SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                     For the fiscal year ended June 30, 2000
                                       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 No. 000-02324
                                              ---------

                              Aeroflex Incorporated
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                              11-1974412
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

35 South Service Road, Plainview, New York                         11803
(Address of Principal Executive Offices)                        (Zip Code)

Registrant's telephone number, including area code:           (516) 694-6700

           Securities registered pursuant to Section 12(b) of the Act:

                                            Name of Each Exchange on
          Title of Class                        Which Registered
          --------------                    ------------------------
               None

Securities registered pursuant
to Section 12(g) of the Act:              Common Stock, $.10 par value
                                          ----------------------------
                                               (Title of Class)

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

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

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant. (The aggregate market value shall be computed by reference to
the price at which the stock was sold,  or the average  bid and asked  prices of
such stock,  as of a specified date within 60 days prior to the date of filing).
As of September 18, 2000 - approximately $1,227,782,000.

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest  practicable  date (applicable only to
corporate registrants).  Common Stock, par value $.10 per share;  outstanding as
of September 18, 2000 - 28,159,174 (excluding 2,194 shares held in treasury).

     Documents  incorporated  by reference:  Part III - Registrant's  definitive
proxy  statement to be filed pursuant to Regulation 14A of the Securities Act of
1934.
<PAGE>
ITEM ONE - BUSINESS

Overview

We use our advanced design, engineering and manufacturing abilities to produce
microelectronic,  integrated  circuit,  interconnect and testing solutions.  Our
products are used in the fiber optic,  broadband  cable,  wireless and satellite
communications  markets.  We also design and manufacture  motion control systems
and  shock  and  vibration  isolation  systems  which  are used for  commercial,
industrial and defense applications.

Our operations are grouped into three segments:

     --   Microelectronics
     --   Test, Measurement and Other Electronics
     --   Isolator Products

These segments, their products and the markets they serve are described below.

Microelectronics

The table below lists some of our products.
<TABLE>
<CAPTION>
   Market           Substrates              Assemblies/Modules      Integrated Circuits
   ------           ----------              ------------------      --------------------
<S>             <C>                        <C>                      <C>
Fiber Optics    Laser Diodes               Application Specific
(including      PIN Pre-Amplifiers         Carrier Assemblies
Cable)          Transimpedance             APD Receiver
                 Amplifiers                Sub-Assemblies
                Pre-Amplifiers             Clock Recovery
                Post-Amplifiers            Synthesizers
                Lithium Niobate            Laser Diode Assemblies
                 Terminations              Transmitter Assemblies
                Mach-Zender Modulators     Modulator Assemblies
                Clock Recovery
                PIN Receivers
                APD Receivers
                1 Ghz Pre- and Post-
                 Amplifiers
                Trunk Amplifiers
                Line Extenders
                Power Doublers

Wireless        Receivers                  Memory Modules           Application Specific
(including      Handset Diplexers          Multiplexers              Integrated Circuits
Satellite)      Handset Triplexers         Data Communication       Controllers
                S, L, Ka, Ku Band           Modules                 Memories
                 Transmit and Receive      Micro Controllers        LVDS Interconnects
                 Modules                   DC to DC Converters      Programmable Logic
                Amplifiers                 Voltages Regulators
                Filters                    IF Switches

</TABLE>
                               -2-
<PAGE>
Thin Film Circuits and Interconnects

We design,  develop,  manufacture and market advanced integrated fiber optic and
wireless  interconnect  products  based on thin film  manufacturing  technology.
Primary product  requirements for this advanced technology include the following
attributes:

--   miniaturization;
--   ease of assembly;
--   improved thermal management;
--   reduced power consumption; and
--   critical component (laser) alignment.

Due to the unique dimensional,  thermal and electrical capabilities of our PIMIC
interconnect technology, our products have become an essential component in:

--   fiber optic transmitters, receivers and amplifiers;
--   cable trunk amplifiers, line extenders,  pre-amplifiers and power doublers;
     and
--   point-to-point and point-to-multipoint microwave radios.

Thin film interconnect technology allows fiber optic module manufacturers,  such
as Nortel Networks,  Lucent  Technologies  and JDS Uniphase,  to achieve maximum
performance  with a low cost of ownership and a high level of quality.  Exacting
laser,  optical lens and diode  placement  requirements,  coupled with stringent
thermal  management needs, make our advanced optical  interconnect  technology a
market  leading  choice  among  the  major  fiber  optic  module  manufacturers.
Continued migration from 2.5 gigabit, or Gbit, transmission rates to 10 Gbit and
40 Gbit  transmission  rates  results  in  increased  output  power  levels  and
operating  frequencies,  further  driving  the  need  for our  advanced  optical
interconnect technology.

Our products also play an  increasingly  important role in the  development  and
expansion of the broadband  cable and HFC  architecture.  Applications  in trunk
amplifiers, line extenders, pre- amplifiers,  post-amplifiers and power doublers
has enabled  greater  bandwidth,  improved  loss  characteristics  and increased
channel  capability  at  the  systems  level.  Additionally,   in  the  wireless
marketplace,  the  advance of dual and  tri-mode  handsets  has  resulted in our
design  of  a  series  of  miniaturized   diplexers  and  triplexers  for  these
communications devices.

Microelectronic Modules

We design,  develop and manufacture  sub-assemblies  and modules for fiber optic
networks.  These  products  primarily  support  the 10 to 40  Gbit  fiber  optic
networks.  Our  manufacturing  equipment,  methods and processes are designed to
maintain the critical  tolerances  required for fiber optic  components and high
Gigahertz RF and microwave  signals.  Our manufacturing  methods are designed to
use  automatic  placement  equipment  and  batch  processing  for  maximum  cost
efficiency and reliability.

We are one of the world's leading  manufacturers of space hybrid  microcircuits.
We hold  several  prime  space  contractor  certifications.  We  offer  numerous
application specific  multi-function  modules and hybrid designs that are highly
reliable,  small and  lightweight;  attributes  that are  significant  for space
components.



                               -3-
<PAGE>
Silicon Integrated Circuits

We have been a designer and supplier of silicon  integrated  circuits for almost
20 years. Our products include both custom and standard integrated circuits such
as databuses, transceivers, microcontrollers, microprocessors and memories. Many
of these circuits are radiation  tolerant for satellite and space  applications.
Our products are on over 100 aerospace  platforms.  Our standard and  semicustom
circuits  are  available  in the  latest  0.6  and  0.25  micron  silicon  wafer
technologies.

The  standard  circuits  include  the  primary  processor,  memory  and  databus
functionality,  and the  semi-custom  gate arrays are available with up to three
million usable gates. These gate arrays are available in both radiation tolerant
and non-radiation tolerant technologies and have been used frequently to replace
field  programmable  gate array  implementations.  We have  pioneered the use of
commercial  foundries  to  product  radiation  tolerant  components,   known  as
Commercial RadHard, for the commercial space marketplace.

Our subsidiary,  Aeroflex UTMC has developed a Content  Addressable Memory (CAM)
Engine,  the UTCAM-Engine , which is beneficial for network and internet address
processing,  image  processing,  pattern  recognition,  artificial  intelligence
learning systems and database applications.  The UTCAM-Engine is based on 0.35 m
technology,  runs at 100 MHz and  delivers  association  matches in as little as
70ns when using fast SRAM.

The Aeroflex UTMC Circuit Card Assembly  capability  consists of full  assembly,
test and coat in a high mix/low-to-medium volume operation. UTMC's processes and
test capabilities provide for state-of-the-art  manufacturing.  UTMC's SpaceCard
combines  best  commercial  practices of the circuit card  assembly  with UTMC's
radiation-hardened   integrated  circuits  to  provide  CCA  solutions  for  the
commercial  space  industry.  UTMC's  CCA  operation  also  assembles  the UT131
Embedded  Controller  Card, a UTMC Standard Product Card. The UT131 ECC is ideal
for space applications.

Test, Measurement and Other Electronics

Instrumentation

Our high-speed test equipment  provides product  enhancements to  communications
systems  manufacturers.  Our  line of  frequency  synthesizers  offers  the best
combination  of  high-speed  and  low  phase  noise   available,   covering  all
communications frequencies. Our FS1000 is a microwave frequency synthesizer that
has been developed to support the requirements of mixed signal test systems used
in the  semiconductor  market.  Our test  systems are  designed to  dramatically
reduce test time for radio  frequency  semiconductors  which allows end users to
increase  throughput without increasing costs. These benefits are derived from a
design  architecture  that  yields  superior  phase  noise and  switching  speed
performance - technology for which we believe we are well-known in the industry.

Our test system products allow communication manufacturers to test communication
satellite  payloads and  transmit/receive  modules faster and more  economically
than ever  before.  Our digital  signal  processing  equipment  and  proprietary
software  algorithms allow users to simultaneously  measure multiple  functions,
eliminating the need for individual instruments.  These testers are based on our
proprietary  software,  firmware,  frequency  conversion  and high-  speed  data
acquisition   technologies  and  allow  for  higher  throughputs  and  increased
flexibility.


                               -4-

<PAGE>
Motion Control Systems

Motion control  systems  includes three  divisions:  stabilization  and tracking
devices,  magnetic motors and scanning devices.  We design,  develop and produce
stabilization  tracking  devices and systems.  These  products play an important
role in high altitude aircraft,  as well as in other aircraft,  ships and ground
vehicles which require precise, highly stable mounting for cameras, antennae and
lasers.  Magnetic motors are utilized in our  stabilization and tracking systems
and in other  applications  where  precise  movement  is  required,  such as for
positioning  antennae,  optical systems,  mechanical  vanes and valves.  We make
electro-optical  scanning devices that are low cost, lightweight thermal imaging
devices  that  detect  targets  based on thermal  radiation  contrasts  with the
background.  These sights are intended for use on standard  issue United  States
Army assault rifles and crew served weapons.

Isolator Products

We design, develop,  manufacture and sell shock and vibration isolation systems.
These devices include rubber, spring and steel wire rope shock and vibration and
noise control  devices.  Purchasers of isolators are  manufacturers  or users of
equipment sensitive to shock and vibration who need to reduce shock/vibration to
levels  compatible  with equipment  fragility to extend the useful life of their
equipment.   There  are  multiple  markets  for  isolation   systems   including
commercial, industrial and defense.

Customers

We   have   hundreds   of   customers   in   the   communications,    satellite,
aerospace/defense,   transportation  and  construction  industries.  Except  for
Teradyne  (11.0%) and Lockheed  Martin (10.5%) in fiscal 2000,  Lockheed  Martin
(12.2%) and Lucent  Technologies  (11.4%) in fiscal 1999 and Lucent Technologies
(15.5%) in fiscal 1998,  no one customer  accounted for more than 10% of our net
sales.

Marketing and Distribution

We use a team-based  sales  approach to assist our  personnel to closely  manage
relationships  at  multiple  levels of the  customer's  organization,  including
management,  engineering and purchasing personnel. Our integrated sales approach
involves  a team  consisting  of a  senior  executive,  a  business  development
specialist  and members of our  engineering  department.  Our use of experienced
engineering  personnel  as part of the  sales  effort  enables  close  technical
collaboration  with our customers during the design and  qualification  phase of
new  communications   equipment.  We  believe  that  this  is  critical  to  the
integration of our product into our customers' equipment.  Some of our executive
officers are also  involved in all aspects of our  relationships  with our major
customers  and  work  closely  with  their  senior   management.   We  also  use
manufacturers' representatives and independent sales representatives as needed.

Research and Development

Our research and development  efforts primarily  involve  engineering and design
relating to:

     --   developing new products
     --   improving existing products


                               -5-
<PAGE>

     --   adapting such products to new applications
     --   developing prototype components to bid on specific programs

Certain product  development and similar costs are recoverable under contractual
arrangements  and  those  that  are not  recoverable  are  expensed  in the year
incurred.  The costs of our self-funded  research  activities were approximately
$11.0 million for fiscal 2000, $9.6 million for fiscal 1999 and $5.2 million for
fiscal 1998. The increases are primarily  attributable  to our  development of a
low-cost,  high-speed,   high-performance  frequency  synthesizer  intended  for
commercial  communication test systems as well as, for fiscal 2000 and 1999, the
addition of the expenses of Aeroflex  UTMC  Microelectronic  Systems.  Also,  in
connection  with our  acquisition  of UTMC  Microelectronic  Systems in February
1999, we allocated $3.5 million of the purchase price to incomplete research and
development  projects.  Since the  research  and  development  projects  had not
reached technological feasibility, $3.5 million was charged to expense in fiscal
1999 in addition to the $9.6 million,  in  accordance  with  generally  accepted
accounting principles.

Backlog

We include in backlog firm purchase  orders or contracts  providing for delivery
of products and services.  At June 30, 2000, our order backlog was approximately
$119.3 million,  approximately  89% of which was scheduled to be delivered on or
before June 30, 2001.  Approximately 76% of this backlog  represents  commercial
contracts and approximately 24% of this backlog  represents  defense  contracts.
Generally,  government  contracts are  cancelable  with payment to us of amounts
which we have spent under the contract  together  with a reasonable  profit,  if
any, while commercial contracts are not cancelable.

At June 30,  1999,  our  backlog  of orders  was  approximately  $93.8  million.
Approximately  85% of this backlog was scheduled to be delivered before June 30,
2000.  Approximately  42% of this  backlog  represented  orders for  military or
national defense purposes.

Competition

In all phases of our  operations,  we compete in both  performance and price. In
the manufacture of microelectronics, we believe our primary competitors are NTK,
Texas   Instruments,   ILC/Data  Devices  Corp.,   Lockheed  Martin,   Honeywell
International  and  Kyocera  International.  In the  manufacture  of  instrument
products, we believe our primary competitors are Agilent Technolgies and Rhode &
Schwartz. In the manufacture of isolators,  we believe our primary competitor is
Barry  Controls,  Inc.  We also  experience  significant  competition  from  the
in-house capabilities of our current and potential customers. We believe that in
all of our operations we compete  favorably in the principal  competitive  areas
of:

     --   technology
     --   performance
     --   reliability
     --   quality
     --   customer service
     --   price

We believe  that to remain  competitive  in the  future,  we will need to invest
significant financial resources in research and development.


                               -6-
<PAGE>
To the  extent  that we are  engaged in  government  contracts,  our  success or
failure, to a large measure,  is based upon our ability to compete  successfully
for  contracts  and  to  complete  them  at a  profit.  Government  business  is
necessarily  affected  by  many  factors  such  as  variations  in the  military
requirements of the government and defense budget allocations.

Government Sales

Approximately  32% of our sales for fiscal  2000 and 41% of our sales for fiscal
1999 were to  agencies  of the  United  States  Government  or to prime  defense
contractors  or  subcontractors  of the United  States  Government.  Our overall
dependence  on the  military has been  declining  due to a focusing of resources
towards  developing  standard  products  for  commercial  markets.  Our  defense
contracts  have been  awarded  either on a bid basis or after  negotiation.  The
contracts  are  primarily  fixed  price  contracts,  though  we also have or had
defense  contracts  providing  for cost plus fixed fee.  Our  defense  contracts
contain  customary   provisions  for  termination  at  the  convenience  of  the
government  without cause.  In the event of such  termination,  we are generally
entitled to reimbursement  for our costs and to receive a reasonable  profit, if
any, on the work done prior to  termination.  Revenues  and costs on  government
contracts are recognized based upon shipments or billings.

In certain  product  areas,  we have suffered  reductions in sales volume due to
cutbacks in the military  budget.  In other product areas,  we have  experienced
increased  sales volume due to a  realignment  of  government  spending  towards
upgrading  existing  systems instead of purchasing  completely new systems.  The
overall effect of the cutbacks and realignment has not been material to us.

Manufacturing

We assemble,  test,  package and ship products at our  manufacturing  facilities
located in:

     --   Colorado Springs, Colorado,
     --   Boca Raton, Florida,
     --   Bloomingdale, New Jersey,
     --   Farmingdale, New York,
     --   Pearl River, New York,
     --   Plainview, New York,
     --   Powell, Ohio,
     --   Richardson, Texas and
     --   Elancourt, France

We have been  manufacturing  products  for  defense  programs  for many years in
compliance with stringent military  specifications.  Our microelectronic  module
manufacturing is certified to the status of Class "K," which means qualified for
space.  We believe we have brought to the  commercial  market the  manufacturing
quality and discipline we have demonstrated in the defense market.  For example,
our Plainview and Farmingdale  manufacturing plants are ISO- 9001 certified,  as
well as  certified  to the  more  stringent  Boeing  D1-9000  standard,  and our
Colorado   Springs  plant  is  ISO-9000   certified  and  is  a  QML  (Qualified
Manufacturers List) supplier at V, Q and T levels.


                               -7-
<PAGE>
Historically,  our volume production requirements for the defense market did not
justify  our  widespread   implementation  of  highly  automated   manufacturing
processes.  Over the last several years, we have expanded our use of high-volume
manufacturing  techniques for product  assembly and testing.  We believe that we
have the  manufacturing  capacity  required to meet the  growing  demand for our
products.

The principal materials we use to manufacture and assemble our products are:

     --   ceramic,
     --   magnetic materials,
     --   gold,
     --   steel,
     --   aluminum,
     --   rubber,
     --   iron and
     --   copper.

Many  of  the  component  parts  we  use in our  products  are  also  purchased,
including:

     --    semiconductors,
     --    transformers and
     --    amplifiers.

Although  we have  several  sole  source  arrangements,  all the  materials  and
components we use,  including  those  purchased from a sole source,  are readily
available and are or can be purchased  from time to time in the open market.  We
have no long-term commitments for their purchase. No supplier provides more than
10% of our raw materials.

Patents and Trademarks

We own several patents, patent licenses and trademarks.  In order to protect our
intellectual  property  rights,  we  rely  on a  combination  of  trade  secret,
copyright,  patent and trademark laws and employee and third-party nondisclosure
agreements.  We  also  limit  access  to and  distribution  of  our  proprietary
information.  While we believe that in the aggregate our patents and  trademarks
are important to our operations, we do not believe that one or any group of them
is so important that its termination could materially affect us.

Employees

As of June 30, 2000,  we had  approximately  1,180  employees,  of whom 630 were
employed in a  manufacturing  capacity,  and 550 were  employed in  engineering,
sales, administrative or clerical positions.  Approximately 240 of our employees
are  covered  by two  collective  bargaining  agreements.  We  believe  that our
employee relations are satisfactory.

Regulation

Our operations are subject to various environmental,  health and employee safety
laws.  We have  spent  money  and  management  has  spent  time  complying  with
environmental,  health and worker safety laws which apply to our  operations and
facilities and we expect that we will continue to do so. Our principal  products
or  services  do  not  require  any  governmental   approval.   Compliance  with


                               -8-
<PAGE>
environmental  laws  has  not  historically   materially  affected  our  capital
expenditures, earnings or competitive position. We do not expect compliance with
environmental laws to have a material effect on us in the future.

Because we  participate  in the defense  industry,  we are subject to audit from
time to time for our compliance with government regulations by various agencies,
including (1) the Defense Contract Audit Agency,  (2) the Defense  Investigative
Service  and (3) the  Defense  Logistics  Agency.  These and other  governmental
agencies  may  also,  from time to time,  conduct  inquiries  or  investigations
regarding a broad range of our activities.  Responding to any audits,  inquiries
or  investigations  may  involve   significant  expense  and  divert  management
attention. Also, an adverse finding in any audit, inquiry or investigation could
involve  penalties  that may have a  material  adverse  effect on our  business,
results of operation or financial condition.

We believe that we generally  comply with all applicable  environmental,  health
and worker safety laws and  governmental  regulations.  Nevertheless,  we cannot
guarantee that in the future we will not incur  additional  costs for compliance
or that those costs will not be material.

Financial Information About Industry Segments

The sales and operating  profits of each industry  segment and the  identifiable
assets  attributable to each industry segment for each of the three years in the
period  ended  June 30,  2000 are set forth in Note 15 of Notes to  Consolidated
Financial Statements.

ITEM TWO - PROPERTIES

Our executive offices and the manufacturing  facilities of Aeroflex Laboratories
Incorporated,  one of our subsidiaries, are an aggregate of approximately 69,000
square feet and are located in premises which we own in Plainview,  Long Island,
New York.

Aeroflex  Laboratories  Incorporated  also leases  manufacturing  facilities  in
Farmingdale,  Long Island, New York of approximately 20,000 square feet and Boca
Raton,  Florida of approximately  11,000 square feet. The annual rental of these
properties  is  approximately  $151,000  for  Farmingdale  and $147,000 for Boca
Raton.

Our  subsidiary,  Aeroflex MIC Technology  Corporation,  owns its  manufacturing
facility in Pearl River,  New York  consisting  of  approximately  63,000 square
feet. MIC leases a manufacturing facility of approximately 29,000 square feet in
Richardson, Texas with an annual rent of approximately $182,000.

Our subsidiary,  Vibration Mountings and Controls,  Inc., conducts manufacturing
operations at a plant located in Bloomingdale,  New Jersey.  The plant, which we
own, is approximately 72,000 square feet.

Our subsidiary, Aeroflex Lintek Corp., occupies approximately 20,000 square feet
of space in Powell, Ohio, with an annual rental of approximately $214,000.

Our  subsidiary,   Aeroflex  UTMC   Microelectronic   Systems,   Inc.,  conducts
manufacturing  operations at a plant located in Colorado Springs,  Colorado. The
plant, which we own, is approximately 102,000 square feet.

We believe  that our  facilities  are  adequate  for our current  and  presently
foreseeable needs.

                               -9-

<PAGE>
Legal Proceedings

Our former subsidiary  Filtron Co. Inc.,was one of several defendants named in a
personal  injury action  initiated in 1994 by several  plaintiffs in the Supreme
Court of the State of New  York,  County of  Kings.  Filtron's  operations  were
discontinued in October 1991.

The  plaintiffs  in the action are current or former  employees  of a company to
whom Filtron sold RFI  filters/capacitors.  According to the  allegations of the
amended verified  complaint,  the plaintiffs and their dependents are seeking to
recover,  respectively,  directly  and  derivatively,  on  diverse  theories  of
negligence,  strict  liability  and breach of warranty,  for injuries  allegedly
suffered  from  exposure  to  a  liquid  substance  or  material  which  Filtron
incorporated  for a  period  of  time  in the RFI  filters/capacitors  which  it
manufactured.  The plaintiffs are seeking damages which  cumulatively may exceed
$500 million. This action is in the discovery stage. We intend to defend against
this action  vigorously.  We believe that,  considering our various defenses and
that we have product  liability  insurance,  the outcome of this action will not
have a material  adverse effect on us, however we cannot  guarantee that will be
the case.

We are involved in various other routine legal  matters.  We believe the outcome
of these matters will not have a material adverse effect on us.

ITEM FOUR - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.










                                      -10-

<PAGE>

                                     PART II

                ITEM FIVE-MARKET FOR THE COMPANY'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS
                ------------------------------------------------

  (a) Our common  stock  trades on the Nasdaq  National  Market under the symbol
"ARXX".  Prior to March 21,  2000,  our common  stock was traded on the New York
Stock Exchange under the symbol "ARX".  The following table sets forth,  for the
calendar periods indicated,  the high and low closing sales prices of our common
stock as reported by the Nasdaq  National Market since March 21, 2000 and, prior
to March 21, 2000,  the high and low closing sales prices of our common stock as
reported  by the New York Stock  Exchange.  The  prices  have been  adjusted  to
reflect a five-for-four stock split that was payable July 7, 2000.
<TABLE>
<CAPTION>
                                                       Common Stock
                                                       ------------
                                                   High              Low
                                                   ----              ---

<S>                                              <C>               <C>

1998
----
First Quarter................................    $ 11.70           $  6.30
Second Quarter...............................      11.45              6.80
Third Quarter................................       9.25              5.35
Fourth Quarter...............................      12.10              6.00

1999
----
First Quarter................................      14.70              9.65
Second Quarter...............................      15.80             10.40
Third Quarter................................      17.25              9.75
Fourth Quarter...............................      10.85              4.45

2000
----
First Quarter................................      56.00              7.75
Second Quarter...............................      39.75             20.80
Third Quarter (through September 18, 2000)...      45.00             25.69

</TABLE>
  (b) As of September 18, 2000, there were  approximately  750 record holders of
our common stock.

  (c) We have never  declared or paid any cash  dividends  on our common  stock.
There have been no stock  dividends  declared or paid on our common stock during
the past three years except for a five-for-four  stock split,  which was payable
on July 7, 2000 to record  holders as of June 26, 2000.  We currently  intend to
retain any future  earnings  for use in the  operation  and  development  of our
business as well as for acquisitions and, therefore, do not intend to declare or
pay any cash  dividends  on our  common  stock  in the  foreseeable  future.  In
addition,  our revolving credit, term loan and mortgage  agreement,  as amended,
prohibits us from paying cash dividends.












                                 -11-
<PAGE>
ITEM SIX - SELECTED FINANCIAL DATA (Unaudited)

(In thousands, except percentages, footnotes and per share data)


<TABLE>
<CAPTION>
                                                        Years ended June 30,
                                  ----------------------------------------------------------------
                                    2000         1999         1998         1997         1996
                                  ----------------------------------------------------------------
<S>                               <C>          <C>          <C>          <C>          <C>
Earnings Statement Data
-----------------------
  Net Sales...................... $185,924     $157,104     $118,861     $ 94,299     $ 74,367
  Net Income (Loss)..............   14,400        9,757(1)     8,406        4,420      (17,420)(2)(3)
  Net Income (Loss) Per Common
    Share
      Basic......................     .60         .44(1)       .45          .28        (1.16)(2)(3)
      Diluted....................     .57         .41(1)       .41          .27              (4)
  Weighted Average Number of
    Common Shares Outstanding
      Basic......................   23,819       22,230       18,503       15,557       14,963
      Diluted....................   25,462       23,910       20,658       18,275             (4)



                                                               June 30,
                                  ----------------------------------------------------------------
                                    2000         1999         1998         1997         1996
                                  ----------------------------------------------------------------
Balance Sheet Data
------------------
  Working Capital................ $133,904     $ 50,366     $ 53,965     $ 25,872     $ 25,300
  Total Assets...................  248,707      165,216      124,101       81,047       81,169
  Long-term Debt
    (including current portion)..   14,549       31,117       11,481       28,916       34,577
  Stockholders' Equity...........  201,932      102,093       87,036       35,040       30,472
Other Statistics
  After Tax Profit Margin (Loss)..   7.7%         6.2%(1)      7.1%         4.7%         (23.4)%(2)(3)
  Return on Average Stockholders'
    Equity.......................    9.5%        10.3%(1)     13.8%        13.5%         (45.4)%(2)(3)
  Stockholders' Equity
    Per Share (5)                 $  7.26      $  4.43      $  4.01      $  2.24      $  1.99

<FN>
(1)  Includes  $3.5  million  ($.14 per  diluted  share and $.16  basic) for the
     write-off of  in-process  research and  development  acquired in connection
     with the purchase of UTMC Microelectronic Systems, Inc. in February 1999.
(2)  Includes  $23.2  million  ($1.55 per share) for the write-off of in-process
     research and  development  acquired in connection  with the purchase of MIC
     Technology Corporation in March 1996.
(3)  Includes  a  $437,000,  net of tax,  gain  ($.03 per  share) on the sale of
     securities.
(4)  As a result of the loss, all options,  warrants and convertible  debentures
     are anti-dilutive.
(5)  Calculated by dividing stockholders' equity, at the end of the year, by the
     number of shares outstanding at the end of the year.

Note:All  share  and  per  share   amounts  have  been  restated  to  reflect  a
     five-for-four stock split.
</FN>
</TABLE>









                                    -12-

<PAGE>
ITEM SEVEN - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             ---------------------------------------------
Overview

     We use our advanced  design,  engineering  and  manufacturing  abilities to
produce microelectronic, integrated circuit, interconnect and testing solutions.
Our  products  are  used in the  fiber  optic,  broadband  cable,  wireless  and
satellite  communications markets. We also design and manufacture motion control
systems and shock and vibration isolation systems which are used for commercial,
industrial  and defense  applications.  Our  operations  are grouped  into three
segments:

     --   microelectronics
     --   test, measurement and other electronics
     --   isolator products

     Our  consolidated  financial  statements  include the  accounts of Aeroflex
Incorporated  and  all  of  our  subsidiaries.   All  of  our  subsidiaries  are
wholly-owned except for Europtest, S.A., of which we own 93.4%.

     Our microelectronics segment has been designing,  manufacturing and selling
state-of-the-art  microelectronics  for the electronics  industry since 1974. In
January 1994, we acquired  substantially  all of the net operating assets of the
microelectronics  division  of Marconi  Circuit  Technology  Corporation,  which
manufactures  a wide variety of  microelectronic  assemblies.  In March 1996, we
acquired MIC Technology  Corporation which designs,  develops,  manufactures and
markets microelectronics  products in the form of passive thin film circuits and
interconnects.   Effective  July  1,  1997,  MIC  Technology   acquired  certain
equipment,  inventory,  licenses  for  technology  and  patents of two of Lucent
Technologies'  telecommunications  component units - multi-chip modules and film
integrated  circuits.  These  units  manufacture   microelectronic  modules  and
interconnect  products.  In February  1999,  we acquired all of the  outstanding
stock of UTMC  Microelectronic  Systems,  Inc.,  consisting of UTMC's integrated
circuit business.

     Our  test,  measurement  and  other  electronics  segment  consists  of two
divisions:  (1)  instruments  and (2) motion  control  products,  including  the
following product lines:

     --   Comstron, a leader in radio frequency and microwave technology used in
          the  manufacture of fast  switching  frequency  signal  generators and
          components,  which we acquired in November 1989. Comstron is currently
          an operating division of Aeroflex  Laboratories  Incorporated,  one of
          our wholly-owned subsidiaries.

     --   Lintek,  a leader in high speed  instrumentation  antenna  measurement
          systems,  radar systems and satellite test systems,  which we acquired
          in January 1995.

     --   Europtest, S.A. (France), of which we acquired 90% effective September
          1, 1998, under a purchase  agreement which requires us to purchase the
          remaining 10% of Europtest pro rata over a three-year period at prices
          determined  based  upon net sales of  Europtest  products.  In October
          1999, we purchased an additional  3.4%.  Europtest  develops and sells
          specialized software-driven test equipment used primarily in cellular,
          satellite and other communications applications.


                                 -13-

<PAGE>

     --   Our  motion  control  products   division  has  been  engaged  in  the
          development and manufacture of  electro-optical  scanning devices used
          in infra-red  night vision  systems  since 1975.  Additionally,  it is
          engaged in the design,  development  and  production of  stabilization
          tracking  devices and systems and magnetic  motors used in  satellites
          and other high reliability applications.

     Our isolator products segment has been designing, developing, manufacturing
and selling  severe  service shock and vibration  isolation  systems since 1961.
These devices are primarily  used in defense  applications.  In October 1983, we
acquired  Vibration  Mountings & Controls,  Inc.,  which  manufactures a line of
off-the-shelf  rubber and spring  shock,  vibration  and  structure  borne noise
control  devices used in commercial  and  industrial  applications.  In December
1986,  we acquired  the  operating  assets of Korfund  Dynamics  Corporation,  a
manufacturer of an industrial line of heavy duty spring and rubber shock mounts.

     Our revenue is based upon  shipments  or  billings.  We record costs on our
long-term   contracts   using    percentage-of-completion    accounting.   Under
percentage-of-completion  accounting,  costs are  recognized  on revenues in the
same relation that total  estimated  manufacturing  costs bear to total contract
value.  Estimated costs at completion are based upon  engineering and production
estimates.  Provisions for estimated losses or revisions in estimated profits on
contracts-in-process  are  recorded  in the  period  in  which  such  losses  or
revisions are first determined.

     Approximately 32% of our sales for fiscal 2000, 41% of our sales for fiscal
1999 and 42% of our sales for fiscal 1998 were to agencies of the United  States
Government  or to prime  defense  contractors  or  subcontractors  of the United
States Government. Our overall dependence on the military has been declining due
to a  focusing  of  resources  towards  developing  standard  products  for  the
commercial markets.  Our government  contracts have been awarded either on a bid
basis or after negotiation.  Our government  contracts are primarily fixed price
contracts,  although we also have or had government contracts providing for cost
plus fixed fee. Our defense contracts have customary  provisions for termination
at the  convenience  of the  government  without  cause.  In the  event  of such
termination,  we are  entitled to  reimbursement  for our costs and to receive a
reasonable profit, if any, on the work done prior to termination.

     We  believe  that  potential   reductions  in  defense  spending  will  not
materially  affect our  operations.  In certain  product areas, we have suffered
reductions  in sales  volume due to cutbacks in the  military  budget.  In other
product areas, we have  experienced  increased sales volume due to a realignment
of government  spending towards upgrading existing systems instead of purchasing
completely new systems.  The overall effect of the cutbacks and  realignment has
not been material to our operations.

     Our product  development  efforts primarily involve  engineering and design
relating to:

     --   developing new products
     --   improving existing products
     --   adapting existing products to new applications
     --   developing prototype components to bid on specific programs

Some of our development  efforts are reimbursed under contractual  arrangements.
Product  development and similar costs which we cannot recover under contractual
arrangements are expensed in the period incurred.


                                 -14-

<PAGE>

Statement of Operations

     The  following  table  sets  forth our net sales  and  operating  income by
business segment for the periods indicated. The special charge represents a $3.5
million charge for the write-off of in-process research and development acquired
in  connection  with the  purchase of UTMC  Microelectronic  Systems in February
1999.

<TABLE>
<CAPTION>
                                   Years Ended June 30,
                            ---------------------------------
                              2000        1999         1998
                              ----        ----         ----
                                     (In thousands)
<S>                         <C>          <C>         <C>
Net Sales:
  Microelectronics          $110,253     $ 96,846    $ 74,263
  Test, Measurement
    and Other Electronics     55,918       41,515      25,685
  Isolator Products           19,753       18,743      18,913
                            --------     --------    --------
    Net Sales               $185,924     $157,104    $118,861
                            ========     ========    ========
Operating Income:
  Microelectronics          $ 22,734     $ 20,104    $ 14,147
  Test, Measurement
    and Other Electronics      2,333        3,134         996
  Isolator Products            2,692        2,108       3,063
  General Corporate
    Expenses                  (5,397)      (4,262)     (3,348)
                            --------     --------    --------
                              22,362       21,084      14,858
  Special Charge                -          (3,500)       -
                            --------     --------    --------
    Operating Income        $ 22,362     $ 17,584    $ 14,858
                            ========     ========    ========
</TABLE>

     The following table sets forth certain items from our statement of earnings
as a  percentage  of net sales for the periods  indicated.  The  special  charge
represents a $3.5 million  charge for the write-off of in- process  research and
development  acquired in  connection  with the purchase of UTMC  Microelectronic
Systems in February 1999.

<TABLE>
<CAPTION>
                                     Years Ended June 30,
                                 ----------------------------
                                  2000       1999      1998
                                  ----       ----      ----
<S>                              <C>        <C>        <C>
Net Sales                        100.0%     100.0%     100.0%

Cost of Sales                     63.8       62.8       65.0
                                 ------     ------     ------
Gross Profit                      36.2       37.2       35.0
                                 ------     ------     ------
Operating Expenses:
  Selling, General and
    Administrative Costs          18.3       17.7       18.1
  Research and Development Costs   5.9        6.1        4.4
  Special Charge                    -         2.2         -
                                 ------     ------     ------
      Total Operating Expenses    24.2       26.0       22.5
                                 ------     ------     ------
Operating Income                  12.0       11.2       12.5

Other Expense, Net                 0.9        0.4        1.4
                                 ------     ------     ------
Income Before Income Taxes        11.1       10.8       11.1
Provision For Income Taxes         3.4        4.6        4.0
                                 ------     ------     ------
Net Income                         7.7%       6.2%       7.1%
                                 ======     ======     ======
</TABLE>


                                 -15-

<PAGE>
Fiscal Year Ended June 30, 2000 Compared to Fiscal Year Ended June 30, 1999

     Net Sales.  Net sales increased 18.3% to $185.9 million in fiscal 2000 from
$157.1  million  in  fiscal  1999.  Net  sales in our  microelectronics  segment
increased  13.8% to $110.3  million in fiscal 2000 from $96.8  million in fiscal
1999 due to the  acquisition of UTMC  Microelectronic  Systems in 1999 partially
offset  by  reductions  in sales in  microelectronic  modules  due to  temporary
slowdowns in the satellite market. Net sales in our test,  measurement and other
electronics  segment  increased 34.7% to $55.9 million in fiscal 2000 from $41.5
million in fiscal 1999  primarily  due to  increased  sales  volume in frequency
synthesizers   (primarily  shipments  of  the  FS-1000  for  use  in  commercial
communications  test  systems).  Net  sales  in our  isolator  products  segment
increased  5.4% to $19.8  million in fiscal  2000 from  $18.7  million in fiscal
1999.

     Gross Profit. Cost of sales includes  materials,  direct labor and overhead
expenses such as engineering labor, fringe benefits,  allocable occupancy costs,
depreciation and manufacturing  supplies.  Gross profit increased 15.3% to $67.4
million in fiscal 2000 from $58.5 million in fiscal 1999. Gross margin decreased
to 36.2% in fiscal 2000 from 37.2% in fiscal 1999. This increase in gross profit
was primarily as a result of increased  sales.  The decrease in gross margin was
due  primarily  to low margins in both the  satellite  test  system  development
program  and  the  start  up of  the  FS-1000,  a  low-cost,  high  speed,  high
performance frequency synthesizer.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative costs include office and management salaries, fringe benefits and
commissions.  Selling, general and administrative costs increased 22.6% to $34.0
million  (18.3% of net sales) in fiscal  2000 from $27.8  million  (17.7% of net
sales) in fiscal 1999. The increase was primarily due to labor related expenses,
including salaries for additional  personnel,  in connection with our growth and
the addition of the expenses of UTMC Microelectronic Systems.

     Research and  Development  Costs.  Research and  development  costs include
material, engineering labor and allocated overhead. Our self-funded research and
development costs increased 14.2% to $11.0 million (5.9% of net sales) in fiscal
2000 from $9.6  million  (6.1% of net sales) in fiscal 1999.  This  increase was
primarily attributable to the additional costs of UTMC Microelectronic  Systems,
partially  offset by reduced costs,  relative to the prior year,  related to the
development of the FS- 1000, a low-cost,  high speed, high performance frequency
synthesizer  intended  for  commercial  communication  test  systems,  which was
completed in early fiscal 2000.

     Other  Expense  (Income).  Interest  expense  increased  to $2.3 million in
fiscal 2000 from $1.5 million in fiscal 1999,  primarily  due to higher  average
levels of  borrowings  throughout  most of the  current  year.  Other  income of
$554,000  for the year ended June 30,  2000  consists  primarily  of $650,000 of
interest income,  $193,000 gain on the sale of securities and a $300,000 expense
for the  settlement  of a lawsuit.  Other  income of $777,000 for the year ended
June 30, 1999 consists  primarily of interest income.  Interest income decreased
due to lower average levels of cash and cash equivalents  throughout most of the
current year.  The  increased  average  levels of  borrowings  and the decreased
average  levels of cash and cash  equivalents  resulted from the  acquisition of
UTMC  Microelectronic   Systems  in  February  1999.  In  connection  with  this
acquisition,  we used most of our cash and cash  equivalents  and  increased our
borrowings by $20.0 million.

     Provision  for Income  Taxes.  Income taxes were $7.2 million (an effective
income tax rate of 35.0%), excluding a $1.0 million benefit from the utilization
of a capital loss  carryforward,  in fiscal 2000, and $7.2 million (an effective
income tax rate of 35.0%,  exclusive of the special  charge) in fiscal 1999. The
income tax  provisions for the years ended June 30, 2000 and 1999 were different



                                 -16-
<PAGE>
from the amounts computed by applying the U.S. Federal income tax rate to income
before  income taxes  primarily due to state and local income taxes and research
and development  credits, and for the year ended June 30, 2000, the $1.0 million
benefit from the  utilization  of a capital loss  carryforward  and for the year
ended June 30, 1999, due to the  non-deductibility  of the $3.5 million  special
charge.

Fiscal Year Ended June 30, 1999 Compared to Fiscal Year Ended June 30, 1998

     Net Sales.  Net sales increased 32.2% to $157.1 million in fiscal 1999 from
$118.9  million  in  fiscal  1998.  Net  sales in our  microelectronics  segment
increased  30.4% to $96.8  million in fiscal  1999 from $74.3  million in fiscal
1998  due to  increased  sales  volume  in  both  thin  film  interconnects  and
microelectronic  modules  and due to the  acquisition  of  UTMC  Microelectronic
Systems at the end of  February  1999.  Net sales in our test,  measurement  and
other  electronics  segment increased 61.6% to $41.5 million in fiscal 1999 from
$25.7  million in fiscal 1998  primarily  due to increased  sales volume in both
frequency synthesizers (including shipments under the new Navy CASS program) and
high speed automatic test systems  (primarily  satellite  payload test equipment
for Hughes Space and  Communications) and due to the acquisition of Europtest in
September  1998 offset in part by decreased  sales volume of  stabilization  and
tracking devices.  Net sales in our isolator products segment were $18.7 million
in fiscal 1999 and $18.9 million in fiscal 1998.

     Gross Profit.  Gross profit increased 40.6% to $58.5 million in fiscal 1999
from $41.6  million in fiscal 1998.  Gross  margin  increased to 37.2% in fiscal
1999 from 35.0% in fiscal  1998.  This  increase  was  primarily  as a result of
increased  margins in our  microelectronics  segment and Comstron  product line,
reflecting the greater efficiency of higher volume, as well as a favorable sales
mix in our microelectronics segment.

     Selling,   General  and   Administrative   Costs.   Selling,   general  and
administrative  costs  increased  28.9% to $27.8 million (17.7% of net sales) in
fiscal 1999 from $21.5 million (18.1% of net sales) in fiscal 1998. The increase
was primarily  due to labor related  costs,  including  salaries for  additional
personnel,  in  connection  with our growth and the  addition of the expenses of
UTMC Microelectronic Systems.

     Research and Development  Costs.  Our self-funded  research and development
costs  increased  85.8% to $9.6 million  (6.1% of net sales) in fiscal 1999 from
$5.2 million  (4.4% of net sales) in fiscal 1998.  This  increase was  primarily
attributable to the addition of the expenses of UTMC Microelectronic Systems and
the costs for continued development of a low-cost,  high speed, high performance
frequency synthesizer intended for commercial communication test systems.

     Acquired  In-Process  Research  and  Development.  In  connection  with the
acquisition of UTMC  Microelectronic  Systems,  we allocated $3.5 million of the
purchase price to incomplete research and development projects.  This allocation
represents  the  estimated  fair value based on future cash flows that have been
adjusted by the projects'  completion  percentage.  At the acquisition date, the
development of these projects had not yet reached technological  feasibility and
the  research  and  development  in progress  had no  alternative  future  uses.
Accordingly, we expensed these costs as of the acquisition date.

     We used an  independent  third-party  appraiser  to  assess  and  value the
in-process  research  and  development.  The value  assigned  to this  asset was
determined by identifying  significant research projects for which technological
feasibility  had not  been  established.  In the  case  of UTMC  Microelectronic
Systems,  this  included  the  design,   development,   and  testing  activities
associated with its commercial products,  data bus products,  radiation hardened


                                 -17-

<PAGE>
products  and  application  specific  integrated  circuits.   The  research  and
development  projects  are  associated  with the  introduction  of  several  new
products  as well as specific  significant  enhancements  to existing  products.
Valuation  of  development  efforts  in the future  has been  excluded  from the
research and development appraisal.

     The nature of the efforts to develop  the  acquired  in-process  technology
into a  commercially  viable  product  relate to the completion of all planning,
designing,  prototyping  and testing  activities that are necessary to establish
that the  proposed  technologies  meet  their  design  specifications  including
functional, technical and economic performance requirements.

     The value  assigned to purchased  in-process  technology  was determined by
estimating the contribution of the purchased in-process technology in developing
a commercially viable product,  estimating the resulting net cash flows from the
expected sales of such a product,  and  discounting  the net cash flows to their
present value using an appropriate discount rate.

     Revenue growth rates for UTMC Microelectronic Systems were estimated by the
third party appraiser based on a detailed  forecast we prepared,  as well as the
appraiser's  discussions with our finance,  marketing and engineering  personnel
and  those  of  UTMC   Microelectronic   Systems.   Allocation   of  total  UTMC
Microelectronic   Systems'  projected   revenues  to  in-process   research  and
development was based on the appraiser's  discussions with UTMC  Microelectronic
Systems'  management  and us.  A  significant  portion  of UTMC  Microelectronic
Systems'  future  revenues was  expected to originate  from the sale of products
that  were not yet  completed  at  acquisition.  However,  UTMC  Microelectronic
Systems'  existing  products and  technologies  are  expected to generate  sales
through 2008.

     Selling,  general and administrative  expenses and profitability  estimates
were  determined  based on our  forecasts  as well as an analysis of  comparable
companies' margin expectations.

     The  projections  utilized in the  transaction  pricing and purchase  price
allocation exclude the potential synergetic benefits related specifically to our
ownership.  Due to the relatively early stage of the development and reliance on
future, unproven products and technologies,  the cost of capital (discount rate)
for UTMC  Microelectronic  Systems was estimated  using venture capital rates of
return.  Due to the nature of the  forecast  and the risks  associated  with the
projected growth and profitability of the development  projects, a discount rate
of 45 percent was used to discount cash flows from the in-process products. This
discount  rate  was  commensurate  with  UTMC  Microelectronic  Systems'  market
position,  the  uncertainties  in the economic  estimates  described  above, the
inherent  uncertainty  surrounding  the successful  development of the purchased
in-process  technology,  the useful life of such technology,  the  profitability
levels of such technology, and the uncertainty related to technological advances
that  could  render  even  UTMC   Microelectronic   Systems'  development  stage
technologies obsolete.

     We  believe  that the  foregoing  assumptions  used in the  forecasts  were
reasonable at the time of the acquisition.  No assurance can be given,  however,
that the underlying  assumptions  used to estimate sales,  development  costs or
profitability,  or the events  associated  with such projects will  transpire as
estimated. For these reasons, actual results may vary from projected results.

     Remaining  development efforts for UTMC  Microelectronic  Systems' research
and  development  include  various  phases of design,  development  and testing.
Funding for such projects is expected to come from internally generated sources.



                                 -18-

<PAGE>
     As evidenced by the continued  support of the  development of its projects,
we believe we have a reasonable  chance of successfully  completing the research
and development  programs.  However, as with all of our technology  development,
there  is risk  associated  with  the  completion  of the  UTMC  Microelectronic
Systems'  research and  development  projects,  and there is no  assurance  that
technological or commercial success will be achieved.

     If the development of UTMC Microelectronic Systems' in-process research and
development  project  is  unsuccessful,  our  sales  and  profitability  may  be
adversely  affected in future  periods.  Commercial  results are also subject to
certain market events and risks, which are beyond our control, such as trends in
technology,  changes in  government  regulation,  market  size and  growth,  and
product introduction or other actions by competitors.

     Other  Expense  (Income).  Interest  expense  decreased  to $1.5 million in
fiscal 1999 from $2.0 million in fiscal 1998, primarily due to reduced levels of
borrowings  throughout most of the current  period.  Other income of $777,000 in
fiscal 1999 and $309,000 in fiscal 1998 consisted  primarily of interest income.
Interest income  increased due to increased  levels of cash and cash equivalents
throughout  most of  fiscal  1999.  The  reduced  levels of  borrowings  and the
increased levels of cash and cash equivalents  resulted from the net proceeds of
$31.3 million from stock issued in our public offering  completed in March 1998.
In connection with our acquisition of UTMC Microelectronic Systems at the end of
February 1999, we used most of our cash and cash  equivalents  and increased our
borrowings by $20.0 million.

     Provision for Income Taxes.  Income taxes  increased  50.5% to $7.2 million
(an  effective  income tax rate of 35.0%,  exclusive  of the special  charge) in
fiscal 1999, from $4.8 million (an effective income tax rate of 36.1%) in fiscal
1998.  The income tax provisions for the years ended June 30, 1999 and 1998 were
different from the amounts computed by applying the U.S. Federal income tax rate
to income before income taxes  primarily due to state and local income taxes and
research and development  credits,  and for the year ended June 30, 1999, due to
the non-deductibility of the $3.5 million special charge.

Market Risk

     We are exposed to market risk related to changes in interest  rates and, to
an immaterial extent, to foreign currency exchange rates. Most of our debt is at
fixed  rates of  interest  or at a  variable  rate  with an  interest  rate swap
agreement  which  effectively  converts the  variable  rate debt into fixed rate
debt. Therefore,  if market interest rates increase by 10 percent from levels at
June 30, 2000,  the effect on our net income would not be material.  Most of our
invested cash and marketable  securities  are at variable rates of interest.  If
market  interest  rates decrease by 10 percent from levels at June 30, 2000, the
effect on our net income would be approximately $270,000.

Seasonality

     Although  our  business is not affected by  seasonality,  historically  our
revenues and earnings  increase  sequentially  from quarter to quarter  within a
fiscal  year,  but the first  quarter is less than the  previous  year's  fourth
quarter.





                                 -19-

<PAGE>
Recent Accounting Pronouncements

     Effective  July 1, 2000,  the Company will adopt SFAS No. 133,  "Accounting
for Derivative  Instruments and Hedging Activities," as amended.  This statement
requires  companies  to record  derivatives  on the  balance  sheet as assets or
liabilities at their fair value. In certain  circumstances  changes in the value
of such  derivatives  may be required  to be  recorded  as gains or losses.  The
impact  of this  statement  is not  expected  to have a  material  effect on the
Company's consolidated financial statements.

Liquidity and Capital Resources

     As of June 30, 2000, we had $133.9 million in working capital.  Our current
ratio was 5.6 to 1 at June 30,  2000.  As of February  25,  1999,  we replaced a
previous  agreement  with a revised  revolving  credit,  term loan and  mortgage
agreement with two banks which is secured by substantially all of our assets not
otherwise  encumbered.  The  agreement  provided for a revolving  credit line of
$23.0  million,  a term loan of $20.0  million and a mortgage  on our  Plainview
property  for $4.5  million.  The  revolving  credit  loan  facility  expires in
December  2002.  The term loan was fully paid in May 2000 with the proceeds from
the sale of our  Common  Stock.  The  interest  rate on  borrowings  under  this
agreement is at various rates depending upon certain financial ratios,  with the
current rate substantially  equivalent to 30- day LIBOR  (approximately  6.7% at
June 30, 2000) plus 1.50% on the revolving  credit  borrowings.  The mortgage is
payable in monthly installments of approximately  $26,000 through March 2008 and
a balloon  payment  of $1.6  million  in April  2008.  We have  entered  into an
interest  rate swap  agreement  for the  outstanding  amount  under the mortgage
agreement  at  approximately  7.6% in order to  reduce  the  interest  rate risk
associated with these borrowings.

     The  terms of the  agreement  require  compliance  with  certain  covenants
including  minimum   consolidated   tangible  net  worth  and  pretax  earnings,
maintenance of certain financial ratios, limitations on capital expenditures and
indebtedness  and  prohibition of the payment of cash  dividends.  In connection
with the  purchase  of certain  materials  for use in  manufacturing,  we have a
letter of credit of $2.0 million.

     In March 1998, we sold 3.2 million  shares  (adjusted  for a  five-for-four
stock split) of our Common Stock in a public offering for $31.3 million,  net of
an  underwriting  discount of $2.0  million and issuance  costs of $496,000.  Of
these net  proceeds,  $9.6  million  was used to repay  bank  indebtedness.  The
balance  of the  net  proceeds  was  used  primarily  for our  purchase  of UTMC
Microelectronic Systems in February 1999.

     Effective  September 1, 1998,  we acquired  90% of the stock of  Europtest,
S.A.  (France) for  approximately  $1.1  million.  The purchase  agreement  also
requires  that we  purchase  the  remaining  10% of  Europtest  pro rata  over a
three-year  period  at  prices  determined  based  upon net  sales of  Europtest
products. In October, 1999, we purchased an additional 3.4% of Europtest's stock
for   approximately   $54,000.   Europtest   develops   and  sells   specialized
software-driven  test equipment used primarily in cellular,  satellite and other
communications applications. The acquired company's net sales were approximately
$1.9 million for the year ended March 31, 1998.

     In December  1998, we financed the  acquisition  and renovation of the land
and building of our Pearl River, NY facility and received proceeds  amounting to
$4.2 million. The debt requires a balloon payment of $4.0 million in 2019.






                                 -20-

<PAGE>
     Effective  February 25, 1999, we acquired all of the  outstanding  stock of
UTMC  Microelectronic  Systems,  Inc.  for $42.5  million of cash.  Prior to the
acquisition,  UTMC  Microelectronic  Systems  distributed  by  dividend  to  its
then-parent, United Technologies Corporation, the assets and United Technologies
assumed  the   liabilities  of  the  circuit  card  assembly   portion  of  UTMC
Microelectronic  Systems  business.  The purchase  price was paid with available
cash of $22.5  million and  borrowings  under our bank loan  agreement  of $20.0
million.    UTMC   Microelectronic    Systems   is   a   leader   in   supplying
radiation-tolerant   integrated  circuits  for  satellite  communications.   The
acquired company's net sales, excluding the circuit card assembly business, were
approximately $33.4 million for the year ended December 31, 1998.

     In May 2000, we sold 3.1 million shares (adjusted for a five-for-four stock
split) of its Common  Stock in a public  offering for $68.5  million,  net of an
underwriting  discount of $3.5 million and issuance costs of $500,000.  Of these
net proceeds,  $13.0 million was used to repay the term loan. The balance of the
net proceeds is invested in short-term  marketable securities and is intended to
ultimately  be used for  additional  working  capital,  including  research  and
development,  and  expansion  of  our  facilities,  and  for  general  corporate
purposes,  including  possible  acquisitions of  technologies,  product lines or
businesses.

     In fiscal 2000,  our  operations  provided  cash of $14.6  million from our
continued  profitability,  partially offset by an increase in receivables due to
our higher sales volume and timing of billings.  In fiscal 2000,  our  investing
activities  used cash of $17.3 million  primarily for the purchase of available-
for-sale securities and for capital expenditures.  In fiscal 2000, our financing
activities  provided cash of $54.7 million primarily from the sale of our Common
Stock in a public offering for $69.0 million  offset,  in part, by debt payments
of $19.1 million.

     We believe that existing cash, cash  equivalents and marketable  securities
coupled with  internally  generated  funds and available lines of credit will be
sufficient for our working capital  requirements,  capital expenditure needs and
the servicing of our debt for at least the next twelve months. At June 30, 2000,
our available unused line of credit was $21.0 million after consideration of the
letter of credit.

     One of our subsidiaries  whose operations were discontinued in 1991, is one
of several  defendants  named in a personal  injury  action  initiated in August
1994,  by a group of  plaintiffs.  The  plaintiffs  are  seeking  damages  which
cumulatively may exceed $500 million. The complaint alleges, among other things,
that the plaintiffs  suffered injuries from exposure to substances  contained in
products sold by our subsidiary to one of its  customers.  This action is in the
discovery  stage.  Based upon available  information and considering our various
defenses,  together with our product liability  insurance,  in our opinion,  the
outcome of the action against our subsidiary will not have a materially  adverse
effect on our consolidated financial statements.

     We are involved in various  other  routine  legal  matters.  We believe the
outcome  of these  matters  will not have a  materially  adverse  effect  on our
consolidated financial statements.

     We are undergoing routine audits by various taxing authorities of our state
and local income tax returns covering periods from 1994 to 1996. We believe that
the probable  outcome of these various audits should not  materially  affect our
consolidated financial statements.

     Our backlog of orders was $119.3 million at June 30, 2000 and $93.8 million
at June 30, 1999.


                                 -21-

<PAGE>
Forward-Looking Statements

 All statements other than statements of historical fact included in this Annual
Report,  including without limitation statements under "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations"  regarding our
financial position, business strategy and plans and objectives of our management
for future operations, are forward-looking  statements. When used in this Annual
Report, words such as "anticipate,"  "believe,"  "estimate,"  "expect," "intend"
and  similar  expressions,  as they  relate  to us or our  management,  identify
forward-looking  statements.  Such  forward-looking  statements are based on the
beliefs  of our  management,  as well  as  assumptions  made by and  information
currently  available to our management.  Actual results could differ  materially
from those contemplated by the forward-looking statements as a result of certain
factors,   including  but  not  limited  to,  competitive  factors  and  pricing
pressures, changes in legal and regulatory requirements, technological change or
difficulties,  product  development  risks,  commercialization  difficulties and
general  economic  conditions.  Such  statements  reflect our current views with
respect to future events and are subject to these and other risks, uncertainties
and  assumptions  relating  to our  operations,  results of  operations,  growth
strategy and liquidity.


ITEM EIGHT - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
             -------------------------------------------

The financial statements and supplementary data listed in the accompanying Index
to Financial Statements and Schedules are attached as part of this report.

ITEM NINE - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
-----------------------------------------------------

  None.


                                    PART III
                                    --------

The  information  required  by Part  III is  incorporated  by  reference  to our
definitive proxy statement in connection with our Annual Meeting of Stockholders
scheduled to be held in November 2000.  The proxy  statement is to be filed with
the Securities and Exchange  Commission within 120 days following the end of our
fiscal year ended June 30, 2000.






                                      -22-
<PAGE>
                                     PART IV
                                     -------
ITEM FOURTEEN - EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
             AND REPORTS ON FORM 8-K

     (a)  See Index to Financial  Statements at beginning of attached  financial
          statements.

     (b)  Reports on Form 8-K:

               None

     (c)  Exhibits

     3.1  Certificate of  Incorporation,  as amended.  (Exhibit 3.1 to Form 10-K
          for the year ended June 30, 1998).

     3.2  By-Laws,  as amended  (Exhibit 3 to Quarterly  Report on Form 10-Q for
          the quarter ended March 31, 1998).

     4.1  Fourth  Amended and Restated Loan and Security  Agreement  dated as of
          February 25, 1999 among the Registrant,  certain of its  subsidiaries,
          The Chase  Manhattan  Bank (as  successor to Chemical  Bank) and Fleet
          Bank, N.A. (as successor to NatWest Bank,  N.A.) (Exhibit 10.5 to Form
          8-K dated February 25, 1999).

     10.1 1989  Non-Qualified  Stock Option Plan,  as amended  (Exhibit  10.8 of
          Annual Report on Form 10-K for the year ended June 30, 1990).

     10.2 1994 Non-Qualified  Stock Option Plan.  (Exhibit 10.2 of Annual Report
          on Form 10-K for the year ended June 30, 1994).

     10.3 1994 Outside  Directors  Stock Option  Plan.  (Exhibit  10.3 of Annual
          Report on Form 10- K for the year ended June 30, 1994).

     10.4 Employment Agreement between Aeroflex  Incorporated and Harvey R. Blau
          (Exhibit  10.1 to Report on Form 10-Q for the quarter  ended March 31,
          1999).

     10.5 Employment  Agreement between Aeroflex  Incorporated and Michael Gorin
          (Exhibit  10.2 to Report on Form 10-Q for the quarter  ended March 31,
          1999).

     10.6 Employment  Agreement between Aeroflex  Incorporated and Leonard Borow
          (Exhibit  10.3 to Report on Form 10-Q for the quarter  ended March 31,
          1999).

     10.7 Deferred  Compensation  Agreement  between  Aeroflex  Incorporated and
          Harvey  R.  Blau  (Exhibit  10.4 to  Report  on Form 8-K dated May 17,
          1997).

     10.8 Employment  Agreement  between  Aeroflex  Incorporated and Carl Caruso
          (Exhibit 10.5 to Report on Form 8-K dated May 17, 1997).

     10.9 1996 Stock  Option Plan  (Exhibit A to  Definitive  Schedule 14A filed
          September 30, 1996).


                                      -23-
<PAGE>

     10.10 1998 Stock Option Plan (Exhibit 10 to  Quarterly  Report on Form 10-Q
           for the quarter ended March 31, 1998).

     10.11 Common Stock Purchase  Agreement made as of February 25, 1999 between
           the Registrant and UTC acting through its Hamilton  Standard Division
           as the owner of all of the issued  and  outstanding  capital stock of
           UTMC. (Exhibit 10.1 to Form 8-K dated February 25, 1999).

     10.12 Long Term Agreement  made as of  February  25,  1999  between UTC and
           UTMC. (Exhibit 10.2 to Form 8-K dated February 25, 1999).

     10.13 Facilities Lease and Services  Agreement made as of February 25, 1999
           between UTMC, UTC and HSE.  (Exhibit 10.3 to Form 8-K dated  February
           25, 1999).

     10.14 Assignment and  License-Back  Agreement  made as of February 25, 1999
           between UTMC and UTC.  (Exhibit  10.4 to Form 8-K dated  February 25,
           1999).

     10.15 1999 Stock Option Plan  (Exhibit A to  Definitive  Schedule 14A filed
           December 3, 1999).

     10.16 2000 Stock Option Plan

     10.17 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated
           and Harvey R. Blau, effective September 1, 1999.

     10.18 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated
           and Michael Gorin, effective September 1, 1999.

     10.19 Amendment No. 1 to Employment Agreement between Aeroflex Incorporated
           and Leonard Borow, effective September 1, 1999.

     22    The following is a list of the Company's subsidiaries:
<TABLE>
<CAPTION>
                                                       State of
               Name                                  Incorporation
               ----                                  -------------
           <S>                                          <C>
           Aeroflex Amplicomm, Inc.                     Delaware
           Aeroflex Laboratories Incorporated           Delaware
           Aeroflex Lintek Corp.                        Ohio
           Aeroflex MIC Technology Corporation          Texas
           Aeroflex Systems Corp.                       Delaware
           Aeroflex UTMC Microelectronic Systems, Inc.  Delaware
           Europtest, S.A.                              France
           Information Systems and Research, Inc.       Virginia
           Vibration Mountings and Controls, Inc.       New York
</TABLE>
     23    Consent of Independent Auditors

     27    Financial Data Schedule

     99    Undertakings



                                      -24-
<PAGE>
     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 28th day of
September 2000.

                                Aeroflex Incorporated

                                By: /s/ Harvey R. Blau
                                    --------------------------
                                      Harvey R. Blau, Chairman

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below on September 28th, 2000 by the following persons in
the capacities indicated:


/s/ Harvey R. Blau             Chairman of the Board
Harvey R. Blau                 (Chief Executive Officer)

/s/ Michael Gorin              President and Director
Michael Gorin                  (Chief Financial Officer and Principal Accounting
                               Officer)

/s/ Leonard Borow              Executive Vice President, Secretary and Director
Leonard Borow                  (Chief Operating Officer)

-------------------------      Director
Paul Abecassis

/s/ Milton Brenner             Director
Milton Brenner

/s/ Ernest E. Courchene, Jr.   Director
Ernest E. Courchene, Jr.

/s/ Donald S. Jones            Director
Donald S. Jones

/s/ Eugene Novikoff            Director
Eugene Novikoff

/s/ John S. Patton             Director
John S. Patton





                                      -25-

<PAGE>
                              AEROFLEX INCORPORATED

                                AND SUBSIDIARIES



                       FINANCIAL STATEMENTS AND SCHEDULES

                 COMPRISING ITEM 8 OF ANNUAL REPORT ON FORM 10-K

                      TO SECURITIES AND EXCHANGE COMMISSION

                          AS OF JUNE 30, 2000 AND 1999

                                AND FOR THE YEARS

                       ENDED JUNE 30, 2000, 1999 AND 1998






<PAGE>
                       FINANCIAL STATEMENTS AND SCHEDULES
                       ----------------------------------


           I  N  D  E  X                                          PAGE
           -------------                                          ----

 ITEM FOURTEEN (a)
 -----------------
1.  FINANCIAL STATEMENTS:

    Independent auditors' report                                  S-1

    Consolidated financial statements:

    Balance sheets - June 30, 2000 and 1999                       S-2-3

    Statements of earnings - each of the three years
       in the period ended June 30, 2000                          S-4

    Statements of stockholders'  equity and  comprehensive
       income - each of the three years in the period ended
       June 30, 2000                                              S-5

    Statements of cash flows - each of the three years
       in the period ended June 30, 2000                          S-6

    Notes (1-15)                                                  S-7-20

    Quarterly financial data (unaudited)                          S-21


2. FINANCIAL STATEMENT SCHEDULES:

    II - Valuation and qualifying accounts                        S-22



All other  schedules  have  been  omitted  because  they are  inapplicable,  not
required,  or the information is included elsewhere in the financial  statements
or notes thereto.
<PAGE>
                          Independent Auditors' Report


The Board of Directors
 and Stockholders
Aeroflex Incorporated


We have  audited  the  accompanying  consolidated  balance  sheets  of  Aeroflex
Incorporated  and  subsidiaries  as of June 30,  2000  and 1999 and the  related
consolidated  statements  of earnings,  stockholders'  equity and  comprehensive
income, and cash flows for each of the years in the three-year period ended June
30, 2000. Our audits also included the financial  statement  schedule  listed in
the Index at item 14(a)2. These consolidated  financial statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial   position  of  Aeroflex
Incorporated  and  subsidiaries as of June 30, 2000 and 1999, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended June 30, 2000, in conformity with accounting  principles  generally
accepted in the United States of America.  Also,  in our opinion,  the financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information set forth therein.

                                        /s/ KPMG LLP
                                            KPMG LLP

Melville, New York
August 15, 2000

                                       S-1
<PAGE>

                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)
<TABLE>
<CAPTION>
                                                          June 30,
                                                   ---------------------
                            ASSETS                    2000        1999
                                                      ----        ----
<S>                                                <C>          <C>

Current assets:
  Cash and cash equivalents...................     $ 54,710     $  2,714
  Marketable securities.......................       11,512         -

  Accounts receivable, less allowance for
    doubtful accounts of $509 and $381
    at June 30, 2000 and 1999, respectively...       51,086       39,967

  Inventories, net............................       37,367       32,637

  Deferred income taxes.......................        5,317        5,291

  Prepaid expenses and other current assets...        2,814        2,314
                                                   --------     --------
       Total current assets...................      162,806       82,923

Property, plant and equipment, net............       52,222       50,802

Intangible assets acquired in connection with
  the purchase of businesses, net of
  accumulated amortization of $4,689 and $3,084
  at June 30, 2000 and 1999, respectively.....       12,839       13,777

Cost in  excess  of fair  value of net  assets
  of  businesses  acquired,  net of accumulated
  amortization of $3,800 and $3,161 at June 30,
  2000 and 1999, respectively.................       13,380       14,019
Deferred income taxes.........................        3,093         -
Other assets..................................        4,367        3,695
                                                   --------     --------
  Total assets................................     $248,707     $165,216
                                                   ========     ========
<FN>
               See notes to consolidated financial statements.
</FN>
</TABLE>

                                       S-2

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)

                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                              June 30,
                                                       --------    --------
    LIABILITIES AND STOCKHOLDERS' EQUITY                 2000        1999
                                                       --------    --------
<S>                                                    <C>         <C>
Current liabilities:
  Current portion of long-term debt..............      $  1,566    $  6,509

  Accounts payable...............................         9,489       8,070

  Accrued expenses and other current
    liabilities..................................        17,847      16,923

  Income taxes payable...........................          -          1,055
                                                       --------    --------
       Total current liabilities.................        28,902      32,557

Long-term debt...................................        12,983      24,608
Deferred income taxes............................          -          3,582
Other long-term liabilities......................         4,890       2,376
                                                       --------    --------
Total liabilities................................        46,775      63,123
                                                       --------    --------
Commitments and contingencies

Stockholders' equity:
  Preferred Stock, par value $.10 per share;
    authorized 1,000 shares:  Series A Junior
    Participating Preferred Stock, par value
    $.10 per share; authorized
    40 shares; none issued.......................          -           -
  Common Stock, par value $.10 per share;
    authorized 40,000 shares; issued 27,835 and
    18,429 at June 30, 2000 and 1999,
    respectively.................................         2,783       1,843
  Additional paid-in capital.....................       190,250     105,720
  Retained earnings (accumulated deficit)........         8,979      (5,421)
                                                       --------    --------
                                                        202,012     102,142
  Less:  Treasury stock, at cost (13 and 6
   shares at June 30, 2000 and 1999,
   respectively).................................            80          49
                                                       --------    --------
Total stockholders' equity.......................       201,932     102,093
                                                       --------    --------
Total liabilities and stockholders' equity.......      $248,707    $165,216
                                                       ========    ========
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                       S-3
<PAGE>
                     AEROFLEX INCORPORATED AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS

                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                       Years Ended June 30,
                                 --------------------------------
                                   2000        1999       1998
                                   ----        ----       ----

<S>                              <C>         <C>         <C>
Net sales.....................   $185,924    $157,104    $118,861
Cost of sales.................    118,548      98,645      77,286
                                 --------    --------    --------
  Gross profit................     67,376      58,459      41,575
                                 --------    --------    --------
Operating costs:
  Selling, general and
    administrative costs......     34,034      27,763      21,545
  Research and development
    costs.....................     10,980       9,612       5,172
  Acquired in-process research
    and development (note 2)..       -          3,500        -
      Total operating costs...     45,014      40,875      26,717
                                 --------    --------    --------
Operating income .............     22,362      17,584      14,858
                                 --------    --------    --------
Other expense (income):
  Interest expense............      2,316       1,454       2,011
  Other expense (income)
    (including interest income
    and dividends of $650,
    $781 and $389)............       (554)       (777)       (309)
                                 --------    --------    --------
      Total other expense
       (income)..............       1,762         677       1,702
                                 --------    --------    --------
Income before income taxes....     20,600      16,907      13,156
Provision for income taxes....      6,200       7,150       4,750
                                 --------    --------    --------
Net income ...................   $ 14,400    $  9,757    $  8,406
                                 ========    ========    ========
Net income per common share:
   Basic......................      $0.60       $0.44       $0.45
                                    =====       =====       =====
   Diluted....................      $0.57       $0.41       $0.41
                                    =====       =====       =====
Weighted average number of
 common shares outstanding:
   Basic......................     23,819      22,230      18,503
   Diluted....................     25,462      23,910      20,658

<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>

                                       S-4

<PAGE>
                              AEROFLEX INCORPORATED
                                AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                    Years Ended June 30, 2000, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                     Retained
                                                                       Additional    Earnings
                                                       Common Stock      Paid-in   (Accumulated     Treasury Stock     Comprehensive
                                        Total      Shares   Par Value    Capital      Deficit)      Shares     Cost       Income
                                      ---------    ------   ---------  ----------   -----------     ------     ----    -------------
<S>                                   <C>           <C>       <C>       <C>          <C>             <C>      <C>          <C>
Balance, July 1, 1997................ $  35,040     12,658    $ 1,266   $  58,110    $ (23,584)       169     $  (752)
Stock issued in public offering......    31,285      2,597        260      31,025         -          -           -
Stock issued upon exercise
  of stock options and warrants......     2,923        349         35       2,141         -          (168)        747
Stock issued upon conversion
  of debentures......................     9,382      1,774        177       9,205         -          -           -
Net income...........................     8,406       -          -           -           8,406       -           -         $   8,406
                                      ---------     ------    -------   ---------    ---------       ----     -------      ---------
Balance, June 30, 1998...............    87,036     17,378      1,738     100,481      (15,178)         1          (5)     $   8,406
Stock issued upon exercise                                                                                                 =========
  of stock options and warrants......     4,967      1,051        105       4,563         -           (34)        299
Purchase of treasury stock...........      (343)      -          -           -            -            39        (343)
Deferred compensation................       676       -          -            676         -          -           -
Net income...........................     9,757       -          -           -           9,757       -           -         $   9,757
                                      ---------     ------    -------   ---------    ---------       ----     -------      ---------
Balance, June 30, 1999...............   102,093     18,429      1,843     105,720       (5,421)         6         (49)     $   9,757
                                                                                                                           =========
Stock issued in public offering......    68,500      2,500        250      68,250         -          -           -
Stock issued upon exercise of
  stock options and warrants.........    18,457      1,339        133      16,365         -          (296)      1,959
Purchase of treasury stock...........    (1,990)      -          -           -            -           300      (1,990)
Deferred compensation................       401       -          -            401         -          -           -
Five-for-four stock split............       (11)     5,567        557        (568)        -             3        -
Unrealized gain on marketable
  securities.........................        82       -          -             82         -          -           -         $      82
Net income...........................    14,400       -          -           -          14,400       -           -            14,400
                                      ---------     ------    -------   ---------    ---------       ----     -------      ---------
Balance, June 30, 2000............... $ 201,932     27,835   $  2,783   $ 190,250    $   8,979         13     $   (80)     $  14,482
                                      =========     ======   ========   =========    =========       ====     =======      =========
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                       S-5

<PAGE>

                     AEROFLEX INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                      Years Ended June 30,
                                                --------------------------------
                                                  2000        1999        1998
                                                  ----        ----        ----
<S>                                             <C>        <C>          <C>
Cash flows from operating activities:
  Net income ..............................     $ 14,400   $  9,757     $  8,406
  Adjustments to reconcile net income to
    net cash provided by operating
    activities:
      Acquired in-process research
        and development....................         -         3,500         -
      Depreciation and amortization........        8,983      6,554        4,884
      Amortization of deferred gain........         (596)      (588)        (588)
      Deferred income taxes................        1,086      1,812        1,004
      Other................................          390        292          (10)
  Change in operating  assets and
    liabilities,  net of effects from
    purchase of businesses:
      Decrease (increase) in accounts
        receivable..........................     (11,133)   (16,365)       1,975
      Decrease (increase) in inventories....      (4,232)     3,825       (8,397)
      Decrease (increase) in prepaid
        expenses and other assets...........      (1,067)    (2,238)        (633)
      Increase (decrease) in accounts
        payable, accrued expenses and
        other long-term liabilities.........       2,393      2,739        5,384
      Increase (decrease) in income
        taxes payable.......................       4,416      2,090        1,648
                                                --------  ---------     --------
Net cash provided by operating
  activities................................      14,640     11,378       13,673
                                                --------  ---------     --------
Cash flows from investing activities:
  Payment for purchase of businesses,
    net of cash acquired....................        (566)   (43,656)        (249)
  Purchase of equipment, inventory and
    technology rights from Lucent
    Technologies............................        -          -          (4,435)
  Capital expenditures......................      (7,213)    (9,104)     (10,613)
  Proceeds from sale of property,
    plant and equipment.....................       1,686        967          209
  Purchase of marketable securities.........     (11,430)      -            -
  Proceeds from sale of marketable
    securities..............................         193        198          110
                                                --------  ---------     --------
Net cash used in investing activities.......     (17,330)   (51,595)     (14,978)
                                                --------  ---------     --------
Cash flows from financing activities:
  Proceeds from issuance of
    common shares in public
    offering.................................     69,000       -          31,781
  Costs in connection with
    public offering..........................       (500)      -            (496)
  Borrowings under debt agreements...........      2,090     24,191        6,231
  Debt repayments............................    (19,081)    (4,663)     (13,685)
  Bank debt financing costs..................       -          (438)        -
  Purchase of treasury stock.................     (1,990)      (343)        -
  Proceeds from the exercise of stock
    options and warrants.....................      5,170      2,539        1,292
  Amounts paid for withholding taxes on
    stock option exercises...................    (11,169)    (5,434)      (1,512)
  Withholding taxes collected for stock
    option exercises.........................     11,166      2,671        1,502
                                                --------  ---------     --------
Net cash provided by financing activities....     54,686     18,523       25,113
                                                --------  ---------     --------
Net increase (decrease) in cash and
  cash equivalents...........................     51,996    (21,694)      23,808
Cash and cash equivalents at beginning of
  period.....................................      2,714     24,408          600
                                                --------  ---------     --------
Cash and cash equivalents at end of period...   $ 54,710   $  2,714     $ 24,408
                                                ========   ========     ========
<FN>
                 See notes to consolidated financial statements.
</FN>
</TABLE>
                                       S-6

<PAGE>
                     AEROFLEX INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Principles and Policies

     Principles of Consolidation
     The accompanying  consolidated financial statements include the accounts of
     Aeroflex  Incorporated and its subsidiaries  (the "Company"),  all of which
     are wholly-owned with the exception of Europtest which is 93.4% owned as of
     June 30, 2000 (see Note 2). All intercompany balances and transactions have
     been eliminated.

     Use of Estimates
     The  preparation  of financial  statements  in  conformity  with  generally
     accepted accounting principles requires that management of the Company make
     a number of estimates and  assumptions  relating to the reporting of assets
     and  liabilities and the disclosure of contingent  assets and  liabilities.
     Among the more significant estimates included in the consolidated financial
     statements are the estimated costs to complete contracts in process. Actual
     results could differ from those estimates.

     Cash and Cash Equivalents
     The Company  considers all highly liquid  investments  having maturities of
     three months or less at the date of acquisition to be cash equivalents.

     Inventories
     Inventories  are  stated  at the  lower of cost  (first-in,  first-out)  or
     market.  Inventories  related to long-term  contracts  are recorded at cost
     less amounts expensed under percentage-of-completion accounting.

     Financial Instruments
     The fair values of all on-balance sheet financial  instruments,  other than
     long-term debt (see Note 8),  approximate  book values because of the short
     maturity of these instruments. Amounts receivable or payable under interest
     rate swap agreements are accounted for as adjustments to interest expense.

     Revenue and Cost Recognition on Contracts
     Revenue is recognized based upon shipments or billings. The Company records
     gross  profit on its  long-term  contracts  using  percentage-of-completion
     accounting  under  which  costs  are  recognized  on  revenues  in the same
     relation that total  estimated  manufacturing  costs bear to total contract
     value.  Estimated  costs at  completion  are  based  upon  engineering  and
     production  estimates.  Provisions  for  estimated  losses or  revisions in
     estimated  profits on  contracts-in-process  are  recorded in the period in
     which such losses or revisions are first determined.

     Property, Plant and Equipment
     Property,   plant  and  equipment  are  stated  at  cost  less  accumulated
     depreciation  computed on a straight-line  basis over the estimated  useful
     lives of the related assets.  Leasehold improvements are amortized over the
     life of the lease or the estimated life of the asset, whichever is shorter.

     Research and Development Costs
     All research and development costs are charged to expense as incurred.  See
     Note 2 for a discussion of acquired in-process research and development.

     Intangible Assets
     Intangible assets are recorded at cost less accumulated  amortization.  The
     excess of purchase price over the fair value of tangible assets acquired is
     being amortized on a straight-line basis over periods ranging from 15 to 40
     years except for certain costs allocated to identifiable  intangible assets
     including existing technology,  assembled workforce, customer relationships
     and patents which are amortized over 6 to 15 years, the estimated remaining
     lives of the intangibles at the time they were acquired by the Company. The



                                       S-7
<PAGE>
     Company periodically  evaluates the recoverability of the carrying value of
     its intangible  assets and the related  amortization  periods.  The Company
     assesses  the   recoverability   of  unamortized   goodwill  based  on  the
     undiscounted projected future earnings of the related businesses.

     Income Per Common Share
     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
     128 "Earnings Per Share," income per common share ("Basic EPS") is computed
     by dividing net income by the weighted  average common shares  outstanding.
     Income per common share assuming  dilution  ("Diluted  EPS") is computed by
     dividing  net income  plus a pro forma  addback of  debenture  interest  by
     weighted average common shares outstanding plus potential dilution from the
     conversion of debentures and the exercise of stock options and warrants.

     Accounting for Stock-Based Compensation
     The Company  records  compensation  expense for employee and director stock
     options only if the current  market price of the  underlying  stock exceeds
     the exercise  price on the date of the grant.  Effective  July 1, 1996, the
     Company adopted SFAS No. 123,  "Accounting  for Stock-Based  Compensation."
     The Company has elected not to  implement  the fair value based  accounting
     method for employee and director stock options,  but instead has elected to
     disclose  the pro forma net  income  and pro forma net income per share for
     employee and director  stock option grants made beginning in fiscal 1996 as
     if such method had been used to account for stock-based  compensation  cost
     as described in SFAS No. 123.

     Income Taxes
     In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company
     measures  deferred tax assets and  liabilities  based upon the  differences
     between the financial accounting and tax bases of assets and liabilities.

     Comprehensive Income
     On July 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
     Income." Comprehensive income consists of net income and equity adjustments
     from foreign currency  translation and available for-sale securities and is
     presented  in the  Consolidated  Statements  of  Stockholders'  Equity  and
     Comprehensive Income. The statement requires only additional disclosures in
     the  consolidated  financial  statements;  it does not effect the Company's
     financial position or results of operations.

     Reclassifications
     Reclassifications  have  been  made  to  the  1998  and  1999  consolidated
     financial statements to conform to the 2000 presentation.

     Recent Accounting Pronouncements
     Effective  July 1, 2000,  the Company will adopt SFAS No. 133,  "Accounting
     for  Derivative  Instruments  and Hedging  Activities,"  as  amended.  This
     statement  requires companies to record derivatives on the balance sheet as
     assets or liabilities at their fair value. In certain circumstances changes
     in the value of such derivatives may be required to be recorded as gains or
     losses.  The impact of this  statement  is not  expected to have a material
     effect on the Company's consolidated financial statements.

     In March 2000, the FASB issued FASB  Interpretation No. 44, "Accounting for
     Certain  Transactions  Involving Stock  Compensation," an interpretation of
     Accounting  Principles Board Opinion No.25. This  interpretation  clarifies
     the application of Option No. 25 for certain issues. This interpretation is
     effective July 1, 2000. The effects of applying this  interpretation  would
     be recognized on a prospective  basis from July 1, 2000. The impact of this
     interpretation is not expected to be material.



                                       S-8
<PAGE>
2.   Acquisition of Businesses

     UTMC
     Effective  February 25, 1999, the Company  acquired all of the  outstanding
     stock of UTMC Microelectronic  Systems,  Inc. ("UTMC") for $42.5 million of
     cash.  The purchase price was paid with available cash of $22.5 million and
     borrowings  under the Company's bank loan agreement of $20.0 million.  UTMC
     is a supplier  of  radiation-tolerant  integrated  circuits  for  satellite
     communications.  The acquired company's net sales were approximately  $33.4
     million for the year ended December 31, 1998.

     The Company  commissioned an independent  asset valuation study of acquired
     tangible  and  identifiable  intangible  assets  to  serve  as a basis  for
     allocation  of the  purchase  price.  Based  on  this  study,  the  Company
     allocated the purchase price,  including acquisition costs of approximately
     $500,000, as follows:
<TABLE>
<CAPTION>
                                                   (In thousands)
                <S>                                    <C>
                Net tangible assets                    $28,771
                Identifiable intangible assets           6,300
                Costs in excess of fair value of
                  net assets acquired                    4,429
                In-process research and development      3,500
                                                       -------
                                                       $43,000
                                                       =======
</TABLE>

     The identifiable  intangible assets include existing  technology,  customer
     relationships  and assembled work force. The  identifiable  intangibles and
     costs in excess  of fair  value of net  assets  are  being  amortized  on a
     straight-line  basis over 6 to 15 years based on the study described above.
     The acquired in-process research and development was not considered to have
     reached  technological   feasibility  and,  in  accordance  with  generally
     accepted accounting principles, the value of such was expensed in the third
     quarter of fiscal 1999.

     Summarized  below are the  unaudited pro forma results of operations of the
     Company as if UTMC had been acquired at the beginning of the fiscal periods
     presented.  The $3.5 million  write-off  has been  included in the June 30,
     1999 pro forma  income but not the June 30, 1998 pro forma  income in order
     to provide comparability to the respective actual results.
<TABLE>
<CAPTION>
                              Pro Forma Years Ended
                                     June 30,
                        -----------------------------------
                               1999                1998
                               ----                ----
                       (In thousands, except per share data)

    <S>                     <C>                 <C>
    Net sales               $  177,149          $  155,371
    Net income                   9,469              11,267

    Net income per share
     Basic                   $    0.43          $     0.61
      Diluted                     0.40                0.55
</TABLE>

     The pro forma  financial  information  presented  above is not  necessarily
     indicative of either the results of operations that would have occurred had
     the acquisition taken place at the beginning of the periods presented or of
     future operating results of the combined companies.

     Europtest
     Effective  September  1, 1998,  the  Company  acquired  90% of the stock of
     Europtest,  S.A.  (France) for  approximately  $1.1  million.  The purchase
     agreement  also  requires  that the Company  purchase the  remaining 10% of
     Europtest pro rata over a three-year period at prices determined based upon
     net sales of Europtest products.  In October 1999, the Company purchased an
     additional 3.4% of Europtest's stock for approximately  $54,000.  Europtest
     develops  and  sells  specialized   software-driven   test  equipment  used



                                       S-9
<PAGE>
     primarily in cellular, satellite and other communications applications. The
     acquired  company's net sales were  approximately $1.9 million for the year
     ended March 31, 1998. On a pro forma basis,  had the Europtest  acquisition
     taken  place as of the  beginning  of the  periods  presented,  results  of
     operations for those periods would not have been materially  affected.  The
     purchase  price has been allocated to the assets  acquired and  liabilities
     assumed based on their fair values.

     The acquisitions have been accounted for as purchases and, accordingly, the
     acquired  assets  and  liabilities  assumed  have  been  recorded  at their
     estimated fair values at the respective dates of acquisition. The operating
     results of UTMC and Europtest are included in the  consolidated  statements
     of earnings from the respective acquisition dates.

3.   Acquisition of Assets From Lucent Technologies
     Effective July 1, 1997, the Company's  subsidiary,  MIC Technology ("MIC"),
     acquired certain equipment,  inventory, licenses for technology and patents
     of  two  of  Lucent  Technologies'   microelectronics  components  units  -
     multi-chip modules and film integrated circuits - for $4.4 million in cash.
     These units manufacture  microelectronic modules and interconnect products.
     The  purchase  price has been  allocated to the assets  acquired,  based on
     their  fair  values,  and  certain  obligations  assumed  relating  to  the
     agreements.

4.   Marketable Securities

     All of the Company's  marketable  securities are deemed by management to be
     available-for-sale and are reported at fair value with net unrealized gains
     or losses reported within stockholders'  equity.  Realized gains and losses
     are recorded based on the specific  identification method. For fiscal years
     2000, 1999 and 1998, gross realized gains and losses were $193,000,  $0 and
     $0, respectively. The carrying amount of the Company's investments is shown
     in the table below:
<TABLE>
<CAPTION>
                                            June 30, 2000
                                            -------------
                                            (In thousands)
    <S>                                         <C>
    Amortized cost                              $11,430
    Gross unrealized gains                           85
    Gross unrealized losses                          (3)
                                                -------
    Estimated fair value                        $11,512
                                                =======
</TABLE>

     The  marketable  securities  at June  30,  2000  were  virtually  all  U.S.
     corporate debt securities with scheduled maturities within one year.

5.   Inventories
     Inventories consist of the following:
<TABLE>
<CAPTION>
                                      June 30,
                              -----------------------
                                2000           1999
                              --------        --------
                                    (In thousands)
 <S>                          <C>             <C>
 Raw materials.........       $ 20,392        $ 18,441
 Work-in-process.......         12,783          11,148
 Finished goods........          4,192           3,048
                              --------        --------
                              $ 37,367        $ 32,637
                              ========        ========
</TABLE>

  Inventories include  contracts-in-process  of $9.3 million and $9.6 million at
 June 30, 2000 and 1999,  respectively,  which consist substantially of unbilled
 material,  labor and  overhead  costs  that are or were  expected  to be billed
 during the succeeding fiscal year.






                                      S-10

<PAGE>
6.   Property, Plant and Equipment
     Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
                                                   June 30,           Estimated
                                        --------------------------   -----------
                                             2000            1999    Useful Life
                                                (In thousands)         In Years
                                                                     -----------
      <S>                               <C>             <C>            <C>
      Land............................  $    4,725      $    4,725
      Building and leasehold
        improvements..................      33,058          32,353     2 to 40
      Machinery, equipment, tools
           and dies...................      38,268          37,727     3 to 10
      Furniture and fixtures..........       8,258           7,521     5 to 10
      Assets recorded under
        capital leases................       6,769           2,334     5 to 10
                                        ----------      ----------
                                            91,078          84,660
      Less accumulated depreciation
        and amortization..............      38,856          33,858
                                        ----------      ----------
                                        $   52,222      $   50,802
                                         ==========      ==========
</TABLE>

     In July 1998, the Company purchased a previously leased operating  facility
     in Pearl River, New York for $2.5 million in cash.

     Repairs and maintenance  expense on property,  plant and equipment was $2.5
     million,  $2.3  million and $1.4 million for the years ended June 30, 2000,
     1999 and 1998, respectively.

7.   Accrued Expenses and Other Current  Liabilities  Accrued expenses and other
     current liabilities include accrued salaries,  wages and other compensation
     of $6.6 million and $7.1 million at June 30, 2000 and 1999, respectively.

8.   Long-Term  Debt and Credit  Arrangements  Long-term  debt  consists  of the
     following:
<TABLE>
<CAPTION>
                                                June 30,
                                        -------------------------
                                           2000            1999
                                           ----            ----
                                              (In thousands)
     <S>                                <C>              <C>
       Revolving credit, term loan
        and mortgage agreement (a)..    $  4,038         $ 21,853
      Building mortgage (b).........       3,965            4,165
      Equipment loans (c)...........        -               4,877
      Capitalized lease
        obligations (c).............       6,026              124
      Other.........................         520               98
                                        --------         --------
                                          14,549           31,117
      Less current maturities.......       1,566            6,509
                                        --------         --------
                                        $ 12,983         $ 24,608
                                        ========         ========
</TABLE>

          Aggregate  long-term  debt as of June 30, 2000  matures in each fiscal
          year as follows:
<TABLE>
<CAPTION>
                                 (In thousands)
                 <S>                 <C>
                 2001............... $  1,566
                 2002...............    1,603
                 2003...............    1,338
                 2004...............    1,545
                 2005...............    1,646
                 Thereafter.........    6,851
                                     --------
                                     $ 14,549
                                     ========
</TABLE>

     Interest  paid was $2.4 million,  $1.6 million and $2.1 million  during the
     years ended June 30, 2000, 1999 and 1998, respectively.


                                      S-11

<PAGE>
     (a) As of February 25, 1999, the Company replaced a previous agreement with
     a revised revolving credit, term loan and mortgage agreement with two banks
     which is secured by substantially all of the Company's assets not otherwise
     encumbered.  The  agreement  provided for a revolving  credit line of $23.0
     million,  a term loan of $20.0  million  and a  mortgage  on the  Company's
     Plainview  property for $4.5 million.  The  revolving  credit loan facility
     expires in December  2002. As of June 30, 1999, the  outstanding  term loan
     was $17.5 million.  The term loan was fully paid with the proceeds from the
     Company's  sale of its  Common  Stock in May  2000.  The  interest  rate on
     borrowings  under this agreement is at various rates depending upon certain
     financial ratios, with the current rate substantially  equivalent to 30-day
     LIBOR  (approximately  6.7% at June 30,  2000) plus 1.50% on the  revolving
     credit  borrowings.  The Company  paid a facility  fee of  $100,000  and is
     required to pay a  commitment  fee of .25% per annum of the average  unused
     portion of the credit line. The mortgage is payable in monthly installments
     of  approximately  $26,000 through March 2008 and a balloon payment of $1.6
     million in April 2008.  The Company has entered into an interest  rate swap
     agreement  for the  outstanding  amount  under the  mortgage  agreement  at
     approximately  7.6% in order to reduce the  interest  rate risk  associated
     with these  borrowings.  The fair market  value of the  interest  rate swap
     agreement was $154,000 as of June 30, 2000 in favor of the Company.

     The  terms of the  agreement  require  compliance  with  certain  covenants
     including  minimum  consolidated  tangible  net worth and pretax  earnings,
     maintenance   of  certain   financial   ratios,   limitations   on  capital
     expenditures  and  indebtedness  and  prohibition  of the  payment  of cash
     dividends.  In connection with the purchase of certain materials for use in
     manufacturing,  the Company has a letter of credit of $2.0 million. At June
     30, 2000, the Company's  available  unused line of credit was $21.0 million
     after consideration of the letter of credit.

     (b) In December 1998, the Company  financed the  acquisition and renovation
     of the land and  building  of its Pearl  River,  NY facility  and  received
     proceeds amounting to $4.2 million. This debt requires a balloon payment of
     $4.0 million in 2019.

     (c) During the year ended June 30, 1998, the Company entered into equipment
     loans with two banks  totaling  $6.2 million.  In June 2000,  the remaining
     balance of these loans of $4.1  million was  refinanced  under two sale and
     capital leaseback  agreements for approximately $6.0 million.  For purposes
     of the Consolidated  Statements of Cash Flows, the $4.1 million refinancing
     was considered a non-cash transaction. These agreements expire through June
     2006 and bear interest at approximately 7.9%.

9.   Senior  Subordinated  Convertible  Debentures  On  September  8, 1997,  the
     Company called for the redemption of all of its  outstanding  7-1/2% Senior
     Subordinated  Convertible  Debentures at 104.5% of the principal  amount of
     $10.0 million.  All of the principal amount of the debentures was converted
     into  the  Company's  Common  Stock  at a price  of  $4.50  per  share.  In
     connection with the  conversions,  $599,000 of deferred bond issuance costs
     were charged to additional paid-in capital.

10.  Stockholders' Equity

     Common Stock Offerings
     In March 1998, the Company sold 3.2 million shares  (adjusted for the stock
     split) of its Common Stock in a public  offering for $31.3 million,  net of
     an underwriting discount of $2.0 million and issuance costs of $496,000. Of
     these net proceeds,  $9.6 million was used to repay bank indebtedness.  The
     balance of the net proceeds was used primarily for the purchase of UTMC.

     In May 2000,  the Company sold 3.1 million  shares  (adjusted for the stock
     split) of its Common Stock in a public  offering for $68.5 million,  net of
     an underwriting discount of $3.5 million and issuance costs of $500,000. Of
     these net  proceeds,  $13.0  million  was used to repay the term loan.  The
     balance of the net proceeds is invested in short-term marketable securities


                                      S-12

<PAGE>
     and is intended  to  ultimately  be used for  additional  working  capital,
     including  research and development,  and expansion of our facilities,  and
     for  general  corporate  purposes,   including  possible   acquisitions  of
     technologies, product lines or businesses.

     Common Stock Split
     On  June  12,  2000,  the  Company's   Board  of  Directors   authorized  a
     five-for-four stock split on its Common Stock, effective June 26, 2000. The
     share and per share amounts in the consolidated  financial  statements give
     effect to the stock split.

     Stock Options and Warrants
     Under the Company's stock option plans,  options may be granted to purchase
     shares of the  Company's  Common Stock  exercisable  at prices equal to the
     fair  market  value  on the  date of  grant.  During  1990,  the  Company's
     shareholders  approved the Non- Qualified  Stock Option Plan (the "NQSOP").
     In December 1993, the Board of Directors adopted the Outside Director Stock
     Option  Plan  (the  "Directors'   Plan")  which  provides  for  options  to
     non-employee directors,  which become exercisable in three installments and
     expire ten years from the date of grant.  The Directors'  Plan, as amended,
     covers 625,000 shares of the Company's  Common Stock. In November 1994, the
     shareholders  approved the Directors' Plan and the 1994 Non-Qualified Stock
     Option Plan (the "1994 Plan"). In November 1996, the shareholders  approved
     the 1996 Stock Option Plan (the "1996 Plan").  In April 1998,  the Board of
     Directors  adopted the 1998 Stock Option Plan (the "1998 Plan"). In January
     2000,  the  shareholders  approved  the 1999 Stock  Option  Plan (the "1999
     Plan"). In March 2000, the Board of Directors adopted the 2000 Stock Option
     Plan ("the 2000 Plan").  The NQSOP,  the 1994 Plan, the 1996 Plan, the 1998
     Plan,  the 1999 Plan and the 2000 Plan  provide  for options  which  become
     exercisable in one or more  installments and each covers 1.9 million shares
     of the  Company's  Common  Stock  except for the 1999 Plan which covers 1.1
     million shares and the 2000 Plan which covers 938,000 shares. Options under
     the NQSOP  and the 1994  Plan  expire  five  years  from the date of grant.
     Options under the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2000 Plan
     shall expire not later than ten years from the date of grant.

     The Company has also issued to employees,  who are not executive  officers,
     options to purchase  685,000  shares of Common  Stock  exercisable  between
     $3.20 and $10.90  per share.  Such  grants  were not  covered by one of the
     above plans.

     Additional  information  with respect to the Company's  stock options is as
     follows:
<TABLE>
<CAPTION>
                                     Weighted       Shares
                                  Average Under
                                    Exercise      Outstanding
                                      Prices        Options
                                  -------------   -----------
                                                 (In thousands)
                 <S>                 <C>              <C>
                 Balance, July 1,
                  1997.........      $  3.06          4,150
                 Granted.......         7.95          1,304
                 Forfeited.....         2.92            (44)
                 Exercised.....         2.54           (545)
                 Balance, June 30,                    -----
                  1998.........         4.43          4,865
                 Granted.......         9.46          1,444
                 Forfeited.....         3.60             (4)
                 Exercised.....         2.99         (1,825)
                 Balance, June 30,                    -----
                  1999.........         6.64          4,480
                 Granted.......        28.02          2,197
                 Forfeited.....         9.64            (28)
                 Exercised.....         4.45         (1,866)
                 Balance, June 30,                    -----
                  2000.........        17.30          4,783
                                                      =====
</TABLE>


                                      S-13

<PAGE>
     The  Company's  stock option plans allow  employees to use shares  received
     from  the   exercise  of  the  option  to  satisfy   the  tax   withholding
     requirements. During fiscal years 2000, 1999 and 1998, payroll tax on stock
     option  exercises  were withheld from  employees in shares of the Company's
     Common Stock amounting to $0, $2.6 million and $10,000, respectively.

     Options to purchase  1.7 million,  1.9 million and 2.9 million  shares were
     exercisable at weighted average exercise prices of $13.62,  $4.06 and $3.12
     as of June 30, 2000, 1999 and 1998, respectively.

     The options  outstanding  as of June 30, 2000 are  summarized  in ranges as
     follows:
<TABLE>
<CAPTION>
                          Options Outstanding
                    ----------------------------------
                    Weighted                 Weighted
        Range of    Average                   Average
        Exercise    Exercise    Options      Remaining
        Prices        Price   Outstanding      Life
        --------    --------  -----------    ---------
                             (In thousands)
     <S>            <C>         <C>           <C>
     $ 3.00-$ 4.30  $ 3.60        321         5.8 years
     $ 6.50-$ 9.70    7.86      1,789         7.8
     $10.75-$14.05   12.67      1,386         8.7
     $32.82-$39.20   38.83      1,287         9.7
                                -----
                                4,783
                                =====
</TABLE>
<TABLE>
<CAPTION>
                     Options Exercisable
                  --------------------------
                    Weighted
       Range of     Average
       Exercise     Exercise      Options
        Prices       Price       Exercisable
       --------     --------     -----------
                                (In thousands)
     <S>             <C>             <C>
     $ 3.00-$ 4.30   $ 3.60          321
     $ 6.50-$ 9.70     7.67          813
     $10.75-$14.05    11.46          194
     $32.82-$39.20    38.73          338
                                   -----
                                   1,666
                                   =====
</TABLE>

     As of June 30,  2000,  the  Company  has  outstanding  warrants to purchase
     66,000 shares of its Common Stock  exercisable  between $5.40 and $6.00 per
     share through June 2004. These warrants were issued primarily in connection
     with the acquisition of MIC in fiscal 1996.

     Accounting for Stock-Based Compensation
     In  fiscal  1997,  the  Company  adopted  SFAS  No.  123,  "Accounting  for
     Stock-Based Compensation." The Company has chosen not to implement the fair
     value based accounting method for employee and director stock options,  but
     has elected to  disclose  the pro forma net income and net income per share
     as if such  method had been used to account  for  stock-based  compensation
     cost as described in SFAS No. 123.

     The per share weighted  average fair value of stock options  granted during
     fiscal 2000, 1999 and 1998 was $21.20,  $6.00 and $5.91,  respectively,  on
     the date of grant  using the Black  Scholes  option-pricing  model with the
     following weighted average  assumptions:  2000 - expected dividend yield of
     0%, risk free interest rate of 6.0%,  expected stock volatility of 94%, and
     an expected option life of 5.3 years; 1999 - expected dividend yield of 0%,
     risk free interest rate of 5.3%,  expected stock  volatility of 77%, and an
     expected  option life of 5.1 years;  1998 - expected  dividend yield of 0%,
     risk free interest rate of 5.8%,  expected stock  volatility of 80%, and an
     expected option life of 7.4 years. The pro forma  compensation  cost before
     income  taxes was $14.0  million , $4.8  million  and $2.0  million for the


                                      S-14
<PAGE>
     years  ended  June 30,  2000,  1999 and  1998,  respectively,  based on the
     aforementioned  fair value at the grant date only for options granted after
     fiscal year 1995.  The  Company's net income and net income per share using
     this pro forma compensation cost would have been:
<TABLE>
<CAPTION>

                                 Years Ended June 30,
                                -----------------------
                       (In thousands, except per share data)

                                         2000
                              --------------------------
                              As Reported      Pro Forma
                              -----------      ---------
     <S>                        <C>            <C>
     Net income...............  $ 14,400       $  5,305

     Net income per share
      - Basic.................   $  0.60        $  0.22
      - Diluted...............      0.57           0.21


                                         1999
                              --------------------------
                              As Reported      Pro Forma
                              -----------      ---------
      Net income..............  $  9,757       $  6,608

      Net income per share
               -Basic.........   $  0.44        $  0.30
               -Diluted.......      0.41           0.28


                                         1998
                              --------------------------
                              As Reported      Pro Forma
                              -----------      ---------
      Net income..............  $  8,406       $  7,112

      Net income per share
           -Basic.............   $  0.45         $ 0.38
           -Diluted...........      0.41           0.36
</TABLE>

     Since the pro forma  compensation  cost reflects only options granted after
     fiscal year 1995, the full impact of calculating  stock-based  compensation
     costs  under  SFAS No.  123 is not  reflected  in the pro forma net  income
     because  compensation cost is recognized over the respective vesting period
     and compensation cost for options granted prior to fiscal year 1996 was not
     reflected.

     Shareholders' Rights Plan
     On  August  13,  1998,  the  Company's   Board  of  Directors   approved  a
     Shareholders' Rights Plan which provides for a dividend distribution of one
     right for each share to holders of record of the Company's  Common Stock on
     August  31,  1998 and the  issuance  of one right for each  share of Common
     Stock that shall be subsequently issued. The rights become exercisable only
     in the event a person or group ("Acquiring Person") accumulates 15% or more
     of the Company's Common Stock, or if an Acquiring Person announces an offer
     which would result in it owning 15% or more of the Common Stock. The rights
     expire on August 31, 2008. Each right will entitle the holder to buy 1/1250
     of a share of Series A Junior Participating Preferred Stock, as amended, of
     the Company at a price of $65. In addition, upon the occurrence of a merger
     or other business combination, or the acquisition by an Acquiring Person of
     50% or more of the  Common  Stock,  holders of the  rights,  other than the
     Acquiring  Person,  will be entitled to purchase either Common Stock of the
     Company or common stock of the  Acquiring  Person at half their  respective
     market values.

     The Company will be entitled to redeem the rights for $.01 per right at any
     time prior to a person becoming an Acquiring Person.


                                      S-15
<PAGE>
     Net Income Per Share
     A  reconciliation  of the numerators and  denominators of the Basic EPS and
     Diluted EPS calculations is as follows:
<TABLE>
<CAPTION>

                                          Years Ended June 30,
                                  -----------------------------------
                                      2000        1999       1998
                                      ----        ----       ----
                                 (In thousands, except per share data)
 <S>                                <C>        <C>       <C>
 Computation of Adjusted
   Net Income:
 Net income for basic
   earnings per common share......  $ 14,400   $  9,757   $  8,406
    Add: Debenture interest and
   amortization expense, net
   of income taxes................      -          -           103
 Adjusted net income for diluted    --------   --------   --------
   earnings per common share......  $ 14,400   $  9,757   $  8,509
 Computation of Adjusted            ========   ========   ========
   Weighted Average Shares
   Outstanding:
 Weighted average shares
   outstanding....................    23,819     22,230     18,503
 Add: Shares assumed to be
   issued upon conversion of
   debentures.....................      -          -           489
 Add: Effect of dilutive
   options and warrants
   outstanding....................     1,643      1,680      1,666
 Weighted average shares and         -------    -------    -------
   common share equivalents used
   for computation of diluted
   earnings per common share......    25,462     23,910     20,658
 Net Income Per Common Share:        =======    =======    =======
   Basic..........................    $0.60      $0.44      $0.45
                                     =======    =======    =======
   Diluted........................    $0.57      $0.41      $0.41
                                     =======    =======    =======
</TABLE>

     Options to purchase 1.3 million shares at exercise  prices ranging  between
     $32.82 and $39.20 per share were  outstanding  as of June 30, 2000 but were
     not included in the  computation of Diluted EPS because the exercise prices
     of these  options were greater than the average  market price of the common
     shares.

11.  Income Taxes

     The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
                                          Years Ended June 30,
                                 ------------------------------------
                                    2000          1999        1998
                                 ---------    ----------     --------
                                              (In thousands)
       <S>                       <C>           <C>           <C>
       Current:
         Federal...............  $   4,656     $   4,465     $   3,178
         State and local.......        458           873           568
                                 ---------     ---------     ---------
                                     5,114         5,338         3,746
                                 ---------     ---------     ---------
       Deferred:
         Federal...............        990         1,989           932
         State and local.......         96          (177)           72
                                 ---------     ---------     ---------
                                     1,086         1,812         1,004
                                 ---------     ---------     ---------
                                 $   6,200     $   7,150     $   4,750
                                 =========     =========     =========
</TABLE>



                                      S-16
<PAGE>
     The provision for income taxes varies from the amount  computed by applying
     the U.S.  Federal income tax rate to income before income taxes as a result
     of the following:
<TABLE>
<CAPTION>

                                          Years Ended June 30,
                                    2000         1999           1998
                                 ---------    ----------     ----------
                                              (In thousands)

       <S>                       <C>           <C>           <C>
       Tax at statutory rate.... $   7,210     $   5,917     $    4,505
       Utilization of capital
        loss carryforward.......    (1,017)         -              -
       Non-deductible acquired
        in-process research
        and development charge..      -            1,225           -
       State and local
        income tax..............       360           452            416
       Research and development
        credit..................      (300)         (500)          (250)
       Other, net...............       (53)           56             79
                                 ---------     ---------     ----------
                                 $   6,200     $   7,150     $    4,750
                                 =========     =========     ==========
</TABLE>

  Deferred tax assets and liabilities consist of:
<TABLE>
<CAPTION>
                                                              June 30,
                                                   ----------------------------
                                                      2000              1999
                                                   ---------         ----------
                                                           (In thousands)
       <S>                                         <C>               <C>
       Accounts receivable.......................  $     210         $      160
       Inventories...............................      4,891              5,025
       Accrued expenses and other current
         liabilities.............................        216                106
                                                   ---------         ----------
         Current assets..........................      5,317              5,291
                                                   ---------         ----------
       Capital lease obligation..................      1,955               -
       Other long-term liabilities...............      1,793                801
       Capital loss carryforwards................      1,262              2,543
       Tax loss carryforwards....................      6,189              1,434
       Tax credit carryforwards..................      4,164              3,864
       Less: valuation allowance.................     (2,165)            (3,426)
                                                   ---------         ----------
         Non-current assets......................     13,198              5,216
                                                   ---------         ----------
       Property, plant and equipment.............     (5,698)            (3,572)
       Intangibles...............................     (4,407)            (5,205)
       Other.....................................       -                   (21)
                                                   ---------         ----------
         Long-term liabilities...................    (10,105)            (8,798)
                                                   ---------         ----------
         Net non-current assets (liabilities)....      3,093             (3,582)
                                                   ---------         ----------
           Total.................................  $   8,410         $    1,709
                                                   =========         ==========
</TABLE>

The Company recorded credits of $13.3 million,  $5.2 million and $1.6 million to
additional  paid-in capital during the years ended June 30, 2000, 1999 and 1998,
respectively,  in  connection  with  the tax  benefit  related  to  compensation
deductions  on the  exercise of stock  options and  warrants.  The  deduction in
fiscal 2000, is expected to create a net  operating  loss  carryforward  for tax
purposes which has resulted in an increase in the Company's deferred tax assets.

In  accordance  with SFAS No.  109,  the Company  records a valuation  allowance
against  deferred  tax assets if it is more  likely than not that some or all of
the  deferred tax assets will not be realized.  The  reduction of the  valuation
allowance in fiscal 2000,  was primarily due to the  utilization of capital loss
carryforwards.

The Company is undergoing  routine audits by various  taxing  authorities of its
state  and  local  income  tax  returns  covering  periods  from  1994 to  1996.
Management believes that the probable outcome of these various audits should not
materially affect the consolidated financial statements of the Company.

                                      S-17

<PAGE>
     The Company made income tax payments of $2.0 million, $3.3 million and $2.1
     million and received  refunds of $940,000,  $75,000 and $26,000  during the
     years ended June 30, 2000, 1999 and 1998, respectively.

12.  Employment Contracts

     As of June 30, 2000, the Company has employment  agreements with certain of
     its  officers for periods  through  June 30, 2004 with annual  remuneration
     ranging from $206,000 to $368,000,  plus cost of living adjustments and, in
     some cases,  additional  compensation  based upon  earnings of the Company.
     Future  aggregate  minimum  payments under these contracts are $1.2 million
     per year.  Certain of the  contracts  provide for a  three-year  consulting
     period at the expiration of the employment term at two-thirds of salary. In
     addition,  these  officers  have the option to terminate  their  employment
     agreements upon change in control of the Company,  as defined,  and receive
     lump sum payments equal to the salary and bonus,  if any, for the remainder
     of the term.

13.  Employee Benefit Plans

     All employees of the Company and certain  subsidiaries  who are not members
     of a collective  bargaining agreement are eligible to participate in one of
     two company  sponsored  401(k) plans.  Each  participant  has the option to
     contribute a portion of his or her compensation and receive a discretionary
     employer   matching   contribution.   Furthermore,   employees  of  certain
     subsidiaries  are eligible to participate in qualified profit sharing plans
     and receive an  allocation  of a  discretionary  share of their  respective
     subsidiary's  profits. For fiscal years ended June 30, 2000, 1999 and 1998,
     these  401(k) and profit  sharing  plans had an  aggregate  expense of $1.7
     million, $1.0 million and $810,000, respectively.

     Effective January 1, 1994, the Company established a Supplemental Executive
     Retirement  Plan  (the  "SERP")  which  provides   retirement,   death  and
     disability  benefits to certain of its  officers.  The SERP expense for the
     fiscal years ended June 30, 2000, 1999 and 1998 was $454,000,  $384,000 and
     $324,000,  respectively.  The assets of the SERP are held in a Rabbi  Trust
     and  amounted to $1.8  million and $1.2  million at June 30, 2000 and 1999,
     respectively.  The accumulated benefit obligation was $2.6 million and $2.0
     million at June 30,  2000 and 1999,  respectively.  The  projected  benefit
     obligation  was $3.3  million  and $2.9  million at June 30, 2000 and 1999,
     respectively.  The  intangible  asset  related to the SERP was $586,000 and
     $462,000 at June 30, 2000 and 1999,  respectively.  A discount rate of 7.5%
     and a rate of  compensation  increase  of 3.0%  are  assumed  in the  above
     calculations  for both  years.  No  participants  are  currently  receiving
     benefits.

14.  Commitments and Contingencies

     Operating Leases

     Several of the Company's  operating  facilities  and certain  machinery and
     equipment are leased under agreements expiring through 2006. The leases for
     machinery and equipment  generally  contain options to purchase at the then
     fair market value of the related leased assets.

  Future  minimum  payments  under  operating  leases as of June 30, 2000 are as
 follows for the fiscal years:
<TABLE>
<CAPTION>
                             (In thousands)
                              ------------
           <S>                 <C>
           2001............... $   2,507
           2002...............     2,174
           2003...............     2,113
           2004...............     1,216
           2005...............       699
           Thereafter.........       191
                               ---------
                               $   8,900
                               =========
</TABLE>

                                      S-18

<PAGE>
     Rental  expense was $2.6 million,  $2.3 million and $1.9 million during the
     fiscal years 2000, 1999 and 1998, respectively.

     Legal Matters

     A subsidiary of the Company whose operations were  discontinued in 1991, is
     one of several  defendants  named in a personal injury action  initiated in
     August 1994, by a group of plaintiffs.  The plaintiffs are seeking  damages
     which cumulatively exceed $500 million. The complaint alleges,  among other
     things,  that the plaintiffs  suffered injuries from exposure to substances
     contained in products sold by the subsidiary to one of its customers.  This
     action is in the discovery  stage.  Based upon  available  information  and
     considering  its various  defenses,  together  with its  product  liability
     insurance,  in the opinion of  management of the Company the outcome of the
     action against its subsidiary will not have a materially  adverse effect on
     the Company's consolidated financial statements.

     The Company is involved in various other routine legal matters.  Management
     believes the outcome of these  matters  will not have a materially  adverse
     effect on the Company's consolidated financial statements.

15.  Business Segments

     The  Company's  business  segments  and  major  products  included  in each
     segment, are as follows:

      Microelectronics:
      a)Microelectronic Modules
      b)Thin Film Interconnects
      c)Integrated Circuits

      Test, Measurement and
       Other Electronics:
      a)Instrument Products
      b)Motion Control Systems

      Isolator Products:
      a)Commercial Spring and Rubber Isolators
      b)Industrial Spring and Rubber Isolators
      c)Military Wire-rope Isolators

     The Company is a manufacturer of advanced technology systems and components
     for commercial industry, government and defense contractors.  Approximately
     32%, 41% and 42% of the Company's sales for the fiscal years 2000, 1999 and
     1998, respectively,  were to agencies of the United States government or to
     prime  defense   contractors  or   subcontractors   of  the  United  States
     government.  The only  customers  which  constituted  more  than 10% of the
     Company's  sales during any year in the period  presented were Teradyne and
     Lockheed  Martin  which  comprised  11.0% and 10.5% of sales in fiscal year
     2000, respectively, Lockheed Martin and Lucent Technologies which comprised
     12.2% and 11.4% of sales in fiscal  year  1999,  respectively,  and  Lucent
     Technologies  which  comprised  15.5% of sales in  fiscal  year  1998.  The
     Company's  customers are located primarily in the United States, but export
     sales  accounted  for 11.8%,  7.7% and 5.5% in fiscal years 2000,  1999 and
     1998, respectively.



                                      S-19
<PAGE>
<TABLE>
<CAPTION>
                                             Years Ended June 30,
                                       -----------------------------
                                         2000       1999      1998
                                        ------     ------    ------
     Business Segment Data:
                                                 (In thousands)
     <S>                               <C>        <C>        <C>
     Net sales:
       Microelectronics............    $110,253   $ 96,846   $ 74,263
       Test, Measurement and
         Other Electronics.........      55,918     41,515     25,685
       Isolator Products...........      19,753     18,743     18,913
                                       --------   --------   --------
         Net sales.................    $185,924   $157,104   $118,861
                                       ========   ========   ========
     Operating income:
       Microelectronics............    $ 22,734   $ 20,104   $ 14,147
       Test, Measurement and
         Other Electronics.........       2,333      3,134        996
       Isolator Products...........       2,692      2,108      3,063
       General corporate expenses..      (5,397)    (4,262)    (3,348)
                                       --------   --------   --------
                                         22,362     21,084     14,858
    Acquired in-process research
         and development(1)........        -        (3,500)      -
       Interest expense............      (2,316)    (1,454)    (2,011)
       Other income (expense), net.         554        777        309
                                       --------   --------   --------
       Income before income
         taxes.....................    $ 20,600   $ 16,907   $ 13,156
                                       ========   ========   ========
     Total assets:
       Microelectronics............    $112,183   $104,222   $ 58,053
       Test, Measurement and
         Other Electronics.........      52,401     43,958     27,522
       Isolator Products...........       9,567     10,020     10,163
       Corporate...................      74,556      7,016     28,363
                                       --------   --------   --------
         Total assets..............    $248,707   $165,216   $124,101
                                       ========   ========   ========
     Capital expenditures:
       Microelectronics............    $  4,777   $  6,955   $  8,792
       Test, Measurement and
         Other Electronics.........       2,284      1,559        848
       Isolator Products...........         152        586        970
       Corporate...................        -             4          3
                                       --------   --------   --------
       Total capital
         expenditures..............    $  7,213   $  9,104   $ 10,613
                                       ========   ========   ========
     Depreciation and amortization
      expense:
       Microelectronics............    $  6,657   $  4,112   $  2,802
       Test, Measurement and
         Other Electronics.........       1,744      1,849      1,553
       Isolator Products...........         554        563        500
       Corporate...................          28         30         29
                                       --------   --------   --------
         Total depreciation and
          amortization expense.....    $  8,983   $  6,554   $  4,884
                                       ========   ========   ========
<FN>
(1)  The special charge for the write-off of in-process research and development
     acquired in the purchase of UTMC is allocable fully to the Microelectronics
     segment.
</FN>
</TABLE>


                                      S-20
<PAGE>

Quarterly Financial Data (Unaudited):
(In thousands, except per share data and footnotes)
<TABLE>
<CAPTION>

                                            Quarter                    Year Ended
2000                          First     Second     Third      Fourth      June 30,
----------------------------------------------------------------------------------
<S>                         <C>        <C>        <C>        <C>        <C>
Net Sales                   $ 42,072   $ 41,531   $ 46,275   $ 56,046   $185,924
Gross Profit                  15,139     13,559     16,721     21,957     67,376
Net Income                  $  2,930   $  1,341   $  3,032   $  7,097   $ 14,400
                            ========   ========   ========   ========   ========
Net income per share:
  Basic                     $ 0.13     $ 0.06     $ 0.13     $ 0.28     $ 0.60
                            ========   ========   ========   ========   ========
  Diluted                   $ 0.12     $ 0.06     $ 0.12     $ 0.26     $ 0.57
                            ========   ========   ========   ========   ========


                                             Quarter                    Year Ended
1999                          First     Second     Third      Fourth      June 30,
----------------------------------------------------------------------------------
Net Sales                   $ 31,629   $ 36,197   $ 40,604   $ 48,674   $157,104
Gross Profit                  11,125     12,402     15,399     19,533     58,459
Net Income (1)              $  2,258   $  2,810   $    188   $  4,501   $  9,757
                            ========   ========   ========   ========   ========
Net income per share:
  Basic (1)                 $ 0.10     $ 0.13     $ 0.01     $ 0.20     $ 0.44
                            ========   ========   ========   ========   ========
  Diluted (1)               $ 0.10     $ 0.12     $ 0.01     $ 0.18     $ 0.41
                            ========   ========   ========   ========   ========
<FN>
(1)  Includes  $3.5 million ($.14 per diluted share and $.16 basic) for the year
     ended June 30, 1999 and quarter ended March 31, 1999,  for the write-off of
     the in- process  research and  development  acquired in connection with the
     purchase of UTMC Microelectronic Systems, Inc.
</FN>
</TABLE>

Since per share  information is computed  independently for each quarter and the
full  year,  based  on the  respective  average  number  of  common  and  common
equivalent shares  outstanding,  the sum of the quarterly per share amounts does
not necessarily equal the per share amounts for each year.

All shares and per share amounts have been  restated to reflect a  five-for-four
stock split.



                                      S-21

<PAGE>

                              AEROFLEX INCORPORATED
                              ---------------------
                                AND SUBSIDIARIES
                                ----------------
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                 -----------------------------------------------
                                 (In thousands)
<TABLE>
<CAPTION>
Column A                 Column B         Column C         Column D    Column E
--------                 --------         --------         --------    --------
                                          Additions
                                    --------------------
                                              Charged
                        Balance at  Charged to   to other                Balance at
                        beginning   costs and    accounts    Deductions    end of
Description              of period  expenses    - describe  - describe     period
                        ----------  ----------  ----------  -----------  ----------
<S>                       <C>        <C>        <C>         <C>           <C>
YEAR ENDED JUNE 30, 2000:
------------------------

Allowance for doubtful
  accounts                $  381      $  183     $     -     $   55  (A)   $  509
                          ======      ======     ========    ======        ======
Reserve for inventory
  obsolescence            $4,354      $  170     $     -     $  574  (B)   $3,950
                          ======      ======     ========    ======        ======
YEAR ENDED JUNE 30, 1999:
------------------------

Allowance for doubtful
  accounts                $  317      $  152     $     -     $   88  (A)   $  381
                          ======      ======     ========    ======        ======
Reserve for inventory
  obsolescence            $3,592      $  805     $     -     $   43  (B)   $4,354
                          ======      ======     ========    ======        ======

YEAR ENDED JUNE 30, 1998:
------------------------

Allowance for doubtful
  accounts                $  417     $   15       $    -     $  115  (A)   $  317
                          ======      ======     ========    ======        ======
Reserve for inventory
  obsolescence            $4,055     $  150     $     -     $  613  (B)    $3,592
                          ======      ======     ========    ======        ======
<FN>
Note: (A) - Net write-offs of uncollectible amounts.
      (B) - Write-off of inventory.
</FN>
</TABLE>


















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