The following discussion should be read in conjunction with the consolidated financial statements and notes thereto.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition, critical accounting policies and estimates, and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes thereto appearing elsewhere herein. This section is organized as follows:

• Business Overview

• Results of Continuing Operations-an analysis and comparison of our consolidated results of operations for the fiscal years ended May 30, 2009, May 31, 2008, and June 2, 2007, as reflected in our consolidated statements of operations.

• Liquidity, Financial Position, and Capital Resources-a discussion of our primary sources and uses of cash for the fiscal years ended May 30, 2009, and May 31, 2008, and a discussion of selected changes in our financial position.

Business Overview

Richardson Electronics, Ltd. ("we", "us", and "our") was originally incorporated in the state of Illinois in 1947 and is currently incorporated in the state of Delaware. We are a global provider of engineered solutions and a global distributor of electronic components to the radio frequency ("RF"), wireless and power conversion, electron device, and display systems markets with total sales in fiscal 2009 of $496.4 million. Utilizing our core engineering and manufacturing capabilities, our strategy is to provide specialized technical expertise and value-add, or "engineered solutions." We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, and logistics for end products of our customers. Design-in support includes component modifications or the identification of lower-cost product alternatives or complementary products.

Our products include primarily RF and microwave components, power semiconductors, electron tubes, microwave generators, and data display monitors. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, and communication applications.

Our sales and marketing, product management, and purchasing functions are organized as follows:

RF, Wireless & Power Division ("RFPD") serves the global RF and wireless communications market, including infrastructure, wireless networks, and the power conversion market.

Electron Device Group ("EDG") provides engineered solutions and distributes electronic components to customers in diverse markets including the steel, automotive, textile, plastics, semiconductor manufacturing, and broadcast industries.

Canvys (formerly the Display Systems Group or "DSG") provides global integrated display products, systems and digital signage solutions serving financial, corporate enterprise, healthcare, and industrial markets.

We currently have operations in the following major geographic regions:

• North America;

• Asia/Pacific;

• Europe; and

• Latin America.

During the second quarter of fiscal 2009, we renamed our DSG business unit Canvys. This change from DSG to Canvys signifies its evolution to a market-driven solutions group.

During the first quarter of fiscal 2009, we moved our Cathode Ray Tube ("CRT") product line from our Canvys segment to our EDG segment. As a result of implementing a new business plan for Canvys during the third quarter of fiscal 2008, we felt that the CRT product line more closely aligned with the existing EDG business model. Prior period segment information has been restated to reflect this change.

On May 31, 2007, we completed the sale of the Security Systems Division/Burtek Systems ("SSD/Burtek") to Honeywell International Incorporated ("Honeywell"). SSD/Burtek is presented as a discontinued operation in accordance with the criteria of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), and prior period results and disclosures have been restated to reflect this reporting.

Results of Continuing Operations

Overview-Fiscal Year Ended May 30, 2009

• Net sales for fiscal 2009 were $496.4 million, down 12.7%, compared to net sales of $568.4 million during last year.

• Gross margin as a percent of net sales decreased to 22.1% during fiscal 2009, compared to 23.9% during last year. The gross margin percent of 22.1% includes $9.5 million of inventory reserves recorded during fiscal 2009.

• Selling, general, and administrative expenses decreased to $110.4 million during fiscal 2009, including $4.6 million of severance expense and $0.7 million of expense related to the write-off of a note receivable, compared to $125.3 million during last year.

• Operating loss during fiscal 2009 was $8.1 million, compared to an operating loss of $1.3 million during last year.

• Net loss during fiscal 2009 was $12.2 million versus a net loss of $8.4 million during last year.

Net Sales and Gross Profit Analysis

During fiscal 2009 consolidated net sales decreased 12.7% reflecting a decline in all three segments. Consolidated net sales during fiscal 2008 increased 2.0% reflecting sales growth in all three segments.

Net sales by segment and percent change for fiscal 2009, 2008, and 2007, were as follows (in thousands):

             Fiscal Year     Fiscal Year     Fiscal Year    FY09 vs FY08       FY08 vs FY07
                2009            2008            2007          % Change           % Change
Net Sales
RFPD        $     355,189   $     376,203   $     369,936           (5.6 %)             1.7 %
EDG                82,168         108,272         108,029          (24.1 %)             0.2 %
Canvys             59,019          79,655          75,273          (25.9 %)             5.8 %
Corporate               3           4,279           4,053

Total       $     496,379   $     568,409   $     557,291          (12.7 %)             2.0 %

Consolidated gross profit was $109.6 million during fiscal 2009, compared to $135.6 million during fiscal 2008. Consolidated gross margin as a percentage of net sales decreased to 22.1% during fiscal 2009, from 23.9% during fiscal 2008. RFPD, EDG, and Canvys incurred inventory write-downs during fiscal 2009 of $2.3 million, $4.8 million, and $2.4 million, respectively, while Canvys and RFPD incurred inventory write-downs of $1.9 million and $0.9 million, respectively, during fiscal 2008.

Consolidated gross profit was $135.6 million during fiscal 2008, compared to $132.4 million during fiscal 2007. Consolidated gross margin as a percentage of net sales increased to 23.9% during fiscal 2008, from 23.8% during fiscal 2007. Canvys and RFPD incurred inventory write-downs during fiscal 2008 of $1.9 million and $0.9 million, respectively.

Gross profit reflects the distribution and manufacturing product margin less manufacturing variances, inventory obsolescence charges, customer returns, scrap and cycle count adjustments, engineering costs, and other provisions. Corporate gross profit includes freight costs and other miscellaneous charges.

Gross profit (loss) by segment and percent of segment net sales for fiscal 2009, 2008, and 2007, were as follows (in thousands):

                      Fiscal Year 2009          Fiscal Year 2008          Fiscal Year 2007
     Gross Profit
     RFPD           $   76,031      21.4 %    $   85,323      22.7 %    $   84,338      22.8 %
     EDG                21,512      26.2 %        35,049      32.4 %        35,490      32.9 %
     Canvys             12,405      21.0 %        15,740      19.8 %        16,597      22.0 %

     Subtotal          109,948      22.2 %       136,112      24.1 %       136,425      24.7 %
     Corporate            (318 )                    (513 )                  (4,022 )

     Total          $  109,630      22.1 %    $  135,599      23.9 %    $  132,403      23.8 %

RF, Wireless & Power Division

RFPD net sales decreased 5.6% to $355.2 million during fiscal 2009, from $376.2 million during fiscal 2008. The decline in net sales, which was the result of the weakening global economy, included declines in net sales of network access, passive/interconnect, and power conversion products, partially offset by an increase in infrastructure products. The sales growth for infrastructure products was in Asia/Pacific, which included the deployment of the next build-out of the Time Division-Synchronous Code Division Multiple Access ("TD-SCDMA") in China. Gross margin as a percentage of net sales declined to 21.4% during fiscal 2009 as compared to 22.7% during fiscal 2008. The decline in gross margin was due primarily to inventory write-downs of $2.3 million during fiscal 2009 as compared to $0.9 million during fiscal 2008. The $2.3 million of inventory write-downs during fiscal 2009 primarily relates to customer specific inventory that did not have return privileges and the exiting of certain market segments. Additionally, during the fourth quarter of fiscal 2009, we evaluated our inventory levels based on an increasingly uncertain economic future.

RFPD net sales increased 1.7% to $376.2 million during fiscal 2008, from $369.9 million during fiscal 2007. The net sales increase for fiscal 2008 was due primarily to an increase in sales of power conversion and passive/interconnect products, partially offset by a decrease in infrastructure products. The increase in power conversion products net sales was due primarily to alternative energy application growth in Asia/Pacific and Europe. The net sales growth of passive/interconnect products was due primarily to the expansion of a consumer wireless franchise in Asia/Pacific and Europe. The decline in infrastructure products was due to the timing of the different phases of the TD-SCDMA project in China. The first phase of the TD-SCDMA project occurred during fiscal 2007, while the second phase was deployed during fiscal 2009. Gross margin as a percentage of net sales declined slightly to 22.7% during fiscal 2008 from 22.8% during fiscal 2007. The decline in gross margin as a percentage of net sales was due primarily to $0.9 million of inventory write-downs recorded during the third quarter of fiscal 2008.

Electron Device Group

EDG net sales declined 24.1% to $82.2 million during fiscal 2009, from $108.3 million during fiscal 2008, due primarily to a decline in semiconductor fabrication equipment products and tubes sales. The semiconductor fabrication equipment industry has experienced an overall decline for several years, in addition to the weakening global economy. North America experienced a decline in tube sales, due primarily to the conversion from analog to digital television which took place in June 2009. Gross margin as a percentage of net sales declined to 26.2% during fiscal 2009 as compared to 32.4% during fiscal 2008. The decline in gross margin as percentage of net sales was due primarily to $4.8 million of inventory write-downs during fiscal 2009. The $4.8 million of inventory write-downs, recorded during fiscal 2009 relates primarily to the evaluation of inventory levels based on the significant decline in sales during the fourth quarter, and an increasingly uncertain economic climate.

EDG net sales increased 0.2% to $108.3 million during fiscal 2008, from $108.0 million during fiscal 2007. The net sales increase for fiscal 2008 was due primarily to an increase in tube sales, partially offset by a decline in net sales of semiconductor fabrication equipment products. The increase in net sales of tubes was due primarily to price increases. The semiconductor fabrication equipment industry has experienced an overall decline during the past couple of years. Gross margin as a percentage of net sales decreased slightly to 32.4% during fiscal 2008 as compared to 32.9% during fiscal 2007. The decline in gross margin as a percentage of net sales during fiscal 2008 as compared to fiscal 2007 was due primarily to shifts in product mix.

Canvys

Canvys net sales declined 25.9% to $59.0 million during fiscal 2009, from $79.7 million during fiscal 2008, due primarily to a decrease in medical imaging and custom/OEM sales throughout Europe. The decline of both product lines was due primarily to lower capital investments as a result of the weakening global economy. Gross margin as a percentage of net sales increased to 21.0% during fiscal 2009 as compared to 19.8% during fiscal 2008, which was due primarily to shifts in customer mix and process improvements, partially offset by the increase in inventory write-downs. Inventory write-downs increased to $2.4 million during fiscal 2009 from $1.9 million during fiscal 2008. The $2.4 million of inventory write-downs recorded during fiscal 2009 primarily relates to the exiting of certain market segments and customer specific inventory that did not have return privileges.

Canvys net sales increased 5.8% to $79.7 million during fiscal 2008, from $75.3 million during fiscal 2007. This increase was due primarily to an increase in digital signage and European sales. Gross margin as a percentage of net sales declined to 19.8% during fiscal 2008 as compared to 22.0% during fiscal 2007. The decline in gross margin as a percentage of net sales during fiscal 2008 as compared to fiscal 2007 was due primarily to $1.9 million of inventory write-downs recorded during the third quarter of fiscal 2008.

During the third quarter of fiscal 2008, Canvys began implementing a new business plan that included exiting unprofitable market segments, exiting distribution of low margin branded products, and an increased focus on digital signage. As a result of the shift in business focus, Canvys eliminated more than 30 positions which are expected to result in more than $3.0 million of annualized cost savings.

Sales by Geographic Area

We currently have 16 facilities in North America, 28 in Asia/Pacific, 15 in Europe, and two in Latin America. On a geographic basis, our sales are categorized by destination to include: North America; Europe; Asia/Pacific; Latin America; and Corporate.

Net sales by geographic area and percent change for fiscal 2009, 2008, and 2007, were as follows (in thousands):

                                 Fiscal Year       Fiscal Year       Fiscal Year      FY09 vs FY08         FY08 vs FY07
                                    2009              2008              2007            % Change             % Change
Net Sales
North America                   $     171,961     $     228,466     $     229,296            (24.7 %)              (0.4 %)
Asia/Pacific                          181,906           167,943           165,230              8.3 %                1.6 %
Europe                                125,932           151,685           143,823            (17.0 %)               5.5 %
Latin America                          15,319            17,288            16,979            (11.4 %)               1.8 %
Corporate                               1,261             3,027             1,963

Total                           $     496,379     $     568,409     $     557,291            (12.7 %)               2.0 %

Gross profit by geographic area and percent of geographic net sales for fiscal 2009, 2008, and 2007, were as follows (in thousands):

                       Fiscal Year 2009          Fiscal Year 2008          Fiscal Year 2007
     Gross Profit
     North America   $   34,236      19.9 %    $   56,832      24.9 %    $   61,849      27.0 %
     Asia/Pacific        40,942      22.5 %        39,510      23.5 %        39,052      23.6 %
     Europe              31,192      24.8 %        40,755      26.9 %        36,481      25.4 %
     Latin America        4,739      30.9 %         5,240      30.3 %         4,845      28.5 %

     Subtotal           111,109      22.4 %       142,337      25.2 %       142,227      25.6 %
     Corporate           (1,479 )                  (6,738 )                  (9,824 )

     Total           $  109,630      22.1 %    $  135,599      23.9 %    $  132,403      23.8 %

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses ("SG&A") decreased during fiscal 2009 to $110.4 million from $125.3 million during fiscal 2008. The decrease was due primarily to a $9.4 million decline in employee related expenses due primarily to headcount reductions (excluding severance), a $3.5 million decline in consulting and other service fees, a $0.9 million decline in travel expenditures, and a $1.5 million decline in facility costs, partially offset by a $1.3 million increase in severance expense, a $0.5 million increase in bad debt expense, and a $0.7 million write-off of a note receivable. Included in SG&A is depreciation expense of $4.3 million and $5.0 million during fiscal year 2009 and 2008, respectively. SG&A as a percentage of net sales increased slightly to 22.3% during fiscal 2009 as compared to 22.0% during fiscal 2008, which was due primarily to the 12.7% decline in net sales during fiscal 2009.

SG&A decreased to $125.3 million during fiscal 2008, from $128.2 million during fiscal 2007. The decrease was due primarily to a decrease in audit and tax fees, severance expense, and travel. Included in SG&A is depreciation expense of $5.0 million and $5.2 million during fiscal year 2008 and 2007, respectively. SG&A as a percentage of net sales decreased to 22.0% during fiscal 2008 as compared to 23.0% in fiscal 2007.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over fair market value of identifiable net assets acquired through business purchases. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142") goodwill and indefinite-lived intangible assets are reviewed for impairment on at least an annual basis by applying a fair-value based test. In evaluating the recoverability of the carrying value of goodwill, we must make assumptions regarding the fair value of our reporting units, as defined under SFAS No. 142. If our fair value estimates or related assumptions change, we may be required to record impairment charges related to goodwill.

Our goodwill impairment testing follows the two-step process as defined in SFAS No. 142. The first step in the process compares the fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. This allocation is similar to a purchase price allocation performed in purchase accounting. If the carrying amount of the reporting unit goodwill exceeds the implied goodwill value, an impairment loss should be recognized in an amount equal to that excess.

Our goodwill balances are reviewed for impairment through the application of a fair-value based test, using the end of our third quarter as the measurement date. In performing our annual review of goodwill balances for impairment, we estimate the fair value of each of our reporting units based primarily on projected future operating results, discounted cash flows, and other assumptions. Projected future operating results and cash flows used for valuation purposes may reflect considerable improvements relative to historical periods with respect to, among other things, revenue growth and operating margins. Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, historically, projected operating results and cash flows have not always been achieved. The failure of one or more of our reporting units to achieve projected operating results and cash flows in the near term or long term could reduce the estimated fair value of the reporting unit below its carrying value and result in the recognition of a goodwill impairment charge.

During the fourth quarter of fiscal 2008, the results of our goodwill impairment tests indicated that the value of goodwill attributable to our Canvys segment was fully impaired. The goodwill impairment tests revealed that the carrying value of our Canvys segment exceeded its fair value, and the carrying amount of goodwill of our Canvys segment, exceeded the implied goodwill value as of the March 1, 2008, measurement date. As a result, we recorded a pre-tax goodwill impairment charge of $11.5 million and a $2.3 million tax benefit related to the charge, during the fourth quarter of fiscal 2008.

During the fourth quarter of fiscal 2009, the results of our goodwill impairment tests indicated that the value of goodwill attributable to our RFPD and EDG segments were fully impaired. The goodwill impairment tests revealed that the carrying values of our RFPD and EDG segments exceeded their fair value, and the carrying amount of goodwill of our RFPD and EDG segments, exceeded the implied goodwill value as of the February 28, 2009, measurement date. As a result, we recorded pre-tax goodwill impairment charges of $0.6 million and $0.9 million for RFPD and EDG, respectively, during the fourth quarter of fiscal 2009. Additionally, a $0.2 million tax benefit was recorded related to the goodwill impairment.

(Gain) Loss on Disposal of Assets

During the third quarter of fiscal 2009, management made the decision not to proceed with the implementation of various modules of enterprise resource management software that were in the development stage and were capitalized in accordance with Accounting Standards Executive Committee State of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. As a result, we recorded a loss on disposal of assets of $5.8 million during the third quarter of fiscal 2009.

On February 20, 2009, we sold our building in Mexico City, Mexico, for $0.1 million. We recorded an immaterial gain during the third quarter of fiscal 2009 with respect to the sale of this property.

During the first quarter of fiscal 2008, we received an offer to sell our interests in property located in Rio de Janeiro, Brazil for 2.0 million Brazilian Reais, which is equivalent to approximately $1.2 million, and received a security deposit of 0.6 million Brazilian Reais, which is equivalent to approximately $0.4 million. We closed on the sale during the third quarter of fiscal 2008 and received additional proceeds of 0.4 million Brazilian Reais, which is equivalent to approximately $0.2 million, in cash and a note receivable of 1.0 million Brazilian Reais.

The note receivable of 1.0 million Brazilian Reais, which is equivalent to approximately $0.6 million, is payable in ten equal monthly installments. We recorded an immaterial gain during the third quarter of fiscal 2008 with respect to the sale of our interests in this property.

On February 1, 2008, we sold our building in Pianopoli, Italy, for $0.4 million. We recorded a pre tax gain of $0.1 million during the third quarter of fiscal 2008 with respect to the sale of this property.

On April 5, 2007, we sold real estate and a building located in the United Kingdom for $1.9 million. We recorded a pre tax gain on sale of $1.5 million during the fourth quarter of fiscal 2007 with respect to the sale of this property.

On December 29, 2006, we sold approximately 1.5 acres of real estate and a building located in Geneva, Illinois for $3.1 million. We recorded a gain of $2.5 million during the third quarter of fiscal 2007 with respect to the sale of this property.

Other (Income) Expense

Other (income) expense was an expense of $2.3 million during fiscal 2009 compared with an expense of $7.4 million during fiscal 2008. The decline in expense during fiscal 2009 was due primarily to favorable changes in foreign currency exchange rates, a gain related to the retirement of a portion of our long-term debt, and a decrease in interest expense. Other (income) expense included a foreign exchange gain of $1.3 million during fiscal 2009 as compared to a foreign exchange loss of $1.5 million during fiscal 2008. Fiscal 2009 included a gain of $0.8 million related to the retirement of $3.3 million of our 8% convertible senior subordinated notes ("8% notes"). See Note 6 "Debt" of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion on the retirement. Interest expense decreased to $4.6 million during fiscal 2009 as compared to $6.9 million during fiscal 2008. See Note 6 "Debt" of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion on interest expense.

Other (income) expense was an expense of $7.4 million during fiscal 2008 compared with an expense of $5.7 million during fiscal 2007. The increase in other expense during fiscal 2008 was due primarily to unfavorable changes in foreign currency exchange rates and an increase in interest expense, partially offset by costs incurred during the first quarter of fiscal 2007 associated with the retirement of long-term debt. Other (income) expense included a foreign exchange loss of $1.5 million during fiscal 2008 as compared to a foreign exchange gain of $1.1 million during fiscal 2007. The foreign exchange loss during fiscal 2008 includes a loss of approximately $0.9 million relating to cash received from the sale of our Security Systems Division/Burtek Systems ("SSD/Burtek") business that was temporarily held in our European entities. Other (income) expense includes costs associated with the retirement of long-term debt of $2.5 million during the first quarter of fiscal 2007 due to entering into two separate agreements in August 2006 to purchase $14.0 million of our 8% notes. We incurred no such charges during fiscal 2008. Interest expense increased to $6.9 million during fiscal 2008 as compared to $5.3 million during fiscal 2007. See Note 6 "Debt" of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion on interest expense.

Income Tax Provision

The effective income tax rates during fiscal 2009, 2008, and 2007 were 16.8%, (2.5%), and 29.1%, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% primarily results from our geographical distribution of taxable income or losses and valuation allowances related to net operating losses.

As of May 30, 2009, domestic federal net operating loss ("NOL") carryforwards amount to approximately $53.3 million. These federal NOLs expire between 2024 . . .