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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



ANNUAL REPORT

ON FORM 10-K



Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934



For the fiscal year ended February 29, 2004



Commission file number 1-8798



Nu Horizons Electronics Corp.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-2621097                          
|(State of other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|70 Maxess Road, Melville, New York                             |  | 11747                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(631) 396-5000

(Registrants telephone number, including area code)



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



None

(Title of class)



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



|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|Common Stock Par Value $.0066 Per Share |  | NASDAQ National Market System            

(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 1-K or any amendment to this Form 10K x



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2. Yes x No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of May 04, 2004.



|                                |  |                   
|------------------------------- |  | ------------------
|Common Stock  Par Value $.0066 |  | 16,859,766        
|Class                           |  | Outstanding Shares



Aggregate Market
Value of Non-Affiliate Stock at May 4, 2004  approximately $168,934,855



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES



TABLE OF CONTENTS



|                     |  |                                                                                       |  |       |  |         
|-------------------- |  | ------------------------------------------------------------------------------------- |  | ----- |  | --------
|PART I:              |  |                                                                                       |  |       |  |         
|                     |  |                                                                                       | 
|ITEM 1.              |  | Business                                                                              |  | Pages |  | 3  6   
|                     |  |                                                                                       | 
|ITEM 2.              |  | Properties                                                                            |  | Page  |  | 7       
|                     |  |                                                                                       | 
|ITEM 3.              |  | Legal Proceedings                                                                     |  | Page  |  | 7       
|                     |  |                                                                                       | 
|ITEM 4.              |  | Submission of Matters to a Vote of Security Holders                                   |  | Page  |  | 7       
|                     |  |                                                                                       | 
|PART II:             |  |                                                                                       |  |       |  |         
|                     |  |                                                                                       | 
|ITEM 5.              |  | Market for the Registrants Common Equity and Related Stockholder Matters             |  | Page  |  | 8       
|                     |  |                                                                                       | 
|ITEM 6.              |  | Selected Financial Data                                                               |  | Page  |  | 9       
|                     |  |                                                                                       | 
|ITEM 7.              |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | Pages |  | 10  16 
|                     |  |                                                                                       | 
|ITEM 7A              |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | Page  |  | 16      
|                     |  |                                                                                       | 
|ITEM 8.              |  | Financial Statements and Supplementary Data                                           |  | Pages |  | F1  F18
|                     |  |                                                                                       | 
|ITEM 9.              |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | Page  |  | 17      
|                     |  |                                                                                       | 
|ITEM 9A              |  | Controls and Procedures                                                               |  | Page  |  | 17      
|                     |  |                                                                                       | 
|PART III:            |  |                                                                                       |  |       |  |         
|                     |  |                                                                                       | 
|ITEM 10.             |  | Directors and Executive Officers of the Registrant                                    |  | Pages |  | 17  19 
|                     |  |                                                                                       | 
|ITEM 11.             |  | Executive Compensation                                                                |  | Pages |  | 20  27 
|                     |  |                                                                                       | 
|ITEM 12.             |  | Security Ownership of Certain Beneficial Owners and Management                        |  | Page  |  | 28      
|                     |  |                                                                                       | 
|ITEM 13.             |  | Certain Relationships and Related Transactions                                        |  | Page  |  | 29      
|                     |  |                                                                                       | 
|ITEM 14              |  | Principal Accounting Fees and Services                                                |  | Page  |  | 29      
|                     |  |                                                                                       | 
|PART IV:             |  |                                                                                       |  |       |  |         
|                     |  |                                                                                       | 
|ITEM 15.             |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | Pages |  | 30  33 
|                     |  |                                                                                       | 
|Signatures           |  |                                                                                       |  | Page  |  | 34      
|                     |  |                                                                                      
|Accountants Consent |  | Page                                                                                  |  | 35   
|                     |  |                                                                                      
|Schedule 11          |  | Page                                                                                  |  | 36   
|                     |  |                                                                                      
|Exhibit Index        |  |                                                                                       |  |      



Page 2



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##### Table of Contents

PART I.



|ITEM 1. | BUSINESS:
|------- | ---------



GENERAL:



Except for historical information contained herein, the matters set forth herein are forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ from those in the forward-looking statements. Potential risks and uncertainties include the factors described below the under Management Discussion and Analysis Risk Factors
in this Form 10-K .



Nu Horizons
Electronics Corp. a Delaware corporation incorporated in 1987, (the Company) and its wholly owned subsidiaries, NIC Components Corp. (NIC), Nu Horizons International Corp. (International), NUHC Inc.
(NUC), Nu Horizons Asia PTE LTD (NUA), Nu Horizons Europe Limited (NUE), Titan Supply Chain Services Corp. (Titan), Titan Supply Chain Services PTE LTD (TSC), Titan Supply Chain Services
Limited (TSE), NUV Inc. (NUV) and its majority owned subsidiaries, NIC Components Europe Limited (NIE) and NIC Components Asia PTE. LTD (NIA) are engaged in the distribution of and supply chain
services for high technology active and passive electronic components.



NUV Inc. (NUV or Nu Visions), is currently an inactive wholly owned subsidiary of the Company, and was a contract assembler of circuit boards and related electromechanical devices for various
original equipment manufacturers, or OEMs, until the sale of its assets on August 23, 2001.



All references in this report to the Company, we, our and us are to Nu Horizons
Electronics Corp. and its subsidiaries.



Active components distributed by the Company, principally to OEMs in the United States, include mainly commercial semiconductor products such as memory chips, microprocessors, digital and linear circuits, microwave, RF and fiber-optic
components, transistors and diodes. Passive components distributed by NIC, principally to OEMs and other distributors nationally, consist of a high technology line of chip and leaded components including capacitors, resistors and related networks.



The active and passive components distributed
by the Company are utilized by the electronics industry and other industries in the manufacture of sophisticated electronic products including: industrial instrumentation, computers and peripheral equipment, consumer electronics, telephone and
telecommunications equipment, satellite communications equipment, cellular communications equipment, medical equipment, automotive electronics, and audio and video electronic equipment.



Manufacturers of electronic components augment their marketing programs through the use of independent
distributors and supply chain service providers such as the Company, upon which the Company believes they rely to a considerable extent to market and deliver their products. The Company offers its customers the convenience of diverse inventories,
rapid delivery, design and technical assistance, inventory management, forecasting and logistical services and the availability of product in smaller quantities than generally available directly from manufacturers. Generally, companies engaged in
the distribution of active and passive electronic components, such as the Company, are required to maintain a relatively significant investment in inventories and accounts receivable. To meet these requirements, the Company, and other companies in
the industry, typically depend on internally generated funds as well as external borrowings.



Managements policy is to manage, maintain and control the bulk of its inventories from its principal headquarters and stocking
facilities in Melville (Long Island), New York, in San Jose, California, in Singapore and in Buckingham, England. As additional franchise line opportunities become available to the Company, the need for branch level inventories may be necessary and
desirable in order to better serve the specific needs of local markets.



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|ITEM 1. | BUSINESS (Continued):
|------- | ---------------------



Semiconductor Products (Active Components):



The Company is a distributor of a broad range of
semiconductor products to commercial and military OEMs, principally in the United States. The Company is a franchised distributor of active components for approximately thirty product lines. Significant franchised product lines include
Allegro, Epson, Exar, Hynix, Integrated Circuit Systems, Intersil Corporation, Linear Technologies, Marvel, Pericom, Renesas, Sharp Microelectronics, ST Microelectronics, Sun Microsystems, TDK Semiconductor, Toshiba, Vitesse Semiconductor and Xilinx
among others.



The Companys franchise
agreements authorize it to sell all or part of the product line of a manufacturer on a non-exclusive basis. Under these agreements, each manufacturer will generally grant credits for any subsequent price reduction by such manufacturer and inventory
return privileges whereby the Company can return to each such manufacturer for credit or exchange a percentage ranging from 5% to 20% of the inventory purchased from said manufacturer during a semi-annual period. The franchise agreements generally
may be cancelled by either party upon written notice. The Company anticipates, in the future, entering into additional franchise agreements and increasing its inventory levels in accordance with business demands.



Financial information regarding the Companys reportable segments and
foreign and domestic operations can be found in note 13 of the Notes to the Companys financial statements.



Passive Components and Relationship with Nippon:



NIC has been the exclusive outlet in North America for Nippon Industries Co. Ltd.s (Japan) (Nippon) brand of passive
components with a license for the use of the Nippon brand. The Company has a License Agreement with Nippon dated as of September 1, 2000 under which the Company has been granted an exclusive license to use the Nippon brand in the United States,
Mexico, Central and South America and the Caribbean. The License Agreement has an initial term of ten years and automatically renews for successive one year periods unless the Company or Nippon terminates the License Agreement 90 days prior to the
end of the initial or any renewal term.



Due
to certain market situations, NIC, with Nippons assent, has also established several manufacturing associations with U.S. and Taiwan based manufacturers to supply NIC with a portion of its product requirements under the NIC brand. NIC intends
to continue to give Nippon priority, however, in acquiring Nippons products whenever Nippons technology and pricing are commensurate with market requirements.



Sales and Marketing:



Managements strategy for long-term success has been to focus the Companys sales and marketing efforts towards the following
industry segments, both domestically and abroad: industrial, telecom/datacom, medical instrumentation, microwave and RF, fiber-optic, consumer electronics, security and protection devices, office equipment, computers and computer peripherals,
factory automation and robotics. In order to help achieve these goals, the Company may enter into new franchise agreements for a broad base of commodity semiconductor products including those used in the key niche industries referred to above.



Page 4



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##### Table of Contents

|ITEM 1. | BUSINESS (Continued):
|------- | ---------------------



Sales and Marketing (continued):



All sales are made through customers purchase orders. Semiconductors are sold
primarily via telephone by the Companys in-house staff of approximately 80 salespersons, and by a field sales force of approximately 100 salespersons. The Company maintains branch sales facilities located as follows:



|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED STATES:  EAST COAST  Massachusetts - Boston New York - Melville (Long Island) and Rochester New Jersey - Mt. Laurel (Philadelphia) and Pine Brook Ohio -
Cleveland Maryland - Columbia North Carolina -
Raleigh Georgia - Atlanta Alabama - Huntsville Florida - Ft. Lauderdale, Orlando and Tampa  MIDWEST  Arizona - Phoenix Colorado - Denver Illinois - Chicago Minnesota - Minneapolis Texas -
Dallas |  | FOREIGN:  CANADA  Toronto  ASIA  Singapore Hong Kong, China Shanghai, China Seoul, S. Korea Bangalor, India Penang,
Malaysia Taipei, Taiwan Shenzhen, China  EUROPE  Buckingham, England
|                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|WEST COAST  California - Irvine, Los Angeles, Sacramento, San Diego and San Jose Oregon - Portland Washington - Redmond                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                         



NICs passive components are marketed through the services of a national network of approximately 20 independent sales representative organizations, employing over 200 salespersons, as well as through NICs in-house sales and
engineering personnel. The independent representative organizations do not represent competing product lines but sell other related products. Commissions to such organizations generally range from 2 to 3% of all sales in a representatives
exclusive territory.



NIC has developed a
national network of 3 global distributors and approximately 25 regional distributor locations, which market passive components on a non-exclusive basis. These distributors have entered into agreements with NIC whereby they are required to purchase
from NIC a prescribed initial inventory. These distributors are protected by NIC against price reductions and are granted certain inventory return and other privileges. Due to the efforts of NIC and its distributors, NICs passive components
have been tested and designed in as a prime source of qualified product by over 7,000 OEMs in the United States.



No single customer accounted for more than 3% of the Companys consolidated sales for the year ended February 29,2004. The
Companys sales practice is to require payment within thirty days of delivery.



Source of Supply:



The Company inventories an extensive stock of active and passive components; however, if the Companys customers order products for which the Company does not maintain inventory, the Companys marketing
strategy is to obtain such products from its franchise manufacturers, or, if a product is unobtainable, to identify and recommend satisfactory interchangeable alternative components. For this purpose, the Company devotes considerable efforts to
familiarizing itself with component product movement throughout the industry, as well as to constant monitoring of its own inventories.



Page 5



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##### Table of Contents

|ITEM 1. | BUSINESS (Continued):
|------- | ---------------------



Source of Supply (continued):



As of February 29, 2004, there were three manufacturers that represented more than
10% of the Companys inventory on a consolidated basis. Those suppliers accounted for approximately $29,466,000 of total inventory. Electronic components distributed by the Company generally are presently readily available; however, from time
to time the electronics industry has experienced a shortage or surplus of certain electronic products.



For the year ended February 29, 2004, the Company purchased inventory from two suppliers that was in excess of 10% of the Companys
total purchases. Purchases from these suppliers were approximately $37,749,000 and $28,195,000 for the fiscal year.



Competition and Regulation:



The Company competes with many companies that distribute semiconductor and passive electronic components and, to a lesser extent,
companies that manufacture such products and sell them directly to OEMs and other distributors. The Company also competes for customers with some of its own suppliers. Many of these companies have substantially greater assets and possess greater
financial and personnel resources than those of the Company. In addition, certain of these companies possess independent franchise agreements to carry semiconductor product lines which the Company does not carry, but which it may desire to have.
Competition is based primarily upon inventory availability, quality of service, knowledge of product and price. The Company believes that the distribution of passive electronic components under its own label is a competitive advantage.



The Companys competitive ability to price its
imported active and passive components could be adversely affected by increases in tariffs, duties, changes in the United States trade treaties with Japan, Taiwan or other foreign countries, transportation strikes and the adoption of Federal
laws containing import restrictions. In addition, the cost of the Companys imports could be subject to governmental controls and international currency fluctuations. Because imports are paid for with U.S. dollars, the decline in value of
United States currency as against foreign currencies would cause increases in the dollar prices of the Companys imports from Japan and other foreign countries. Although the Company has not experienced any material adverse effect to date in its
ability to compete or maintain its profit margins as a result of any of the foregoing factors, no assurance can be given that such factors will not have a material adverse effect in the future.



Backlog:



The Company defines backlog as orders, believed to be firm,
received from customers and scheduled for shipment, no later than 60 days for active components and no later than 90 days for passive components from the date of the order. As of May 1, 2004, the Companys backlog was approximately $47,200,000
as compared to a backlog of approximately $29,600,000 at May 1, 2003.



Employees:



As of February 29,
2004, the Company employed approximately 527 persons: 44 in management, 329 in sales and sales support, 30 in product and purchasing, 30 in finance, accounting and human resources, 23 in MIS, 20 in operations and 51 in quality control, shipping,
receiving and warehousing. The Company believes that its employee relations are satisfactory.



Available Information:



The public may read and copy any materials filed by us with the SEC at the SECs public reference room at 450 Fifth Street, NW, Washington D.C., 20549. The public may obtain information about the operation of the
SECs public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information about issuers such as us that file
electronically with the SEC.



In addition, we
make available free of charge on our website at http://www.nuhorizons.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) under the Exchange Act as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.



Page 6



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##### Table of Contents

|ITEM 2. | PROPERTIES:
|------- | -----------



In December 1996, the Company leased an approximately 80,000 square foot facility in Melville, Long Island, New York to serve as its
executive offices and main distribution center. The lease term is from December 17, 1996, to December 16, 2008 at an annual base rental of $601,290 and provides for a 4% annual escalation in each of the last ten years of the term.



On May 1, 1996, the Company leased approximately 25,000
square feet of warehouse and office space for its San Jose, California operation. This facility serves as the Companys West Coast regional sales and distribution headquarters. The current lease term is from May 1, 2001 to April 30, 2006 at an
annual base rental of $540,000.



On August 1,
2000, the Company leased approximately 10,000 square feet of office space in Melville, Long Island, New York to serve as the executive offices of its NIC Components subsidiary. The lease term is from April 1, 2001 to December 31, 2008 at an
annual base rental of $285,700 and provides for a 4% annual escalation in each subsequent year of the lease.



The Company also leases space for twenty nine (29) branch sales offices, which range in size from 1,000 square feet to 14,000 square feet,
with lease terms that expire between July 2004 and June 2009. Annual base rentals range from $21,600 to $199,400 with aggregate base rentals approximating $3,129,000. The Company believes it can obtain extensions of the leases scheduled to expire in
fiscal 2004 on substantially similar terms to those currently in effect.



|ITEM 3. | LEGAL PROCEEDINGS:
|------- | ------------------



No material legal proceeding is pending to which the Company is a party or to which any of its property is or may be subject.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
|------- | ----------------------------------------------------



During the fourth quarter of the fiscal year ended February 29, 2004 no matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise.



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##### Table of Contents

PART II.



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
|------- | ----------------------------------------------------------------------



| | a) | The Companys common stock is traded on the NASDAQ National Market System under the symbol NUHC. The following table sets forth, for the periods indicated, the high
and low closing prices for the Companys common stock as reported by the NASDAQ National Market System.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                    |  |   |       |  |   |     
|----------------------------------- |  | - | ----- |  | - | ----
|FISCAL YEAR 2003:                   |  |   |       |  |   |     
|First Quarter                       |  | $ | 10.00 |  | $ | 8.35
|Second Quarter                      |  |   | 9.25  |  |   | 6.35
|Third Quarter                       |  |   | 7.20  |  |   | 4.98
|Fourth Quarter                      |  |   | 7.11  |  |   | 4.85
|                                    |  |  
|FISCAL YEAR 2004:                   |  |   |       |  |   |     
|First Quarter                       |  | $ | 6.10  |  | $ | 4.75
|Second Quarter                      |  |   | 7.47  |  |   | 5.15
|Third Quarter                       |  |   | 9.05  |  |   | 7.20
|Fourth Quarter                      |  |   | 12.40 |  |   | 7.91
|                                    |  |  
|FISCAL YEAR 2005:                   |  |   |       |  |   |     
|First Quarter (Through May 4, 2004) |  | $ | 11.39 |  | $ | 9.35



| | b) | As of May 4, 2004, the Companys common stock was owned by approximately 400 holders of record and 7,500 beneficial holders.
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| | c) | The Company has never paid a cash dividend on its common stock. The Companys current revolving credit line agreement permits dividends of up to 25% of the Companys
consolidated net income.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity Compensation Plan Information



The following chart summarizes the options and warrants
outstanding and available to be issued at February 29, 2004:



|                                                           |  |                                                                                     |  |                                                                      |      |                                                                                                                                          |        
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                              |  | Number of securitiesto be issued uponexercise ofoutstanding optionsand
warrants (a) |  | Weighted-averageexercise price ofoutstanding optionsand warrants (b) |      | Number of securitiesremaining availablefor future issuanceunder equitycompensation
plans(excluding securitiesreflected in column(a)) (c)
|Equity compensation plans approved by security holders     |  | 1,874,693                                                                           |  | $                                                                    | 7.90 |                                                                                                                                          | 247,000
|Equity compensation plans not approved by security holders |  | 1,466,569                                                                           |  | $                                                                    | 4.77 |                                                                                                                                          | 46,318 
|Total                                                      |  | 3,341,262                                                                           |  | $                                                                    | 6.53 |                                                                                                                                          | 293,318



Page 8



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##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA:
|------- | ------------------------



|                                                                                                                           |  |                                   |             |   |                                   |   |             |                                   |  |   |                                   |   |  |                                   |             |   |  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----------- | - | --------------------------------- | - | ----------- | --------------------------------- |  | - | --------------------------------- | - |  | --------------------------------- | ----------- | - |  | - | ----------- | -
|                                                                                                                           |  | For The YearEndedFebruary 29,2004 |             |   | For The YearEndedFebruary 28,2003 |   |             | For The YearEndedFebruary 28,2002 |  |   | For The YearEndedFebruary 28,2001 |   |  | For The YearEndedFebruary 29,2000 |            
|INCOME STATEMENT DATA:                                                                                                     |  |                                   |             |   |                                   |   |             |                                   |  |   |                                   |   |  |                                   |             |   |  |   |             |  
|Continuing Operations:                                                                                                     |  |                                   |             |   |                                   |   |             |                                   |  |   |                                   |   |  |                                   |             |   |  |   |             |  
|Net sales                                                                                                                  |  | $                                 | 345,863,877 |   |                                   | $ | 302,080,809 |                                   |  | $ | 281,912,508                       |   |  | $                                 | 634,009,953 |   |  | $ | 364,069,562 |  
|Gross profit on sales                                                                                                      |  |                                   | 60,960,780  |   |                                   |   | 55,228,068  |                                   |  |   | 60,222,426                        |   |  |                                   | 139,502,597 |   |  |   | 76,456,311  |  
|Gross profit percentage                                                                                                    |  |                                   | 17.6        | % |                                   |   | 18.3        | %                                 |  |   | 21.4                              | % |  |                                   | 22.0        | % |  |   | 21.0        | %
|Net income (loss) before provision for income taxes and minority interests                                                 |  |                                   | (1,269,061  | ) |                                   |   | (2,309,743  | )                                 |  |   | (2,797,157                        | ) |  |                                   | 58,515,268  |   |  |   | 20,694,140  |  
|Income (loss)                                                                                                              |  |                                   | (847,999    | ) |                                   |   | (2,511,638  | )                                 |  |   | (2,762,566                        | ) |  |                                   | 33,561,085  |   |  |   | 11,903,786  |  
|Income (loss) from discontinued operations                                                                                 |  |                                   |            |   |                                   |   |            | (1)                               |  |   | 4,982,242                         |   |  |                                   | 1,791,000   |   |  |   | (205,000    | )
|Net income (loss)                                                                                                          |  | $                                 | (847,999    | ) |                                   | $ | (2,511,638  | )                                 |  | $ | 2,219,676                         |   |  | $                                 | 35,352,085  |   |  | $ | 11,698,786  |  
|Earnings (loss) per common share:                                                                                          |  |                                   |             |   |                                   |   |             |                                   |  |   |                                   |   |  |                                   |             |   |  |   |             |  
|Basic                                                                                                                      |  | $                                 | (.05        | ) |                                   | $ | (.15        | )                                 |  | $ | .13                               |   |  | $                                 | 2.18        |   |  | $ | .87         |  
|Diluted                                                                                                                    |  |                                   | (2          | ) |                                   |   | (2          | )                                 |  | $ | .13                               |   |  | $                                 | 1.99        |   |  | $ | .67         |  
|(1)Includes gain on sale of unit  (2)Due to the loss, the presentation of diluted earnings per share would be antidilutive | 
|                                                                                                                           |  | For The YearEndedFebruary 29,2004 |             |   | For The YearEndedFebruary 28,2003 |   |             | For The YearEndedFebruary 28,2002 |  |   | For The YearEndedFebruary 28,2001 |   |  | For The YearEndedFebruary 29,2000 |            
|BALANCE SHEET DATA:                                                                                                        |  |                                   |             |   |                                   |   |             |                                   |  |   |                                   |   |  |                                   |             |   |  |   |             |  
|Working capital                                                                                                            |  | $                                 | 123,494,074 |   |                                   | $ | 116,792,079 |                                   |  | $ | 120,790,159                       |   |  | $                                 | 201,732,737 |   |  | $ | 106,903,383 |  
|Total assets                                                                                                               |  |                                   | 158,178,171 |   |                                   |   | 148,099,189 |                                   |  |   | 151,318,461                       |   |  |                                   | 247,830,999 |   |  |   | 136,625,266 |  
|Long-term debt                                                                                                             |  |                                   | 5,580,495   |   |                                   |   | 252,832     |                                   |  |   | 2,731,598                         |   |  |                                   | 85,181,496  |   |  |   | 38,307,319  |  
|Shareholders equity                                                                                                       |  |                                   | 124,402,543 |   |                                   |   | 123,992,341 |                                   |  |   | 126,473,177                       |   |  |                                   | 124,361,211 |   |  |   | 75,461,183  |  



Page 9



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
|------- | --------------------------------------------------------------------------------------



Overview:



Nu Horizons Electronics Corp. (the Company), and its wholly-owned subsidiaries, NIC Components Corp. (NIC), Nu Horizons
International Corp. (International), NUHC Inc (NUC), Nu Horizons Asia PTE LTD (NUA), Nu Horizons Europe Limited (NUE), Titan Supply Chain Services Corp. (Titan), Titan Supply Chain Services
PTE LTD (TSC), Titan Supply Chain Services Limited (TSE), NUV Inc. (NUV) and its majority owned subsidiaries, NIC Components Europe Limited (NIE) and NIC Components Asia PTE. LTD (NIA) are
engaged in the distribution of high technology active and passive electronic components to a wide variety of original equipment manufacturers (OEMs) of electronic products. Active components distributed by the Company include
semiconductor products such as memory chips, microprocessors, digital and linear circuits, microwave, RF and fiber-optic components, transistors and diodes. Passive components distributed by NIC, principally to OEMs and other distributors
nationally, consist of a high technology line of chip and leaded components, including capacitors, resistors and related networks.



As of August 23, 2001 the Company sold the assets of Nu Visions Manufacturing Inc. (Nu Visions), a wholly owned subsidiary of the Company,
which was a contract assembler of circuit boards and related electromechanical devices for various OEMs.



The electronics and the electronics distribution industries suffered one of the most severe downturns in the industries history beginning in 2001
and continuing through most of 2003. This downturn was marked by an oversupply of components, excess manufacturing capacity and a significant decline in the demand for electronic components. The second half of calendar 2003 appears to have been the
break out period the industry has long been expecting. This was evidenced by industry wide double digit sequential and year over year increases in sales dollar volume, albeit accompanied by continued downward margin pressures. Management believes
that this improvement in the components market worldwide should continue. The Companys strategy of maintaining its infrastructure and investing during the electronic industrys severe downturn is now beginning to see positive results.
Sales in Asia increased almost 200% from fiscal 2003 to 2004 and the Companys book to bill ratio, company wide, remains positive. Year over year and quarter over quarter the Company has increased market share with all of its major suppliers
for both the semiconductor and passive component businesses.



For the fiscal year ended February 29, 2004, net sales from continuing operations increased to $345.9 million from $302.1 million in the comparable period last year. Net loss for fiscal 2004 was $848,000 or $0.05 per share, compared with a
net loss of $2.5 million, or $.15 per share in the year-earlier period. The Company has now reported four sequential quarters of sales growth, with the fiscal 2004 fourth quarter experiencing a 12% sequential increase in sales over the fiscal 2004
years third quarter. The Company believes that the industry is in full recovery mode and that Nu Horizons should continue to participate in the benefits of this increased demand.



For an understanding of the significant factors that influenced the companys performance during the past three years,
the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this annual report on Form 10-K.



The following table sets forth for the years ended February 2004, 2003 and 2002, certain items in the Companys
consolidated statements of operations expressed as a percentage of net sales.



|                                              |  |                      |   |  |       |   |  |       |  
|--------------------------------------------- |  | -------------------- | - |  | ----- | - |  | ----- | -
|                                              |  | Years Ended February |  
|                                              |  | 2004                 |   |  | 2003  |   |  | 2002  |  
|Net sales                                     |  | 100.0                | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                 |  | 82.4                 |   |  | 81.7  |   |  | 78.6  |  
|Gross profit                                  |  | 17.6                 |   |  | 18.3  |   |  | 21.4  |  
|Operating expenses                            |  | 18.1                 |   |  | 19.0  |   |  | 21.4  |  
|Impairment of goodwill                        |  | 0.0                  |   |  | 0.0   |   |  | 0.4   |  
|Interest expense                              |  | 0.0                  |   |  | 0.0   |   |  | 0.5   |  
|Interest (income)                             |  | (0.1                 | ) |  | 0.0   |   |  | 0.0   |  
|(Loss) before taxes                           |  | (0.4                 | ) |  | (0.8  | ) |  | (1.0  | )
|Income tax provision (benefit)                |  | (0.2                 | ) |  | (0.2  | ) |  | (0.2  | )
|(Loss) after taxes, before minority interests |  | (0.2                 | ) |  | (0.6  | ) |  | (0.8  | )
|Minority interests                            |  | 0.1                  |   |  | 0.2   |   |  | 0.2   |  
|Discontinued operations                       |  | 0.0                  |   |  | 0.0   |   |  | 1.8   |  
|Net income (loss)                             |  | (0.2                 | ) |  | (0.8  | ) |  | 0.8   |  



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



Critical Accounting Policies and Estimates:



The Companys financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make significant estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and liabilities. The Company evaluates its estimates, including those related to bad debts, inventories, intangible assets, income taxes and contingencies and litigation, on an
ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



The Company believes the following critical accounting policies, among others, involve the more significant judgments and
estimates used in the preparation of its consolidated financial statements:



| |  | The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements (SAB 104). Under SAB
104, revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable and collectibility is
reasonably assured. The Company recognizes revenues at time of shipment of its products and sales are recorded net of discounts and returns.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company maintains allowances for doubtful accounts for estimated bad debts. If the financial condition of the Companys customers were to deteriorate, resulting in an
impairment of their inability to make payments, additional allowances might be required.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Inventories are recorded at the lower of cost or market. Write-downs of inventories to market value are based upon product franchise agreements governing price protection, stock
rotation and obsolescence, as well as assumptions about future demand and market conditions. If assumptions about future demand/or actual market conditions are less favorable than those projected by management, additional write-downs of inventories
could be required.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Fiscal Year 2004 versus
2003



Results of Continuing Operations:



Net sales for the year ended February 29, 2004 aggregated
$345,864,000 as compared to $302,081,000 for the year ended February 28, 2003, an increase of approximately $44,000,000 or 14.5%. This increase was comprised of a decline in sales of approximately $3,000,000 in the first six months of the 2004
fiscal year as compared to the first six months of the prior fiscal year. This was followed by an increase in sales of approximately $47,000,000 in the second half of fiscal 2004 as compared to the last six months of fiscal 2003. Given the
historically cyclical nature of the Companys industry, management attributes this increase in sales performance in the latter part of fiscal 2004 as the break out period the electronic component industry has long been expecting. This was
evidenced by the industry wide double digit sequential increases in sales dollar volume in the latter six months of calendar 2003. Management believes this improvement in the components market worldwide should continue through fiscal 2005, although
no assurances can be given in this regard.



Gross profit
margin as a percentage of net sales was 17.6% for the year ended February 29, 2004 as compared to 18.3% for the year ended February 28, 2003. Management believes that this continuing gross margin pressure results from a change in the Companys
product mix which was impacted by larger orders in the computer and liquid crystal categories domestically, coupled with increased sales in the Asian market which requires lower selling prices due to volume demand from Asian contract manufacturer.
Management believes that margin pressures during the first quarter of fiscal 2005 have stabilized and should not continue to decline, however, no assurances can be given in this regard.



Operating expenses increased to $62,436,000 for the year ended February 29, 2004 from $57,440,000 for the year ended
February 28, 2003, an increase of approximately $4,996,000 or 8.7%. The dollar increase in operating expenses was entirely due to personnel related costs  commissions, salaries, travel and fringe benefits resulting from increased staffing
levels in connection with the expansion of the Companys Asian and U.S. operational capability during the current fiscal year. Management made a strategic decision to invest in expanding



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



Fiscal Year 2004 versus 2003 (Continued):



Results of Continuing Operations (Continued):



the Companys personnel during the recent market downturn, which resulted in increased operating expenses. Management believes that this investment will
enable the Company to take advantage of the current and future rebound the industry is currently experiencing, although no assurances can be given in this regard.



Interest expense increased to $140,000 for the year ended February 29, 2004 as compared to $98,000 for the year ended
February 28, 2003. This increase was primarily due to a return to bank borrowings in the fourth quarter of fiscal 2004 due to the increase in the Companys inventory and accounts receivable levels which were needed to support increased sales
activity in the latter half of the fiscal 2004 period.



Net
loss from continuing operations for the year ended February 29, 2004 was $848,000 or $.05 per share, as compared to a loss of $2,512,000 or $.15 per share for the year ended February 28, 2003. Management attributes the fiscal 2004 loss of $848,000
to the increase in operating and interest expense exceeding the moderate increase in gross margin dollars.



Fiscal Year 2003 versus 2002



Results of Continuing Operations:



Net sales for the year ended February 28, 2003 aggregated $302,081,000 as compared to $281,913,000 for the year ended February 28, 2002, an increase of
$20,168,000 or approximately 7.2%. Management attributes this increase in sales for the period to the core semiconductor and passive component distribution business, which had recently experienced a moderate increase in demand.



Gross profit margin as a percentage of net sales was 18.3% for the year
ended February 28, 2003 as compared to 21.4% for the year ended February 28, 2002. This continuing decrease in gross margin percentage reflects decreasing prices due to increased competitive pressures resulting from the industry wide decline in
demand coupled with an oversupply of product in the marketplace. The aforementioned reduction in margin percentage resulted in a $5,000,000 decrease in total gross margin dollars in fiscal 2003 in spite of the 7.2% or $20,168,000 increase in
sales.



Operating expenses decreased by $2,938,000 to
$57,440,000 for the year ended February 28, 2003 from $60,378,000 for the year ended February 28, 2002, a decrease of approximately 4.9%. The dollar decrease in operating expenses was due to an approximately $3,850,000 decrease in personnel related
costs  commissions, salaries, travel and fringe benefits, partially offset by an increase of approximately $912,000 in various other general and administrative expenses. Operating expenses as a percentage of sales decreased to 19.0% of sales
as compared to 21.4% for the prior year.



Interest expense
decreased by $1,419,000 from $1,517,000 for the year ended February 28, 2002 to $98,000 for the year ended February 28, 2003. This decrease was primarily due to bank borrowings being reduced to zero resulting from the decrease in the Companys
inventory and accounts receivable levels which had been needed to support sales activity in the fiscal 2001 and 2002 periods, net of the commitment fees required to maintain the Companys revolving line of credit facility.



Net loss from continuing operations for the year ended February 28, 2003 was
$2,512,000 or $.15 per share, as compared to a loss of $2,763,000 or $.17 per share for the year ended February 28, 2002. Management attributes the fiscal 2003 loss of $2,512,000 to a continued reduction of gross margin dollars exceeding the
reduction in operating and interest expense. The $2,763,000 loss for fiscal 2002 is due to reduced sales volume in excess of reductions in operating expenses, resulting in a loss of $1,638,000 and a one-time charge for the impairment of the value of
goodwill, which had previously been amortized over a fifteen-year period, resulting in an additional $1,125,000 loss.



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



Discontinued Operations:



On August 23, 2001, the Company completed the sale of the assets of its contract-manufacturing subsidiary, Nu Visions
Manufacturing, Inc. The selling price of $31,563,000 was paid with $2,000,000 subordinated debt and $29,563,000 of cash proceeds.



Net income from the discontinued operation for the year ended February 28, 2002 was $799,000 or $.05 per share. The net gain on the sale of the subsidiary
resulted in an after tax profit of $4,184,000 or $.25 per share for the fiscal year February 28, 2002. This resulted in total net income from the discontinued operation for the year ended February 28, 2002 of $4,982,000 or $.30 per basic share and
$.29 per diluted share.



Combined Net Income (Loss):



Net loss for the year ended February 28, 2003 was
$2,512,000 or $.15 per share as compared to net income (which comes from both continuing and discontinued operations) of $2,220,000 or $.13 per share in the fiscal year ended February 28, 2002.



Liquidity and Capital Resources:



Fiscal Year 2004 versus 2003



The Company ended its 2004 fiscal year with working capital and cash
aggregating approximately $123,494,000 and $12,470,000 respectively, as compared to approximately $116,792,000 and $31,346,000 respectively, at February 28, 2003. The Companys current ratio at February 29, 2004, was 5.6:1 as compared to 6.2:1
at February 28, 2003.



On September 4, 2003, the Company
entered into a secured revolving line of credit with three banks, which currently provides for maximum borrowings of $41,500,000 at either (i) the lead banks prime rate or (ii) LIBOR plus 100 to 275 basis points depending on the ratio of the
Companys liabilities to its tangible net worth, at the option of the Company through September 4, 2007. Borrowings under this line of credit were $5,300,000 at February 29, 2004. There were no borrowings at February 28, 2003. As of the end of
both fiscal years, the Company was in compliance with all the required covenants.



The Company has contacted its banks to discuss entering into a new loan agreement to address the Companys need to increase its available revolving credit line to approximately $75,000,000 and to revise certain
financial covenants contained in the current loan agreement. The Company is currently in full compliance with all of the covenants contained in its current agreement. However, the Company believes that, due to increased borrowing requirements
resulting from projected substantial overall increases in sales in the electronic components market, the Company will need additional availability under its credit line. In addition, the Company believes that commencing November 2004, it is likely
to have insufficient twelve month trailing earnings to insure compliance with the covenant related to earnings before interest and depreciation. Several banks have advised the Company that they are willing to enter into a new loan agreement that
would enable the Company to remain in compliance with all covenants, as revised, as well as provide a sufficient increase in the available borrowing limits for the foreseeable future. There can be no assurances that the Company and its lenders will
actually enter into such an agreement.



The Company
anticipates that its resources provided by its cash flow from operations, without entering into the aforementioned new loan agreement, will be insufficient to meet its financing requirements for the next twelve-month period.



Off-Balance Sheet Arrangements:



As of February 29, 2004, the Company had no off-balance sheet arrangements
to report.



Page 13



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



Contractual Obligations:



|                            |  |       |            |                  |   |           |  |           |           |                   |   |           |  |   |          
|--------------------------- |  | ----- | ---------- | ---------------- | - | --------- |  | --------- | --------- | ----------------- | - | --------- |  | - | ---------
|Contractual Obligations     |  | Total |            | Less than 1 year |   | 1-3 years |  | 3-5 years |           | More than 5 years
|Long Term Obligations       |  | $     |           |                  | $ |          |  | $         |          |                   | $ |          |  | $ |         
|Capital Lease Obligations   |  |       | 1,189,000  |                  |   | 419,000   |  |           | 419,000   |                   |   | 351,000   |  |   |         
|Operating Lease Obligations |  |       | 10,041,000 |                  |   | 3,129,000 |  |           | 5,629,000 |                   |   | 1,283,000 |  |   |         
|Purchase Obligations        |  |       |           |                  |   |          |  |           |          |                   |   |          |  |   |         
|Minority Interest           |  |       | 1,466,000  |                  |   |          |  |           |          |                   |   |          |  |   | 1,466,000
|                            |  |       |            |                  |   |           |  |           |           |                   |   |           |  |   |          
|Total                       |  | $     | 12,696,000 |                  | $ | 3,548,000 |  | $         | 6,048,000 |                   | $ | 1,634,000 |  | $ | 1,466,000
|                            |  |       |            |                  |   |           |  |           |           |                   |   |           |  |   |          



Inflationary
Impact:



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



Forward Looking Statement Disclaimer:



Except for historical information contained herein, the
matters set forth above may be forward-looking statements. Such forward-looking statements are based on the current beliefs of the Companys management. Certain risks and uncertainties could cause actual results to differ from those in the
forward-looking statements. Potential risks and uncertainties include such factors as those described under Risk Factors below. The Company does not undertake any obligation to update its forward looking statements.



Risk Factors:



The Company may not have adequate liquidity or capital resources to
finance its operations for the next twelve months.



The Company expects that it will require cash beyond the amount currently available under its existing credit agreement and its cash flow from operations in order to enable it to purchase inventory for the projected substantial overall
sales increase in the electronics components market. The Company is engaged in discussions with its banks to discuss the entry into a new loan agreement with a revolving credit line of approximately $75 million; however, there is no assurance that
the Company and its lenders will enter into a revised loan agreement and, if the Company fails to do so, it may not have sufficient cash flow from operations to meet its financing requirements for the next twelve months.



A large portion of the Companys revenues come from sales of
semiconductors, which is a highly cyclical industry, and an industry down-cycle could significantly affect the Companys operating results.



The semiconductor industry historically has experienced periodic fluctuations in product supply and demand, often associated with changes in technology
and manufacturing capacity, and is generally considered to be highly cyclical. According to the Semiconductor Industry Association, the semiconductor industry experienced its worst annual downturn in history with revenue from worldwide semiconductor
sales estimated to have fallen by approximately 50% from calendar 2000 to 2001. The Companys revenues closely follow the strength or weakness of the semiconductor market. The Companys total sales of semiconductors in fiscal years 2004,
2003, 2002 and 2001 were $346,000,000, $302,000,000 $282,000,000 and $634,000,000 respectively. Although the Companys results have recently shown signs of an industry upturn, a technology industry downcycle, particularly in the semiconductor
sector, could negatively affect the Companys operating results in the future.



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



The Companys revenues and profitability have declined significantly from historical highs
and, although revenues have started to increase in recent quarters, the Company may be unable to achieve consistent profitability at levels experienced in the past.



The Companys operations have been significantly and negatively affected by the recent downturn in the technology
industry and the general economy. From a high of approximately $191 million in sales in the fiscal quarter ended November 2000, the Companys sales stabilized in the $70 to $80 million range per quarter for eight quarters. In the two most
recent quarters, the Companys revenues have begun to show signs of growth and an industry up-cycle, with $102,000,000 of revenues in the quarter ended February 29, 2004. Despite this recent growth, the Company has not yet been able to achieve
consistent profitability at a level deemed acceptable to management. As a result, the Company has continued to implement substantial cost-cutting measures designed to align its expenses to provide profitability at current revenue levels. The success
of these cost-cutting measures, as well as the timing of any economic recovery, will affect the Companys ability to achieve consistent profitability at reasonable levels. Although the Company does not anticipate any further restructuring
charges in the near term, if the Company is not able to maintain an acceptable level of profitability, the Company may need to consider expense reductions.



If the Company were unable to maintain its relationships with key suppliers, it could adversely affect the Companys sales.



In fiscal 2004, sales of products and services from three suppliers
exceeded 10% of the Companys inventory on a consolidated basis. As a result, to the extent that those suppliers are not willing to do business with the Company in the future on terms acceptable to the Company, the loss of these suppliers could
materially adversely affect the Companys business, results of operations, financial condition or liquidity. If any of these industry leading suppliers was unwilling to do business with the Company, the Companys relationships with its
customers could be materially adversely affected because the Companys customers depend on the Companys distribution of electronic components and computer products from the industrys leading suppliers.



Declines in the value of the Companys inventory could materially
adversely affect the Companys business, results of operations, financial condition or liquidity.



The electronic components and computer products industry is subject to rapid technological change, new and enhanced products and evolving industry
standards, which can contribute to decline in value or obsolescence of inventory. During an economic downturn it is possible that prices will decline due to an oversupply of product and, therefore, there may be greater risk of declines in inventory
value. Although it is the policy of many of the Companys suppliers to offer distributors like the Company certain protections from the loss in value of inventory (such as price protection, limited rights of return and rebates), the Company
cannot assure you that such return policies and rebates will fully compensate it for the loss in value, or that the vendors will choose to, or be able to, honor such agreements. The Company cannot assure you that unforeseen new product developments
or declines in the value of its inventory will not materially adversely affect its business, results of operations, financial condition or liquidity, or that the Company will successfully manage its existing and future inventories.



Substantial defaults by the Companys customers on the
Companys accounts receivable could have a significant negative impact on the Companys business, results of operations, financial condition or liquidity.



A significant portion of the Companys working capital consists of accounts receivable from customers. If customers
responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for products and services, or were to become unwilling or unable to make payments in a timely manner, the Companys business,
results of operations, financial condition or liquidity could be adversely affected. If the economic and industry downturn were to continue, it could have an adverse affect on the servicing of these accounts receivable, which could result in longer
payment cycles, increased collection costs and defaults in excess of managements expectations.



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued):
|------- | --------------------------------------------------------------------------------------------------



The electronics component and computer industries are highly competitive and if the Company
cannot effectively compete, its revenues may decline.



The market for the Companys products and services is very competitive and subject to rapid technological advances. Not only does the Company compete with other distributors, it also competes for customers with some of its own
suppliers. The Companys failure to maintain and enhance its competitive position could adversely affect its business and prospects.



The sizes of the Companys competitors vary across market sectors, as do the resources the Company has allocated to the sectors in which it does
business. Therefore, some of the competitors may have greater financial, personnel, capacity and other resources than the Company has in one or more of its market sectors. As a result, the Companys competitors may be in a stronger position to
respond quickly to potential acquisitions and other market opportunities, new or emerging technologies and changes in customer requirements.



The Companys non-U.S. locations represent a significant and growing portion of its revenue, and consequently, the Company is increasingly
exposed to risks associated with operating internationally.



In fiscal 2004, approximately 18.5 % of the Companys sales came from its operations outside the United States. During fiscal 2003 and 2002 approximately 8% and 11.8% of sales, respectively, were from locations outside the United
States. Most notable in this growth of non-U.S. sales is the increasing volume of sales activity in the Asia region, which accounted for approximately 17.1% of consolidated sales in fiscal 2004. As a result of the Companys foreign sales and
locations, its operations are subject to a variety of risks that are specific to international operations, including the following:



| |  | potential restrictions on transfers of funds;
| | - | ---------------------------------------------



| |  | foreign currency fluctuations;
| | - | ------------------------------



| |  | import and export duties and value added taxes;
| | - | -----------------------------------------------



| |  | import and export regulation changes that could erode profit margins or restrict exports;
| | - | -----------------------------------------------------------------------------------------



| |  | changing foreign tax laws and regulations;
| | - | ------------------------------------------



| |  | potential military conflicts;
| | - | -----------------------------



| |  | inflexible employee contracts in the event of business downturns; and
| | - | ---------------------------------------------------------------------



| |  | the burden and cost of compliance with foreign laws.
| | - | ----------------------------------------------------



Manufacturing of electronic component and computer products is increasingly shifting to lower-cost production facilities in Asia, and most notably the
Peoples Republic of China. The Companys business and prospects could be materially adversely affected if this shift continues and the Company is unable to develop distribution relationships with these or other manufacturers on acceptable
terms. In particular, if the Company is unable to develop relationships with manufacturers that provide profit margins comparable to the margins maintained under existing relationships, the Companys operating results may be negatively
affected. In addition, the Company has operations in several locations in emerging or developing economies that have a potential for higher risk. The risks associated with these economies include currency volatility and other economic or political
risks. While the Company has and will continue to adopt measures to reduce the impact of losses resulting from volatile currencies and other risks of doing business abroad, the Company cannot ensure that such measures will be adequate.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
|-------- | -----------------------------------------------------------



The Companys credit facility bears interest based on interest rates tied to the prime or LIBOR rate, either of which may fluctuate over time based
on economic conditions. As a result, the Company is subject to market risk for changes in interest rates and could be subjected to increased or decreased interest payments if market rates fluctuate and the Company has borrowings outstanding under
its line of credit.



The Company has several foreign
subsidiaries and acquires certain inventory from foreign suppliers and as such, faces risk due to adverse movements in foreign currency exchange rates, primarily the Singapore dollar and the British pound. These risks could have a material impact on
the Companys financial results in future periods.



The
electronic component industry is cyclical which can cause significant fluctuations in sales, gross margins and profits, from year to year. For example, during calendar 2001, the industry experienced a severe decline in the demand for electronic
components, which caused sales to decrease by 56%. The prior year reflected a 74% increase in net sales. It is difficult to predict the timing of the changing cycles in the electronic component industry.



Page 16



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##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



Independent Auditors Report



To The Board of
Directors and Shareholders

Nu Horizons Electronics Corp.

Melville, New York



We have audited the accompanying
consolidated balance sheets of Nu Horizons Electronics Corp. and subsidiaries as of February 29, 2004 and February 28, 2003, and the consolidated statements of operations, changes in shareholders equity and cash flows for the three years in
the period ended February 29, 2004. Our audits also included the financial statement schedule listed in the index at Item 15(a). These consolidated financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 Nu Horizons Electronics Corp. and subsidiaries at February 29, 2004 and February 28, 2003, and the results of their operations and their cash flows for each of the three years in the
period ended February 29, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, the financial statement schedule listed in the index at Item 15(a) presents fairly, in all material respects,
the information required to be set forth therein.



/s/ LAZAR LEVINE & FELIX LLP

LAZAR LEVINE & FELIX LLP



New York, New York

April 19, 2004



F - 1



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                      |  | February 29,2004 |             |   | February 28,2003 |  
|-ASSETS-                                                                                                                                              |  |                  |             |   |                  |   |             |  
|CURRENT ASSETS:                                                                                                                                       |  |                  |             |   |                  |   |             |  
|Cash                                                                                                                                                  |  | $                | 12,469,973  |   |                  | $ | 31,345,616  |  
|Accounts receivable - net of allowance for doubtful accounts of $4,089,801 and $4,083,590 for 2004 and 2003, respectively                             |  |                  | 68,230,405  |   |                  |   | 39,092,343  |  
|Inventories                                                                                                                                           |  |                  | 68,729,081  |   |                  |   | 66,073,022  |  
|Prepaid expenses and other current assets                                                                                                             |  |                  | 794,086     |   |                  |   | 2,952,665   |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL CURRENT ASSETS                                                                                                                                  |  |                  | 150,223,545 |   |                  |   | 139,463,646 |  
|PROPERTY, PLANT AND EQUIPMENT  NET                                                                                                                   |  |                  | 4,401,898   |   |                  |   | 5,150,499   |  
|OTHER ASSETS:                                                                                                                                         |  |                  |             |   |                  |   |             |  
|Subordinated note receivable                                                                                                                          |  |                  | 2,000,000   |   |                  |   | 2,000,000   |  
|Other assets                                                                                                                                          |  |                  | 1,552,728   |   |                  |   | 1,485,044   |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|                                                                                                                                                      |  | $                | 158,178,171 |   |                  | $ | 148,099,189 |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|-LIABILITIES AND SHAREHOLDERS EQUITY-                                                                                                                |  |                  |             |   |                  |   |             |  
|CURRENT LIABILITIES:                                                                                                                                  |  |                  |             |   |                  |   |             |  
|Accounts payable                                                                                                                                      |  | $                | 21,479,465  |   |                  | $ | 16,732,172  |  
|Accrued expenses                                                                                                                                      |  |                  | 5,250,006   |   |                  |   | 5,939,395   |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL CURRENT LIABILITIES                                                                                                                             |  |                  | 26,729,471  |   |                  |   | 22,671,567  |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|LONG-TERM LIABILITIES:                                                                                                                                |  |                  |             |   |                  |   |             |  
|Revolving credit line                                                                                                                                 |  |                  | 5,300,000   |   |                  |   |            |  
|Deferred income taxes                                                                                                                                 |  |                  | 280,495     |   |                  |   | 252,832     |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL LONG-TERM LIABILITIES                                                                                                                           |  |                  | 5,580,495   |   |                  |   | 252,832     |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|MINORITY INTEREST IN SUBSIDIARIES                                                                                                                     |  |                  | 1,465,662   |   |                  |   | 1,182,449   |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                         |  |                  |             |   |                  |   |             |  
|SHAREHOLDERS EQUITY:                                                                                                                                 |  |                  |             |   |                  |   |             |  
|Preferred stock, $1 par value, 1,000,000 shares authorized; none issued or outstanding                                                                |  |                  |            |   |                  |   |            |  
|Common stock, $.0066 par value, 50,000,000 shares authorized; 16,859,766 and 16,663,817 shares issued and outstanding for 2004 and 2003,
respectively |  |                  | 111,275     |   |                  |   | 109,981     |  
|Additional paid-in capital                                                                                                                            |  |                  | 43,934,877  |   |                  |   | 42,925,545  |  
|Retained earnings                                                                                                                                     |  |                  | 80,650,760  |   |                  |   | 81,498,759  |  
|Other accumulated comprehensive income (loss)                                                                                                         |  |                  | (294,369    | ) |                  |   | (541,944    | )
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY                                                                                                                            |  |                  | 124,402,543 |   |                  |   | 123,992,341 |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  
|                                                                                                                                                      |  | $                | 158,178,171 |   |                  | $ | 148,099,189 |  
|                                                                                                                                                      |  |                  |             |   |                  |   |             |  



See notes to
consolidated financial statements.



F - 2



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|--------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ---------------- | - | ----------- | ---------------- |  | - | ----------- | -
|                                                                                              |  | For The Year Ended |            
|                                                                                              |  | February 29,2004   |             |   | February 28,2003 |   |             | February 28,2002 | 
|NET SALES                                                                                     |  | $                  | 345,863,877 |   |                  | $ | 302,080,809 |                  |  | $ | 281,912,508 |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|COSTS AND EXPENSES (INCOME):                                                                  |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Cost of sales                                                                                 |  |                    | 284,903,097 |   |                  |   | 246,852,741 |                  |  |   | 221,690,082 |  
|Operating expenses                                                                            |  |                    | 62,435,993  |   |                  |   | 57,439,743  |                  |  |   | 60,377,685  |  
|Impairment of goodwill                                                                        |  |                    |            |   |                  |   |            |                  |  |   | 1,124,636   |  
|Interest expense                                                                              |  |                    | 139,630     |   |                  |   | 98,068      |                  |  |   | 1,517,262   |  
|Interest income                                                                               |  |                    | (345,782    | ) |                  |   |            |                  |  |   |            |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                                              |  |                    | 347,132,938 |   |                  |   | 304,390,552 |                  |  |   | 284,709,665 |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|(LOSS) BEFORE PROVISION (CREDIT) FOR INCOME TAXES AND MINORITY INTERESTS                      |  |                    | (1,269,061  | ) |                  |   | (2,309,743  | )                |  |   | (2,797,157  | )
|Provision (credit) for income taxes                                                           |  |                    | (704,275    | ) |                  |   | (539,927    | )                |  |   | (503,742    | )
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|(LOSS) BEFORE MINORITY INTERESTS                                                              |  |                    | (564,786    | ) |                  |   | (1,769,816  | )                |  |   | (2,293,415  | )
|Minority interest in earnings of subsidiaries                                                 |  |                    | 283,213     |   |                  |   | 741,822     |                  |  |   | 469,151     |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|(LOSS) FROM CONTINUING OPERATIONS                                                             |  |                    | (847,999    | ) |                  |   | (2,511,638  | )                |  |   | (2,762,566  | )
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|DISCONTINUED OPERATIONS:                                                                      |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Income from operations of contract manufacturing subsidiary disposed of - net of income taxes |  |                    |            |   |                  |   |            |                  |  |   | 798,735     |  
|Gain on sale of contract manufacturing subsidiary  net of income taxes                       |  |                    |            |   |                  |   |            |                  |  |   | 4,183,507   |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                                              |  |                    |            |   |                  |   |            |                  |  |   | 4,982,242   |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|NET INCOME (LOSS)                                                                             |  | $                  | (847,999    | ) |                  | $ | (2,511,638  | )                |  | $ | 2,219,676   |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|NET INCOME (LOSS) PER COMMON SHARE  BASIC:                                                   |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Continuing operations                                                                         |  | $                  | (.05        | ) |                  | $ | (.15        | )                |  | $ | (.17        | )
|Discontinued operations                                                                       |  |                    | .00         |   |                  |   | .00         |                  |  |   | .30         |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                                              |  | $                  | (.05        | ) |                  | $ | (.15        | )                |  | $ | .13         |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|NET INCOME (LOSS) PER COMMON SHARE-DILUTED:                                                   |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Continuing operations                                                                         |  | $                  | (.05        | ) |                  | $ | (.15        | )                |  | $ | (.16        | )
|Discontinued operations                                                                       |  |                    | .00         |   |                  |   | .00         |                  |  |   | .29         |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                                              |  | $                  | (.05        | ) |                  | $ | (.15        | )                |  | $ | .13         |  
|                                                                                              |  |                    |             |   |                  |   |             |                  |  |   |             |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                                    |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Basic                                                                                         |  |                    | 16,729,163  |   |                  |   | 16,663,817  |                  |  |   | 16,574,911  |  
|Diluted                                                                                       |  |                    | 16,729,163  |   |                  |   | 16,663,817  |                  |  |   | 17,430,332  |  



See notes to
consolidated financial statements.



F - 3



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY



|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |            |   |                            |   |          |   |  |   |             |  
|----------------------------------------------- |  | ---------- |  | ----------- | ------- | ------------------------ | - | ---------------- |  | - | ------------------------------------------ | - |  | ----------- | ---------- | - | -------------------------- | - | -------- | - |  | - | ----------- | -
|                                                |  | Shares     |  | CommonStock |         | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Loan ToESOP |            |   | Total Shareholders Equity |  
|Balance at February 28, 2001                    |  | 16,501,840 |  | $           | 108,912 |                          | $ | 41,798,615       |  | $ | 81,790,721                                 |   |  | $           | 821,807    |   |                            | $ | (158,844 | ) |  | $ | 124,361,211 |  
|Exercise of stock options                       |  | 107,165    |  |             | 707     |                          |   | 490,616          |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 491,323     |  
|Income tax benefit from stock options exercised |  |           |  |             |        |                          |   | 311,596          |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 311,596     |  
|Repayment from ESOP                             |  |           |  |             |        |                          |   |                 |  |   |                                           |   |  |             |           |   |                            |   | 158,844  |   |  |   | 158,844     |  
|Foreign currency translation                    |  |           |  |             |        |                          |   |                 |  |   |                                           |   |  |             | (1,069,473 | ) |                            |   |         |   |  |   | (1,069,473  | )
|Net income                                      |  |           |  |             |        |                          |   |                 |  |   | 2,219,676                                  |   |  |             |           |   |                            |   |         |   |  |   | 2,219,676   |  
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |            |   |                            |   |          |   |  |   |             |  
|Balance at February 28, 2002                    |  | 16,609,005 |  |             | 109,619 |                          |   | 42,600,827       |  |   | 84,010,397                                 |   |  |             | (247,666   | ) |                            |   |         |   |  |   | 126,473,177 |  
|Exercise of stock options                       |  | 54,812     |  |             | 362     |                          |   | 246,439          |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 246,801     |  
|Income tax benefit from stock options exercised |  |           |  |             |        |                          |   | 78,279           |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 78,279      |  
|Foreign currency translation                    |  |           |  |             |        |                          |   |                 |  |   |                                           |   |  |             | (294,278   | ) |                            |   |         |   |  |   | (294,278    | )
|Net (loss)                                      |  |           |  |             |        |                          |   |                 |  |   | (2,511,638                                 | ) |  |             |           |   |                            |   |         |   |  |   | (2,511,638  | )
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |            |   |                            |   |          |   |  |   |             |  
|Balance at February 28, 2003                    |  | 16,663,817 |  |             | 109,981 |                          |   | 42,925,545       |  |   | 81,498,759                                 |   |  |             | (541,944   | ) |                            |   |         |   |  |   | 123,992,341 |  
|Exercise of stock options                       |  | 195,949    |  |             | 1,294   |                          |   | 823,982          |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 825,276     |  
|Income tax benefit from stock options exercised |  |           |  |             |        |                          |   | 185,350          |  |   |                                           |   |  |             |           |   |                            |   |         |   |  |   | 185,350     |  
|Foreign currency translation                    |  |           |  |             |        |                          |   |                 |  |   |                                           |   |  |             | 247,575    |   |                            |   |         |   |  |   | 247,575     |  
|Net (loss)                                      |  |           |  |             |        |                          |   |                 |  |   | (847,999                                   | ) |  |             |           |   |                            |   |         |   |  |   | (847,999    | )
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |            |   |                            |   |          |   |  |   |             |  
|Balance at February 29, 2004                    |  | 16,859,766 |  | $           | 111,275 |                          | $ | 43,934,877       |  | $ | 80,650,760                                 |   |  | $           | (294,369   | ) |                            | $ |         |   |  | $ | 124,402,543 |  
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |            |   |                            |   |          |   |  |   |             |  



See notes to
consolidated financial statements.



F - 4



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



Page 1 of 2



|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|---------------------------------------------------- |  | ------------------ | ------------ | - | ---------------- | - | ------------ | ---------------- |  | - | ------------ | -
|                                                     |  | For The Year Ended |             
|                                                     |  | February 29,2004   |              |   | February 28,2003 |   |              | February 28,2002 | 
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:    |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash flows from operating activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash received from customers                         |  | $                  | 316,725,815  |   |                  | $ | 303,006,935  |                  |  | $ | 358,499,244  |  
|Cash paid to suppliers and employees                 |  |                    | (341,482,272 | ) |                  |   | (271,254,844 | )                |  |   | (275,441,710 | )
|Interest paid                                        |  |                    | (139,630     | ) |                  |   | (98,068      | )                |  |   | (1,517,262   | )
|Interest received                                    |  |                    | 345,782      |   |                  |   |             |                  |  |   |             |  
|Income taxes paid                                    |  |                    | (68,882      | ) |                  |   | (67,652      | )                |  |   | (2,676,308   | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash provided by (used in) operating activities  |  |                    | (24,619,187  | ) |                  |   | 31,586,371   |                  |  |   | 78,863,964   |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash flows from investing activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Capital expenditures                                 |  |                    | (629,307     | ) |                  |   | (383,255     | )                |  |   | (1,393,184   | )
|Proceeds from sale of subsidiary                     |  |                    |             |   |                  |   |             |                  |  |   | 29,563,000   |  
|Net assets of subsidiary sold                        |  |                    |             |   |                  |   |             |                  |  |   | (18,217,706  | )
|Expenses related to sale of subsidiary               |  |                    |             |   |                  |   |             |                  |  |   | (3,606,122   | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash provided by (used in) investing activities  |  |                    | (629,307     | ) |                  |   | (383,255     | )                |  |   | 6,345,988    |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash flows from financing activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Borrowings under revolving credit line               |  |                    | 13,900,000   |   |                  |   | 6,700,000    |                  |  |   | 81,300,000   |  
|Repayments under revolving credit line               |  |                    | (8,600,000   | ) |                  |   | (9,200,000   | )                |  |   | (163,800,000 | )
|Proceeds from exercise of stock options              |  |                    | 825,276      |   |                  |   | 246,801      |                  |  |   | 491,323      |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash provided by (used in) financing activities  |  |                    | 6,125,276    |   |                  |   | (2,253,199   | )                |  |   | (82,008,677  | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Effect of exchange rate changes                      |  |                    | 247,575      |   |                  |   | (294,279     | )                |  |   | (1,069,473   | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net increase (decrease) in cash and cash equivalents |  |                    | (18,875,643  | ) |                  |   | 28,655,638   |                  |  |   | 2,131,802    |  
|Cash and cash equivalents, beginning of year         |  |                    | 31,345,616   |   |                  |   | 2,689,978    |                  |  |   | 558,176      |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash and cash equivalents, end of year               |  | $                  | 12,469,973   |   |                  | $ | 31,345,616   |                  |  | $ | 2,689,978    |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  



See notes to
consolidated financial statements.



F - 5



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



Page 2 of 2



|                                                                          |  |                    |             |   |                  |   |            |                  |  |   |             |  
|------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ---------------- | - | ---------- | ---------------- |  | - | ----------- | -
|                                                                          |  | For The Year Ended |            
|                                                                          |  | February 29,2004   |             |   | February 28,2003 |   |            | February 28,2002 | 
|RECONCILIATION OF NET INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES |  |                    |             |   |                  |   |            |                  |  |   |             |  
|NET (LOSS) INCOME                                                         |  | $                  | (847,999    | ) |                  | $ | (2,511,638 | )                |  | $ | 2,219,676   |  
|Adjustments:                                                              |  |                    |             |   |                  |   |            |                  |  |   |             |  
|Gain on sale of subsidiary                                                |  |                    |            |   |                  |   |           |                  |  |   | (4,183,507  | )
|Depreciation and amortization                                             |  |                    | 1,377,908   |   |                  |   | 1,378,233  |                  |  |   | 1,416,235   |  
|Impairment of goodwill                                                    |  |                    |            |   |                  |   |           |                  |  |   | 1,124,636   |  
|Contribution to ESOP (compensation)                                       |  |                    |            |   |                  |   |           |                  |  |   | 158,844     |  
|Bad debt provision                                                        |  |                    |            |   |                  |   |           |                  |  |   | 86,982      |  
|Changes in assets and liabilities:                                        |  |                    |             |   |                  |   |            |                  |  |   |             |  
|(Increase) decrease in accounts receivable                                |  |                    | (29,138,062 | ) |                  |   | 926,126    |                  |  |   | 54,850,081  |  
|(Increase) decrease in inventories                                        |  |                    | (2,656,059  | ) |                  |   | 29,003,176 |                  |  |   | 40,047,471  |  
|Decrease in prepaid expenses and other current assets                     |  |                    | 2,158,579   |   |                  |   | 773,903    |                  |  |   | 4,230,329   |  
|(Increase) decrease in other assets                                       |  |                    | (67,684     | ) |                  |   | 176,728    |                  |  |   | (2,045,742  | )
|Increase (decrease) in accounts payable and accrued expenses              |  |                    | 4,243,254   |   |                  |   | 1,950,513  |                  |  |   | (19,703,700 | )
|Increase in income taxes                                                  |  |                    | 283,213     |   |                  |   | 99,513     |                  |  |   | 361,698     |  
|Increase (decrease) in minority interest                                  |  |                    | 27,663      |   |                  |   | (210,183   | )                |  |   | 300,961     |  
|                                                                          |  |                    |             |   |                  |   |            |                  |  |   |             |  
|Net cash provided by (used in) operating activities                       |  | $                  | (24,619,187 | ) |                  | $ | 31,586,371 |                  |  | $ | 78,863,964  |  
|                                                                          |  |                    |             |   |                  |   |            |                  |  |   |             |  



See notes to
consolidated financial statements.



F - 6



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|1. | ORGANIZATION:
|-- | -------------



Nu Horizons Electronics Corp. and its subsidiaries, (both wholly and majority owned) are wholesale and export distributors of semiconductor and passive
electronic components throughout the United States, Asia and Europe.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|-- | -------------------------------------------



| | a. | Principles of Consolidation:
| | -- | ----------------------------



The consolidated financial statements include the accounts of Nu Horizons Electronics Corp. (the Company), and its wholly-owned subsidiaries,
NIC Components Corp. (NIC), Nu Horizons International Corp. (International), NUHC Inc. (NUC), Nu Horizons Asia PTE LTD (NUA), Nu Horizons Europe Limited (NUE), Titan Supply Chain Services
Corp. (Titan), Titan Supply Chain Services PTE LTD (TSC), Titan Supply Chain Services Limited (TSE), NUV Inc. (NUV) and its majority owned subsidiaries, NIC Components Europe Limited (NIE)
and NIC Components Asia PTE. LTD (NIA). All material intercompany balances and transactions have been eliminated. See also Note 3.



| | b. | Use of Estimates:
| | -- | -----------------



In preparing financial statements in accordance with accounting principles generally accepted in the United States of America, management makes certain
estimates and assumptions, where applicable, that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses
during the reporting period. While actual results could differ from those estimates, management does not expect such variances, if any, to have a material effect on the financial statements.



| | c. | Concentration of Credit Risk/Fair Value:
| | -- | ----------------------------------------



Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.



The Company maintains, at times, deposits in federally
insured financial institutions in excess of federally insured limits. Management attempts to monitor the soundness of the financial institution and believes the Companys risk is negligible. Concentrations with regard to accounts receivable are
limited due to the Companys large customer base.



The
carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term nature of these items. The carrying amount of long-term debt also approximates fair value since the interest rates on
these instruments approximate market interest rates.



| | d. | Cash and Cash Equivalents:
| | -- | --------------------------



For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a remaining maturity of three months or
less to be cash equivalents.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
|-- | -------------------------------------------------------



| | e. | Inventories:
| | -- | ------------



Inventories, which consist primarily of goods held for resale, are stated at the lower of cost (first-in, first-out method) or market.



| | f. | Depreciation:
| | -- | -------------



Depreciation is provided using the straight-line method as follows:



|                       |  |             
|---------------------- |  | ------------
|Office equipment       |  | 5 years     
|Furniture and fixtures |  | 5  12 years
|Computer equipment     |  | 5 years     



Leasehold
improvements are amortized over the term of the lease. Maintenance and repairs are charged to operations and major improvements are capitalized. Upon retirement, sale or other disposition, the associated cost and accumulated depreciation are
eliminated from the accounts and any resulting gain or loss is included in operations.



| | g. | Goodwill:
| | -- | ---------



As a result of its review of goodwill in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of, the Company identified certain conditions as indicators of asset impairment and accordingly, recognized full impairment of the remaining goodwill, recording a one-time charge of $1,124,636, as of February 28, 2002.



Prior to its determination of impairment, costs in excess of net assets
acquired were amortized on a straight-line basis over fifteen years. As of the end of fiscal 2004, 2003 and 2002, there was no goodwill on the Companys balance sheet.



| | h. | Income Taxes:
| | -- | -------------



The Company has elected to file a consolidated federal income tax return with its domestic subsidiaries. The Company utilizes SFAS 109 Accounting
for Income Taxes, which requires use of the asset and liability approach of providing for income taxes. Deferred income taxes are provided for on the timing differences for certain items which are treated differently for tax and financial
reporting purposes. These items include depreciation of fixed assets, inventory capitalization valuations and the recognition of bad debt expense.



International has elected under Section 995 of the Internal Revenue Code to be taxed as an Interest Charge Disc. Based upon these rules,
income taxes are paid when International distributes its income to the parent company. Until distributions are made, the parent company pays interest only on the deferred tax liabilities. Internationals untaxed income at February 29, 2004
approximates $1,726,000.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
|-- | -------------------------------------------------------



| | i. | Revenue Recognition/Shipping and Handling Costs:
| | -- | ------------------------------------------------



The Company recognizes revenue in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue
Recognition (SAB 104). Under SAB 104 revenue is recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectibility is reasonably
assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates, and returns.



Amounts related to shipping and handling that are billed to customers as part of sales transactions are reflected as a reduction of operating expenses and
aggregated $73,151, $97,125 and $130,328 for the fiscal years ended 2004, 2003 and 2002, respectively. Shipping and handling costs incurred by the Company are included in costs of sales and aggregated $754,345, $1,117,080 and $1,042,052 for the
fiscal years ended 2004, 2003 and 2002, respectively.



| | j. | Advertising and Promotion Costs:
| | -- | --------------------------------



Advertising and promotion costs, which are included in general and administrative expenses, are expensed as incurred. For the fiscal years ended 2004,
2003 and 2002, such costs aggregated $301,062, $295,466 and $424,490, respectively.



| | k. | Earnings Per Common Share:
| | -- | --------------------------



Basic earnings (loss) per share is computed based upon the weighted average number of common shares outstanding and excludes any potential dilution.
Diluted earnings (loss) per share reflect potential dilution from the exercise of securities into common stock. The effect of stock options have been excluded from the determination of the weighted average common shares for diluted (loss) per share
for the 2004 and 2003 years as the effect was antidilutive.



| | l. | Stock-Based Compensation:
| | -- | -------------------------



The Company accounts for its stock-based compensation using the intrinsic value method provided for under Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. Under APB No. 25 and related interpretations, compensation cost is recognized based on the difference, if any, on the date of grant between the fair value of the
Companys stock and the amount an employee must pay to acquire the stock. SFAS No. 123, Accounting for Stock Based Compensation (as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment to FASB Statement No. 123), establishes a fair-value based method of accounting for stock-based compensation plans. The Company has adopted the disclosure-only alternative under SFAS No. 123, which requires the disclosure of the
pro forma effects on net loss and net loss per share as if the fair value accounting prescribed by SFAS No. 123 had been adopted. Compensation expense related to stock options granted to non-employees is accounted for under SFAS 148, whereby
compensation expense is recognized over the vesting period based on the fair value of the options on the date of grant.



No stock-based employee compensation cost is reflected in net loss, as all options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
|-- | -------------------------------------------------------



| | l. | Stock-Based Compensation (continued):
| | -- | -------------------------------------



The following table illustrates the effect on net loss and net loss per share as if the Company had
applied the fair value recognition provisions of SFAS No. 123 to stock based compensation.



|                            |  |      |            |   |      |   |            |      |  |   |          
|--------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------
|                            |  | 2004 |            |   | 2003 |   |            | 2002
|Net earnings (loss):        |  |      |            |   |      |   |            |      |  |   |          
|As reported                 |  | $    | (847,999   | ) |      | $ | (2,511,638 | )    |  | $ | 2,219,676
|Pro forma                   |  |      | (1,537,384 | ) |      |   | (3,382,655 | )    |  |   | 1,230,375
|Basic earnings per share:   |  |      |            |   |      |   |            |      |  |   |          
|As reported                 |  | $    | (.05       | ) |      | $ | (.15       | )    |  | $ | .13      
|Pro forma                   |  | $    | (.05       | ) |      | $ | (.20       | )    |  | $ | .07      
|Diluted earnings per share: |  |      |            |   |      |   |            |      |  |   |          
|As reported                 |  | $    | (.05       | ) |      | $ | (.15       | )    |  | $ | .13      
|Pro forma                   |  | $    | (.05       | ) |      | $ | (.20       | )    |  | $ | .07      



The fair value of
each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the fiscal years ended 2004, 2003 and 2002, respectively: expected volatility of 39.2%, 40.1%,
and 38.9%, respectively; risk free interest rate of 2.5%, 4.0%, and 4.9%, respectively; and expected lives of 2 to 7 years.



The effects of applying SFAS 123 in the above pro forma disclosures are not indicative of future amounts, as they are likely to be affected by the number
of grants awarded since additional awards are generally expected to be made at varying amounts.



| | m. | Foreign Currency Translation/Other Comprehensive Income:
| | -- | --------------------------------------------------------



Assets and liabilities of the Companys foreign subsidiaries are translated at current exchange rates, while income and expenses are translated at
average rates for the period. Translation gains and losses are reported as a component of accumulated other comprehensive income on the statement of shareholders equity in accordance with SFAS No. 130, Reporting Comprehensive
Income.



| | n. | Reclassifications:
| | -- | ------------------



Certain prior years information has been reclassified to conform to the current years reporting presentation.



| | o. | Recent Accounting Pronouncements:
| | -- | ---------------------------------



In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity. This Statement establishes standards regarding how an issuer classifies, measures, and discloses certain types of financial instruments having characteristics of both liabilities and equity. It requires that an issuer classify a
freestanding financial instrument that is within its scope as a liability. In addition, this statement provides guidance on how to account for non-controlling interests of a limited-life subsidiary. The adoption of this provision did not have an
impact on the Companys consolidated financial position and results of operations.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|3. | SALE OF SUBSIDIARY:
|-- | -------------------



On August 23, 2001, the Company completed the sale of the assets of its contract-manufacturing subsidiary, Nu Visions Manufacturing, Inc. (Nu
Visions). The selling price of $31,563,000 consisted of $2,000,000 in a subordinated note (see below) and $29,563,000 in cash.



Operating results for the period March 1, 2001 to August 23, 2001, of Nu Visions were as follows:



|                           |  |      |           
|-------------------------- |  | ---- | ----------
|                           |  | 2002
|Net sales                  |  | $    | 21,736,655
|Income before income taxes |  |      | 1,331,226 
|Income tax provision       |  |      | 798,735   



Pursuant to the sale
of this subsidiary, the Company received a $2,000,000 Junior Subordinated Note, dated August 23, 2001 and issued by the buyer as part of the purchase price. The note has a maturity date of May 14, 2007 and is subordinate in right of payment to all
existing and future indebtedness of the issuer. The note bears interest from the issue date, on the principal amount, to, and including the maturity date, at a rate of 8% per annum. Interest shall be payable on the maturity date and shall compound
quarterly as of each anniversary of the issue date. Prepayment of the note and interest accrued is permitted if and when certain conditions in the subordination agreement have been met.



|4. | PROPERTY, PLANT AND EQUIPMENT:
|-- | ------------------------------



Property, plant and equipment which is recorded at cost, consists of the following:



|                                                |  |      |            |      |   |           
|----------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                |  | 2004 |            | 2003
|Furniture, fixtures and equipment               |  | $    | 8,185,446  |      | $ | 7,882,785 
|Computer equipment                              |  |      | 5,993,016  |      |   | 5,678,891 
|Leasehold improvements                          |  |      | 1,254,364  |      |   | 1,254,364 
|                                                |  |      |            |      |   |           
|                                                |  |      | 15,432,826 |      |   | 14,816,040
|Less: accumulated depreciation and amortization |  |      | 11,030,928 |      |   | 9,665,541 
|                                                |  |      |            |      |   |           
|                                                |  | $    | 4,401,898  |      | $ | 5,150,499 
|                                                |  |      |            |      |   |           



Depreciation expense
for the 2004, 2003 and 2002 years aggregated $1,377,908, $1,378,233 and $1,259,248, respectively.



|5. | OTHER ASSETS:
|-- | -------------



Other assets consists of the following:



|                                          |  |      |           |      |   |          
|----------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                          |  | 2004 |           | 2003
|Net cash surrender value  life insurance |  | $    | 1,339,920 |      | $ | 1,280,884
|Other assets                              |  |      | 212,808   |      |   | 204,160  
|                                          |  |      |           |      |   |          
|                                          |  | $    | 1,552,728 |      | $ | 1,485,044
|                                          |  |      |           |      |   |          



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|6. | REVOLVING CREDIT LINE:
|-- | ----------------------



On September 14, 2003, the Company entered into an unsecured revolving line of credit agreement with three banks, which currently provides for maximum
borrowings of $41,500,000 at either (i) the lead banks prime rate or (ii) LIBOR plus 100 to 275 basis points depending on the ratio of the Companys liabilities to its tangible net worth, at the option of the Company, through September 4,
2007. Direct borrowings under the line of credit were $5,300,000 at February 29, 2004. There were no borrowings at February 28, 2003. As of the end of each of the fiscal years, the Company had met all of the required covenants.



|7. | CAPITAL STOCK AND STOCK OPTIONS:
|-- | --------------------------------



Stock options granted to date under the Companys 1994 Stock Option Plan generally expire five years after date of grant and become exercisable in
four equal annual installments, commencing one year from date of grant. Stock options granted to date under each of the Companys 1998, 2000 and 2002 Stock Option Plans and 2000 and 2002 Key Employee Stock Option Plans, generally expire ten
years after the date of grant and become exercisable in two equal annual installments commencing one year from date of grant. Stock options granted under the Companys Outside Director Stock Option Plan and 2000 and 2002 Outside Directors
Stock Option Plans, expire ten years after the date of grant and become exercisable in three equal annual installments on the date of grant and the succeeding two anniversaries thereof.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|7. | CAPITAL STOCK AND STOCK OPTIONS (Continued):
|-- | --------------------------------------------



A summary of options granted and related information for the three years ended February 29, 2004 is
as follows:



|                                                               |  |           |   |  |                                |      
|-------------------------------------------------------------- |  | --------- | - |  | ------------------------------ | -----
|                                                               |  | Options   |   |  | Weighted AverageExercise Price
|Outstanding February 28, 2001                                  |  | 2,248,779 |   |  | $                              | 5.88 
|Granted                                                        |  | 99,000    |   |  |                                | 10.00
|Exercised                                                      |  | (103,304  | ) |  |                                | 4.77 
|Cancelled                                                      |  | (43,763   | ) |  |                                | 8.46 
|                                                               |  |           |   |  |                                |      
|Outstanding February 28, 2002                                  |  | 2,200,712 |   |  |                                | 6.07 
|Weighted average fair value of options granted during the year |  |           |   |  | $                              | 9.99 
|                                                               |  |           |   |  |                                |      
|Granted                                                        |  | 1,361,000 |   |  | $                              | 7.15 
|Exercised                                                      |  | (54,812   | ) |  |                                | 4.30 
|Cancelled                                                      |  | (57,122   | ) |  |                                | 8.62 
|                                                               |  |           |   |  |                                |      
|Outstanding February 28, 2003                                  |  | 3,449,778 |   |  |                                |      
|Weighted average fair value of options granted during the year |  |           |   |  | $                              | 6.08 
|                                                               |  |           |   |  |                                |      
|Granted                                                        |  | 127,000   |   |  | $                              | 5.50 
|Exercised                                                      |  | (195,949  | ) |  |                                | 4.22 
|Cancelled                                                      |  | (39,567   | ) |  |                                | 8.20 
|                                                               |  |           |   |  |                                |      
|Outstanding February 29, 2004                                  |  | 3,341,262 |   |  |                                |      
|                                                               |  |           |   |  |                                |      
|Weighted average fair value of options granted during the year |  |           |   |  | $                              | 4.30 
|                                                               |  |           |   |  |                                |      
|Options exercisable at the end of each fiscal year:            |  |           |   |  |                                |      
|February 28, 2002                                              |  | 1,818,621 |   |  | $                              | 5.04 
|February 28, 2003                                              |  | 1,924,653 |   |  |                                | 5.62 
|February 29, 2004                                              |  | 2,604,762 |   |  |                                | 6.38 



Exercise prices for
options outstanding as of February 29, 2004 ranged from $2.93 to $18.33. The weighted-average remaining contractual life of these options is approximately 5 years. Outstanding options at February 29, 2004 are held by approximately 70 individuals.



|8. | MINORITY INTERESTS IN SUBSIDIARIES:
|-- | -----------------------------------



Minority interests at February 29, 2004 and February 28, 2003 represents the liability related to a 15% minority interest in NIC Components Asia PTE. LTD,
(NIA) and 20% minority interest in NIC Components Europe Limited (NIE).



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|9. | INCOME TAXES:
|-- | -------------



The provision (credit) for income taxes from continuing operations is comprised of the following:



|                |  |      |            |   |      |   |          |      |  |   |          |  
|--------------- |  | ---- | ---------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                |  | 2004 |            |   | 2003 |   |          | 2002 | 
|Current:        |  |      |            |   |      |   |          |      |  |   |          |  
|Federal         |  | $    | (1,195,777 | ) |      | $ | (747,670 | )    |  | $ | (256,833 | )
|State and local |  |      | (298,944   | ) |      |   | (191,481 | )    |  |   | (60,907  | )
|Foreign         |  |      | 848,246    |   |      |   | 377,900  |      |  |   | 267,956  |  
|Deferred:       |  |      |            |   |      |   |          |      |  |   |          |  
|Federal         |  |      | (46,240    | ) |      |   | 16,976   |      |  |   | (341,362 | )
|State           |  |      | (11,560    | ) |      |   | 4,348    |      |  |   | (112,596 | )
|                |  |      |            |   |      |   |          |      |  |   |          |  
|                |  | $    | (704,275   | ) |      | $ | (539,927 | )    |  | $ | (503,742 | )
|                |  |      |            |   |      |   |          |      |  |   |          |  



The tax benefits
associated with the disqualifying disposition of stock acquired with incentive stock options reduced taxes currently payable as shown above by $185,350 for 2004 and $78,279 for 2003. Such benefits are credited to additional paid-in capital.



The components of the net deferred income tax liability,
pursuant to SFAS 109, are as follows:



|                               |  |      |            |   |      |   |            |  
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                               |  | 2004 |            |   | 2003 |  
|Deferred tax assets:           |  |      |            |   |      |   |            |  
|Accounts receivable            |  | $    | 1,335,023  |   |      | $ | 1,507,665  |  
|Inventory                      |  |      | 282,227    |   |      |   | 96,550     |  
|Goodwill                       |  |      | 96,620     |   |      |   | 120,304    |  
|                               |  |      |            |   |      |   |            |  
|Total deferred tax assets      |  |      | 1,713,870  |   |      |   | 1,724,519  |  
|                               |  |      |            |   |      |   |            |  
|Deferred tax liabilities:      |  |      |            |   |      |   |            |  
|Fixed assets                   |  |      | (1,310,310 | ) |      |   | (1,186,477 | )
|Income of Interest Charge DISC |  |      | (684,055   | ) |      |   | (790,874   | )
|                               |  |      |            |   |      |   |            |  
|Total deferred tax liabilities |  |      | (1,994,365 | ) |      |   | (1,977,351 | )
|                               |  |      |            |   |      |   |            |  
|Net deferred tax liabilities   |  | $    | (280,495   | ) |      | $ | (252,832   | )
|                               |  |      |            |   |      |   |            |  



The following is a
reconciliation of the maximum statutory federal tax rate to the Companys effective tax rate:



|                      |  |       |    |  |       |    |  |       |   
|--------------------- |  | ----- | -- |  | ----- | -- |  | ----- | --
|                      |  | 2004  |    |  | 2003  |    |  | 2002  |   
|Statutory rate        |  | (34.0 | )% |  | (34.0 | )% |  | (34.0 | )%
|State and local taxes |  | (6.8  | )  |  | (5.3  | )  |  | (7.8  | ) 
|Foreign and other     |  | (14.7 | )  |  | 15.9  |    |  | 23.8  |   
|                      |  |       |    |  |       |    |  |       |   
|Effective tax rate    |  | (55.5 | )% |  | (23.4 | )% |  | (18.0 | )%
|                      |  |       |    |  |       |    |  |       |   



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|10. | EMPLOYEE BENEFIT PLANS:
|--- | -----------------------



On January 13, 1987, the Companys Board of Directors approved the adoption of an employee stock ownership plan (ESOP). The ESOP covers all eligible
employees and contributions are determined by the Board of Directors. The ESOP purchases shares of the Companys common stock using loan proceeds. As the loan is repaid, a pro rata amount of common stock is released for allocation to eligible
employees. The Company makes cash contributions to the ESOP to meet its obligations. Contributions to the ESOP for the three years ended February 29, 2004 aggregated $0 for 2004, $0 for 2003, and $158,844 for 2002. At February 29, 2004, the ESOP
owned 489,880 shares of the Companys common stock at an average price of approximately $3.24 per share.



In January 1991, the Company also established a 401(k) profit sharing plan to cover all eligible employees. The Companys contributions to the plan
are discretionary, but may not exceed 1% of compensation. Contributions to the plan for the three years ended February 29, 2004 were $237,068, $209,057 and $145,947, respectively.



|11. | COMMITMENTS AND CONTINGENCIES:
|--- | ------------------------------



Employment Contracts:



On September 13, 1996, the Company signed employment contracts (the Contracts), as amended, with three of its senior executives for a
continually renewing five-year term. The Contracts specified a base salary of $226,545 for each officer, which shall be increased each year by the change in the consumer price index, and also entitle two of the three officers to an annual bonus
equal to 3.33% and the third officer to 2.33% (9% in the aggregate) of the Companys consolidated earnings before income taxes. Benefits are also payable upon the occurrence of either a change in control of the Company, as defined, or the
termination of the officers employment, as defined. The Contracts also provide for certain payments of the executives salaries, performance bonuses and other benefits in event of death or disability of the officer for the balance of the
period covered by the agreement.



Leases:



In December 1996, the Company leased an approximately 80,000 square foot
facility in Melville, Long Island, New York to serve as its executive offices and main distribution center. In mid- 1997, the Company moved its executive offices and distribution operation to the facility. The lease term is from December 17, 1996 to
December 16, 2008 at an annual base rental of $601,290 and provides for a 4% annual escalation in each of the last ten years of the term. The Company also leases certain other sales offices, warehouses and other properties which leases include
various escalation clauses, renewal options, and other provisions. Aggregate minimum rental commitments under non-cancelable operating leases are as follows:



|            |  |   |          
|----------- |  | - | ---------
|Fiscal 2005 |  | $ | 3,129,000
|Fiscal 2006 |  |   | 2,617,000
|Fiscal 2007 |  |   | 1,641,000
|Fiscal 2008 |  |   | 1,371,000
|Fiscal 2009 |  |   | 1,045,000
|Thereafter  |  |   | 238,000  



Rent expense was
$3,151,940, $3,231,553 and $2,956,569, for each of the three years in the period ending February 29, 2004.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|11. | COMMITMENTS AND CONTINGENCIES (Continued):
|--- | ------------------------------------------



Litigation:



At times the Company is involved in various lawsuits incidental to its business. At February 29, 2004, management does not believe that any litigation
matter is material to its financial statements.



|12. | MAJOR SUPPLIERS:
|--- | ----------------



For the year ended February 29, 2004, the Company purchased inventory from two suppliers that was in excess of 10% of the Companys total purchases.
Purchases from these suppliers were approximately $37,749,000 and $28,195,000 for the fiscal year.



For the year ended February 28, 2003, the Company purchased inventory from two suppliers that was in excess of 10% of the Companys total purchases.
Purchases from these suppliers were approximately $57,915,000 and $22,289,000 for the fiscal year.



|13. | BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION:
|--- | --------------------------------------------



Since the sale of the Companys contract manufacturing subsidiary, management believes that the Company is once again operating in a single business
segment, distribution of electronic components, in accordance with the rules of SFAF No. 131 (Disclosure About Segments of an Enterprise and Related Information).



In as much as the Companys business is primarily conducted in the United States, operations are also carried out
overseas through our foreign subsidiaries in different geographic areas.



Revenues, by geographic area, for the fiscal years are as follows:



|             |  |      |             |      |   |             |  |   |            
|------------ |  | ---- | ----------- | ---- | - | ----------- |  | - | -----------
|             |  | 2004 |             | 2003 |   | 2002       
|Americas     |  | $    | 281,747,445 |      | $ | 277,647,379 |  | $ | 248,668,150
|Europe       |  |      | 4,784,252   |      |   | 3,957,503   |  |   | 16,640,422 
|Asia/Pacific |  |      | 59,332,180  |      |   | 20,475,927  |  |   | 16,603,936 
|             |  |      |             |      |   |             |  |   |            
|             |  | $    | 345,863,877 |      | $ | 302,080,809 |  | $ | 281,912,508
|             |  |      |             |      |   |             |  |   |            



Total assets, by
geographic area, at the end of the fiscal years are as follows:



|             |  |      |             |      |   |             |  |   |            
|------------ |  | ---- | ----------- | ---- | - | ----------- |  | - | -----------
|             |  | 2004 |             | 2003 |   | 2002       
|Americas     |  | $    | 113,249,247 |      | $ | 128,911,799 |  | $ | 132,283,894
|Europe       |  |      | 1,717,119   |      |   | 1,265,127   |  |   | 9,897,388  
|Asia/Pacific |  |      | 43,211,805  |      |   | 17,922,263  |  |   | 9,137,179  
|             |  |      |             |      |   |             |  |   |            
|             |  | $    | 158,178,171 |      | $ | 148,099,189 |  | $ | 151,318,461
|             |  |      |             |      |   |             |  |   |            





F - 16



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 29, 2004



|14. | SELECTED QUARTERLY FINANCIAL DATA (Unaudited):
|--- | ----------------------------------------------



|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|-------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ---------------- | - | ---------- | -------------- |  | - | ------------ | - |  | - | ---------- | -
|                                                                           |  | Three Month Period Ended |            
|                                                                           |  | February 29,2004         |             |   | November 30,2003 |   |            | August 31,2003 |  |   | May 31, 2003 |  
|Net sales                                                                  |  | $                        | 102,023,823 |   |                  | $ | 91,071,802 |                |  | $ | 79,965,110   |   |  | $ | 72,803,142 |  
|Cost of sales                                                              |  |                          | 85,249,290  |   |                  |   | 75,312,065 |                |  |   | 65,570,341   |   |  |   | 58,771,401 |  
|Operating expenses                                                         |  |                          | 16,120,890  |   |                  |   | 15,560,035 |                |  |   | 15,401,486   |   |  |   | 15,353,582 |  
|Interest expense (income) net                                              |  |                          | 24,354      |   |                  |   | (206,877   | )              |  |   | (35,247      | ) |  |   | 11,618     |  
|Provision (credit) for income taxes                                        |  |                          | 176,395     |   |                  |   | 136,931    |                |  |   | (432,497     | ) |  |   | (585,104   | )
|Minority interest                                                          |  |                          | (43,636     | ) |                  |   | (72,682    | )              |  |   | (83,879      | ) |  |   | (83,016    | )
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Net income (loss)                                                          |  | $                        | 409,258     |   |                  | $ | 196,966    |                |  | $ | (622,852     | ) |  | $ | (831,371   | )
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Basic Earnings (Loss) per Share                                            |  | $                        | .02         |   |                  | $ | .01        |                |  | $ | (.04         | ) |  | $ | (.05       | )
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Weighted average number of common and common equivalent shares outstanding |  |                          | 16,859,766  |   |                  |   | 16,700,700 |                |  |   | 16,681,145   |   |  |   | 16,675,040 |  
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|                                                                           | 
|                                                                           |  | Three Month Period Ended |            
|                                                                           |  | February 28,2003         |             |   | November 30,2002 |   |            | August 31,2002 |  |   | May 31, 2002 |  
|Net sales                                                                  |  | $                        | 70,927,941  |   |                  | $ | 75,830,874 |                |  | $ | 80,309,727   |   |  | $ | 75,012,267 |  
|Cost of sales                                                              |  |                          | 58,064,130  |   |                  |   | 62,492,563 |                |  |   | 65,748,059   |   |  |   | 60,547,989 |  
|Operating expenses                                                         |  |                          | 14,602,507  |   |                  |   | 14,501,397 |                |  |   | 14,071,202   |   |  |   | 14,264,637 |  
|Interest expense (income)                                                  |  |                          | (9,693      | ) |                  |   | 38,269     |                |  |   | 21,664       |   |  |   | 47,828     |  
|Provision (credit) for income taxes                                        |  |                          | (514,121    | ) |                  |   | (238,897   | )              |  |   | 167,826      |   |  |   | 45,265     |  
|Minority interest                                                          |  |                          | 560,737     |   |                  |   | 35,592     |                |  |   | 46,648       |   |  |   | 98,845     |  
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Net income (loss)                                                          |  | $                        | (1,775,619  | ) |                  | $ | (998,050   | )              |  | $ | 254,328      |   |  | $ | 7,703      |  
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Basic (Loss) Earnings per Share                                            |  | $                        | (.11        | ) |                  | $ | (.06       | )              |  | $ | .02          |   |  | $ | .00        |  
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  
|Weighted average number of common and common equivalent shares outstanding |  |                          | 16,663,817  |   |                  |   | 16,663,817 |                |  |   | 16,646,868   |   |  |   | 16,636,447 |  
|                                                                           |  |                          |             |   |                  |   |            |                |  |   |              |   |  |   |            |  





F - 17



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##### Table of Contents

REPORT OF MANAGEMENT



The consolidated financial statements of Nu Horizons Electronics Corp. have been prepared by the company, which is responsible for their
integrity and objectivity. These statements, prepared in accordance with accounting principles generally accepted in the United States, reflect our best use of judgment and estimates where appropriate. The company also prepared the other information
in the annual report on Form 10-K and is responsible for its accuracy and consistency with the consolidated financial statements.



The companys system of internal controls is designed to provide reasonable assurance that company assets are safeguarded from loss or unauthorized use or
disposition and that transactions are executed in accordance with managements authorization and are properly recorded. In establishing the basis for reasonable assurance, management balances the costs of the internal controls with the benefits
they provide. The system contains self-monitoring mechanisms, and compliance is tested through reviews by officers of the Company.



The audit committee of the board of directors, consisting entirely of independent directors as defined by the Securities and Exchange Commission and NASDAQ rules, meets
regularly with the companys management and independent auditors and reviews audit plans and results, as well as managements actions taken in discharging its responsibilities for accounting, financial reporting, and internal controls.
Members of management, the operating controls staff, and the independent auditors have direct and confidential access to the audit committee at all times.



The companys independent auditors, Lazar Levine & Felix LLP, were engaged to audit the consolidated financial statements in accordance with auditing standards
generally accepted in the United States. These standards include a study and evaluation of internal controls for the purpose of establishing a basis for reliance thereon relative to the scope of their audit of the consolidated financial statements.
Their report appears herein.



|    |  |                             |  |  |  |     |  |                        
|--- |  | --------------------------- |  |  |  | --- |  | -----------------------
|    |  |                             |  | 
|    |  |                             |  | 
|BY: |  | /s/    PAUL DURANDO         |  |  |  | BY: |  | /s/    ARTHUR NADATA   
|    |  |                             |  |  |  |     |  |                        
|    |  | Paul Durando                |  |  |  |     |  | Arthur Nadata          
|    |  | Vice President, Finance and |  |  |  |     |  | President and          
|    |  | Treasurer                   |  |  |  |     |  | Chief Executive Officer



F - 18



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##### Table of Contents

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES:
|------- | --------------------------------------------------------------------------------------



The Company had no disagreements on accounting or financial disclosure matters with its accountants, nor did it change
accountants, during the three-year period ending February 29, 2004.



|ITEM 9A. | CONTROLS AND PROCEDURES:
|-------- | ------------------------



The Companys chief executive officer and chief financial officer have evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act)) as of February 29, 2004. Based on such evaluation, they have concluded that, as of February 29, 2004, the
Companys disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the Securities and Exchange Commission. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.





There were no changes in the Companys internal control over financial reporting or in other factor that have, or is reasonably likely to, materially affect the Companys internal control over financial
reporting during the period covered by this report.



PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
|-------- | ---------------------------------------------------



|                    |  |     |  |                                                  
|------------------- |  | --- |  | -------------------------------------------------
|NAME                |  | AGE |  | POSITION                                         
|Irving Lubman       |  | 65  |  | Chief Operating Officer and Chairman of the Board
|Arthur Nadata       |  | 58  |  | President, Chief Executive Officer and Director  
|Richard S. Schuster |  | 55  |  | Vice-President, Secretary and Director           
|Paul Durando        |  | 60  |  | Vice President  Finance, Treasurer and Director 
|Herbert Gardner     |  | 64  |  | Director                                         
|Martin Novick       |  | 68  |  | Director                                         
|Dominic A. Polimeni |  | 57  |  | Director                                         
|David Siegel        |  | 78  |  | Director                                         



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##### Table of Contents

|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued):
|-------- | ---------------------------------------------------------------



The Companys Certificate of Incorporation provides for a Board of Directors
consisting of not less than three nor more than eleven directors, classified into three classes as nearly equal in number as possible, whose terms of office expire in successive years. The following table sets forth the directors of the Company.



|                                                                    |  |                                                                      |  |                                                                      
|------------------------------------------------------------------- |  | -------------------------------------------------------------------- |  | ---------------------------------------------------------------------
|Class I (To Serve Until the Annual Meeting of Stockholders in 2006) |  | Class II (To Serve Until the Annual Meeting of Stockholders in 2004) |  | Class III (To Serve Until the Annual Meeting of Stockholders in 2005)
|Paul Durando                                                        |  | Martin Novick(1)(2)(3)                                               |  | Irving Lubman                                                        
|Herbert Gardner(1)(2)(3) David Siegel(1)(2)(3)                      |  | Dominic A. Polimeni(1)(2)(3) Richard S. Schuster                     |  | Arthur Nadata                                                        



|(1) | Member of Compensation Committee
|--- | --------------------------------



|(2) | Member of Audit Committee
|--- | -------------------------



|(3) | Member of Nominating Committee
|--- | ------------------------------



All officers serve at the discretion of the Board. There are no family relationships among the directors and officers.



Irving Lubman has been the Companys Chairman of the Board since
October 1982 and Chief Operating Officer since September 1996. Mr. Lubman was the Companys Chief Executive Officer from October 1982 to September 1996. Mr. Lubman has been actively involved in electronic components distribution since
1957, when he joined Milgray Electronics Corp., holding the position of sales manager until 1968. From 1968 through October 1982, when he joined the Company, Mr. Lubman was corporate vice president of Diplomat Electronics Corp., also a distributor
of electronic components. Effective June 1, 2004, Mr. Lubman will cease to be Chairman of the Board and Chief Operating Officer.



Arthur Nadata has been the Companys President and a Director since October 1982 and Chief Executive Officer since September 1996. Mr. Nadata was
also the Treasurer of the Company from October 1982 to September 1996. Prior to joining the Company in October 1982, Mr. Nadata worked for eighteen years for Diplomat Electronics Corp. in various operational and sales positions of increasing
responsibility, eventually becoming corporate vice president of sales and marketing. Effective June 1, 2004, Mr. Nadata will cease to be President of the Company and will become Chairman of the Board.



Richard S. Schuster has been the Companys Vice President, Secretary
and a Director since October 1982. For the seven years prior to joining the Company in November 1982, Mr. Schuster served as manager of Capar Components Corp., an importer and distributor of passive components, and a wholly owned subsidiary of
Diplomat Electronics Corp. For the six year period prior to 1975, Mr. Schuster was employed by International Components Corp. and was responsible for production, engineering and sales of imported semiconductor and passive components. Effective June
1, 2004, Mr. Schuster will cease to be Vice President and will become President and Chief Operating Officer of the company.



Paul Durando has been our Vice President, Finance since joining the Company in March 1991, Treasurer since September 1996 and has been a Director since
September 1994. Prior to joining the Company in March 1991, Mr. Durando served for six years as Executive Vice President of Sigma Quality Foods, Inc. From 1977 to 1984, he was Vice President, Operations of the Wechsler Coffee Corp. Mr. Durando was
also associated with Deloitte Haskins & Sells for seven years.



Herbert M. Gardner has been a Director of the Company since May 1984. Mr. Gardner has been Executive Vice President and Treasurer of Barrett Gardner Associates, Inc. an investment banking firm since October 2002 and prior there for twenty
eight years Senior Vice President for Janney Montgomery Scott LLC. and its predecessors. Mr. Gardner is Chairman of the Board of Supreme Industries Inc., a manufacturer of specialized truck bodies and buses. Mr. Gardner also serves as a director of
Rumson-Fair Haven Bank & Trust, a community commercial bank and trust company; Rewards Network, Inc. a leader in the development and marketing of transaction based dining and other consumer rewards programs; TGC Industries, Inc., a seismic
services company; Hirsch International Corporation, an importer of computerized embroidery machines; and Co-Active Marketing Group, Inc., a marketing and sales promotion company.



Page 18



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##### Table of Contents

|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued):
|-------- | ---------------------------------------------------------------



Martin Novick has been a Director of the Company since September 24, 2003. Presently he is group Vice
President of Sales at Audiovox Electronics Corporation, where he has served as Vice President for the past 35 years. He has been in the consumer electronics business for 45 years with expertise in both purchasing and marketing. He is President of
Ren-Mar Enterprises Ltd., a private investment company located in Toronto, Canada. He is also a partner in Great American Realty, a private investment company.



Dominic A. Polimeni has been a Director of the Company since September 1997. Mr. Polimeni has over 28 years experience in the distribution and
Inventory Logistics Management (ILM) businesses and has been responsible for evaluating and negotiating over 50 acquisitions of distribution and ILM businesses. He has been a Director, president and Chief executive Officer of
Distribution Dynamics, Inc., a privately-held ILM company based in Eden Prairie, MN, since September 2003. Distribution Dynamics filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April 2004 in order to effect the sale of
substantially all of the assets of its business under section 363 of the Code. Until May 2002, Mr. Polimeni was a Director of Questron Technology, Inc., a publicly held company based in Boca Raton, Florida, from March 1995, and Chairman and Chief
Executive Officer of Questron from February 1996. Questron sold its business and assets through a Chapter 11 Section 363 sale under the U.S. Bankruptcy Code, in May 2002. Mr. Polimeni has also been a Managing Director of Gulfstream Financial Group,
Inc., a privately held financial consulting and investment-banking firm since August 1990. Prior to that he held the position of Chief Financial Officer of Arrow Electronics, Inc. from 1986 to 1990. He also held several other positions, including
general management positions, with Arrow over an eight-year period. Mr. Polimeni began his career as a certified public accountant in the New York office of Arthur Young & Company.



David Siegel has been a Director of the Company since June 2000. For more than the past five years Mr. Siegel has been a
Vice President and director of Great American Electronics, a distribution company, which he founded. Mr. Siegel is also a director of Micronetics Corp. and Surge Components Corp. Mr. Siegel previously served on our Board of Directors from September
1991 to October 1996.



Audit Committee and Audit Committee
Expert



The Company has an audit committee established in
accordance with section 3(a)(58) of the exchange Act. The members of the audit committee currently are Dominic Polimeni, Herbert Gardner, David Siegel and Martin Novick.



The Board has determined that Dominic Polimeni, the current committee chairman and a member of the audit committee since
September 1997, qualified as an audit committee financial expert, as defined by the Securities and Exchange Commission rules, based on his education, experience and background.



Code of Conduct



The Board of Directors has adopted a code of conduct that applies to all of
our employees, officers and directors and a code of ethics that applies to our senior financial officers. A copy of the code of conduct is attached as an exhibit to this report on Form 10-K. In addition, you can find links to these materials on our
website at: www.nuhorizons.com and we will provide copies of these materials, free of charge, if a request is sent to : Nu Horizons Electronics Corp., 70 Maxess Road, Melville, New York 11747, attention: Secretary.



Compliance with Section 16(a) of the Securities Exchange Act



Section 16(a) of the Exchange Act requires the
Companys executive officers, directors and persons who own more than ten percent of a registered class of the Companys equity securities (Reporting Persons) to file report of ownership and changes in ownership on Forms 3, 4
and 5 with the Securities and Exchange Commission (the SEC) and the National Association of Securities Dealers (the NASD). These Reporting Persons are required by SEC regulation to furnish the Company with copies of all Forms
3, 4 and 5 they file with the SEC and NASD.



Based solely on
the Companys review of the copies of the forms it has received, the Company believes that all Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect to transactions during fiscal year 2004.



Page 19



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION:
|-------- | -----------------------



The following table sets forth the compensation paid by the Company to its Chief Executive Officer and each of the three other executive officers for the
years ended February 29, 2004, February 28, 2003 and February 28, 2002.



SUMMARY COMPENSATION TABLE



|                                                                                  |  |                         |  |                        |                       |       |     |                                  |  |                            |  |     |                   
|--------------------------------------------------------------------------------- |  | ----------------------- |  | ---------------------- | --------------------- | ----- | --- | -------------------------------- |  | -------------------------- |  | --- | ------------------
|                                                                                  |  | Annual Compensation (1) |  | Long Term Compensation
|Name of Principal and
Position                                                    |  | Fiscal Year             |  | Salary                 |                       | Bonus |     | SecuritiesUnderlying Options (2) |  | All other (3) Compensation
|Irving Lubman COO, Chairman of the Board                                          |  | 200420032002            |  | $$$                    | 263,900263,900263,040 |       | $$$ | 00120,981                        |  | 0265,0000                  |  | $$$ | 40,58341,31341,313
|                                                                                  |  |                         |  |                        |                      
|Arthur Nadata President and CEO                                                   |  | 200420032002            |  | $$$                    | 263,900263,900263,040 |       | $$$ | 00172,702                        |  | 0390,0000                  |  | $$$ | 38,94539,60539,605
|                                                                                  |  |                         |  |                        |                      
|Richard Schuster Vice President and Secretary and President, NIC Components Corp. |  | 200420032002            |  | $$$                    | 263,900263,900263,040 |       | $$$ | 00172,702                        |  | 0345,0000                  |  | $$$ | 35,67036,15436,154
|                                                                                  |  |                         |  |                        |                      
|Paul Durando Vice President, Finance and Treasurer                                |  | 200420032002            |  | $$$                    | 180,000180,000180,000 |       | $$$ | 0012,953                         |  | 090,0000                   |  | $$$ | 1,8001,8001,800   



SUMMARY COMPENSATION
TABLE  Footnotes



|(1) | No other annual compensation is shown because the amounts of perquisites and other non-cash benefits provided by the Company do not exceed the lesser of $50,000 or
10% of the total annual base salary and bonus disclosed in this table for the respective officer.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The amounts disclosed in this column include the Companys contributions on behalf of the named executive officer to the Companys 401(k)-retirement plan
in amounts equal to a maximum of 1% of the executive officers annual salary and, for Messrs. Lubman, Nadata and Schuster contributions to life insurance policies where the Company is not the beneficiary, and the cost to the Company of the
non-business use of Company automobiles used by executive officers.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page 20



---

##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



Employment Contracts



On September 13, 1996, the Company signed employment contracts (the Contracts), as amended, with three of its
senior executives for a continually renewing five-year term. The Contracts specify a base salary of $226,545 for each officer in 1997, which shall be increased each year by the change in the consumer price index, and also entitle two of the three
officers to an annual bonus equal to 3.33%, and the third officer to 2.33% (9% in the aggregate) of the Companys consolidated earnings before income taxes. Benefits are also payable upon the occurrence of either a change in control of the
Company, as defined, or the termination of the officers employment, as defined. In the event the employee terminates his employment within six months after a change in control of the Company, he will receive a lump sum payment equal to
three-quarters of the remaining compensation under his employment agreement. Each Contract also provides for certain payments of the executive salary, performance bonuses and other benefits in the event of death or disability of the officer for the
balance of the period covered by the agreement. Effective June 1, 2004, the contract between the Company and Mr. Lubman will be terminated and he will cease to be entitled to the 2.33% annual bonus described above.



There were no stock options granted to the executive officers named in Item
11 during the fiscal year ended February 29, 2004.



The
following table sets forth certain information as to each exercise of stock options during the fiscal year ended February 29, 2004 by the persons named in the Summary Compensation Table and the fiscal year end value of unexercised options:



AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR-END

OPTIONS/SAR VALUES



|                 |  |                            |  |                   |         |                                            |         |                                                        |   |          
|---------------- |  | -------------------------- |  | ----------------- | ------- | ------------------------------------------ | ------- | ------------------------------------------------------ | - | ---------
|                 |  |                            |  |                   |         | Number ofUnexercisedOptions/SARs at FY End |         | Value ofUnexercised In-the-MoneyOptions/SARs at FY End
|                 |  | SharesAcquired on Exercise |  | ValueRealized (1) |         | Exercisable/ Unexercisable                 |         | Exercisable/ Unexercisable                            
|Irving Lubman    |  | 34,200                     |  | $                 | 215,923 |                                            | 496,673 |                                                        | $ | 2,021,478
|                 |  |                            |  |                   |         |                                            | 187,325 |                                                        |   | 318,550  
|                 |  |                            |  |                  
|Arthur Nadata    |  | 34,200                     |  | $                 | 217,886 |                                            | 621,051 |                                                        |   | 2,390,615
|                 |  |                            |  |                   |         |                                            | 257,325 |                                                        |   | 458,500  
|                 |  |                            |  |                  
|Richard Schuster |  | 34,200                     |  | $                 | 216,573 |                                            | 547,923 |                                                        |   | 2,109,728
|                 |  |                            |  |                   |         |                                            | 231,075 |                                                        |   | 406,800  
|                 |  |                            |  |                  
|Paul Durando     |  | 0                          |  |                   | 0       |                                            | 77,718  |                                                        |   | 187,064  
|                 |  |                            |  |                   |         |                                            | 45,000  |                                                        |   | 84,300   



|(1) | Market value less exercise price, before payment of applicable federal or state taxes.
|--- | --------------------------------------------------------------------------------------



Directors who are not employees of the Company receive an annual fee of $6,000 for Board Membership and $1,000 for each
Board of Directors or Committee meeting attended. There were three meetings of the Board of Directors and two meetings of the Compensation Committee during the fiscal year ended February 29, 2004. All of our directors attended 75% or more of the
total number of meetings of the Board of Directors and Committees on which they served and two directors attended or participated in all of the meetings of the Board of Directors, one director attended two meetings and one director attended one
meeting.



Page 21



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



Audit Committee



For the fiscal year ended February 29, 2004, there were four meetings of the Audit Committee. The Companys Audit
Committee is involved in discussions with the Companys independent public accountants with respect to the scope and results of the Companys year-end audit, the Companys internal accounting controls and the professional services
furnished by the independent auditors to the Company. During fiscal 2004, the Company appointed a standing Nominating Committee which has not yet met.



Compensation Committee Interlocks and Insider Participation



The Companys Compensation Committee consisted during fiscal 2004 of Messrs. Gardner (Chairman), Novick, Polimeni and
Siegel.



In accordance with rules promulgated by the
Securities and Exchange Commission, the information included under the captions Compensation Committee Report on Executive Compensation and Company Stock Performance will not be deemed to be filed or to be proxy soliciting
material or incorporated by reference in any prior or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934.



94,693 shares and no options are currently available for grant.



1994 Stock Option Plan:



In September 1994, the Companys stockholders approved the 1994 Stock Option Plan (the 1994 Plan), as amended in September 1996, under
which key employees and officers of the Company, its subsidiaries and affiliates may be granted options to purchase an aggregate of 1,732,500 shares of the Companys Common Stock, as adjusted for a 5% stock dividend and a three for two stock
split. The Compensation Committee, consisting of at least two members of the Board of Directors, administers the 1994 Plan. The Compensation Committee, subject to provisions in the 1994 Plan, has the authority to designate, in its discretion, which
persons are to be granted options, the number of shares subject to each option, and the period of each option. Each recipient must be an employee of the Company at the time of grant and throughout the period ending on the day three months before the
date of exercise. Under the terms of the 1994 Plan, the exercise price of the shares subject to each option granted will be not less than 85% nor more than 100% of the fair market value at the date of grant or 110% of such fair market value for
options granted to any employee to or director who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company. Adjustments will be made to the purchase price in the event of stock
dividends, corporate reorganizations, or similar events. Options are currently outstanding for 394,693 shares and no options are currently available for grant.



The Compensation Committee of the Board of Directors has the responsibility and authority to administer and interpret the provisions of the 1994 Plan.
The Compensation Committee shall appropriately adjust the number of shares for which awards may be granted pursuant to the 1994 Plan in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or
combination of shares, merger, consolidation, rights offering or any change in capitalization. The Board may, from time to time, amend, suspend or terminate any or all of the provisions of the 1994 Plan, provided that, without the participants
approval, no change may be made which would prevent an ISO granted under the 1994 Plan from qualifying as an ISO under Section 422A of the Internal Revenue Code of 1986, as amended (the Code) or results in a modification of the ISO under
Section 425(h) of the Code or otherwise alter or impair any right theretofore granted to any participant; and further provided that, without the consent and approval of the holders of a majority of the outstanding shares of Common Stock of the
Company present at that meeting at which a quorum exists, neither the Board nor the Committee may make any amendment which (i) changes the class of persons eligible for options; (ii) increases (except as provided under Section 1.6 of the 1994 Plan)
the total number of shares or other securities reserved for issuance under the 1994 Plan; (iii) decreases the minimum option prices stated in Section 2.2 of the 1994 Plan (other than to change the manner of determining Fair Market Value to conform
to any then applicable provision of the Code or any regulation thereunder); (iv) extends the expiration date of the 1994 Plan, or the limit on the maximum term of options; or (v) withdraws the administration of the 1994 Plan from a committee
consisting of two or more members, each of whom is a Disinterested Person. With the consent of the participant affected thereby, the Committee may amend or modify any outstanding option in any manner not inconsistent with the terms of the 1994 Plan.



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



1998 Stock Option Plan:



In May 1998, the Board of Directors adopted the Nu Horizons Electronics Corp. 1998 Stock Option Plan (the 1998 Option
Plan), as amended, under which any director, officer, employee or consultant of the Company, a subsidiary or an affiliate may be granted options to purchase an aggregate 1,653,750 shares of the Companys Common Stock, as adjusted for a 5%
dividend and a 3-for-2 stock split. The 1998 Option Plan may be administered by the Board of Directors of the Company or by a committee consisting of two or more non-employee Directors, as defined by Rule 16b under the Securities Exchange Act of
1934. The Compensation Committee administers the 1998 Option Plan. Subject to the terms of the 1998 Option Plan, the Board of Directors or the Committee may determine and designate those directors, officers, employees and consultants who are to be
granted stock options under the 1998 Option Plan and the number of shares to be subject to such options and the term of the options to be granted, which term may not exceed ten years. The Board of Directors of the Committee also, subject to the
express provisions of the 1998 Option Plan, has the authority to interpret the 1998 Option Plan and to prescribe, amend and rescind the rules and regulations relating to the 1998 Option Plan. Only non-qualified stock options may be granted under the
terms of the 1998 Option Plan. The exercise price of the options granted under the 1998 Option Plan would not be less than such fair market value at the date of grant. The option price, as well as the number of shares subject to such option, shall
be appropriately adjusted by the Committee in the event of stock splits, stock dividends, recapitalizations, and certain other events involving a change in the Companys capital. During fiscal 2004, no options were granted under the 1998 Option
Plan. Options are currently outstanding for 1,197,819 shares and 27,068 options are currently available for grant.



2000 Stock Option Plan:



In July 2000, the Board of Directors adopted the Nu Horizons Electronics Corp. 2000 Stock Option Plan, under which any of the Companys employees or
consultants, or those of its subsidiaries or affiliates, may be granted options to purchase an aggregate 300,000 shares of Common Stock, as adjusted for a 3-for-2 stock split. The Companys executive officers and directors are not eligible to
participate in the 2000 Option Plan. The 2000 Option Plan may be administered by the Board of Directors or a committee consisting of two or more Non-Employee Directors, as defined by Rule 16b of the Securities Exchange Act of 1934. The Compensation
Committee administers the 2000 Option Plan. Subject to the terms of the 2000 Option Plan, the Board of Directors or the Committee may determine and designate those employees and consultants who are to be granted stock options under the 2000 Option
Plan, the number of shares to be subject to such options and the term of the options to be granted, which term may not exceed ten years. The Board of Directors or the Committee also, subject to the express provisions of the 2000 Option Plan, has the
authority to interpret the 2000 Option Plan and to prescribe, amend and rescind the rules and regulations relating to the 2000 Option Plan. Only non-qualified stock options may be granted under the terms of the 2000 Option Plan. The exercise price
for the options granted under the 2000 Option Plan will not be less than fair market value at the date of grant. The option price, as well as the number of shares subject to such option, shall be appropriately adjusted by the Committee in the event
of stock splits, stock dividends, recapitalizations and certain other events involving a change in the Companys capital. During fiscal 2004, 34,000 options were granted under the plan with an exercise price of $4.30 and 19,250 options remain
available for grant.



2000 Key Employee Stock Option Plan:



In November 2000, the Companys stockholders
approved the 2000 Key Employee Stock Option Plan (the 2000 Key Employee Plan) under which key employees and officers of the Company, its subsidiaries and affiliates may be granted options to purchase an aggregate of 600,000 shares of the
Companys Common Stock, as adjusted for a three for two stock split. The 2000 Key Employee Plan may be administered by the Board of Directors or a committee, consisting of two or more members of the Board of Directors who are Non-Employee
Directors, as defined by Rule 16b of the Securities Exchange Act of 1934. Our Compensation Committee administers the 2000 Key Employee Plan. Subject to the terms of the 2000 Key Employee Plan, the Board of Directors or the Committee may determine
and designate those employees and consultants who are to be granted stock options under the 2000 Key Employee Plan and the number of shares to be subject to such options and the term of the options to be granted, which term may not exceed ten years.
The Board of Directors or the Committee shall also, subject to the express provisions of the 2000 Key Employee Plan, have the authority to interpret the 2000 Key Employee Plan and to prescribe, amend and rescind the rules and regulations relating to
the 2000 Key



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



Employee Plan. Only non-qualified stock options may be granted under the terms of the 2000 Key Employee Plan. The exercise price for the options granted
under the 2000 Key Employee Plan will not be less than fair market value at the date of grant. The Committee in the event of stock splits, stock dividends, recapitalizations and certain other events involving a change in our capital shall,
appropriately adjust the option price, as well as the number of shares subject to such option. Options are currently outstanding for 600,000 and no options remain available for grant.



2002 Key Employee Stock Option Plan:



In September 2002, the Companys stockholders approved the 2002 Key Employee Stock Option Plan (the 2002 Key
Employee Plan) under which key employees and officers of the Company, its subsidiaries and affiliates may be granted options to purchase an aggregate of 650,000 shares of the Companys Common Stock. The 2002 Key Employee Plan may be
administered by the Board of Directors or a committee, consisting of two or more members of the Board of Directors who are Non-Employee Directors, as defined by Rule 16b of the Securities Exchange Act of 1934. Our Compensation Committee administers
the 2002 Key Employee Plan. Subject to the terms of the 2002 Key Employee Plan, the Board of Directors or the Committee may determine and designate those employees and consultants who are to be granted stock options under the 2002 Key Employee Plan
and the number of shares to be subject to such options and the term of the options to be granted, which term may not exceed ten years. The Board of Directors or the Committee shall also, subject to the express provisions of the 2002 Key Employee
Plan, have the authority to interpret the 2002 Key Employee Plan and to prescribe, amend and rescind the rules and regulations relating to the 2002 Key Employee Plan. Only non-qualified stock options may be granted under the terms of the 2002 Key
Employee Plan. The exercise price for the options granted under the 2002 Key Employee Plan will not be less than fair market value at the date of grant. The Committee in the event of stock splits, stock dividends, recapitalizations and certain other
events involving a change in our capital shall, appropriately adjust the option price, as well as the number of shares subject to such option. During fiscal 2004, 33,000 were granted under the plan with exercise price of $5.50 and 67,000 options
remain available for grant.



Outside Director Stock Option
Plan:



In September 1994, the Companys stockholders
approved the Outside Directors Stock Option Plan (the Director Plan) which covers 236,250 shares of the Companys Common Stock, as adjusted for a 5% stock dividend and a 3-for-2 stock split. The primary purposes of the Director Plan
are to attract and retain well-qualified persons for service as directors of the Company and to provide such outside directors with the opportunity to increase their proprietary interest in the Companys continued success and further align
their interests with the interests of the stockholders of the Company through the grant of options to purchase shares of the Companys Common Stock. At February 29, 2004, there are 74,500 director options outstanding and no options remain
available for grant.



All directors of the Company who are not
employees of the Company were eligible to participate in the Director Plan.



The Compensation Committee of the Board of Directors has the responsibility and authority to administer and interpret the provisions of the Director Plan. The Compensation Committee shall appropriately adjust the
number of shares for which awards may be granted pursuant to the Director Plan in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights
offering, or any change in capitalization.



Under the Director
Plan each non-employee Director then serving, on June 1 of each year from 1994 through 1999, received options to purchase 10,000 shares of Common Stock (as adjusted for stock splits and stock dividends) at a price equal to the closing price of the
Common Stock on a national securities exchange upon which the Companys stock is listed or the average of the mean between the last reported bid and asked prices if the Common Stock is not so listed for the five business days
immediately preceding the date of grant. Options awarded to each outside director vested in three equal installments over a period of two years, subject to forfeiture under certain conditions and shall be exercisable by the outside director upon
vesting.



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



2000 Outside Directors Stock Option Plan:



In November 2000, the Companys stockholders approved the 2000 Outside
Directors Stock Option Plan (the 2000 Director Plan) which covers 210,000 shares of the Companys Common Stock, as adjusted for a 3-for-2 stock split. The primary purposes of the 2000 Director Plan are to attract and retain
highly skilled individuals as directors of the Company, to provide additional incentive to such outside directors to serve as directors and to encourage their continued service on the Board of Directors. At February 29, 2004, there are 165,000
director options outstanding and 45,000 options remain available for grant.



All directors of the Company who are not employees of the Company, of which there are four, are eligible to participate in the Director Plan.



The Board of Directors has the responsibility and authority to administer and interpret the provisions of the 2000 Director
Plan. The Board of Directors of the Company may at any time amend, suspend or discontinue the 2000 Director Plan but no such action shall adversely affect any outstanding option without the consent of the optionee that holds such option. In the
event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights offering, or any change in capitalization of the Company, the number of shares covered by
each outstanding option, the number of shares authorized under the 2000 Director Plan as well as the exercise price of each outstanding option shall be appropriately adjusted.



Under the Director Plan, on November 9, 2000 each non-employee Director then serving received options to purchase 15,000
shares of Common Stock at a price of $14.62 per share (the price of shares of Common Stock on November 9, 2000) and on the June 1 of each subsequent year each non-employee director then serving will be granted options to purchase 15,000 shares of
Common Stock at a price equal to the closing price of the Common Stock on a national securities exchange upon which the Companys stock is listed or the average of the mean between the last reported bid and asked prices if the
Common Stock is not so listed for the five business days immediately preceding the date of grant. Options awarded to each outside director vest in three equal installments over a period of two years, subject to forfeiture under certain conditions
and shall be exercisable by the outside director upon vesting.



2002 Outside Directors Stock Option Plan:



In September 2002, the Companys stockholders approved the 2002 Outside Directors Stock Option Plan (the 2002 Director Plan) which covers 150,000 shares of the Companys Common Stock. The primary purposes of the
2002 Director Plan are to attract and retain highly skilled individuals as directors of the Company, to provide additional incentive to such outside directors to serve as directors and to encourage their continued service on the Board of Directors.
At February 29, 2004, there are 15,000 director options outstanding and 135,000 options remain available for grant.



All directors of the Company who are not employees of the Company, of which there are four, are eligible to participate in the Director Plan.



The Board of Directors has the responsibility and authority to administer
and interpret the provisions of the 2002 Director Plan. The Board of Directors of the Company may at any time amend, suspend or discontinue the 2002 Director Plan but no such action shall adversely affect any outstanding option without the consent
of the optionee that holds such option. In the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights offering, or any change in capitalization of
the Company, the number of shares covered by each outstanding option, the number of shares authorized under the 2002 Director Plan as well as the exercise price of each outstanding option shall be appropriately adjusted.



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



Under the Director Plan, at each annual stockholder meeting during the term of this plan, commencing
with the annual meeting held in 2003, each Outside Director then serving who does not receive options under the 2000 Outside Directors Stock Option Plan shall automatically receive an additional option to purchase 15,000 shares of Common Stock
(the Annual Option), at a price equal to the closing price of the Common Stock on a national securities exchange upon which the Companys stock is listed on the date of grant of the Option. Options awarded to each outside director
vest in three equal installments over a period of two years, subject to forfeiture under certain conditions and shall be exercisable by the outside director upon vesting.



Summary of Fiscal 2002 Outside Director Stock Option Grants:



During fiscal 2004, pursuant to the 2000 Director Plan, the Company granted
options to purchase 15,000 shares to each of Messrs. Polimeni and Siegel at a price of $8.51 per share.



During fiscal 2004, pursuant to the 2002 Director Plan, the Company granted options to purchase 15,000 to Mr. Gardner at a price of $8.51 per share.



Employee Stock Ownership Plan:



In January 1987, the Company adopted an Employee Stock Ownership Plan
(ESOP or Plan) that covers substantially all of the Companys employees. The ESOP is managed by three Trustees, Messrs. Lubman, Nadata and Schuster (the Trustees), who vote the securities held by the Plan
(other than securities of the Company which have been allocated to employees accounts).



The annual contributions to the Plan are to be in such amounts as the Board of Directors in its sole discretion shall determine. Each employee who participates in the Plan has a separate account and the annual
contribution by the Company to an employees account is not permitted to exceed the lesser of $30,000 (or such other limit as may be the maximum permissible pursuant to the provisions of Section 415 of the Internal Revenue Code and Regulations
issued thereunder) or 25% of such employees annual compensation, as defined under the Plan. No contributions are required of, nor shall any be accepted from, any employee.



All contributions to the Plan are invested in the Companys securities (except for temporary investments), the Trustees
having the right to purchase the Companys securities on behalf of employees. The Trustees are considered the stockholder for the purpose of exercising all owners and stockholders rights, with respect to the Companys
securities held in the Plan, except for voting rights, which inure to the benefit of each employee who can vote all shares held in his account, even if said shares are not vested. Vesting is based upon an employees years of service, with
employees generally becoming fully vested after six years.



Benefits are payable to employees at retirement or upon death, disability or termination of employment, with payments commencing no later than sixty days following the last day of the Plan year in which such event occurred. Subject to the
right of the employee to demand payment in the form of the Companys Common Stock, all benefits are payable in cash or in Common Stock, at the discretion of the Trustees.



The Trustees are empowered to borrow funds for the purpose of purchasing the Companys securities. The securities so
purchased are required to be held in an acquisition indebtedness account, to be released and made available for reallocation as principal is repaid. At February 29, 2004, there were no borrowings relative to the plan. At February 29, 2004, the ESOP
owned 489,880 shares at an average price of approximately $3.24 per share.



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##### Table of Contents

|ITEM 11. | EXECUTIVE COMPENSATION (Continued):
|-------- | -----------------------------------



401(k) Savings Plan



The Company sponsors a retirement plan intended to be qualified under Section 401(k) of the Internal Revenue Code. All
non-union employees over age 21 who have been employed by the Company for at least six months are eligible to participate in the plan. Employees may contribute to the plan on a tax-deferred basis up to 15% of their total annual salary, but in no
event more than the maximum permitted by the Code ($14,000 in calendar 2003). Company contributions are discretionary. Effective with the plan year ended February 29, 2004, the Company has elected to make matching contributions at the rate of $ .25
per dollar contributed by each employee up to a maximum of 1% of an employees salary vesting at the cumulative rate of 20% per year of service starting one year after commencement of service and, accordingly, after five years of any
employees service with Company, matching contributions by the Company are fully vested. As of February 29, 2004 approximately 250 employees had elected to participate in the plan. For the fiscal year ended February 29, 2004, the Company
contributed $237,068 to the plan, of which $9,693 was a matching contribution of $2,631 for each of Mr. Lubman, Mr. Nadata, Mr. Schuster and $1,800 for Mr. Durando.



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##### Table of Contents

|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
|-------- | ---------------------------------------------------------------



The following table sets forth, as of May 1, 2004, certain information with regard to the record and beneficial ownership of the Companys Common
Stock by (i) all persons known to the Company to be beneficial owners of more than 5% of the companys outstanding Common Stock, based solely on filings with the Commission; (ii) each Director, (iii) the Companys Chief Executive Officer
and the three other most highly compensated executive officers of the Company; and (iv) all executive officers and Directors as a group.



|                                                  |  |           |        |  |         |  
|------------------------------------------------- |  | --------- | ------ |  | ------- | -
|NAME                                              |  | SHARES    |        |  | PERCENT |  
|Paul Durando                                      |  | 113,024   | (1)(2) |  | *       |  
|Herbert M. Gardner                                |  | 148,815   | (3)(4) |  | *       |  
|Dominic Polimeni                                  |  | 35,000    | (3)    |  | *       |  
|David Siegel                                      |  | 61,804    | (3)    |  | *       |  
|Irving Lubman                                     |  | 642,440   | (5)(6) |  | 3.4     | %
|Arthur Nadata                                     |  | 1,098,481 | (5)(6) |  | 5.7     | %
|Richard S. Schuster                               |  | 1,098,653 | (5)(6) |  | 5.7     | %
|Wasatch Advisors Inc.                             |  | 1,151,790 | (7)    |  | 6.0     | %
|Dimensional Fund Advisors                         |  | 1,163,354 | (8)    |  | 6.0     | %
|FMR Corp.                                         |  | 1,965,900 | (9)    |  | 10.3    | %
|Royce & Associates                                |  | 1,173,800 | (10)   |  | 6.1     | %
|All officers and directors as a group (8 persons) |  | 3,198,217 |        |  | 16.8    | %



NOTES:



|(*) | Less than 1% of the Companys outstanding stock.
|--- | ------------------------------------------------



|(1) | Includes options exercisable within 60 days for 102,718 shares of Common Stock under the Companys 2000, 1998 and 1994 Stock Option Plans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes 10,306 shares of fully vested Common Stock owned through the Employees Stock Ownership Plan, which include voting power.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes options exercisable within 60 days for 119,500 shares of common stock for Mr. Gardner, 35,000 shares for Mr. Polimeni and 45,000 shares for Mr. Siegel under
the Companys Outside Director Stock Option Plan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes 4,330 shares owned by Mr. Gardners spouse, as to which he disclaims beneficial ownership, 5,775 shares held in the Gardner Family Foundation, of which
he is President, 13,623 shares owned by Mr. Gardners qualified plan and 5,587 shares held by his IRA.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Includes options exercisable within 60 days for 567,298 shares of common stock for Mr. Lubman, 639,798 for Mr. Schuster and 724,178 shares for Mr. Nadata under the
Companys 2000, 1998 and 1994 Stock Option Plans.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes 25,885 shares of fully vested common stock owned through the Employees Stock Ownership Plan, which include voting power. These officers are also Trustees of
the Plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | 150 Social Hall Ave., Salt Lake City, Utah 84111
|--- | ------------------------------------------------



|(8) | 1299 Ocean Ave, 11thFl., Santa
Monica, CA 90401
|--- | -----------------------------------------------



|(9) | 82 Devonshire Street, Boston, MA 02109
|--- | --------------------------------------



|(10) | 1414 Avenue of the Americas, N.Y., N.Y. 10019
|---- | ---------------------------------------------



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##### Table of Contents

|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
|-------- | -----------------------------------------------



For the fiscal year ended February 29, 2004, the Company received an aggregate $341,600 in respect of various electronic components sold to Brevan
Electronics, a corporation in which Stuart Schuster, Mr. Schusters brother, is an officer and owns a greater than ten percent equity interest.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES:
|-------- | ---------------------------------------



The following table presents fees for professional audit services and other services rendered by Lazar Levine & Felix LLP:



|                      |  |      |         |      |   |        
|--------------------- |  | ---- | ------- | ---- | - | -------
|                      |  | 2004 |         | 2003
|Audit fees(1)         |  | $    | 151,450 |      | $ | 132,017
|Audit related fees(2) |  |      | 24,609  |      |   | 15,944 
|Tax fees(3)           |  |      | 50,042  |      |   | 56,907 
|                      |  |      |         |      |   |        
|                      |  | $    | 226,101 |      | $ | 204,868
|                      |  |      |         |      |   |        



|(1) | Audit fees represent fees billed and expected to be billed for professional services rendered in connection with: (a) audits and reviews of the fiscal 2004 and 2003
Nu Horizons Electronics Corp. consolidated financial statements, in accordance with auditing standards generally accepted in the United States of America; (b) consultations on accounting matters reflected in the financial statements; and (c)
attestation services with respect to securities offerings and SEC filings.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Audit-related fees represent fees billed for professional services rendered in connection with: (a) audits of Nu Horizons Electronics Corp.s employee benefit
plans; (b) internal control reviews and (c) accounting consultation on the implementation of Sarbanes-Oxley Section 404.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Tax fees represent fees billed for professional services rendered in connection with: (a) tax compliance and (b) consultations related to tax audits.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



Audit Committee Pre-Approval:



The Audit Committee has pre-approved all audit services and permitted
non-audit services provided by the independent auditors, and the compensation, fees and terms for such services. The Committee also has determined not to adopt any blanket pre-approval policy but instead to require that the Committee pre-approve the
compensation and terms of service for audit services provided by the independent auditors and any changes in terms and compensation resulting from changes in audit scope, company structure or other matters. The Committee has also determined to
require pre-approval by the Audit Committee or its Chairman of the compensation and terms of service for any permitted non-audit services provided by the independent auditors. Any proposed non-audit services exceeding any pre-approved fee levels
require further pre-approval by the Audit Committee or its Chairman. The CFO reports regularly to the Audit Committee on the services performed and fees incurred by the independent auditors for audit and permitted non-audit services during the prior
quarter.



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##### Table of Contents

PART IV.



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORT ON FORM 8K:
|-------- | ----------------------------------------------------------------



| | (a) (1) | The following consolidated financial statements of the registrant and its subsidiaries are filed as a part of this report:
| | ------- | --------------------------------------------------------------------------------------------------------------------------



|                                                                                                                     |  |     
|-------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                     |  | Page
|                                                                                                                     | 
|Independent Auditors Report                                                                                         |  | F-1 
|                                                                                                                     | 
|Consolidated Balance Sheets as of February 29, 2004 and February 28, 2003                                            |  | F-2 
|                                                                                                                     | 
|Consolidated Statements of Operations for the three years in the period ended February 29, 2004                      |  | F-3 
|                                                                                                                     | 
|Consolidated Statements of Changes in Shareholders Equity for the three years in the period ended February 29, 2004 |  | F-4 
|                                                                                                                     | 
|Consolidated Statements of Cash Flows for the three years in the period ended February 29, 2004                      |  | F-5 
|                                                                                                                     | 
|Notes to Consolidated Financial Statements                                                                           |  | F-7 
|                                                                                                                     | 
|(a) (2) Schedule II  Valuation and Qualifying Accounts and Reserves                                                 |  | 36  
|                                                                                                                     | 
|(a) (3) See exhibits required  Item (c) below                                                                       |  |     
|                                                                                                                     | 
|(b)      No reports were filed by the Company on Form 8-K during the last quarter of the fiscal year.                |  |     
|                                                                                                                     | 
|(c)      Exhibits                                                                                                    |  |     



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|(d) | ITEM  15.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K:
|--- | -----------------------------------------------------------------------------



|               |  |                                                                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                      
|3.1            |  | Certificate of Incorporation, as amended(Incorporated by Reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the Quarter ended November 30,
2000).                                                                       
|               | 
|3.2            |  | By-laws, as amended (Incorporated by Reference to Exhibit 3.2 to the Companys Annual Report on Form 10-K for the year ended February 29, 1988)                                                                                                  
|               | 
|4.1            |  | Specimen Common Stock Certificate (Incorporated by Reference as Exhibit 4.1 to the Companys Registration Statement on Form S-1, Registration No. 2-89176).                                                                                      
|               | 
|10.1           |  | Agreement between the Company and Trustees relating to the Companys Employee Stock Ownership Plan (Incorporated by Reference to Exhibit 10.5 to the Companys Annual Report on Form
10-K for the year ended February 28, 1987).                 
|               | 
|10.2           |  | 1994 Stock Option Plan (Incorporated by Reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended August 31, 1994).                                                                                         
|               | 
|10.3           |  | Outside Director Stock Option Plan (Incorporated by Reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended August 31, 1994).                                                                             
|               | 
|10.4           |  | Agreement dated September 22, 1995 between the Company and Paul Durando (Incorporated by Reference to Exhibit 10.13 to the Companys Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995).                                       
|               | 
|10.5           |  | Employment and Change of Control Agreements dated September 13, 1996, between and Company and Irving Lubman. (Incorporated by Reference to Exhibit 10.15 to the Companys Quarterly Report
on Form 10Q for the quarter ended August 31, 1996).   
|               | 
|10.6           |  | Employment and Change of Control Agreements dated September 13, 1996, between and Company and Arthur Nadata. (Incorporated by Reference to Exhibit 10.16 to the Companys Quarterly Report
on Form 10Q for the quarter ended August 31, 1996).   
|               | 
|10.7           |  | Employment and Change of Control Agreements dated September 13, 1996, between and Company and Richard Schuster. (Incorporated by Reference to Exhibit 10.17 to the Companys Quarterly
Report on Form 10Q for the quarter ended August 31, 1996).
|               | 
|10.8           |  | Form of Indemnity Agreements between the Company and Messrs. Durando, Gardner, Lubman, Nadata, Schuster, Siegel and Novick (incorporated by reference to Exhibit 10.19 to Form 10-Q for the
quarter ended May 31, 1997)                          
|               | 
|10.9           |  | 1998 Stock Option Plan, as amended (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8, No.333-82805).                                                                                                 
|               | 
|10.10          |  | 2000 Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8, No.333-51188).                                                                                                             



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##### Table of Contents

|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
|-------- | ------------------------------------------------------------------



| | (c) | Exhibits (continued):
| | --- | ---------------------



|               |  |                                                                                                                                                                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                        
|10.11          |  | 2000 Key Employee Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 No. 333-51192).                                                                                                  
|               | 
|10.12          |  | 2000 Outside Directors Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 No.333-51190).                                                                                             
|               | 
|10.13          |  | First Amendment to Revolving Credit Agreement dated October 30, 2002 between the Company and six banks (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended November
30, 2002).                                           
|               | 
|10.14          |  | Second Amendment to Revolving Credit Agreement dated February 24, 2003 between the Company and six banks.                                                                                                                                          
|               | 
|10.15          |  | 2002 Key Employee Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 No. 333-103625).                                                                                                 
|               | 
|10.16          |  | 2002 Outside Directors Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on Form S-8 No. 333-103626).                                                                                            
|               | 
|10.17          |  | Revolving Credit Agreement dated September 4, 2003 between the Company and three banks: Fleet National Bank, Citibank, N.A. and Israel discount Bank (Incorporated by reference to Exhibit 10.1
of Form 10Q for the quarter ended August 31, 2003).
|               | 
|11.            |  | Computation of Per Share Earnings                                                                                                                                                                                                                  
|               | 
|14.            |  | Code of Conduct                                                                                                                                                                                                                                    
|               | 
|22.            |  | The following is a list of the Companys subsidiaries:                                                                                                                                                                                             



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|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
|-------- | ------------------------------------------------------------------



|                                       |  |                                  
|-------------------------------------- |  | ---------------------------------
|Name                                   |  | State or Country of Incorporation
|NIC Components Corp.                   |  | New York                         
|NIC Components Europe Limited          |  | United Kingdom                   
|Nu Horizons International Corp.        |  | New York                         
|NUV, Inc.                              |  | Massachusetts                    
|NUHC Inc.                              |  | Canada                           
|Nu Horizons Electronics Europe Limited |  | United Kingdom                   
|Titan Supply Chain Services Corp.      |  | New York                         
|Titan Supply Chain Services Limited    |  | United Kingdom                   
|Titan Supply Chain Services PTE LTD    |  | Singapore                        
|Nu Horizons Asia PTE LTD               |  | Singapore                        
|NIC Components Asia PTE. LTD           |  | Singapore                        



|     |  |                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------
|     | 
|23.  |  | Accountants Consent                                                                                  
|     | 
|31.1 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
|     | 
|31.2 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
|     | 
|32.1 |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
|     | 
|32.2 |  | Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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SIGNATURES



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.



NU HORIZONS ELECTRONICS CORP.(Registrant)By:

/s/    ARTHUR NADATAArthur Nadata, President (Principal Operating Officer)




By:

/s/    PAUL DURANDOPaul Durando Vice President, Finance (Principal Financial and Accounting Officer)




Pursuant to the requirements of
the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:



|          |  |                                               |  |                                                 |  |            
|--------- |  | --------------------------------------------- |  | ----------------------------------------------- |  | -----------
|SIGNATURE |  | CAPACITY                                      |  | DATE                                           
|          |  |                                               | 
|By:       |  | /s/    IRVING
LUBMANIrving
Lubman             |  | Chairman of The Board, Chief Operating Officer  |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    ARTHUR
NADATAArthur
Nadata             |  | President, Chief Executive Officer and Director |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    RICHARD
SCHUSTERRichard
Schuster       |  | Vice President, Secretary and Director          |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    PAUL
DURANDOPaul
Durando               |  | Vice President, Finance, Treasurer and Director |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    HERBERT
M.GARDNERHerbert M.
Gardner    |  | Director                                        |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    MARTIN
NOVICKMartin
Novick             |  | Director                                        |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    DOMINIC A.
POLIMENIDominic A.
Polimeni |  | Director                                        |  | May 7, 2004
|          |  |                                               | 
|By:       |  | /s/    DAVID
SIEGELDavid
Siegel               |  | Director                                        |  | May 7, 2004



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Accountants Consent



We consent to the
incorporation by reference in Registration Statement numbers 333-79561, 333-82805, 33-88952, 33-88958, 333-51188, 333-51190 , 333-51192, 333-103625 and 333-103626 on Form S-8 of our opinion dated April 19, 2004 on the consolidated financial
statements of Nu Horizons Electronics Corp. and subsidiaries included in the Corporations annual report on Form 10-K for the fiscal year ended February 29, 2004.



/s/ LAZAR LEVINE & FELIX LLPLAZAR LEVINE & FELIX LLP Certified Public Accountants




New York, New York

May 7, 2004



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##### Table of Contents

SCHEDULE II



NU HORIZONS ELECTRONICS
CORP. AND SUBSIDIARIES



SCHEDULE IIVALUATION AND QUALIFYING

ACCOUNTS AND RESERVES



Three Years Ended February 29, 2004



|                                                                                    |  |                                |           |                                        |   |                |  |                          |           |  |   |          
|----------------------------------------------------------------------------------- |  | ------------------------------ | --------- | -------------------------------------- | - | -------------- |  | ------------------------ | --------- |  | - | ---------
|Description                                                                         |  | Balance at Beginning of period |           | Additions charged to costsand expenses |   | Deductions (A) |  | Balance at end of period
|Valuation account deducted in the balance sheet from the asset to which it applies: |  |                                |           |                                        |   |                |  |                          |           |  |   |          
|Allowance for doubtful accounts-accounts receivable                                 |  |                                |           |                                        |   |                |  |                          |           |  |   |          
|2004                                                                                |  | $                              | 4,083,590 |                                        | $ | 6,211          |  |                          |          |  | $ | 4,089,801
|                                                                                    |  |                                |           |                                        |   |                |  |                          |           |  |   |          
|2003                                                                                |  | $                              | 4,445,901 |                                        | $ | 0              |  | $                        | 362,311   |  | $ | 4,083,590
|                                                                                    |  |                                |           |                                        |   |                |  |                          |           |  |   |          
|2002                                                                                |  | $                              | 5,590,675 |                                        | $ | 0              |  | $                        | 1,144,774 |  | $ | 4,445,901
|                                                                                    |  |                                |           |                                        |   |                |  |                          |           |  |   |          



|(A) | Accounts written off.
|--- | ---------------------



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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



EXHIBIT INDEX



to



FORM 10-K



FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2004



ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934



---



NU HORIZONS ELECTONICS CORP.

(Exact Name of Registrant as Specified in Its Charter)



|               |  |                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                           
|               | 
|11             |  | Computation of Per Share Earnings                                                                     
|               | 
|14             |  | Code of Conduct                                                                                       
|               | 
|31.1           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
|               | 
|31.2           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    
|               | 
|32.1           |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
|               | 
|32.2           |  | Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



---