Company's
subsidiaries to include a full range of products.

      GROSS PROFIT. Gross profit increased $63.1 million, or 92.8% from $68.0
million in 1995 to $131.1 million in 1996 due principally to acquisitions and,
to a lesser extent, internal growth. Gross profit on a comparable basis for
subsidiaries consolidated for both 1995 and 1996 increased $18.3 million or
26.9%. Newly acquired companies contributed $44.8 million of gross profit.

      Gross margin decreased from 7.3% in 1995 to 7.1% in 1996. The decrease was
due to lower gross margins from subsidiaries located in Western Europe,
particularly those operations acquired from Merisel, which, as a result of high
volumes of sales in those entities, had a significant impact on the Company's
gross margin as a whole. The Company attributes the decrease in gross margins to
competitive pressures in this region, especially in Germany. The Company's
subsidiaries in Germany had the lowest gross margin rate of all its European
subsidiaries. The Company expects that overall gross margins may continue to
decline in 1997 due to continued competitive pricing pressures, the fact that
the gross margins of the acquired Merisel companies have been generally lower
than that of the Company and will be included in the consolidation for the full
year and the impact of the acquisition of Frank & Walter, which operates in
Germany where gross margins are generally lower. The gross margin of the
combined Merisel companies for the nine months ended September 30, 1996 on a pro
forma basis was 6.9%.

                                       17
<PAGE>

      OPERATING EXPENSES. Operating expenses as a percentage of net sales
declined from 6.1% in 1995 to 5.5% in 1996. The decline was due to efficiencies
gained through increased volume and the Company's efforts to control costs. The
reduction was achieved even though a provision of $1.4 million was made for
restructuring costs incurred by CHS (consisting of severance costs for CHS
employees, writeoff of CHS leasehold improvements and lease termination costs of
CHS closed facilities) to implement consolidation in markets in which a CHS
company previously existed and a company was acquired from Merisel. The
operating expense ratio without such charge would have been 5.4% for the year
and 5.0% in the fourth quarter of 1996. The Company believes that this
percentage will continue to decline in 1997 due to the impact of economies of
scale as a result of the Merisel acquisition.

      NET INTEREST EXPENSE. Net interest expense increased $3.8 million or
81.2% from $4.7 million in 1995 to $8.5 million in 1996. The increase is
directly related to the increase in average loan amounts outstanding.

      INCOME TAX EXPENSE. Income taxes as a percentage of earnings before income
taxes and minority interest in subsidiaries increased slightly from 29.4% in
1995 to 29.9% in 1996. Management does not believe this change is significant.
The difference between this tax rate and the statutory United States tax rate is
due to the utilization of net operating loss carryforwards and lower foreign tax
rates offset, to some extent, by losses in subsidiaries with no tax benefit and
non-deductible goodwill amortization. The Company expects to have an effective
tax rate lower than the statutory United States tax rate in 1997 principally due
to its ability to use remaining net operating loss carryforwards from certain
subsidiaries and lower foreign tax rates in other subsidiaries.

1995 COMPARED TO 1994

      NET SALES. Net sales increased $577.5 million or 160.8% from $359.2
million in 1994 to $936.7 million in 1995 due principally to acquisitions and to
a lesser extent, internal growth. Of the increase in net sales, subsidiaries
formed or acquired in 1995 contributed $177.7 million. Net sales of subsidiaries
consolidated for part of 1994 and all of 1995 (CHS Promark, CHS England, CHS
France and CHS Belgium) contributed $352.2 million of the increase in net sales.
Net sales of subsidiaries consolidated for all of 1994 and 1995, which included
CHS Germany, CHS Portugal and 16% of CHS Czechia grew $47.6 million or 26.3%.
This growth is attributed to increased consumer demand for microcomputer
products offered by the Company.

      Net sales to Comtrad related companies decreased from $52.4 million in
1994 to $21.1 million in 1995 and had a gross profit margin equivalent to sales
to unaffiliated parties for similar products.

      GROSS PROFIT. Gross profit increased $42.8 million or 169.9% from $25.2
million in 1994 to $68.0 million in 1995 due principally to acquisitions and, to
a lesser extent, internal growth. Gross profit for subsidiaries included in the
consolidation for all of 1994 and 1995 did not increase in proportion to sales
as a result of the lowering of prices in Germany in response to

                                       18
<PAGE>

increased competition. Gross profit from such subsidiaries grew $1.7 million or
17.9%. Gross profit from subsidiaries consolidated for part of 1994 and all of
1995 grew $28.6 million. Newly acquired companies contributed $12.5 million of
gross profit.

      Gross margin increased from 7.0% in 1994 to 7.3% in 1995. The increase was
due to higher gross margins from subsidiaries consolidated for part of 1994 and
all of 1995. The Company attributes the increase in gross margin to greater
sales of networking and software products which had higher gross margins than
other products offered by the Company.

      OPERATING EXPENSES. Operating expenses as a percentage of net sales
remained unchanged at 6.1% in 1994 and 1995.

      NET INTEREST EXPENSE. Net interest expense increased $2.9 million or
158.1% from $1.8 million in 1994 to $4.7 million in 1995. The increase in
interest expense is directly related to the increase in average loan amounts
outstanding.

      INCOME TAX EXPENSE. Income taxes as a percentage of earnings before income
taxes decreased from 38.5% in 1994 to 29.4% in 1995. The decrease in the
Company's net effective tax rate is attributed to the utilization of net
operating loss carry forwards and lower foreign tax rates, offset to some extent
by non-deductible goodwill amortization.

SEASONALITY

      The Company may experience variability in its net sales and net income on
a quarterly basis as a result of many factors, including the condition of the
microcomputer industry in general, shifts in demand for software and hardware
products and industry announcements of new products or upgrades. Sales in Europe
in the first and fourth quarters of each year are typically higher than in the
second and third quarters. In South America, sales in the third and fourth
quarters of each year are typically higher than in the first and second
quarters.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash used in operating activities in 1996 and 1995 was $99.1 and
$22.1 million, respectively, due principally to increases in receivables,
inventory and other current assets, offset to some extent by increases in
accounts payable. In both years these changes were reflective of sales increases
and general business growth. Net cash used in investing activities in 1996 and
1995 was $38.5 and $5.5 million, respectively, due principally to acquisitions
in 1996 and, to a lesser extent, to investments in fixed assets. Net cash
provided by financing activities in 1996 and 1995 was $163.3 and $29.9 million,
respectively, due principally in 1996 to proceeds of the public offering, and in
both years to borrowings under new debt agreements and increased borrowings
under other agreements.

      On February 5, 1996, CHS Promark entered into a Loan and Security
Agreement, as amended in October 1996, providing for revolving credit advances
and the issuance of letters of credit against eligible accounts receivable and
inventory up to a maximum of $60 million. Amounts outstanding bear interest, at
the election of the borrower, at either a variable market rate

                                       19
<PAGE>

based on the prime rate of the lender or LIBOR. The agreement limits the ability
of CHS Promark to pay dividends to the Company to 50% of net income after taxes.
The agreement matures in October, 1999 and is secured by a lien on essentially
all of CHS Promark's assets. The agreement contains certain restrictive
covenants, including limitations on transactions with affiliated companies and
employee loans. CHS Promark was in violation of these specific covenants at
December 31, 1996, but waivers for these violations were granted by the
financial institution. The Company has guaranteed this indebtedness.

      The Company's subsidiaries typically enter into short-term credit
agreements with financial institutions in their countries of operations. As of
December 31, 1996, the aggregate amount available under these agreements was
$224 million and $154 million was then outstanding. Such agreements are usually
for a term of one year and are secured by the receivables of the borrower. The
weighted average interest rate at December 31, 1996 was 7.3%. The Company
typically guarantees these loans.

      The Company derives all of its operating income and cash flow from its
subsidiaries and relies on payments from, and intercompany borrowings with, its
subsidiaries to generate the funds necessary to meet its obligations. In certain
countries, exchange controls may limit the ability of the Company's subsidiaries
to make payments to the Company. At December 31, 1996, there was no country with
exchange control limitations in which the Company had significant operations.
Restrictions in financing or credit arrangements may also limit such payments.
Claims of creditors of the Company's subsidiaries will generally have priority
as to the assets and cash flow of such subsidiaries over the claims of the
Company or its shareholders.

      INFLATION

      The Company operates in certain countries that have experienced high rates
of inflation and hyperinflation. However, inflation did not have any meaningful
impact on the Company's results of operations in the three year period ended
December 31, 1996, and the Company does not expect that it will have a material
impact in 1997.

      ASSET MANAGEMENT

      INVENTORY. The Company's goal is to achieve high inventory turns and
maintain a low number of SKUs and thereby reduce the Company's working capital
requirements and improve return on equity. The Company's strategy to achieve
this goal is to both effectively manage its inventory and achieve high order
fill rates.

      To reduce the risk of loss to the Company due to vendor price reductions
and slow moving or obsolete inventory, the Company's contracts with its vendors
generally provide price protection and stock rotation privileges, subject to
certain limitations. Price protection allows the Company to offset the accounts
payable owed to a particular vendor if such vendor reduces the

                                       20
<PAGE>

price of products the Company has purchased within a specified period of time
and which remain in inventory. Stock rotation permits the Company to return to
the vendor for full credit, with an offsetting purchase order for new products,
pre-determined amounts of inventory purchased within a specified period of time.
Such credit is typically used to offset existing invoices due without incurring
re-stocking fees.

      ACCOUNTS RECEIVABLE. The Company manages its accounts receivable to
balance the need of its customers to purchase on credit with its desire to
minimize its credit losses. Bad debt expense as a percentage of the Company's
net sales for the years ended 1994, 1995 and 1996 was .4%, .3% and .2%,
respectively. The Company's credit losses have been minimized by its extensive
credit approval process and the use of credit insurance and factoring by its
Western European subsidiaries. In its sales to customers in South America, the
Company often receives post-dated checks at the time of sale. Customers who
qualify for credit are typically granted payment terms appropriate to the
customs of each country.

      CURRENCY RISK MANAGEMENT

      FUNCTIONAL CURRENCY. The Company's functional currency, as defined by
Statement of Financial Accounting Standards No.52, is the United States Dollar.
The local currencies of the countries where subsidiaries conduct operations are
considered the functional currencies for such entities. Most of the Company's
subsidiaries use the local currencies as their functional currency and translate
assets and liabilities using the exchange rates in effect at the balance sheet
date and results of operations using the average exchange rates prevailing
during the year. Translation effects are reflected in the cumulative foreign
currency translation adjustment in equity. The Company's exposure under these
translation rules, which is unhedged, may affect the carrying value of its
foreign net assets and therefore its equity and net tangible book value, but not
its net income or cash flow. Exchange differences arising from transactions and
balances in currencies other than the functional currency are recorded as
expense or income in the subsidiaries and the Company and affect the Statements
of Earnings.

         HEDGING. The Company attempts to limit its risk of currency
fluctuations through hedging. In 1996, a significant amount of the purchases of
products by the Company were made in United States dollars and approximately 83%
of Company sales were made in currencies other than the United States dollar.
The most significant currencies in which sales were made were the German mark
(17% of sales), the British pound (12%) and the French franc (13%). At December
31, 1996, approximately $166 million of accounts payable were attributable to
foreign currency liabilities denominated in dollars and approximately 72% of
these liabilities were unhedged.

      CHS FINANCE. In March 1995, the Company formed CHS Finance as a finance
company for the Company's distribution activities. CHS Finance engages in
central treasury functions including hedging activities related to foreign
currency for the Company and short term working capital loans to the Company's
subsidiaries to enable them to take advantage of early payment discounts offered
by certain vendors. These loans are denominated in the currency of the borrower
or U.S. dollars. Generally, CHS Finance hedges its receivables denominated in
currencies other than its functional currency, the Swiss franc. It attempts to
limit the amount of unhedged receivables to an amount which approximates the
U.S. dollar denominated loans payable by the Company's subsidiaries. In the
fourth quarter of 1996, the Company modified this policy to allow unhedged
receivables, principally in U.S. dollars and German marks, of an amount
approximately equal to its total unhedged liabilities. This modified policy
continued through the first quarter of 1997. The Company intends to review this
policy periodically and may modify it in the future.

                                       21
<PAGE>

      Through both hedging activities coordinated by CHS Finance and local
country activities in certain subsidiaries, the Company makes forward purchases
of dollars in an attempt to hedge local European currencies and reduce exposure
to fluctuations in exchange rates. Additionally, in certain countries in Eastern
Europe and in South America where it is not practical to make forward purchases,
to minimize exposure to currency devaluations, the Company has adopted a policy
of attempting to match accounts receivable with accounts payable and to limit
holdings of local currencies. Factors which affect exchange rates are varied and
no reliable prediction methods are available for determining the likely future
exchange rates. In general, countries make an effort to maintain stability in
rates for trade purposes.

      There can be no assurance that these asset management programs will be
effective in limiting the Company's exposure to these risks.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The consolidated financial statements of the Company appear beginning at
page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

      None.

                                       22
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      (a)   Directors of the Company.

            The information required regarding the identification of the
Company's directors is incorporated by reference to the information contained in
the Proxy Statement for the 1997 Annual Meeting of Shareholders of the Company.

      (b)   Executive Officers of the Company.

            The executive officers of the Company, as well as certain key
employees, and their ages as of March 1, 1997, are as follows:

          NAME                AGE                      POSITION
-------------------------   --------    ---------------------------------------
Claudio Osorio                37        Chairman of the Board, Chief
                                        Executive Officer and President

Alvin Perlman                 70        Executive Vice President - South
                                        American Region and Director

Craig Toll                    48        Chief Financial Officer and Treasurer

Antonio Boccalandro           30        Secretary and Director

Pasquale Giordano(1)          49        Chief Operating Officer - Europe Region

Clifford Dyer(1)              59        Chief Operating Officer - South
                                        American Region
--------------------

(1)  Each of these persons is a significant employee, but not an executive
     officer of the Company.

     CLAUDIO OSORIO (full name - Claudio Eleazar Osorio Rodriguez), the founder
of the Company's current business and operations, has served as the President,
Chief Executive Officer, and a Director of the Company since 1993. Mr. Osorio
has served as president of Comtrad since 1988. Mr. Osorio is an attorney with a
degree from UCAB (Catholic University of Andre Bello) located in Venezuela. He
also holds a Master of Business Administration degree from IESA, also located in
Venezuela. He is a director of Comtrad and the president and a director of
Comtrad Holdings, Inc.

                                       23
<PAGE>

      ALVIN PERLMAN has been a Director and the Executive Vice President and
Chief Operating Officer, South American Region, of the Company since 1994. He
has served for the past five years as the chief executive officer of Zemex
Electronics, Inc., d/b/a CHS Promark, and was the sole owner of CHS Promark
prior to its acquisition by the Company in June 1994. Mr. Perlman has also
served as a director of Comtrad Holdings, Inc. since November 1994. Mr. Perlman
has a Bachelor of Science degree from the University of Connecticut.

      CRAIG TOLL has been the Chief Financial Officer of the Company since July,
1994 and its Treasurer since June, 1995. Mr. Toll was self-employed as a
consultant to CHS Promark from April 1994 to July 1994. For over five years
prior to April 1994, Mr. Toll was a partner in the accounting firm of Deloitte &
Touche. Mr. Toll has a Bachelor of Science degree in Economics and a Master of
Science degree in Accounting, both from the Wharton School of the University of
Pennsylvania.

      ANTONIO BOCCALANDRO has been a Director and Secretary of the Company since
1993. He was Treasurer of the Company from December 1993 to June 1995. He has
also been employed in various capacities by Comtrad since 1988. In 1990 Mr.
Boccalandro became a director of Comtrad and he has also been a director
of Comtrad Holdings, Inc. since June 1994.

      PASQUALE GIORDANO has been the Chief Operating Officer - Europe Region
since January 1, 1997. Previously, he was Chief Operating Officer - South
American Region of the Company since January 1, 1996. From January 1989, Mr.
Giordano has been the president and chief operating officer of CHS Promark.
Prior to such service, he was a vice-president of CHS Promark in charge of its
New York office. From 1988 until he joined CHS Promark in 1989, Mr. Giordano was
the operating vice-president of the electronics division of Caldor. Mr. Giordano
has a Bachelors degree from City College of New York.

      CLIFFORD DYER has been the Chief Operating Officer - Latin American Region
since January 1, 1997. From February 1987 until it was acquired by the Company
in October 1996, Mr. Dyer was President of Merisel Latin America, Inc. and was
responsible for all Latin American Operations. He was the founder in 1982 of the
predecessor company to Merisel Latin America, Inc. Prior to 1982, Mr. Dyer was
President of GTE Venezuela and held directorships in various companies.

ITEM 11. EXECUTIVE COMPENSATION

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Shareholders of the Company.

                                       24
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Shareholders of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Shareholders of the Company.

                                       25
<PAGE>

                                     PART IV

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

      (a)   Documents Filed as Part of this Report.

            (1) Financial Statements

                See "Item 8. Financial  Statements and  Supplementary  Data"
for Financial Statements included under this Annual Report on Form 10-K.

            (2) Financial Statement Schedules

            (3) Exhibits:

EXHIBIT       DESCRIPTION
-------       -----------
  3.1         Articles of Incorporation (1)
  3.2         Bylaws (1)
 10.1         Plan of Acquisition dated June 30, 1994 (2)
 10.2         Form of Registration Agreement (2)
 10.3         Agreement and Plan of Exchange dated June 30, 1994 (2)
 10.4         Purchase and Sale Agreement dated June 30, 1994 (2)
 10.5         Repurchase Option Agreement dated June 30, 1994 (2)
 10.6         Stockholders Agreements dated June 30, 1994 (2)
 10.7         Employment Agreement for Alvin Perlman (2)
 10.8         Notes Payable to Comtrad,  Inc., dated May 23, November 14, and
              December 29, 1994 (2)
 10.9         Revolving Credit Agreement with The First National Bank of
              Boston, dated March 1, 1993, as amended (2)
 10.10        Reseller Agreement with Hewlett Packard dated March 1, 1994 (2)
 10.11        Reseller Agreement with Hewlett Packard dated November 1, 1994
              (2)
 10.12        Stock Incentive Plan (2)
 10.13        Lease for Miami, Florida Facility dated June 29, 1993 (2)
 10.14        Real Estate Leasing Contract for Nenndorf, Germany Facility
              dated November 12, 1994 (2)
 10.15        Loan and Security Agreement by and between Congress Financial
              Corporation (Florida), as Lender and Zemex Electronics
              International, Inc. as Borrower, dated February 5, 1996, together
              with the guarantee thereof by the Company (1)
 10.16        Credit Agreement by and between MashreqBank PSC, New York
              Branch, as lender and the Company, as borrower, dated July 10,
              1995 (1) and Amendment dated as of August 17, 1995 (3)
 10.17        Employment Agreement between the Company and Claudio Osorio
              dated March 22, 1996 (3)

                                       26
<PAGE>

 10.18        Employment Agreement between the Company and Craig Toll dated
              March 22, 1996 (3)
 10.19        Form of Indemnity Agreement between the Company and each of the
              Directors of the Company and Craig Toll (3)
 10.20        Noncompetition Agreement dated April 11, 1996 among the Company,
              Comtrad, Inc. and Comtrad Holdings, Inc. (3)
 10.21        Purchase and Sale Agreement between Comtrad, Inc. and the Company
              dated December 8, 1993 (CHS Germany) (2)
 10.22        Agreement and Plan of Exchange between the Company and Comtrad,
              Inc., dated April 25, 1995 (CHS Belgium, CHS England, CHS France
              and CHS Portugal) (3)
 10.23        Agreement and Plan of Exchange between the Company and Comtrad
              Holdings, Inc. dated October 13, 1995 (CHS BEK) (3)
 10.24        Agreement and Plan of Exchange between the Company, CHS Czechia
              s.r.o., Comtrad, Inc. and Zbynek Kraus dated October 27, 1995 (CHS
              Czechia) (3)
 10.25        Stock Purchase Agreement between the Company and Comtrad Holdings,
              Inc. dated December 29, 1995 (CHS Poland) (3)
 10.26        Stock purchase agreement between the Company and Comtrad, Inc.
              dated December 29, 1995 (CHS Sweden) (3)
 10.27        Stock Purchase Agreement between the Company and Comtrad, Inc.
              dated December 29, 1995 (CHS Finland) (3)
 10.28        Purchase Agreement dated January 31, 1996 between the Company and
              Comtrad Holdings, Inc. and the individual persons comprising the
              "KVENTA QUOTAHOLDERS" (CHS Hungary) (4)
 10.29        Stock Purchase Agreement between the Company, Contrad Holdings,
              Inc. and Comtrad, Inc. dated March 27, 1996 (CHS Baltic, CHS
              Bulgaria, CHS Romania, CHS Croatia, CHS Brazil and CHS
              Slovakia) (3)
 10.30        Purchase Agreement dated March 1996 between Zemex Electronics
              International and Cosapi Organizacion Empresarial S.A. (CHS
              Peru) (3)
 10.31        Stock Purchase Agreement dated March 29, 1996 between the Company
              and Hugo Wyrsch (CHS Switzerland) (3)
 10.32        Loan Agreement dated 29 March 1996 among CHS Finance SA, Singer
              and Friedlander Limited and certain banks named in the Agreement
              (3)
 10.33        Purchase Agreement by and among CHS Electronics, Inc., as Buyer,
              and Merisel, Inc. and Merisel Europe, Inc. as Sellers dated as of
              August 29, 1996 as amended by First Amendment to Purchase
              Agreement dated as of October 4, 1996 (4)
 10.34        Second Amendment to Purchase Agreement by and among CHS
              Electronics, Inc. as Buyer and Merisel, Inc. and Merisel Europe,
              Inc. as Sellers dated as of December 27, 1996 (5)
 10.35        Settlement Agreement and Release by and among CHS Electronics,
              Inc. as Buyer and Merisel, Inc. and Merisel Europe, Inc. as
              Sellers dated February 13, 1997 (5)

                                       27
<PAGE>

 10.36        Agreement as of October 31, 1996 between CHS Electronics, Inc. and
              Comtrad, Inc. (5)
 10.37        Stock Exchange Agreement dated December 19, 1996 between CHS
              Electronics, Inc. and Frank & Walter Computer GmbH (5)
 21           Subsidiaries of the Company (5)
 23.1         Consent of Independent Certified Public Accountants(5)
 27.1         Financial Data Schedule(5)

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

(1)   Incorporated herein by this reference from the Company's Annual Report on
      Form 10-K for the year ended December 31, 1995.
(2)   Incorporated herein by this reference from the Company's registration
      statement on Form 10 filed with the Securities and Exchange Commission on
      May 26, 1994 and the amendments thereto filed on August 1, 1994, September
      9, 1994, December 2, 1994 and January 12, 1995.
(3)   Incorporated  herein by this reference  from the Company's  Registration
      Statement on Form S-1 (File No. 333-03864).
(4)   Incorporated herein by this reference from the Company's Current Report on
      Form 8-K filed on October 18, 1996.
(5)   Filed herewith.

      (b) Reports on Form 8-K

During the last quarter of the period covered by this Report, the Company filed
a current report on Form 8-K, dated October 18, 1996, as amended by Form 8-K/A
dated December 17, 1996, which included information pursuant to Item 2.,
Acquisition or Disposition of Assets, relating to the acquisition of the assets
described in such Report.

                                       28
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, as amended (the "Act"), the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                           CHS ELECTRONICS, INC.

                                           By:/s/ CLAUDIO OSORIO
                                              -------------------
                                              Claudio Osorio
                                              President

Dated: March 31, 1997

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

        SIGNATURE                         TITLE                      DATE
        ---------                         -----                      -----

/S/CLAUDIO OSORIO
--------------------------       President and Director          March  31, 1997
Claudio Osorio                   (principal executive officer)

/S/ALVIN PERLMAN
--------------------------       Executive Vice President        March  31, 1997
Alvin Perlman                    and Director

/S/ANTONIO BOCCALANDRO
--------------------------       Secretary and                   March  31, 1997
Antonio Boccalandro              Director

/S/CRAIG TOLL
--------------------------       Chief Financial Officer         March  31, 1997
Craig Toll                       and Treasurer (principal
                                 financial officer and
                                 principal accounting officer)
/S/OTTO GERLACH
---------------------------      Director                        March  31, 1997
Otto Gerlach

/S/ZBYNEK KRAUS
---------------------------      Director                        March  31, 1997
Zbynek Kraus

/S/DONALD D. WINSTEAD
---------------------------      Director                        March  31, 1997
Donald D. Winstead

                                       29

<PAGE>


            REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
CHS Electronics, Inc.

We have audited the accompanying consolidated balance sheets of CHS
Electronics, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of earnings, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CHS Electronics,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their earnings and their consolidated cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

                                                       GRANT THORNTON LLP
Miami, Florida
March 7, 1997

                                      F-1
<PAGE>

                              CHS ELECTRONICS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                                              DECEMBER 31
                                                       ------------------------
                                                         1995            1996
                                                       ----------      --------
ASSETS                                                 (Restated)

CURRENT ASSETS:
Cash                                                    $ 11,171       $ 35,137
Accounts receivable:
  Trade, less allowance for doubtful accounts
  of $4,388 in 1995 and $14,830 in 1996                  112,501        340,098
  Affiliates                                                 843          3,241
                                                        --------       --------
                                                         113,344        343,339
Inventories                                              102,159        321,770
Deferred tax asset                                           456           --
Prepaid expenses                                           9,824         39,374
                                                        --------       --------
  Total current assets                                   236,954        739,620

PROPERTY AND EQUIPMENT, NET                                9,126         30,947
COST IN EXCESS OF ASSETS ACQUIRED, NET                    17,305         78,780
OTHER ASSETS                                               2,419         12,602
                                                        --------       --------
                                                        $265,804       $861,949
                                                        ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Notes payable                                           $ 46,438       $155,932
Accounts payable, trade                                  165,494        452,569
Accrued liabilities                                       14,242         44,873
Amounts due to sellers under
 acquisition agreements                                     --           49,200
Income taxes payable                                         937          5,120
Deferred income taxes                                       --              420
                                                        --------       --------
  Total current liabilities                              227,111        708,114

LONG TERM DEBT                                             8,801         45,327
MINORITY INTEREST                                                         3,975
SHAREHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000
  shares; 0 shares issued and
  outstanding                                               --             --
Common stock, authorized 100,000,000
 shares at $.001 par value; issued and
  outstanding 7,582,534 shares at
  December 31, 1995, and 12,400,384
  shares at December 31, 1996                                  8             12
Additional paid-in capital                                24,976         92,850
Retained earnings                                          4,558         16,724
Cumulative foreign currency
  translation adjustment                                     350         (5,053)
                                                        --------       --------
TOTAL SHAREHOLDERS' EQUITY                                29,892        104,533
                                                        --------       --------
                                                        $265,804       $861,949
                                                        ========       ========

The accompanying notes are an integral part of these statements.

                                      F-2
<PAGE>

                              CHS ELECTRONICS, INC.
                       CONSOLIDATED STATEMENTS OF EARNINGS
                        (In thousands, except share data)

                                                  YEAR ENDED DECEMBER 31
                                             ----------------------------------
                                               1994        1995         1996
                                             --------    --------    ----------
                                                       (Restated)
Net sales (including sales to
  affiliates of $52,421, $21,063
  and $0 in 1994, 1995 and 1996,
  respectively)                              $359,169    $936,703    $1,855,540

Cost of goods sold                            333,983     868,716     1,724,432
                                             --------    --------    ----------

Gross profit                                   25,186      67,987       131,108
Operating expenses                             21,798      57,188       102,235
                                             --------    --------    ----------

Operating income                                3,388      10,799        28,873

Other (income) expense
Interest income                                  (250)     (1,757)       (3,199)
Interest expense                                2,070       6,454        11,712
                                             --------    --------    ----------
                                                1,820       4,697         8,513
                                             --------    --------    ----------
Earnings before income taxes and
  minority interest in subsidiaries             1,568       6,102        20,360

Income taxes                                      603       1,797         6,086
Minority interest in subsidiaries                --          --           2,108
                                             --------    --------    ----------
Net earnings                                 $    965    $  4,305    $   12,166
                                             ========    ========    ==========

Net earnings per common share                $    .21    $    .59    $     1.16
                                             ========    ========    ==========

The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                          CHS ELECTRONICS, INC.
             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                       Three Years Ended December 31, 1996
                                 (In thousands)
                                                                                                      CUMULATIVE
                                                                                                        FOREIGN
                                                            ADDITIONAL     RETAINED                     CURRENCY
                                               COMMON        PAID-IN       EARNINGS       DEFERRED    TRANSLATION
                                                STOCK        CAPITAL       (DEFICIT)    COMPENSATION   ADJUSTMENT      TOTAL
                                               ------       ----------     ---------    ------------  -----------     ------
<S>                                            <C>          <C>            <C>          <C>           <C>             <C>
Balance at January 1, 1994                           6         3,247          (712)         --            (611)        1,930

Issuance of common stock through
private offering                                     2         3,998          --            --            --           4,000

Issuance of common stock in
acquisitions                                         6        18,841          --            --            --          18,847

Issuance of compensatory stock options            --             280          --            (280)         --            --

Deferred compensation recognized                  --            --            --             142          --             142

Net earnings                                      --            --             965          --            --             965

Foreign currency translation adjustment           --            --            --            --             734           734
                                              --------      --------      --------      --------      --------      --------
Balance at December 31, 1994, as
previously reported                                 14        26,366           253          (138)          123        26,618

Adjustment for acquisition of six
companies (Note B)                                --          (6,748)         --            --            --          (6,748)
                                              --------      --------      --------      --------      --------      --------
Balance December 31, 1994 as restated               14        19,618           253          (138)          123        19,870

Adjustment 1 for 2 reverse split                    (7)            7          --            --            --            --

Deferred compensation recognized                  --            --            --             138          --             138

Issuance of common stock in acquisitions             1         5,351          --            --            --           5,352

Net earnings                                      --            --           4,305          --            --           4,305

Foreign currency translation adjustment           --            --            --            --             227           227
                                              --------      --------      --------      --------      --------      --------

Balance at December 31, 1995                         8        24,976         4,558          --             350        29,892

Common stock or other consideration
issued in acquisitions (Note B)                   --          16,982          --            --            --          16,982

Common stock issued in public offering               4        50,610          --            --            --          50,614

Stock options exercised                           --             282          --            --            --             282

Net earnings                                      --            --          12,166          --            --          12,166

Foreign currency translation adjustment           --            --            --            --          (5,403)       (5,403)
                                              --------      --------      --------      --------      --------      --------

Balance at December 31, 1996                  $     12      $ 92,850      $ 16,724      $   --        $ (5,053)     $104,533
                                              ========      ========      ========      ========      ========      ========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>

                              CHS ELECTRONICS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (In thousands, except share data)

                                                   YEAR ENDED DECEMBER 31
                                              -------------------------------
                                                1994        1995        1996
                                              --------    --------    -------
                                              (Restated)  (Restated)
Increase in cash and cash equivalents:
Cash flows from operating activities:
Net earnings                                  $    965    $  4,305    $ 12,166
Adjustments to reconcile net earnings
  to net cash provided by (used in)
  operating activities:
  Depreciation and amortization                    874       2,456       5,200
  Deferred compensation amortized                  138         148       1,432
  Minority interest in net earnings               --          --         2,108
  Changes in assets and liabilities excluding
  effects of acquisitions:
  Accounts receivable-trade, net                (9,242)    (37,724)   (118,694)
  Acounts receivable-affiliates, net            (1,022)    (12,285)     (2,398)
  Inventories                                  (18,798)    (32,204)   (129,357)
  Prepaid expenses and other current assets     (2,429)     (1,742)    (22,345)
  Accounts payable                              36,617      51,818     173,244
  Accrued liabilities and income taxes             758       3,175     (20,481)
                                              --------    --------    --------
Net cash provided by (used in)
  operating activities:                          7,861     (22,053)    (99,125)

Cash flows from investing activities:

  Purchase of fixed assets                      (1,728)     (6,866)    (11,624)
  Cash provided from (used in) acquisitions      4,890       1,317     (26,876)
                                              --------    --------    --------
Net cash provided by (used in)
  investing activities:                          3,162      (5,549)    (38,500)

Cash flows from financing activities:
  Proceeds from public offering                   --          --        50,614
  Proceeds from private placement                4,000        --          --
  Proceeds from stock options exercised           --          --           282
  Payments on notes to affiliate                (3,771)       --          --
  Proceeds from affiliate notes                  1,650        --          --
  Net borrowing from (repayments to) banks      (5,254)     29,855     112,452
                                              --------    --------    --------
  Net cash provided by (used in)
    financing activities:                       (3,375)     29,855     163,348

Effect of exchange rate changes on cash            117         550      (1,757)
                                              --------    --------    --------

INCREASE  IN CASH AND CASH EQUIVALENTS           7,765       2,803      23,966

Cash at beginning of year                          603       8,368      11,171
                                              --------    --------    --------

Cash at end of year                           $  8,368    $ 11,171      35,137
                                              ========    ========    ========
(continued)

                                      F-5
<PAGE>

                              CHS ELECTRONICS, INC.
            CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                    (In thousands, except share data)

                                                     YEAR ENDED DECEMBER 31
                                                --------------------------------
                                                   1994        1995       1996
                                                ----------  ----------   -------
                                                (Restated)  (Restated)

Supplemental disclosure of cash flow information:

Cash paid during the period for:
  Interest                                         $1,532      $4,944    $10,064
  Income Taxes                                     $  747      $1,753    $ 3,892

Non cash investing and financing activities:
These statements of cash flows do not include non-cash investing and financing
transactions associated with the common stock issued for various acquisitions.
The components of the transactions in each year are as follows:

                                                    YEAR ENDED DECEMBER 31
                                                ------------------------------
                                                  1994        1995      1996
                                                -------     -------    -------

Fair value of assets acquired including
  cash acquired                                 $92,049     $19,216    $14,691
Less: Common stock or other
  consideration issued                           26,647       7,152      3,278
                                                -------     -------    -------
Liabilities assumed                             $65,402     $12,064    $11,413
                                                =======     =======    =======

In 1996, $13.7 million was credited to additional paid-in capital representing
additional consideration paid by Comtrad under acquisition agreements for
subsidiaries now held by the Company

In 1994 and 1995, a $6.7 million and a $5.2 million, respectively, reduction in
receivable from affiliate was charged to additional paid-in capital.
Compensatory stock options of $280,000 were issued in 1994.

The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>

                              CHS ELECTRONICS, INC.
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                       Three Years ended December 31, 1996

NOTE A - SUMMARY OF ACCOUNTING POLICIES

1. FORMATION OF BUSINESS

On January 1, 1993, CHS Electronic Publishing Service GmbH, (CHS Germany) was
acquired by Comtrad, Inc. ("Comtrad"), a U.S. corporation based in Miami,
Florida. In December 1993, Comtrad transferred CHS Germany to a publicly held,
inactive Utah corporation which then changed its name to CHS Electronics, Inc.
(the Company). This transaction has been accounted for as a reverse acquisition
so that in all periods prior to 1994, CHS Germany is the reporting entity.

2. NATURE OF OPERATIONS

The Company is an international distributor of computer equipment, peripherals
and software. The products are sold, principally to resellers, in Western
Europe, South America and Eastern Europe.

3. RESTATEMENTS

The 1994 and 1995 financial statements have been restated for the effects of
companies acquired in a manner similar to a pooling of interests due to a common
control (see note B). All share and per share information have been restated for
a one for two reverse stock split approved by the shareholders in March 1996.

4. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its subsidiaries, wholly owned and majority owned. All significant intercompany
accounts and transactions have been eliminated in consolidation.

5. FOREIGN CURRENCY TRANSLATION

Assets and liabilities of foreign subsidiaries are translated into United States
dollars at the exchange rate in effect at the end of the year. Revenues and
expenses of these subsidiaries are translated at the average exchange rate
during the year. The aggregate effect of translating the financial statements of
foreign subsidiaries is included in a separate component of shareholders' equity
entitled cumulative foreign currency translation adjustment. In the normal
course of business, the Company advances funds to certain of its foreign
subsidiaries, which are not expected to be repaid in the foreseeable future.
Translation adjustments resulting from these advances are included in cumulative
foreign currency translation adjustment. For entities in highly inflationary
countries, the U.S. dollar is considered the functional currency and a
combination of current and historical rates are used in translating assets and
liabilities. The related exchange adjustments are included in earnings.

6. CASH EQUIVALENTS

For the purpose of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

                                      F-7
<PAGE>

7. CONCENTRATION OF CREDIT RISK

The Company's credit risk on trade receivables is diversified over a wide
geographic area and many customers. The largest customer accounts for less than
1% of sales. The Company performs ongoing credit evaluations of its customers.
In South America, the Company obtains guarantees from its customers in some
cases. The Company uses credit insurance in several locations (covering $223
million in receivables at December 31, 1996) and factoring without recourse in
other locations to mitigate risk and provides for estimated credit losses at
time of sale.

8. INVENTORIES

Inventories, consisting of finished products, are stated at the lower of cost or
market, with cost being determined principally by current replacement cost,
which approximates the first-in first-out method.

9. DEPRECIATION AND AMORTIZATION

Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives.
Leasehold improvements are amortized over the lives of respective leases or the
service lives of the improvements whichever is shorter.

The straight-line and accelerated methods of depreciation are followed for
financial reporting purposes. The useful lives are as follows:

                                           YEARS
                                           -----
      Buildings                            30-50
      Leasehold improvements               3-7
      Computer equipment                   2-5
      Office equipment and furniture       3-10

Expenditures for renewals and improvements that significantly extend the useful
life of an asset are capitalized. The costs of software used in business
operations are capitalized and amortized over their expected useful lives.
Expenditures for maintenance and repairs are charged to operations when
incurred. When assets are sold or retired, the cost of the asset and the related
accumulated depreciation are removed from the accounts and any gain or loss is
recognized at such time.

10. INCOME TAXES

The Company utilizes the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. Under the liability
method specified by SFAS 109, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities as measured by the current enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense is the result of
changes in deferred tax assets and liabilities.

The Company intends to invest the undistributed earnings of its foreign
subsidiaries indefinitely. At December 31, 1995 and 1996, the cumulative amount
of undistributed earnings on which the Company has not recognized United States
income taxes was approximately $6 million and $13 million, respectively.
However, it is anticipated that United States income taxes on such amounts would
be partially offset by available foreign income tax credits.

11. REVENUE RECOGNITION

The Company recognizes sales upon shipment, as there is no significant post-sale
obligation and collectibility is reasonably assured. Income from vendor rebates,
discounts, and cooperative advertising is recognized when earned, as a reduction
of the cost of inventory sold or as a reduction of operating expenses.

                                      F-8
<PAGE>

12. COST IN EXCESS OF ASSETS ACQUIRED, NET

The cost in excess of assets acquired is being amortized to earnings over a 20
year period on a straight-line basis. The Company evaluates its goodwill in
accordance with Financial Accounting Standard Board Statement No. 121 to
determine potential impairment by comparing the carrying value to undiscounted
future cash flows of the related assets. The Company modifies or adjusts the
value of a subsidiary's goodwill if an impairment is indicated by the difference
between the undiscounted cash flows and the carrying value. All of the Company's
goodwill is identified with the assets acquired and falls under the scope of
SFAS No. 121. Accumulated amortization was $1.2 million and $2.2 million at
December 31, 1995 and 1996, respectively.

13. EARNINGS PER COMMON SHARE

Earnings per share for each year is computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
(common stock options and warrants) outstanding during the year, unless such
inclusion is anti-dilutive. The weighted average number of shares was 4,693,332
in 1994, 7,282,785 in 1995 and 10,438,019 in 1996.

14. STOCK OPTIONS

Options granted under the Company's 1994 Stock Option Plan and Chief Executive
Officer option plan are accounted for under APB Opinion 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES.

15. USE OF ESTIMATES

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

NOTE B - ACQUISITIONS

In 1996 the Company acquired eighteen companies in as many countries. The
largest acquisition was of seven companies comprising the European and Latin
American businesses of a competitor, Merisel, Inc. These seven companies were
acquired for cash and debt assumptions. The total consideration paid was
approximately $148 million consisting of $30 million of cash and $118 million
of debt assumed or refinanced. The Company financed the acquisition primarily
through borrowing or factoring at each subsidiary acquired. Approximately $11
million is owed to Merisel at December 31, 1996. The acquisition has been
accounted for as a purchase, effective as of September 30, 1996. Therefore,
operations of these companies are included only in the 1996 fourth quarter. The
cost of the acquisition has been allocated to the assets acquired based on their
fair values. This resulted in approximately $10.5 million of goodwill.

In connection with this acquisition, the Company intends to consolidate former
Merisel operations and CHS operations in the 5 countries where each had
operations. Additionally, the Company intends to dispose of the former Merisel
warehouse located in the Netherlands and has entered into a letter of intent to
sell the warehouse. The consolidation of the operations in United Kingdom and
France is complete and the remainder of the consolidations should be completed
in 1997. The Company has accrued approximately $15 million for these activities,
consisting of severence cost-$1 million, lease termination-$4.6 million, loss on
sale in Netherlands warehouse-$6.4 million, writeoff of leasehold improvements
and computer systems-$3 million. Through December 31, 1996, $2 million has been
charged against this reserve, consisting principally of severance costs, lease
termination costs and writeoffs of leasehold improvements.

In June 1996, the Company acquired 100% of an unaffiliated company in Russia for
consideration based on a multiple of that company's net income in 1996. The
acquisition was initially recorded at no consideration, which

                                      F-9
<PAGE>

approximated the value of net assets acquired. Subsequently, the agreement was
modified to measure the value of the Company based 50% on 1996 results and 50%
on 1997 results. The 1996 portion is payable in cash and the 1997 portion is
payable in cash or stock at the seller's option. In 1996, $20.6 million was
recorded as purchase price and goodwill.

In April 1996, the Company acquired 100% of an unaffiliated company in
Switzerland for consideration based on a multiple of the acquired company's 1996
net earnings but not less than $1.7 million. The acquisition was initially
recorded at $1.7 million resulting in no goodwill. Subsequently, the agreement
was modified to base the price on results through September 30, 1996. In the
1996 fourth quarter 183,237 CHS shares were issued and there was an adjustment
to the purchase price based on a revaluation of the assets at date of purchase,
which resulted in goodwill of $870,000.

In March 1996, the Company acquired six companies from Comtrad for a reduction
of indebtedness of $7.8 million. These acquisitions have been accounted for as
an exchange between entities under common control in a manner similar to a
pooling of interests. Accordingly, these acquisitions have been included in the
accompanying financial statements from the date acquired by Comtrad. As a
result, financial statements for 1995 have been restated. The companies in
Bulgaria, Croatia, Lithuania and Romania were started by Comtrad in 1993 and
1994 for a minimal investment and have insignificant operations. They are
treated as if Comtrad acquired them on December 31, 1994. Sixty-five percent of
a company in Slovakia was acquired in early 1994 for a minimal investment and
1994 results were insignificant. The remaining 35% was acquired by Comtrad for a
contingent payment in CHS shares to be based on 1996 results. This acquisition
has been recorded as of December 31, 1994 based on the cost of the 65% interest
acquired with the remaining cost to be recorded as goodwill when known. The
contingent amount is not known at this time. Comtrad acquired the Brazil company
in November 1994 for Comtrad common shares valued at $762,000. The acquisition
was recorded by the Company as of December 31, 1994 at this value, resulting in
goodwill of $2.5 million. An additional amount of $240,000 was paid by Comtrad
in 1996 to complete its acquisition of this company, which had the effect of
increasing goodwill to $2.75 million.

The combined and separate CHS results of the companies for 1995 are as shown
below (in thousands):

<TABLE>
<CAPTION>
                          CHS
                    (AS ORIGINALLY                                                                                (RESTATED)
                      PRESENTED)       BALTIC        BRAZIL        BULGARIA     CROATIA      ROMANIA   SLOVAKIA    COMBINED
                    --------------     ------        ------        --------     -------      -------   --------   ----------
<S>                 <C>                <C>           <C>           <C>          <C>          <C>       <C>         <C>
Sales                  $862,324         2,610        45,934          4,236       4,820        3,592     13,187     $936,703
Net earnings (loss)       4,743            63          (147)           (25)       (100)        (152)       (77)       4,305
</TABLE>

In February 1996, the Company acquired 51% of an unaffiliated company in Hungary
for consideration based on 51% of the book value of equity at December 31, 1996
plus a multiple of 51% of 1996 net earnings. Based on a history of profitable
operations, the acquisition was initially recorded at 51% of the book value on
January 31, 1996. Based on 1996 results the purchase price was increased to
$17.6 million resulting in goodwill of $15.8 million. As permitted by the
agreement, the sellers have elected to receive the proceeds in cash rather than
stock.

In 1995, the Company acquired nine companies in as many countries. Eight of
these were acquired from Comtrad Holdings, Inc. ("CHI") or Comtrad (a wholly
owned subsidiary of CHI) and have been accounted for as an exchange between
entities under common control in a manner similar to a pooling of interests.
Accordingly, these acquisitions have been included in the accompanying financial
statements from the date acquired by Comtrad or CHI. The acquisition of the
company in the Czech Republic was partially (16%) from Comtrad and partially
from an individual. The portion from Comtrad was valued at Comtrad's basis of
$758,000. The portion purchased from the unrelated individual has been accounted
for as a purchase. Results of the remaining 84% of the Czech Republic company
have been included in the accompanying financial statements from October 1,
1995. Information about the pooled acquisitions is shown below:

                                      F-10
<PAGE>

<TABLE>
<CAPTION>
                                                                 CHS               COMTRAD OR CHI
COMPANY            SERVICE AREA        CONSIDERATION       ACQUISITION DATE       ACQUISITION DATE
---------------------------------   --------------------------------------------------------------
<S>                <C>              <C>                    <C>                    <C>
CHS England        United Kingdom                             April 1995           September 1994
CHS France         France               1,750,000             April 1995           September 1994
CHS Belgium        Belgium                shares              April 1995           September 1994
CHS Portugal       Portugal                                   April 1995            January 1993
CHS BEK            South America     287,500 shares          October 1995            July 1995
CHS Czechia(16%)   Czech Republic     92,000 shares          October 1995           January 1993
CHS Finland        Finland             $2,300,000           December 1995            July 1995
CHS Sweden         Sweden              $2,400,000           December 1995            July 1995
CHS ABC Data       Poland              $2,300,000           December 1995          November 1995
</TABLE>

In these transactions, assets and liabilities were transferred to the Company at
Comtrad's or CHI's original cost basis. In several of these transactions
Comtrad's cost is subject to adjustment from earn out agreements. Comtrad's
purchase price for the three companies in the United Kingdom, France and Belgium
consisted of a $7 million note and an amount determined by an earn out based on
1994 and 1995 earnings. In accounting for this transaction initially, after
reducing fixed assets to zero, there was an excess of net assets acquired over
cost ($4,161,000 at December 31, 1994). In May 1995, the acquisition agreement
was modified to reduce to 100,000 the maximum number of additional Company
shares that could become due to such sellers based on 1995 operating results, in
return for Comtrad's payment to the sellers of $794,000 and 500,000 shares of
Company stock owned by Comtrad. The 100,000 additional shares were issued by
Comtrad in early 1996. The value of this additional purchase price ($5,344,000),
less what had previously been recorded as a liability for the 1994 earn out
($617,000), has been recorded in the accompanying consolidated balance sheet as
an increase in additional paid in capital, a reduction of the excess of net
assets acquired over cost to zero and restoration of a portion of fixed assets.
In 1995, $975,000 of depreciation which would have applied to fixed assets
reduced to zero was not incurred.

As consideration for the acquisition of the company in Portugal, Comtrad
delivered common stock valued at $800,000. The acquisition was recorded at this
value, resulting in goodwill of $450,000.

As consideration for the acquisition of BEK, CHI delivered CHI class B common
shares which have preference rights in liquidation to a specified number of
Company shares held by CHI depending on a one year earn out. As of December 31,
1995, the acquisition was recorded at CHI's basis of approximately $1.75
million, based on the six month results. In 1996 the amount was adjusted to $2.4
million based on the final results resulting in total goodwill of $2.4 million.

Comtrad acquired two companies in Sweden and Finland, for a number of Company
shares owned by Comtrad to be determined by an earn out based on 1996 results.
At December 31,1996 the amount was recorded based on such results, at $11.2
million by charging costs in excess of assets acquired and crediting additional
paid-in capital.

In consideration for the acquisition of the company in Poland, CHI delivered
shares of its stock, a $600,000 note and an unknown number of Company shares to
be determined by an earn out based on 1996 results. The value given by CHI was
determined to be $1.8 million and the difference of $500,000 between that amount
and the price paid by the Company has been charged to additional paid-in
capital. Costs in excess of assets acquired of $.7 million has been recorded on
this transaction. At December 31, 1996, the earn out amount was recorded based
on 1996 results at $2.2 million which increased goodwill and additional paid-in
capital.

As noted above, terms of several of the acquisitions by Comtrad provided for
contingent consideration. The Company believes such contingent consideration
payments are additional purchase price. The Company's conclusion is based on the
terms of each agreement, which provide that the contingent consideration is not
dependent on the continued employment of sellers, is based on a multiple of
earnings over a short time period, is the major portion of the purchase price
and is in addition to fair compensation paid to the former owner through salary
and bonus.

                                      F-11
<PAGE>

The Company acquired 84% of the Czech Republic company from an individual by
issuing 483,000 shares which were valued at their market value of $3,246,000.
This produced goodwill of $2.4 million.

On June 30, 1994, the Company entered into a Plan of Acquisition ("Plan"), with
Comtrad, CHI, and Alvin Perlman ("Perlman"), the sole shareholder of CHS Promark
and the owner of the minority interests in certain subsidiaries. Under the terms
of the Plan, the Company acquired from CHI 77% of the capital stock of CHS
Promark and 30% of the outstanding capital of three companies operating in
Argentina, Chile and Colombia (the South American subsidiaries) in exchange for
1,540,000 shares of the Company's common stock. In a simultaneous transaction,
the Company acquired the remaining 23% of the stock of CHS Promark (which owned
the remaining 70% of the South American subsidiaries) from Perlman in exchange
for 460,000 shares of the Company's common stock. In July 1994, CHS Promark
acquired the Venezuelan operations of Comtrad for nominal consideration. The
exchange between the Company and CHI has been accounted for as an exchange
between entities under common control with CHI's cost basis in the acquired
assets being pushed down to the Company. The exchange between the Company and
Perlman for the remaining 23% interest in CHS Promark has been accounted for by
the Company as a purchase. The Company recorded a total investment of $11.3
million, which was the fair market value of CHS Promark as determined by an
independent appraisal. The excess of the cost over the fair value of the net
assets acquired was approximately $8.4 million and is being amortized over 20
years.

The following represents the unaudited pro forma results of operations assuming
all of these acquisitions had taken place on January 1, 1995:

                                          YEAR ENDED DECEMBER 31
                                     ------------------------------
                                     (000'S EXCEPT PER SHARE DATA)

                                          1995          1996
                                       ----------    ----------

Sales                                  $2,449,861    $2,940,792
Net earnings                                1,995         4,317
Net earnings per share                 $      .25    $      .41

Proforma adjustments have been made to eliminate non-recurring loss in the
operations acquired from Merisel and to add goodwill amortization and interest
expense on the amounts payable to selling stockholders at 7.5%. The proforma
information is not necessarily indicative of the actual results of operation
that would have occurred had the acquisitions taken place on January 1, 1995, or
of results which may occur in the future.

                                      F-12
<PAGE>

NOTE C - ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                            YEAR ENDED DECEMBER 31
                                         ---------------------------
                                               (IN THOUSANDS)

                                           1994      1995      1996
                                         -------   -------   -------
Allowance for doubtful accounts
  Beginning balance                       $ 546     $3,358   $ 4,388
  Provision for bad debt                  1,596      3,035     3,412
  Write-offs                               (473)    (2,161)   (3,775)
  Acquired though acquisition             1,689       156     10,805
                                         ------    ------    -------

  Ending balance                         $3,358    $4,388    $14,830
                                         ======    ======    =======

NOTE D - PROPERTY AND EQUIPMENT

                                                     DECEMBER 31
                                                  -----------------
                                                    (IN THOUSANDS)

                                                    1995      1996
                                                  -------   -------

Land and buildings                                $ 1,943   $ 3,167
Furniture and fixtures                              6,973    15,126
Leasehold improvements                              1,790     4,914
Computers and office equipment                      2,498    25,000
Vehicles and other                                  1,992     5,414
                                                  -------   -------
                                                   15,196    53,621

Less accumulated depreciation and amortization      6,070    22,674
                                                  -------   -------
                                                  $ 9,126   $30,947
                                                  =======   =======

                                      F-13
<PAGE>

NOTE E - INCOME TAXES

The components of earnings before income taxes and minority interest in
subsidiaries consist of the following:

                                             YEAR ENDED DECEMBER 31
                                          ---------------------------
                                                (IN THOUSANDS)

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

  Domestic                                $1,258    $  741    $ 1,361
  Foreign                                    310     5,361     18,999
                                          ------    ------    -------
  Total                                   $1,568    $6,102    $20,360
                                          ======    ======    =======

The provision for income taxes consists of the following:

                                             YEAR ENDED DECEMBER 31
                                          ---------------------------
                                                (IN THOUSANDS)

                                           1994      1995      1996
                                          ------    ------    ------
Current
  U.S Federal                             $ 776    $  525     $1,721
  U.S. State                                122        41        228
  Foreign                                    35     1,357      4,520
                                          -----    ------     ------
                                            933     1,923      6,469
                                          -----    ------     ------
Deferred
  U.S Federal                              (289)   $   67       (258)
  U.S. State                                (41)        5        (47)
  Foreign                                     -      (198)       (78)
                                          -----    ------     ------
                                           (330)     (126)      (383)
                                          -----    ------     ------
  Total                                   $ 603    $1,797     $6,086
                                          =====    ======     ======

Deferred tax assets (liabilities) are comprised of the following:

                                                           DECEMBER 31
                                                      --------------------
                                                         (IN THOUSANDS)

                                                        1995        1996
                                                      -------     --------

  Net operating losses of foreign subsidiaries        $ 4,162     $ 11,405
  Employee compensation not currently deductible          127          131
  Inventory differences                                    66       (3,009)
  Allowances for bad debts                                265        1,788
  Accruals not currently deductible                         -          305
  Other                                                     -          (34)
                                                      -------     --------
                                                        4,620       10,586
  Valuation allowance                                  (4,164)     (11,006)
                                                      -------     --------
  Total                                               $   456     $   (420)
                                                      =======     ========

                                      F-14
<PAGE>

The major elements contributing to the difference between taxes at the U.S.
federal statutory tax rate and the effective tax rate are as follows:

                                                YEAR ENDED DECEMBER 31
                                               --------------------------
                                                    (IN THOUSANDS)

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

Income taxes at the statutory rate             $ 533     $2,070    $6,922
Foreign income subject to tax at other
than statutory rate                              (53)      (212)   (1,356)
State or local income taxes, less effect
of federal benefits                               53         55       168
Losses without tax benefit                       390        613     1,329
Goodwill amortization                            108        190       255
Utilizations of net operating losses of
foreign subsidiaries                            (382)      (826)   (1,196)
Other                                            (46)       (93)      (36)
                                               -----     ------    ------
Income taxes at the effective tax rate         $ 603     $1,797    $6,086
                                               =====     ======    ======

At December 31, 1996, the Company has net operating loss carry forwards in
certain foreign jurisdictions that expire as follows:

           1998                  $9,480,000
           1999                   6,539,000
           2000                   1,964,000
           No expiration date    14,388,000

NOTE F - NOTES PAYABLE AND LONG TERM DEBT

Several of the Company's subsidiaries have credit lines with local banks
totaling $224 million at December 31, 1996. Generally, borrowings under such
lines are collateralized by receivables or inventory. The lines are principally
of one year duration and are renewable by the banks. In 1996, the maximum and
average amounts outstanding were $172 million and $116 million, respectively.
The weighted average interest rate at December 31, 1996 was 7.3%.

                                      F-15
<PAGE>

The Company's long-term debt consists of the following at:

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31
                                                                                   ----------------------
                                                                                     1995          1996
                                                                                   --------      --------
<S>                                                                                <C>           <C>
CHS Promark has a $60 million revolving credit agreement with a financial
institution. The agreement, which expires October 1999, provides for advances
and letters of credit based upon eligible accounts receivable and inventories.
Interest is at a variable market rate based on the prime rate of the lender or
LIBOR, at CHS Promark's option. All of CHS Promark's assets, including accounts
receivable and inventories totaling $65.5 million at December 31, 1996, are
pledged as collateral. The agreement contains certain restrictive covenants,
including limitations on transactions with affiliated companies and employee
loans. CHS Promark was in violation of these specific covenants at December 31,
1996, but waivers for these violations were granted by the financial institution
in March, 1997. The agreement also limits the ability of CHS Promark to pay
dividends to the Company to 50% of CHS Promark's net income.                            -      $ 34,374

CHS Promark had a $12,000,000 revolving credit agreement with a bank. The
agreement, which was refinanced in February, 1996, included banker's acceptances
and a line of credit. Interest on the advances under the line was at the bank's
base rate for the first 5 months of 1995 and at a penalty rate for the remainder
of 1995. CHS Promark's accounts receivable and inventories were pledged as
collateral. In addition, the credit agreement contained certain restrictive
covenants.                                                                         $8,004             -

Capitalized leases, collateralized by computer equipment, bearing interest
ranging from 7.4% to 11% with maturities through September, 2002.                     628        10,626

Other notes and mortgages on building, interest at 9.5%, with maturities through
2002, collateralized by a building with net book value at December 31, 1996 of
$674,000.                                                                             343         2,455
                                                                                   ------      --------
Total                                                                               8,975        47,455
Less current portion of long-term debt, included in notes payable                     174         2,128
                                                                                   ------      --------
Total long-term debt                                                               $8,801      $ 45,327
                                                                                   ======      ========
</TABLE>

                                      F-16
<PAGE>

Scheduled maturities of long-term debt are as follows (in thousands):
Year ending December 31,

  1997                                                2,128
  1998                                               38,225
  1999                                                2,571
  2000                                                2,539
  2001                                                  883

NOTE G - CONCENTRATIONS

The Company's operations are substantially all outside the United States. In
1996, the largest amount of sales occurred in Germany, which comprised 17% of
total sales. The Company also had sales of almost 13% in each of France and
England. While these countries are considered politically stable, there is risk
that economic difficulties in any of these countries could adversely affect the
Company's business. The Company also has operations in the less politically
stable countries of Venezuela, Croatia and Bulgaria.

Most of the Company's sales are made in local currencies other than the U.S.
dollar. The largest amounts of sales were in German marks (17%), French francs
(13%) and British pounds (12%). In some countries, certain purchases and the
resulting payables are in currencies (principally the U.S. dollar) different
than the functional currency. Further, certain subsidiaries have loans
receivable or payable denominated in currencies other than their functional
currency. Transaction gains and losses on these receivables and liabilities are
included in the determination of earnings for the relevant periods. In 1994,
1995, and 1996, foreign currency gains were $385,000, $74,000, and $1,559,000,
respectively.

The Company enters into foreign exchange contracts to hedge foreign currency
transactions on a continuing basis for periods consistent with its committed
exposure. The foreign exchange contracts are valued at market and generally have
maturities which do not exceed six months. Gains and losses on foreign exchange
contracts offset losses and gains on assets, liabilities and transactions being
hedged. As a result, the Company does not anticipate any material adverse effect
due to exchange rate movements over the short term period covered by these
contracts. At December 31, 1996, the face value of foreign exchange forward
contracts against trade payables was $47 million, which approximated the fair
market value of the contracts. At December 31, 1996, accounts payable
denominated in U.S. dollars and German marks were $166 million (principally $120
million in U.S. dollars and $43 million in German marks). The largest unhedged
amounts of trade payables was in subsidiaries in the Netherlands ($43 million),
Czech Republic ($16 million), and Poland ($13 million), and various Latin
American countries ($25 million).

In some countries there are risks of continuing periodic devaluations or of
large devaluations. In these countries, no hedging mechanism exists. The Company
has risks in these countries that such devaluations could cause economic loss
and negatively impact future sales since its product cost would increase in
local terms after such devaluations. The Company attempts to limit its economic
loss through structural mechanisms of limiting its holdings of local currency
and receivables to the amount of its local currency payables.

The Company has a major supplier, Hewlett-Packard (HP), whose products accounted
for 49%, 35%, and 34% of sales for 1994, 1995 and 1996, respectively. No other
vendor accounted for more than 10% of sales in any year except in 1996 in which
one vendor was 12%. HP has the right to terminate its distribution agreement
with any Company subsidiary if the subsidiary is unable to cure, within a
reasonable period of time, any violation of the agreement after having received
notice from HP of the violation. Each Company subsidiary has the right to
terminate the HP agreement on 90 days notice. Each Company subsidiary believes
that its relationship with HP is good, and has no reason to believe that its
distribution arrangement will not be a long-term relationship. No assurance can
be given, however, that HP will renew each Company subsidiary's agreement at the
time of its annual review or in subsequent years. Management has not formulated
alternative plans of action in the event the HP contracts are terminated. The
amounts outstanding to HP at December 31, 1995 and 1996 were $32 million and $70
million, respectively.

                                      F-17
<PAGE>

NOTE H - LEASE OBLIGATIONS AND OTHER CONTINGENCIES

The Company leases equipment, offices, sales and warehouse space under
non-cancelable leases. The following is a schedule by years of the minimum
rental commitments remaining on leased property and equipment (in thousands):

YEAR ENDING
DECEMBER 31,         BUILDINGS    EQUIPMENT    VEHICLES AND OTHER      TOTAL
-----------------------------------------------------------------------------
  1997                $7,578       $1,256            $2,233           $11,067
  1998                 5,367          848             1,495             7,710
  1999                 5,037          497               805             6,339
  2000                 4,513          242               555             5,310
  2001                 3,540           33               128             3,701
Subsequent years      16,398          202                 -            16,600

Total rental expense was $1,583,000, $2,503,000, and $6,715,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.

Rental expense includes approximately $734,000 annually for monthly rent due on
a CHS facility in Germany under a lease agreement dated November 1993 with a
term of 17 years. CHS Germany has the option to purchase the leased property at
both the end of the seventh year of the lease term, and at the end of the lease,
for the net book value of the property as calculated under applicable German tax
laws. The option prices at the end of the seventh and seventeenth year would
approximate $5.6 million and $2.8 million, respectively. In addition, the lessor
has the right to adjust the minimum rental payments at the end of 1999 if
certain economic conditions prevail.

The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. The Company is not currently
engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on the Company. The Company is
subject to a tax audit in Portugal where the tax authorities have preliminarily
found a deficiency of approximately $3 million. The Company believes it has
properly reported its income and paid taxes in Portugal and intends to contest
the proposed adjustments vigorously. The Company has requested a re-audit, which
has been granted, although no specific date is yet scheduled. The Company
expects the ultimate resolution of this matter will not have a material adverse
effect on the Company's financial position or results of operations.

NOTE I - RELATED PARTY TRANSACTIONS

At December 31, 1996 and 1995, the Company carried a receivable from Comtrad in
an amount of $3.2 million and $843,000 respectively. In 1996, this receivable is
in the form of a promissory note which Comtrad has agreed to collateralize with
210,000 shares of CHS owned by Comtrad. The amount is due the earlier of a
public offering of the Company or 60 days after demand. Interest charged to
Comtrad was $162,000, $438,000 and $86,000 in 1994, 1995 and 1996 respectively.
In 1995 the Company owed amounts to Comtrad which were subsequently
extinguished. Interest paid to Comtrad was $117,000 and $126,000 in 1994 and
1995, respectively.

In 1996, the Company purchased a company in Romania from Comtrad for $375,000
(see note B). Subsequently, the Company loaned $800,000 to the subsidiary to
enable it to purchase an office building. In December 1996, the Company sold
this subsidiary back to Comtrad for the original purchase price plus an amount
equal to the losses from April to date of sale ($200,000). No gain was
recognized on the sale, which had the impact of increasing the amount due from
Comtrad by $1.4 million.

During 1993, various management services were provided to CHS Germany by Comtrad
or its affiliates. As compensation for these services, a management charge
aggregating $896,000 was levied. In the fourth quarter of 1994, a study was
performed of the actual costs relating to the services provided by Comtrad and
affiliates. Based

                                      F-18
<PAGE>

on such study the Company applied for and received a credit from Comtrad against
such fees of $579,000. Such amount has been recorded as a reduction of
administrative expenses in 1994. In the past the Company billed Comtrad for
actual costs of salaries, space and other administrative costs it incurred on
Comtrad's behalf. Such amounts were $670,000, $495,000, and $0 in 1994, 1995 and
1996, respectively. In 1995, Comtrad billed the Company $887,000 for the
Company's share of actual costs incurred by Comtrad for salaries, space and
other administrative expenses for shared employees.

Comtrad owned operating subsidiaries in Europe engaged in essentially the same
business as CHS Germany. During the ten months ended October 31, 1994, certain
Comtrad subsidiaries purchased substantially all of their goods for resale from
CHS Germany. These entities were initially invoiced at cost plus 2% for all
goods purchased. This arrangement was necessary since formal distributorship
agreements between the Comtrad subsidiary companies and the principal supplier
of goods, Hewlett-Packard, had not been finalized. In the last quarter of 1994,
a study of the actual handling costs was completed, which concluded the actual
costs for the year were 4.5% of such sales. As a result an additional $500,000,
representing the cumulative effect of the difference between 4.5% and 2%, was
billed to the affiliates and recorded in gross profit in 1994. Handling costs
billed to Comtrad, which are recorded as a reduction in operating costs, were
$900,000, $73,000 and $0 in 1994, 1995 and 1996 respectively.

A director of the Company serves the Company as a management consultant under a
consulting agreement specifying payments of $4,000 per month. In 1994, 1995, and
1996, $45,700 and $48,000 and $48,000 respectively was paid under this
agreement.

Immediately prior to the Company's acquisition of CHS Promark, CHI, Comtrad, the
shareholders of Comtrad, the Company and Alvin Perlman entered into an Agreement
and Plan of Exchange ("Exchange Agreement"). Under the terms of the Exchange
Agreement, all of the Comtrad shareholders exchanged 100% of the outstanding
Comtrad common stock for 770,000 shares of CHI common stock and 100,000 shares
of CHI class A common stock. Mr. Perlman exchanged 77% of the issued and
outstanding capital stock of CHS Promark for 230,000 shares of CHI common stock.
The class A common stock of CHI has no dividend, liquidation, participation or
voting rights, except it is redeemable at the election of CHI with 1,540,000
shares of the Company's common stock held by Comtrad and has preference in
liquidation over the CHI common stock with respect to the same 1,540,000 shares.
In a related transaction, Mr. Perlman sold CHI 30% of the capital stock of each
of the South American subsidiaries for $2.5 million paid in the form of $100,000
in cash and a 7% promissory note in the principal amount of $2.4 million which
has been fully satisfied.

The Company has guaranteed the obligation of CHI to pay to the former owner of
its subsidiary in Poland an earn out amount. Such amount, when known, is to be
paid in Company stock.

NOTE J - COMMON STOCK AND STOCK OPTION PLANS

In June 1996, the Company completed a public offering of common shares in which
the Company sold 4,591,539 shares and selling shareholders sold 1,733,461
shares. The Company shares were sold at $12 per share which raised $50.6 million
for the Company net of expenses and commissions. As part of the offering the
underwriter received warrants entitling the purchase of 300,000 shares of stock
in a 4 year period beginning in June 1997 at a price starting at $13.20 and
increasing each year.

In March 1996, the shareholders approved a reincorporation as a Florida company,
a reverse 1 for 2 stock split and the authorization of 5,000,000 shares of
preferred stock in such class or series and with such rights as approved by the
Board of Directors. All share information has been restated to reflect the 1 for
2 split. A majority vote by the holders of the preferred stock as well as the
holders of common stock is necessary to vote affirmatively on matters of
mergers, sales of substantially all the Company's assets, exchanges of stock or
changes in the articles of incorporation.

                                      F-19
<PAGE>

On February 17, 1994, the Company completed a private placement offering of
896,523 shares of its common stock. The stock was sold to unrelated investors at
$4.46 per share. The net proceeds of $3,998,493 were used to partially repay the
$4,000,000 promissory note owed to Comtrad.

In 1994, Claudio Osorio, CHI, and Alvin Perlman entered into an option
agreement. The option agreement grants to CHI and Mr. Osorio an option until
June 30, 1996, subsequently extended to June 1997, to purchase all shares of the
Company's common stock and CHI common stock held by Mr. Perlman for $15 million
less any amounts realized by Mr. Perlman on sales of CHS shares he owns. The
current option price is approximately $10 million. For the month of July 1997,
Mr. Perlman has an option to put all shares of the Company's common stock and
the CHI common stock held by him to Mr. Osorio for $15 million less any amounts
realized by Mr. Perlman on sales of CHS shares he owns , and CHI has guaranteed
Mr. Osorio's performance if the put option is exercised. The payment obligations
of CHI under the option agreement, should they arise, are secured by 727,097
shares of the Company's common stock held by CHI.

In August 1994, a Stock Incentive Plan was adopted by the Company's Board of
Directors and subsequently approved by the Company's shareholders in June 1995.
The maximum number of shares issuable under the Plan was 497,000. In September
1995, the Board of Directors and subsequently the shareholders approved the
issuance of an additional 150,000 shares under the plan. In December 1996, the
Board of Directors approved, subject to approval by the Company's shareholders,
the issuance of an additional 600,000 shares under the plan. Certain of the
grants (423,000 at December 31, 1996) are intended to qualify as incentive stock
options and the remaining are non-qualified options. All options were issued
with an exercise price equal to the market price and have a life of 10 years.
Vesting periods are generally 25% a year for four years.

In June 1996, the Board of Directors approved, subject to approval by the
Company's shareholders the 1996 Chief Executive Officer Option Plan. The Plan
provides for options covering up to 500,000 shares of CHS stock to be issued to
the CEO upon the approval by the Board of Directors of a qualifying acquisition,
as defined or of any acquisition if recommended by the Compensation Committee
and approved by the Board. A qualifying acquisition is one where greater than
50% of the purchase price is comprised of common stock calculated by an earn out
formula. The options are to be granted at market value and vest based on the
earnings of the acquired company. In 1996, 432,794 options were granted under
this plan.

In December 1994, when the estimated fair value was $6.00, the Board granted the
Company's Chief Executive Officer non-qualified options to purchase 56,080
shares for which the exercise price is $1.00 per share. The vesting period is
two years and the options expire in ten years. The compensation element of
$280,400 was considered applicable to this individual's year of service
beginning July 1, 1994 and the full amount has been amortized to compensation
expense in the accompanying financial statements.

The Company accounts for its stock options under APB 25. No compensation cost
has been recognized as the exercise price of such options do not exceed the fair
value of the underlying stock at the date of grant. Had compensation cost for
the plan been determined based on the fair value of the options at the grant
dates consistent with the method of Statement of Financial Accounting Standards
123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123), the Company's net
earnings per share would have been reduced to the pro forma amounts indicated
below.

                                                 1995          1996
                                                 ----          ----

  Net earnings                  As reported   $4,305,000    $12,166,000
                                Pro forma      4,241,000     11,777,000

  Primary earnings per share    As reported   $      .59    $      1.16
                                Pro forma            .58           1.13

                                      F-20
<PAGE>

  The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively; dividend yield of 0%
for each year; expected volatility of 70% in each year; risk-free interest rates
of 5.81% in 1995 and 6.06 % in 1996; and expected lives of 4.5 years for each
year.

A summary of the status of the Company's stock option plans as of December 31,
1994, 1995, and 1996, and changes during the years ending on those dates is
presented below.

<TABLE>
<CAPTION>
                                                1994                     1995                    1996
                                          --------------------     --------------------    ---------------------
                                                      WEIGHTED                 WEIGHTED                 WEIGHTED
                                                       AVERAGE                 AVERAGE                   AVERAGE
                                                      EXERCISE                 EXERCISE                 EXERCISE
                                           SHARES      PRICE       SHARES        PRICE       SHARES       PRICE
                                          -------     --------     -------     --------    ---------    ---------
<S>                                       <C>         <C>          <C>         <C>         <C>          <C>
Outstanding at beginning of year             --           --       402,005     $   5.30      564,088    $   6.90
Granted                                   422,005     $   5.34     223,000         9.58    1,055,813       14.63
Exercised                                    --           --          --           --        (41,074)       6.86
Cancelled                                 (20,000)        6.00     (60,917)        6.16      (35,961)      15.42
                                          -------                  -------                 ---------    --------
Outstanding at end of year                402,005         5.30     564,088         6.90    1,542,866       12.02
                                          =======                  =======                 =========    ========
Options exercisable at year end              --           --       138,855     $   4.99      515,628    $   8.90
Weighted - average fair value of
options granted during the year                            N/A                      N/A                 $   8.83
</TABLE>

The following information applies to options outstanding at December 31, 1996:

  Number outstanding                             1,542,866
  Range of exercise prices                     $6.00-18.63
  Weighted-average exercise price                   $12.02
  Weighted-average remaining contractual life    9.2 years

                                      F-21
<PAGE>

NOTE K - SEGMENT INFORMATION

The Company's operations involve a single industry segment distribution of
microcomputer equipment and software products. The geographic areas in which the
Company operates are Western Europe, Eastern Europe and Latin America. Net
sales, operating income (before interest and income taxes) and identifiable
assets by geographical area were as follows (in thousands):

<TABLE>
<CAPTION>
                      WESTERN     EASTERN       LATIN
                       EUROPE     EUROPE       AMERICA     ELIMINATIONS    CONSOLIDATED
                     ---------    -------     --------     ------------    ------------
<S>                  <C>          <C>         <C>          <C>             <C>
1994
----
Net sales            $ 287,244    $ 6,559     $ 65,366       $    -        $  359,169
                                                                           ==========
Operating income         1,809         43        2,004            -             3,856
Corporate expenses                                                               (468)
                                                                           ----------
                                                                                3,388
                                                                           ==========
Identifiable assets    110,457      4,868       49,433         (419)          164,339
Corporate assets                                                                  129
                                                                           ----------
                                                                           $  164,468
                                                                           ==========
1995
----
Net sales            $ 542,438    $65,320     $328,945       $    -        $  936,703
                                                                           ==========
Operating income         7,358        252        3,934            -            11,544
Corporate expenses                                                               (745)
                                                                           ----------
                                                                               10,799
                                                                           ==========
Identifiable assets    169,442     33,283       85,409      (22,677)          265,457
Corporate assets                                                                  347
                                                                           ----------
                                                                           $  265,804
                                                                           ==========
1996
----
Net sales           $1,063,997   $215,518     $576,025            -        $1,855,540
                                                                           ==========
Operating income         9,559     11,440       10,663            -            31,662
Corporate expenses                                                             (2,789)
                                                                           ----------
                                                                               28,873
                                                                           ==========
Identifiable assets    528,568    110,656      207,734            -           846,958
Corporate assets                                                               14,991
                                                                           ----------
                                                                           $  861,949
                                                                           ==========
</TABLE>

NOTE L - SUBSEQUENT EVENTS

In December 1996 the Company signed a definitive agreement to purchase Frank &
Walter GmbH, a privately held company in Germany in the same business as the
Company. The agreement is subject to obtaining governmental anti-trust approvals
(which has been done) and certain other provisions. The transaction is expected
to close in March 1997 but be effective January, 1997. The purchase price is 2.2
million unregistered shares of common stock. The transaction is expected to be
accounted for as a purchase. For 1996, Frank & Walter had net sales of $686
million, operating income of $10.8 million and pretax income of $6.3 million
(unaudited information)

In January 1997 the Board of Directors approved, subject to approval by the
Company's shareholders, the Directors and Officers 1997 Stock Option Plan. Under
the plan 600,000 options will be available for grant to senior officers and
directors. All options will be granted at market value and have specific vesting
periods, generally pro rata over 3 years. Through March 1997, 540,000 options
were granted under this plan.

                                      F-22
<PAGE>

NOTE M - SUMMARIZED QUARTERLY FINANCIAL DATA FOR 1995 AND 1996 (unaudited)

             (in thousands, except for per share information)

                            Q1         Q2          Q3        Q4       YEAR
                         ------------------------------------------------------
1995
----
Net sales                $207,419  $172,744   $239,074   $317,466    $936,703
Gross profit               14,910    13,400     17,425     22,252      67,987
Net earnings                1,667       950      1,163        525       4,305
Net earnings per share        .24       .14        .16        .07         .59

1996
----
Net sales                $302,995  $316,506   $376,209   $859,830  $1,855,540
Gross profit               22,542    23,764     27,109     57,693     131,108
Net earnings                1,988     1,726      2,325      6,127      12,166
Net earnings per share        .25       .21        .19        .48(A)     1.16

(A) Results for the fourth quarter 1996 include a restructuring charge of $1.4
million ($1.1 million or $.11 per share after tax) for costs incurred by the
Company to implement consolidation of its operations with acquired operations
from Merisel.

                                      F-23

<PAGE>

<TABLE>
<CAPTION>
                               INDEX TO EXHIBITS

                                                                             SEQUENTIALLY
EXHIBIT                                                                        NUMBERED
NUMBER        DESCRIPTION                                                        PAGE
-------       -----------                                                    ------------
<S>           <C>                                                            <C>
 10.34        Second Amendment to Purchase Agreement by and among CHS
              Electronics, Inc. as Buyer and Merisel, Inc. and Merisel Europe,
              Inc. as Sellers dated as of December 27, 1996 (5)
 10.35        Settlement Agreement and Release by and among CHS Electronics,
              Inc. as Buyer and Merisel, Inc. and Merisel Europe, Inc. as
              Sellers dated February 13, 1997 (5)
 10.36        Agreement as of October 31, 1996 between CHS Electronics, Inc. and
              Comtrad, Inc. (5)
 10.37        Stock Exchange Agreement dated December 19, 1996 between CHS
              Electronics, Inc. and Frank & Walter Computer GmbH (5)
 21           Subsidiaries of the Company (5)
 23.1         Consent of Independent Certified Public Accountants(5)
 27.1         Financial Data Schedule(5)

</TABLE>