UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

|X|   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934

For the fiscal year ended June 30, 2008

                                       OR

|_|   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

                          Commission File Number 0-6620

                                  ANAREN, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           New York                                              16-0928561
-------------------------------                              ------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

               6635 Kirkville Road, East Syracuse, New York 13057
               --------------------------------------------------
              (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code(315) 432-8909

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 Par Value
                                (Title of Class)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes |_| No |X|

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section15(d) of the Act. Yes |_| No |X|

<PAGE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or15(d) of the Securities  Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |X| No |_|

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

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
definition  of "large  accelerated  filer,"  "accelerated  filer," and  "smaller
reporting company" in Rule12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer |_|    Accelerated Filer |X|   Non-accelerated Filer |_|
Smaller reporting company |_|

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes |_| No |X|

The  aggregate   market  value  of  the   Registrant's   Common  Stock  held  by
non-affiliates of the Registrant,  based on the closing sale price of the Common
Stock on  December  31,  2007,  as  reported on the Nasdaq  Global  market,  was
approximately $236,234,734.

The number of shares of the Registrant's  Common Stock  outstanding on September
9, 2008 was 14,595,795.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for use in connection with its 2008
Annual Meeting of  Shareholders  are  incorporated by reference into Part III of
this Annual Report on Form 10-K.

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

<PAGE>

                                     PART I

Item 1. Business

General Overview

      The Company was incorporated in New York in 1967. The Company's  executive
offices are located at 6635 Kirkville Road, East Syracuse,  New York 13057.  The
telephone  number  of the  Company  at that  location  is  (315)  432-8909.  The
Company's website is located at  www.anaren.com.  The Company makes its periodic
and  current  reports  available,  free of  charge,  on its  website  as soon as
reasonably  practicable  after such  material is  electronically  filed with, or
furnished to, the Securities and Exchange Commission. The Company's common stock
is listed on the  Nasdaq  Global  Market  under the  symbol  "ANEN."  Unless the
context otherwise provides, the "Company" or "Anaren" refers to Anaren, Inc. and
its subsidiaries.

      The Company is a leading  provider of microwave  components and assemblies
for the  wireless  and space  and  defense  electronic  markets.  The  Company's
distinctive  engineering,  manufacturing  and packaging  techniques enable it to
cost-effectively  produce  compact,  lightweight  microwave  products for use in
wireless  communication  and space and defense systems covering a broad range of
frequencies  (from 100MHZ to more than 30GHZ) and power levels  (small signal to
more than 500 watts).

      Through its focused research and development efforts,  Anaren continues to
design  components and subsystems for wireless  communication  systems including
wireless infrastructure,  wireless consumer and medical applications, as well as
advanced radar,  beamforming,  jamming, and receiver  applications for the space
and defense markets.

Recent Developments

      On July 31, 2008, the Company  cancelled its previous $50.0 million demand
note loan  agreement  with no balance  outstanding  on the loan; and on the same
day,  the  Company  signed a loan  agreement  with its bank for a $50.0  million
declining  revolving  line of  credit  to be used to  finance  acquisitions  and
working capital needs. On July 31 and August 29, 2008, the Company took advances
totaling $50.0 million on this line to finance the  acquisitions of M.S. Kennedy
Corp. and Unicircuit,  Inc.  Advances under this line, at the Company's  choice,
bear interest at LIBOR, plus 100 to 450 basis points or at the Prime Rate, minus
(100) to plus 225 basis points,  depending upon the Company's EBITDA performance
at the end of each  quarter as measured by the  formula:  EBITDA  divided by the
Current Portion of Long-term debt plus interest expense.  Availability of credit
under the line declines 20% annually on the anniversary date of the note and any
outstanding principal balance in excess of the new line limit is due and payable
at that time.

      On August 1, 2008, the Company  completed the acquisition of M.S. Kennedy,
Corp. ("MSK"),  located in Syracuse, New York. MSK is a leading provider of high
performance  analog  microelectronics  to the Defense and Space markets and is a
leading  designer and producer of custom  analog  hybrids,  power  hybrids,  and
multi-chip modules. MSK offers broad electronic component design, packaging, and
integration  capability  with net sales of $22.4 million in calendar  2007.  MSK
will be integrated into Anaren's existing Space & Defense business group. Anaren
acquired  MSK for a purchase  price of $28.0  million on a cash free,  debt free
basis,  and earnings  from MSK are expected to be accretive in fiscal year 2009.
The  Company  financed  this  transaction  through a five  year,  $50.0  million
revolving  debt  facility.  Goodwill  and  intangible  assets  related  to  this
acquisition will be approximately $14-16 million.

      On August 30, 2008,  the Company  completed the  acquisition of Unicircuit
Inc.  located in Littleton,  Colorado.  Unicircuit is a manufacturer  of printed
circuit boards (PCB) used in various  military and aerospace  applications  with
net sales of $18.7  million in  calendar  2007.  Unicircuit  is a leader in high
frequency PCB technology and will enhance Anaren's ability to capture integrated
microwave  assembly  opportunities  in  the  defense,  satellite  and  aerospace
markets.  Unicircuit will be integrated  into Anaren's  existing Space & Defense
business  group.  Anaren  acquired  Unicircuit,  Inc.  for a  purchase  price of
approximately  $21.7 million on a cash free, debt free basis,  and earnings from
Unicircuit  are  expected  to be  accretive  in fiscal  year 2009.  The  Company
financed this  transaction  by utilizing  its existing five year,  $50.0 million
revolving  debt  facility.  Goodwill  and  intangible  assets  related  to  this
acquisition will be approximately $11-13 million.


--------------------------------------------------------------------------------
                                       1
<PAGE>

Wireless Segment

      Industry Overview

      The  Company's  Wireless  products  are used  primarily  in  communication
systems,  either in user equipment,  such as Wireless Local Area Network (WLAN),
Bluetooth,  or Satellite  Television Reception  applications,  or on the network
infrastructure  side such as Cellular  Telephone  Base  Stations  or  Television
Broadcast equipment applications.

      A typical  wireless  communications  network is  comprised of a geographic
region  containing  a number of cells,  each of which  contains one or more base
stations,  which are linked in a network to form a service  provider's  coverage
area.  Each base station houses the equipment that receives  incoming  telephone
calls and broadcasts calls to the wireless users within the cell. A base station
can  process  a fixed  number  of radio  channels  through  the use of  multiple
transceivers,  power amplifiers,  filters, and combiners - along with an antenna
to transmit and receive signals to and from the wireless user.

      Global  System for Mobile  communications  (GSM) and the higher  data rate
overlay  Enhanced  Data Rates for GSM Evolution  (EDGE) is the industry  leading
technology in terms of equipment  shipped,  users served, and countries covered.
In support of major equipment roll-outs primarily in India and China, demand for
GSM/EDGE  equipment  was at all time highs  during  fiscal 2007 and  remained at
those levels in fiscal  2008.  This  resulted in  increased  demand for both the
Company's  components and higher level custom  assemblies.  The Company believes
that the  industry  trend for GSM/EDGE  equipment is going to remain  relatively
strong for the next several years.

      GSM is referred  to as a second  generation  (2G)  wireless  network.  For
higher data rates, third generation networks (3G) are utilized.  In the years to
come, the number of persons  requiring high data rates to support using internet
and email from mobile terminals is also expected to continue to grow.  Fueled by
this demand,  deployment of new high data rate networks should continue.  Demand
for 3G related  products is  estimated to be similar to 2G equipment in the near
future. The Company's products are utilized in both 2G and 3G GSM equipment.

      Worldwide  Interoperability  for Microwave  Access (WiMAX) is a technology
aimed at providing  wireless data over long distances in a variety of ways, from
point-to-point  links to full mobile  cellular  type access.  There is currently
increasing  amounts  of  development  activity  in the  industry  aimed  at this
emerging technology.  The Company has and continues to develop products for this
application.

Strategy

      The Company's  strategy for the Wireless segment is to continue to use its
microwave  expertise,  proprietary  technologies,   extensive  microwave  design
libraries  and  low  cost  manufacturing  capabilities  to  further  expand  its
penetration in the wireless  industry.  Key components of the Company's strategy
include the following:

      Pursue Large Addressable Markets. The Company has successfully  penetrated
      the mobile wireless infrastructure market and is using its market position
      to pursue other wireless markets such as WLAN, Mobile Handsets, Bluetooth,
      Satellite Television, medical and other consumer electronics markets. This
      is enabled by advances made in the Company's  design and  manufacturing of
      sub miniature Multi-Layer Stripline components.

      Focus on value added products. The Company intends to expand its component
      offerings  to enable  the  Company  to  increase  the  number of  products
      addressing each wireless  application.  In addition,  with its Multi-Layer
      Stripline,   ferrite  devices,   and  Thick  Film  Ceramic   manufacturing
      technologies,   the  Company   intends  to   continue   to  increase   the


--------------------------------------------------------------------------------
                                       2
<PAGE>

      functionality of its products,  thereby enabling its wireless customers to
      continue to reduce the size and cost of their platforms, while the Company
      increases its content value.

      Strengthen and Expand Customer  Relationships.  Today, a limited number of
      large OEMs drive the wireless market. The Company has developed, and plans
      to  continue  to  expand,   customer  relationships  with  many  of  these
      manufacturers including Andrew, Ericsson,  Huawei, Motorola, Nokia Siemens
      Networks and Nortel  Networks.  The Company intends to further  strengthen
      its customer  relationships by offering  complete  outsourcing  solutions,
      from research and  development to product design and  production,  thereby
      increasing the customers' reliance on the Company.

      Pursue  Price  Leadership  Position.   The  Company  aspires  to  use  its
      technological   leadership,   low   cost   manufacturing,   and   sourcing
      capabilities  to be one of, if not the lowest cost  provider of components
      and higher level assemblies for the wireless markets.

      Pursue Strategic  Acquisitions.  The Company intends to continue to pursue
      opportunistic  acquisitions of companies,  product lines and technologies.
      The Company  will focus on  acquisitions  that  compliment  its  technical
      expertise  and business  development  resources  and provide a competitive
      advantage for its targeted markets.

Products and Technologies

      The  Company  provides  components  and  assemblies  to  leading  wireless
industry  equipment  manufacturers.   These  products  range  from  subminiature
components for consumer electronics to large back planes for high power wireless
infrastructure applications.

      The Company has  developed  its product  offerings to enable  customers to
reduce the size and cost,  while enhancing the  performance of their  equipment.
The Company  continually invests capital and human resources to enhance existing
products  and develop new  products to address the latest  market  demands.  The
Company has developed and continues to market a full line of standard  products,
as well as custom products,  to wireless  original  equipment  manufacturers.  A
brief description of the Company's major product categories is as follows:

      Passive Surface Mount Components. The Company's Xinger(R) line of products
      consists of off-the-shelf surface mount microwave components which provide
      passive  microwave  signal  distribution  functions.  These  products were
      developed  to  provide a low-cost  high  performance  signal  distribution
      component,  which could be placed on standard  printed circuit boards with
      automated production equipment. The primary applications of these products
      are in equipment for cellular base  stations and in WLAN,  Bluetooth,  and
      Satellite Television.

      In cellular  base  stations,  the  Company's  surface  mount  products are
      utilized  in radio  frequency  power  amplifiers,  and are  also  found in
      low-noise  amplifiers and radios. The Company believes it is currently the
      market leader in this product area,  supplying  industry  leading original
      equipment  manufacturers  and leading power amplifier  manufacturers.  The
      Company  continues to invest in the expansion of this product line as well
      as its addressable market. The Company's surface mount product line offers
      significantly improved RF performance and power handling in a package that
      supports the latest global environmentally friendly initiatives.

      The Company has also recently  introduced  several  products  specifically
      designed  to address  WLAN,  cellular  telephone  handsets  and  Bluetooth
      applications.  These  innovative  products  are  1/100th  the  size of our
      typical   Xinger(R)  type  of  product  and  offer  performance  and  cost
      advantages over traditional consumer electronic components.

      Ferrite  Products.  The Company's  ferrite  components are used in various
      wireless  base  station  applications.  They are a key  component  in base
      station amplifiers, and their primary function is to protect the sensitive
      amplifier  electronics from damage by isolating them  electronically  from
      potentially  harmful high power signals. In fiscal year 2007 and 2008, the
      Company continues to expand its ferrite product offering and also expanded
      its production capacity for ferrite products.


--------------------------------------------------------------------------------
                                       3
<PAGE>

      Resistive   Products.   The  Company's  resistive  product  line  includes
      resistors,  power  terminations,  and  attenuators  for use in high  power
      wireless, industrial, and medical applications.  These products range from
      very  small  components  for  implantable  medical  devices  to high power
      products used in power  amplifiers.  These products are frequently used in
      conjunction  with  ferrite  products as well as  Xinger(R)  surface  mount
      components.

      Custom  Splitting  and  Combining  Products.  In addition to its  standard
      products,  the Company offers a wide range of custom signal  splitting and
      combining  solutions.   These  custom  solutions  are  typically  used  to
      distribute  signals to and from  antennas,  radio  transceivers  and power
      amplifiers in wireless  base station  applications.  The Company's  custom
      assemblies typically integrate several of the Company's components such as
      Xinger(R),   ferrite,   and  resistive   products.   Given  this  vertical
      integration,  the Company's Custom Splitting and combining  products offer
      very  high  performance  and can be  designed  in  unique  configurations,
      allowing base station  designers an  opportunity  to greatly reduce space,
      complexity and cost while enhancing performance.

      Custom Radio Frequency Backplane Assemblies. The Company's radio frequency
      backplanes  provide  efficient  connections of microwave  signals  between
      subsystems in wireless  base  stations.  Radio  frequency  backplanes  are
      conceptually  similar to the  motherboard  in a personal  computer,  which
      efficiently connects signals between multiple subsystems. These assemblies
      range from  radio  frequency-only  to fully  integrated  radio  frequency,
      direct current  power,  and digital  signal  routing  solutions.  They are
      typically used in conjunction with radio  transceivers and radio frequency
      power amplifiers.  The Company also offers backplane assemblies with fully
      integrated radio-frequency signal switching capability.

      Hybrid Matrix  Assemblies.  The Company's  hybrid matrix  assemblies allow
      customers  to  effectively  reduce  the  number  of  amplifiers  in a base
      station.  Base station amplifier systems are designed to handle peak usage
      when  maximum  calls are  being  made over a  network.  Due to the  sector
      coverage of typical base stations,  some amplifiers are heavily used while
      others are not. The Company's  matrices  allow the spreading of high usage
      volume over all base  station  amplifiers,  permitting  a reduction in the
      total number of amplifiers needed.  These products are offered in a number
      of packaging configurations, including backplanes.

Customers

      The Company  believes that the strength of its customer  support and depth
of its customer  relationships provide the Company a competitive  advantage.  To
this end, the Company endeavors to become an integral part of its key customers'
operations  by working  closely  with them  through the entire  development  and
production  process.  The  Company  assigns a dedicated  multi-disciplined  team
including project  engineering,  design engineering and customer service to each
customer to ensure a high level of  responsiveness  and customer  service.  This
team  assists  the  customer  from the  conceptual  design  stages  through  the
development and  manufacturing  process.  By maintaining  close contact with the
customers' design engineering,  manufacturing, purchasing and project management
personnel,  the Company  can better  understand  their  needs,  rapidly  develop
customer-specific solutions, and more effectively design the Company's solutions
into the customers' systems and networks.

      The  Company  sells its  standard  line of  Xinger(R)  components,  custom
products,  resistive  components,  and ferrite  components  to leading  original
equipment  manufacturers and a broad range of other wireless  equipment contract
manufacturers.  In general,  customers  have  purchased the  Company's  products
directly  from the  Company or through  distributors  or sales  representatives.
During the fiscal year ending June 30, 2008, the Wireless business accounted for
60% of the Company's total revenues.  Nokia Siemens Networks  (Nokia)  accounted
for over 17% of net sales.  No other Wireless  customer  accounted for more than
10% of the  Company's  fiscal  2008 net sales.  The  following  is a list of the
customers  who  generated  $1,000,000 or more in revenues for the Company in the
fiscal year ending June 30, 2008:

      o     Avnet Electronics

      o     Celestica Corp.

      o     EG Components


--------------------------------------------------------------------------------
                                       4
<PAGE>

      o     Flextronics International, Ltd.

      o     Huawei Technologies Co., Ltd.

      o     MCL Industries

      o     Motorola, Inc.

      o     Nokia Siemens Networks

      o     Richardson Electronics, Ltd.

      o     Solectron Corporation

      o     St. Jude Medical

      o     Telecom International, Inc.

Competition

      The  microwave  component  and  assembly  industry  continues to be highly
competitive.  Direct  competitors of the Company in the wireless  market include
Aeroflex, Smith Industries, TYCO and Soshin Electric Co. As a direct supplier to
original equipment manufacturers, the Company also faces significant competition
from the in-house  capabilities of its customers.  However, the current trend in
the wireless  marketplace has been for the original  equipment  manufacturers to
outsource more design and production work.

      The principal competitive factors in both the foreign and domestic markets
are technical  performance,  reliability,  ability to produce in volume, on-time
delivery  and most  critically,  price.  It is  anticipated  that  this  pricing
pressure will continue indefinitely.

Based on these factors,  the Company believes that it competes  favorably in its
markets.  The Company  believes  that it is  particularly  strong in the area of
technical  performance  in the  wireless  marketplace.  With  its  manufacturing
capability in Suzhou,  China, and new innovative design techniques,  the Company
believes that it now competes favorably on price as well.

Backlog

      The Company's backlog of orders for the Wireless segment was $13.0 million
as of June 30, 2008,  versus $15.3 million as of June 30, 2007.  Backlog for the
Wireless  segment  primarily  represents firm orders for component  products and
signed purchase orders (i.e.,  orders for specific  custom  sub-assemblies)  for
custom components due to ship within eight to twelve weeks. The Company does not
believe that its Wireless backlog as of any particular date is representative of
actual sales for any succeeding  period.  Typically,  large  original  equipment
manufacturers  including  Ericsson,  Motorola,  Nokia  and  Nortel,  who use the
Company's  component  and custom  products,  negotiate  set prices for estimated
annual volumes.  The Company then receives a firm delivery  commitment  prior to
shipment.  The Company does not  recognize  backlog until it has received a firm
order.

      As part of the Company's close working  relationships  with major wireless
communications customers, the customers expect the Company to respond quickly to
changes in the volume and delivery  schedule of their orders and, if  necessary,
to inventory  products at its facilities for just-in-time  delivery.  Therefore,
although  contracts with these  customers  typically  specify  aggregate  dollar
volumes  of  products  to be  purchased  over an  extended  time  period,  these
contracts also


--------------------------------------------------------------------------------
                                       5
<PAGE>

provide for delivery flexibility,  on short notice. In addition, these customers
may  cancel  orders  with  some  financial   penalty  or  defer  orders  without
significant penalty.

Space and Defense Segment

Industry Overview

      The U.S. Department of Defense (DOD) and major U.S. Defense OEM's continue
to be  committed to ensure a high state of military  readiness.  The DOD funding
priorities focus on the safety and effectiveness of our troops, national defense
programs,  homeland security, and battlefield command and communication systems.
Funding for advanced radar systems,  advanced jamming systems,  smart munitions,
electronic  surveillance  systems and satellite  and ground based  communication
systems has remained strong.  Therefore,  we see a favorable outlook for defense
industry spending and demand for our products and technologies.

Strategy

      The Company's strategy for the Space and Defense segment is to continue to
use its microwave  expertise,  proprietary design libraries,  technologies,  and
manufacturing  capabilities  to further  expand its  customer  penetration.  Key
components of the Company's strategy include the following:

      Strengthen and Expand Strategic Customer  Relationships.  Today, a limited
      number of large OEMs drive the Space and Defense business. The Company has
      developed,  and plans to continue to expand,  customer  relationships with
      many  of  these  OEM's  including,  Raytheon,  Lockheed  Martin,  Northrop
      Grumman, ITT, Harris and Boeing. The Company intends to further strengthen
      its customer  relationships by offering complete solutions,  from research
      and development to product design and manufacturing.

      Focus on value added  products.  The Company intends to expand its product
      and technology  offerings to increase the added value for next  generation
      Space and Defense systems.  The Company intends on leveraging  investments
      in advanced  microwave  packaging  technologies to meet the demands of our
      customers for increased levels of integration and functionality.

      Pursue Strategic  Acquisitions.  The Company intends to continue to pursue
      opportunistic acquisitions of companies (like M.S. Kennedy Corporation and
      Unicircuit, Inc.), product lines and technologies that provide synergistic
      opportunities  for its Space and Defense  segment.  The Company  will also
      focus on acquisitions that compliment its technical expertise and business
      development resources and provide a competitive advantage for its targeted
      markets.

Products and Technology

      Our Space and Defense group principally designs and manufactures  advanced
microwave-based  hardware for use in advanced  radar systems,  advanced  jamming
systems,  smart  munitions,  electronic  surveillance  systems and satellite and
ground based communication systems.

      Radar Countermeasure  Subsystems.  Defense radar countermeasure subsystems
      digitally  measure,  locate and counter enemy radar  systems.  Our Digital
      Radio  Frequency  Measurement  (DRFM's)  devices  are used for storing and
      retrieving  radio  frequency  signals as part of  military  aircraft  self
      protection  systems.  Our  Digital  Frequency   Discriminators  (DFD)  are
      employed  in  electronic  warfare  (EW)  systems to detect and measure the
      radio frequency (RF) signals  emitted by enemy radar systems.  Our Company
      also manufactures a suite of electronic  subassemblies designed to process
      radar signals detected by a receiver. This technology is a major component
      of a Electronic Support Measure (ESM) system used on helicopters and fixed
      winged  aircraft  to  detect,   locate  and  identify  enemy  radar.  This
      technology is called a Passive Ranging Subsystem.

      Beamformers.  Beamformers  determine the number, size and quality of beams
      that are produced from an antenna array.  The Company supplies passive and
      active beamformers and has unique expertise in designing and manufacturing
      high  performance  beamformers  in industry  leading small size  packages.
      Passive  beamformers produce


--------------------------------------------------------------------------------
                                       6
<PAGE>

      fixed  beam  locations  while  active   beamformers  allow  for  real-time
      reconfiguration of the beam pattern. Beamforming technology is implemented
      on military and commercial phased array satellites and radars.

      Switch  Matrices.  Switch  matrices route radio  frequency  signals from a
      single  location to one or multiple  end user  locations.  These  products
      allow  system  operators  to  allocate   capacity  as  required,   thereby
      increasing utilization and revenue generation.

      Radar Feed Networks. Radar feed networks distribute radio frequency energy
      to the antenna  elements of the radar.  Radar Feed Networks are integrated
      into radar  platforms  for  airborne,  shipborne,  ground  base radars and
      missile guidance applications.

Customers

      The Company currently sells passive  components and electronic  subsystems
to prime contractors serving the United States and foreign  governments.  During
the fiscal year ending June 30, 2008,  the Space and Defense  segment  accounted
for 40% of the  Company's  revenues.  Lockheed  Martin  accounted for 13% of the
Company's net sales. No other Space and Defense customer accounted for more than
10% of the Company's fiscal 2008 net sales. The following is a list of Space and
Defense  customers  who  generated  $1,000,000 or more in revenues in the fiscal
year ending June 30, 2008:

      o     ITT Corporation

      o     Lockheed Martin Corporation

      o     MCL Industries

      o     Northrup Grumman Corporation

      o     Raytheon Company

      o     Thales Alenia Space France

      o     LIGNEX1 Co., Ltd.

Competition

      As a direct supplier to the large defense  contracting  corporations,  the
Company faces  significant  competition  from the in-house  capabilities  of its
customers.  In some cases,  we are  approached  after a customer has had limited
success with an internal  design effort or to supply a solution in parallel with
an internal effort as a form of risk mitigation.

      Direct  competitors of the Company in the Space and Defense market include
EMS Technologies, Filtronic Signal Solutions, KOR Electronics, Smith Industries,
Tyco Inc., and Merrimac Industries.

Backlog

      Backlog of orders for the Space and Defense  segment was $64.6  million as
of June 30, 2008 versus  $56.0  million as of June 30,  2007.  All of the orders
included  in the  Space  and  Defense  segment  backlog  are  covered  by signed
contracts or purchase orders. However,  backlog is not necessarily indicative of
future sales.  Accordingly,  the Company does not believe that its backlog as of
any particular date is representative of actual sales for any succeeding period.

Sales and Marketing

      The  Company  markets  its  products   worldwide  to  original   equipment
manufacturers in the wireless and space and defense markets  primarily through a
sales and  marketing  force of 27 people as of June 30,  2008.  The  Company has
regional  sales  offices  located  in  Sacramento,  California;   Waterlooville,
England;  and Suzhou and Shenzen,  China. In


--------------------------------------------------------------------------------
                                       7
<PAGE>

addition,  as of June 30,  2008,  the  Company  had  contracts  with three major
distributors,  with sixteen manufacturers'  representatives in the United States
and  Canada,  and with ten  international  representatives  located  in  Western
Europe, the Middle East and Asia. As part of its marketing efforts,  the Company
advertises in major trade  publications  and attends major industry  shows.  The
Company has also invested  significantly  in its Internet website which contains
an electronic  version of its entire catalog.  In addition,  the website enables
users to download  important  device  parameter  files.  These files contain the
performance  information for catalog  components in a format which is compatible
with commonly  used computer  aided  design/computeraided  modeling,  or CAD/CAM
equipment.  The Company also provides mechanical drawings and applications notes
for  proper  use of  the  parts.  This  service  allows  designers  to  get  the
information  they require and to easily  incorporate  the  Company's  parts into
their designs.

      After identifying key potential  customers,  the Company makes sales calls
with its own sales, management and engineering personnel and with manufacturers'
representatives.  To promote widespread acceptance of the Company's products and
provide  customers with support for their  technical and commercial  needs,  the
sales and engineering teams work closely with the customers to develop solutions
tailored  for their  particular  requirements.  The  Company  believes  that its
engineering  team,  comprised of 191 design and engineering  professionals as of
June 30, 2008, is a key competitive advantage.

      The Company uses distributors for its standard products,  most notably the
Xinger(R)  line  of  surface  mount  components.  Richardson  Electronics  is  a
worldwide distributor of Anaren products.  Avnet distributes components in North
America and Asia, meanwhile, BFI Optilus distributes Company products in Europe.
The Scandinavian  countries are serviced by E.G. Components,  Inc., a subsidiary
of Elektronikgruppen. Distribution has become an important part of the Company's
sales  efforts by providing the Company with a larger sales force to promote its
catalog product offerings.

Employees

      As of June 30, 2008, the Company employed 930 full-time people,  including
221 temporary employees. Of these employees, 191 were members of the engineering
staff,  654 were in  manufacturing  positions,  27 were in sales  and  marketing
positions,  and 57 were in  management  and  support  functions.  None of  these
employees are represented by a labor union,  and the Company has not experienced
any  work  stoppages.  The  Company  considers  its  employee  relations  to  be
excellent.

Manufacturing

      The Company currently maintains  manufacturing locations in East Syracuse,
New York;  Salem,  New  Hampshire;  and Suzhou,  China.  During fiscal 2007, the
Company moved its Suzhou  operation from a leased 25,000 square foot facility to
a leased 76,000 square foot facility, and built a 54,000 square foot addition to
its 105,000 square foot East Syracuse, NY facility.  The facility move in Suzhou
provides  the  Company  with ample  manufacturing  space and  ability to readily
respond to future wireless infrastructure business expansion needs. The addition
in Syracuse will facilitate expansion of its Space and Defense manufacturing and
engineering areas to support current and future growth.  During fiscal 2005, the
Company   consolidated   its  Amitron   operation   located  in  North  Andover,
Massachusetts and its RF Power operation  located in Bohemia,  New York into one
facility  located  in  Salem,  New  Hampshire,  operating  under a wholly  owned
subsidiary,  Anaren Ceramics,  Inc. This facility  includes  significantly  more
space for future  expansion and a  State-of-the-Art  Class 10,000 clean room for
manufacturing.

      The Company continues to develop  capability to produce highly engineered,
complex microwave  subassemblies to support its Space and Defense  business.  In
fiscal 2007, the Company invested in state-of-the-art  Low Temperature  Co-fired
Ceramic (LTCC) equipment for its Salem, New Hampshire facility.  This technology
supports the manufacture of multi-layer  ceramic  circuits which perform well at
RF and Microwave frequencies and provides the high level of integration required
in today's advanced military electronic systems.

      The  Company is  committed  to  providing  the lowest  cost  manufacturing
solutions.  Part of this strategy has evolved with the  continued  investment in
its Suzhou, China operation.  Most high volume, labor intensive


--------------------------------------------------------------------------------
                                       8
<PAGE>

wireless  product  lines from the  Syracuse and the Salem  operations  have been
successfully  transitioned  to Suzhou over the past three  years,  with plans to
transfer  the  remainder  in fiscal  2009.  The  Company  has also  successfully
implemented  a  material   sourcing   function  in  Suzhou,   facilitating   the
identification,  qualification,  and  procurement of lower cost raw materials to
support the wireless infrastructure products being manufactured in Suzhou.

      All of the Company's facilities (Syracuse, New York; Salem, New Hampshire;
and Suzhou, China) are ISO 9001 certified.

      The Company manufactures its products from standard components, as well as
from items  which are  manufactured  by vendors to its  specifications.  The raw
materials  utilized in the various  product areas are generally  accessible  and
common to both of the Company's business segments. The Company purchases most of
its raw materials  from a variety of vendors and most of these raw materials are
available from a number of sources.  During fiscal year 2008, the Company had no
single vendor from which it purchased  more than 10% of its total raw materials,
and the  Company  believes  that  alternate  sources  of  supply  are  generally
available for all raw materials supplied by all Company vendors.

Research and Development

The  Company's  research  and  development  efforts  are  focused on the design,
development and engineering of both products and  manufacturing  processes.  The
current development efforts of the Company include:

      o     products  for  use  in  mobile  and  fixed  wireless  infrastructure
            applications;

      o     advanced  manufacturing  technology to produce  microwave  stripline
            structures  for  broadband   millimeter   wave,  or  extremely  high
            frequency, communications satellite applications;

      o     advanced low temperature co-fired ceramic to produce,  light weight,
            highly  integrated  microwave  integrated  substrates  for  advanced
            military applications; and

      o     miniature  components  for  wireless   networking,   subscriber  and
            broadcast applications.

      These activities include  customer-funded design and development,  as well
as efforts funded  directly by the Company.  Research and  development  expenses
funded by the Company were $10.4 million in fiscal 2008,  $9.1 million in fiscal
2007 and $8.7 million in fiscal 2006. Research and development costs are charged
to expense as incurred.

Intellectual Property

      The  Company's   success   depends  to  a  significant   degree  upon  the
preservation and protection of its product and manufacturing process designs and
other proprietary technology. To protect its proprietary technology, the Company
generally limits access to its technology, treats portions of such technology as
trade secrets,  and obtains  confidentiality  or non-disclosure  agreements from
persons  with  access  to the  technology.  The  Company's  agreements  with its
employees prohibit them from disclosing any confidential information, technology
developments  and  business  practices,  and from  disclosing  any  confidential
information  entrusted to the Company by other parties.  Consultants  engaged by
the  Company  who have  access to  confidential  information  generally  sign an
agreement  requiring them to keep  confidential  and not disclose any non-public
confidential information.

      The Company  currently has 13 active patents and has filed 20 other patent
applications  that are  currently  pending  before the United  States Patent and
Trademark  Office to protect both the  construction  and design of its products.
The  Company  plans  to  pursue  intellectual  property  protection  in  foreign
countries,  primarily in the form of international  patents,  in instances where
the  technology  covered is  considered  important  enough to justify  the added
expense.  By  agreement,  Company  employees  who  initiate or  contribute  to a
patentable  design or process  are  obligated  to assign  their  interest in any
patent or potential patent to the Company.


--------------------------------------------------------------------------------
                                       9
<PAGE>

Government Regulation

      The  Company's  products are  incorporated  into  wireless  communications
systems   that  are   subject  to   regulation   domestically   by  the  Federal
Communications  Commission and internationally by other government agencies.  In
addition,  because of its participation in the defense industry,  the Company is
subject to audit from time to time for compliance with government regulations by
various  governmental  agencies.  The  Company  is also  subject to a variety of
local, state and federal government  regulations relating to environmental laws,
as they relate to toxic or other  hazardous  substances  used to manufacture the
Company's  products.  The  Company  believes  that it operates  its  business in
material compliance with applicable laws and regulations.  However,  any failure
to comply  with  existing or future  laws or  regulations  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

Item 1A. Risk Factors

      In an effort to provide investors a balanced view of our current condition
and  future  growth  opportunities,  this  Annual  Report on Form 10-K  includes
comments by our management about future performance.  These statements which are
not historical  information,  are  "forward-looking  statements" pursuant to the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995.
These,  and other  forward-looking  statements,  are  subject  to  business  and
economic  risks and  uncertainties  that could  cause  actual  results to differ
materially from those discussed. The risks and uncertainties described below are
not the  only  risks  and  uncertainties  that we  face.  Additional  risks  and
uncertainties  not presently known to us or that are currently deemed immaterial
may also impair our business operations.  If any of the following risks actually
occur,  our business could be adversely  affected,  and the trading price of our
common stock could decline, and you may lose all or part of your investment. You
are encouraged to review our 2008 Annual  Report,  this Form 10-K for the fiscal
year ended June 30,  2008 and  exhibits  hereto  filed with the  Securities  and
Exchange  Commission,  to learn more about the various  risks and  uncertainties
facing our business  and their  potential  impact on our  revenue,  earnings and
stock price.  Unless  required by law, we disclaim any  obligation  to update or
revise any forward-looking statement.

      The  Company  recently   completed  two  acquisitions  and   significantly
increased its long term debt.

      Our recent acquisition of M.S. Kennedy Corp. and Unicircuit,  Inc. present
management challenges and substantially increase our long term indebtedness.  We
intend to integrate  both MSK and Unicircuit  into our Space & Defense  business
group. In doing so, there are risks and uncertainties that the expected benefits
of the  acquisition  may  not be  realized  (including  the  realization  of the
accretive  effects  from  the  acquisitions),  risks  of  potential  loss of key
management  employees  of the acquired  companies,  and the  potential  risks of
realization of unknown liabilities not identified during due diligence.  We also
significantly  increased  our long term  indebtedness  when we acquired  MSK and
Unicircuit,  and the applicable Loan Agreement with our lender contains  certain
financial covenants that we are required to meet.

      Our Wireless  business group has a significant  concentration  of business
with one OEM customer,  Nokia Siemens Networks ("Nokia"),  who accounts for over
17% of net sales.

      Our Wireless  segment  currently  derives a significant  amount of revenue
from production of one combiner  subassembly that is used in a Nokia single base
station platform. Because of this relatively high concentration of business with
one customer and for only one platform,  the Company's revenue and profitability
could be materially and adversely impacted by cancellation, postponement, or end
of life of this particular combiner subassembly.

      We depend on a small number of suppliers for many of our  component  parts
and services.

      In some cases we rely on a limited  group of  suppliers to provide us with
services and materials  necessary for the manufacture of our products.  While we
believe  that  substitute  sources  of supply at  reasonably  similar  costs are
available  for these and other  products  purchased,  our  reliance on a limited
group of suppliers  involves  several risks,  including  potential  inability to
timely  obtain  critical  materials  or  services;  potential  increase  in  raw
materials  costs or  production  costs;  potential  delays  in  delivery  of raw
materials or finished products; and reduced control over reliability and quality
of components or assemblies,  as outsourcing  continues.  We do not have binding


--------------------------------------------------------------------------------
                                       10
<PAGE>

contractual  commitments  or other  controls over our  suppliers,  and therefore
cannot always rely upon the guaranteed  availability of the materials  necessary
for the  manufacture  of our  products.  If we are required to seek  alternative
contract  manufacturers  or  suppliers  because we are  unable to obtain  timely
deliveries of acceptable  quality from existing  manufacturers or suppliers,  we
could be forced to delay delivery of our products to our customers. In addition,
if our  suppliers and contract  manufacturers  increase  their prices,  we could
suffer  losses  because we may be unable to recover these cost  increases  under
fixed price production commitments to our customers.

      Capital  expenditures  by wireless  service  providers for  infrastructure
equipment are volatile.

      The late 1990s  through 2000 saw dramatic  growth in the demand for mobile
communications.  Despite this rapid growth in customer demand,  expenditures for
capital  infrastructure  equipment by service providers began to decline rapidly
during the first  quarter of calendar year 2001.  This had a negative  impact on
all of our  Wireless  product  lines,  particularly  the  printed-circuit  board
business.  During  fiscal 2004,  infrastructure  spending  rebounded  due to the
deployment of new technology to expand existing  network  capacity  resulting in
rising sales and orders across all of our Wireless  product lines, and sales and
orders have  remained  strong  through  fiscal year 2008.  Capital  spending for
wireless infrastructure equipment remains volatile and relatively unpredictable.
Future decreases in capital expenditures for wireless  infrastructure  equipment
may adversely impact the success of these product lines.

      Changes in funding for defense procurement programs could adversely affect
our ability to grow or maintain our revenues and profitability.

      The demand for many of our Space and Defense  products has been  favorably
impacted by an upward trend in defense spending in the last few years for, among
other things, advanced radar systems, advanced jamming systems, smart munitions,
electronic  surveillance  systems and satellite  and ground based  communication
systems. Although the ultimate size of future defense budgets remains uncertain,
current  indications are that the total defense budget may decline over the next
few years.  The specific  programs in which we  participate,  or in which we may
seek to  participate  in the  future,  must  compete  with  other  programs  for
consideration during the budget formulation and appropriation  processes.  While
we believe  that our products are a high  priority for national  defense,  there
remains  the  possibility  that one or more of the  programs  we  serve  will be
reduced,  extended or terminated.  Reductions in these existing programs, unless
offset by other programs and  opportunities,  could adversely affect our ability
to grow our revenues and profitability.

      We face  continuing  pressure to reduce the average  selling  price of our
wireless products.

      Many of our wireless  customers  are under  continuous  pressure to reduce
costs and,  therefore,  we expect to continue to experience  pressure from these
customers  to  reduce  the  prices  of the  products  that we sell to them.  Our
customers  frequently  negotiate volume supply  arrangements  well in advance of
delivery  dates,  requiring  us to  commit  to price  reductions  before  we can
determine  whether the assumed cost reductions or the negotiated  supply volumes
can be achieved.  To offset declining  average sales prices,  we believe that we
must achieve manufacturing cost reductions and increase our sales volumes. If we
are unable to offset  declining  average selling prices,  our gross margins will
decline,  and  this  decline  could  materially  harm  our  business,  financial
condition and operating results.

      We  depend  on the  future  development  of  the  wireless  and  satellite
communications markets, which is difficult to predict.

      We believe  that our future  growth  depends in part on the success of the
wireless and satellite  communications  markets. A number of the markets for our
products in the wireless and  satellite  communications  area have only recently
begun to develop.  It is  difficult  to predict the rate at which these  markets
will  grow,   if  at  all.   Existing  or  potential   wireless  and   satellite
communications  applications  for our products may fail to develop or may erode.
If the markets for our products in wireless and satellite communications fail to
grow, or grow more slowly than anticipated,  our business,  financial  condition
and operating results could be harmed.

      The markets which we serve are very competitive,  and if we do not compete
effectively in our markets, we will lose sales and have lower margins.


--------------------------------------------------------------------------------
                                       11
<PAGE>

      The  markets  for  our  products  are   extremely   competitive   and  are
characterized  by  rapid  technological  change,  new  product  development  and
evolving  industry  standards.  In addition,  price  competition  is intense and
significant price erosion  generally occurs over the life of a product.  We face
competition from component manufacturers which have integration capabilities, as
well  as  from  the  internal  capabilities  of  large  communications  original
equipment  manufacturers and defense prime contractors.  Our future success will
depend in part upon the extent to which these  parties  elect to  purchase  from
outside sources rather than manufacture their own microwave components.  Many of
our current and potential  competitors  have  substantially  greater  financial,
technical, marketing, distribution and other resources than us, and have greater
name recognition and market acceptance of their products and  technologies.  Our
competitors  may develop new  technologies  or products that may offer  superior
price or performance  features,  and new products or technologies may render our
customers' products obsolete.

      If we are unable to meet the rapid  technological  changes in the wireless
and  satellite  communications  markets,  our  existing  products  could  become
obsolete.

      The  markets in which we compete  are  characterized  by rapidly  changing
technologies,  evolving industry standards and frequent improvements in products
and services. If technologies  supported by our products become obsolete or fail
to gain widespread acceptance, as a result of a change in the industry standards
or otherwise,  our business  could be harmed.  Our future success will depend in
part on  factors  including  our  ability to enhance  the  functionality  of our
existing  products  in a  timely  and  cost-effective  manner;  our  ability  to
establish  close working  relationships  with major  customers for the design of
their new wireless  transmission  systems that  incorporate  our  products;  our
ability to identify,  develop and achieve market acceptance of new products that
address new  technologies  and meet  customer  needs in wireless  communications
markets;  our ability to continue to apply our  expertise  and  technologies  to
existing and emerging  wireless and satellite  communications  markets;  and our
ability to achieve acceptable product costs on new products.

      We must also  continue to make  significant  investments  in research  and
development  efforts in order to develop  necessary  product  enhancements,  new
designs and  technologies.  We may not be able to obtain a sufficient  number of
engineers,  or other technical  support staff, or the funds necessary to support
our research and development efforts when needed. In addition,  our research and
development efforts may not be successful,  and our new products may not achieve
market  acceptance.  Wireless  and  satellite  technologies  are complex and new
products and  enhancements  developed by our  customers can in turn require long
development periods for our new products or for enhancement or adaptation of our
existing  products.  If we are unable to develop and  introduce  new products or
enhancements  in a timely  manner in response to changing  market  conditions or
customer requirements,  or if our new products do not achieve market acceptance,
our business, financial condition and operating results could suffer.

      We rely  on a  limited  number  of  original  equipment  manufacturers  as
customers and the loss of one or more of them could harm our business.

      We depend upon a small number of customers for a majority of our revenues.
During fiscal 2008, we had two customers  that each  accounted for more than 10%
of our net sales (Nokia, who represented 17% and Lockheed Martin Corporation who
represented  13%).  We  anticipate  that we will  continue to sell products to a
relatively  small  group  of  customers.   Delays  in  manufacturing  or  supply
procurement or other factors could potentially cause cancellation,  reduction or
delay in orders by a  significant  customer  or in  shipments  to a  significant
customer.  Our future  success  depends  significantly  on the  decision  of our
current  customers  to  continue to  purchase  products  from us, as well as the
decision of  prospective  customers  to develop and market space and defense and
wireless communications systems that incorporate our products.

      We must continue to attract and retain  qualified  engineers and other key
employees to grow our business.

      Our  continued  success  depends on our ability to continue to attract and
retain qualified engineers,  particularly  microwave  engineers,  and management
personnel.  Attracting and retaining  qualified  engineers,  including microwave
engineers,  particularly  in upstate New York,  is very  challenging.  If we are
unable  to  successfully   hire,  train  and  retain  qualified   engineers  and
experienced management personnel, it could jeopardize our ability to develop new


--------------------------------------------------------------------------------
                                       12
<PAGE>

products  for the  wireless  and  space and  defense  markets,  and  could  also
negatively impact our ability to grow our business.

      Failure to meet market expectations could impact our stock price.

      The  market  price  for our  common  stock is  based,  in part,  on market
expectations for our sales growth,  earnings per share and cash flow. Failure to
meet these  expectations  could cause the market  price of our stock to decline,
potentially rapidly and sharply.

      We have been unable to procure a new tenant for our U.K. leased facility.

      We currently lease approximately  20,000 square feet in a building located
in Frimley,  England,  pursuant to a lease  agreement  that  expires in February
2014,  with an annual  rent  expense,  property  taxes,  and fees  amounting  to
approximately  $700,000.  Despite our efforts  since  October 2007, we have been
unable to identify a new tenant(s) to take occupancy of the leased space.  If we
remain  unsuccessful,  we may be required to take additional  charges related to
this lease.

Other  Risks.  In addition to the risks  identified  above,  other risks we face
include, but are not limited to, the following:

      o     potential inability to timely ramp up to meet some of our customers'
            increased demands;

      o     order cancellations or extended postponements;

      o     unanticipated delays and/or difficulties  increasing  procurement of
            raw materials in Asia through our Suzhou, China facility;

      o     technological   shifts   away   from  our   technologies   and  core
            competencies;

      o     unanticipated  impairments of assets including investment values and
            goodwill; and

      o     litigation    involving    antitrust,     intellectual     property,
            environmental,   product  warranty,  product  liability,  and  other
            issues.

Item 1B. Unresolved Staff Comments

      None.

Item 2. Properties

      The  principal  real  estate  of the  Company  is a  159,000  square  foot
building,  which the Company owns, located on a 30-acre parcel in East Syracuse,
New York. The Company's principal subsidiary,  Anaren Microwave,  Inc., utilizes
this  facility  which houses a substantial  portion of the Company's  marketing,
manufacturing,  administrative,  research and  development,  systems  design and
engineering  activities.  During fiscal 2007,  the Company  constructed a 54,000
square foot addition to this  existing  building  bringing it to 159,000  square
feet to accommodate,  primarily,  the growth of its Space and Defense  business.
The building was completed in the first quarter of fiscal 2008.

      Anaren Ceramics, Inc., a wholly owned subsidiary of the Company,  operates
in  a  65,000  square  foot  building,  which  the  Company  owns,  situated  on
approximately 12 acres in Salem, New Hampshire.

      The Company  leases a 76,000 square foot  facility in Suzhou,  China which
houses light  manufacturing  and assembly  activities  of the  Company's  Anaren
Communications  Suzhou Co. Ltd. subsidiary.  This facility has an annual rent of


--------------------------------------------------------------------------------
                                       13
<PAGE>

approximately  $200,000.  The  initial  lease  period on the new  building  runs
through April 2013 and is renewable through April 2023.

      The Company leases a 20,000 square foot building in Frimley, England which
is currently not used in its operations.  Annual rental cost of this facility is
approximately  $700,000  and the Company is currently  attempting  to sublet the
building.  During the fiscal year ended June 30, 2008,  the  sublease  agreement
expired  and  the  payments  to  the  Company   under  a  sublease   represented
approximately  30% of the full  lease  value.  The  existing  lease term on this
building runs to 2014. The sub-lease expired in October 2007 and the Company has
not yet secured a new tenant.  There is no  assurance  that the Company  will be
able to continuously sublet the building during the remaining lease term.

      Management  considers  the  foregoing   facilities,   with  the  expansion
activity,  adequate for the current and anticipated mid-term future requirements
of the Company,  and expects that suitable additional space will be available to
the Company, as needed, at reasonable commercial terms.

Item 3. Legal Proceedings

      There are no material legal proceedings pending against the Company.

Item 4. Submission of Matters to a Vote of Security Holders

      During the fourth  quarter of the fiscal year ended June 30,  2008,  there
were no matters submitted to a vote of security holders.

Item 4A. Executive Officers of the Registrant

      Executive  officers of Anaren,  Inc., their respective ages as of June 30,
2008, and their positions held with the Company are as follows:

<TABLE>
<CAPTION>
NAME                    AGE       OFFICE OR POSITION HELD
----                    ---       -----------------------
<S>                     <C>       <C>
Lawrence A. Sala        45        President, Chief Executive Officer, Chairman and Director

Carl W. Gerst, Jr       71        Chief Technical Officer, Vice Chairman and Director

Gert R. Thygesen        53        Senior Vice President, Technology

George A. Blanton       47        Senior Vice President, Chief Financial Officer,
                                  Treasurer

Mark P. Burdick         50        Senior Vice President and General Manager

Timothy P. Ross         48        Senior Vice President, Business Development

Amy B. Tewksbury        44        Senior Vice President, Human Resources

David M. Ferrara        53        Secretary and General Counsel
</TABLE>

      Lawrence A. Sala joined the Company in 1984. He has been  President  since
May 1995, has served as Chief  Executive  Officer since  September 1997, and has
been Chairman of the Board of Directors  since  November 2001. Mr. Sala became a
member of the Board of Directors  of the Company in 1995.  He holds a Bachelor's
Degree in Computer Engineering,  a Master's Degree in Electrical Engineering and
a Master's Degree in Business Administration, all from Syracuse University.


--------------------------------------------------------------------------------
                                       14
<PAGE>

      Carl W.  Gerst,  Jr.  has been a member of the Board of  Directors  of the
Company since its founding.  Mr. Gerst has served as Chief Technical Officer and
Vice Chairman of the Board since May 1995 and served as Treasurer  from May 1992
to November 2001. Mr. Gerst previously served as Executive Vice President of the
Company from its  founding  until May 1995.  He holds a  Bachelor's  Degree from
Youngstown  University  and a Master's  Degree in Business  Administration  from
Syracuse University.

      Gert R.  Thygesen  joined the  Company in 1981 and has served as Sr.  Vice
President of Technology  since  November  2005 and Vice  President of Technology
from September 2000 until November 2005. He previously served as Vice President,
Operations  from April 1995 to September  2000,  and as Operations  Manager from
1992 until 1995. Mr.  Thygesen holds a Bachelor of Science Degree and a Master's
Degree in Electrical Engineering from Aalborg University Center, Denmark.

      George A. Blanton joined the Company in 2008 as the Company's  Senior Vice
President, Chief Financial Officer and Treasurer. Prior to his appointment,  Mr.
Blanton  served  as  the  Assistant  General  Manager  of  Sonic  Industries,  a
subsidiary of Dover  Corporation.  From 1995 to 2006,  Mr. Blanton served as the
Chief  Financial  Officer of Sargent,  a subsidiary  of Dover  Corporation.  Mr.
Blanton  holds a Bachelor  of Science  Degree in  Business  Administration  from
University  of Southern  California,  and a Master's in Business  Administration
from Loyola Marymount University, Los Angeles, CA.

      Mark P. Burdick has been with the Company since 1978 and has served as Sr.
Vice  President and General  Manager  since 2005 and Vice  President and General
Manager from September 2000 until November 2005. He served as Vice President and
General  Manager,  Wireless  segment from November 1999 until September 2000, as
Business  Unit Manager -- Commercial  Products  from 1994 to 1999,  and as Group
Manager for  Defense  Radar  Countermeasure  Subsystems  from 1991 to 1994.  Mr.
Burdick holds a Bachelor of Science  Degree in Electrical  Engineering  from the
Rochester  Institute of  Technology,  and a Master's of Business  Administration
from the University of Rochester.

      Timothy P. Ross has been with the Company since 1982 and has served as Sr.
Vice President -- Business Development since November 2005 and Vice President --
Business  Development from September 2000 until November 2005. He served as Vice
President and General  Manager,  Space and Defense  segment,  from November 1999
until  September  2000.  Mr. Ross served as Business  Unit  Manager -- Satellite
Communications from 1995 to 1999 and as a Program Manager from 1988 to 1995. Mr.
Ross holds an Associate's  Degree in Engineering  Science, a Bachelor of Science
in Electrical  Engineering from Clarkson University,  and a Master's in Business
Administration from the University of Rochester.

      Amy Tewksbury has served as Sr. Vice  President of Human  Resources  since
November 2005 and joined the Company in October 2002 as Vice  President of Human
Resources.  Prior to joining Anaren,  Ms. Tewksbury was employed by Wegmans Food
Markets,  Inc. for 16 years. She held various  positions with Wegmans  including
Syracuse  Division Human Resources  Manager,  Corporate Human Resources  Project
Manager, and Store Operations.  Ms. Tewksbury holds a Bachelor of Science Degree
in Management from Syracuse University.

      David M. Ferrara has served as the Company's Secretary and General Counsel
since February 1996, and became a part-time  employee of the Company in January,
2008. Mr.  Ferrara is a member of the law firm Bond Schoeneck & King,  PLLC, and
practices in the areas of labor and  employment  and corporate  law. Mr. Ferrara
holds a Bachelor's  Degree in Labor Relations from LeMoyne  College,  a Master's
Degree in Industrial  Labor Relations from Michigan State University and a Juris
Doctor Degree from Indiana University.

--------------------------------------------------------------------------------
                                       15
<PAGE>

                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
        Issuer Purchases of Equity Securities

      The common  stock of the Company is quoted on the Nasdaq  Global under the
symbol  "ANEN." The following  table sets forth the range of quarterly  high and
low sales prices  reported on the Nasdaq Global Market for the Company's  common
stock for the quarters  indicated.  Quotations  represent prices between dealers
and do not include retail mark-ups, mark-downs or commissions.

                                       CLASS A STOCK
                  ----------------------------------------------------------
                  1st Quarter     2nd Quarter     3rd Quarter    4th Quarter
                  -----------     -----------     -----------    -----------
Fiscal 2007
  High             $  25.00        $  22.94        $  18.23        $  20.13
  Low              $  15.60        $  17.14        $  15.42        $  16.31

Fiscal 2008
  High             $  19.30        $  17.40        $  16.78        $  14.87
  Low              $  13.44        $  13.98        $  11.97        $  10.50

      The Company had approximately 456 holders of record of its common stock at
September 10, 2008.

      The Company has never  declared or paid any cash  dividends on its capital
stock. The Company currently intends to retain earnings,  if any, to support the
development  of its business and does not  anticipate  paying cash dividends for
the  foreseeable  future.  Payment of future  dividends,  if any, will be at the
discretion of the Board of Directors after taking into account various  factors,
including the Company's financial  condition,  operating results and current and
anticipated cash needs.

Issuer Purchases of Equity Securities

      On May 16, 2007, the Board of Directors  increased by 2,000,000 the number
of shares  that the  Company  was  authorized  to  repurchase  in open market or
privately  negotiated   transactions  through  its  previously  announced  stock
repurchase  program.  The  program,  which may be  suspended at any time without
notice,  has no expiration  date.  There were no shares  purchased from April 1,
2008 through June 30, 2008;  and on June 30,  2008,  1,547,341  shares  remained
authorized for purchase.


--------------------------------------------------------------------------------
                                       16
<PAGE>

Performance Graph

The following  graph presents the cumulative  total  shareholder  return for the
five years ending June 30, 2008 for our common stock,  as compared to the Nasdaq
Composite  Index and to the Nasdaq  Electronic  Components  Index.  The starting
value of each index and the  investment  in common stock was $100.00 on June 30,
2003.

[The following information was depicted as a line chart in the printed material]


<TABLE>
<CAPTION>
                                                                                           June
                                                         2003          2004          2005          2006          2007          2008
<S>                                                    <C>           <C>           <C>           <C>           <C>           <C>
Anaren, Inc.                                           $100.00       $171.64       $138.13       $215.23       $184.98       $111.03
NASDAQ Composite Index                                  100.00        129.09        127.97        136.00        164.15        142.67
NASDAQ Electronic Components Index                      100.00        128.86        116.61        111.27        131.28        118.83
</TABLE>

Item 6. Selected Consolidated Financial Data

      The selected  consolidated  financial data set forth below with respect to
the Company's  statements of operations  for each of the years in the three year
period ended June 30, 2008,  and with respect to the balance  sheets at June 30,
2008 and 2007 are derived from the consolidated  financial  statements that have
been audited by KPMG LLP,  independent  registered public accounting firm, which
are included  elsewhere in this Annual Report on Form 10-K, and are qualified by
reference  to  such  consolidated   financial  statements.   The  statements  of
operations  data for the years  ended June 30, 2004 and June 30,  2005,  and the
balance  sheet  data at June 30,  2004,  June 30,  2005 and June 30,  2006,  are
derived  from audited  consolidated  financial  statements  not included in this
Annual Report on Form 10-K. The following selected financial data should be read
in conjunction  with the consolidated  financial  statements for the Company and
notes thereto and  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations included elsewhere herein.


--------------------------------------------------------------------------------
                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                                        For the Years Ended
                                                                  -----------------------------------------------------------------
                                                                  June 30,       June 30,      June 30,      June 30,      June 30,
Statement of Income Data:                                           2008           2007          2006          2005          2004
                                                                  ---------     ---------     ---------     ---------     ---------
<S>                                                               <C>           <C>           <C>           <C>           <C>
(in thousands, except per share data)
Net Sales                                                         $ 131,316     $ 128,987     $ 105,464     $  94,461     $  85,079
Cost of sales                                                        90,838        83,125        67,494        64,591        55,070
                                                                  ---------     ---------     ---------     ---------     ---------
Gross Profit                                                         40,478        45,862        37,970        29,870        30,009
                                                                  ---------     ---------     ---------     ---------     ---------
Operating expenses:
  Marketing                                                           7,018         7,416         7,036         6,858         6,723
  Research and development                                           10,411         9,134         8,748         6,288         5,861
  General and administrative                                         13,592        12,298        10,345         8,685         8,731
  Restructuring                                                         255            --            --           458            --
                                                                  ---------     ---------     ---------     ---------     ---------
  Total operating expenses                                           31,276        28,848        26,129        22,289        21,315
                                                                  ---------     ---------     ---------     ---------     ---------
Operating income                                                      9,202        17,014        11,841         7,581         8,694
                                                                  ---------     ---------     ---------     ---------     ---------
Other income (expense):

  Interest expense                                                      (80)          (24)          (25)          (29)          (10)
  Other, primarily interest income                                    2,323         3,571         2,453         1,599         1,678
                                                                  ---------     ---------     ---------     ---------     ---------
  Total other income, net                                             2,243         3,547         2,428         1,570         1,668
                                                                  ---------     ---------     ---------     ---------     ---------
Income from continuing operations before income taxes                11,445        20,561        14,269         9,151        10,362
Income taxes                                                          2,982         5,211         3,252         1,738         2,695
                                                                  ---------     ---------     ---------     ---------     ---------
Income from continuing operations                                     8,463        15,350        11,017         7,413         7,667
                                                                  ---------     ---------     ---------     ---------     ---------
Discontinued operations:
Income (loss) from discontinued
  operations of Anaren Europe                                            --            --            82            --          (774)
Income tax benefit                                                      770            --            --            --         1,800
                                                                  ---------     ---------     ---------     ---------     ---------
Net income from discontinued operations                                 770            --            82            --         1,026
                                                                  ---------     ---------     ---------     ---------     ---------
Net income                                                        $   9,233     $  15,350     $  11,099     $   7,413     $   8,693
                                                                  =========     =========     =========     =========     =========
Basic earnings per share:
  Income from continuing operations                               $     .57     $     .89     $     .64     $     .38     $     .36
  Income from discontinued operations                             $     .05     $      --     $     .01     $      --     $     .05
                                                                  ---------     ---------     ---------     ---------     ---------
Net income                                                        $     .62     $     .89     $     .65     $     .38     $     .41
                                                                  =========     =========     =========     =========     =========
Diluted earnings per share:
Income from continuing operations                                 $     .56     $     .87     $     .62     $     .37     $     .35
Income from discontinued operations                               $     .05     $      --     $     .01     $      --     $     .05
                                                                  ---------     ---------     ---------     ---------     ---------
Net income                                                        $     .61     $     .87     $     .63     $     .37     $     .40
                                                                  =========     =========     =========     =========     =========
Shares used in computing net Earnings per share:
  Basic                                                              14,827        17,319        17,157        19,346        21,026
  Diluted                                                            15,068        17,721        17,682        19,832        21,808
  Diluted
Balance Sheet Data:
Cash and cash equivalents                                         $  10,711     $   7,912     $  15,733     $   5,901     $  23,303
Working capital                                                      71,163        72,858       112,160        84,554       105,987
Total assets                                                        172,103       191,204       189,026       175,482       207,482
Long-term debt, less current installments                                --            --            --            --            --
Stockholders' equity                                                150,864       166,794       172,118       159,079       190,364
</TABLE>


--------------------------------------------------------------------------------
                                       18
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

      The following Management's  Discussion and Analysis of Financial Condition
and Results of Operations  should be read in conjunction  with the  consolidated
financial  statements  and the notes  thereto  appearing  elsewhere in this Form
10-K.  The  following   discussion,   other  than  historical  facts,   contains
forward-looking statements that involve a number of risks and uncertainties. The
Company's  results  could  differ  materially  from those  anticipated  in these
forward-looking  statements as a result of various  factors,  including  factors
described elsewhere in this Annual Report.

Overview

      The consolidated  financial  statements present the financial condition of
the  Company  as of June 30,  2008 and 2007,  and the  consolidated  results  of
operations and cash flows of the Company for the years ended June 30, 2008, 2007
and 2006.

      The  Company  designs,  develops  and  markets  microwave  components  and
assemblies for the wireless communications, satellite communications and defense
electronics  markets.  The  Company's  distinctive  manufacturing  and packaging
techniques enable it to cost-effectively produce compact,  lightweight microwave
products  for  use in  base  stations  and  subscriber  equipment  for  wireless
communications as well as, in satellites and in defense electronics systems. The
Company  sells  its  products  to  leading  wireless  communications   equipment
manufacturers  such  as  Ericsson,  Motorola,  Nokia  Siemens  Networks,  Nortel
Networks,  and Huawei, and to satellite  communications and defense  electronics
companies such as Boeing Satellite,  ITT, Lockheed Martin,  Northrup Grumman and
Raytheon.

      Net  sales are  derived  from  sales of the  Company's  products  to other
manufacturers  or systems  integrators.  Net sales are recognized when units are
shipped.

      Net sales under certain long-term contracts of the Space and Defense (S&D)
segment,  many of which provide for periodic payments,  are recognized under the
percentage-of-completion  method using the units of delivery  method.  Estimated
manufacturing  cost-at-completion  for these contracts are reviewed on a routine
periodic  basis,  and  adjustments  are  made   periodically  to  the  estimated
cost-at-completion based on actual costs incurred,  progress made, and estimates
of the  costs  required  to  complete  the  contractual  requirements.  When the
estimated  manufacturing  cost-at-completion  exceeds the  contract  value,  the
contract is written down to its net  realizable  value,  and the loss  resulting
from cost overruns is immediately  recognized.  To properly match net sales with
costs,  certain  contracts  may have  revenue  recognized  in excess of billings
(unbilled  revenues),  and other  contracts  may have  billings in excess of net
sales  recognized  (billings  in  excess of  contract  costs).  Under  long-term
contracts,  the  prerequisites  for billing the customer  for periodic  payments
generally involve the Company's achievement of contractually specific, objective
milestones (e.g.,  completion of design,  testing,  or other engineering  phase,
delivery of test data or other  documentation,  or  delivery  of an  engineering
model or flight hardware).

      On July 31, 2008, the Company  cancelled its previous $50.0 million demand
note loan  agreement  with no balance  outstanding  on the loan; and on the same
day,  the  Company  signed a loan  agreement  with its bank for a $50.0  million
declining  revolving  line of  credit  to be used to  finance  acquisitions  and
working capital needs. On July 31 and August 29, 2008, the Company took advances
totaling $50.0 million on this line to finance the  acquisitions of M.S. Kennedy
Corp. and Unicircuit,  Inc.  Advances under this line, at the Company's  choice,
bear interest at LIBOR, plus 100 to 450 basis points or at the Prime Rate, minus
(100) to plus 225 basis points,  depending upon the Company's EBITDA performance
at the end of each  quarter as measured by the  formula:  EBITDA  divided by the
Current Portion of Long-term debt plus interest expense.  Availability of credit
under the line declines 20% annually on the anniversary date of the note and any
outstanding principal balance in excess of the new line limit is due and payable
at that time.

      On August 1, 2008, the Company  completed the acquisition of M.S. Kennedy,
Corp. ("MSK"),  located in Syracuse, New York. MSK is a leading provider of high
performance  analog  microelectronics  to the Defense and Space markets and is a
leading  designer and producer of custom  analog  hybrids,  power  hybrids,  and
multi-chip modules. MSK offers


--------------------------------------------------------------------------------
                                       19
<PAGE>

broad electronic component design,  packaging,  and integration  capability with
net  sales of $22.4  million  in  calendar  2007.  MSK will be  integrated  into
Anaren's  existing Space & Defense  business  group.  Anaren  acquired MSK for a
purchase  price of $28.0 million on a cash free,  debt free basis,  and earnings
from MSK are expected to be accretive in fiscal year 2009. The Company  financed
this  transaction  through a five year,  $50.0 million  revolving debt facility.
Goodwill and intangible assets related to this acquisition will be approximately
$14-16 million.

      On August 30, 2008,  the Company  completed the  acquisition of Unicircuit
Inc.  located in Littleton,  Colorado.  Unicircuit is a manufacturer  of printed
circuit boards (PCB) used in various  military and aerospace  applications  with
net sales of $18.7  million in  calendar  2007.  Unicircuit  is a leader in high
frequency PCB technology and will enhance Anaren's ability to capture integrated
microwave  assembly  opportunities  in  the  defense,  satellite  and  aerospace
markets.  Unicircuit will be integrated  into Anaren's  existing Space & Defense
business  group.  Anaren  acquired  Unicircuit,  Inc.  for a  purchase  price of
approximately  $21.7 million on a cash free, debt free basis,  and earnings from
Unicircuit  are  expected  to be  accretive  in fiscal  year 2009.  The  Company
financed this  transaction  by utilizing  its existing five year,  $50.0 million
revolving  debt  facility.  Goodwill  and  intangible  assets  related  to  this
acquisition will be approximately $11-13 million.

Results of Operations

      Net sales from continuing operations for the year ended June 30, 2008 were
$131.3  million,  up 1.8% from  $129.0  million  for fiscal  2007.  Income  from
continuing  operations  for fiscal 2008 was $8.5 million,  or 6.4% of net sales,
down $6.9  million,  or 44.9% from income from  continuing  operations  of $15.3
million in fiscal 2007.


--------------------------------------------------------------------------------
                                       20
<PAGE>

      The following  table sets forth the  percentage  relationships  of certain
items from the Company's  consolidated  statements of operations as a percentage
of net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                                                                   Years Ended June 30,
                                                                                     ----------------------------------------------
                                                                                      2008                 2007                2006
                                                                                     -----                -----               -----
<S>                                                                                  <C>                  <C>                 <C>
Net sales                                                                            100.0%               100.0%              100.0%
                                                                                     =====                =====               =====
Cost of sales                                                                         69.2                 64.4                64.0
                                                                                     -----                -----               -----
Gross Profit                                                                          30.8                 35.6                36.0
                                                                                     -----                -----               -----
Operating expenses:
  Marketing                                                                            5.3                  5.8                 6.7
  Research and development                                                             7.9                  7.1                 8.3
  General and administrative                                                          10.4                  9.5                 9.8
  Restructuring                                                                        0.2                   --                  --
                                                                                     -----                -----               -----
    Total operating expenses                                                          23.8                 22.4                24.8
                                                                                     -----                -----               -----
Operating income                                                                       7.0                 13.2                11.2
                                                                                     -----                -----               -----
Other income (expense):
  Interest expense                                                                    (0.1)                  --                  --
  Other, primarily interest income                                                     1.8                  2.7                 2.3
                                                                                     -----                -----               -----
    Total other income                                                                 1.7                  2.7                 2.3
                                                                                     -----                -----               -----
Income from continuing operations                                                      8.7                 15.9                13.5
  before income taxes
Income taxes                                                                           2.3                  4.0                 3.1
                                                                                     -----                -----               -----
Net income from continuing operations                                                  6.4                 11.9                10.4
Discontinued operations:
  Income from discontinued
    operations of Anaren Europe                                                         --                   --                 0.1
  Income tax benefit                                                                  (0.6)                  --                  --
                                                                                     -----                -----               -----
  Net income from discontinued operations                                              0.6                   --                 0.1
                                                                                     -----                -----               -----
  Net income                                                                           7.0%                11.9%               10.5%
                                                                                     -----                -----               -----
</TABLE>

The following  table sets forth the Company's net sales by industry  segment for
the periods indicated:

<TABLE>
<CAPTION>
                                                                         Years Ended June 30,
                                          -------------------------------------------------------------------------------
                                                  2008                          2007                          2006
                                             (In thousands)                (In thousands)                (In thousands)
                                          -------------------           -------------------           -------------------
<S>                                       <C>            <C>            <C>            <C>            <C>            <C>
Wireless                                  $ 78,741       60.0%          $ 77,800       60.3%          $ 66,731       63.3%
Space & Defense                             52,575       40.0%            51,187       39.7%            38,733       36.7%
                                          --------      -----           --------      -----           --------      -----
                                          $131,316      100.0%          $128,987      100.0%          $105,464      100.0%
                                          ========      =====           ========      =====           ========      =====
</TABLE>

Year Ended June 30, 2008 Compared to Year Ended June 30, 2007

Net Sales.  Net sales  increased  $2.3  million,  or 1.8% to $131.3  million for
fiscal 2008 compared to $129.0 million for fiscal 2007.  This increase  resulted
from a $1.4  million  rise in  shipments  of Space and  Defense  products  and a
$940,000 increase in shipments of Wireless products in fiscal 2008.

      Sales of Wireless products, which consist of standard components,  ferrite
components and custom  subassemblies  for use in building  wireless base station
and consumer equipment were relatively flat in fiscal 2008, rising $940,000 over
fiscal  2007.  The small  increase  was led by a $2.1  million  rise in standard
component  sales which offset a $1.3 million  decline in consumer  product sales
year over year.  Sales of Wireless custom products were unchanged in fiscal 2008


--------------------------------------------------------------------------------
                                       21
<PAGE>

compared to fiscal 2007 and  included  sales to Nokia  Corp.  of $22.4  million,
which  represented  28% of total  Wireless  sales and 17% of total  Company  net
sales.

      Sales of Space and Defense  products rose $1.4 million,  or 2.7% in fiscal
2008 compared to last year.  Sales of Space and Defense  products in fiscal 2007
benefited from $11.4 million in shipments of Counter-Improvised Explosive Device
(Counter-IED)  products,  which  dropped to slightly  more than $1.0  million in
fiscal 2008. This drop in sales was offset by higher sales in receiver and space
products resulting from the higher level of business won by the Company over the
past three fiscal  years,  which has resulted in the record level of backlog for
this group of $64.6 million at June 30, 2008.

Gross Profit.  Cost of sales  consists  primarily of  engineering  design costs,
materials,  material  fabrication  costs,  assembly  costs,  direct and indirect
overhead, and test costs. Gross profit represents net sales minus cost of sales.
Gross profit for fiscal 2008 was $40.5 million  (30.8% of net sales),  down $5.4
million from $45.9 million (35.6% of net sales) for the prior year. Gross profit
on sales  decreased in fiscal 2008 over last year due to the decline in sales of
higher  margin  defense  Counter-IED  products,  and  continuing  losses  at the
Company's Salem,  New Hampshire  facility due to lower than planned sales volume
and product yield. Additionally, yield and production efficiency problems in the
Space and Dense group and a $450,000  charge for an anticipated  cost overrun on
an  engineering  prototype  contract in the fourth  quarter added further to the
decline in gross margin.

Marketing.  Marketing  expenses  consist  mainly of employee  related  expenses,
commissions  paid to sales  representatives,  trade show  expenses,  advertising
expenses and related travel expenses. Marketing expenses were $7.0 million (5.3%
of net sales) for fiscal 2008,  down  $398,000  from $7.4  million  (5.8% of net
sales) for fiscal 2007. Marketing expenses in the current fiscal year were below
fiscal  2007 due to lower  commission  expense  on  defense  products  and lower
payroll costs from a reduction in sales personnel.

Research and Development.  Research and development expenses consist of material
and  salaries  and  related  overhead  costs of  employees  engaged  in  ongoing
research,  design and  development  activities  associated with new products and
technology  development.  Research and  development  expenses were $10.4 million
(7.9% of net  sales) in fiscal  2008,  up 14.0% from $9.1  million  (7.1% of net
sales) for fiscal 2007.  Research and  development  expenditures  are supporting
further   development  of  Wireless   infrastructure   and  consumer   component
opportunities,  as well as new  technology  development in the Space and Defense
group.  Research  and  development  expenditures  have  increased in fiscal 2008
versus last year due to the higher level of  opportunities  in both the Wireless
and  Space  and  Defense  marketplaces,  which  has  resulted  in the  hiring of
additional personnel over the last 12 months to perform development  activities.
The  Company  does not expect to reduce its  current  research  and  development
efforts and is presently working on a number of new standard and custom Wireless
and Space and Defense opportunities.

General and  Administrative.  General  and  administrative  expenses  consist of
employee  related  expenses,  professional  services,  intangible  amortization,
travel related  expenses and other corporate costs.  General and  administrative
expenses  increased  10.5% to $13.6 million (10.4% of net sales) for fiscal 2008
from $12.3  million (9.5% of net sales) for fiscal 2007.  The increase  resulted
primarily from additional  professional service costs ($350,000) associated with
the restatement of the Company's  second and third quarter fiscal 2007 financial
statements  that  were  incurred  during  the  first  quarter  of  fiscal  2008,
additional  costs from new  restricted  stock grants  issued in August 2007 that
have a shorter vesting schedule than the traditional  stock option grants issued
in the  comparable  prior period,  and  additional  personnel in Finance,  Human
Resources and Information Technology functions.

Restructuring.  Restructuring  expense  consists of payroll,  outplacement,  and
benefit costs associated with the termination of nine employees at the Company's
Salem, New Hampshire facility in the fourth quarter of fiscal 2008.

Operating  Income.  Operating  income fell 45.9% in fiscal 2008 to $9.2 million,
(7.0% of net sales)  compared to $17.0  million  (13.2% of net sales) for fiscal
2007. On an operating segment basis,  Wireless operating income was $3.6 million
for fiscal 2008, down 55% from the Wireless  operating income of $8.0 million in
fiscal 2007. The decline in Wireless operating income in fiscal 2008 compared to
fiscal  2007  resulted  from a number of  factors  including:  price  erosion on
standard  components  products sold to large customers,  lower margins on custom
products due to platform  transitions  at Nokia,  and  continuing  losses at our
Salem,  New  Hampshire  facility  due  to  product  yield  and   inefficiencies.
Additionally,  2008 Wireless operating margins were further eroded due to end of
program life scrap charges of $250,000,  a $350,000 charge for anticipated costs
to repair a custom assembly product in the Wireless group


--------------------------------------------------------------------------------
                                       22
<PAGE>

and a $255,000  restructuring charge for severance pay related to a reduction in
workforce at the Company's ceramic facility in Salem, New Hampshire.

      Space and Defense  operating  income was $6.2  million in fiscal 2008 down
$3.4  million  from $9.6  million  for fiscal  2007.  Operating  margins in this
segment  declined  due  to  manufacturing  inefficiencies  encountered  on  some
programs which suffered procurement delays,  engineering cost overruns, a change
in product mix due to a decline in higher margin Counter-IED  products, a higher
level of internal  research and  development  spending for the segment year over
year and the increase in general and administrative expense in fiscal 2008.

Interest  Expense.  Interest expense  represents  interest  incurred on deferred
obligations.  Interest  expense  for  fiscal  2008  was  approximately  $80,000,
compared to $25,000 for fiscal 2007.

Other Income.  Other income is primarily  interest  income  received on invested
cash balances and rental income. Other income decreased 34.9% to $2.3 million in
fiscal 2008 compared to $3.6 million for last year.  This decrease was caused by
the  decline in  available  investable  cash due to the use of $30.2  million to
purchase  treasury  shares  over the  last  twelve  months.  Other  income  will
fluctuate  based on short term market interest rates and the level of investable
cash balances.

Income Taxes. Income taxes on income from continuing  operations for fiscal 2008
were $3.0 million  (2.3% of net sales),  representing  an effective  tax rate of
26.1%.  This  compares to income tax expense of $5.2 million (4.0% of net sales)
for fiscal 2007,  representing  an effective  tax rate of 25.3%.  The  Company's
effective  tax rate is a direct  result of the  proportion  of federally  exempt
state  municipal bond income and federal tax credits and benefits in relation to
the levels of United States and foreign  taxable  income or loss.  The projected
effective tax rate for fiscal 2009 is approximately  30.0% compared to an actual
effective tax rate of 26.1% for fiscal 2008.

Discontinued  Operations.  Income from  discontinued  operations for fiscal 2008
included a $770,000  tax benefit due to the  reduction  of an  unrecognized  tax
benefit  resulting  from the  lapse of the  applicable  statute  of  limitations
related to the prior dissolution of the Company's  European  subsidiary,  Anaren
Europe, B.V.

Year Ended June 30, 2007 Compared to Year Ended June 30, 2006

Net sales.  Net sales  increased  $23.5 million,  or 22.3% to $129.0 million for
fiscal 2007 compared to $105.5 million for fiscal 2006.  This increase  resulted
from a $12.4 million rise in shipments of Space and Defense products and a $11.1
million increase in shipments of Wireless products in fiscal 2007.

      The increase in sales of Wireless products,  was a result of the continued
overall  strength  of the  wireless  infrastructure  market  and  the  Company's
capturing a new custom assembly  design win increasing the Company's  content on
one base station platform.

      Wireless  product  sales  rose  $11.1  million,  or 16.6% in  fiscal  2007
compared to fiscal 2006,  due to a $7.8 million  increase in shipments of custom
wireless components in fiscal 2007. The increase in custom product sales was due
to the  introduction of new products and the continuing high level of demand for
existing  infrastructure  products  from Nokia.  During  fiscal  2007,  sales of
standard  components  rose 5.8%, or $2.2 million  compared to fiscal 2006 due to
the strong  infrastructure  market demand throughout fiscal 2007.  Additionally,
Wireless consumer product sales increased $1.1 million,  or 25.6% in fiscal year
2007 compared to fiscal 2006, reflecting the improved customer acceptance of our
new consumer related products.

      Sales of Space and Defense products rose $12.5 million, or 32.2% in fiscal
2007 compared to fiscal 2006.  Space and Defense  product sales increased due to
the higher level of new business booked by the Company over fiscal 2006 and 2007
and the shipment of new Counter IED related  products under a contract  received
in the first  quarter of fiscal  2007.  Shipments  relating  to the  Counter IED
contract  accounted  for $11.4  million in Space and Defense sales during fiscal
2007.

Gross  Profit.  Gross  profit  represents  net sales minus cost of sales.  Gross
profit for fiscal 2007 was $45.9 million  (35.6% of net sales),  up $7.9 million
from $38.0  million  (36.0% of net sales) for the prior year.  Gross profit as a
percent of sales


--------------------------------------------------------------------------------
                                       23
<PAGE>

declined  slightly  in fiscal 2007  compared  to fiscal  2006  despite the $23.5
million  increase in sales,  due to a somewhat less favorable  Wireless  product
mix, higher material content and lower than expected production yields in fiscal
2007.

Marketing.  Marketing  expenses were $7.4 million (5.8% of net sales) for fiscal
2007,  up 5.4%,  or $380,000  compared to $7.0  million  (6.7% of net sales) for
fiscal 2006.  Marketing  expenses in fiscal 2007 rose only slightly  compared to
fiscal 2006, despite the increase in sales volume,  due to declining  commission
expense  resulting from the maturing of a number of large programs to lower rate
structures.  This decline  off-set  higher travel and personnel  expenses in the
2007 year compared to fiscal 2006.

Research and  Development.  Research and development  expenses were $9.1 million
(7.1% of net  sales) in fiscal  2007,  up 4.4%  from $8.7  million  (8.3% of net
sales) for fiscal 2006.  Research and  development  expenditures  are supporting
further development of Wireless infrastructure and consumer products, as well as
new  technology  development  in the Space and  Defense  segment.  Research  and
development  expenditures have fluctuated with the level of opportunities in the
marketplace  which have  resulted in the hiring of additional  personnel  during
fiscal 2007 to assist in development initiatives.

General and Administrative.  General and administrative expenses increased 18.9%
to $12.3 million  (9.5% of net sales) for fiscal 2007,  from $10.3 million (9.8%
of net sales) for fiscal 2006. The increase  resulted  primarily from additional
professional  service costs  incurred due to the  restatements  of the Company's
financial  statements  that were  required to be filed with the  Securities  and
Exchange  Commission in January 2007, as well as additional  personnel costs due
to the  expanded  level  of  the  Company's  business,  and  additional  outside
consulting services retained by the Company for specific short term initiatives.
Additionally,  the  Company  incurred a lease  charge in the  fourth  quarter of
fiscal 2007 amounting to $542,000  related to the future lease cost in excess of
expected rental income generated by the Company's Frimley, U.K. facility.

Operating  Income.  Operating  income  rose  43.7% in fiscal  year 2007 to $17.0
million  (13.2% of sales),  compared to $11.8  million  (11.2% of net sales) for
fiscal 2006. Operating income improved  significantly in fiscal 2007 compared to
fiscal 2006 due to the large  increase in sales volume  (22.3%) and a relatively
smaller (10.4%) increase in operating expenses which more than off-set the small
decline in gross  margin as a percent of sales.  On a reporting  segment  basis,
Wireless operating income was $8.0 million for fiscal 2007, up $600,000, or 8.1%
from Wireless  operating  income of $7.4 million in fiscal 2006. The increase in
Wireless  operating  income was  relatively  minor compared to the $11.1 million
increase in sales in the fiscal  2007 due to  inefficiencies  in the Salem,  New
Hampshire  facility  resulting from a decline in new sales at that facility,  as
well as less  favorable  Wireless  product mix in fiscal 2007 compared to fiscal
2006.

Space and Defense  operating income was $9.6 million (18.7% of Space and Defense
net sales),  for fiscal 2007, up $5.1 million from $4.5 million for fiscal 2006.
Operating  margins in this group improved as a result of  efficiencies  realized
from the $12.5  million  increase  in  shipments  of Space and  Defense  segment
products in fiscal 2007,  which included $11.4 million of Counter-IED  products,
compared to fiscal 2006.

Other Income.  Other income  increased 45.6% to $3.6 million (2.7% of net sales)
in fiscal 2007  compared to $2.5  million  (2.3% of net sales) for fiscal  2006.
This  increase was caused mainly by the rise in market  interest  rates over the
last twelve  months and was partially  off-set by a decline in  investable  cash
balances during fiscal 2007 as funds were used to purchase treasury shares.

Interest  Expense.  Interest  expense  represents  interest  paid on a  deferred
obligation. Interest expense for fiscal 2007 was unchanged from fiscal 2006.

Income  Taxes.  Income  taxes for  fiscal  2007 were $5.2  million  (4.0% of net
sales), representing an effective tax rate of 25.3%. This compares to income tax
expense of $3.3  million  (3.1% of net sales) for fiscal 2006,  representing  an
effective tax rate of 22.8%. The Company's effective tax rate is a direct result
of the  proportion of federally  exempt state  municipal bond income and federal
tax credits and benefits in relation to the levels of taxable income or loss, as
well as, the phase out of the China tax holiday.


--------------------------------------------------------------------------------
                                       24
<PAGE>

Discontinued  Operations.  Discontinued operations in fiscal 2006 represents the
result of liquidation and dissolution of the Company's  Anaren Europe  corporate
structure  which ceased  operating in December  2003.  During the third  quarter
ended March 31, 2006 and in conjunction with the finalization of Anaren Europe's
bankruptcy proceeding, the Company performed the final liquidation of its Anaren
Europe  corporate  structure.  As a  result  of this  liquidation,  the  Company
recognized a gain of $81,713 from the liquidation of the remaining assets.


--------------------------------------------------------------------------------
                                       25
<PAGE>

Critical Accounting Policies

      The  methods,  estimates  and  judgments  management  uses in applying the
Company's  most critical  accounting  policies have a significant  impact on the
results reported in the Company's financial statements.  The U.S. Securities and
Exchange  Commission  has defined the most critical  accounting  policies as the
ones  that  are most  important  to the  portrayal  of the  Company's  financial
condition and results,  and that require  management to make the most  difficult
and  subjective  judgments,  often as a result of the need to make  estimates of
matters that are inherently uncertain.  Based on this definition,  the Company's
most  critical  policies  include:  1) valuation of accounts  receivable,  which
impacts general and  administrative  expense;  2) valuation of inventory,  which
impacts cost of sales and gross margin;  3) the assessment of  recoverability of
goodwill and other intangible and long-lived assets, which impacts write-offs of
goodwill,  intangibles  and  long-lived  assets;  4) accounting  for stock based
compensation,   which  impacts  multiple  expense   components   throughout  the
statements  of income;  and 5) accounting  for income  taxes,  which impacts the
valuation  allowance  and  the  effective  tax  rate.   Management  reviews  the
estimates,  including,  but not limited to,  allowance  for  doubtful  accounts,
inventory  reserves  and  income  tax  valuations  on a regular  basis and makes
adjustments  based on  historical  experiences,  current  conditions  and future
expectations.  The reviews are performed  regularly and  adjustments are made as
required by current available information.  The Company believes these estimates
are  reasonable,  but actual results could and have differed at times from these
estimates.

Valuation of Accounts Receivable

      The Company's accounts receivable  represent those amounts which have been
billed to its  customers but not yet  collected.  The Company  analyzes  various
factors  including  historical  experience,  credit  worthiness of customers and
current  market and economic  conditions.  The allowance  for doubtful  accounts
balance is established  based on the portion of those accounts  receivable which
are  deemed to be  potentially  uncollectible.  Changes  in  judgments  on these
factors could impact the timing of costs recognized.

Valuation of Inventory

      The Company  states  inventories  at the lower of cost or market,  using a
standard cost  methodology to determine the cost basis for the  inventory.  This
method   approximates   actual   cost  on  a   first-in-first-out   basis.   The
recoverability  of  inventories  is based on the types and  levels of  inventory
held, forecasted demand, pricing, competition and changes in technology.

Assessment of Recoverability of Intangible and Long-Lived Assets

      Long-lived  assets with  estimated  useful lives are  depreciated to their
residual  values over those useful  lives in  proportion  to the economic  value
consumed.  Long-lived assets are tested for impairment at the group level, which
is usually an economic  unit such as a  manufacturing  facility  or  department,
which has a measurable economic output or product.  Long-lived assets are tested
for  impairment  when  events or  changes  in  circumstances  indicate  that the
carrying  amount of a long-lived  asset may not be  recoverable  and exceeds its
fair market value. This circumstance exists if the carrying amount of the assets
in question  exceeds the sum of the  undiscounted  cash flows expected to result
from the use of the asset.  The  impairment  loss is  measured  as the amount by
which the  carrying  amount of a  long-lived  asset  exceeds  its fair  value as
determined by the discounted  cash flow or in the case of negative cash flow, an
independent market appraisal of the asset.

      Goodwill is tested annually during the fourth fiscal quarter, or sooner if
indicators of impairment  exist,  for impairment by the Company at the reporting
unit level by comparing the fair value of the  reporting  unit with its carrying
value.  Valuation  methods for  determining the fair value of the reporting unit
include  reviewing  quoted  market  prices and  discounted  cash  flows.  If the
goodwill is indicated as being impaired (the fair value of the reporting unit is
less than the carrying  amount),  the fair value of the  reporting  unit is then
allocated to its assets and  liabilities in a manner similar to a purchase price
allocation in order to determine  the implied fair value of the  reporting  unit
goodwill.  This  implied  fair  value of the  reporting  unit  goodwill  is then
compared with the carrying  amount of the reporting  unit goodwill and, if it is
less, the Company would then recognize an impairment loss.


--------------------------------------------------------------------------------
                                       26
<PAGE>

      The projection of future cash flows for the goodwill  impairment  analysis
requires  significant  judgments and estimates  with respect to future  revenues
related to the assets and the future  cash  outlays  related to those  revenues.
Actual  revenues and related cash flows or changes in  anticipated  revenues and
related cash flows could result in changes in this  assessment  and result in an
impairment charge.  The use of different  assumptions could increase or decrease
the related impairment charge.

Stock Based Compensation

      The Company accounts for stock based  compensation by recognizing  expense
over the vesting  period for any nonvested  stock option awards  granted.  Stock
option  grants  are  valued by using a  Black-Scholes  method at the date of the
grant.  There are assumptions and estimates made by management which go into the
valuation of the options granted, such as volatility,  expected option term, and
forfeiture  rate.  The Company  recognizes  expense on options  granted  using a
straight-line  method  over the  vesting  period.  Restricted  stock  grants are
expensed over the vesting period, which is determined at the date of the grant.

Valuation Allowance - Deferred Taxes

      The Company  records  valuation  allowances to reduce  deferred tax assets
when it is more  likely  than not that some  portion  of the  amount  may not be
realized.  The Company evaluates the need for valuation  allowances on a regular
basis and adjusts the allowance as needed.  These adjustments,  when made, would
have an impact on the  Company's  financial  statements  in the period that they
were recorded.

Liquidity and Capital Resources

      Net cash  provided by operations  for the years ended June 30, 2008,  2007
and 2006 was $12.0 million, $21.8 million and $16.6 million,  respectively.  The
positive  cash  flow  from   operations  was  due  primarily  to  profit  before
depreciation and equity based compensation expense in all three fiscal years. In
all three years the positive cash flow from earnings was partially  off-set by a
combined increase in inventory and accounts receivable amounting to $6.0 million
in fiscal  2008,  $6.3  million in fiscal 2007 and $4.0  million in fiscal 2006.
Additionally,  in fiscal 2008, 2007 and 2006, cash flow from operations rose due
to $3.7  million,  $3.5 million and $3.5  million in equity  based  compensation
expense, respectively,  which did not require cash. Additionally, in fiscal 2007
operating cash flow was further  enhanced by a $3.4 million increase in accounts
payable.

      Net cash provided by investing activities in fiscal 2008 was $20.1 million
and consisted of net maturities of marketable  debt securities of $32.5 million,
net of capital expenditures of $12.4 million.

      Net cash used in investing  activities in fiscal 2007 was $6.8 million and
consisted of capital  expenditures  of $13.2 million,  including $5.3 million in
current year  expenditures  to construct and equip a 54,000 square foot addition
to our East Syracuse,  New York manufacturing  facility,  less funds provided by
net maturities of marketable debt securities of $6.2 million.

      Net cash used in investing  activities in fiscal 2006 was $4.3 million and
consisted of capital  expenditures  of $7.5 million,  including $1.4 million for
infrastructure  work in the fourth  quarter to support  the 54,000  square  foot
building  expansion,  off-set by cash  provided by net  maturities of marketable
debt securities of $3.2 million.

      Net cash used in financing  activities  in fiscal 2008,  2007 and 2006 was
$29.5  million,  $23.1 million and $2.6 million,  respectively.  In fiscal 2008,
$784,000  was  provided by cash and tax  benefits  resulting  from stock  option
exercises  and $30.2  million  was used to purchase  2.0  million  shares of the
Company's  common stock for treasury.  In fiscal 2007, $2.6 million was provided
by cash and tax benefits  resulting from the exercise of stock options and $25.7
million was used to purchase  1.5 million  shares,  while in fiscal  2006,  $7.2
million was  provided  by the  exercise  of stock  options and $9.8  million was
expended to repurchase 697,000 shares.


--------------------------------------------------------------------------------
                                       27
<PAGE>

      The Company  expects to continue to purchase shares of its common stock in
the open market and/or through private negotiated transactions under the current
Board authorization, depending on market conditions. At June 30, 2008 there were
1,547,341 shares remaining under the current Board repurchase authorization.

      At June 30, 2008,  the Company had  approximately  $44.1  million in cash,
cash  equivalents,  and marketable  securities and no debt, and has had positive
operating  cash flow for over ten  years.  The  Company  believes  that its cash
requirements for the foreseeable  future will be satisfied by currently invested
cash balances, expected cash flows from operations and its newly secured line of
credit.

      On July 31, 2008, the Company  cancelled its previous $50.0 million demand
note loan  agreement  with no balance  outstanding  on the loan; and on the same
day,  the  Company  signed a loan  agreement  with its bank for a $50.0  million
declining  revolving  line of  credit  to be used to  finance  acquisitions  and
working capital needs. On July 31 and August 29, 2008, the Company took advances
totaling $49.8 million on this line to finance the  acquisitions of M.S. Kennedy
Corp. and Unicircuit,  Inc.  Advances under this line, at the Company's  choice,
bear interest at LIBOR, plus 100 to 450 basis points or at the Prime Rate, minus
(100) to plus 225 basis points,  depending upon the Company's EBITDA performance
at the end of each  quarter as measured  by the formula  (payable on a quarterly
basis):  EBITDA  divided by the Current  Portion of Long-term debt plus interest
expense.  Availability  of credit  under the line  declines  20% annually on the
anniversary date of the note and any outstanding  principal balance in excess of
the new line limit is due and payable at that time.

Disclosures About Contractual Obligations and Commercial Commitments

      Accounting   standards   require   disclosure   concerning  the  Company's
obligations  and commitments to make future  payments under  contracts,  such as
debt and  lease  agreements,  and  under  contingent  commitments,  such as debt
guarantees. The Company's obligations and commitments are as follows:

<TABLE>
<CAPTION>
                                                                       Less                                                  Over
                                                    Total           Than 1 Yr.        2 - 3 Yrs.       4 - 5  Yrs.          5 Yrs.
                                                  ----------        ----------        ----------       -----------        ----------
<S>                                               <C>               <C>               <C>               <C>               <C>
Operating leases -- facilities                    $3,949,733        $  720,506        $1,441,012        $1,441,012        $  347,203
Deferred compensation                              1,029,261           313,746           627,492            88,023                --
</TABLE>

Recent Accounting Pronouncements

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 157, "Fair Value  Measurements" which is effective for fiscal years
beginning  after  November  15, 2007 (the  Company's  2009 fiscal  year) and for
interim  periods  within  those  years.   This  statement  defines  fair  value,
establishes  a  framework  for  measuring  fair value and  expands  the  related
disclosure requirements. The Company does not believe this statement will have a
material impact on the financial statements.

      In  February  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 159,  "The Fair Value  Option for  Financial  Assets and  Financial
Liabilities - Including an Amendment of FASB Statement No. 115" (SFAS 159). This
Statement  provides  companies with an option to measure,  at specified election
dates, many financial instruments and certain other items at fair value that are
not currently measured at fair value. A company that adopts SFAS 159 will report
unrealized  gains and losses on items for which the fair  value  option has been
elected in earnings at each  subsequent  reporting  date.  This  Statement  also
establishes  presentation  and  disclosure  requirements  designed to facilitate
comparisons  between entities that choose different  measurement  attributes for
similar types of assets and liabilities.  This Statement is effective for fiscal
years  beginning  after November 15, 2007 (the Company's 2009 fiscal year).  The
Company  does not  believe  this  statement  will have a material  impact on its
financial statements.

      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 141 (revised  2007),  "Business  Combinations"  (SFAS 141(R)).  The
objective  of this  Statement  is to  improve  the  relevance,  representational
faithfulness,  and  comparability  of the  information  that a reporting  entity
provides in its financial reports about a business combination. Specifically, it
establishes principles and requirements over how the acquirer (1) recognizes and
measures the identifiable  assets  acquired,  the liabilities  assumed,  and any
noncontrolling interest in the acquiree; (2) recognizes and measures


--------------------------------------------------------------------------------
                                       28
<PAGE>

goodwill acquired in the business combination or a gain from a bargain purchase,
and;  (3)  determines  what  information  to  disclose  to  enable  users of the
financial  statements  to  evaluate  the  nature  and  financial  effects of the
business  combination.  This  Statement is effective for fiscal years  beginning
after  December 15, 2008  (fiscal year 2010).  The Company does not believe this
Statement will have a material impact on its financial statements.

      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 160, "Noncontrolling Interests in Consolidated Financial Statements
an amendment of ARB No. 51" (SFAS 160).  The  objective of this  Statement is to
improve  the  relevance,   comparability,  and  transparency  of  the  financial
information  that a  reporting  entity  provides in its  consolidated  financial
statements  by   establishing   accounting  and  reporting   standards  for  the
noncontrolling  interest  in a  subsidiary  (minority  interests)  and  for  the
deconsolidation  of a subsidiary.  This Statement is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2008
(fiscal  year  2010).  The  Company is  currently  assessing  the impact of this
Statement on its financial statements.

      In  April  2008,   the  FASB  issued  a  FASB  Staff  Position  No.  142-3
"Determination  of the Useful Life of Intangible  Assets"  (FSP).  This Position
amends the  factors  that  should be  considered  in the  developing  renewal or
extension  assumptions  used  to  determine  the  useful  life  of a  recognized
intangible  asset under FASB Statement No. 142,  "Goodwill and Other  Intangible
Assets." The intent of the FSP is to improve the consistency  between the useful
life of a recognized intangible asset and the period of expected cash flows used
to measure the fair value of the asset  under FASB  Statement  No. 141  (revised
2007),  "Business  Combinations," and other U.S.  generally accepted  accounting
principles.  This Statement is effective for fiscal years,  and interim  periods
within those fiscal years, beginning after December 15, 2008 (fiscal year 2010).
The Company is currently assessing the impact of this Statement on its financial
statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The following  discusses the  Company's  possible  exposure to market risk
related  to changes in  interest  rates,  equity  prices  and  foreign  currency
exchange rates.  This discussion  contains  forward-looking  statements that are
subject to risks and  uncertainties.  Results could differ materially from those
anticipated in these forward-looking  statements as a result of various factors,
including factors described elsewhere in this Annual Report on Form 10-K.

      As of June 30, 2008, the Company had cash, cash equivalents and marketable
securities of $44.1 million, all of which consisted of highly liquid investments
in  marketable  debt  securities.  The  marketable  debt  securities  at date of
purchase  normally  have  maturities  between one and 18 months,  are exposed to
interest rate risk and will decrease in value if market interest rates increase.
A  hypothetical  decrease  in market  interest  rate of 10.0% from June 30, 2008
rates, or 0.350%,  would have reduced net income and cash flow by  approximately
$108,000, or $0.0074 per diluted share for the year. Due to the relatively short
maturities  of the  securities  and its  ability  to hold those  investments  to
maturity,  the Company does not believe  that an immediate  decrease in interest
rates would have a significant  effect on its financial  condition or results of
operations.  Over time,  however,  declines  in  interest  rates will reduce the
Company's interest income.

Item 8. Financial Statements and Supplementary Data

      The financial  statements called for by this Item are provided under "Item
15.  Exhibits,  Financial  Statement  Schedules  and Reports on Form 8-K," which
information is  incorporated  herein by reference.  The unaudited  supplementary
financial  information  required  by this  Item is  contained  in note 22 to the
consolidated financial statements of the Company which are included elsewhere in
this Annual Report on Form 10-K.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

      The Company's Chief Executive Officer and its Chief Financial Officer have
concluded, based on their evaluation as of the end of the period covered by this
report, that the Company's  "disclosure  controls and procedures" (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective
to ensure that  information  required to be  disclosed  in the reports  that the
Company  files or  submits  under  the  Securities  Exchange  Act of 1934 is (i)
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and (ii) accumulated
and  communicated  to the Company's  management,  including its Chief  Executive
Officer


--------------------------------------------------------------------------------
                                       29
<PAGE>

and Chief Financial Officer,  as appropriate to allow timely decisions regarding
required disclosure.

Internal Control over Financial Reporting

      (a)   See Item 15 of this  Annual  Report  on Form  10-K for  Management's
            Annual Report on Internal Control over Financial Reporting, which is
            incorporated herein by reference.

      (b)   See Item 15 of this Annual  Report on Form 10-K for the  attestation
            report of KPMG LLP,  the  Company's  independent  registered  public
            accounting firm, which is incorporated herein by reference.

      (c)   In connection  with the foregoing  evaluation by the Company's Chief
            Executive Officer and its Chief Financial  Officer,  no changes were
            identified  in  the  Company's   "internal  control  over  financial
            reporting" (as defined in the Securities  Exchange Act of 1934 Rules
            13a-15(f) and 15d-15(f)) that occurred  during the Company's  fiscal
            quarter ended June 30, 2008 (the  Company's  fourth fiscal  quarter)
            that  have  materially   affected,   or  are  reasonably  likely  to
            materially  affect,  the Company's  internal  control over financial
            reporting.

Item 9B. Other Information

      Not Applicable.


--------------------------------------------------------------------------------
                                       30
<PAGE>

                                    PART III

Item 10. Directors, Executive Officers and Corporate Governance

      Certain  information  required by this Item is contained in the  Company's
proxy  statement  filed with respect to the 2008 Annual Meeting of  Shareholders
and is incorporated by reference herein. Certain information regarding executive
officers of the Company required by this Item is included in Item 4A hereof.

      On August 13, 2002, the Board of Directors adopted Anaren's Code of Ethics
and Business  Conduct,  which outlines the ethical  principles  that provide the
foundation for the Company's dealings with customers,  suppliers,  shareholders,
the investment community and employees.  The Code is applicable to all employees
including  officers,  and to the  Company's  directors.  The Code, as revised in
February 2006, has been distributed to all employees and is available for review
on the Company's website, www.anaren.com.

Item 11. Executive Compensation

      Information  required by this Item is  contained  in the  Company's  proxy
statement filed with respect to the 2008 Annual Meeting of  Shareholders  and is
incorporated by reference herein.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          Related Stockholder Matters

      Information  required by this Item is  contained  in the  Company's  proxy
statement filed with respect to the 2008 Annual Meeting of  Shareholders  and is
incorporated by reference herein.

Item  13.  Certain   Relationships  and  Related   Transactions,   and  Director
           Independence

      Information  required by this Item is  contained  in the  Company's  proxy
statement filed with respect to the 2008 Annual Meeting of  Shareholders  and is
incorporated by reference herein.

Item 14. Principal Accounting Fees and Services

      Information  required by this Item is  contained  in the  Company's  proxy
statement filed with respect to the 2008 Annual Meeting of  Shareholders  and is
incorporated by reference herein.


--------------------------------------------------------------------------------
                                       31
<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) 1. and 2.     Financial  Statements and Schedules:  Reference is made to the
                  Index of Financial Statements hereinafter contained

3. Exhibits:

      Reference is made to the list of Exhibits hereinafter contained

(b) Exhibits:

    Index to Exhibits

    Exhibit No.                           Description
    -----------                           -----------

        3.1       Certificate of Incorporation, as amended (1)

        3.2       Restated By-Laws (2)

        4.1       Specimen Certificate of Common Stock (3)

        4.2       Shareholder  Protection Rights Agreement dated as of April 20,
                  2001,  between the Company and American Stock Transfer & Trust
                  Company, including forms of Rights Certificate and Election to
                  Exercise (4)

        10.1      Employment  Agreement,  dated as of July 1, 2006,  between the
                  Company and Lawrence A. Sala (5)

        10.2      Pension Plan and Trust (6)

        10.3      Anaren Microwave, Inc. Incentive Stock Option Plan, as amended
                  (7)

        10.4      Anaren Microwave,  Inc. 1989 Non-statutory  Stock Option Plan,
                  as amended (8)

        10.5      Anaren  Microwave,  Inc.  Incentive  Stock Option Plan for Key
                  Employees (9)

        10.6      Anaren Microwave, Inc. Stock Option Plan (10)

        10.7      Form of Change of Control  Agreements dated June 22, 2007 with
                  Joseph Porcello, Mark Burdick, Timothy Ross, Amy Tewksbury and
                  Gert Thygesen (11)

        10.8      Employment  Agreement,  dated as of February 14, 2004, between
                  the Company and Carl W. Gerst, Jr. (12)

        10.9      Anaren, Inc. Comprehensive Long-Term Incentive Plan (13)

       10.10      Addendum to the Employment  Agreement with Carl W. Gerst,  Jr.
                  dated as of May 16,  2007,  between  the  Company  and Carl W.
                  Gerst, Jr. (14)

       10.11      Addendum II to the  Employment  Agreement  with Carl W. Gerst,
                  Jr. dated as of June 16, 2008, between the Company and Carl W.
                  Gerst, Jr. (15)

       10.12      Revolving  Loan  Agreement  between  Anaren,  Inc. and KeyBank
                  National Association dated as of July 30, 2008 (16)

       10.13      364 Day LIBOR Grid Note Loan Agreement  between  Anaren,  Inc.
                  and Manufacturers and Traders Trust Company dated as of May 1,
                  2008.(17)

         21       Subsidiaries of the Company

         23       Consent of KPMG LLP, Independent  Registered Public Accounting
                  Firm

         31       Rule 13a-14(a) Certifications

         32       Section 1350 Certifications

        (1)       (A)   Restated  Certificate of  Incorporation  of the Company,
                        filed on August  11,  1967,  is  incorporated  herein by
                        reference  to  Exhibit  3(a) to  Company's  Registration
                        Statement on Form S-1  (Registration  No. 2-42704);  (B)
                        Amendment,  filed on December 19, 1980, is  incorporated
                        herein by reference to Exhibit  4.1(ii) to the Company's
                        Registration  Statement  on Form S-2  (Registration  No.
                        2-86025);  (C)  Amendment,  filed on March 18, 1985,  is
                        incorporated  herein by  reference to Exhibit 3.1 to the
                        Company's  Annual Report on Form 10-K  (Commission  File
                        No. 0-6620) for the fiscal year ended June 30, 1987; (D)
                        Amendment,  filed on December 14, 1987, is  incorporated
                        herein by reference to Exhibit 4(a)(iv) to the Company's
                        Registration  Statement  on Form S-8  (Registration  No.
                        33-19618);  (E)  Amendment,  filed on April 8, 1999,  is
                        incorporated  herein by  reference to Exhibit 3.1 to the
                        Company's  Annual


--------------------------------------------------------------------------------
                                       32
<PAGE>

                        Report on Form 10-K (Commission File No. 0-6620) for the
                        fiscal year ended June 30, 1999; (F) Amendment, filed on
                        February 8, 2000, is  incorporated  herein  reference to
                        Exhibit 4.1 to the Company's  Registration  Statement on
                        Form S-3  (Registration  No.  333-31460)  filed with the
                        Securities and Exchange Commission on March 2, 2000; and
                        (G)   Amendment,   filed  on  November  22,   2000,   is
                        incorporated   by   reference  to  Exhibit  3.1  to  the
                        Company's Quarterly Report on Form 10-Q (Commission File
                        No.  0-6620) for the three  months  ended  December  31,
                        2000.

        (2)             Incorporated  herein  reference  to  Exhibit  4.2 to the
                        Company's    Registration    Statement   on   Form   S-3
                        (Registration  No.  333-31460) filed with the Securities
                        and Exchange Commission on March 2, 2000.

        (3)             Incorporated  herein  reference  to  Exhibit  4.3 to the
                        Company's    Registration    Statement   on   Form   S-3
                        (Registration  No.  333-31460) filed with the Securities
                        and Exchange Commission on March 2, 2000.

        (4)             Incorporated herein by reference to Exhibits 4.1 and 4.2
                        to the  Company's  Registration  Statement  on Form  8-A
                        (Commission  File No.  0-6620) filed with the Securities
                        and Exchange Commission on April 26, 2001.

        (5)             Incorporated  herein by reference to Exhibit 10.1 to the
                        Company's Periodic Report on Form 8-K,  (Commission File
                        No.  0-6620),  filed with the  Securities  and  Exchange
                        Commission on July 25, 2006.

        (6)             Incorporated  herein by reference to Exhibit 4(b) to the
                        Company's    Registration    Statement   on   Form   S-8
                        (Registration No. 33-19618).

        (7)             Incorporated  herein by  reference  to Appendix A to the
                        Company's definitive proxy statement for its 1998 annual
                        meeting  of  the   shareholders   (Commission  File  No.
                        0-6620),   filed  with  the   Securities   and  Exchange
                        Commission on September 25, 1998.

        (8)             Incorporated  herein by  reference  to Appendix B to the
                        Company's definitive proxy statement for its 1998 annual
                        meeting  of  the   shareholders   (Commission  File  No.
                        0-6620),   filed  with  the   Securities   and  Exchange
                        Commission on September 25, 1998.

        (9)             Incorporated  herein by  reference  to Appendix A to the
                        Company's definitive proxy statement for its 2000 annual
                        meeting  of  the   shareholders   (Commission  File  No.
                        0-6620),   filed  with  the   Securities   and  Exchange
                        Commission on September 18, 2000.

        (10)            Incorporated  herein by  reference  to Appendix B to the
                        Company's definitive proxy statement for its 2000 annual
                        meeting  of  the   shareholders   (Commission  File  No.
                        0-6620),   filed  with  the   Securities   and  Exchange
                        Commission on September 18, 2000.

        (11)            Incorporated  herein by reference to Exhibit 10.1 to the
                        Company's  Periodic Report on Form 8-K (Commission  File
                        No.  0-6620)  filed  with the  Securities  and  Exchange
                        Commission on June 27, 2007.

        (12)            Incorporated herein by reference to Exhibit 10.12 to the
                        Company's  Quarterly  Report  on Form 10-Q for the three
                        months ended March 31, 2007.

        (13)            Incorporated  herein by  reference  to Appendix A to the
                        Company's definitive proxy statement for its 2004 annual
                        meeting  of  the   shareholders   (Commission  File  No.
                        0-6620),   filed  with  the   Securities   and  Exchange
                        Commission on September 17, 2004.


--------------------------------------------------------------------------------
                                       33
<PAGE>

        (14)            Incorporated  herein by reference to Exhibit 10.1 to the
                        Company's  periodic Report on Form 8-K (Commission  File
                        No.0-6620)   filed  with  the  Securities  and  Exchange
                        Commission on July 25, 2007.

        (15)            Incorporated  herein by reference to Exhibit 10.1 to the
                        Company's  periodic Report on Form 8-K (Commission  File
                        No.0-6620)   filed  with  the  Securities  and  Exchange
                        Commission on June 20, 2008.

        (16)            Incorporated  herein by  reference  to Exhibit  10.2 and
                        10.3  to the  Company's  periodic  Report  on  Form  8-K
                        (Commission  File  No.0-6620)  filed with the Securities
                        and Exchange Commission on August 1, 2008.

        (17)            Incorporated  herein by reference to Exhibit 99.1 to the
                        Company's  periodic report on Form 10Q (Commission  File
                        No.  0-6620)  filed  with the  Securities  and  Exchange
                        Commission on May 12, 2008.

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

                                    ANAREN, INC.

                                    /s/ LAWRENCE A. SALA
                                    --------------------------------------------
                                    Name: Lawrence A. Sala
                                    Title: President and Chief Executive Officer

Date: September 15, 2008

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

<TABLE>
<CAPTION>
          Signature                                      Title                               Date
          ---------                                      -----                               ----
<S>                                     <C>                                           <C>
/s/ Lawrence A. Sala                    President, Chief Executive Officer and        September 15, 2008
------------------------------          Chairman of the Board, Director
Lawrence A. Sala                        (Principal Executive Officer)

/s/ George A. Blanton                   Sr. Vice President, Chief Financial           September 15, 2008
------------------------------          Officer, Treasurer
George A. Blanton

/s/ Carl W. Gerst, Jr.                  Chief Technical Officer, Vice Chairman        September 15, 2008
------------------------------          of the Board and Director
Carl W. Gerst, Jr.

/s/ Dale F. Eck                         Director                                      September 15, 2008
------------------------------
Dale F. Eck

/s/ Matthew S. Robison                  Director                                      September 15, 2008
------------------------------
Matthew S. Robison

/s/ David L. Wilemon                    Director                                      September 15, 2008
------------------------------
David L. Wilemon

/s/ James G. Gould                      Director                                      September 15, 2008
------------------------------
James G. Gould

/s/ Robert U. Roberts                   Director                                      September 15, 2008
------------------------------
Robert U. Roberts

/s/ John L. Smucker                     Director                                      September 15, 2008
------------------------------
John L. Smucker

/s/ Patricia T. Civil                   Director                                      September 15, 2008
------------------------------
Patricia T. Civil
</TABLE>


--------------------------------------------------------------------------------
                                       34
<PAGE>

                                  ANAREN, INC.

                        Consolidated Financial Statements

                             June 30, 2008 and 2007

     (With Report of Independent Registered Public Accounting Firm Thereon)


--------------------------------------------------------------------------------
                                       35
<PAGE>

                                  ANAREN, INC.

                                      Index

                                                                           Page
                                                                           ----
Report of Independent Registered Public Accounting Firm                     37
Consolidated Balance Sheets as of June 30, 2008 and 2007                    40
Consolidated Statements of Income for the years ended
  June 30, 2008, 2007 and 2006                                              41
Consolidated Statements of Stockholders' Equity and Comprehensive
  Income for the years ended June 30, 2008, 2007 and 2006                   42
Consolidated Statements of Cash Flows for the years ended
  June 30, 2008, 2007 and 2006                                              43
Notes to Consolidated Financial Statements                               44 - 69


--------------------------------------------------------------------------------
                                       36
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Anaren Inc.:

      We have audited the consolidated  financial statements of Anaren, Inc. and
subsidiaries as listed in the accompanying  index. 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 Anaren, Inc.
and  subsidiaries  as of June  30,  2008  and  2007,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended June 30, 2008,  in  conformity  with U.S.  generally  accepted  accounting
principles.

      As  discussed  in note 2 to the  consolidated  financial  statements,  the
Company adopted  Financial  Accounting  Standards Board  Interpretation  No. 48,
Accounting for Uncertainty in Income Taxes, effective July 1, 2007, Statement of
Financial  Accounting  Standards  No.  158,  Employers'  Accounting  for Defined
Benefit  Pension and Other  Postretirement  Plans,  effective June 30, 2007, and
Securities  and  Exchange   Commission  Staff   Accounting   Bulletin  No.  108,
Considering   the  Effects  of  Prior  Year   Misstatements   when   Quantifying
Misstatements in the Current Year Financial Statements, effective July 1, 2006.

      We also have  audited,  in  accordance  with the  standards  of the Public
Company  Accounting  Oversight Board (United  States),  Anaren,  Inc.'s internal
control  over  financial  reporting  as of June  30,  2008,  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 September 15, 2008 expressed an unqualified  opinion on the  effectiveness
of the Company's internal control over financial reporting.

/s/ KPMG LLP

Syracuse, New York
September 15, 2008


--------------------------------------------------------------------------------
                                       37
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Anaren Inc.:

      We have audited Anaren,  Inc.'s internal control over financial  reporting
as of June 30,  2008,  based on,  criteria  established  in  Internal  Control -
Integrated Framework issued by the Committee of Sponsoring  Organizations of the
Treadway  Commission  (COSO).  Anaren,  Inc.'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,
included in the  accompanying  Annual Report on Internal  Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company'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,  assessing the risk that a material  weakness
exists,  and testing and  evaluating the design and operating  effectiveness  of
internal control based on the assessed risk. Our audit also included  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,  Anaren,  Inc.  maintained,  in all  material  respects,
effective  internal control over financial  reporting as of June 30, 2008, based
on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

      We also have  audited,  in  accordance  with the  standards  of the Public
Company  Accounting  Oversight Board (United States),  the consolidated  balance
sheets of Anaren,  Inc. and  subsidiaries  as of June 30, 2008 and 2007, and the
related   consolidated   statements   of   income,   stockholders'   equity  and
comprehensive  income,  and cash  flows for each of the years in the  three-year
period ended June 30, 2008, and our report dated September 13, 2008 expressed an
unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Syracuse, New York
September 15, 2008


--------------------------------------------------------------------------------
                                       38
<PAGE>

     MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      Management of Anaren, Inc. is responsible for establishing and maintaining
an adequate system of internal control over financial reporting.  This system is
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 of
America.

      The Company's  internal  control over financial  reporting  includes those
policies and procedures  that (i) pertain to the maintenance of records that, in
reasonable   detail,   accurately  and  fairly  reflect  the   transactions  and
dispositions  of the assets of the Company;  (ii) 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 (iii) 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,  a system of internal  control over
financial reporting can provide only reasonable assurance and may not prevent or
detect misstatements.  Further, because of changes in conditions,  effectiveness
of internal  controls over  financial  reporting may vary over time.  Our system
contains   self-monitoring   mechanisms,   and  actions  are  taken  to  correct
deficiencies as they are identified.

      Management  conducted an evaluation of the  effectiveness of the system of
internal  control over  financial  reporting  based on the framework in Internal
Control  --  Integrated   Framework   issued  by  the  Committee  of  Sponsoring
Organizations  of the  Treadway  Commission  (COSO).  Based on this  evaluation,
management  concluded  that  the  Company's  system  of  internal  control  over
financial reporting was effective as of June 30, 2008.

      The  effectiveness  of  the  Company's  internal  control  over  financial
reporting  has been  audited  by KPMG  LLP,  an  independent  registered  public
accounting firm, as stated in their report which is included herein.


--------------------------------------------------------------------------------
                                       39
<PAGE>

                                  ANAREN, INC.
                           Consolidated Balance Sheets
                             June 30, 2008 and 2007

<TABLE>
<CAPTION>
                                                                                                      2008                 2007
                                                                                                 -------------        -------------
<S>                                                                                              <C>                  <C>
                                  ASSETS
Current Assets:
       Cash and cash equivalents                                                                 $  10,710,825        $   7,912,276
       Securities available-for-sale (note 5)                                                               --           14,150,000
       Securities held to maturity (note 5)                                                         21,073,929           20,951,788
       Receivables, less allowances of $419,305 and $255,677
         in 2008 and 2007, respectively                                                             23,101,590           19,768,701
       Inventories (note 6)                                                                         26,981,367           24,331,597
       Other receivables                                                                             1,505,162            1,606,093
       Prepaid expenses                                                                              1,152,148              771,251
       Deferred income taxes (note 17)                                                               1,645,955            1,174,255
       Other current assets                                                                            610,981            1,121,513
                                                                                                 -------------        -------------
         Total current assets                                                                       86,781,957           91,787,474
Securities available-for-sale (note 5)                                                                 314,200                   --
Securities held to maturity (note 5)                                                                11,993,768           31,540,247
Property, plant, and equipment, net (note 7)                                                        42,266,431           37,091,786
Deferred income taxes (note 17)                                                                         31,159               31,447
Goodwill (note 1)                                                                                   30,715,861           30,715,861
Other intangible assets, net of accumulated amortization
  (note 3)                                                                                                  --               37,500
                                                                                                 -------------        -------------
       Total assets                                                                              $ 172,103,376        $ 191,204,315
                                                                                                 =============        =============

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
       Accounts payable                                                                          $   9,160,496        $  11,717,120
       Accrued expenses (note 9)                                                                     2,581,074            3,907,652
       Income taxes payable                                                                                 --              726,240
       Customer advance payments                                                                     1,259,001            1,318,812
       Other current liabilities (note 11)                                                           2,618,422            1,259,616
                                                                                                 -------------        -------------
         Total current liabilities                                                                  15,618,993           18,929,440
      Deferred income taxes (note 17)                                                                  813,720            1,373,353
      Pension and postretirement benefit obligation
        (note 16)                                                                                    3,314,739            2,954,664
      Other Liabilities (note 11)                                                                    1,492,268            1,152,710
                                                                                                 -------------        -------------
      Total liabilities                                                                             21,239,720           24,410,167
                                                                                                 -------------        -------------
Commitments and concentrations (notes 17, 18 and 19)
Stockholders' Equity:

       Common stock, $0.01 par value. Authorized 200,000,000 shares (note 14);
       issued 27,393,094 and 27,128,855 at June 30, 2008 and
       2007, respectively                                                                              273,930              271,288
       Additional paid-in capital                                                                  192,313,860          187,877,944
       Retained earnings                                                                            94,540,282           85,306,813
       Accumulated other comprehensive loss (note 14)                                                 (343,990)            (984,640)
                                                                                                 -------------        -------------
                                                                                                   286,784,082          272,471,405

       Less 12,780,181 and 10,752,506 treasury shares at
         June 30, 2008 and 2007, respectively, at cost                                             135,920,426          105,677,257
                                                                                                 -------------        -------------
       Total stockholders' equity                                                                  150,863,656          166,794,148
                                                                                                 -------------        -------------
      Total liabilities and stockholders' equity                                                 $ 172,103,376        $ 191,204,315
                                                                                                 =============        =============
</TABLE>

           See accompanying notes to consolidated financial statements


--------------------------------------------------------------------------------
                                       40
<PAGE>

                                  ANAREN, INC.
                        Consolidated Statements of Income
                    Years ended June 30, 2008, 2007 and 2006

<TABLE>
<CAPTION>
                                                                            2008                    2007                   2006
                                                                        -------------          -------------          -------------
<S>                                                                     <C>                    <C>                    <C>
Net Sales                                                               $ 131,316,261          $ 128,987,104          $ 105,464,236
Cost of Sales                                                              90,838,310             83,125,048             67,493,977
                                                                        -------------          -------------          -------------
         Gross profit                                                      40,477,951             45,862,056             37,970,259
                                                                        -------------          -------------          -------------
Operating Expenses:
   Marketing                                                                7,018,237              7,416,140              7,036,240
   Research and development                                                10,410,400              9,134,147              8,747,463
   General and administrative                                              13,592,175             12,297,591             10,345,398
   Restructuring (note 10)                                                    255,000                     --                     --
                                                                        -------------          -------------          -------------
         Total operating expenses                                          31,275,812             28,847,878             26,129,101
                                                                        -------------          -------------          -------------
         Operating income                                                   9,202,139             17,014,178             11,841,158
                                                                        -------------          -------------          -------------
Other income (expense):
   Interest expenses                                                          (79,400)               (24,572)               (25,203)
   Other, primarily interest income                                         2,322,730              3,571,354              2,452,914
                                                                        -------------          -------------          -------------
         Total other income, net                                            2,243,330              3,546,782              2,427,711
                                                                        -------------          -------------          -------------
Income from continuing operations before
income taxes                                                               11,445,469             20,560,960             14,268,869
Income tax expense (note 17)                                                2,982,000              5,211,000              3,252,000
                                                                        -------------          -------------          -------------
         Income from continuing operations                                  8,463,469             15,349,960             11,016,869
Discontinued operations (note 4):
   Income from discontinued operations
     of Anaren Europe                                                              --                     --                 81,713
   Income tax benefit                                                         770,000                     --                     --
                                                                        -------------          -------------          -------------
         Net income from discontinued
           operations                                                         770,000                     --                 81,713
                                                                        -------------          -------------          -------------
         Net income                                                     $   9,233,469          $  15,349,960          $  11,098,582
                                                                        =============          =============          =============
Basic earnings per share equivalent share:
   Income from continuing operations                                    $        0.57          $        0.89          $        0.64
   Income from discontinued operations                                           0.05                     --                   0.01
                                                                        -------------          -------------          -------------
       Net income                                                       $        0.62          $        0.89          $        0.65
                                                                        =============          =============          =============
Diluted earnings per share equivalent share:
   Income from continuing operations                                    $        0.56          $        0.87          $        0.62
   Income from discontinued operations                                           0.05                     --                   0.01
                                                                        -------------          -------------          -------------
       Net income                                                       $        0.61          $        0.87          $        0.63
                                                                        =============          =============          =============
Weighted average common shares
   Outstanding:
       Basic                                                               14,826,795             17,318,508             17,156,720
       Diluted                                                             15,067,711             17,720,723             17,682,231
</TABLE>

           See accompanying notes to consolidated financial statements


--------------------------------------------------------------------------------
                                       41
<PAGE>

                                  ANAREN, INC.
    Consolidated Statements of Stockholders' Equity and Comprehensive Income
                    Years ended June 30, 2008, 2007 and 2006

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                                            Other
                         Comprehensive   Common    Additional                           Comprehensive                     Total
                             Income       Stock     Paid-in     Unearned     Retained      (Loss)        Treasury      Stockholders'
                             (loss)      Amount     Capital   Compensation   Earnings      Income          Stock          Equity
                         -------------  --------  ----------- ------------  ----------- -------------  -------------   ------------
<S>                        <C>           <C>       <C>          <C>         <C>          <C>            <C>            <C>
Balance at June 30, 2005                $260,708  $171,333,97  $(248,578)  $59,395,271  $(1,483,003)   $(70,179,810)  $159,078,563
Comprehensive income:
   Net income              $11,098,582        --           --         --    11,098,582           --              --     11,098,582
   Other comprehensive
     loss:
     Foreign currency
     translation
     adjustment                103,009        --           --         --            --           --              --             --
       Minimum pension
       liability
       adjustment, net
       of tax benefit
       of $469,815             938,597        --           --         --            --           --              --             --
                           -----------
         Other
         comprehensive
         loss                1,041,606        --           --         --            --    1,041,606              --      1,041,606
                           -----------
         Total
         comprehensive
         income            $12,140,188
                           ===========
Purchase of treasury
stock (696,585 shares)                        --           --         --            --           --      (9,803,481)    (9,803,481)
Exercise of stock
options under equity
plans (note 12)                            7,867    5,541,353         --            --           --              --      5,549,220
Stock based employer
compensation                                  --    3,474,761         --            --           --              --      3,474,761
Tax benefit from
exercise of stock
options (note 17)                             --    1,679,149         --            --           --              --      1,679,149
Reclassification of
unearned compensation
(note 12)                                     --     (248,578)   248,578            --           --              --             --
                                        -------- ------------  ---------   -----------  -----------   -------------   ------------
Balance at June 30, 2006                 268,575  181,780,660         --    70,493,853     (441,397)    (79,983,291)   172,118,400
Cumulative effect of
the adjustment
resulting from the
adoption of SAB108,
net of tax benefit of
$302,000 (note 2)                             --           --         --      (537,000)          --              --       (537,000)
                                        -------- ------------  ---------   -----------  -----------   -------------   ------------
Balance at June 30, 2006                 268,575  181,780,660         --    69,956,853     (441,397)    (79,983,291)   171,581,400
Comprehensive income:
   Net income              $15,349,960        --           --         --    15,349,960           --              --     15,349,960
   Other comprehensive
   loss:
     Foreign currency
     translation
     adjustment                260,090        --           --         --            --           --              --             --
       Minimum pension
       liability
       adjustment, net
       of tax of
       $281,742                546,913        --           --         --            --           --              --             --
                           -----------
Other comprehensive income     807,003        --           --         --            --      807,003              --        807,003
                           -----------
         Total
         comprehensive
         income            $16,156,963
                           ===========
Purchase of treasury
stock (1,502,863
shares)                                       --           --         --            --           --     (25,693,966)   (25,693,966)
Exercise of stock
options under equity
plans (note 12)                            2,713    2,195,386         --            --           --              --      2,198,099
Adjustment to initially
apply SFAS No. 158,
net of tax benefit of
$695,581 (note 2)                             --           --         --            --   (1,350,246)             --     (1,350,246)
Tax benefit from
exercise of stock
options (note 17)                             --      433,042         --            --           --              --        433,042
Stock based employer
compensation                                  --    3,468,856                       --           --              --      3,468,856
                                        -------- ------------  ---------   -----------  -----------   -------------   ------------
Balance at June 30, 2007                $271,288 $187,877,944  $      --   $85,306,813  $  (984,640)  $(105,677,257)  $166,794,148
                                        -------- ------------  ---------   -----------  -----------   -------------   ------------
Comprehensive income:
   Net income              $ 9,233,469        --           --         --     9,233,469           --              --      9,233,469
   Other comprehensive
   loss:
     Foreign currency
     translation
     adjustment              1,004,957        --           --         --            --           --              --             --
     Minimum pension
       liability
       adjustment, net
       of tax of
       $91,958                (178,507)       --           --         --            --           --              --             --
     Mark to market
       available-for-sale
       investments            (185,800)       --           --         --            --           --              --             --
                           -----------
Other comprehensive
income                         640,650        --           --         --            --      640,650              --        640,650
                           -----------
         Total
         comprehensive
         income            $ 9,874,119
                           ===========
Purchase of treasury
stock (2,027,675 shares)                      --           --         --            --           --     (30,243,169)   (30,243,169)
Exercise of stock
options under equity
plans (note 12)                            2,642      662,957         --            --           --              --        665,599
Tax benefit from
exercise of stock
options (note 17)                             --      118,622         --            --           --              --        118,622
Stock based employer
compensation                                  --    3,654,337                       --           --              --      3,654,337
                                        -------- ------------  ---------   -----------  -----------   -------------   ------------
Balance at June 30, 2008                $273,930 $192,313,860  $      --   $94,540,282  $  (343,990)  $(135,920,426)  $150,863,656
                                        ======== ============  =========   ===========  ===========   =============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.


--------------------------------------------------------------------------------
                                       42
<PAGE>

                                  ANAREN, INC.
                      Consolidated Statements of Cash Flows
                    Years ended June 30, 2008, 2007 and 2006

<TABLE>
<CAPTION>
                                                                                  2008                 2007               2006
                                                                              -------------       -------------       -------------
<S>                                                                           <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                             $   9,233,469       $  15,349,960       $  11,098,582
       Net income from discontinued operations                                      770,000                  --              81,713
                                                                              -------------       -------------       -------------
           Net income from continuing operations                                  8,463,469          15,349,960          11,016,869
       Adjustments to reconcile net income from continuing
       operations to net cash provided by operating activities:
       Depreciation                                                               6,764,178           5,205,144           4,875,335
       (Gain) loss on property, plant, and equipment                                151,686             (77,508)             15,875
       Amortization                                                                 604,574             302,871             332,870
       Deferred income taxes                                                       (935,726)           (179,276)           (356,986)
       Stock based compensation                                                   3,675,679           3,468,856           3,474,761
       Provision for doubtful accounts and sales allowance                          163,628               3,977             (40,948)

       Changes in operating assets and liabilities:
           Receivables                                                           (3,340,517)         (3,798,667)         (1,540,917)
           Inventories                                                           (2,671,112)         (2,504,326)         (2,423,923)
           Other receivables                                                        100,931            (270,084)            (31,329)
           Other current assets, including prepaids                                 129,635            (456,580)           (552,671)
           Accounts payable                                                      (1,593,693)          3,374,228             755,007
           Accrued expenses                                                      (1,326,578)            652,836             922,931
           Income taxes payable                                                    (726,240)             22,752            (797,600)
           Customer advance payments                                                (59,811)            835,090             483,722
           Other liabilities                                                      2,465,002             775,520             435,453
           Pension and postretirement benefit
           obligation                                                                89,610            (931,957)            158,718
                                                                              -------------       -------------       -------------
             Net cash provided by operating
             activities from continuing operations                               11,954,715          21,772,836          16,727,167
       Net cash used in operating activities from
       discontinued activities from discontinued
       operations                                                                        --                  --             (97,241)
                                                                              -------------       -------------       -------------
             Net cash provided by operating activities                           11,954,715          21,772,836          16,629,926
                                                                              -------------       -------------       -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                     (12,383,440)        (13,174,670)         (7,543,718)
       Proceeds from sale of property, plant,
       and equipment                                                                     --             134,508               1,000
       Maturities of held to maturity and
       available-for-sale securities                                             64,831,425         136,150,578         103,595,269
       Purchase of held to maturity and
       available-for-sale securities                                            (32,324,160)       (129,901,455)       (100,378,000)
                                                                              -------------       -------------       -------------
             Net cash provided by (used in) investing
             activities from continuing operations                               20,123,825          (6,791,039)         (4,325,449)
                                                                              -------------       -------------       -------------
       Net cash provided by investing activities from
       discontinued operations                                                           --                  --                  --
                                                                              -------------       -------------       -------------
             Net cash provided by (used in)
             investing activities                                                20,123,825          (6,791,039)         (4,325,449)
                                                                              -------------       -------------       -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Stock options exercised                                                      665,599           2,198,099           5,549,220
       Excess tax benefit from exercise of
       stock options                                                                118,622             433,042           1,679,149
       Purchase of treasury stock                                               (30,243,169)        (25,693,966)         (9,803,481)
                                                                              -------------       -------------       -------------
             Net cash used in financing activities
             from continuing operations                                         (29,458,948)        (23,062,825)         (2,575,112)
       Net cash used in financing activities from
       discontinued operations                                                           --                  --                  --
                                                                              -------------       -------------       -------------
             Net cash used in financing activities                              (29,458,948)        (23,062,825)         (2,575,112)
                                                                              -------------       -------------       -------------
Effect of exchange rates on cash                                                    178,957             260,090             103,008
                                                                              -------------       -------------       -------------
             Net increase (decrease) in cash and
             cash equivalents                                                     2,798,549          (7,820,938)          9,832,373
Cash and cash equivalents, beginning of year                                      7,912,276          15,733,214           5,900,841
                                                                              -------------       -------------       -------------
Cash and cash equivalents, end of year                                        $  10,710,825       $   7,912,276       $  15,733,214
                                                                              =============       =============       =============
</TABLE>

           See accompanying notes to consolidated financial statements


--------------------------------------------------------------------------------
                                       43
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                          June 30, 2008, 2007 and 2006

(1) Summary of Significant Accounting Policies:

   (a) Principles of Consolidation

      The consolidated financial statements include the accounts of Anaren, Inc.
and its wholly  owned  subsidiaries  (the  Company).  Intercompany  accounts and
transactions have been eliminated.

   (b) Operations

      The  Company is engaged in the design,  development,  and  manufacture  of
microwave and radio  frequency  components,  assemblies,  and  subsystems  which
receive,  process,  and  transmit  radar,  wireless  communications,  and  other
wireless signals and other microwave transmissions. Its primary products include
devices   and   systems   used  in  the   wireless   communications,   satellite
communications, and defense electronics markets.

   (c) Revenue Recognition

      Net  sales are  derived  from  sales of the  Company's  products  to other
manufacturers  or systems  integrators.  Net sales are recognized when units are
shipped.

      Net sales under certain long-term contracts of the Space and Defense (S&D)
segment,  many of which provide for periodic payments,  are recognized under the
percentage-of-completion  method using the units of delivery  method.  Estimated
manufacturing  cost-at-completion  for these contracts are reviewed on a routine
periodic  basis,  and  adjustments  are  made   periodically  to  the  estimated
cost-at-completion based on actual costs incurred,  progress made, and estimates
of the  costs  required  to  complete  the  contractual  requirements.  When the
estimated  manufacturing  cost-at-completion  exceeds the  contract  value,  the
contract is written down to its net  realizable  value,  and the loss  resulting
from cost overruns is immediately recognized.

      To properly match net sales with costs, certain contracts may have revenue
recognized in excess of billings  (unbilled  revenues),  and other contracts may
have billings in excess of net sales recognized  (billings in excess of contract
costs).  Under long-term  contracts,  the prerequisites for billing the customer
for  periodic   payments   generally   involve  the  Company's   achievement  of
contractually  specific,  objective  milestones  (e.g.,  completion  of  design,
testing,   or  other  engineering   phase,   delivery  of  test  data  or  other
documentation, or delivery of an engineering model or flight hardware).

      An  award  or  incentive  fee is  usually  variable  based  upon  specific
performance  criteria  stated  in the  contract.  Award  or  incentive  fees are
recognized at 100% only upon  achieving the  contractual  criteria and after the
customer has approved or granted the award or incentive.

   (d) Cash and Cash Equivalents

      Cash and cash equivalents  includes cash on hand,  certificates of deposit
and  short-term  cash  investments  that are  highly  liquid in nature  and have
original maturities of three months or less.

   (e) Marketable Securities

      The Company classifies its securities as either available-for-sale or held
to  maturity,  as the  Company  does not hold any  securities  considered  to be
trading.  Held to maturity  securities  are those debt  securities for which the
Company  has the  positive  intent and the ability to hold until  maturity.  All
other   securities   not  included  in  held  to  maturity  are   classified  as
available-for-sale.  Management  determines the  appropriate  classification  of
securities at the time of purchase and reevaluates  such  designation as of each
balance sheet date.

      Held to maturity  securities  are recorded at amortized  cost adjusted for
the  amortization  or  accretion  of premiums or  discounts.  Available-for-sale
securities are recorded at fair value.  Unrealized holding gains and losses, net
of the related tax effect,  on  available-for-sale  securities are excluded from
earnings  and are reported as  accumulated  other  comprehensive  income or loss
until realized.


--------------------------------------------------------------------------------
                                       44
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      The Company  invests  its excess  cash  principally  in  municipal  bonds,
commercial  paper,  corporate  bonds  and  notes,  and  U.S.  government  agency
securities.  The Company also has an investment in an auction rate security. The
auction rate security has a long-term underlying maturity, and the interest rate
resets every 365 days.

      A decline in the fair value of any  available-for-sale or held to maturity
security,  that is deemed other than temporary, is charged to earnings resulting
in the  establishment  of a new cost basis for the  security,  and  dividend and
interest  income  are  recognized   when  earned.   The  Company  records  their
available-for-sale   securities  to  market  value  through   accumulated  other
comprehensive  income.  The reduction in market value of the  available-for-sale
securities at June 30, 2008 and 2007 is $185,800 and $0, respectively.


--------------------------------------------------------------------------------
                                       45
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

   (f) Trade Accounts Receivable

      Trade accounts  receivable are recorded at the invoiced  amount and do not
bear  interest.  The  allowance  for  doubtful  accounts is the  Company's  best
estimate  of the amount of  probable  credit  losses in the  Company's  existing
accounts  receivable.  The Company  reviews its allowance for doubtful  accounts
monthly by reviewing balances over 90 days for collectibility.  Account balances
are charged off against the allowance  after all means of  collection  have been
exhausted and the potential for recovery is considered  remote. The Company does
not have any  off-balance-sheet  credit exposure  related to its customers.  The
allowance for sales returns is the Company's best estimate of probable  customer
credits for returns of previously  shipped products,  and is based on historical
rates of returns by customers.

   (g) Inventories

      Inventories  are  stated  at the  lower  of cost  or  market,  cost  being
determined on a first-in, first-out basis.

   (h) Warranty

      The Company generally provides its customers with a one year warranty from
the date the  goods are sold.  Quarterly,  the  Company  analyzes  its  warranty
liability for reasonableness.  Based upon a three year history of warranty costs
incurred,   the  nature  of  the  products  shipped  subject  to  warranty,  and
anticipated warranty trends, the Company believes its warranty liability at June
30, 2008 is reasonable.

   (i) Property, Plant, and Equipment

      Property,  plant,  and equipment are stated at cost.  Depreciation of land
improvements  and buildings is calculated  by the  straight-line  method over an
estimated  service life of 25-30 years.  Machinery and equipment,  and furniture
and  fixtures are  depreciated  by the  straight-line  method based on estimated
useful lives of 5 to 10 years.

   (j) Goodwill

      Goodwill  represents  the  excess of cost  over the fair  value of the net
tangible assets and identifiable intangible assets of businesses acquired.

      Goodwill is tested  annually for impairment at the reporting unit level in
the fourth  quarter,  using  March 31, 2008 as the test date,  of the  Company's
fiscal year, by comparing the fair value of the reporting unit with its carrying
value.  Valuation  methods for  determining the fair value of the reporting unit
include  reviewing  quoted  market  prices and  discounted  cash  flows.  If the
goodwill is indicated as being impaired, the fair value of the reporting unit is
then  allocated to its assets and  liabilities in a manner similar to a purchase
price  allocation  in order to determine the implied fair value of the reporting
unit  goodwill.  This implied fair value of the reporting  unit goodwill is then
compared with the carrying  amount of the reporting unit goodwill,  and if it is
less, the Company would then recognize an impairment loss.  During 2008, we were
not required to record any impairment on goodwill.

   (k) Long-Lived Assets

      The  Company  accounts  for  long-lived  assets,  excluding  goodwill,  in
accordance  with the  provisions  of Statement  144,  Impairment  or Disposal of
Long-Lived  Assets.  Statement  144 sets  forth  criteria  to  determine  when a
long-lived  asset is held for sale and held for use. Such criteria  specify that
the asset must be available for immediate sale in its present  condition subject
only to terms  that are  usual  and  customary  for  sales  of such  assets.  In
addition,  the sale of the asset must be probable,  and its transfer expected to
qualify  for  recognition  as a  completed  sale,  generally  within  one  year.
Statement 144 requires  recognition  of an impairment  loss only if the carrying
amount of a  long-lived  asset is not  recoverable  from its  undiscounted  cash
flows.  An impairment  loss is measured as the  difference  between the carrying
amount and fair value of the asset. The Company  evaluates its long-lived assets
if impairment  indicators arise. During 2008, we were not required to record any
impairment on fixed assets or asset groups.


--------------------------------------------------------------------------------
                                       46
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

   (l) Foreign Currency Translation

      The financial statements of the China subsidiary have been translated into
U.S.  dollars in accordance  with  Statement of Financial  Accounting  Standards
("SFAS") No. 52, "Foreign Currency Translation." All balance sheet accounts have
been  translated  using the exchange  rates in effect at the balance sheet date.
Income  statement  amounts have been translated  using the average exchange rate
for the year. The resulting cumulative  translation  adjustment of approximately
$1.4  million  and $0.4  million  at June 30,  2008 and 2007,  respectively,  is
reflected  as   accumulated   other   comprehensive   income,   a  component  of
stockholders' equity.

   (m) Earnings Per Share

      Basic earnings per share is based on the weighted average number of common
shares outstanding.  Diluted earnings per share is based on the weighted average
number of common shares outstanding, as well as dilutive potential common shares
which,  in the Company's  case,  comprise shares issuable under the stock option
and restricted  stock plans  described in notes 12 and 13. The weighted  average
number of common shares utilized in the calculation of the diluted  earnings per
share does not include antidilutive shares aggregating 1,681,807, 1,052,964, and
500,100 at June 30, 2008,  2007,  and 2006,  respectively.  The  treasury  stock
method is used to calculate  dilutive  shares which  reduces the gross number of
dilutive  shares by the number of shares  purchasable  from the  proceeds of the
options assumed to be exercised.

      The following table sets forth the computation of basic and diluted shares
for use in the calculation of earnings per share as of June 30:

<TABLE>
<CAPTION>
                                                                                               For the Years Ended
                                                                             -------------------------------------------------------
                                                                                2008                  2007                  2006
                                                                             -----------           -----------           -----------
<S>                                                                          <C>                   <C>                   <C>
Numerator:
Earnings available to common stockholders                                    $ 9,233,469           $15,349,960           $11,098,582
                                                                             ===========           ===========           ===========
Denominator:
Denominator for basic earnings per share
outstanding                                                                   14,826,795            17,318,508            17,156,720
                                                                             ===========           ===========           ===========
Denominator for diluted earnings per share:
   Weighted average shares outstanding                                        14,826,795            17,318,508            17,156,720
Common stock options and restricted stock                                        240,916               402,215               525,511
                                                                             -----------           -----------           -----------
Weighted average shares                                                       15,067,711            17,720,723            17,682,231
                                                                             ===========           ===========           ===========
</TABLE>

   (n) Research and Development Costs

      Research and development costs are expensed as incurred.

   (o) Income Taxes

      The Company  utilizes the asset and  liability  method of  accounting  for
income  taxes.  Under this  method,  deferred  tax assets  and  liabilities  are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their respective tax bases and tax credit carryforwards. Deferred tax assets and
liabilities  are measured  using  enacted tax rates.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.


--------------------------------------------------------------------------------
                                       47
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

   (p) Cash Flow Supplemental Disclosure

<TABLE>
<CAPTION>
                                                                                                 For the Years Ended
                                                                                  --------------------------------------------------
                                                                                     2008                2007                2006
                                                                                  ----------          ----------          ----------
<S>                                                                               <C>                 <C>                 <C>
Cash paid during the year for:
   Interest                                                                       $   24,572          $   24,572          $   25,203
   Taxes paid (net of refunds)                                                     3,318,718           4,938,011           2,718,391
Fixed asset purchases included in accounts payable                                   581,168           1,544,099                  --
</TABLE>

   (q) Use of Estimates

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

   (r) Accounting Pronouncements Not Yet Adopted

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 157, "Fair Value  Measurements" which is effective for fiscal years
beginning  after  November  15, 2007 (the  Company's  2009 fiscal  year) and for
interim  periods  within  those  years.   This  statement  defines  fair  value,
establishes  a  framework  for  measuring  fair value and  expands  the  related
disclosure requirements. The Company does not believe this statement will have a
material impact on the financial statements.

      In  February  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 159,  "The Fair Value  Option for  Financial  Assets and  Financial
Liabilities - Including an Amendment of FASB Statement No. 115" (SFAS 159). This
Statement  provides  companies with an option to measure,  at specified election
dates, many financial instruments and certain other items at fair value that are
not currently measured at fair value. A company that adopts SFAS 159 will report
unrealized  gains and losses on items for which the fair  value  option has been
elected in earnings at each  subsequent  reporting  date.  This  Statement  also
establishes  presentation  and  disclosure  requirements  designed to facilitate
comparisons  between entities that choose different  measurement  attributes for
similar types of assets and liabilities.  This Statement is effective for fiscal
years  beginning  after November 15, 2007 (the Company's 2009 fiscal year).  The
Company  does not  believe  this  statement  will have a material  impact on its
financial statements.

      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 141 (revised  2007),  "Business  Combinations"  (SFAS 141(R)).  The
objective  of this  Statement  is to  improve  the  relevance,  representational
faithfulness,  and  comparability  of the  information  that a reporting  entity
provides in its financial reports about a business combination. Specifically, it
establishes principles and requirements over how the acquirer (1) recognizes and
measures the identifiable  assets  acquired,  the liabilities  assumed,  and any
noncontrolling  interest in the acquiree;  (2) recognizes and measures  goodwill
acquired in the business combination or a gain from a bargain purchase, and; (3)
determines  what  information  to  disclose  to  enable  users of the  financial
statements  to  evaluate  the  nature  and  financial  effects  of the  business
combination.  This  Statement is  effective  for fiscal  years  beginning  after
December  15, 2008  (fiscal  year  2010).  The  Company  does not  believe  this
Statement will have a material impact on its financial statements.

      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 160, "Noncontrolling Interests in Consolidated Financial Statements
an amendment of ARB No. 51" (SFAS 160).  The  objective of this  Statement is to
improve  the  relevance,   comparability,  and  transparency  of  the  financial
information  that a  reporting  entity  provides in its  consolidated  financial
statements  by   establishing   accounting  and  reporting   standards  for  the
noncontrolling  interest  in a  subsidiary  (minority  interests)  and  for  the
deconsolidation  of a subsidiary.  This Statement is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2008
(fiscal  year  2010).  The  Company is  currently


--------------------------------------------------------------------------------
                                       48
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

assessing the impact of this Statement on its financial statements.

      In  April  2008,   the  FASB  issued  a  FASB  Staff  Position  No.  142-3
"Determination  of the Useful Life of Intangible  Assets"  (FSP).  This Position
amends the  factors  that  should be  considered  in the  developing  renewal or
extension  assumptions  used  to  determine  the  useful  life  of a  recognized
intangible  asset under FASB Statement No. 142,  "Goodwill and Other  Intangible
Assets." The intent of the FSP is to improve the consistency  between the useful
life of a recognized intangible asset and the period of expected cash flows used
to measure the fair value of the asset  under FASB  Statement  No. 141  (revised
2007),  "Business  Combinations," and other U.S.  generally accepted  accounting
principles.  This Statement is effective for fiscal years,  and interim  periods
within those fiscal years, beginning after December 15, 2008 (fiscal year 2010).
The Company is currently assessing the impact of this Statement on its financial
statements.

(2) Adoption of Recent Accounting Pronouncements

      Effective July 1, 2007, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 48 ("FIN No. 48"), "Accounting for Uncertainty
in Income  Taxes - an  interpretation  of FASB  Statement  No.  109." FIN No. 48
clarifies  the  accounting  for  uncertainty  in income taxes  recognized  in an
enterprise's financial statements in accordance with FASB Statement No. 109. FIN
No. 48 prescribes a  recognition  threshold  and  measurement  attribute for the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected to be taken on a tax return. Additionally, FIN No. 48 provides guidance
on derecognition,  classification, interest and penalties, accounting in interim
periods, disclosure and transition (note 17).

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standard No. 158,  "Employer's  Accounting for Defined Benefit Pension and Other
Postretirement  Plans-an  amendment to FASB  Statements  87, 88, 106 and 132(R)"
("SFAS 158"),  which  requires  balance sheet  recognition  of the overfunded or
underfunded status of pension and postretirement  benefit plans. Under SFAS 158,
actuarial  gains and losses,  prior service costs or credits,  and any remaining
transition  assets or obligations  that have not been recognized  under previous
accounting  standards  must be recognized  in  Accumulated  Other  Comprehensive
Income,  net of tax  effects,  until they are  amortized  as a component  of net
periodic benefit cost. In addition, the measurement date, the date at which plan
assets and the benefit obligation are measured,  is required to be the company's
fiscal year end.  This  Statement  is  effective  for fiscal  years ending after
December 15, 2006 (the Company's 2007 fiscal year).  Upon adoption,  the Company
has recognized a $1,350,246  reduction in accumulated other comprehensive income
on the balance sheet, net of tax benefit of $695,581.

<TABLE>
<CAPTION>
                                                                            Before                                        After
                                                                        Application of                               Application of
                                                                         SFAS No. 158           Adjustments           SFAS No. 158
                                                                         -------------         -------------         --------------
<S>                                                                      <C>                   <C>                    <C>
Pension and postretirement benefit obligation                            $     908,837         $   2,045,827          $   2,954,664
Deferred income taxes                                                        2,068,934              (695,581)             1,373,353
Total liabilities                                                           23,059,921             1,350,246             24,410,167
Accumulated other comprehensive income (loss)                                  365,606            (1,350,246)              (984,640)
Total stockholders' equity                                                 168,144,394            (1,350,246)           166,794,148
</TABLE>

      In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
"Considering   the  Effects  of  Prior  Year   misstatements   when  Quantifying
misstatements  in Current Year Financial  Statements"  ("SAB 108").  SAB 108 was
issued to provide  interpretive  guidance on how the effects of the carryover or
reversal of prior year  misstatements  should be  considered  in  quantifying  a
current year misstatement.  Under SAB 108, both the balance sheet and the income
statement  approach  must be  considered  when  evaluating  the  materiality  of
misstatements.  The  Company  adopted  SAB 108 in the  fourth  quarter  of 2007,
effective July 1, 2006. After applying the dual approach,  the accounting errors
relating to the warranty accrual,  the sales returns reserve, and the accounting
for a distributor contract, that were deemed immaterial in the prior years using
the  income  statement  approach,  were  deemed  material  to the  current  year
financial  statements  using the balance sheet approach.  In accordance with SAB
108, the cumulative effect  adjustment of these accounting  changes


--------------------------------------------------------------------------------
                                       49
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

was recorded to the beginning  retained  earnings as of July 1, 2006. The impact
of the two items noted above on the July 1, 2006 balances are presented below:

Accounts receivable                                                   $(388,000)

Other liabilities                                                      (451,000)
                                                                      ---------
      Total                                                            (839,000)

Less deferred tax benefit                                               302,000
                                                                      ---------

Adjustment to retained earnings                                       $(537,000)
                                                                      =========

(3) Other Intangible Assets

      Other intangible assets as of June 30, are as follows:

<TABLE>
<CAPTION>
                                                                       2008                                       2007
                                                          --------------------------------          --------------------------------
                                                            Gross                                     Gross
                                                           carrying            Accumulated           carrying           Accumulated
                                                            amount            amortization            amount            amortization
                                                          ----------          ------------          ----------          ------------
<S>                                                       <C>                  <C>                  <C>                  <C>
Patent                                                    $  574,966           $  574,966           $  574,966           $  574,966
Customer relationships                                     1,350,000            1,350,000            1,350,000            1,312,500
Noncompetition agreements                                    180,000              180,000              180,000              180,000
                                                          ----------           ----------           ----------           ----------
      Total                                               $2,104,966           $2,104,966           $2,104,966           $2,067,466
                                                          ==========           ==========           ==========           ==========
</TABLE>

      Intangible asset  amortization  expense for the years ended June 30, 2008,
2007, and 2006 aggregated $37,500,  $302,871,  and $332,870,  respectively.  The
intangible  assets  have been fully  amortized  during the first  quarter  ended
September  30,  2007,  and no  future  amortization  expense  related  to  these
intangible assets will occur in subsequent years.

(4) Discontinued Operations

      On July 10,  2003,  the Company  announced  its decision to dispose of its
Anaren Europe operation.  After completing  production of the remaining customer
orders under  contract  during the first  quarter of fiscal 2004,  production at
Anaren Europe ceased and the  production  equipment was  liquidated via auction.
The subsidiary was dissolved during the third quarter of fiscal year 2006, after
resolution of administrative  proceedings.  During fiscal year 2008, income from
discontinued  operations of $770,000 was  recognized  due to the reduction of an
unrecognized tax benefit  resulting from the lapse of the applicable  statute of
limitations,  as  discussed  in note 17. The  results of  operations  for Anaren
Europe for the prior years have been  classified as  discontinued  operations in
the  statement  of  operations.  Components  of  net  income  from  discontinued
operations of Anaren Europe for the years ended June 30 are as follows:

<TABLE>
<CAPTION>
                                                                             2008                2007                2006
                                                                           --------            --------            --------
<S>                                                                        <C>                 <C>                 <C>
Income (expense)                                                           $770,000            $     --            $ 81,713
                                                                           --------            --------            --------
Net income from discontinued operations                                    $770,000            $     --            $ 81,713
                                                                           ========            ========            ========
</TABLE>


--------------------------------------------------------------------------------
                                       50
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

(5)  Securities

The amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>
                                                                                      June 30, 2008
                                                       -----------------------------------------------------------------------------
                                                                                Gross                 Gross
                                                        Amortized            unrealized            unrealized
                                                          cost                  gains                 losses              Fair value
                                                       -----------           -----------           -----------           -----------
<S>                                                    <C>                   <C>                   <C>                   <C>
Securities available-for-sale:
   Auction rate securities                             $   500,000           $        --           $  (185,800)          $   314,200
                                                       -----------           -----------           -----------           -----------
      Total securities available-for-sale              $   500,000           $        --           $  (185,800)          $   314,200
                                                       ===========           ===========           ===========           ===========
Securities held to maturity:
    Municipal bonds                                    $32,566,511           $   246,941           $        --           $32,813,452
    Commercial paper                                            --                    --                    --                    --
    Corporate bonds                                        201,320                 1,024                    --               202,344
    Federal agency bonds                                   299,866                   323                    --               300,189
                                                       -----------           -----------           -----------           -----------
      Total securities held to maturity                $33,067,697           $   248,288           $        --           $33,315,985
                                                       ===========           ===========           ===========           ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                      June 30, 2007
                                                       -----------------------------------------------------------------------------
                                                                                Gross                 Gross
                                                        Amortized            unrealized            unrealized
                                                          cost                  gains                 losses              Fair value
                                                       -----------           -----------           -----------           -----------
<S>                                                    <C>                   <C>                   <C>                   <C>
Securities available-for-sale:
   Auction rate securities                             $14,150,000           $        --           $        --           $14,150,000
                                                       -----------           -----------           -----------           -----------
      Total securities available-for-sale              $14,150,000           $        --           $        --           $14,150,000
                                                       ===========           ===========           ===========           ===========
Securities held to maturity:
    Municipal bonds                                    $47,059,882           $        --           $  (143,577)          $46,916,305
    Commercial paper                                     2,595,026                    --                    --             2,595,026
    Corporate bonds                                      2,238,166                    --                  (264)            2,237,902
    Federal agency bonds                                   598,961                    --                  (411)              598,550
                                                       -----------           -----------           -----------           -----------
      Total securities held to maturity                $52,492,035           $        --           $  (144,252)          $52,347,783
                                                       ===========           ===========           ===========           ===========
</TABLE>

      Contractual  maturities of marketable  debt securities held to maturity at
June 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                      2008                                        2007
                                                       ---------------------------------           ---------------------------------
                                                                                Fair                                         Fair
                                                                                market                                      market
                                                          Cost                  value                 Cost                  value
                                                       -----------           -----------           -----------           -----------
<S>                                                    <C>                   <C>                   <C>                   <C>
Within one year                                        $21,073,929           $21,147,444           $20,951,788           $20,943,580
One year to five years                                  11,993,768            12,168,541            31,540,247            31,404,203
                                                       -----------           -----------           -----------           -----------
    Total                                              $33,067,697           $33,315,985           $52,492,035           $52,347,783
                                                       ===========           ===========           ===========           ===========
</TABLE>


--------------------------------------------------------------------------------
                                       51
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      Contractual maturities of auction rate securities available for sale at
June 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                      2008                                        2007
                                                       ---------------------------------           ---------------------------------
                                                                                Fair                                         Fair
                                                                                market                                      market
                                                          Cost                  value                 Cost                  value
                                                       -----------           -----------           -----------           -----------
<S>                                                    <C>                   <C>                   <C>                   <C>
Within one year                                        $        --           $        --           $14,150,000           $14,150,000
One year to five years                                     500,000               314,200                    --                    --
                                                       -----------           -----------           -----------           -----------
    Total                                              $   500,000           $   314,200           $14,150,000           $14,150,000
                                                       ===========           ===========           ===========           ===========
</TABLE>

      The Company  invests in auction rate  securities.  Auction rate securities
have  long-term  underlying  maturities  and the interest  rates reset every 365
days.

(6) Inventories

      Inventories at June 30 are summarized as follows:

                                                  2008                  2007
                                               -----------           -----------
Component parts                                $14,277,256           $11,841,427
Work in process                                  9,077,429             7,392,973
Finished goods                                   3,626,682             5,097,197
                                               -----------           -----------
                                               $26,981,367           $24,331,597
                                               ===========           ===========

(7) Property, Plant, and Equipment

      Components  of property,  plant,  and  equipment at June 30 consist of the
following:

<TABLE>
<CAPTION>
                                                                                                  2008                       2007
                                                                                               -----------               -----------
<S>                                                                                            <C>                       <C>
Land and land improvements                                                                     $ 4,157,617               $ 4,157,617
Construction in process                                                                          3,022,085                 5,774,893
Buildings, furniture, and fixtures                                                              25,241,565                17,956,858
Machinery and equipment                                                                         48,383,137                64,683,378
                                                                                               -----------               -----------
                                                                                                80,804,404                92,572,746
Less accumulated depreciation and amortization                                                  38,537,973                55,480,960
                                                                                               -----------               -----------
                                                                                               $42,266,431               $37,091,786
                                                                                               ===========               ===========
</TABLE>

(8) Debt

The Company entered into an unsecured  demand note loan agreement on May 1, 2008
with Manufacturers and Traders Trust Company ("M&T").  The loan agreement has no
term and the maximum loan amount that may be outstanding  under the agreement is
$50.0 million. The facility has no fees and any borrowings will bear interest at
the London  Interbank  Offered  Rate  (LIBOR) plus  seventy-five  basis  points.
Interest  on any  outstanding  balance is payable  monthly  and any  outstanding
principle  amount is payable upon demand of the lender.  This  agreement  may be
cancelled  at  anytime  for any reason by the bank and any  outstanding  balance
would be due and payable at that time. The Company's United States  subsidiaries
have  guaranteed  this demand note loan.  This  demand note loan  agreement  was
terminated on July 31, 2008 (note 23).


--------------------------------------------------------------------------------
                                       52
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

(9) Accrued Expenses

      Accrued expenses at June 30 consist of the following:

                                                    2008                  2007
                                                 ----------           ----------
Compensation                                     $1,400,574           $2,945,888
Commissions                                         805,496              654,596
Health insurance                                    241,694              280,819
Other                                               133,310               26,349
                                                 ----------           ----------
                                                 $2,581,074           $3,907,652
                                                 ==========           ==========

The Company maintains an accrual for incurred, but not reported,  claims arising
from  self-insured  health benefits  provided to the Company's  employees in the
United States, which is included in accrued expenses in the consolidated balance
sheets.  The Company  determines  the adequacy of this accrual by evaluating its
historical  experience  and trends related to both health  insurance  claims and
payments,  information  provided  by its third party  administrator,  as well as
industry experience and trends.

(10) Restructuring

      On July 8, 2008,  the Company  reduced its  headcount at the New Hampshire
facility.  The headcount reduction was communicated or implied prior to June 30,
2008 that resulted in establishing an accrual  amounting to $255,000  related to
severance.

<TABLE>
<CAPTION>
                                                                  Year ending June 30, 2008
                                           --------------------------------------------------------------------
                                             Balance                                                   Balance
                                             June 30,             Costs              Cash              June 30,
                                              2007              incurred         expenditures            2008
                                           -----------          --------          -----------          --------
<S>                                        <C>                  <C>               <C>                  <C>
Severance accrual                          $        --          $255,000          $        --          $255,000
                                           ===========          ========          ===========          ========
</TABLE>

(11) Other Liabilities

      Other liabilities as of June 30 consist of the following:

                                                       2008              2007
                                                    ----------        ----------
Deferred compensation                               $  966,817        $  937,811
Supplemental Retirement Plan                           537,859           460,459
Accrued lease                                          890,980           542,056
Warranty Accrual                                       854,536           472,000
Income tax liability                                   510,000                --
Loss on contracts                                      350,498                --
                                                    ----------        ----------
                                                     4,110,690         2,412,326
Less current portion                                 2,618,422         1,259,616
                                                    ----------        ----------
                                                    $1,492,268        $1,152,710
                                                    ==========        ==========

      The Company is currently paying to a former employee's beneficiary $65,000
annually through 2015, or until the death of the employee's beneficiary.

      In  fiscal  year  2004,   the  Company  began   accruing  for  a  deferred
compensation  agreement that the Company  entered into with an employee in March
2004,  and extended  the  agreement in May 2007.  During  fiscal year 2008,  the
Company  entered into a final  agreement with this employee.  Under the terms of
this  contract,  the  Company  has agreed to pay the  present  valued  amount of
approximately $0.7 million to this employee beginning in January 2009.


--------------------------------------------------------------------------------
                                       53
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      In  fiscal  year  2007,  the  Company  accrued  for a  potential  sublease
obligation  due to the loss of a tenant in the leased  European  facility in the
second  quarter of fiscal year 2008.  The amount accrued for as of June 30, 2008
and 2007 is  approximately  $0.9  million and $0.5  million,  respectively,  and
represents the full amount of the estimated liability, net of sublease income.

(12) Stock-Based Compensation

      The Company applies the fair-value  recognition provisions of Statement of
Financial  Accounting Standards No. 123R (SFAS 123R). This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on the grant-date fair value of the awards.  The cost is recognized
as  compensation  expense on a  straight-line  basis over the requisite  service
period of the awards.

      Total stock-based compensation expense recognized for the years ended June
30,  2008,   2007,  and  2006  was  $3,675,679,   $3,415,905,   and  $3,383,811,
respectively.   These  amounts  include  $1,349,378,   $420,492,  and  $116,534,
respectively  related to the  Company's  restricted  stock program (note 13) and
$2,326,301,  $2,995,413,  and $3,267,277  related to the Company's  stock option
program for the year ended June 30, 2008, 2007, and 2006 respectively.

      Stock-based  compensation  expense  included in  operating  expenses is as
follows for the year ended:

<TABLE>
<CAPTION>
                                                                                                  June 30, 2008
                                                                               -----------------------------------------------------
                                                                                 Stock              Restricted              Total
                                                                                option                stock              stock-based
                                                                                program              program            compensation
                                                                               ----------           ----------          ------------
<S>                                                                            <C>                  <C>                  <C>
Cost of good sold                                                              $  526,935           $  297,988           $  824,923
Marketing                                                                         179,480               48,486              227,966
Research and development                                                          376,759              213,061              589,820
General and administrative                                                      1,229,495              782,133            2,011,628
                                                                               ----------           ----------           ----------
      Total cost of stock-based compensation                                    2,312,669            1,341,668            3,654,337
Amounts expensed out of inventory for the year                                     13,632                7,710               21,342
                                                                               ----------           ----------           ----------
Net stock-based compensation expense                                           $2,326,301           $1,349,378           $3,675,679
                                                                               ==========           ==========           ==========
Amount of related income tax benefit
  recognized in income                                                         $  453,000           $  486,000           $  939,000
                                                                               ==========           ==========           ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                  June 30, 2007
                                                                               -----------------------------------------------------
                                                                                 Stock              Restricted              Total
                                                                                option                stock              stock-based
                                                                                program              program            compensation
                                                                               ----------           ----------          ------------
<S>                                                                            <C>                  <C>                  <C>
Cost of good sold                                                              $  681,378           $  248,512           $  929,890
Marketing                                                                         233,952                   --              233,952
Research and development                                                          464,323                   --              464,323
General and administrative                                                      1,668,711              171,980            1,840,691
                                                                               ----------           ----------           ----------
      Total cost of stock-based compensation                                    3,048,364              420,492            3,468,856
Amounts capitalized in inventory for the year                                     (52,951)                  --              (52,951)
                                                                               ----------           ----------           ----------
Net stock-based compensation expense                                           $2,995,413           $  420,492           $3,415,905
                                                                               ==========           ==========           ==========
Amount of related income tax benefit
  recognized in income                                                         $  483,000           $  151,000           $  634,000
                                                                               ==========           ==========           ==========
</TABLE>


--------------------------------------------------------------------------------
                                       54
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

<TABLE>
<CAPTION>
                                                                                                  June 30, 2006
                                                                               -----------------------------------------------------
                                                                                 Stock              Restricted              Total
                                                                                option                stock              stock-based
                                                                                program              program            compensation
                                                                               ----------           ----------          ------------
<S>                                                                            <C>                  <C>                  <C>
Cost of good sold                                                              $  966,207           $  106,534           $1,072,741
Marketing                                                                         274,631                   --              274,631
Research and development                                                          346,167                   --              346,167
General and administrative                                                      1,771,222               10,000            1,781,222
                                                                               ----------           ----------           ----------
      Total cost of stock-based compensation                                    3,358,227              116,534            3,474,761
Amounts capitalized in inventory for the year                                     (90,950)                  --              (90,950)
                                                                               ----------           ----------           ----------
Net stock-based compensation expense                                           $3,267,277           $  116,534           $3,383,811
                                                                               ==========           ==========           ==========
Amount of related income tax benefit
  recognized in income                                                         $  251,000           $   45,000           $  296,000
                                                                               ==========           ==========           ==========
</TABLE>

                     Nonvested Shares Issued Under the Plan

                                                  Number        Weighted-Average
                                                    of             Grant-Date
                                                  Shares           Fair Value
                                                 --------           --------
Nonvested at June 30, 2007                        896,386           $   6.29
Granted                                                --                 --
Forfeited                                         (25,080)             14.16
Vested                                           (544,456)             15.94
                                                 --------           --------
Nonvested at June 30, 2008                        326,850           $  14.92
                                                 ========           ========

      As of June 30, 2008 and 2007,  there were  2,248,863 and  2,348,063  stock
options  outstanding,  respectively.  At June 30, 2008,  the aggregate  value of
unvested options,  as determined on respective grant dates using a Black-Scholes
option valuation model,  was $2,985,184 (net of estimated  forfeitures),  all of
which is expected to be recognized as compensation  expense in fiscal years 2009
through 2012. The aggregate  intrinsic value of both vested and unvested options
at June 30, 2008 was  $(13,782,569)  (net of forfeitures).  As of June 30, 2008,
1,922,014  stock  options  were  exercisable,   which  represents  an  aggregate
intrinsic value of $(5,454,831).

      During the year ended June 30, 2008, 2007, and 2006 the Company granted 0,
186,850,  and  387,500  nonstatutory  stock  options  with a fair  value  of $0,
$2,529,901, and 3,446,140 (net of estimated forfeitures),  and 25,080 and 19,850
options were forfeited and/or expired, respectively.  During the year ended June
30, 2008, 2007, and 2006 there were 73,320,  210,637,  and 664,103 stock options
exercised,   which   represents  an  aggregate   intrinsic  value  of  $425,093,
$1,871,608,  and  6,938,901  respectively.  New option grants made after July 1,
2006, as well as option grants issued prior to that date, have been valued using
a Black-Scholes  option valuation model. For the grant issued during fiscal year
2007,  the Company used the  Simplified  Method to estimate the expected term of
the expected  life of stock  option  grants as defined by SEC  Accounting  Staff
Bulletin  No.  107 for each  award  granted;  expected  volatility  was based on
historical  volatility  levels of the  Company's  common  stock;  the  risk-free
interest  rate was  based  on the  implied  yield  currently  available  on U.S.
Treasury zero coupon issues with the remaining term equal to the expected life.


--------------------------------------------------------------------------------
                                       55
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      The unearned  compensation  balance of $248,578 as of June 30, 2005, which
was  accounted  for under  APB 25,  was  reclassified  into  additional  paid-in
capital.

Stock Option Plans

      In November 2004, the shareholders  approved the amendment and restatement
of the Company's  three existing stock option plans,  which combined these plans
under one  single  consolidated  equity  compensation  plan,  the  Anaren,  Inc.
Comprehensive  Long-Term  Incentive  Plan.  The  effect  of  the  amendment  and
restatement  was to combine the separate  share pools  available for grant under
the  three  existing  plans  into a  single  grant  pool,  expand  the  type  of
equity-based  awards the Company may grant,  and extend the term of the combined
plan to October  31,  2014.  Under the  restated  plan,  the  Company  may issue
incentive stock options,  nonstatutory stock options, stock appreciation rights,
restricted  stock,  performance  shares,  and  performance  units  that can vest
immediately or up to five years. Under this plan, the Company reserved 1,326,488
new common shares available for grant. On June 30, 2008, the Company had 772,638
shares available for grant under the restated plan.

      Information with respect to this plan is as follows:

<TABLE>
<CAPTION>
                                                                                                       Weighted
                                                                  Total              Option            average
                                                                 shares              price         exercising price
                                                                ---------       ---------------    ----------------
<S>                                                             <C>             <C>                     <C>
Outstanding at June 30, 2006                                    2,445,907       $ 2.27 to 54.00         $15.91
   Issued                                                         186,850        19.56 to 20.00          19.56
   Exercised                                                     (210,637)        2.28 to 19.21          10.86
   Expired                                                        (54,207)        2.28 to 19.21          13.71
   Canceled                                                       (19,850)        9.51 to 20.00          16.56
                                                                ---------
Outstanding at June 30, 2007                                    2,348,063       $ 5.73 to 56.13         $16.65
   Issued                                                              --                    --             --
   Exercised                                                      (73,320)        5.73 to 15.00           9.67
   Expired                                                         (3,300)        9.51 to 19.56           5.77
   Canceled                                                       (22,580)        9.51 to 19.56          15.09
                                                                ---------
Outstanding at June 30, 2008                                    2,248,863       $ 5.73 to 19.56         $16.91
                                                                =========

Shares exercisable at June 30, 2008                             1,922,014       $ 5.73 to 56.13         $16.95
                                                                =========
</TABLE>

The following table summarizes significant ranges of outstanding and exercisable
options at June 30, 2008:

                  Options outstanding                        Options exercisable
-------------------------------------------------------     --------------------
                                 Weighted      Weighted                 Weighted
     Range of                     average       Average                  average
     exercise                    remaining     Exercise                 exercise
      prices         Shares    life in years     price      Shares       price
----------------   ---------   -------------   --------    ---------    --------

$  5.73 - $15.00   1,749,899       4.34         $ 12.59    1,517,279    $ 13.49
   15.01 - 40.00     339,364       5.31           19.86      245,135      23.30
   40.01 - 65.00     159,600       2.34           53.04      159,600      54.39
                   ---------                               ---------
                   2,248,863                               1,922,014
                   =========                               =========


--------------------------------------------------------------------------------
                                       56
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      During the years  ended June 30,  2007 and 2006,  the  per-share  weighted
average fair value of the  nonstatutory  stock  options  granted were $13.89 and
$8.88.  There were no grants made during 2008 under this plan. The fair value of
options at the date of the grant was  estimated  using the  Black-Scholes  model
with the following assumptions for the respective period ending June 30:

                                                   2007               2006
                                              ---------------    ---------------
Expected option life                          6.0 - 6.5 years    6.0 - 6.5 years
Weighted average risk-free interest rate         4.56% -4.87%       3.92% -5.02%
Weighted average expected volatility          60.00% - 75.00%    54.12% - 62.00%
Rate of dividends                                        0.0%               0.0%

(13) Restricted Stock Program

      The following  table  summarizes the restricted  stock issuances that have
not yet vested:

                                               Per share value          Term
Fiscal Year           Shares outstanding        at grant date        (in months)
2006                        109,749                $ 21.15               60
2007                         59,214            $ 16.80 - 19.56           36
2008                        205,307            $ 12.06 - 16.49         12 - 48

* On May 17, 2006, the Company issued restricted stock grants,  totaling 109,749
shares that are  outstanding to  participants as of June 30, 2008. The per-share
value of each grant was $21.15.  These shares are subject to a forfeiture period
which  expires as of the later of May 17, 2009 and the last day of the Company's
single  fiscal year during which the Company has both net sales from  operations
of at least  $250  million  and  operating  income of at least 12 percent of net
sales.  These grant agreements expire if both financial  performance  conditions
above are not met by June 30, 2011.  Presently,  the Company has  recognized  no
compensation expense for this grant and the shares have not been included in the
current diluted  earnings per share  calculation as the Company believes that it
is probable  that these goals will not be met within the time period  specified.
In the future,  if it becomes probable that the sales and earnings goals will be
achieved,  the  compensation  cost associated with the grant will be immediately
recognized for the period through the date it becomes probable, and ratably over
the remaining vesting period for the remainder of the grant value.

      The Company recognized  compensation  expense associated with the lapse of
restrictions aggregating $1,349,378,  $420,492, and $116,534, in 2008, 2007, and
2006, respectively.  During fiscal year 2008 there were 19,879 and 23,500 shares
that were  forfeited  and vested,  respectively.  There were no  forfeitures  or
shares vested during 2007 and 2006.


--------------------------------------------------------------------------------
                                       57
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

(14) Accumulated Other Comprehensive Income (Loss)

      The   cumulative   balance  of  each   component  of   accumulated   other
comprehensive income (loss) is as follows:

<TABLE>
<CAPTION>
                                                          Foreign              Minimum              Mark to             Accumulated
                                                         currency              pension               Market                other
                                                        translation           liability         Available for Sale     comprehensive
                                                        adjustment            adjustment           Securities          income (loss)
                                                        ----------           -----------        ------------------     -------------
<S>                                                     <C>                  <C>                    <C>                  <C>
Balances at June 30, 2007                               $  365,606           $(1,350,246)           $      --            $(984,640)
Current period change                                    1,004,957              (178,507)            (185,800)             640,650
                                                        ----------           -----------            ---------            ---------
Balances at June 30, 2008                               $1,370,563           $(1,528,753)           $(185,800)           $(343,990)
                                                        ==========           ===========            =========            ==========

</TABLE>

(15) Shareholder Protection Rights Plan

      In April 2001,  the board of directors  adopted a  Shareholder  Protection
Rights Plan. The plan provides for a dividend  distribution of one right on each
outstanding share of the Company's stock,  distributed to shareholders of record
on  April  27,  2001.  The  rights  will  be  exercisable  and  will  allow  the
shareholders to acquire common stock at a discounted  price if a person or group
acquires 20% or more of the outstanding  shares of common stock.  Rights held by
persons who exceed the 20% threshold will be void. In certain circumstances, the
rights  will  entitle  the  holder  to buy  shares in an  acquiring  entity at a
discounted  price. The board of directors may, at its option,  redeem all rights
for $0.001 per right at any time prior to the rights becoming  exercisable.  The
rights will expire on April 27,  2011,  unless  earlier  redeemed,  exchanged or
amended by the Board.


--------------------------------------------------------------------------------
                                       58
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

(16) Employee Benefit Plans

Defined Benefit Plan

      The Company has a  noncontributory  defined  benefit pension plan covering
eligible  employees.  Effective  August  15,  2000 the plan was  closed  for new
participants.  Benefits  under this plan  generally are based on the  employee's
years of service and  compensation.  The following table presents the changes in
the defined benefit pension plan and the fair value of the Plan's assets for the
years ended June 30:

<TABLE>
<CAPTION>
                                                                                                 2008                     2007
                                                                                             ------------             ------------
<S>                                                                                          <C>                      <C>
Change in benefit obligation:
  Benefit obligation at beginning of year                                                    $ 11,161,169             $ 10,718,898
  Service cost                                                                                    272,319                  286,353
  Interest cost                                                                                   704,537                  658,800
  Actuarial (gain) loss                                                                          (571,874)                (113,593)
  Benefits paid                                                                                  (391,440)                (389,289)
                                                                                             ------------             ------------
  Benefit obligation at end of year                                                          $ 11,174,711             $ 11,161,169
                                                                                             ============             ============
Change in plan assets:
  Fair value of plan assets at beginning of year                                             $ 11,005,849             $  8,841,389
  Actual return on plan assets                                                                   (541,592)               1,186,022
  Employer contributions                                                                          150,000                1,367,727
  Benefits paid                                                                                  (391,440)                (389,289)
                                                                                             ------------             ------------
  Fair value of plan assets at end of year                                                   $ 10,222,817             $ 11,005,849
                                                                                             ============             ============
  Plan Benefit Obligation in Excess of Plan Assets                                           $   (951,894)            $   (155,320)
                                                                                             ============             ============
Amounts Recognized in Accumulated Other Comprehensive Income
  Net actuarial loss                                                                            1,455,041                  890,144
Weighted average assumptions:
  Discount rate at year-end                                                                          6.85%                    6.35%
  Rate of increase in compensation levels at year end                                                4.00%                    4.00%
  Expected return on plan assets during the year                                                     8.50%                    8.50%
  Measurement date                                                                                June 30                  June 30
</TABLE>


--------------------------------------------------------------------------------
                                       59
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

Components  of net  periodic  pension  cost for the years  ended  June 30 are as
follows:

<TABLE>
<CAPTION>
                                                                                    2008               2007                 2006
                                                                                 ---------           ---------           ---------
<S>                                                                              <C>                 <C>                 <C>
Service cost                                                                     $ 272,319           $ 286,353           $ 342,349
Interest cost                                                                      704,537             658,800             607,181
Expected return on plan assets                                                    (917,653)           (740,273)           (693,461)
Amortization of unrecognized prior service cost                                         --              (1,298)             (3,232)
Amortization of unrecognized (gain) loss                                            31,467              73,544             189,743
                                                                                 ---------           ---------           ---------
Net periodic pension cost                                                        $  90,670           $ 277,126           $ 442,580
                                                                                 =========           =========           =========
Weighted average assumptions:
   Discount rate                                                                      6.35%               6.25%               5.25%
   Expected increase in compensation levels at year end                               4.00%               4.00%               4.00%
   Expected return on plan assets during the year                                     8.50%               8.50%               8.50%
</TABLE>

The  estimated  amount  of net  actuarial  loss  that  will  be  amortized  from
accumulated other comprehensive income into net periodic pension cost in 2009 is
$85,199.

Plan Assets

<TABLE>
<CAPTION>
                                                                        2008                              2007
                                                              -------------------------        ---------------------------
                                                                Actual       Percentage          Actual         Percentage
                                                              allocation     allocation        allocation       allocation
                                                              ----------     ----------        ----------       ----------
<S>                                                          <C>                 <C>          <C>                   <C>
Money market                                                 $   960,620         9.40%        $   201,064           1.83%
Common equities                                                  397,891         3.89             551,728           5.01
Corporate debt securities                                      1,549,576        15.16           1,440,389          13.09
Government debt securities                                     3,019,534        29.54           2,846,157          25.86
Global equity mutual fund                                        862,289         8.43           1,231,743          11.19
Closed end equity mutual funds                                 3,432,907        33.58           4,734,768          43.02
                                                             -----------       ------         -----------         ------
                                                             $10,222,817       100.00%        $11,005,849         100.00%
                                                             ===========       ======         ===========         ======
</TABLE>

Plan's  Investment  Policy:  Investments shall be made pursuant to the following
objectives:  1) preserve  purchasing  power of plan's  assets base  adjusted for
inflation; 2) provide long term growth; 3) avoid significant  volatility.  Asset
allocation shall be determined based on a long term target allocation having 30%
of assets  invested in  Large-Cap  domestic  equities,  11% in mid-cap  domestic
equities, 11% in small-cap domestic equities, 8% international equities, and 40%
in the broad bond market,  with little or none invested in cash. Both investment
allocation and performance shall be reviewed periodically.


--------------------------------------------------------------------------------
                                       60
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

Determination of Assumed Rate of Return

      The  Corporation  has  selected  the assumed  rate of return  based on the
following:

                                                         Expected
                                                         compound      Expected
                                         Target         annualized     weighted
                                       percentage         5-year        average
                                       allocation    (index) return     return
                                       ----------    --------------     ------
Large-cap stocks                         30.00%           11.10%         3.33%
Mid-cap stocks                           11.00            12.60          1.39
Small-cap stocks                         11.00            12.60          1.39
International common stocks               8.00            10.90          0.87
Broad bond market                        40.00             4.80          1.92
                                        ------                           ----
   Total                                100.00%                          8.90%
                                        ======                           ====

      The Company  estimated  investment  expenses of approximately  0.5% of the
portfolio annually.

Expected Contributions

      The Company had no minimum  requirements  to fund the pension plan for the
fiscal year ended June 30, 2008, however,  discretionary contributions amounting
to $150,000 were made. Expected contributions for fiscal 2009 are $0.

Estimated Future Benefit Payments

      The following estimated benefit payments, which reflect future service, as
appropriate, are expected to be paid:

      July 1, 2008- June 30, 2009 ............................  $  509,531
      July 1, 2009- June 30, 2010 ............................     536,150
      July 1, 2010- June 30, 2011 ............................     550,022
      July 1, 2011- June 30, 2012 ............................     594,687
      July 1, 2012- June 30, 2013 ............................     610,646
      Years 2014 - 2018 ......................................   3,423,396

Defined Contribution Plan

      The Company  maintains a voluntary  contributory  salary  savings  plan to
which participants may contribute.  The Company's matching  contribution is 100%
(75% for fiscal year 2006) of the participants'  contribution up to a maximum of
5% of the  participants'  compensation.  During fiscal 2008, 2007, and 2006, the
Company contributed $1.1 million, $0.9 million, and $0.6 million,  respectively,
to this plan. The Company also contributed  approximately $0.1 million in fiscal
year 2008 to purchase $250 in the Company's stock for each participant.

Profit Sharing Plan

      The  Company  maintains  a profit  sharing  plan which  provides an annual
contribution  by the Company based upon a percentage of operating  earnings,  as
defined.  Eligible employees are allocated amounts under the profit sharing plan
based upon their respective earnings,  as defined.  Contributions under the plan
were approximately $0.2 million,  $0.5 million, and $0.4 million in fiscal 2008,
2007, and 2006,  respectively.  While the Company intends to continue this plan,
it reserves the right to terminate or amend the plan at any time.


--------------------------------------------------------------------------------
                                       61
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

Postretirement Health Benefit Plan

      The Company has a contributory postretirement health benefit plan covering
eligible  employees.  Effective  August  15,  2000 the plan was  closed  for new
participants.  The  Company  provides  medical  coverage  for current and future
eligible  retirees  of the Company  plus their  eligible  dependents.  Employees
generally  become  eligible for retiree  medical  coverage by retiring  from the
Company  after  attaining  at  least  age 55 with 15 years  of  service  (active
employees at June 27, 1993 were  eligible by retiring  after  attaining at least
age 55 with 10 years of  service).  Retirees at June 27, 1993 pay  approximately
$30 per month for health care coverage and the Company is responsible for paying
the remaining  costs. For this group, any increase in health care coverage costs
for  retired  employees  will  be  shared  by  the  Company  and  retirees  on a
fifty-fifty  basis,  while any increase in coverage costs for retiree dependents
will be totally paid by the retirees. For eligible employees retiring after June
27, 1993, the Company  contributes a fixed dollar amount towards the cost of the
medical  plan.  Any future cost  increases for the retiree  medical  program for
these participants will be charged to the retiree.

The  following  table  presents  the  changes  in  the  postretirement   benefit
obligation and the funded status of the Plan at June 30:

<TABLE>
<CAPTION>
                                                                                                   2008                     2007
                                                                                                -----------             -----------
<S>                                                                                             <C>                     <C>
Benefit obligation at beginning of year                                                         $ 2,799,344             $ 2,606,509
Service cost                                                                                         69,256                  63,423
Interest cost                                                                                       144,421                 157,746
Plan participants' contributions                                                                    148,781                 123,679
Amendments                                                                                         (195,117)                     --
Actuarial (gain) loss                                                                              (392,819)                 59,406
Benefits paid                                                                                      (211,021)               (228,141)
Medicare Part D prescription drug subsidy                                                                --                  16,722
                                                                                                -----------             -----------
Benefit obligation at the end of year                                                           $ 2,362,845             $ 2,799,344
                                                                                                ===========             ===========
Fair value of plan assets                                                                       $        --             $        --
Under funded status                                                                              (2,362,845)             (2,799,344)
                                                                                                -----------             -----------
  Accrued postretirement benefit cost                                                           $(2,362,845)            $(2,799,344)
                                                                                                ===========             ===========
Amounts Recognized in Accumulated Other Comprehensive Income
  Net actuarial loss                                                                            $    73,712             $   460,102
</TABLE>

      Net  periodic   postretirement   benefit  cost   includes  the   following
components:

<TABLE>
<CAPTION>
                                                                                    2008                  2007                2006
                                                                                  ---------             --------            --------
<S>                                                                               <C>                   <C>                 <C>
Service cost                                                                      $  69,256             $ 63,423            $ 74,708
Interest cost                                                                       144,421              157,746             146,662
Amortized loss                                                                       15,610               25,215              52,830
Amortization of unrecognized prior service cost                                     (18,108)                  --                  --
                                                                                  ---------             --------            --------
   Net periodic postretirement benefit cost                                       $ 211,179             $246,384            $274,200
                                                                                  =========             ========            ========
</TABLE>

The  estimated  amount  of net  actuarial  loss  that  will  be  amortized  from
accumulated other comprehensive income into net periodic  postretirement benefit
cost in 2009 is $147,361.

      The weighted  average  discount rate used in determining  the  accumulated
postretirement  benefit  obligation was 6.86%,  6.28%,  and 6.25%, at the end of
fiscal 2008, 2007, and 2006,  respectively.  Effective July 1, 2007, the Company
amended the plan to increase the employee's  contribution  percentage of certain
retirees in the plan from 30% to 35%.


--------------------------------------------------------------------------------
                                       62
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

Assumed health care cost trend rates are as follows:

<TABLE>
<CAPTION>
                                                                               2008                       2007
                                                                               ----                       ----
<S>                                                                        <C>                         <C>
Health care cost trend rate assumed for next year                          7.75 - 11.0%                8.0 - 10.0%

Rate that the cost trend rate gradually declines to                             5%                         5%

Year that the rate reaches the rate it is assumed to remain at                 2016                       2015
</TABLE>

      A  one-percentage  point  change in assumed  health  care cost trend rates
would have the following effects:

<TABLE>
<CAPTION>
                                                                                1% increase     1% decrease
                                                                                -----------     -----------
<S>                                                                              <C>            <C>
      Effect on total of service and interest cost components...............     $ 17,691       $ (15,645)
      Effect on postretirement benefit obligation...........................      174,643        (155,432)
</TABLE>

Estimated Future Benefit Payments

      Shown  below  are  the  expected   gross   benefit   payments   (including
      prescription  drug  benefits)  and the  expected  gross  amount of subsidy
      receipts.

                                                          Gross        Subsidy
                                                        payments       receipts
                                                       ---------      ---------
2009                                                   $ 174,268      $ (26,907)
2010                                                     173,283        (30,894)
2011                                                     179,536        (34,701)
2012                                                     195,525        (37,875)
2013                                                     192,061        (42,663)
Years 2014 - 2018                                        986,676       (158,905)

(17) Income Taxes

The  following  table  presents the Domestic  and Foreign  components  of income
before income taxes and  discontinued  operations and the expense  (benefit) for
income taxes as well as the taxes charged or credited to stockholders' equity:

<TABLE>
<CAPTION>
                                                                                               Year ended June 30
                                                                           --------------------------------------------------------
                                                                               2008                  2007                  2006
                                                                           ------------          ------------          ------------
<S>                                                                        <C>                   <C>                   <C>
Income before income taxes and
   discontinued operations:
        Domestic                                                           $  8,955,177          $ 18,142,512          $ 10,568,029
        Foreign                                                               2,490,292             2,418,448             3,700,840
                                                                           ------------          ------------          ------------
                                                                           $ 11,445,469          $ 20,560,960          $ 14,268,869
                                                                           ============          ============          ============
Income tax expense charged to the
   income statement from
   continuing operations:
        Current:
           Federal                                                         $  3,272,524          $  5,026,921          $  3,431,352
           State and local                                                      191,250               215,697               177,634
           Foreign                                                              453,952               147,658                    --
                                                                           ------------          ------------          ------------
             Total current                                                    3,917,726             5,390,276             3,608,986
                                                                           ------------          ------------          ------------
        Deferred:
           Federal                                                             (813,303)             (153,010)             (144,577)
           State and local                                                      (41,788)              (27,721)             (179,507)
           Foreign                                                              (80,635)                1,455               (32,902)
                                                                           ------------          ------------          ------------
             Total deferred                                                    (935,726)             (179,276)             (356,986)
                                                                           ------------          ------------          ------------
             Subtotal                                                         2,982,000             5,211,000             3,252,000
                                                                           ------------          ------------          ------------
Income tax benefit recognized in the
   income statement from discontinued
   operations:
           Income tax benefit                                                  (770,000)                   --                    --
                                                                           ------------          ------------          ------------
             Total income taxes charged to the
             income statement                                              $  2,212,000          $  5,211,000          $  3,252,000
                                                                           ============          ============          ============
Income taxes charged (credited) to
   shareholders equity:
   Current benefit of stock based
      compensation                                                         $   (118,622)             (433,042)           (1,679,149)
   Deferred taxes (benefit) from recognition
      of pension liability                                                      (91,958)             (413,839)              469,815
                                                                           ------------          ------------          ------------
           Income taxes credited to
             shareholders' equity                                          $   (210,580)         $   (846,881)         $ (1,209,334)
                                                                           ============          ============          ============
</TABLE>


--------------------------------------------------------------------------------
                                       63
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      A reconciliation of the expected consolidated income tax expense, computed
by applying a 35% U.S. Federal corporate income tax rate to income before income
taxes and discontinued operations, to income tax expense, is as follows:

<TABLE>
<CAPTION>
                                                                             2008                    2007                   2006
                                                                          -----------            -----------            -----------
<S>                                                                       <C>                    <C>                    <C>
Expected consolidated income tax expense                                  $ 4,005,914            $ 7,196,336            $ 4,994,104
State taxes, net of Federal benefit                                            97,150                122,184                 (1,217)
Nontaxable interest income                                                   (542,113)              (806,272)              (539,197)
Change in valuation allowance                                                 150,380                 38,428               (238,169)
Effect of foreign operations                                                 (498,286)              (697,045)            (1,227,022)
Non-deductible stock-based compensation                                       360,292                540,103                912,066
Export tax benefits                                                            26,423               (217,350)              (239,372)
Research credits                                                             (124,259)              (611,455)              (416,600)
Domestic production tax benefit                                              (211,108)              (166,250)               (75,820)
Other, net                                                                   (282,393)              (187,679)                83,227
                                                                          -----------            -----------            -----------
                                                                          $ 2,982,000            $ 5,211,000            $ 3,252,000
                                                                          ===========            ===========            ===========
</TABLE>

      The tax effects of  temporary  differences  that give rise to the deferred
tax assets and deferred tax liabilities at June 30, are presented below:

<TABLE>
<CAPTION>
                                                                                                   2008                     2007
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>
Deferred tax assets:
      Inventories                                                                              $   953,837              $   831,996
      Deferred compensation                                                                        541,683                  503,377
      Retirement benefits                                                                          336,563                  265,963
      Postretirement benefits                                                                      810,418                  756,800
      Stock-based compensation                                                                   1,748,145                  925,163
      Nondeductible reserves                                                                     1,012,871                  537,399
      Unrealized losses on securities available-for-sale                                            66,888                       --
      Federal and state tax attribute carryforwards                                                198,630                  168,659
      State net operating loss carryforwards                                                       120,409                   60,991
                                                                                               -----------              -----------
        Gross deferred tax assets                                                                5,789,444                4,050,348
      Valuation deferred tax assets                                                               (385,927)                (168,659)
                                                                                               -----------              -----------
        Net deferred tax assets                                                                  5,403,517                3,881,689
                                                                                               -----------              -----------
Deferred tax liabilities:
      Plant and equipment, principally due to differences
        In depreciation                                                                         (1,599,995)              (1,518,521)
      Intangible assets including goodwill                                                      (2,940,128)              (2,530,819)
                                                                                               -----------              -----------
        Gross deferred tax liabilities                                                          (4,540,123)              (4,049,340)
                                                                                               -----------              -----------
        Net deferred tax assets (liabilities)                                                  $   863,394              $  (167,651)
                                                                                               ===========              ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                   2008                     2007
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>
Presented as:
Current deferred tax asset                                                                     $ 1,645,955              $ 1,174,255
Long-term deferred tax asset                                                                        31,159                   31,447
Long-term deferred tax liability                                                                  (813,720)              (1,373,353)
                                                                                               -----------              -----------
      Net deferred tax assets (liabilities)                                                    $   863,394              $  (167,651)
                                                                                               ===========              ===========
</TABLE>


--------------------------------------------------------------------------------
                                       64
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      In  assessing  the  realizability  of  deferred  tax  assets,   management
considers  whether it is more  likely  than not that some  portion or all of the
deferred tax assets will not be realized.  The ultimate  realization of deferred
tax assets is dependent  upon the generation of future taxable income during the
periods in which  those  temporary  differences  become  deductible.  Management
considers the scheduled  reversal of deferred tax liabilities,  projected future
taxable income, and tax planning strategies in making this assessment.

      The Company has capital loss carryforwards of $265,204,  which may only be
used to  offset  capital  gains  and  expire  in  2010.  As a  result  of  these
limitations, at June 30, 2008 and 2007, the Company has a valuation allowance of
$92,821  with  respect  to these  losses.  At June 30,  2008,  the  Company  has
unrealized  losses on securities  available-for-sale  of $185,800.  If realized,
these losses would be  characterized  as capital  losses and subject to the same
limitations.  As a result of the  limitations,  the  Company has  established  a
valuation allowance of $66,888 with respect to the unrealized losses.

      At June 30, 2008,  the Company has  $2,146,328 of state net operating loss
carryforwards,  which begin to expire in 2015. Management does not believe it is
more likely than not that the Company  will realize the deferred tax benefits of
the  state net  operating  losses  and  established  a  valuation  allowance  of
$120,409.  At June 30, 2008, the Company has state tax credit  carryforwards  of
$160,316, which expire from 2010 through 2013. The state tax credits may only be
realized after utilization of the net operating loss  carryforwards.  Management
does not believe it is more likely  than not that the Company  will  realize the
deferred tax benefits of the state tax credits before their expiration.  At June
30, 2008,  the Company had a valuation  allowance  with respect to the state tax
credits of $105,809, an increase of $29,971.

      The Company's  subsidiary in China is eligible for a tax holiday resulting
from reduced tax rates for the first five tax years after it  generates  taxable
income in excess of its  existing  net  operating  loss  carryforwards.  The tax
benefit varies over the remaining  years of the holiday.  Fiscal year ended June
30, 2008, is the third year of its tax holiday. The effect of the tax holiday is
approximately  $373,000, or $0.02, per diluted share. United States income taxes
have not been provided on undistributed  earnings of the China  subsidiary.  The
Company's intention is to reinvest these earnings permanently.

      Based upon the level of  historical  taxable  income and  projections  for
future  taxable  income,  management  believes  it is more  likely  than not the
Company  will  realize the  benefits  of the  deferred  tax  assets,  net of the
existing valuation allowance.

      As discussed in note 2, effective July 1, 2007 the Company adopted FIN No.
48. The  Company  did not record a  cumulative  effect  adjustment  to  retained
earnings  as  a  result  of  this  adoption.  Upon  adoption,  the  Company  had
unrecognized  tax  benefits of $414,000  related to  continuing  operations  and
unrecognized tax benefits of $770,000  resulting from deductions  related to the
liquidation of a subsidiary  which would be recorded as discontinued  operations
if recognized.

      A reconciliation  of beginning and ending  unrecognized tax benefits is as
follows:

Balance at July 1, 2007                                             $ 1,184,000
Increases related to prior years' tax positions                          63,000
Decreases related to prior years' tax positions                         (14,000)
Increases related to current years' tax positions                        48,000
Lapse of statue                                                        (804,000)
                                                                     ----------
Balance at June 30, 2008                                            $   477,000
                                                                     ==========


--------------------------------------------------------------------------------
                                       65
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

      As of June 30, 2008, the Company has $510,000 of unrecognized  tax benefit
liabilities,  including  interest and penalties,  recorded in other  non-current
liabilities on the Company's  Consolidated Balance Sheet because payment of cash
is not anticipated within one year of the balance sheet date.

      As of July 1,  2007  and June 30,  2008,  the  Company  had  $414,000  and
$477,000,  respectively,  of  unrecognized  tax  benefits  that would affect the
Company's effective tax rate if recognized.

      In accordance with the Company's accounting policy, the Company recognizes
accrued  interest  and  penalties  related to  unrecognized  tax  benefits  as a
component of income tax  expense.  This policy did not change as a result of the
adoption of FIN No. 48. For the year ended June 30, 2008 the Company  recognized
a benefit of $82,000 for the reduction in accrued interest and penalties.  As of
July 1, 2007 and June 30, 2008, the Company had $115,000 and $33,000, net of tax
benefit respectively,  included in the liability for uncertain tax positions for
the possible payment of interest and penalties.

      Various state income tax  examinations  are  currently in progress.  It is
reasonably   possible   that  the  liability   associated   with  the  Company's
unrecognized  tax  benefits  will  increase or  decrease  within the next twelve
months as a result of these  examinations  or the  expiration of the statutes of
limitations.  At this time,  an  estimate  of the range of  reasonably  possible
outcomes cannot be made. The Company is subject to income tax  examinations  for
its U.S.  federal and foreign  income  taxes for the fiscal  years 2005  through
2008, and for state and local taxes for the fiscal years 2002 through 2008.

(18) Segment and Related Information

   (a) Segments

      The  Company  operates  predominately  in  the  wireless   communications,
satellite  communications,  and  space  and  defense  electronics  markets.  The
Company's  two  reportable  segments are the Wireless  segment and the Space and
Defense  segment.  These segments have been determined  based upon the nature of
the products and services offered,  customer base,  technology,  availability of
discrete internal financial  information,  homogeneity of products, and delivery
channel,  and are  consistent  with the way the Company  organizes and evaluates
financial information  internally for purposes of making operating decisions and
assessing performance.

      The  wireless  segment  designs,   manufactures,  and  markets  commercial
products  used  mainly  by the  wireless  communications  market.  The space and
defense segment of the business designs,  manufactures,  and markets specialized
products for the radar and communications  markets.  The revenue disclosures for
the Company's reportable segments depict products that are similar in nature.

      The  following  table  reflects  the  operating  results  of the  segments
consistent  with  the  Company's  internal  financial  reporting  process.   The
following  results  are used in part,  by  management,  both in  evaluating  the
performance of, and in allocating resources to, each of the segments:


--------------------------------------------------------------------------------
                                       66
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

<TABLE>
<CAPTION>
                                                                                     Corporate
                                                              Space and                 and
                                        Wireless               Defense              Unallocated             Consolidated
                                      -----------            -----------            -----------            ------------
<S>                                   <C>                    <C>                    <C>                     <C>
Net sales:
   2008                               $78,741,013            $52,575,248            $         --            $131,316,261
   2007                                77,799,507             51,187,597                      --             128,987,104
   2006                                66,731,312             38,732,924                      --             105,464,236
Operating income:
   2008                                 3,639,388              6,154,568                (591,817)              9,202,139
   2007                                 7,968,604              9,587,630                (542,056)             17,014,178
   2006                                 7,369,184              4,471,974                      --              11,841,158
Goodwill and intangible assets:
   June 30, 2008                       30,715,861                     --                      --              30,715,861
   June 30, 2007                       30,753,361                     --                      --              30,753,361
Identifiable assets:*
   June 30, 2008                       29,047,917             21,035,041              91,304,557             141,387,515
   June 30, 2007                       28,039,869             16,475,428             115,935,657             160,450,954
Depreciation:**
   2008                                 3,743,796              3,020,382                      --               6,764,178
   2007                                 2,904,112              2,301,032                      --               5,205,144
   2006                                 2,594,443              2,280,892                      --               4,875,335
Intangibles amortization:***
   2008                                    37,500                     --                      --                  37,500
   2007                                   302,871                     --                      --                 302,871
   2006                                   332,870                     --                      --                 332,870
</TABLE>

  *   Segment assets primarily include receivables, and inventories. The Company
      does not  segregate  other  assets on a products  and  services  basis for
      internal  management  reporting and,  therefore,  such  information is not
      presented.  Assets included in corporate and  unallocated  principally are
      cash and  cash  equivalents,  marketable  securities,  other  receivables,
      prepaid expenses, deferred income taxes, and property, plant and equipment
      not specific to business acquisitions.

 **   Depreciation expense related to acquisition--specific property, plant, and
      equipment  is  included  in the  segment  classification  of the  acquired
      business.  Depreciation expense related to non-business combination assets
      is  allocated  departmentally  based on an estimate  of capital  equipment
      employed  by  each  department.   Depreciation  expense  is  then  further
      allocated  within the  department  as it relates to the specific  business
      segment impacted by the consumption of the capital resources utilized. Due
      to the  similarity of the property,  plant,  and equipment  utilized,  the
      Company does not specifically identify these assets by individual business
      segment for internal reporting purposes.

***   Amortization of intangible assets arising from business combinations,  and
      patent  amortization,  is allocated  to the segments  based on the segment
      classification of the acquired or applicable operation.

   (b) Geographic Information

      Net sales by geographic region are as follows:

<TABLE>
<CAPTION>
                              United              Asia                                                                  Consolidated
                              States            Pacific            Europe            Americas           Other             Net sales
                           -----------        -----------        -----------        ----------        ----------        ------------
<S>                        <C>                <C>                <C>                <C>               <C>               <C>
2008                       $66,419,726        $37,801,231        $19,675,971        $1,886,617        $5,532,716        $131,316,261
2007                        72,619,796         31,123,632         16,422,835         2,888,990         5,931,851         128,987,104
2006                        57,317,412         29,242,776         12,143,309         2,869,330         3,891,409         105,464,236
</TABLE>

   (c) Customers

      In 2008,  sales to two  customers  both exceeded 10% of  consolidated  net
sales,  totaling  approximately  $39.4  million  ($22.4  million  related to the
Wireless segment and $17.0 million related to the Space and Defense segment). In
2007,  sales to two  customers  both  exceeded  10% of  consolidated  net sales,
totaling  approximately  $38.6 million  ($21.5  million  related to the Wireless
segment and $17.1 million  related to the Space and Defense  segment).  In 2006,
sales to two customers  both exceeded 10% of  consolidated  net sales,  totaling
approximately  $32.3  million  ($17.7  million  related to the Space and Defense
segment and $14.6 million related to the wireless segment).

(19) Commitments

      The Company is obligated under contractual  obligations and commitments to
make future payments such as lease  agreements and contingent  commitments.  The
Company's obligations and commitments are as follows:


--------------------------------------------------------------------------------
                                       67
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

Year ending June 30:
      2009                                          $1,034,252
      2010                                           1,034,252
      2011                                           1,034,252
      2012                                             785,506
      2013                                             743,529
      Thereafter                                       347,203
                                                    ----------
                                                     4,978,994
      Less sublease income                                  --
                                                    ----------
                                                    $4,978,994
                                                    ==========

      Net rent  expense for the years ended June 30,  2008,  2007,  and 2006 was
$1,574,307,  $882,363, and $748,963, respectively. Rent expense for fiscal 2008,
2007,  and 2006 was  offset  by  sublease  income  of  $154,092,  $504,338,  and
$464,209, respectively.

      The  minimum  lease  payments  for  the  Company's  operating  leases  are
recognized on a  straight-line  basis over the minimum lease term. The Company's
China operation building lease has a step rent provision.

(20) Concentrations

      The  Company and others,  which are engaged in  supplying  defense-related
equipment  to the United  States  Government  (the  Government),  are subject to
certain business risks peculiar to the defense industry. Sales to the Government
may be  affected  by changes in  procurement  policies,  budget  considerations,
changing concepts of national defense,  political developments abroad, and other
factors.  Sales to direct contractors of the United States Government  accounted
for  approximately  35%, 36%, and 30% of consolidated  net sales in fiscal 2008,
2007,  and  2006,  respectively.  While  management  believes  there  is a  high
probability of continuation of the Company's current  defense-related  programs,
it is attempting to reduce its dependence on sales to direct  contractors of the
United States  Government  through  development  of its  commercial  electronics
business.

(21) Foreign Operations

      The Company  maintains  and operates a facility in Suzhou,  China.  During
fiscal  year 2008,  net  external  sales  totaled  $10,164,628.  Included in the
company's total assets,  as of June 30, 2008,  includes  $4,839,011 of inventory
held  for  resale,  as  well as  $5,592,445  of  fixed  assets  (net of  related
accumulated  depreciation).  As of June 30, 2008,  there is no reason to believe
that any of the Company's foreign assets or future operations will be impaired.

(22) Quarterly Financial Data (Unaudited)

The following table sets forth certain unaudited quarterly financial information
for the years ended June 30, 2008 and 2007:

<TABLE>
<CAPTION>
                                                                                    2008 quarter ended
                                                         ---------------------------------------------------------------------------
                                                         September 30          December 31            March 31             June 30
                                                         ------------          -----------          -----------          -----------
<S>                                                       <C>                  <C>                  <C>                  <C>
Net sales                                                 $32,090,192          $32,367,982          $32,618,733          $34,239,354
Gross profit                                               10,518,986           10,400,495           10,140,492            9,417,978
Net income                                                  2,705,464            2,551,314            2,816,589            1,160,102
Income from continuing operations:
     Basic earnings per share                                   $0.17                $0.17                $0.14                $0.08
     Diluted earnings per share                                  0.17                 0.17                 0.14                 0.08
Income from discontinued operations:
     Basic earnings per share                                   $0.00                $0.00                $0.05                $0.00
     Diluted earnings per share                                  0.00                 0.00                 0.05                 0.00
</TABLE>


--------------------------------------------------------------------------------
                                       68
<PAGE>

                                  ANAREN, INC.
                   Notes to Consolidated Financial Statements
                    June 30, 2008, 2007 and 2006 (continued)

<TABLE>
<CAPTION>
                                                                                    2007 quarter ended
                                                         ---------------------------------------------------------------------------
                                                         September 30          December 31            March 31             June 30
                                                         ------------          -----------          -----------          -----------
<S>                                                       <C>                  <C>                  <C>                  <C>
Net sales                                                 $30,203,110          $30,322,785          $32,600,635          $35,860,574
Gross profit                                               10,839,332           10,897,780           11,358,481           12,766,463
Net income                                                  3,760,678            3,761,294            3,510,725            4,317,263
Net income per common share:
     Basic income per share                                     $0.21                $0.21                $0.20                $0.26
     Diluted income per share                                    0.21                 0.21                 0.20                 0.25
</TABLE>

Income  per  share  amounts  for  each  quarter  are  required  to  be  computed
independently,  and as a result,  their sum does not necessarily equal the total
year income per share amounts.

(23) Subsequent Event

      On July 31, 2008, the Company  cancelled its previous $50.0 million demand
note loan  agreement  with no balance  outstanding  on the loan; and on the same
day,  the  Company  signed a loan  agreement  with its bank for a $50.0  million
declining  revolving  line of  credit  to be used to  finance  acquisitions  and
working capital needs. On July 31 and August 29, 2008, the Company took advances
totaling $50.0 million on this line to finance the  acquisitions of M.S. Kennedy
Corp. and Unicircuit,  Inc.  Advances under this line, at the Company's  choice,
bear interest at LIBOR, plus 100 to 450 basis points or at the Prime Rate, minus
(100) to plus 225 basis points,  depending upon the Company's EBITDA performance
at the end of each  quarter as measured by the  formula:  EBITDA  divided by the
Current Portion of Long-term debt plus interest expense.  Availability of credit
under the line declines 20% annually on the anniversary date of the note and any
outstanding principal balance in excess of the new line limit is due and payable
at that time.

      On August 1, 2008, the Company  completed the acquisition of M.S. Kennedy,
Corp. ("MSK"),  located in Syracuse, New York. MSK is a leading provider of high
performance  analog  microelectronics  to the Defense and Space markets and is a
leading  designer and producer of custom  analog  hybrids,  power  hybrids,  and
multi-chip modules. MSK offers broad electronic component design, packaging, and
integration  capability  with net sales of $22.4 million in calendar  2007.  MSK
will be integrated into Anaren's existing Space & Defense business group. Anaren
acquired  MSK for a purchase  price of $28.0  million on a cash free,  debt free
basis,  and  earnings  from MSK are expected to be  accretive  immediately.  The
Company financed this transaction  through a five year, $50.0 million  revolving
debt facility.  Goodwill and intangible  assets related to this acquisition will
be approximately $14-16 million.

      On August 30, 2008,  the Company  completed the  acquisition of Unicircuit
Inc.  located in Littleton,  Colorado.  Unicircuit is a manufacturer  of printed
circuit boards (PCB) used in various  military and aerospace  applications  with
net sales of $18.7  million in  calendar  2007.  Unicircuit  is a leader in high
frequency PCB technology and will enhance Anaren's ability to capture integrated
microwave  assembly  opportunities  in  the  defense,  satellite  and  aerospace
markets.  Unicircuit will be integrated  into Anaren's  existing Space & Defense
business  group.  Anaren  acquired  Unicircuit,  Inc.  for a  purchase  price of
approximately  $21.7 million on a cash free, debt free basis,  and earnings from
Unicircuit  are  expected  to be  accretive  in fiscal  year 2009.  The  Company
financed this  transaction  by utilizing  its existing five year,  $50.0 million
revolving  debt  facility.  Goodwill  and  intangible  assets  related  to  this
acquisition will be approximately $11-13 million.


--------------------------------------------------------------------------------
                                       69