AVNET, INC.

 

 

 

NOTICE OF 2007 ANNUAL MEETING OF SHAREHOLDERS

 

 

To Be Held Thursday, November 8, 2007

 

TO ALL SHAREHOLDERS OF AVNET, INC.:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AVNET, INC., a New York corporation (“Avnet”), will be held at the Arizona Corporate Broadcast Center, 2617 South 46th Street, Suite 300, Phoenix, Arizona 85034 on Thursday, November 8, 2007, at 11:00 a.m., mountain standard time, for the following purposes:

 

 

The Board of Directors has fixed the close of business on September 10, 2007 as the record date for the Annual Meeting. Only holders of record of shares of Avnet’s Common Stock at the close of business on such date shall be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

 

By Order of the Board of Directors

 

 

David R. Birk

Secretary

 

September 28, 2007

TABLE OF CONTENTS

 

AVNET, INC.
2211 South 47th Street
Phoenix, Arizona 85034

 

 

 

 

PROXY STATEMENT
Dated September 28, 2007

 

 

 

 

FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 8, 2007

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Avnet, Inc. (“Avnet” or the “Company”) to be voted at the Annual Meeting of Shareholders to be held at the Arizona Corporate Broadcast Center, 2617 South 46th Street, Suite 300, Phoenix, Arizona 85034 on November 8, 2007, and at any and all postponements or adjournments thereof (the “Annual Meeting”), with respect to the matters referred to in the accompanying notice. The approximate date on which this Proxy Statement and the enclosed form of proxy are first being sent or given to shareholders is September 28, 2007. Only holders of record of outstanding shares of Common Stock at the close of business on September 10, 2007, the record date, are entitled to notice of and to vote at the Annual Meeting. Each shareholder is entitled to one vote per share held on the record date. The aggregate number of shares of Common Stock outstanding (net of treasury shares) at September 10, 2007 was 149,901,283, comprising all of Avnet’s capital stock outstanding as of that date.

 

Proxies for shares of Avnet Common Stock, par value $1.00 per share (the “Common Stock”), may be submitted by completing and mailing the proxy card that accompanies this Proxy Statement or by submitting your proxy voting instructions by telephone or through the Internet. Shareholders who hold their shares through a broker, bank or other nominee should contact their nominee to determine whether they may submit their proxy by telephone or Internet. Shares of Common Stock represented by a proxy properly signed or submitted and received at or prior to the Annual Meeting will be voted in accordance with the shareholder’s instructions. If a proxy card is signed, dated and returned without indicating any voting instructions, shares of Common Stock represented by the proxy will be voted “FOR” each of Proposals 1 through 3. The Board of Directors is not currently aware of any business to be acted upon at the Annual Meeting other than as described herein. If, however, other matters are properly brought before the Annual Meeting, the persons appointed as proxies will have discretion to vote according to their best judgment, unless otherwise indicated on any particular proxy. The persons appointed as proxies will have discretion to vote on adjournment of the Annual Meeting. Proxies will extend to, and be voted at, any adjournment or postponement of the Annual Meeting to the extent permitted under the Business Corporation Law of the State of New York.

 

In accordance with rules and regulations recently adopted by the SEC, instead of mailing a printed copy of the proxy materials to each shareholder of record, Avnet is now furnishing proxy materials on the Internet to the shareholders other than those by virtue of their participation in the Avnet 401(k) plan. Participants in the Avnet 401(k) plan will each receive a printed copy of the proxy materials. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy on the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of the proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.

 

It is anticipated that the Notice of Internet Availability of Proxy Materials will be available to shareholders on or before September 28, 2007.

 

Proxy and Revocation of Proxy

 

Any person who signs and returns the enclosed proxy or properly votes by telephone or Internet may revoke it by submitting a written notice of revocation or a later dated proxy that is received by Avnet prior to the Annual Meeting, or by voting in person at the Annual Meeting. However, a proxy will not be revoked by simply attending the Annual Meeting and not voting. All written notices of revocation and other communications with respect to revocation by Avnet shareholders should be addressed as follows: David R. Birk, Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034. To revoke a proxy previously submitted by telephone or Internet, a shareholder of record can simply vote again at a later date, using the same procedures, in which case the later submitted vote will be recorded and the earlier vote will thereby be revoked. Please note that any shareholder whose shares are held of record by a broker, bank or other nominee and who provides voting instructions on a form received from the nominee may revoke or change his or her voting instructions only by contacting the nominee who holds his or her shares. Such shareholders may not vote in person at the Annual Meeting unless the shareholder obtains a legal proxy from the broker, bank or other nominee.

 

Quorum and Voting

 

The presence at the Annual Meeting, in person or by proxy, of the shareholders of record entitled to cast at least a majority of the votes that all shareholders are entitled to cast is necessary to constitute a quorum. Each vote represented at the Annual Meeting in person or by proxy will be counted toward a quorum. If a quorum should not be present, the Annual Meeting may be adjourned from time to time until a quorum is obtained.

 

Broker Voting

 

Brokers holding shares of record for a customer have the discretionary authority to vote on some matters if they do not receive timely instructions from the customer regarding how the customer wants the shares voted. There are also some matters (“non-discretionary matters”) with respect to which brokers do not have discretionary authority to vote if they do not receive timely instructions from the customer. When a broker does not have discretion to vote on a particular matter and the customer has not given timely instructions on how the broker should vote, then what is referred to as a “broker non-vote” results. Any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, but would be treated as not entitled to vote with respect to non-discretionary matters. Therefore, a broker non-vote would not count as a vote in favor of or against such matters and, accordingly, would not affect the outcome of the vote. Brokers will have discretionary authority to vote on Proposals 1, 2 and 3 in the absence of timely instructions from their customers.

 

Required Vote

 

  Proposal 1

 

To be elected, each director nominee must receive the affirmative vote of a plurality of the votes of the Common Stock present or represented at the Annual Meeting and entitled to vote. Votes may be cast in favor of or withheld with respect to each nominee. Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for the election of directors and, therefore, will not affect the outcome of the vote on such election. However, Avnet’s Corporate Governance Guidelines (the “Guidelines”) require that, in an uncontested election, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the shareholder election results. The Guidelines specify the procedures that the Board of Directors must follow in such event and the time frame within which the Board must determine and publicly announce the results of its deliberation.

  Proposal 2

 

Reapproval of the Avnet, Inc. Executive Incentive Plan requires the affirmative vote of the holders of a majority of the Common Stock present or represented at the meeting and entitled to vote. Abstentions are not counted in determining the votes cast in connection with the reapproval, but do have the effect of reducing the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated.

 

  Proposal 3

 

Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2008 requires the affirmative vote of the holders of a majority of the Common Stock present or represented at the meeting and entitled to vote. Abstentions are not counted in determining the votes cast in connection with the ratification of the appointment of KPMG LLP, but do have the effect of reducing the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated.

 

CORPORATE GOVERNANCE

 

Avnet is committed to good corporate governance practices. This commitment is not new — the Company has developed and evolved its corporate governance practices over many years. The Board of Directors believes that good corporate governance practices provide an important framework that promotes long-term value, strength and stability for shareholders.

 

Corporate Governance Guidelines

 

In September 2003, the Board of Directors adopted Corporate Governance Guidelines, which collect in one document many of the corporate governance practices and procedures that had evolved at Avnet over the years. Among other things, the Guidelines address the duties of the Board of Directors, director qualifications and selection process, director compensation, Board operations, Board committee matters and director orientation and continuing education. The Guidelines also provide for annual self-evaluations by the Board and its committees. The Board reviews the Guidelines on an annual basis, most recently at its regularly scheduled meeting in August 2007. The Guidelines are available on the Company’s website at www.ir.avnet.com/documents.cfm

 

As a general policy, as set forth in the Corporate Governance Guidelines, the Board recommends certain limits as to the service of directors on other boards of public companies. These limits are as follows: (1) the Company’s Chairman of the Board and Chief Executive Officer may serve on up to two additional boards; (2) Directors who are actively employed on a full-time basis may serve on up to two additional boards; and (3) Directors who are retired from active full-time employment may serve on up to four additional boards.

 

Director Independence

 

The Board of Directors believes that a substantial majority of its members should be independent directors. The Board adopted the following “Director Independence Standards,” which are consistent with criteria established by the New York Stock Exchange, to assist the Board in making these independence determinations.

 

No Director can qualify as independent if he or she has a material relationship with the Company outside of his or her service as a Director of the Company. A Director is not independent if:

 

 

 

The Board has reviewed all known material transactions and relationships between each Director, or any member of his or her immediate family, and the Company, its senior management and its independent registered public accounting firm. Based on this review and in accordance with its independence standards set forth above, the Board has affirmatively determined that all of the non-employee directors — Eleanor Baum, J. Veronica Biggins, Lawrence W. Clarkson, Ehud Houminer, James A. Lawrence, Frank R. Noonan, Ray M. Robinson, and Gary L. Tooker — are independent (“Independent Directors”).

 

Director Nominations

 

The Corporate Governance Committee is responsible for identifying, screening and recommending candidates for election to the Company’s Board of Directors. The Committee reviews the business experience, education and skills of candidates as well as character, judgment and issues of diversity in factors such as age, gender, race and culture. These factors, and others considered useful by the Board, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.

 

Directors must also possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of all shareholders. Board members are expected to diligently prepare for, attend and participate in all Board and applicable Committee meetings. Each Board member is expected to see that other existing and future commitments do not materially interfere with the member’s service as a Director.

The Corporate Governance Committee also reviews whether a potential candidate will meet the Company’s independence standards and any other director or committee membership requirements imposed by law, regulation or stock exchange rules.

 

Director candidates recommended to the Corporate Governance Committee are subject to full Board approval and subsequent election by the shareholders. The Board of Directors is also responsible for electing directors to fill vacancies on the Board that occur due to retirement, resignation, expansion of the Board or other events occurring between the shareholders’ annual meetings. The Corporate Governance Committee may retain a search firm, from time to time, to assist in identifying and evaluating director candidates. When a search firm is used, the Committee provides specified criteria for director candidates, tailored to the needs of the Board at that time, and pays the firm a fee for these services. Recommendations for director candidates are also received from Board members and management and may be solicited from professional associations as well.

 

The Corporate Governance Committee will consider recommendations of director candidates received from shareholders on the same basis as recommendations of director candidates received from other sources. The director selection criteria discussed above will be used to evaluate all recommended director candidates. Shareholders who wish to suggest an individual for consideration for election to the Company’s Board of Directors may submit a written recommendation to the Corporate Governance Committee by sending it to the Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034. Shareholder recommendations must contain the following information:

 

 

To be considered by the Committee for the slate recommended in the proxy statement for the 2008 annual meeting, shareholders should submit any director recommendation and all required information to the Secretary no later than May 31, 2008.

 

Under the Company’s By-laws, shareholders may also nominate a candidate for election at an annual meeting of shareholders. Details regarding this nomination procedure and the required notice and information are set forth elsewhere in this Proxy Statement under the heading “2008 Annual Meeting.”

 

Director Communications

 

Shareholders and other interested parties may contact any or all of the Company’s Directors by writing to the Board of Directors or to the Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, AZ 85034. They may also submit an email to the Lead Director, the chair of the Audit Committee or the non-employee Directors as a group, by filling out the email form on the Company’s website at www.ir.avnet.com/governance.cfm under the caption “Board of Directors Committee Composition.”

 

Communications received are distributed to the Board, or to any individual Director or group of Directors as appropriate, depending on the facts and circumstances outlined in the communication. The Avnet Board of

Directors has requested that items that are unrelated to the duties and responsibilities of the Board be excluded, including spam, junk mail and mass mailings, product and services inquiries, product and services complaints, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. Any product and services inquiries or complaints will be forwarded to the proper department for handling. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded. Any such communication will be made available to any non-employee Director upon request.

 

Code of Conduct

 

The Company has adopted a Code of Conduct that applies to Directors, officers and employees, including the Chief Executive Officer and all financial and accounting personnel. A copy of the Code of Conduct can be reviewed at www.ir.avnet.com/documents.cfm. Any future amendments to, or waivers for executive officers and Directors from, certain provisions of the Code of Conduct, will be posted on the Company’s website.

 

Reporting of Ethical Concerns

 

The Audit Committee of the Board of Directors has established procedures for employees, shareholders, vendors and others to communicate concerns about the Company’s ethical conduct or business practices, including accounting, internal controls or financial reporting issues. Matters may be reported in the following ways:

 

Employees of the Company are encouraged to contact their manager, Human Resources representative or the Code of Conduct Advisor(s) assigned to their facility to report and discuss matters of concern.

 

All persons, including employees, may contact:

 

 

Lead Director

 

The Board of Directors has established a rotation system for Lead Director service. Each Independent Director serves as the Lead Director from time to time as service rotates among the Independent Directors on an annual basis. Mr. Lawrence W. Clarkson currently serves as the Lead Director. Mr. Ehud Houminer will be the Lead Director serving a one year term beginning upon the adjournment of the Board of Directors meeting immediately following the Annual Meeting of the shareholders on November 8, 2007.

 

The Lead Director has the following responsibilities:

 

 

 

Executive Sessions

 

To promote free and open discussion and communication, non-management Directors meet in executive session without management present at regularly scheduled Board meetings. Non-management Directors may meet at other times at the discretion of the Lead Director or upon the request of any Independent Director. Executive sessions are chaired by the Lead Director.

 

Stock Ownership Guidelines

 

The Board has adopted stock ownership guidelines providing that each Director should own, within four years of joining the Board, 10,000 shares of Avnet Common Stock. Shares that are awarded to Directors as part of director compensation, as well as Phantom Share Units acquired by Directors under the Avnet Deferred Compensation Plan for Outside Directors, count towards the ownership requirements under the guidelines, but options, even if vested, do not. All Directors are in compliance with this requirement.

 

Avnet Website

 

In addition to the information about Avnet and its subsidiaries contained in this Proxy Statement, extensive information about the Company can be found on its website located at www.avnet.com, including information about the Company’s management team, products and services and its corporate governance practices.

 

The corporate governance information on Avnet’s website includes the Company’s Corporate Governance Guidelines, the Code of Conduct, the charters for each of the standing committees of the Board of Directors, how a shareholder can nominate a director candidate for election and how shareholders and other interested parties can communicate with the Lead Director, the chair of the Audit Committee and the non-employee Directors. In addition, amendments to the Code of Conduct and waivers granted to the Company’s Directors and executive officers under the Code of Conduct, if any, will be posted in this area of the website. These documents can be accessed at www.ir.avnet.com/documents.cfm. Printed versions of the Corporate Governance Guidelines, the Code of Conduct and the charters for the Board committees can be obtained, free of charge, by writing to the Company at: Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, AZ 85034.

 

In addition, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those Reports, if any, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as Section 16 filings made by any of the Company’s executive officers or Directors with respect to Avnet Common Stock, are available on the Company’s website (www.avnet.com under the “Investor Relations — SEC Filings” caption) as soon as reasonably practicable after the report is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).

 

This information about Avnet’s website and its content, together with other references to the website made in this Proxy Statement, is for information only. The content of the Company’s website is not and should not be deemed to be incorporated by reference in this Proxy Statement or otherwise filed with the Securities and Exchange Commission.

 

THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

Avnet’s Board of Directors held seven meetings during fiscal 2007 — four regular quarterly meetings, a meeting held in connection with management’s presentation of its annual strategic plan and two special meetings. The non-management Directors met separately in executive session four times during fiscal 2007.

 

During fiscal 2007, each Director standing for re-election attended at least 75% of the combined number of meetings of the Board held during the period for which the Director served and of the committees on which such Director served. All members of the Board of Directors are expected to attend the annual meeting of shareholders, unless unusual circumstances prevent such attendance. Board and committee meetings are scheduled in conjunction with the annual meeting of shareholders. All of the Directors standing for election attended Avnet’s 2006 annual meeting of shareholders.

 

The Board currently has, and appoints the members of, a standing Audit Committee, Compensation Committee, Corporate Governance Committee and Finance Committee. Each committee reports regularly to the full Board and annually evaluates its performance. The members of the committees are identified in the following table.

 

 

Audit Committee

 

The Audit Committee is charged with assisting and representing the Board of Directors in fulfilling its oversight responsibilities with respect to the integrity of the financial statements of the Company, the independence and performance of the Company’s corporate audit and independent registered public accounting firm, and compliance with legal and regulatory requirements, as well as the Company’s internal ethics and compliance program and enterprise risk management activities. Moreover, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm. All of the members of the Audit Committee are independent under Avnet’s Director Independence Standards and also meet the additional requirements for audit committee independence established by the SEC. The Board of Directors has determined that three members of the Committee (Messrs. Houminer, Lawrence and Noonan) qualify as “audit committee financial experts,” as defined in rules adopted by the SEC. Please see the Audit Committee Report set forth elsewhere in this Proxy Statement for more information about the Committee and its operations. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2007, the Audit Committee held thirteen meetings.

 

Compensation Committee

 

The Compensation Committee is responsible for reviewing and approving compensation of all of the Company’s executive officers other than the CEO and for evaluating the performance of the CEO and, on the basis of such evaluation, for recommending to the Independent Directors the CEO compensation for consideration and approval. In addition, the Compensation Committee administers all of Avnet’s equity

compensation plans and oversees Avnet’s diversity and community relations programs. All of members of the Committee meet the independence requirements of the New York Stock Exchange listing standards and the independence standards adopted by the Board of Directors. The Committee operates under a written charter that outlines the purpose, member qualifications, authority and responsibilities of the Committee. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. A copy of the Committee charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2007, the Compensation Committee held six meetings.

 

Corporate Governance Committee

 

The Corporate Governance Committee is charged with identifying, screening and recommending to the Board of Directors appropriate candidates to serve as directors of the Company and is responsible for overseeing the process for evaluating the Board of Directors and its Committees. This Committee also oversees and makes recommendations with respect to corporate governance issues affecting the Board of Directors and the Company. All of the members of the Corporate Governance Committee are independent under Avnet’s Director Independence Standards. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2007, the Corporate Governance Committee held four meetings.

 

Finance Committee

 

The Finance Committee is responsible for evaluating the Company’s short and long-term financing needs and capital structure and for making recommendations about future financing. The Committee also oversees the administration of the Avnet Pension Plan and Trust and the Avnet 401(k) Plan and Trust. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The Committee’s charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2007, the Finance Committee held five meetings.

 

Executive Committee

 

The Board of Directors has also established an Executive Committee, which is charged with the authority of the full Board and, between meetings of the Board, is authorized to exercise the powers of the Board in the management of the business and affairs of Avnet to the extent permitted by law. The Executive Committee is comprised of the Chairman and four other Directors. All of the Independent Directors rotate service on the Executive Committee. The Executive Committee did not meet in fiscal 2007.

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

Nine Directors are to be elected at the Annual Meeting to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. It is the intention of the persons named in the enclosed proxy card to vote each properly signed and returned proxy (unless otherwise directed by the shareholder executing such proxy) for the election as Directors of Avnet of the nine persons listed below. Each nominee has consented to being named herein and to serving if elected. All of the nominees listed below were most recently elected as Directors at the Annual Meeting of Shareholders held on November 9, 2006.

 

Directors will be elected by a plurality of the votes properly cast at the Annual Meeting. Only votes cast “for” the election of Directors will be counted in determining whether a nominee for Director has been elected. Thus, shareholders who do not vote, or who withhold their vote, will not affect the outcome of the election. Under the Corporate Governance Guidelines, however, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the election results. The Board must then determine whether to accept the director’s resignation in accordance with the procedures set forth in the Corporate Governance Guidelines and publicly announce the results of its deliberation.

 

In case any of the nominees below should become unavailable for election for any presently unforeseen reason, the persons named in the enclosed form of proxy will have the right to use their discretion to vote for a substitute or to vote for the remaining nominees and leave a vacancy on the Board of Directors. Under Avnet’s By-laws, any such vacancy may be filled by a majority vote of the Directors then in office or by the shareholders at any meeting thereof. Alternatively, the Board of Directors may reduce the size of the Board to eliminate the vacancy.

 

The information set forth below as to each nominee has been furnished by such nominee as of September 10, 2007:

 

 

AUDIT COMMITTEE REPORT

 

The Audit Committee represents and assists the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements, the independence, qualification and performance of the Company’s corporate auditor and its independent registered public accounting firm, and compliance with legal and regulatory requirements. The Audit Committee operates under a written charter, which sets forth its purpose, member qualifications, authority and responsibilities. The Audit Committee reviews its charter on a regular basis and most recently reviewed and amended it at the Committee’s regularly scheduled meeting on August 9, 2007. The charter is available on the Company’s website at www.ir.avnet.com/governance.cfm.

 

The Audit Committee monitors the activities and performance of the Company’s internal audit function, including scope of reviews, department staffing levels and reporting and follow-up procedures. The Audit Committee also oversees the Company’s efforts and plans in enterprise risk management. In addition, the Audit Committee oversees the Company’s internal ethics and compliance program. The Audit Committee also meets quarterly with KPMG LLP, the Company’s independent registered public accounting firm (“KPMG”), and with the Company’s Director of Corporate Audit, the Chief Financial Officer and the Chief Ethics and Compliance Officer in separate, executive sessions. Management has responsibility for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the system of internal controls.

 

The Audit Committee meets with KPMG and management to review the Company’s interim financial results before publication of the Company’s quarterly earnings press releases and the filing of the Company’s quarterly reports on Form 10-Q and annual report on Form 10-K. The Committee also monitors the activities and performance of KPMG, including audit scope, audit fees, auditor independence and non-audit services performed by KPMG. All services to be performed by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee and management provides quarterly reports to the Committee on the status and fees for all such projects.

 

The Audit Committee has reviewed and discussed the consolidated financial statements for fiscal year 2007 with management and KPMG. This review included a discussion with KPMG and management of Avnet’s accounting principles, the reasonableness of significant estimates and judgments, including disclosure of critical accounting estimates, and the conduct of the audit. The Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 “Communication with Audit Committees,” as amended by Statement on Auditing Standards No. 90 “Audit Committee Communications.” KPMG provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and the Committee discussed with KPMG its independence. The Audit Committee has concluded that KPMG is independent from the Company and its management. KPMG also discussed with the Committee its internal quality control procedures and the results of its most recent peer review. In reliance on this review and these discussions, and the report of KPMG, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements

in the Company’s Annual Report on Form 10-K for the year ended June 30, 2007 for filing with the Securities and Exchange Commission.

 

James A. Lawrence, Chair

Ehud Houminer

Eleanor Baum

Frank Noonan

 

PRINCIPAL ACCOUNTING FIRM FEES

 

The table below provides information relating to fees charged for services performed by KPMG LLP, the Company’s independent registered public accounting firm, in both fiscal 2007 and fiscal 2006.

 

 

Audit Fees.  In both years, Audit Fees consisted of work performed by the principal auditor associated with the audit of the Company’s consolidated financial statements, including reviews performed on the Company’s Form 10-Q filings, statutory audits required for the Company’s subsidiaries and assistance with registration statements filed by the Company, including comfort letters and consents. Audit Fees also include fees incurred in connection with the audit of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

 

Audit-Related Fees.  In both years, Audit-Related Fees included certain compliance-related agreed-upon procedures and assistance with certain acquisition due diligence efforts.

 

Tax Fees.  In both years, Tax Fees consisted primarily of assistance with respect to global tax compliance (federal, international, state and local), tax audits, a tax-related transfer pricing study, tax-related due diligence in connection with certain acquisitions and expatriate tax services.

 

All services to be provided by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee. The Audit Committee has adopted an “External Auditor Scope of Services Policy,” which requires the Audit Committee’s pre-approval of all services to be performed by the Company’s independent registered public accounting firm. In each case, pre-approval is required either by the Audit Committee or by the Chair of the Audit Committee, who is authorized to approve projects up to $250,000 and must then report them to the full Committee by the next Committee meeting. Management provides quarterly reports to the Audit Committee on the status and fees for all projects.

 

BENEFICIAL OWNERSHIP OF COMMON STOCK BY MANAGEMENT AND OTHERS

 

The following table sets forth information with respect to the Common Stock of Avnet beneficially owned at September 10, 2007 by (a) persons that, to Avnet’s knowledge, were the beneficial owners of more than 5% of Avnet’s outstanding Common Stock (“5% Holders”), (b) each Director and director nominee of Avnet, (c) each of the named executive officers, and (d) all Directors and executive officers of Avnet as a group. Except where specifically noted in the table, all the shares listed for a person or the group are directly held by such person or group members, with sole voting and dispositive power.

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, Avnet’s Directors, executive officers and beneficial owners of more than 10% of the outstanding Common Stock are required to file reports with the Securities and Exchange Commission concerning their ownership of and transactions in Avnet Common Stock and are also required to provide Avnet with copies of such reports. Based solely on such reports and related information furnished to Avnet, Avnet believes that in fiscal 2007 all such filing requirements were complied within a timely manner by all Directors and executive officers except for (a) Messrs. Birk, Church, Feldberg, Hamada, Kamins, Phillips, Sadowski, Smith and Vallee each of whom, due to an administrative error, filed one Form 4 after the required filing date; and (b) Mr. Church reported six transactions by his son and daughter on a Form 5 filed in July 2007.

 

EXECUTIVE OFFICERS OF THE COMPANY

 

The current executive officers of the Company are:

 

 

Mr. Vallee joined the Company in February 1977 and has been Chairman of the Board and Chief Executive Officer since June 1998. Prior thereto, he served as Vice Chairman of the Board from November 1992 until June 1998 and also President and Chief Operating Officer from March 1992 until his election as CEO in June 1998.

 

Mr. Birk has been Senior Vice President of Avnet since November 1992. Mr. Birk was elected Vice President and General Counsel in September 1989 and previously held the position of Secretary from July 1997 until November 2003 and was re-elected to the position of Secretary in January 2005. In June 2007, Mr. Birk was elected to the Board of Directors of UAP Holding Corp., which distributes agricultural and non-crop inputs to the U.S. and Canada.

 

Mr. Church has been Senior Vice President of Avnet since November 1995 and currently serves as Chief Human Resources and Organizational Development Officer. Mr. Church previously served as President of Avnet Electronics Marketing Americas from 1994 to 2001 and co-President of Electronics Marketing from August 1998 to April 2001. Prior thereto, Mr. Church held various positions with Avnet including President of Hamilton Hallmark, Vice President of Corporate Marketing for Hamilton Hallmark and President of Avnet’s OEM Marketing Group.

 

Mr. Feldberg became an executive officer in July 2004 when he was promoted to President of Avnet Electronics Marketing. Mr. Feldberg previously served as President of Avnet Electronics Marketing Americas from June 2002 until June 2004 and has served as a corporate Vice President since November 1996. Mr. Feldberg served as President of Avnet Electronics Marketing Asia from December 2000 to June 2002.

 

Mr. Hamada was appointed as Chief Operating Officer in July 2006 and has been Senior Vice President of Avnet since November 2002. Mr. Hamada served as the President of the Computer Marketing operating group from January 2002 until July 2003 and was appointed Vice President of Avnet in November 1999.

 

Mr. Kamins has been Senior Vice President of Avnet since November 2000 and was Chief Information Officer for two years before taking on the role of Chief Operational Excellence Officer in July 2005. Prior thereto, he served as President of the Applied Computing operating group from its formation in October 1999 until July 2003. Mr. Kamins served as a Vice President of Avnet from November 1999 to November 2000 and previously held various management positions since he joined Avnet in 1996. Mr. Kamins is a director of Interdigital Inc. and Calence LLC.

 

Mr. Paget joined the Company in March 2007 as President of Avnet Technology Solutions. Before joining Avnet, Mr. Paget was President of the Technology Solutions Division of Synnex Corporation from May 2004

to February 2007. Prior thereto, he held the position of Senior Vice President and General Manager of GE Technology Financial Services from January 2003 to May 2004. Mr. Paget served as President and Chief Executive Officer of GE Access from November 2000 to May 2003.

 

Mr. Phillips is Vice President and Chief Information Officer of Avnet. He joined Avnet with the July 2005 acquisition of Memec where he had served as Senior Vice President and Chief Information Officer since May 2004. Prior to joining Memec, Mr. Phillips was Senior Vice President and Chief Information Officer for Gateway Inc. He joined Gateway in June 1999 and served as Vice President of Information Technology in London and San Diego before his appointment in August 2003 as Chief Information Officer.

 

Mr. Sadowski has been Senior Vice President of Avnet since November 1992 and Chief Financial Officer since February 1993. Prior thereto, Mr. Sadowski has held various management positions in Avnet’s finance organization including the position of Controller.

 

Mr. Smith joined Avnet in 2000 and was promoted to President of Avnet Logistics in June 2006. He previously served as Senior Vice President of Warehousing & Distribution Worldwide for Avnet Logistics from October 2004 to June 2006 and served as Senior Vice President and Director of operations for Avnet Electronics Marketing Americas from October 2000 to September 2004.

 

Officers of the Company are generally elected each year at the meeting of the Board of Directors following the annual meeting of shareholders and hold office until the next such annual meeting or until their earlier death, resignation or removal.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed the Compensation Discussion and Analysis (“CD&A”) and discussed it with management. Based on its review and discussion with management, the Committee recommended to the Board of Directors that the CD&A be included in the Company’s 2007 Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K. This Report is provided by the following independent directors, who comprise the Committee:

 

Ray M. Robinson, Chair

J. Veronica Biggins

Ehud Houminer

Gary Tooker

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Avnet’s compensation programs are designed to be performance-based, with individual pay linked to key financial objectives of the Company, with appropriate balance between short and long term Company goals. The ultimate objective of the compensation program is to attract and retain the talent critical to the long term success of Avnet in creating shareholder value.

 

This CD&A describes the overall compensation practices at Avnet and specifically describes total compensation for the named executive officers included in the Summary Compensation Table.

 

Compensation Philosophy and Objectives

 

Avnet’s compensation philosophy may be best characterized as pay for performance and pay at risk.

 

The more responsibility executives have for the Company’s performance over time, the more their pay is determined by the degree to which certain performance goals are reached. That part of compensation is generally referred to as “at risk” pay and is one of the fundamental ways in which the Company aligns executive pay with stockholder interests.

This compensation philosophy translates into the following two principles in Avnet’s executive compensation design:

 

 

 

 

 

Overview of Avnet’s Executive Compensation Practices

 

Role of the Compensation Committee  The Compensation Committee of the Board of Directors (the “Committee”) has traditionally had the primary responsibility for the approval and implementation of the compensation program for the Chief Executive Officer (“CEO”) and the other executive officers. During the first quarter of each new fiscal year, the Committee leads the Board in conducting an annual assessment of the performance of the CEO in light of the performance goals and objectives that had been established for the Company and for the CEO in particular for the preceding fiscal year. The Committee also solicits input from each Director using a written form of CEO evaluation adopted by the Board, analyzes the input and reports back to the full Board. The results of the evaluation are discussed with the CEO and are then considered by the Committee in setting new goals and the compensation plan for the CEO for the new fiscal year. Under the current Committee charter, the recommended CEO compensation plan will be submitted each year to all of the independent members of the Board for their consideration and approval. In addition to its responsibilities in respect of the CEO compensation, the Committee reviews and approves the compensation of all other executive officers of the Company.

 

In assessing the propriety and competitiveness of the total compensation plans for the CEO and the other executive officers, the Committee considers total compensation opportunities, both short- and long-term, while at the same time focusing attention on the competitiveness of each component of compensation. Actual incentive payouts, actual value received from long-term incentive awards and actual overall compensation levels may vary from the targeted levels based on Avnet’s consolidated and business unit performance. The overall mix of pay components is monitored and compared to the practices of other companies to ensure that appropriate pay leverage is maintained in each overall compensation package including equity-based incentives which emphasize long-term shareholder value creation.

 

Role of Management  At the beginning of each fiscal year, the CEO evaluates the performance of the Chief Operating Officer (“COO”); and the CEO or COO evaluate the performance of the other executive officers against the strategic operating plan for the prior fiscal year. In addition, the CEO’s and the COO’s evaluations of individual performance also focus on executive officers’ leadership abilities, including their professional development and mentoring of their direct reports. This additional evaluation is carried out by evaluating, on a quarterly and annual basis, each executive officer’s performance against a set of specific

“critical performance factors” (“CPFs”) mutually set and agreed upon by the executive officer and the CEO or COO, as the case may be. Examples of CPFs for the named executive officers include:

 

 

Each executive officer is also evaluated on his commitment to Avnet’s “core values”. These core values are:

 

 

These core values form the foundation of Avnet’s performance- and values-based culture in developing its overall strategies focused on profitable growth, operational excellence and people development — the driving forces behind Avnet’s march toward becoming the premier technology marketing, distribution and services company, globally.

 

The CEO and COO, in consultation with the Chief Human Resources and Organizational Development Officer (CHROD), then develop compensation recommendations for the other executive officers. Factors that are weighed in making individual target compensation recommendations include:

 

 

The CEO or COO review of an executive officer’s performance with respect to his or her CPFs and commitment to Avnet core values is not directly tied to the executive officer’s compensation. Such reviews, however, heavily influence the CEO’s and/or COO’s assessment of an executive officer’s readiness for the types of responsibilities typically associated with a particular position. Once an executive officer’s role and responsibilities are defined, “value of the job in the marketplace” and “relative importance of the position within the executive ranks” are the most determinative factors in setting the proper compensation plan for that executive officer, adjusted to take into consideration the executive officer’s tenure and experience. “Individual contribution,” as used in this CD&A, refers to the contribution from the business unit or support unit over which an executive officer has direct responsibility or Avnet’s overall results in the case of corporate executives.

 

At the Committee’s regularly scheduled meeting in August, the CEO presents the findings and compensation recommendations for each executive officer to the Committee for its review and consideration. The CHROD assists the Committee in its deliberations with respect to CEO compensation and in gathering market and industry data and analyses relating to CEO compensation. The other executive officers, except as described above, do not play a role in setting executive officer compensation.

Role of Compensation Consultants and Benchmarking  The Committee assesses the competitiveness of the Company’s executive compensation program against three types of references. One type of reference the Committee uses in its annual review of executive compensation are the most current compensation statistics for comparable executive positions at a group of industry peers, which statistics are taken from such companies’ respective filings with the SEC. These industry peer companies include Agilysys, Arrow Electronics, Ingram Micro, and Tech Data. The second type of reference the Committee uses are results of independent executive compensation surveys provided by the Committee’s outside compensation consultant or by the Company’s CHROD at the request of the Committee, as the Committee deems necessary. The companies participating in such surveys include an array of companies including companies in the distribution of technology products or services sector with broad global scale and scope, companies with significant brand equity, companies that are recognized for best practices and companies with which the Company competes for talent.

 

While the executive compensation statistics from the industry peers provide the Committee with specific and concrete reference to the competitiveness of the Company’s executive compensation, the results of the other non-peer executive compensation surveys offer the broader context in which the compensation statistics of the industry peers and of the Company are reviewed for reasonableness and competitiveness. In addition and as the third set of reference, the Committee always conducts its annual executive compensation review with the Company’s past compensation practices and traditions in mind. The Committee believes that each of the three types of references described above serves a different purpose and, together, provide a balanced framework within which the Committee deliberates on the Company’s annual executive compensation review. Against this backdrop, the Committee further believes that, as a general rule, it would formally engage an independent compensation consultant at least once every three years to augment its annual review process. The Committee most recently engaged its own compensation consultant (Mercer Human Resource Consulting) in 2005.

 

Deductibility of Executive Compensation  Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) disallows a federal income tax deduction to publicly held companies for certain compensation paid to the Company’s chief executive officer and four other most highly compensated executive officers to the extent that compensation exceeds $1 million per executive officer covered by Section 162(m) in any fiscal year. The limitation applies only to compensation that is not considered “performance based” as defined in the Section 162(m) regulations.

 

In designing the Company’s compensation programs, the Committee carefully considers the effect of Section 162(m) together with other factors relevant to the Company’s business needs. The Company has historically taken, and intends to continue taking, appropriate actions, to the extent it believes desirable, to preserve the deductibility of annual incentive and long-term compensation.

 

Components of Executive Compensation

 

Executive compensation consists of three components — base salary, annual cash incentive compensation and long-term incentive compensation in the form of equity. The Committee believes that these three components serve different purposes and, together, serve the best interests of the Company and its shareholders.

 

Base Salary  Base salary is the guaranteed element of an executive’s annual cash compensation. The value of base salary reflects the executive’s long-term performance, skill set and the market value of that skill set. As is described in more detail under the heading “Employment Agreements and Change in Control Agreements” in this Proxy Statement, each of the named executive officers has an employment agreement, which provides for an annual review of total compensation, including base salary. Each year, the Company undertakes the process described above in this CD&A in the “Overview of Avnet’s Compensation Practices.” As noted above, the Committee uses market and industry compensation data, gathered from multiple sources, to test for reasonableness and competitiveness of the Company’s compensation program. Base salaries are not automatically increased if the Committee (or the

independent directors in the case of the CEO’s base salary) believes that other elements of compensation are more appropriate in light of the stated goals and objectives.

 

Annual Cash Incentive Compensation  In addition to base salary, executive officers are eligible to receive annual incentive cash compensation based on the performance of the Company and business unit (where appropriate). The Company adopted the Executive Incentive Plan (the “Incentive Plan”) in September 2002. The Incentive Plan was approved by shareholders at the Company’s 2002 annual meeting and is included as Proposal 2 in this Proxy Statement for reapproval by the shareholders in order for the incentive compensation payments pursuant to the Incentive Plan to continue to qualify as deductible expense under Section 162(m) of the Internal Revenue Code of 1986, as amended. Cash incentive awards are tied to performance goals measuring, depending on the executive, performance of either operating income, pre-tax income or net income to budgeted levels, adjusted by a factor measuring performance of return on working capital or return on total capital employed against pre-established goals. Performance goals for operating group presidents are weighted more heavily on the performance of the applicable operating group but contain a component based on the performance of the entire Company as well. Generally, the Committee sets the threshold, target and maximum levels so that the relative difficulty of achieving the target level is consistent from year to year. Even though the payout amount can vary greatly from year to year, the objective is to be at target, on average, over a period of years with the expectation of successful execution of the business plan. The table below outlines the payout factor (or multiple range) that applies to each performance level.

 

 

For fiscal 2007, Mr. Vallee’s annual cash incentive compensation (column (g) of the Summary Compensation Table or SCT) earned represents 138% of his targeted cash incentive compensation based upon the Company’s actual consolidated net income and return on capital employed for fiscal year 2007 as compared with the targeted pre-established goals. The annual cash incentive compensation for the other named executive officers in the SCT represents a range of 118% to 138% of targeted cash incentive compensation based upon achievements (actual vs. budgeted) of the Company’s and the applicable business unit’s pre-tax income, net income or return on capital employed, as the case may be.

 

In addition to the Incentive Plan, the Committee may also establish other bonus or incentive programs and may grant discretionary bonuses as it deems appropriate. No additional bonuses were paid to named executive officers for fiscal 2007.

 

Long-Term Incentive Compensation  The Committee grants long-term incentive compensation awards under the Company’s Long Term Incentive Plan (“LTIP”) based generally on each executive’s individual contribution in a particular fiscal period and the executive’s potential to contribute to the long-term success of the Company. The Committee believes in the importance of equity ownership for all executive officers for purposes of incentive, retention and alignment of interests with shareholders. During the 2007 fiscal year, the Committee awarded long-term incentive compensation pursuant to the 2003 Stock Compensation Plan (the “2003 Plan”), under which options, restricted stock, stock appreciation rights and other equity-based awards could be granted. The 2003 Plan and all other equity plans were terminated upon the approval by the shareholders at the November 2006 annual meeting of shareholders of the 2006 Stock Compensation Plan (the “2006 Plan”), which provides for substantially the same types of equity-based awards that could be granted under the 2003 Plan.

 

 

 

As a result of this study, beginning with the Company’s fiscal year 2006, the Committee provided eligible employees, including the CEO and other executive officers, with a portion of their long-term equity-based incentive compensation in the form of performance-based stock units (“PSUs”). These PSUs were awarded under the terms of the 2003 Plan. The PSUs provide for payment to each grantee of a number of shares of the Company’s Common Stock at the end of a three-year period based upon the Company’s achievement of performance goals established by the Committee at the beginning of each three-year period. These performance goals are based upon a three-year cumulative increase in the Company’s absolute economic profit (referred to as “EP” in the table below) over the prior three-year period and the increase in the Company’s economic profit relative to the increase in the economic profit of a peer group of corporations, as may be adjusted by the Committee to exclude the impact of certain items such as those related to acquisitions and restructurings. The adjustments are intended to ensure that award payments represent actual shareholder value creation and are not artificially inflated or deflated due to such items either in the award year or the previous (comparator) year(s). Starting in fiscal 2008, performance shares will be awarded under the 2006 Plan. The following table outlines the payout factors that applies to various performance levels.

 

 

By the way of example, under the above payout matrix, an eligible executive would not receive any of the PSUs allotted to the executive for a given plan cycle if the Company’s 3-year cumulative EP improvement achieved on both an Absolute and Relative basis were below “Threshold.” The executive would receive 50% of the allotted PSUs if the Company’s 3-year cumulative EP improvement achieved the “Target” on either the Relative or Absolute axis but achieved only “Threshold” on the other axis. The same executive would receive up to 200% of the allotted PSUs if the Company’s 3-year cumulative EP improvement reached the stated “Maximum” goal on both the Absolute and Relative axis. The first 3-year cycle under Performance Share program started in fiscal 2006 and runs through the end of fiscal 2008. No payout has yet been made under this program, but based upon the Company’s performance to date, a payout is expected in September 2008. Under the terms of the Performance Share award, which terms have been filed with the SEC, receipt of the PSUs is also contingent upon continued employment on the delivery date in all cases except in the case of death, disability or retirement in which case an eligible executive would be entitled to receiving a pro rata number of PSUs (in the case of death or disability) or all of the PSUs (in the case of retirement) earned for the 3-year program cycle.

 

Equity Grant Practices  As was mentioned earlier in this CD&A, the exercise price of each stock option awarded to the executive officers under the LTIP is the closing price of Avnet stock on the date of grant, which typically is the date of the regularly scheduled meeting of the Compensation Committee in August of each year. This meeting was in September of each year prior to 2006. Generally, the only exception is in the case of a new hire or a promotion, in which cases options may be granted at or about the time of hiring or promotion. PSUs and RSUs are also granted to our named executive officers at the August meeting. Board and committee meetings are generally scheduled at least one year in advance. Scheduling decisions are made without regard to anticipated earnings or the major announcements by the Company. Repricing of stock options without shareholder approval is prohibited under the 2003 Plan and 2006 Plan.

 

Stock Ownership Guidelines  With a significant portion of each executive officer’s total compensation in the form of equity-based incentives, the executive officers have a substantial interest and incentive to take steps to ensure profitable growth of the Company to drive long term shareholder returns. To further reinforce this focus, the Committee has established stock ownership guidelines for all executive officers. The guidelines provide that the named executive officers should hold shares of the Company’s Common Stock, with a market value equal to a multiple of each officer’s base salary, as set forth below:

 

 

Shares that count toward the guidelines include shares actually owned by the officer. Options, vested or unvested, do not count towards the ownership requirement under the guidelines. Until the ownership requirement under the Guidelines is met, a covered officer must hold at least 50% of any net shares he or she receives upon the exercise of options or upon the delivery of any RSU or PSU awards. “Net shares” means the number of shares to be issued after the deduction of the number of shares with an aggregate

market value equal to the aggregate amount of exercise price (in the case of option exercise) plus the amount due to mandatory tax withholdings. The Company and the Committee believe that this mandatory holding feature under the Stock Ownership Guidelines effectively requires each of the covered officers of the Company to permanently hold a certain number of the Company’s stock for as long as they are an executive officer of the Company. As of June 30, 2007, each of the named executive officers exceeded his minimum stock ownership requirement.

 

Employee and Post-Employment Benefits

 

Pension Plan and SERP  An important retention tool is the Avnet Pension Plan (the “Pension Plan”) which covers United States employees of Avnet, including all of the named executive officers. The Pension Plan is a broad-based tax-qualified defined benefit plan with a cash balance feature. In addition, Avnet has in place the Executive Officers’ Supplemental Life Insurance and Retirement Program (“SERP”) in which each named executive officer participates. The SERP is another retention tool because entitlement to the SERP benefits is contingent upon the satisfaction of certain age and service requirements. The Company balances the effectiveness of these plans as a compensation and retention tool with the cost to the company of providing them. The benefit formula under the Pension Plan and the SERP is described in the Pension Benefits Table on page 29.

 

Deferred Compensation  The Company has a Deferred Compensation Plan for highly compensated employees ($100,000 and higher) including all of the named executive officers, allowing these employees to set aside a portion of their income for retirement on a pre-tax basis, in addition to the amounts allowed under the 401(k) Plan, at a minimal cost to the Company. Under this unfunded program, amounts deferred by a participant are credited with earnings based upon the returns actually obtained through the “deemed investment” selected by the executive, as described in more detail following the Nonqualified Deferred Compensation table on page 30.

 

D&O Insurance  As permitted by Section 726 of the Business Corporation Law of New York, Avnet has in force directors’ and officers’ liability insurance and corporate reimbursement insurance. The policy insures Avnet against losses from claims against its directors and officers when they are entitled to indemnification by Avnet, and insures Avnet’s directors and officers against certain losses from claims against them in their official capacities. All duly elected directors and officers of Avnet and its subsidiaries are covered under this insurance. The primary insurer is Chubb, a Division of Federal Insurance Company, and the five excess carriers are CNA Insurance Companies, ACE American Insurance Company, Zurich American Insurance Company, Arch Insurance Company and National Union Fire Insurance Co. of Pittsburgh, PA. The coverage was renewed effective August 1, 2007 for a one year term. The total premium paid for both primary and excess insurance was $1,445,526.

 

Perquisites  The Company provides named executive officers with a limited number of perquisites that the Company and the Committee believe are reasonable and consistent with its overall compensation program, and necessary to remain competitive. The Committee periodically reviews the level of perquisites provided to the named executive officers. Costs associated with perquisites provided by the Company are included under All Other Compensation in the following Summary Compensation Table.

 

Employment Agreements and Change in Control Agreements  Each of the named executive officers has entered into an employment agreement and a change in control agreement with the Company. The change in control agreements are intended to encourage retention in the face of the disruptive impact of an actual or attempted change in control of the Company. The agreements are also intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executives’ own employment. More detailed descriptions of these programs are included under the heading “Potential Payouts Upon Termination and Change in Control.”

 

COMPENSATION OF AVNET EXECUTIVE OFFICERS

 

The following table sets forth information concerning the compensation during Avnet’s last fiscal year of its Chief Executive Officer, the Chief Financial Officer and the three executive officers at the end of last fiscal year who had the highest individual total compensation during Avnet’s fiscal year ended June 30, 2007:

 

SUMMARY COMPENSATION TABLE

 

 

 

 

 

Grants of Plan-Based Awards

 

The following table provides information about equity and non-equity plan-based awards to the named executive officers in fiscal 2007 relating to (1) annual cash incentive awards; (2) the RSUs; (3) the PSUs and (4) the option grants. The actual payouts in fiscal 2007 under the Non-Equity Incentive Plan Awards are included in the Summary Compensation Table as are the expenses recorded by the Company associated with the awards under the Equity Incentive Plan in accordance with SFAS 123R.

 

 

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information on the current holdings of stock option and stock awards by the named executive officers. This table includes unexercised and unvested option awards; unvested RSUs; or PSUs with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each named executive officer. The vesting schedule for each grant is shown following this table, based on the option or stock award grant date. The market value of the stock awards is based on the closing market price of Avnet stock as of June 30, 2007, which was $39.64. The PSUs are subject to specified performance objectives over the performance period. The market value as of June 30, 2007, shown below assumes 100% achievement of these objectives. For additional information about the option awards and stock awards, see the description of equity incentive compensation in the CD&A and note 12 of the Footnotes to Avnet’s financial statements in the Form 10-K for the year ended June 30, 2007, as filed with the SEC.