##### Table of Contents

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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 28, 2005



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 10-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 01, 2005.



|                                |  |                   
|------------------------------- |  | ------------------
|Common Stock  Par Value $.0066 |  | 16,891,647        
|Class                           |  | Outstanding Shares



Aggregate Market Value
of Non-Affiliate Stock at August 31, 2004  approximately $125,112,000



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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 17  
|ITEM 8.              |  | Financial Statements and Supplementary Data                                           |  | Pages |  | F1  F18
|ITEM 9.              |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | Page  |  | 18      
|ITEM 9A              |  | Controls and Procedures                                                               |  | Page  |  | 18  20 
|                     |  |                                                                                       | 
|PART III:            |  |                                                                                       |  |       |  |         
|ITEM 10.             |  | Directors and Executive Officers of the Registrant                                    |  | Pages |  | 21  22 
|ITEM 11.             |  | Executive Compensation                                                                |  | Pages |  | 23  30 
|ITEM 12.             |  | Security Ownership of Certain Beneficial Owners and Management                        |  | Page  |  | 31      
|ITEM 13.             |  | Certain Relationships and Related Transactions                                        |  | Page  |  | 32      
|ITEM 14.             |  | Principal Accounting Fees and Services                                                |  | Page  |  | 32      
|                     |  |                                                                                       | 
|PART IV:             |  |                                                                                       |  |       |  |         
|ITEM 15.             |  | Exhibits and Financial Statement Schedules                                            |  | Pages |  | 33  36 
|                     |  |                                                                                       | 
|Signatures           |  |                                                                                       |  | Page  |  | 37      
|                     |  |                                                                                      
|Accountants Consent |  | Page                                                                                  |  | 38   
|                     |  |                                                                                       | 
|Schedule 11          |  |                                                                                       |  | Page  |  | 39      
|                     |  |                                                                                       | 
|Exhibit Index        |  |                                                                                       |  | Page  |  | 40      



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.



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.



Page 3



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##### Table of Contents

|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 12 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 and Orlando  MIDWEST  Arizona - Phoenix Colorado - Denver Illinois - Chicago Minnesota - Minneapolis Texas -
Austin, Dallas  WEST COAST  California - Irvine, Los Angeles, San Diego and San Jose Oregon - Portland Washington State - Bothell |  | FOREIGN:  CANADA  Toronto  ASIA  Singapore Hong Kong, China Shanghai and Shenzhen, China Seoul, S. Korea Bangalore, Mumbai, New Delhi and Secunderabad, India Penang, Malaysia Taipei, Taiwan  EUROPE Buckingham, England



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, which to date have not been material. 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 28,2005. 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 28, 2005, there were three manufacturers that represented more than
10% of the Companys inventory on a consolidated basis. Those suppliers accounted for an aggregate of approximately $36,600,000 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 28, 2005, the Company purchased inventory from each of three suppliers that was in excess of 10% of the
Companys total purchases. Purchases from these suppliers were approximately $97,360,000, $66,197,000 and $48,334,000 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, 2005, the Companys backlog was approximately $49,000,000
as compared to a backlog of approximately $47,000,000 at May 1, 2004.



Employees:



As of February 28,
2005, the Company employed approximately 574 persons: 55 in management, 344 in sales and sales support, 40 in product and purchasing, 30 in finance, accounting and human resources, 24 in MIS, 20 in operations and 61 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 its 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 five (25) branch sales offices in the United States and one (1) in Canada, 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 2006 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 28, 2005 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 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                       |  | $ | 11.39 |  | $ | 8.06
|Second Quarter                      |  |   | 10.25 |  |   | 6.22
|Third Quarter                       |  |   | 8.33  |  |   | 5.62
|Fourth Quarter                      |  |   | 8.71  |  |   | 6.40
|                                    |  |  
|FISCAL YEAR 2006:                   |  |   |       |  |   |     
|First Quarter (Through May 1, 2005) |  | $ | 7.36  |  | $ | 6.06



| | b) | As of May 1, 2005, 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 28, 2005:



|                                                           |  |                                                                                     |  |                                                                      |      |                                                                                                                                           |        
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                              |  | Number of securitiesto be issued uponexercise ofoutstanding optionsand
warrants (a) |  | Weighted-averageexercise price ofoutstanding optionsand warrants (b) |      | Number of securitiesremaining available forfuture issuance underequity
compensationplans (excludingsecurities reflected incolumn (a)) (c)
|Equity compensation plans approved by security holders     |  | 1,922,500                                                                           |  | $                                                                    | 8.18 |                                                                                                                                           | 52,530 
|Equity compensation plans not approved by security holders |  | 1,450,993                                                                           |  | $                                                                    | 4.73 |                                                                                                                                           | 128,500
|                                                           |  |                                                                                     |  |                                                                      |      |                                                                                                                                           |        
|Total                                                      |  | 3,373,493                                                                           |  | $                                                                    | 6.65 |                                                                                                                                           | 181,030
|                                                           |  |                                                                                     |  |                                                                      |      |                                                                                                                                           |        



Page 8



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##### Table of Contents

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



|                                                                           |  |                                    |             |   |                                    |   |             |                                    |  |   |                                    |     |  |                                    |             |   |  |   |             |  
|-------------------------------------------------------------------------- |  | ---------------------------------- | ----------- | - | ---------------------------------- | - | ----------- | ---------------------------------- |  | - | ---------------------------------- | --- |  | ---------------------------------- | ----------- | - |  | - | ----------- | -
|                                                                           |  | For TheYear EndedFebruary 28, 2005 |             |   | For TheYear EndedFebruary 29, 2004 |   |             | For TheYear EndedFebruary 28, 2003 |  |   | For TheYear EndedFebruary 28, 2002 |     |  | For TheYear EndedFebruary 28, 2001 |            
|INCOME STATEMENT DATA:                                                     |  |                                    |             |   |                                    |   |             |                                    |  |   |                                    |     |  |                                    |             |   |  |   |             |  
|                                                                           |  |                                    |             |   |                                   
|Continuing Operations:                                                     |  |                                    |             |   |                                    |   |             |                                    |  |   |                                    |     |  |                                    |             |   |  |   |             |  
|Net sales                                                                  |  | $                                  | 467,849,374 |   |                                    | $ | 345,863,877 |                                    |  | $ | 302,080,809                        |     |  | $                                  | 281,912,508 |   |  | $ | 634,009,953 |  
|Gross profit on sales                                                      |  |                                    | 77,581,380  |   |                                    |   | 60,960,780  |                                    |  |   | 55,228,068                         |     |  |                                    | 60,222,426  |   |  |   | 139,502,597 |  
|Gross profit percentage                                                    |  |                                    | 16.6        | % |                                    |   | 17.6        | %                                  |  |   | 18.3                               | %   |  |                                    | 21.4        | % |  |   | 22.0        | %
|Net income (loss) before provision for income taxes and minority interests |  |                                    | 5,580,154   |   |                                    |   | (1,269,061  | )                                  |  |   | (2,309,743                         | )   |  |                                    | (2,797,157  | ) |  |   | 58,515,268  |  
|                                                                           |  |                                    |             |   |                                   
|Income (loss)                                                              |  |                                    | 3,073,409   |   |                                    |   | (847,999    | )                                  |  |   | (2,511,638                         | )   |  |                                    | (2,762,566  | ) |  |   | 33,561,085  |  
|                                                                           |  |                                    |             |   |                                   
|Income (loss) from discontinued operations                                 |  |                                    |            |   |                                    |   |            |                                    |  |   |                                   | (1) |  |                                    | 4,982,242   |   |  |   | 1,791,000   |  
|                                                                           |  |                                    |             |   |                                   
|Net income (loss)                                                          |  | $                                  | 3,073,409   |   |                                    | $ | (847,999    | )                                  |  | $ | (2,511,638                         | )   |  | $                                  | 2,219,676   |   |  | $ | 35,352,085  |  
|                                                                           |  |                                    |             |   |                                   
|Earnings (loss) per common share:                                          |  |                                    |             |   |                                    |   |             |                                    |  |   |                                    |     |  |                                    |             |   |  |   |             |  
|Basic                                                                      |  | $                                  | .18         |   |                                    | $ | (.05        | )                                  |  | $ | (.15                               | )   |  | $                                  | .13         |   |  | $ | 2.18        |  
|                                                                           |  |                                    |             |   |                                   
|Diluted                                                                    |  | $                                  | .17         |   |                                    |   | (.05        | )                                  |  |   | (.15                               | )   |  | $                                  | .13         |   |  | $ | 1.99        |  



|(1) | Includes gain on sale of unit
|--- | -----------------------------



|(2) | Due to the loss, the inclusion of common stock equivalents in diluted earnings per share would be antidilutive
|--- | --------------------------------------------------------------------------------------------------------------



|                     |  |                       |             |                       |   |                       |  |                       |             |                       |   |             |  |   |            
|-------------------- |  | --------------------- | ----------- | --------------------- | - | --------------------- |  | --------------------- | ----------- | --------------------- | - | ----------- |  | - | -----------
|                     |  | As ofFebruary 28,2005 |             | As ofFebruary 29,2004 |   | As ofFebruary 28,2003 |  | As ofFebruary 28,2002 |             | As ofFebruary 28,2001
|BALANCE SHEET DATA:  |  |                       |             |                       |   |                       |  |                       |             |                       |   |             |  |   |            
|                     |  |                       |             |                       |  
|Working capital      |  | $                     | 145,485,083 |                       | $ | 123,494,074           |  | $                     | 116,792,079 |                       | $ | 120,790,159 |  | $ | 201,732,737
|Total assets         |  |                       | 177,799,300 |                       |   | 158,178,171           |  |                       | 148,099,189 |                       |   | 151,318,461 |  |   | 247,830,999
|Long-term debt       |  |                       | 23,968,766  |                       |   | 5,580,495             |  |                       | 252,832     |                       |   | 2,731,598   |  |   | 85,181,496 
|Shareholders equity |  |                       | 127,932,907 |                       |   | 124,402,543           |  |                       | 123,992,341 |                       |   | 126,473,177 |  |   | 124,361,211



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.



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 was a
break out period for the industry. This was evidenced by industry wide double digit sequential and year over year increases in sales dollar volume for both calendar 2003 and 2004, 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 approximately 70% from fiscal 2004 to fiscal 2005 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 28, 2005, net sales increased to $467.8 million from $345.9 million in the comparable period last year.
Net income for fiscal 2005 was $3,073,000 or $.18 per share, compared with a net loss of $848,000, or $.05 per share in the year-earlier period.



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 2005, 2004 and 2003, certain items in the
Companys consolidated statements of operations expressed as a percentage of net sales.



|                                                     |  |                      |   |  |       |   |  |       |  
|---------------------------------------------------- |  | -------------------- | - |  | ----- | - |  | ----- | -
|                                                     |  | Years Ended February |  
|                                                     |  | 2005                 |   |  | 2004  |   |  | 2003  |  
|Net sales                                            |  | 100.0                | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                        |  | 83.4                 |   |  | 82.4  |   |  | 81.7  |  
|Gross profit                                         |  | 16.6                 |   |  | 17.6  |   |  | 18.3  |  
|Operating expenses                                   |  | 15.0                 |   |  | 18.1  |   |  | 19.0  |  
|Interest expense                                     |  | 0.4                  |   |  | 0.0   |   |  | 0.0   |  
|Interest (income)                                    |  | 0.0                  |   |  | (0.1  | ) |  | 0.0   |  
|Income (loss) before taxes                           |  | 1.2                  |   |  | (0.4  | ) |  | (0.8  | )
|Income tax provision (benefit)                       |  | 0.4                  |   |  | (0.2  | ) |  | (0.2  | )
|Income (loss) after taxes, before minority interests |  | 0.8                  |   |  | (0.2  | ) |  | (0.6  | )
|Minority interests                                   |  | 0.1                  |   |  | 0.1   |   |  | 0.2   |  
|Net income (loss)                                    |  | 0.6                  |   |  | (0.2  | ) |  | (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. Our estimate of the
allowances needed is based on our past history of collections of accounts receivable from our customers. This history has shown that we have always provided sufficient allowances in prior periods. 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 thereby reducing our operating income. For example, each additional 1% of accounts receivable requiring an
allowance would have reduced operating income by approximately $800,000 for the year ended February 28, 2005.



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. In prior periods, reserves required for obsolescence were not material to our financial statements. 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. For example, each additional 1% of inventory that became obsolete and could
not be returned under our many distributor franchise agreements, would have reduced operating income by approximately $800,000 for the year ended February 28, 2005.



Fiscal Year 2005 versus 2004

Results of Operations:



Net sales for the year ended February 28, 2005 aggregated $467,849,000 as compared to $345,864,000 for the year ended February 29, 2004, an increase of approximately $121,985,000 or 35.3%. Given the historically
cyclical nature of the Companys industry, management attributes this increase in sales performance in the latter part of fiscal 2004 (calendar 2003) as the break out period the electronic components industry had long been expecting. The
substantial year over year sales gains can be attributed to the recovery experienced by the semiconductor industry in general over the last twelve months as well as a significant increase in our Asian sales in, an increase of approximately 70%
comparing fiscal 2005 to the prior year. Management believes, however, that the industry growth rate in the near term will be in the single digits. The marketplace continues to offer poor near term visibility, which makes it difficult for management
to estimate the Companys overall sales volume and earnings prospects for the 2006 fiscal year.



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##### Table of Contents

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



Fiscal Year 2005 versus 2004 (Continued):

Results of Operations (Continued):



Gross profit margin as a percentage of net sales was 16.6% for the year ended
February 28, 2005 as compared to 17.6% for the year ended February 29, 2004. Management believes that this continuing gross margin pressure results from a change in the Companys product mix and increased order size coupled with increased sales
in the Asian market, which requires lower selling prices due to volume demand from large Asian contract manufacturers. Management believes that margin pressures may continue during the first half of fiscal 2006 and possibly stabilize in the second
half of the year, however, no assurances can be given in this regard.



Operating expenses increased to $70,138,000 for the year ended February 28, 2005 from $62,436,000 for the year ended February 29, 2004, an increase of approximately $7,702,000 or 12.3%. The dollar increase in
operating expenses was due to increases in the following expense categories: Approximately $4,706,000 or 61.1% of the increase was for personnel related costs 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. The remaining increases were a result of net increases in bank fees and charges $577,000 or 7.5%, insurances and professional fees $582,000 or 7.5%, Sarbanes Oxley
compliance $350,000 or 4.5%, rent $422,000 or 5.6%, bad debt reserves $285,000 or 3.7%, freight $250,000 or 3.2% and miscellaneous other expenses $530,000 or 6.9%. Management made a strategic decision to invest in expanding 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 $1,920,000 for the year ended February 28, 2005 as compared to $140,000 for the year ended February 29, 2004. This increase was primarily due to a return to bank borrowings beginning 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 and a thirty five percent sales increase for fiscal
2005.



Net income from for the year ended
February 28, 2005 was $3,073,000 or $.18 per share, as compared to a loss of $848,000 or $.05 per share for the year ended February 28, 2004. Management attributes the fiscal 2005 profit of $3,073,000 to the increase in gross margin dollars
exceeding the increase in operating and interest expense.



Fiscal Year 2004 versus 2003

Results of 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.



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 gross margin pressure resulted 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 required lower selling prices due to volume demand from Asian contract manufacturer.



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 2004 fiscal year. Management made a strategic decision to invest in expanding
the Companys personnel during the market downturn, which resulted in increased operating expenses.



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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 Operations (Continued):



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 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.



Liquidity and Capital Resources:



Fiscal Year 2005 versus 2004



The Company ended its 2005 fiscal year with working capital
and cash aggregating approximately $145,485,000 and $7,024,000 respectively, as compared to approximately $123,494,000 and $12,470,000 respectively, at February 29, 2004. The Companys current ratio at February 28, 2005, was 6.9:1 as compared
to 5.6:1 at February 29, 2004.



On September
30, 2004, the Company entered into a secured revolving line of credit, as amended, with eight banks, which currently provides for maximum borrowings of $100,000,000 or maximum borrowings of $65,000,000 utilizing an asset based formula predicated on
a certain percentage of outstanding domestic accounts receivable and inventory positions at any given month end. The credit line bears interest 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 February 27, 2008. Borrowings under this line of credit were $22,800,000 at February 28, 2005 and $5,300,000 at February 28, 2004. As of the end
of both fiscal years, the Company was in compliance with all the required bank covenants.



The Company anticipates that its resources provided by its cash flow from operations and its current borrowing agreement, will be
sufficient to meet its financing requirements for the next twelve-month period.



Off-Balance Sheet Arrangements:



As of February 28, 2005, the Company had no off-balance sheet arrangements.



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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
|Revolving Credit Line    |  | $     | 22,800,000 |                  | $ |          |  | $         |           |                   | $ | 22,800,000 |  | $ |          
|Equipment Leases         |  |       | 838,000    |                  |   | 419,000   |  |           | 419,000   |                   |   |           |  |   |         
|Operating Lease          |  |       | 8,881,000  |                  |   | 3,294,000 |  |           | 4,046,000 |                   |   | 1,534,000  |  |   | 7,000    
|Purchase Obligations     |  |       |           |                  |   |          |  |           |          |                   |   |           |  |   |         
|Employment Agreements(i) |  |       | 2,800,000  |                  |   | 560,000   |  |           | 1,120,000 |                   |   | 1,120,000  |  |   |         
|Minority Interest        |  |       | 1,200,000  |                  |   |          |  |           |          |                   |   |           |  |   | 1,200,000
|                         |  |       |            |                  |   |           |  |           |           |                   |   |            |  |   |          
|Total                    |  | $     | 36,519,000 |                  | $ | 4,275,000 |  | $         | 5,585,000 |                   | $ | 25,454,000 |  | $ | 1,207,000
|                         |  |       |            |                  |   |           |  |           |           |                   |   |            |  |   |          



|(i) | Base salary excluding potential bonuses
|--- | ---------------------------------------



Inflationary Impact:



Since the inception of operations, inflation has not significantly affected the Companys operating results. 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:



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 electronic components in fiscal years 2005, 2004, 2003, 2002 and 2001 were $467,000,000,
$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
last four quarters, the Companys revenues have begun to show signs of stability with sequential revenues of $118,000,000, $119,000,000, 116,000,000 and $114,000,000 for the quarters ended February 28, 2005. 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 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 further expense reductions.



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



In fiscal 2005,
sales of products and services from each of 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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##### Table of Contents

|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 2005, approximately 24 % of the Companys sales came from its operations outside the United States. During fiscal 2004,
2003 and 2002 approximately 18.5%, 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 21.4% of consolidated sales in fiscal 2005. 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:
|-------- | -----------------------------------------------------------



Interest Rate Risk:



All of the Companys bank debt and the associated interest expense are sensitive to changes in the level of interest rates. 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. A hypothetical 100 basis point (one percentage point) increase in interest
rates would have resulted in incremental interest expense of approximately $450,000 for the year ended February 28, 2005. There were only nominal bank borrowings for the comparable prior year period ended February 29, 2004. 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 is in a borrowing mode.



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##### Table of Contents

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



Foreign Exchange Rate Risk:



The Company has several foreign subsidiaries in Asia, the
United Kingdom and Canada. The Company does business in more than one dozen countries and currently generates approximately 24% of its revenues from outside North America. The Companys ability to sell its products in foreign markets may be
affected by changes in economic, political or market conditions in the foreign markets in which the Company does business.



The Companys total assets in its foreign subsidiaries was $81.9 million and $44.9 million at February 28, 2005 and 2004
respectively, translated into US dollars at the closing exchange rates. The company also acquires certain inventory from foreign suppliers and, as such, faces risk due to adverse movements in foreign currency exchange rates. These risks could have a
material impact on the Companys results in future periods. The potential loss based on end of period balances and prevailing exchange rates resulting from a hypothetical 10% strengthening of the dollar against foreign currencies was not
material in the quarter ended February 28, 2005. The Company does not currently employ any currency derivative instruments, futures contracts or other currency hedging techniques to mitigate its risks in this regard.



Industry Risk:



The electronic component industry is cyclical which can
cause significant fluctuations in sales, gross profit 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 17



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##### Table of Contents

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



Report of Independent Registered Public Accounting Firm



The Board of Directors and Stockholders

Nu Horizons Electronics Corp.

Melville, New York



We have audited the
accompanying consolidated balance sheets of Nu Horizons Electronics Corp. and subsidiaries (the Company) as of February 28, 2005 and February 29, 2004, and the related consolidated statements of operations, shareholders equity and
comprehensive income, and cash flows for each of the years in the three-year period ended February 28, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nu Horizons Electronics Corp.
and subsidiaries as of February 28, 2005 and February 29, 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended February 28, 2005 in conformity with accounting principles generally
accepted in the United States of America.



We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Nu Horizons Electronics Corp. and subsidiaries as of February 28, 2005, based on criteria
established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated May 4, 2005 expressed an unqualified opinion on managements
assessment of, and the effective operation of, internal control over financial reporting.



/s/ Lazar Levine & Felix LLPLazar Levine & Felix LLP




New York, New York

May 4, 2005



F - 1



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                      |  |                  |             |                  |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | ---------------- | - | ----------- | -
|                                                                                                                                                      |  | February 28,2005 |             | February 29,2004 |  
|-ASSETS-                                                                                                                                              |  |                  |             |                  |   |             |  
|CURRENT ASSETS:                                                                                                                                       |  |                  |             |                  |   |             |  
|Cash                                                                                                                                                  |  | $                | 7,024,203   |                  | $ | 12,469,973  |  
|Accounts receivable - net of allowance for doubtful accounts of $4,581,812 and $4,089,801 for 2005 and 2004, respectively                             |  |                  | 79,679,565  |                  |   | 68,230,405  |  
|Inventories                                                                                                                                           |  |                  | 81,696,415  |                  |   | 68,729,081  |  
|Prepaid expenses and other current assets                                                                                                             |  |                  | 1,782,872   |                  |   | 794,086     |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|TOTAL CURRENT ASSETS                                                                                                                                  |  |                  | 170,183,055 |                  |   | 150,223,545 |  
|                                                                                                                                                      |  |                 
|PROPERTY, PLANT AND EQUIPMENT  NET                                                                                                                   |  |                  | 3,928,058   |                  |   | 4,401,898   |  
|                                                                                                                                                      |  |                 
|OTHER ASSETS:                                                                                                                                         |  |                  |             |                  |   |             |  
|Subordinated note receivable                                                                                                                          |  |                  | 2,000,000   |                  |   | 2,000,000   |  
|Other assets                                                                                                                                          |  |                  | 1,688,187   |                  |   | 1,552,728   |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|                                                                                                                                                      |  | $                | 177,799,300 |                  | $ | 158,178,171 |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|-LIABILITIES AND SHAREHOLDERS EQUITY-                                                                                                                |  |                  |             |                  |   |             |  
|CURRENT LIABILITIES:                                                                                                                                  |  |                  |             |                  |   |             |  
|Accounts payable                                                                                                                                      |  | $                | 20,251,746  |                  | $ | 21,479,465  |  
|Accrued expenses                                                                                                                                      |  |                  | 4,446,226   |                  |   | 5,250,006   |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|TOTAL CURRENT LIABILITIES                                                                                                                             |  |                  | 24,697,972  |                  |   | 26,729,471  |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|LONG-TERM LIABILITIES:                                                                                                                                |  |                  |             |                  |   |             |  
|Revolving credit line                                                                                                                                 |  |                  | 22,800,000  |                  |   | 5,300,000   |  
|Deferred income taxes                                                                                                                                 |  |                  | 1,168,766   |                  |   | 280,495     |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|TOTAL LONG-TERM LIABILITIES                                                                                                                           |  |                  | 23,968,766  |                  |   | 5,580,495   |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|MINORITY INTEREST IN SUBSIDIARIES                                                                                                                     |  |                  | 1,199,655   |                  |   | 1,465,662   |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|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; 16,891,647 and 16,859,766 shares issued and outstanding for 2005 and 2004,
respectively |  |                  | 111,485     |                  |   | 111,275     |  
|Additional paid-in capital                                                                                                                            |  |                  | 44,089,809  |                  |   | 43,934,877  |  
|Retained earnings                                                                                                                                     |  |                  | 83,724,169  |                  |   | 80,650,760  |  
|Other accumulated comprehensive income (loss)                                                                                                         |  |                  | 7,444       |                  |   | (294,369    | )
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|TOTAL SHAREHOLDERS EQUITY                                                                                                                            |  |                  | 127,932,907 |                  |   | 124,402,543 |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  
|                                                                                                                                                      |  | $                | 177,799,300 |                  | $ | 158,178,171 |  
|                                                                                                                                                      |  |                  |             |                  |   |             |  



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 28,2005   |             |   | February 29,2004 |   |             | February 28,2003 | 
|NET SALES                                                              |  | $                  | 467,849,374 |   |                  | $ | 345,863,877 |                  |  | $ | 302,080,809 |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|COSTS AND EXPENSES                                                     |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Cost of sales                                                          |  |                    | 390,267,994 |   |                  |   | 284,903,097 |                  |  |   | 246,852,741 |  
|Operating expenses                                                     |  |                    | 70,138,119  |   |                  |   | 62,435,993  |                  |  |   | 57,439,743  |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                       |  |                    | 460,406,113 |   |                  |   | 347,339,090 |                  |  |   | 304,292,484 |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|INCOME (LOSS) FROM OPERATIONS                                          |  |                    | 7,443,261   |   |                  |   | (1,475,213  | )                |  |   | (2,211,675  | )
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|OTHER (INCOME) EXPENSE                                                 |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Interest expense                                                       |  |                    | 1,920,449   |   |                  |   | 139,630     |                  |  |   | 98,068      |  
|Interest income                                                        |  |                    | (57,342     | ) |                  |   | (345,782    | )                |  |   |            |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|                                                                       |  |                    | 1,863,107   |   |                  |   | (206,152    | )                |  |   | 98,068      |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTERESTS |  |                    | 5,580,154   |   |                  |   | (1,269,061  | )                |  |   | (2,309,743  | )
|Provision (credit) for income taxes                                    |  |                    | 2,022,752   |   |                  |   | (704,275    | )                |  |   | (539,927    | )
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|INCOME (LOSS) BEFORE MINORITY INTERESTS                                |  |                    | 3,557,402   |   |                  |   | (564,786    | )                |  |   | (1,769,816  | )
|Minority interest in earnings of subsidiaries                          |  |                    | 483,993     |   |                  |   | 283,213     |                  |  |   | 741,822     |  
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|NET INCOME (LOSS)                                                      |  | $                  | 3,073,409   |   |                  | $ | (847,999    | )                |  | $ | (2,511,638  | )
|                                                                       |  |                    |             |   |                  |   |             |                  |  |   |             |  
|NET INCOME (LOSS) PER COMMON SHARE                                     |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Basic                                                                  |  | $                  | .18         |   |                  | $ | (.05        | )                |  | $ | (.15        | )
|Diluted                                                                |  | $                  | .17         |   |                  | $ | (.05        | )                |  | $ | (.15        | )
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                             |  |                    |             |   |                  |   |             |                  |  |   |             |  
|Basic                                                                  |  |                    | 16,877,147  |   |                  |   | 16,729,163  |                  |  |   | 16,663,817  |  
|Diluted                                                                |  |                    | 17,768,649  |   |                  |   | 16,729,163  |                  |  |   | 16,663,817  |  



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, 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 |  
|Exercise of stock options                       |  | 31,881     |  |             | 210     |                          |   | 154,932          |  |   |                                           |   |  |             |         |                            |  |   |  |  |   | 155,142     |  
|Foreign currency translation                    |  |           |  |             |        |                          |   |                 |  |   |                                           |   |  |             | 301,813  |                            |  |   |  |  |   | 301,813     |  
|Net income                                      |  |           |  |             |        |                          |   |                 |  |   | 3,073,409                                  |   |  |             |         |                            |  |   |  |  |   | 3,073,409   |  
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |          |                            |  |   |   |  |   |             |  
|                                                |  |            |  |             |         |                          |  
|Balance at February 28, 2005                    |  | 16,891,647 |  | $           | 111,485 |                          | $ | 44,089,809       |  | $ | 83,724,169                                 |   |  | $           | 7,444    |                            |  | $ |  |  | $ | 127,932,907 |  
|                                                |  |            |  |             |         |                          |   |                  |  |   |                                            |   |  |             |          |                            |  |   |   |  |   |             |  



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 28,2005   |              |   | February 29,2004 |   |              | February 28,2003 | 
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:    |  |                    |              |   |                  |   |              |                  |  |   |              |  
|                                                     |  |                    |             
|Cash flows from operating activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash received from customers                         |  | $                  | 456,114,804  |   |                  | $ | 316,725,815  |                  |  | $ | 303,006,935  |  
|Cash paid to suppliers and employees                 |  |                    | (476,628,839 | ) |                  |   | (341,482,272 | )                |  |   | (271,254,844 | )
|Interest paid                                        |  |                    | (1,920,449   | ) |                  |   | (139,630     | )                |  |   | (98,068      | )
|Interest received                                    |  |                    | 57,342       |   |                  |   | 345,782      |                  |  |   |             |  
|Income taxes paid                                    |  |                    | (191,996     | ) |                  |   | (68,882      | )                |  |   | (67,652      | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash provided by (used in) operating activities  |  |                    | (22,569,138  | ) |                  |   | (24,619,187  | )                |  |   | 31,586,371   |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash flows from investing activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Capital expenditures                                 |  |                    | (833,587     | ) |                  |   | (629,307     | )                |  |   | (383,255     | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash (used in) investing activities              |  |                    | (833,587     | ) |                  |   | (629,307     | )                |  |   | (383,255     | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|                                                     |  |                    |             
|Cash flows from financing activities:                |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Borrowings under revolving credit line               |  |                    | 142,000,000  |   |                  |   | 13,900,000   |                  |  |   | 6,700,000    |  
|(Repayments) under revolving credit line             |  |                    | (124,500,000 | ) |                  |   | (8,600,000   | )                |  |   | (9,200,000   | )
|Proceeds from exercise of stock options              |  |                    | 155,142      |   |                  |   | 825,276      |                  |  |   | 246,801      |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net cash provided by (used in) financing activities  |  |                    | 17,655,142   |   |                  |   | 6,125,276    |                  |  |   | (2,253,199   | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Effect of exchange rate changes                      |  |                    | 301,813      |   |                  |   | 247,575      |                  |  |   | (294,279     | )
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Net increase (decrease) in cash and cash equivalents |  |                    | (5,445,770   | ) |                  |   | (18,875,643  | )                |  |   | 28,655,638   |  
|                                                     |  |                    |             
|Cash and cash equivalents, beginning of year         |  |                    | 12,469,973   |   |                  |   | 31,345,616   |                  |  |   | 2,689,978    |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  
|Cash and cash equivalents, end of year               |  | $                  | 7,024,203    |   |                  | $ | 12,469,973   |                  |  | $ | 31,345,616   |  
|                                                     |  |                    |              |   |                  |   |              |                  |  |   |              |  



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 28,2005   |             |   | February 29,2004 |   |             | February 28,2003 | 
|RECONCILIATION OF NET INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES |  |                    |             |   |                  |   |             |                  |  |   |            |  
|                                                                          |  |                    |            
|NET INCOME (LOSS)                                                         |  | $                  | 3,073,409   |   |                  | $ | (847,999    | )                |  | $ | (2,511,638 | )
|Adjustments:                                                              |  |                    |             |   |                  |   |             |                  |  |   |            |  
|Depreciation and amortization                                             |  |                    | 1,307,427   |   |                  |   | 1,377,908   |                  |  |   | 1,378,233  |  
|Bad debt reserve                                                          |  |                    | 285,410     |   |                  |   |            |                  |  |   |           |  
|Changes in assets and liabilities:                                        |  |                    |             |   |                  |   |             |                  |  |   |            |  
|(Increase) decrease in accounts receivable                                |  |                    | (11,734,570 | ) |                  |   | (29,138,062 | )                |  |   | 926,126    |  
|(Increase) decrease in inventories                                        |  |                    | (12,967,334 | ) |                  |   | (2,656,059  | )                |  |   | 29,003,176 |  
|(Increase) decrease in prepaid expenses and other current assets          |  |                    | (988,786    | ) |                  |   | 2,158,579   |                  |  |   | 773,903    |  
|(Increase) decrease in other assets                                       |  |                    | (135,459    | ) |                  |   | (67,684     | )                |  |   | 176,728    |  
|(Decrease) increase in accounts payable and accrued expenses              |  |                    | (3,031,499  | ) |                  |   | 4,243,254   |                  |  |   | 1,950,513  |  
|Increase in income taxes                                                  |  |                    |            |   |                  |   | 283,213     |                  |  |   | 99,513     |  
|Increase in deferred income taxes                                         |  |                    | 1,888,271   |   |                  |   |            |                  |  |   |           |  
|(Decrease) Increase in minority interest                                  |  |                    | (266,007    | ) |                  |   | 27,663      |                  |  |   | (210,183   | )
|                                                                          |  |                    |             |   |                  |   |             |                  |  |   |            |  
|Net cash provided by (used in) operating activities                       |  | $                  | (22,569,138 | ) |                  | $ | (24,619,187 | )                |  | $ | 31,586,371 |  
|                                                                          |  |                    |             |   |                  |   |             |                  |  |   |            |  



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 28, 2005



|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 Electronics Hong Kong Limited (NUK), Nu Horizons
Europe Limited (NUE), Titan Supply Chain Services Corp. (Titan), Titan Supply Chain Services PTE LTD (TSC), Titan Supply Chain Services Limited (TSE) 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.



| | 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.



| | 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. In excess of 90% of
our total inventories are covered by product line distributor agreements whereby the Company has the right to return slow-moving and obsolete inventory to our suppliers. Obsolescence charges for inventory not covered by such agreements have not been
material to date.



F - 7



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



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



| | 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. | 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 28, 2005
approximates $1,970,000.



| | h. | 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 in accordance with EITF 01-09.



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 $89,415, $73,151 and $97,125 for the fiscal years ended 2005, 2004 and 2003, respectively. Shipping and handling costs incurred by the Company are included in costs of sales and aggregated $1,314,347, $754,345 and $1,117,080 for the
fiscal years ended 2005, 2004 and 2003, respectively.



| | i. | 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 2005,
2004 and 2003, such costs aggregated $188,647, $301,062 and $295,466, respectively.



| | j. | 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 fiscal years as the effect was antidilutive.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



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



| | k. | Stock-Based Compensation:
| | -- | -------------------------



The Company accounts for employee stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, Financial Accounting Standards Board Interpretation (FASB) No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock Compensation 
an Interpretation of APB Opinion No. 25, and complies with the disclosure provisions of Statement of Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation. The Company accounts
for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force (EITF) No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.



If compensation cost for the Companys stock-based compensation plans had been determined in a manner consistent with the fair value approach described in SFAS No. 123, the Companys net income (loss) and net income (loss) per
share as reported would have been reduced to the pro forma amounts indicated below.



|                                           |  |      |           |      |   |            |      |  |   |            |  
|------------------------------------------ |  | ---- | --------- | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                           |  | 2005 |           | 2004 |   |            | 2003 | 
|Net income (loss):                         |  |      |           |      |   |            |      |  |   |            |  
|As reported                                |  | $    | 3,073,409 |      | $ | (847,999   | )    |  | $ | (2,511,638 | )
|Stock-based compensation cost  net of tax |  |      | 520,524   |      |   | 689,385    |      |  |   | 871,017    |  
|                                           |  |      |           |      |   |            |      |  |   |            |  
|Pro forma                                  |  | $    | 2,552,885 |      | $ | (1,537,384 | )    |  | $ | (3,382,655 | )
|                                           |  |      |           |      |   |            |      |  |   |            |  
|Basic earnings per share:                  |  |      |           |      |   |            |      |  |   |            |  
|As reported                                |  | $    | .18       |      | $ | (.05       | )    |  | $ | (.15       | )
|Pro forma                                  |  | $    | .15       |      | $ | (.09       | )    |  | $ | (.20       | )
|Diluted earnings per share:                |  |      |           |      |   |            |      |  |   |            |  
|As reported                                |  | $    | .17       |      | $ | (.05       | )    |  | $ | (.15       | )
|Pro forma                                  |  | $    | .14       |      | $ | (.09       | )    |  | $ | (.20       | )



Options vest over
several years and new options are generally granted each year. Because of these factors, the pro forma effect shown above may not be representative of the pro forma effect of SFAS No. 123 in future years.



The fair value of each option is estimated on the date of grant using the
Black-Scholes method with the following weighted average assumptions.



|                        |  |            |   |  |            |   |  |            |  
|----------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                        |  | 2005       |   |  | 2004       |   |  | 2003       |  
|Option Plans:           |  |            |   |  |            |   |  |            |  
|Dividends               |  |           |   |  |           |   |  |           |  
|Expected term           |  | 2 7 years |   |  | 2 7 years |   |  | 2 7 years |  
|Risk free interest rate |  | 2.7        | % |  | 2.5        | % |  | 4.0        | %
|Volatility rate         |  | 37.5       | % |  | 39.2       | % |  | 40.1       | %



The following table
shows the weighted average fair value of options using the fair value approach under SFAS 123:



|                                                                 |  |      |      |      |   |      |  |   |     
|---------------------------------------------------------------- |  | ---- | ---- | ---- | - | ---- |  | - | ----
|                                                                 |  | 2005 |      | 2004 |   | 2003
|Weighted average fair value of options granted during the period |  | $    | 3.72 |      | $ | 4.30 |  | $ | 6.08



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



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



| | l. | 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.



| | m. | Reclassifications:
| | -- | ------------------



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



| | n. | Recent Accounting Pronouncements Affecting the Company:
| | -- | -------------------------------------------------------



In March 2004, the FASB reached a consensus on Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments, which provides guidance to determine the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity (including individual
securities and investments in mutual funds), and investments accounted for under the cost method or the equity method. The guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary
impairment evaluations made in reporting periods beginning after June 15, 2004. The adoption of Issue No. 03-1 has not had any impact on the Companys financial statements and results of operations.



In April 2004, the EITF reached consensus on EITF Issue No. 03-6,
Participating Securities and the Two Class Method under FASB Statement No. 128 (EITF 03-6). EITF 03-06 addresses a number of questions regarding the computation of earnings per share by companies that have issued securities
other than common stock that contractually entitle the holder to participate in the dividends and earnings of the company when, and if, it declares dividends on its common stock. EITF 03-6 also provides further guidance in applying the two-class
method of calculating earnings per share, clarifying what constitutes a participating security and how to apply the two-class method of computing earnings per share once it is determined that a security is participating, including how to allocate
undistributed earnings to such a security. EITF 03-6 is effective for fiscal periods beginning after March 31, 2004 and requires retroactive restatement of prior earnings per share amounts. The adoption of EITF No. 03-6 has not had a material impact
on the Companys financial statements and results of operations.



In November 2004, the FASB issued Statement No. 151, Inventory Costs. This statement amends the guidance in ARB 43 (Chapter 4 - Inventory Pricing) to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material (spoilage). SFAS No. 151 requires that such items be recognized as current period charges. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is not expected to have a material impact on the
Companys financial statements and results of operations.



In December 2004, the FASB issued SFAS No. 153 Exchange of Non-monetary Assets - an amendment of APB Opinion No. 29. Statement 153 eliminates the exception to fair value for exchanges of similar productive assets and replaces it
with a general exception for exchange transactions that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement is effective for
exchanges of non-monetary assets occurring after June 15, 2005. The application of this statement is not expected to have an impact on the Companys financial statements considering the Companys intermittent participation in exchanges of
non-monetary assets.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



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



| | n. | Recent Accounting Pronouncements Affecting the Company (continued):
| | -- | -------------------------------------------------------------------



In December 2004, the FASB issued SFAS No. 123 (revised 2004), or SFAS 123R, Share-Based Payment. This statement replaces SFAS 123,
Accounting for Stock-Based Compensation and supersedes Accounting Principles Boards Opinion No. 25 (ABP 25), Accounting for Stock Issued to Employees. SFAS 123R will require us to measure the cost of our employee
stock-based compensation awards granted after the effective date based on the grant date fair value of those awards and to record that cost as compensation expense over the period during which the employee is required to perform services in exchange
for the award (generally over the vesting period of the award). SFAS 123R addresses all forms of share-based payments awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights.
In addition, we will be required to record compensation expense (as previous awards continue to vest) for the unvested portion of previously granted awards that remain outstanding at the date of adoption. SFAS 123R is effective for fiscal years
beginning after June 15, 2005. Therefore, we are required to implement the standard no later than our first fiscal quarter which begins on March 1, 2006. SFAS 123R permits public companies to adopt its requirements using the following methods: (1) a
modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the
requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date; or (2) a modified retrospective method which includes the requirements of the modified
prospective method described above, but also permits entities to restate their financial statements based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures for either (a) all prior periods presented or (b)
prior interim periods of the year of adoption.



We are
currently evaluating the alternative methods of adoption as described above. As permitted by SFAS 123, we currently account for share-based payments to employees using APB 25s intrinsic value method and, as such, generally recognize no
compensation cost for employee stock options. Accordingly, the adoption of SFAS 123Rs fair value method will have a significant impact on our results of operations, although it will have no negative impact on our cash flow. The impact of
adoption of SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. See Note2k above for information related to the pro forma effects on our reported net income and net income
per share of applying the fair value recognition provisions of the previous SFAS 123 to stock-based employee compensation.



In December 2004, the FASB issued Financial Staff Position (FSP) No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings
Repatriation Provision within the American Jobs Creation Act of 2004 (FSP 109-2). On October 22, 2004, the American Jobs Creation Act of 2004 (the Act) was signed into law. The Act creates a temporary incentive for U.S.
corporations to repatriate accumulated income earned abroad by including an 85 percent deduction for certain foreign earnings that are repatriated, as defined in the Act, at an effective federal tax cost of 5.25 percent. FSP 109-2 is effective
immediately and provides accounting and disclosure guidance for the repatriation provision. FSP 109-2 allows companies additional time to evaluate the effects of the law on its unremitted earnings for the purpose of applying the indefinite
reversal criteria under APB 23, Accounting for Income Taxes  Special Areas, and requires explanatory disclosures from companies that have not yet completed the evaluation. Repatriated foreign earnings under the Act have been
utilized in a manner compliant with the provisions of the Act. Therefore, as discussed above, the repatriated earnings will be subject to an effective federal tax rate of 5.25% and applicable sate and local taxes.



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|3. | PROPERTY, PLANT AND EQUIPMENT:
|-- | ------------------------------



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



|                                                |  |      |            |      |   |           
|----------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                |  | 2005 |            | 2004
|Furniture, fixtures and equipment               |  | $    | 8,654,290  |      | $ | 8,185,446 
|Computer equipment                              |  |      | 6,338,046  |      |   | 5,993,016 
|Leasehold improvements                          |  |      | 1,254,364  |      |   | 1,254,364 
|                                                |  |      |            |      |   |           
|                                                |  |      | 16,246,700 |      |   | 15,432,826
|Less: accumulated depreciation and amortization |  |      | 12,318,642 |      |   | 11,030,928
|                                                |  |      |            |      |   |           
|                                                |  | $    | 3,928,058  |      | $ | 4,401,898 
|                                                |  |      |            |      |   |           



Depreciation expense
for the 2005, 2004 and 2003 years aggregated $1,307,427, $1,377,908 and $1,378,233, respectively.



|4. | SUBORDINATED NOTE RECEIVABLE:
|-- | -----------------------------



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. 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.



|5. | REVOLVING CREDIT LINE:
|-- | ----------------------



On September 30, 2004, the Company entered into a secured revolving line of credit agreement, as amended, with eight banks, which currently provides for
maximum borrowings of $100,000,000 or maximum borrowings of $65,000,000 utilizing an asset based formula predicated on a certain percentage of outstanding domestic accounts receivable and inventory positions at any given month end, Borrowings under
the credit line bear interest 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 February
27, 2008. Direct borrowings under the line of credit were $22,800,000 at February 28, 2005 and $5,300,000 at February 28, 2004. As of the end of each of the fiscal years, the Company had met all of the required bank covenants.



|6. | 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 and 2000 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.



F - 12



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|6. | CAPITAL STOCK AND STOCK OPTIONS (Continued):
|-- | --------------------------------------------



A summary of options granted and related information for the three years ended February 28, 2005 is
as follows:



|                                                               |  |           |   |  |                                |     
|-------------------------------------------------------------- |  | --------- | - |  | ------------------------------ | ----
|                                                               |  | Options   |   |  | Weighted AverageExercise Price
|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
|                                                               |  |           |   |  |                                |     
|Granted                                                        |  | 121,000   |   |  | $                              | 7.83
|Exercised                                                      |  | (31,981   | ) |  |                                | 4.85
|Cancelled                                                      |  | (56,788   | ) |  |                                | 9.39
|                                                               |  |           |   |  |                                |     
|Outstanding February 28, 2005                                  |  | 3,373,493 |   |  |                                |     
|                                                               |  |           |   |  |                                |     
|Weighted average fair value of options granted during the year |  |           |   |  | $                              | 3.72
|                                                               |  |           |   |  |                                |     
|Options exercisable at the end of each fiscal year:            |  |           |   |  |                                |     
|February 28, 2003                                              |  | 1,924,653 |   |  | $                              | 5.62
|February 29, 2004                                              |  | 2,604,762 |   |  |                                | 6.38
|February 28, 2005                                              |  | 3,230,243 |   |  |                                | 6.65



The following table
summarizes information about stock options outstanding as of December 31, 2004:



|                        |  |                  |  |                                           |  |                                |       |                   |           |                                |   |      
|----------------------- |  | ---------------- |  | ----------------------------------------- |  | ------------------------------ | ----- | ----------------- | --------- | ------------------------------ | - | -----
|                        |  | Outstanding      |  | Exercisable                              
|Range of exerciseprices |  | Number of shares |  | Weighted averageremainingcontractual life |  | Weighted averageexercise price |       | Numberexercisable |           | Weighted averageexercise price
|$2.93 to $6.44          |  | 2,200,743        |  | 6.22 years                                |  | $                              | 5.10  |                   | 2,119,493 |                                | $ | 4.87 
|$7.31 to $14.62         |  | 1,160,750        |  | 6.16 years                                |  | $                              | 10.52 |                   | 1,098,750 |                                | $ | 9.97 
|$18.33                  |  | 12,000           |  | 5.53 years                                |  | $                              | 18.33 |                   | 12,000    |                                | $ | 18.33



|7. | MINORITY INTERESTS IN SUBSIDIARIES:
|-- | -----------------------------------



Minority interests at February 28, 2005 and February 29, 2004 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 28, 2005

|8. | INCOME TAXES:
|-- | -------------



Components of income (loss) before income taxes is as follows:

|         |  |      |            |   |      |   |            |      |  |   |            |  
|-------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|         |  | 2005 |            |   | 2004 |   |            | 2003 | 
|Domestic |  | $    | (2,792,499 | ) |      | $ | (5,694,970 | )    |  | $ | (2,966,977 | )
|Foreign  |  |      | 8,372,653  |   |      |   | 4,425,909  |      |  |   | 657,234    |  
|         |  |      |            |   |      |   |            |      |  |   |            |  
|         |  | $    | 5,580,154  |   |      | $ | (1,269,061 | )    |  | $ | (2,309,743 | )
|         |  |      |            |   |      |   |            |      |  |   |            |  



The tax benefits
associated with the disqualifying disposition of stock acquired with incentive stock options reduced taxes currently payable as shown below by $185,350 for 2004. Such benefits are credited to additional paid-in capital. The provision (credit) for
income taxes is comprised of the following:

|                |  |      |           |      |   |            |      |  |   |          |  
|--------------- |  | ---- | --------- | ---- | - | ---------- | ---- |  | - | -------- | -
|                |  | 2005 |           | 2004 |   |            | 2003 | 
|Current:        |  |      |           |      |   |            |      |  |   |          |  
|Federal         |  | $    | 241,564   |      | $ | (1,195,777 | )    |  | $ | (747,670 | )
|State and local |  |      | 49,734    |      |   | (298,944   | )    |  |   | (191,481 | )
|Foreign         |  |      | 843,183   |      |   | 848,246    |      |  |   | 377,900  |  
|Deferred:       |  |      |           |      |   |            |      |  |   |          |  
|Federal         |  |      | 740,226   |      |   | (46,240    | )    |  |   | 16,976   |  
|State           |  |      | 148,048   |      |   | (11,560    | )    |  |   | 4,348    |  
|                |  |      |           |      |   |            |      |  |   |          |  
|                |  | $    | 2,022,752 |      | $ | (704,275   | )    |  | $ | (539,927 | )
|                |  |      |           |      |   |            |      |  |   |          |  



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

|                               |  |      |            |   |      |   |            |  
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                               |  | 2005 |            |   | 2004 |  
|Deferred tax assets:           |  |      |            |   |      |   |            |  
|Accounts receivable            |  | $    | 1,325,585  |   |      | $ | 1,335,023  |  
|Inventory                      |  |      | 189,457    |   |      |   | 282,227    |  
|Goodwill                       |  |      | 76,989     |   |      |   | 96,620     |  
|                               |  |      |            |   |      |   |            |  
|Total deferred tax assets      |  |      | 1,592,031  |   |      |   | 1,713,870  |  
|                               |  |      |            |   |      |   |            |  
|Deferred tax liabilities:      |  |      |            |   |      |   |            |  
|Fixed assets                   |  |      | 1,872,797  |   |      |   | (1,310,310 | )
|Income of Interest Charge DISC |  |      | 888,000    |   |      |   | (684,055   | )
|                               |  |      |            |   |      |   |            |  
|Total deferred tax liabilities |  |      | 2,760,797  |   |      |   | (1,994,365 | )
|                               |  |      |            |   |      |   |            |  
|Net deferred tax liabilities   |  | $    | (1,168,766 | ) |      | $ | (280,495   | )
|                               |  |      |            |   |      |   |            |  



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

|                             |  |       |   |  |       |    |  |       |   
|---------------------------- |  | ----- | - |  | ----- | -- |  | ----- | --
|                             |  | 2005  |   |  | 2004  |    |  | 2003  |   
|Statutory rate               |  | 34.0  | % |  | (34.0 | )% |  | (34.0 | )%
|State and local taxes        |  | 6.7   |   |  | (6.8  | )  |  | (5.3  | ) 
|Foreign  Asia subsidiaries  |  | 19.2  |   |  | 13.9  |    |  | 16.8  |   
|Foreign - Canada and U. K.   |  | 3.5   |   |  | (2.3  | )  |  | (2.8  | ) 
|Income from non-U.S. sources |  | (25.1 | ) |  | (20.9 | )  |  | 0.0   |   
|Disqualifying dispositions   |  | 0.0   |   |  | (5.0  | )  |  | (3.0  | ) 
|Other                        |  | (2.1  | ) |  | (.04  | )  |  | 4.9   |   
|                             |  |       |   |  |       |    |  |       |   
|Effective tax rate           |  | 36.2  | % |  | (55.5 | )% |  | (23.4 | )%
|                             |  |       |   |  |       |    |  |       |   



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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|9. | 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 28, 2005 aggregated $0 for 2005, $112,728 for 2004 and $0 for 2003. At February 28, 2005, the ESOP
owned 472,204 shares of the Companys common stock at an average price of approximately $3.45 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 28, 2005 were $283,618, $237,068 and $209,057, respectively.



|10. | 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. Effective June 1, 2004, the contract between the Company and Mr. Lubman was terminated and he ceased to be entitled to the 2.33% annual bonus described below. 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 entitled Mr. Lubman to 2.33% (9% in the aggregate) of the Companys
consolidated earnings before income taxes. On the termination of his employment agreement, each executive is entitled to certain payment, as follows:



| |  |  | Due to death or Disability (as defined in the employment agreement), salary and benefits for a five (5) year period.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | For Cause (as defined in the employment agreement), solely base salary through the date of termination.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Termination other than for death, disability or cause, shall be deemed to be a Retirement under the Retirement Plan.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Following a Change in Control (as defined in the employment agreement), a lump sum equal to three times the average total compensation paid to the applicable employee with respect
to the five fiscal years of the Registrant prior to the Change of Control, minus $100.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Executive Retirement Plan:



On December 1, 2004, our Board of Directors approved the adoption of the Nu Horizons Executive Retirement Plan (the Retirement Plan). Pursuant
to the terms of the Retirement Plan, we will provide an unfunded retirement benefit to certain executive employees of the company and its subsidiaries upon such executives retirement (as defined in the Retirement Plan). At the time the Board
of Directors approved the Retirement Plan, they determined that the participation of Mr. Nadata, Chairman of the Board and Chief Executive Officer, and Mr. Schuster, President, each a Founder (as defined in the Retirement Plan), would be contingent
upon the execution and delivery by each of them of an amendment to their respective employment agreements, which amendment would provide that a termination of employment other than for death, disability or cause would be a Retirement
under the Retirement Plan. As a result the Effective Date of the Retirement Plan is March 28, 2005, the date of such execution and delivery. Upon his Retirement, each executive will be entitled to receive an annual benefit in an amount
determined by the number of years of service the executive has provided to the Registrant, ranging from a minimum of $310,000 for 20 years of service to a maximum of $392,884 for 25 years of service.



F - 15



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|10. | COMMITMENTS AND CONTINGENCIES (continued):
|--- | ------------------------------------------



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 2006 |  | $ | 3,294,028
|Fiscal 2007 |  |   | 2,208,985
|Fiscal 2008 |  |   | 1,837,030
|Fiscal 2009 |  |   | 1,310,650
|Fiscal 2010 |  |   | 223,364  
|Thereafter  |  |   | 7,166    



Rent expense was
$3,538,701, $3,151,940 and $3,231,553, for each of the three years in the period ending February 28, 2005.



Litigation:



At times the Company is involved in various lawsuits incidental to its business. At February 28, 2005, management does not believe that any litigation
matter is material to its financial statements.



|11. | MAJOR SUPPLIERS:
|--- | ----------------



For the year ended February 28, 2005, the Company purchased inventory from three suppliers that was in excess of 10% of the Companys total
purchases. Purchases from these suppliers were approximately $97,360,000, $60,197,000 and $48,334,000 for the fiscal year.



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.



F - 16



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|12. | 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).



Inasmuch 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.



The net book value of long-lived assets by geographic area, for the fiscal years are as follows:



|                                                                                 |  |      |             |      |   |             |  |   |            
|-------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- |  | - | -----------
|                                                                                 |  | 2005 |             | 2004 |   | 2003       
|Americas                                                                         |  | $    | 3,589,705   |      | $ | 4,161,771   |  | $ | 4,995,203  
|Europe                                                                           |  |      | 33,742      |      |   | 27,668      |  |   | 28,342     
|Asia/Pacific                                                                     |  |      | 304,611     |      |   | 212,459     |  |   | 126,954    
|                                                                                 |  |      |             |      |   |             |  |   |            
|                                                                                 |  | $    | 3,928,058   |      | $ | 4,401,898   |  | $ | 5,150,499  
|                                                                                 |  |      |             |      |   |             |  |   |            
|                                                                                 |  |      |            
|Revenues, by geographic area, for the fiscal years are as follows:               |  |      |             |      |   |             |  |   |            
|                                                                                 |  |      |            
|                                                                                 |  | 2005 |             | 2004 |   | 2003       
|Americas                                                                         |  | $    | 352,778,270 |      | $ | 281,747,445 |  | $ | 277,647,379
|Europe                                                                           |  |      | 14,158,886  |      |   | 4,784,252   |  |   | 3,957,503  
|Asia/Pacific                                                                     |  |      | 100,912,218 |      |   | 59,332,180  |  |   | 20,475,927 
|                                                                                 |  |      |             |      |   |             |  |   |            
|                                                                                 |  | $    | 467,849,374 |      | $ | 345,863,877 |  | $ | 302,080,809
|                                                                                 |  |      |             |      |   |             |  |   |            
|                                                                                
|Total assets, by geographic area, at the end of the fiscal years are as follows:
|                                                                                 |  |      |            
|                                                                                 |  | 2005 |             | 2004 |   | 2003       
|Americas                                                                         |  | $    | 95,933,830  |      | $ | 113,249,247 |  | $ | 128,911,799
|Europe                                                                           |  |      | 13,920,840  |      |   | 1,717,119   |  |   | 1,265,127  
|Asia/Pacific                                                                     |  |      | 67,944,630  |      |   | 43,211,805  |  |   | 17,922,263 
|                                                                                 |  |      |             |      |   |             |  |   |            
|                                                                                 |  | $    | 177,799,300 |      | $ | 158,178,171 |  | $ | 148,099,189
|                                                                                 |  |      |             |      |   |             |  |   |            



F - 17



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##### Table of Contents

NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED FEBRUARY 28, 2005



|13. | SELECTED QUARTERLY FINANCIAL DATA (Unaudited):
|--- | ----------------------------------------------



|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  
|-------------------------------------------------------------------------- |  | ------------------------ | ----------- | ---------------- | - | ----------- | --------------- |  | - | ------------ | - |  | - | ----------- | -
|                                                                           |  | Three Month Period Ended |            
|                                                                           |  | February 28,2005         |             | November 30,2004 |   |             | August 31,2004  |  |   | May 31,2004  |  
|Net sales                                                                  |  | $                        | 114,222,492 |                  | $ | 116,218,925 |                 |  | $ | 119,231,880  |   |  | $ | 118,176,077 |  
|Cost of sales                                                              |  |                          | 95,383,758  |                  |   | 96,829,764  |                 |  |   | 99,493,834   |   |  |   | 98,560,638  |  
|Operating expenses                                                         |  |                          | 18,016,075  |                  |   | 17,687,355  |                 |  |   | 17,250,611   |   |  |   | 17,184,078  |  
|Interest expense (income) net                                              |  |                          | 549,868     |                  |   | 557,471     |                 |  |   | 426,804      |   |  |   | 328,964     |  
|Provision for income taxes                                                 |  |                          | 39,543      |                  |   | 405,028     |                 |  |   | 787,413      |   |  |   | 790,768     |  
|Minority interest                                                          |  |                          | 116,642     |                  |   | 154,459     |                 |  |   | 87,181       |   |  |   | 125,711     |  
|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  
|Net income                                                                 |  | $                        | 116,606     |                  | $ | 584,848     |                 |  | $ | 1,186,037    |   |  | $ | 1,185,918   |  
|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  
|Basic Earnings (Loss) per Share                                            |  | $                        | .01         |                  | $ | .03         |                 |  | $ | .07          |   |  | $ | .07         |  
|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  
|Weighted average number of common and common equivalent shares outstanding |  |                          | 16,891,647  |                  |   | 16,891,647  |                 |  |   | 16,884,147   |   |  |   | 16,884,147  |  
|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  
|                                                                           | 
|                                                                           |  | 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  |  
|                                                                           |  |                          |             |                  |   |             |                 |  |   |              |   |  |   |             |  



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|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 28, 2005.



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



Evaluation of Disclosure Controls and Procedures



Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this annual report.



Managements Report on Internal Control Over Financial Reporting



Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Our internal control over
financial reporting includes those policies and procedures that:



| |  |  | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting
principles in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting
principles in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the
financial statements
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our management assessed
the effectiveness of our system of internal control over financial reporting as of February 28, 2005. In making this assessment, we used the framework in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment and the criteria set forth by COSO, we believe that Nu Horizons maintained effective internal control over financial reporting as of February 28, 2005. Our
assessment of the effectiveness of our internal control over financial reporting has been audited by Lazar Levine & Felix LLP, an independent registered public accounting firm, as stated in their report which is included herein.



Inherent Limitations on Effectiveness of Controls



Our system of internal control over financial reporting was designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.



All internal control systems, no matter how well designed and operated, can
provide only reasonable assurance with respect to financial statement preparation and presentation. Our management does not expect that our disclosure controls and procedures will prevent all error and fraud. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that all control issues within the company have been detected, even with respect to those systems of internal control that are determined to be effective. These inherent limitations include the realities that judgments in decision-making can be
faulty, and that breakdown can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our



Page 18



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##### Table of Contents

system contains self monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.



Audit Committee Oversight



The Audit Committee of the Board of Directors, which is comprised solely of
independent directors, has oversight responsibility for our financial reporting process and the audits of our consolidated financial statements and internal control over financial reporting. The Audit Committee meets regularly with management and
the independent registered public accounting firm (collectively, the accountants) to review matters related to the quality and integrity of our financial reporting, internal control over financial reporting (including compliance matters
related to our Code of Personal and Business Conduct and Ethics), and the nature, extent, and results of internal and external audits. Our accountants have full and free access and report directly to the Audit Committee. The Audit Committee
recommended, and the Board of Directors approved, that the audited consolidated financial statements be included in this Annual Report on Form 10-K.



Report of Independent Registered Public Accounting Firm On Internal Control Over Financial Reporting



The Board of Directors and Stockholders of

Nu Horizons Electronics Corp.

Melville, New
York



We have audited managements assessment, included
in the accompanying Managements Report on Internal Control Over Financial Reporting, that Nu Horizons Electronics Corp. (Nu Horizons), maintained effective internal control over financial reporting as of February 28, 2005, based on
criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Nu Horizonss management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of Nu Horizonss
internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.



Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, managements assessment that Nu Horizons Electronics Corp. maintained effective internal control over financial reporting as of
February 28, 2005 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Nu Horizons Electronics Corp. maintained, in all material respects, effective internal control over financial reporting as of February
28, 2005, based on the COSO criteria.



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##### Table of Contents

Report of Independent Registered Public Accounting Firm On Internal Control Over Financial Reporting
(continued)



We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nu Horizons Electronics Corp. and subsidiaries as of February 28, 2005 and 2004 and the related consolidated statements of income,
shareholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended February 28, 2005, and our report dated May 4, 2005 expressed an unqualified opinion on those consolidated financial statements.



/s/ Lazar Levine & Felix LLPLazar Levine & Felix LLP




New York, New York

May 4, 2005



|ITEM 9B. | OTHER INFORMATION:
|-------- | ------------------



None



PART III



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



|                    |  |     |  |                                                 
|------------------- |  | --- |  | ------------------------------------------------
|NAME                |  | AGE |  | POSITION                                        
|Arthur Nadata       |  | 59  |  | Chairman, Chief Executive Officer and Director  
|                    |  |    
|Richard S. Schuster |  | 56  |  | President, Secretary and Director               
|                    |  |    
|Paul Durando        |  | 61  |  | Vice President  Finance, Treasurer and Director
|                    |  |    
|Herbert Gardner     |  | 65  |  | Director                                        
|                    |  |    
|Martin Novick       |  | 69  |  | Director                                        
|                    |  |    
|Dominic A. Polimeni |  | 58  |  | Director                                        
|                    |  |    
|David Siegel        |  | 79  |  | 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 2007) |  | Class III (To Serve Until the Annual Meeting of Stockholders in 2005)
|Paul Durando                                                        |  | Dominic A. Polimeni(1)(2)(3)(4)                                      |  | Arthur Nadata                                                        
|Herbert Gardner(1)(2)(3) David Siegel(1)(2)(3)                      |  | Richard S. Schuster                                                  |  | Martin Novick(1)(2)(3)                                               



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



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



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



|(4) | Member of the Acquisition Committee
|--- | -----------------------------------



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



Arthur Nadata has been the Companys Chairman of the Board since June
2004 and the Chief Executive Officer since September 1996. Mr. Nadata had been the President, Treasurer and a Director 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.



Richard S. Schuster is a Director and has been the Companys President since June of 2004. Mr. Schuster was 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.



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; TGC Industries, Inc., a seismic services
company and Co-Active Marketing Group, Inc., a marketing and sales promotion company.



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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. He has 30 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. Since 1990, Mr. Polimeni has been President of Gulfstream Financial Group, Inc., a privately
held financial consulting and investment-banking firm. From September 2003 through November 2004, he was a Director, President and Chief Executive Officer of Distribution Dynamics, Inc., a privately held ILM company based in Eden Prairie, MN.
Distribution Dynamics sold its business and assets through a Chapter 11 Section 363 sale under the U.S. Bankruptcy Code in 2004. From March 1995 through May 2002, Mr. Polimeni was Chairman and Chief Executive Officer of Questron Technology, Inc., a
publicly held ILM company based in Boca Raton, Florida. Questron sold its business and assets through a Section 363 sale in 2002. Previously, he held the position of Chief Financial Officer of Arrow Electronics, Inc., as well as other positions,
including general management positions, with Arrow. Mr. Polimeni began his career as a certified public accountant in the New York office of Arthur Young & Company, now Ernst & Young LLP.



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 (Chairman), 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, qualifies 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 2005.



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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 28, 2005, February 29, 2004 and February 28, 2003.



SUMMARY COMPENSATION TABLE



|                                                                             |  |                         |  |                        |                       |       |     |                                  |  |                            |  |     |                   
|---------------------------------------------------------------------------- |  | ----------------------- |  | ---------------------- | --------------------- | ----- | --- | -------------------------------- |  | -------------------------- |  | --- | ------------------
|                                                                             |  | Annual Compensation (1) |  | Long Term Compensation
|Name of Principal and Position                                               |  | Fiscal Year             |  | Salary                 |                       | Bonus |     | SecuritiesUnderlying Options (2) |  | All other (2) Compensation
|Arthur Nadata Chairman of the Board And CEO                                  |  | 200520042003            |  | $$$                    | 280,000263,900263,900 |       | $$$ | 175,94200                        |  | 00390,000                  |  | $$$ | 38,28838,94539,605
|                                                                             |  |                         |  |                        |                      
|Richard Schuster President and Secretary and President, NIC Components Corp. |  | 200520042003            |  | $$$                    | 280,000263,900263,900 |       | $$$ | 175,94200                        |  | 00345,000                  |  | $$$ | 35,18635,67036,154
|                                                                             |  |                         |  |                        |                      
|Paul Durando Vice President, Finance and Treasurer                           |  | 200520042003            |  | $$$                    | 180,000180,000180,000 |       | $$$ | 13,32900                         |  | 0090,000                   |  | $$$ | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### 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. Effective June 1, 2004, the contract between the Company and Mr. Lubman was terminated and he ceased to be entitled to the 2.33% annual bonus described below. 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 the two officers to an annual bonus equal to 3.33%, and entitled Mr. Lubman to 2.33% (9% in the aggregate) of the Companys
consolidated earnings before income taxes. On the termination of his employment agreement, each executive is entitled to certain payment, as follows:



| |  |  | Due to death or Disability (as defined in the employment agreement), salary and benefits for a five (5) year period.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | For Cause (as defined in the employment agreement), solely base salary through the date of termination.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Termination other than for death, disability or cause, shall be deemed to be a Retirement under the Retirement Plan.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Following a Change in Control (as defined in the employment agreement), a lump sum equal to three times the average total compensation paid to the applicable employee with respect
to the five fiscal years of the Registrant prior to the Change of Control, minus $100.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



There were no stock options granted to the executive officers named in Item 11 during the fiscal year ended February 28, 2005.



The following table sets forth certain information as to each exercise of stock options during the fiscal year ended February 28, 2005 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



|                 |  |                           |                            |                    |                            |                                            |  |                                                        |          
|---------------- |  | ------------------------- | -------------------------- | ------------------ | -------------------------- | ------------------------------------------ |  | ------------------------------------------------------ | ---------
|                 |  | SharesAcquired onExercise |                            | Value Realized (1) |                            | Number ofUnexercisedOptions/SARs at FY End |  | Value ofUnexercised In-the-MoneyOptions/SARs at FY End
|                 |  |                           | Exercisable/ Unexercisable |                    | Exercisable/ Unexercisable
|Arthur Nadata    |  | 0                         |                            | 0                  |                            | 878,375                                    |  | $                                                      | 1,329,365
|                 |  |                           |                            |                    |                            | 0                                          |  |                                                        | 0        
|                 |  |                           |                            |                   
|Richard Schuster |  | 0                         |                            | 0                  |                            | 778,998                                    |  |                                                        | 1,180,934
|                 |  |                           |                            |                    |                            | 0                                          |  |                                                        | 0        
|                 |  |                           |                            |                   
|Paul Durando     |  | 0                         |                            | 0                  |                            | 122,718                                    |  |                                                        | 87,989   
|                 |  |                           |                            |                    |                            | 0                                          |  |                                                        | 0        



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



Directors Compensation and Board and Committee Meetings



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 four (4) meetings of the Board of Directors, one (1) meeting of the Outside Directors, five (5) meetings of the Audit Committee, four (4) meetings of the Compensation Committee, two (2) meetings of the
Nominating Committee and ten (10) meetings of the Acquisition Committee during the fiscal year ended February 28, 2005. A copy of the charters for each of the Audit, Compensation and Nominating Committees can be found on our website at
www.nuhorizons.com. All of our directors attended or participated in all of the meetings of the Board of Directors and Committee meetings.



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##### Table of Contents

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



Audit Committee



For the fiscal year ended February 28, 2005, there were five (5) 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 and quarterly reviews, the Companys internal accounting controls and the
professional services furnished by the independent auditors to the Company.



Compensation Committee Interlocks and Insider Participation



The Companys Compensation Committee consisted during fiscal 2005 of Messrs. Gardner (Chairman), Novick, Polimeni and Siegel. The Compensation
Committee determines the compensation of our executive officers, subject to the terms of existing employment contracts and administers our option plans.



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.



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 384,750 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 16-b 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 1,196,243 shares and 27,280 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 (the 2000 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 2005, no options were granted under the 2000 Stock
Option Plan and 25,250 options are currently 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 3 for 2 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 16-b 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



Page 26



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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 16-b 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 2005, 61,000 options were granted under the plan with exercise prices of $6.44 and $10.02.
8,500 options are currently available for grant under the plan.



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 28, 2005, there are 63,750
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 28, 2005, there are 210,000
director options outstanding and no 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 28, 2005, there are 30,000 director options outstanding and 120,000 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.



Page 28



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##### Table of Contents

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



Under the 2002 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 2005 Outside Director Stock Option Grants:



During fiscal 2005, pursuant to the 2000 Director Plan, the Company granted
options to purchase 15,000 shares to each of Messrs. Gardner, Polimeni and Siegel at a price of $6.44 per share.



During fiscal 2005, pursuant to the 2002 Director Plan, the Company granted options to purchase 15,000 shares to Mr. Novick at a price of $6.44 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. 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 28, 2005, there were no borrowings relative to the plan. At February 28, 2005, the ESOP
owned 472,204 shares at an average price of approximately $3.45 per share.



Page 29



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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 ($15,000 in calendar 2004). Company contributions are discretionary. Effective with the plan year ended February 28, 2005, 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 28, 2005 approximately 250 employees had elected to participate in the plan. For the fiscal year ended February 28, 2005, the Company
contributed $283,618 to the plan, of which $7,062 was a matching contribution of $2,631 for each of Mr. Nadata and Mr. Schuster and $1,800 for Mr. Durando.



Executive Retirement Plan



On December 1, 2004, our Board of Directors approved the adoption of the Nu Horizons Executive Retirement Plan (the Retirement Plan). Pursuant
to the terms of the Retirement Plan, we will provide an unfunded retirement benefit to certain executive employees of the company and its subsidiaries upon such executives retirement (as defined in the Retirement Plan). At the time the Board
of Directors approved the Retirement Plan, they determined that the participation of Mr. Nadata, Chairman of the Board and Chief Executive Officer, and Mr. Schuster, President, each a Founder (as defined in the Retirement Plan), would be contingent
upon the execution and delivery by each of them of an amendment to their respective employment agreements, which amendment would provide that a termination of employment other than for death, disability or cause would be a Retirement
under the Retirement Plan. As a result the Effective Date of the Retirement Plan is March 28, 2005, the date of such execution and delivery. Upon his Retirement, each executive will be entitled to receive an annual benefit in an amount
determined by the number of years of service the executive has provided to the Registrant, ranging from a minimum of $310,000 for 20 years of service to a maximum of $392,884 for 25 years of service.



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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, 2005, 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                                      |  | 118,323   | (1)(2) |  |         | *
|Herbert M. Gardner                                |  | 148,123   | (3)(4) |  |         | *
|Martin Novick                                     |  | 5,000     | (3)    |  |         | *
|Dominic Polimeni                                  |  | 60,000    | (3)    |  |         | *
|David Siegel                                      |  | 76,804    | (3)    |  |         | *
|Arthur Nadata                                     |  | 1,139,697 | (5)(6) |  | 6.1     | %
|Richard S. Schuster                               |  | 1,136,652 | (5)(6) |  | 6.1     | %
|Wasatch Advisors Inc.                             |  | 1,565,061 | (7)    |  | 8.4     | %
|Dimensional Fund Advisors                         |  | 1,325,768 | (8)    |  | 7.0     | %
|Babson Capital                                    |  | 919,060   | (9)    |  | 5.0     | %
|Royce & Associates                                |  | 1,485,534 | (10)   |  | 7.9     | %
|Wellington Management Company LLP                 |  | 1,392,500 | (11)   |  | 7.4     | %
|All officers and directors as a group (7 persons) |  | 2,684,599 |        |  | 14.4    | %



NOTES:



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



|(1) | Includes options exercisable within 60 days for 107,718 shares of Common Stock under the Companys 2000, 1998 and 1994 Stock Option Plans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes 10,605 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 123,750 shares of common stock for Mr. Gardner, 5,000 shares for Mr. Novick, 60,000 shares for Mr. Polimeni and
60,000 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, 24,373 shares owned by Mr. Gardners qualified plan and 5,587 shares held by his IRA.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Includes options exercisable within 60 days for 691,498 shares of common stock for Mr. Schuster and 765,875 shares for Mr. Nadata under the Companys 2000, 1998
and 1994 Stock Option Plans.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Includes 26,184 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) | One Memorial Drive, Cambridge, MA 02142
|--- | ---------------------------------------



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



|(11) | 75 State Street, Boston, MA 02109
|---- | ---------------------------------



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##### Table of Contents

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



For the fiscal year ended February 28, 2005, the Company received an aggregate $416,000 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:



|                      |  |      |         |      |   |        
|--------------------- |  | ---- | ------- | ---- | - | -------
|                      |  | 2005 |         | 2004
|Audit fees(1)         |  | $    | 171,650 |      | $ | 151,450
|Audit related fees(2) |  |      | 92,432  |      |   |       
|Tax fees(3)           |  |      | 51,080  |      |   | 50,042 
|All Other(4)          |  |      | 36,100  |      |   | 24,609 
|                      |  |      |         |      |   |        
|                      |  | $    | 351,262 |      | $ | 226,101
|                      |  |      |         |      |   |        



|(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 2005 and 2004
Nu Horizons Electronics Corp. consolidated financial statements, in accordance with standards of the PCAOB; (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 the audit of Nu Horizons Electronics Corp. internal controls.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(4) | Accounting consultation on the implementation of Sarbanes Oxley Section 404 and the audit of the Companys employee benefit plans.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



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 AND SCHEDULES:
|-------- | ---------------------------------------------



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



|                                                                                                                     |  |                                                              |  |     
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | ----
|                                                                                                                     |  |                                                              |  | Page
|Report of Independent Registered Public Accounting Firm                                                              |  | F-1                                                         
|                                                                                                                     | 
|Consolidated Balance Sheets as of February 28, 2005 and February 29, 2004                                            |  | F-2                                                         
|                                                                                                                     | 
|Consolidated Statements of Operations for the three years in the period ended February 28, 2005                      |  | F-3                                                         
|                                                                                                                     | 
|Consolidated Statements of Changes in Shareholders Equity for the three years in the period ended February 28, 2005 |  | F-4                                                         
|                                                                                                                     | 
|Consolidated Statements of Cash Flows for the three years in the period ended February 28, 2005                      |  | F-5                                                         
|                                                                                                                     | 
|Notes to Consolidated Financial Statements                                                                           |  | F-7                                                         
|                                                                                                                     |  |                                                             
|(a) (2)                                                                                                              |  | Schedule II  Valuation and Qualifying Accounts and Reserves |  | 39  
|                                                                                                                     |  |                                                             
|(a) (3)                                                                                                              |  | See exhibits required  Item (c) below                       |  |     
|                                                                                                                     |  |                                                             
|(b)                                                                                                                  |  | Exhibits                                                     |  |     



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##### Table of Contents

|(c) | ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES:
|--- | ------------------------------------------------------



|               |  |                                                                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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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|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
|-------- | --------------------------------------------



| | (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                                                                                                                                                                                                                  
|               | 
|22             |  | The following is a list of the Companys subsidiaries:                                                                                                                                                                                             



|                                       |  |                                  
|-------------------------------------- |  | ---------------------------------
|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                        





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##### Table of Contents

|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
|-------- | --------------------------------------------



|     |  |                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------
|     | 
|23   |  | Accountants Consent (included as Page 38 in this Form 10-K)                                          
|     | 
|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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##### Table of Contents



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,CEO (Principal Operating Officer)




By:

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




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



|    |  |                                            |  |                                                            |  |            
|--- |  | ------------------------------------------ |  | ---------------------------------------------------------- |  | -----------
|    |  | SIGNATURE                                  |  | CAPACITY                                                   |  | DATE       
|    |  |                                            | 
|By: |  | /s/ ARTHUR NADATAArthur Nadata             |  | Chairman of The Board, Chief Executive Officer             |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ RICHARD SCHUSTERRichard Schuster       |  | President, Chief Operating Officer, Secretary and Director |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ PAUL DURANDOPaul Durando               |  | Vice President, Finance, Treasurer and Director            |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ HERBERT M. GARDNERHerbert M. Gardner   |  | Director                                                   |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ MARTIN NOVICKMartin Novick             |  | Director                                                   |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ DOMINIC A. POLIMENIDominic A. Polimeni |  | Director                                                   |  | May 9, 2005
|    |  |                                            | 
|By: |  | /s/ DAVID SIEGELDavid Siegel               |  | Director                                                   |  | May 9, 2005



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##### Table of Contents

Exhibit 23



Consent of Independent Registered Public Accounting Firm



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 May 4, 2005, 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 28, 2005.



/s/ LAZAR LEVINE & FELIX LLPLAZAR LEVINE & FELIX LLPCertified Public Accountants




New York, New York

May 11, 2005



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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 28, 2005



|                                                                                    |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          
|----------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ------------------------------------- | - | -------------- |  | - | ----------------------- | - |  | - | ---------
|Description                                                                         |  | Balance atBeginning ofperiod |           | Additions charged tocosts andexpenses |   | Deductions (A) |  |   | Balance atend of period
|Valuation account deducted in the balance sheet from the asset to which it applies: |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          
|Allowance for doubtful accounts- accounts receivable                                |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          
|2005                                                                                |  | $                            | 4,089,801 |                                       | $ | 285,510        |  | $ | (206,601                | ) |  | $ | 4,581,812
|                                                                                    |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          
|2004                                                                                |  | $                            | 4,083,590 |                                       | $ | 0              |  | $ | (6,211                  | ) |  | $ | 4,089,801
|                                                                                    |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          
|2003                                                                                |  | $                            | 4,445,901 |                                       | $ | 0              |  | $ | 362,311                 |   |  | $ | 4,083,590
|                                                                                    |  |                              |           |                                       |   |                |  |   |                         |   |  |   |          



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



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##### Table of Contents

---



SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549



---



EXHIBIT INDEX



to



FORM 10-K



FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2005



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                                                                 
|               | 
|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 Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



---



Page 40