Avnet has established three strategic pillars that we manage the company to:

Profitable Growth

Five years ago, we turned our attention to profitable growth with return on capital and economic profits, rather than accounting profits, as our primary measures of success. As we exited fiscal year 2006, at 11.1 percent ROCE, we exceeded our weighted average cost of capital and created shareholder value, evidence that we are delivering more value and getting paid fairly for it. Our objective is to outpace the markets we serve on the top line and grow economic profits substantially faster than sales. For our Electronics Marketing operating group with superior technical expertise and supply chain solutions, we are taking advantage of synergistic opportunities to sell more components, services and solutions to customers throughout the design-to manufacturing process.

For computer products division, Technology Solutions, we are now targeting vertical markets with value-added scalable services. We are expanding our line card to embrace emerging technologies and complementary new suppliers.

Operational Excellence

At Avnet, operational excellence is everyone's responsibility, because no one knows his or her job better than the person doing it. Everyone at Avnet is encouraged to seek opportunities for process improvement and is given tools and training to foster innovation. Our corporate operational excellence team supports efforts throughout the company to streamline processes and eliminate steps that do not add value. Operational excellence directly impacts top line and bottom line performance by increasing customer satisfaction while increasing productivity, which further distances us from our competitors.

People Development

Avnet strives to help all employees meet their potential. In each of the past three years, we have conducted a comprehensive survey gathering our employees' input and benchmarking us against other leading companies. Survey results show that our people have an excellent understanding of Avnet's business goals and how their jobs contribute to achieving them. They also understand our core values, feel they are treated with respect, and believe Avnet conducts business with honesty and integrity. Additionally, all employees are expected to maintain professional development plans; we continually refine our training programs at every level of the business, from classes tailored to our top 300 executives to an online catalog of courses for supervisors and individual contributors. We take great pride in knowing our success is grounded in Avnet's culture of performance and values, one that puts our financial achievements on equal footing with our principles. Our new chief operating officer (COO), Rick Hamada, has been at the vanguard of Avnet's efforts to build this culture, instituting our first published core values and many of our employee recognition programs. Joining Avnet in 1983 as a technical specialist, Hamada rose through the ranks to become president of Avnet Technology Solutions, which enjoyed impressive results under his leadership and is performing well above the company's targeted business model. As COO, Hamada takes on responsibility for Avnet Technology Solutions and Avnet Electronics Marketing, as well as our logistics, operational excellence and information technology activities.

Avnet's goal is to be the premier technology distribution company in the world.

A Global Outlook

With more than 10,000 employees selling our supplier partners' products and services in 70 countries, we have built industry leading scale and scope and we are leveraging it. The COO's role is global, as is mine, a partnership intended to help Avnet reach its goals faster and outperform our competitors. We formed the Global Executive Council, comprising our "C-level" executives and regional presidents, which meets quarterly to develop and drive Avnet's strategies. We unveiled a global alignment for our financial, logistics, information technology, operational excellence and human resources support functions that will help us operate those services more efficiently while allowing the business groups to increase the amount of time focused on growth.

The Future

Industry analysts anticipate secular market growth of approximately 7 percent over the next few years for the markets Avnet serves. We aspire to achieve double-digit growth at the top and bottom lines. Our vision is to be the premier technology marketing, distribution and services company in the world for our customers, suppliers, employees and shareholders. How will we do it? Innovation. Execution. Excellence. We have the knowledge, tools, products, services, people and financial resources we need to win in the marketplace. Our global organizational structure is in place. Profitable growth is our mantra, and we have real traction in our operational excellence and people development initiatives. The result: economic profits and shareholder value growth. In short, we have what we need to compete very well in fiscal year 2007 and beyond.