MCMS INC /DE/, S-1/A, 2000-11-21

MCMS INC /DE/
S-1/A, 2000-11-21
ELECTRONIC COMPONENTS, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2000

REGISTRATION NO. 333-46668

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

MCMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

------------------------

<TABLE>
<CAPTION>
DELAWARE 3679 82-0480109
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

83 GREAT OAKS BOULEVARD
SAN JOSE, CALIFORNIA 95119
(408) 284-3500

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

ANGELO M. NINIVAGGI
MCMS, INC.
16399 FRANKLIN ROAD
NAMPA, IDAHO 83687
(208) 898-2600

(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:

<TABLE>
<S> <C>
FREDERICK TANNE WILLIAM J. GRANT, JR.
ANDREW E. NAGEL WILLKIE FARR & GALLAGHER
KIRKLAND & ELLIS 787 SEVENTH AVENUE
CITIGROUP CENTER NEW YORK, NY 10019
153 EAST 53RD STREET (212) 728-8000
NEW YORK, NEW YORK 10022
(212) 446-4800
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.

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

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED
WITHOUT NOTICE. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.

Prospectus (Not Complete)
Issued , 2000

[LOGO]

MCMS, INC.
CLASS A COMMON STOCK

------------------------------

MCMS is offering shares of Class A common stock in an initial public
offering. No public market currently exists for our common stock. We anticipate
that the initial public offering price for our shares will be between $
and $ per share.

------------------------------

We have applied to have our Class A common stock approved for quotation on
the Nasdaq National Market under the symbol "MCMS."

------------------------------

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
------------------------------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Offering Price.............................................. $ $
Underwriting Discounts and Commissions...................... $ $
Offering Proceeds to MCMS, before expenses.................. $ $
</TABLE>

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

MCMS has granted the underwriters the right to purchase up to an additional
shares of Class A common stock to cover any over-allotments. The
underwriters can exercise this right at any time within 30 days after the
offering. Banc of America Securities LLC expects to deliver the shares of Class
A common stock to investors on , 2000.

BANC OF AMERICA SECURITIES LLC
------------------------------
The date of this prospectus is , 2000
<PAGE> 3
Inside the front cover will be eight pictures depicting the following:

1. Picture of the Nampa, Idaho facility.

2. Picture of technician performing computer aided design work.

3. Picture of production floor.

4. Picture of printed circuit board manufacturing process.

5. Picture of worker on assembly line.

6. Picture of printed circuit board assembly.

7. Picture of integrated circuit test equipment and fixture.

8. Picture of system assembly operation.

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 16
Dividend Policy....................... 16
The Reclassification.................. 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 30
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................ 43
Related Party Transactions............ 51
Principal Stockholders................ 54
Description of Indebtedness........... 56
Description of Capital Stock.......... 58
Shares Eligible for Future Sale....... 61
Underwriting.......................... 62
Legal Matters......................... 64
Experts............................... 64
Where You Can Find Additional
Information......................... 64
Index to Financial Statements......... F-1
</TABLE>

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it is
unlawful. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.

This preliminary prospectus is subject to completion prior to this
offering.

Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are forward-looking statements. These forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in the prospectus
that are not historical facts. When used in this prospectus, the words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "seek," "should," or "will" or the negative of these terms or
similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including the factors discussed under "Risk Factors."

We own a registered trademark in the United Stated in "MCMS" and the MCMS
logo. Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.

Industry statistical data presented in this prospectus have been compiled
from reports, publications and materials issued by a number of organizations,
consulting firms and industry experts including: Ryan, Hankin & Kent, Strategis
Group, International Data Corporation, KMI Market Research, Dataquest and
Technology Forecasters, Inc. Although we have not independently verified the
data, we believe that the information compiled by these organizations,
consulting firms and industry experts which is referred to or presented in this
prospectus is reliable. In addition, statistical data relating to us presented
in this prospectus have been compiled from our internal surveys and schedules,
which, while believed by us to be reliable, have not been verified by any
independent sources.

2
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information we present in greater detail elsewhere
in this prospectus. This prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those discussed in the forward-looking statements as a result of factors
described under "Risk Factors" and elsewhere in this prospectus.

MCMS, INC.

We are a global leading provider of advanced electronics manufacturing
services to original equipment manufacturers who primarily serve the data
communications, telecommunications, and computer/memory module industries.
Original equipment manufacturers design, build, market and sell new products to
end users of these products. These manufacturers may outsource one or more of
these functions to electronics manufacturing services providers. We target
customers that are technology leaders in rapidly growing markets, such as
Internet infrastructure, wireless communications and optical networking, that
have complex manufacturing services requirements and that seek to form long-term
relationships with their electronics manufacturing services providers. We offer
a broad array of electronics manufacturing services ranging from pre-production
engineering to manufacturing, end-order fulfillment and after-sales product
support.

We deliver this broad range of services through six strategically located
facilities in the United States, Mexico, Asia and Europe. We have long-standing
relationships with networking and telecommunications industry leaders such as
Cisco Systems, Inc., Extreme Networks, Inc., Alcatel Internetworking, Inc. and
Nokia Corp. and have recently established relationships with several companies
in the emerging areas of wireless communications and optical networking,
including AT&T Wireless Services, Inc., JDS Uniphase Corporation, Alidian
Networks, Inc., Digital Lightwave, Inc. and Tachion Networks, Inc. According to
Technology Forecasters, Inc., a market research and consulting firm, we are
among the 20 largest electronics manufacturing services companies worldwide. We
believe that our competitive advantages in the areas of engineering, advanced
manufacturing capabilities and operational flexibility position us to capitalize
on the accelerating trend among original equipment manufacturers to outsource a
broad range of manufacturing and related services for technologically advanced
products.

The electronics manufacturing services industry is expected to continue its
strong growth as original equipment manufacturers, particularly those in the
Internet infrastructure, wireless communications and optical networking markets,
continue to expand rapidly and further utilize the value-added offerings
delivered by electronics manufacturing services providers such as MCMS.
According to Technology Forecasters, the global electronics manufacturing
services industry is expected to grow at a compounded annual growth rate of 27%,
from $78 billion in revenues in 1999 to $260 billion in 2004. Technology
Forecasters estimates that the percentage of the total cost of goods sold that
is outsourced for manufacture by original equipment manufacturers in the
electronics industry will increase from 11% in 1999 to 26% in 2004. In its
global report, Technology Forecasters projected that the larger electronics
manufacturing services providers, those with annual revenues in excess of $500
million, will grow at a compounded annual growth rate of 35% from 1998 to 2003.
The TFI monitored actual rate of growth for those companies were 42% between
1998 and 1999. In addition, we believe that electronics manufacturing services
companies who focus on the Internet infrastructure, wireless communications and
optical networking markets will experience a higher rate of growth than the
industry average. Established original equipment manufacturers in these markets
are increasingly outsourcing a broadening array of complex design and
manufacturing functions to electronics manufacturing service providers. In
addition, emerging companies in these markets typically maintain little or no
internal manufacturing capability, relying instead from their inception on the
manufacturing resources of their sophisticated electronics manufacturing
services providers.

3
<PAGE> 6

THE MCMS SOLUTION

The strength of our customer relationships has been built by our ability to
consistently provide our customers with:

Advanced Engineering Capabilities. We have developed advanced technical
capabilities that enable us to support the complex manufacturing requirements of
our existing customer base and to attract new customers. We support and develop
these advanced technical capabilities with our staff of over 360 engineers and
technicians and a patent portfolio consisting of 43 patents and 22 patent
applications.

Expertise in Internet Infrastructure, Wireless Communications and Optical
Networking Markets. We believe that our experience and our early entry into the
Internet infrastructure, wireless communications and optical networking markets
makes us one of the few electronics manufacturing services providers capable of
offering original equipment manufacturers advanced wireless and optical design
and manufacturing services.

Memory Module Expertise. We have been a leading provider of memory modules
since 1984 and we are one of a limited number of electronics manufacturing
services providers with significant memory module design, assembly and test
capabilities.

A Broad Range of Advanced Manufacturing and Fulfillment Services. Our
ability to deliver a comprehensive manufacturing solution from design through
end-order fulfillment and after-sales support reduces our customers' time to
market and time to volume.

Global Scale and Infrastructure. Our global presence allows us to shift
manufacturing resources to the areas where our customers and their end-markets
are located, reduce the time and cost required to bring our customers' products
to market and simultaneously introduce our customers' products in major global
markets. All of our locations utilize the same or functionally similar assembly
and test equipment, information systems and quality procedures, which allow for
a smooth transfer of production from one facility to another.

OUR STRATEGY

Our objective is to be a leading global provider of advanced electronics
manufacturing services to a diverse group of leading and emerging original
equipment manufacturers operating in the data communications, telecommunications
and computer/memory module industries. To achieve this objective, we intend to
continue to pursue the following strategies:

- target long-term relationships with original equipment manufacturers in
high growth markets;

- provide a comprehensive set of advanced flexible manufacturing services;

- maintain our position as a manufacturing technology leader;

- provide advanced supply chain management; and

- expand our global presence.

------------------------

Until September 2000, our company was incorporated in Idaho. In September
2000, we merged with a wholly-owned Delaware subsidiary, effectively becoming a
Delaware corporation as further discussed in the section entitled "The
Reclassification." We maintain our principal executive offices at 83 Great Oaks
Boulevard, San Jose, California 95119. Our telephone number is (408) 284-3500.
Our web site is www.mcms.com. This reference to our website is not an active
hyperlink. The information contained in our website is not incorporated by
reference into this prospectus and does not constitute part of this prospectus.

4
<PAGE> 7

THE OFFERING

Class A common stock offered by
MCMS.................................. shares

Common stock to be outstanding after
this offering......................... shares Class A common stock
1,480,588 shares Class B common
stock*

Use of proceeds....................... We intend to use substantially all of
the net proceeds from this offering
to redeem our outstanding redeemable
preferred stock and pay down our
senior credit facility.

Proposed Nasdaq National Market
symbol................................ "MCMS"
------------
* Holders of our Class B common stock are entitled to the same rights,
privileges, benefits and notices as the holders of Class A common stock,
except that they are not entitled to vote, other than as required by law.

------------------------

The number of shares of Class A common stock that will be outstanding after
the offering is based on the number of shares outstanding as of October 31,
2000. This number excludes:

- 2,486,625 shares of Class A common stock issuable upon exercise of stock
options outstanding as of October 31, 2000, with a weighted average
exercise price of $3.68 per share;

- 451,562 additional shares of Class A common stock reserved for issuance
under our option plans; and

- 500,000 shares of common stock issuable upon exercise of warrants at an
exercise price of $.001.

------------------------

Please also note that, except where otherwise indicated:

- MCMS' fiscal year ends on the Thursday closest to August 31 and fiscal
years are identified in this prospectus according to the calendar year in
which they end;

- the information in this prospectus assumes no exercise of the
underwriters' over-allotment option; and

- the information in this prospectus gives effect to our reincorporation in
Delaware and the reclassification of all classes and series of our
capital stock into two classes of common stock, which is discussed in
greater detail elsewhere in this prospectus.

5
<PAGE> 8

SUMMARY FINANCIAL DATA

You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes thereto included
elsewhere in this prospectus. As adjusted information is provided for the
balance sheet data as of August 31, 2000 to reflect the application of the net
proceeds from the sale of the shares of Class A common stock
offered by MCMS after deducting estimated offering expenses, underwriting
discounts and commissions.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------
SEPTEMBER 3, SEPTEMBER 2, AUGUST 31,
1998 1999 2000
------------- ------------- ----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 333,920 $ 432,715 $472,448
Cost of goods sold.......................................... 303,251 407,354 449,957
--------- --------- --------
Gross profit................................................ 30,669 25,361 22,491
Selling, general and administrative expenses................ 15,798 22,491 23,940
--------- --------- --------
Income (loss) from operations............................... 14,871 2,870 (1,449)
Interest expense (income), net.............................. 9,212 19,652 22,038
Income tax provision (benefit).............................. (930) (3,497) 163
--------- --------- --------
Net loss.................................................... (1,809) (13,947) (23,650)
========= ========= ========
Net loss to common stockholders(1).......................... $ (3,459) $ (17,539) $(27,679)
========= ========= ========
Net loss to common stockholders per share before
extraordinary item -- basic and diluted(1)................ $ (1.36) $ (3.38) $ (5.49)
========= ========= ========
Weighted average common shares outstanding -- basic and
diluted................................................... 2,534,183 5,008,598 5,041,001

OTHER FINANCIAL DATA:
EBITDA(2)................................................... $ 27,263 $ 17,943 $ 15,522
Adjusted EBITDA(2).......................................... 27,463 19,420 17,410
Cash flow provided by (used in)
Operating activities...................................... 1,363 (11,004) (822)
Investing activities...................................... (19,752) (17,085) (7,900)
Financing activities...................................... 12,508 20,502 8,630
Capital expenditures........................................ 20,111 17,111 7,973
Depreciation and amortization(3)............................ 12,392 15,073 16,971
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------
DECEMBER 2, MARCH 2, JUNE 1, AUGUST 31,
1999 2000 2000 2000 TOTAL
----------- -------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
QUARTERLY FINANCIAL DATA:
Net sales................................... $100,016 $99,055 $113,474 $159,903 $472,448
Gross profit................................ 6,104 3,062 5,379 7,946 22,491
EBITDA(2)................................... 4,485 640 4,010 6,387 15,522
Adjusted EBITDA(2).......................... $ 5,064 $ 985 $ 4,245 $ 7,116 $ 17,410
</TABLE>

6
<PAGE> 9

<TABLE>
<CAPTION>
AS OF AUGUST 31, 2000
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED(4)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ --
Working capital............................................. 30,085
Total assets................................................ 217,502
Long term debt, net of current portion...................... 217,176
Redeemable preferred stock.................................. 33,295
Total stockholders' deficit................................. (158,114)
</TABLE>

------------

(1)After giving pro forma effect to the sale of shares of Class A common
stock in this offering and the receipt and use of proceeds as if they had
occurred on August 31, 2000, our fiscal 2000 interest expense and net loss
would have decreased by and our net loss per share to common
stockholders would have reduced by .

(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because we believe it is frequently used
by investors in the evaluation of companies. Adjusted EBITDA is defined as
EBITDA adjusted for management fees and other charges described in the
following table. Neither EBITDA nor adjusted EBITDA should be considered as
an alternative to cash flow from operating activities, as a measure of
liquidity or as an alternative to net income as a measure of operating
results in accordance with United States GAAP. Our definition of adjusted
EBITDA may differ from definitions of adjusted EBITDA used by other
companies.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------------
SEPTEMBER 3, SEPTEMBER 2, AUGUST 31,
1998 1999 2000
-------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
EBITDA............................................... $ 27,263 $ 17,943 $ 15,522
Infrequent management expenses(a).................... 231 395 510
Consulting/management fees(b)........................ 125 263 393
Non-capitalized ERP expenses(c)...................... -- 272 113
Non-cash foreign exchange (gain)/loss................ (156) 547 365
Non-recurring charge(d).............................. -- -- 507
-------- -------- --------
Total adjustments.................................. 200 1,477 1,888
-------- -------- --------
Adjusted EBITDA...................................... $ 27,463 $ 19,420 $ 17,410
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
DECEMBER 2, MARCH 2, JUNE 1, AUGUST 31,
1999 2000 2000 2000 TOTAL
----------- -------- ------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA................................. $4,485 $ 640 $4,010 $6,387 $15,522
Infrequent management expenses(a)...... 290 109 92 19 510
Consulting/management fees(b).......... 123 146 62 62 393
Non-capitalized ERP expenses(c)........ 76 25 12 -- 113
Non-cash foreign exchange loss......... 90 65 69 141 365
Non-recurring charge(d)................ -- -- -- 507 507
------ ------ ------ ------ -------
Total adjustments.................... 579 345 235 729 1,888
------ ------ ------ ------ -------
Adjusted EBITDA........................ $5,064 $ 985 $4,245 7,116 $17,410
====== ====== ====== ====== =======
</TABLE>

--------------------
(a) Includes recruiting fees and severance costs incurred for several of
our senior managers.

(b) Includes fees incurred for the use of outside consultants as well as
the management fees paid to Cornerstone Equity Investors.

(d)Non-recurring charge incurred in connection with our disengagement
with Fore Systems.

(3) In the fiscal years ended September 3, 1998, September 2, 1999, and August
31, 2000 depreciation and amortization excludes $526,000, $943,000 and
$954,000, respectively, of deferred loan cost amortization that was included
in interest expense.

(4) As adjusted data reflects the sale of the shares of Class A common
stock in this offering and the receipt and use of the proceeds, after
deducting underwriting fees and estimated offering expenses.

7
<PAGE> 10

RISK FACTORS

You should carefully consider the risks described below before making a
decision to buy our shares. If any of the following risks actually occur, our
business could be harmed. In that event, the trading price of our shares might
decline, and you could lose all or part of your investment. You should also
refer to the other information set forth in this prospectus, including our
consolidated financial statements and related notes.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

ADVERSE CHANGES IN THE INDUSTRIES WE SERVE, INCLUDING REDUCED DEMAND FOR OUR
SERVICES, WOULD LIKELY CAUSE OUR NET SALES AND PROFITABILITY TO DECLINE.

Our business depends on the data communications, telecommunications and
computer/memory module industries, which are characterized by intense
competition, relatively short product life-cycles and significant fluctuations
in product demand. In addition, these industries are generally subject to rapid
technological change and product obsolescence. If any of these factors or other
factors reduce demand for our manufacturing services, our net sales and
profitability would likely be negatively affected. Furthermore, these industries
are subject to economic cycles and have in the past experienced, and are likely
in the future to experience, recessionary periods. A recession or any other
event leading to excess capacity or a downturn in the markets we serve would
likely cause our net sales and profitability to decline.

A SMALL NUMBER OF MAJOR CUSTOMERS ACCOUNTS FOR MOST OF OUR NET SALES, AND THE
LOSS OF ANY OF THESE CUSTOMERS WOULD CAUSE OUR NET SALES AND PROFITABILITY TO
DECLINE.

We depend on a relatively small number of customers for a significant
portion of our net sales. Our two largest customers in fiscal year 2000 were
Cisco Systems, which represented approximately 40.8% of our net sales, and
Extreme Networks, which represented approximately 12.1% of our net sales. In
addition, our five largest customers in fiscal 2000 accounted for approximately
73.4% of our net sales. We expect to continue to depend upon a relatively small
number of customers for a significant percentage of our net sales.

Our major customers may not continue to purchase products and services from
us at current levels or at all. In the past we have lost and in the future we
could lose customers for a variety of reasons, including the acquisition of our
customers by third parties, product discontinuation and customers' shifting of
production to internal facilities or to our competitors. We may not be able to
expand our customer base to make up any sales shortfalls if we lose one or more
of our major customers. Our attempts to diversify our customer base and reduce
our reliance on particular customers may not be successful. If we lose one or
more of our major customers and are unable to adequately expand our customer
base to make up the resulting sales shortfalls, our net sales and profitability
would likely decline.

One of our major customers has notified us of its preference to limit the
percentage of our business that its orders may constitute. If we are unable to
expand and diversify our customer base, this customer or other major customers
may reduce the amount of products and services that they currently purchase from
us which could cause our net sales and profitability to decline.

WE ANTICIPATE THAT OUR NET SALES AND OPERATING RESULTS WILL FLUCTUATE, WHICH
COULD AFFECT THE PRICE OF OUR COMMON STOCK.

Our net sales and operating results have fluctuated and may continue to
fluctuate significantly from quarter to quarter. We generally receive purchase
orders from customers for products to be shipped during the ensuing 60 to 90
days. Accordingly, our net sales in any given quarter depend on obtaining and
fulfilling orders for assemblies to be manufactured and shipped in the same
quarter in which those orders are received. Further, our level of net sales in a
given quarter may depend on assemblies configured, completed, packaged

8
<PAGE> 11

and shipped in the final weeks of such quarter. Our operating results may
fluctuate in the future as a result of many factors, including:

- variations in customer orders relative to our manufacturing capacity;

- variations in the timing of shipment of products to customers;

- introduction and market acceptance of our customers' new products;

- changes in competitive and economic conditions generally or in our
customers' markets;

- effectiveness of our manufacturing processes, including controlling
costs;

- changes in cost and availability of components or skilled labor;

- the timing and price we pay for acquisitions and related acquisition
costs; and

- start-up costs associated with the launching of new customer programs or
operations.

We base our operating expenses on anticipated revenue levels and a high
percentage of our operating expenses are relatively fixed in the short term. As
a result, any unanticipated shortfall in revenue in a quarter would likely
adversely affect our operating results for that quarter. Also, changes in our
product assembly mix may cause our margins to fluctuate which could negatively
impact our results of operations for that period. Our results in any period
should not be considered indicative of the results to be expected in any future
period. It is possible that in one or more future periods our results of
operations will fail to meet the expectations of securities analysts or
investors, and the price of our common stock could decline significantly.

OUR AGREEMENTS WITH OUR CUSTOMERS ARE GENERALLY SHORT-TERM PURCHASE ORDERS, AND
CANCELLATIONS, REDUCTIONS OR DELAYS IN CUSTOMER ORDERS WOULD ADVERSELY AFFECT
OUR NET SALES AND PROFITABILITY.

We generally obtain only short-term purchase orders or commitments from our
customers, rather than long-term contracts. We work closely with our customers
to develop forecasts for future orders, but these forecasts are not binding.
Customers may cancel their orders, change production quantities from forecast
volumes or delay production for a number of reasons which are beyond our
control, including their internal operating and liquidity concerns. Any
significant delay, cancellation or reduction of orders from our customers could
cause our net sales to decline significantly. Because many of our costs and
operating expenses are relatively fixed, a reduction in customer demand could
also decrease our profitability. Moreover, the cancellation of purchase orders
by customers or inaccurate customer forecasts could result in excess and
obsolete inventory. We seek to hold customers responsible for actions on their
part that result in excess and obsolete inventory. If we are unable to get our
customers to pay for excess and obsolete inventory, or if we are otherwise
unable to dispose of, make use of, or return this inventory, there could be an
adverse effect on our business, financial condition and results of operations.

WE HAVE A RECENT HISTORY OF NET LOSSES AND MAY EXPERIENCE FURTHER LOSSES IN THE
FUTURE.

We have consistently experienced net losses since the second quarter of
fiscal 1998. We reported a net loss to common stockholders for fiscal year 2000
of $27.7 million, for fiscal year 1999 of $17.5 million and for fiscal year 1998
of $3.5 million. Due to our significant leverage and other factors, we may
experience further net losses in the future. Although we intend to reduce our
leverage using the net proceeds of this offering, we cannot predict whether,
when or to what extent we will become consistently profitable.

SHORTAGES OR PRICE FLUCTUATIONS IN COMPONENT PARTS SPECIFIED BY OUR CUSTOMERS
COULD DELAY PRODUCT SHIPMENTS AND REDUCE OUR PROFITABILITY.

Many of the products we manufacture include components that are only
available from a single supplier. Supply shortages for a particular component
can delay production of all products using that component or cause cost
increases in the services we provide. In the past, we have experienced, and we
are currently experiencing, industry-wide shortages in some of the materials we
use, such as capacitors, memory components, logic devices and enclosures. As a
result, our suppliers have been forced to allocate available
9
<PAGE> 12

quantities among their customers and we have not been able to obtain all of the
materials desired in a timely fashion. Our inability to obtain these needed
materials has in some instances slowed production or assembly, and therefore
delayed shipments to our customers, increased inventory levels, increased costs
and reduced profitability. We may also bear the risk of periodic component price
increases which could increase our costs and reduce our profitability.

In addition, if we fail to manage our inventory effectively, we may be
subject to fluctuations in materials costs, scrap and excess and obsolete
inventory, which could increase our overall costs and reduce profitability. We
are required to forecast our future inventory needs based upon the anticipated
demand of our customers. If we are unable to accurately forecast this demand, we
may experience a shortage or an excess of materials. A shortage of materials
could lengthen production schedules and increase costs, while an excess of
materials may increase the costs of maintaining inventory, adversely impact our
liquidity, and increase the risk of inventory obsolescence.

INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND OR PRICES FOR OUR SERVICES.

The electronics manufacturing services industry is highly competitive and
characterized by low profit margins. We compete against numerous electronics
manufacturing service providers with global operations. In addition, current and
prospective customers could evaluate the merits of manufacturing products
internally. Consolidation in the electronics manufacturing services industry
results in a continually changing competitive landscape. The consolidation trend
in the industry also results in larger and more geographically diverse
competitors who have significant combined resources with which to compete
against us. Some of our competitors are less financially leveraged than we are
and have substantially greater managerial, manufacturing, engineering,
technical, financial, systems, sales and marketing resources than we do. These
competitors may:

- have greater name recognition and geographic and market presence;

- be better able to take advantage of acquisition opportunities;

- adapt more quickly to changes in customer requirements;

- devote greater resources to the development, promotion and sale of their
services; and

- have broader service offerings.

We also may be operating at a cost disadvantage as compared to competitors
who have greater direct buying power or who have lower cost structures.
Increased competition from existing or potential competitors could result in
price reductions, reduced profitability or loss of market share.

IF WE ARE UNABLE TO RESPOND TO RAPIDLY CHANGING TECHNOLOGIES AND PROCESS
DEVELOPMENTS, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.

The markets for our products and services are characterized by rapidly
changing technologies and continuing process developments. Our success will
depend in large part upon our ability to maintain and enhance our technological
capabilities, to develop and market products and services that meet changing
customer needs and to successfully anticipate or respond to technological
changes on a cost-effective and timely basis. Our core technologies may
encounter competition from new or revised technologies that render existing
technology less competitive or obsolete or that reduce the demand for our
services. We may be unable to respond effectively to the technological
requirements of the changing market. If we determine that new technologies and
equipment are required to remain competitive, the development, acquisition and
implementation of these technologies may require us to make significant capital
investments. We may not be able to obtain capital for these purposes in the
future, and our investments in new technologies may not result in commercially
viable technological processes. If we are unable to successfully respond to
these changing technologies and process developments, our net sales and
profitability could be adversely affected.

10
<PAGE> 13

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO SUPPORT
OUR FUTURE GROWTH.

We expect to continue to have increasing working capital and capital
expenditure requirements to expand our operations and remain competitive in the
rapidly changing electronics manufacturing services industry. Our future success
may depend on our ability to obtain additional financing to support our future
growth, if any. We may not be able to obtain additional financing when we want
or need it, and it may not be available on satisfactory terms. If we issue
additional equity securities or convertible debt to raise capital, it may be
dilutive to your ownership interest. In addition, any additional capital may
have terms and conditions that adversely affect our business, such as financial
or operating covenants.

IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, OUR BUSINESS MAY SUFFER.

Our future success largely depends on the skills and efforts of our
executive management and our engineering, program management, procurement,
manufacturing and sales employees. Our continued growth will also require us to
attract, motivate, train and retain additional skilled and experienced
personnel. We face intense competition for such personnel. We may not be able to
attract, motivate and retain personnel with the skills and experience needed to
successfully manage our business and operations.

OUR FOREIGN OPERATIONS EXPOSE US TO POLITICAL, ECONOMIC AND LOGISTICAL
UNCERTAINTIES.

We currently have foreign operations in Malaysia, Mexico and Belgium. We
may in the future expand into other international regions. We also purchase a
significant number of components manufactured in foreign countries. Because of
the scope of our international operations, we are subject to the following
uncertainties:

- economic or political instability;

- transportation delays and interruptions;

- foreign currency exchange rate fluctuations;

- increased employee turnover and labor unrest;

- longer payment cycles;

- greater difficulty in collecting accounts receivable;

- difficulties in staffing and managing foreign personnel and diverse
cultures; and

- less developed infrastructures.

In addition, changes in policies by the United States or foreign
governments could negatively affect our operating results due to increased
duties, increased regulatory requirements, higher taxation, currency conversion
limitations, restrictions on the transfer of funds, the imposition of or
increase in tariffs and limitations on imports or exports. Also, we could be
negatively affected if our host countries revise their policies away from
encouraging foreign investment or foreign trade, including tax holidays.

IF WE ARE UNABLE TO MANAGE OUR EXPANSION, OUR BUSINESS COULD BE DISRUPTED AND
OUR NET SALES AND PROFITABILITY COULD DECREASE.

Since 1996, we have completed one acquisition and commenced operations at
three new facilities. Our growth has placed and will continue to place a
significant strain on our management, financial resources and information,
operations and financial systems.

As part of our business strategy, we expect to continue to expand our
operations through the opening of new facilities, expanding existing facilities
and by selectively making acquisitions. Competition for attractive

11
<PAGE> 14

manufacturing operations in our industry is substantial. Expanding our
operations involves numerous risks, including:

- difficulty in integrating operations, technologies, systems, and products
and services of acquired companies;

- diversion of management's attention;

- disruption of operations; and

- failure to effectively enter markets in which we have limited or no prior
experience and where competitors in such markets have stronger market
positions.

Acquisitions may have an adverse financial impact on our business as a
result of various factors, including:

- the potential liabilities of the acquired businesses;

- increases in expenses and working capital requirements;

- the dilutive effect of the issuance of additional equity securities;

- the financial impact of transaction expenses; and

- the amortization of goodwill and other intangible assets involved in any
transactions that are accounted for using the purchase method of
accounting, and possible adverse tax and accounting effects.

We may not be able to identify suitable acquisition candidates or finance
and complete transactions that we select.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH WOULD NEGATIVELY
AFFECT OUR ABILITY TO COMPETE.

We believe that the protection of our intellectual property rights is, and
will continue to be, important to the success of our business. We rely on a
combination of patent, trademark and trade secret laws and restrictions on
disclosure to protect our intellectual property rights. Despite these
protections, unauthorized parties may attempt to copy or otherwise obtain and
use our proprietary technology. We cannot be certain that patents we have or
that may be issued as a result of our pending patent applications will protect
or benefit us or give us adequate protection from competing technologies. We
also cannot be certain that others will not develop our unpatented proprietary
technology or effective competing technologies on their own. We believe that our
proprietary technology does not infringe on the proprietary rights of others.
However, if others assert valid infringement claims against us with respect to
our past, current or future designs or processes, we could be required to enter
into cross-licensing agreements or expensive royalty arrangements, indemnify
third parties, develop non-infringing technologies or engage in costly
litigation.

WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL AND WORKPLACE HEALTH AND SAFETY
LAWS, WHICH EXPOSE US TO POTENTIAL FINANCIAL LIABILITY.

Our operations are regulated under a number of federal, state, provincial,
local and foreign environmental and workplace health and safety laws and
regulations, which govern, among other things, the discharge of hazardous
materials into the air, ground and water as well as the handling, storage and
disposal of these materials. Compliance with these laws is an important
consideration for us because we do use hazardous materials in our manufacturing
processes. We may be liable under environmental laws for the cost of cleaning up
properties we own or operate if they are or become contaminated by the release
of hazardous materials, regardless of whether we caused the release. Even if we
fully comply with applicable environmental laws, we, along with any other person
who arranges for the disposal of our wastes, may be liable for costs associated
with an investigation and remediation of sites at which we have arranged for the
disposal of hazardous wastes if the sites become contaminated. In addition, we
may be liable in the event employees and/or visitors are exposed to hazardous
materials in excess of legally permissible exposure limits. In the event of a

12
<PAGE> 15

contamination or a violation of environmental and workplace health and safety
laws, we could be held liable for damages, including fines, penalties and the
costs of remedial actions, and could also be subject to revocation of our
discharge permits. Any revocations could require us to cease or limit production
at one or more of our facilities, thereby negatively affecting our operations.
Environmental and workplace health and safety laws could also become more
stringent over time, imposing greater compliance costs and increasing risks and
penalties associated with any violation.

RISKS RELATED TO OUR CAPITAL STRUCTURE

WE EXPECT TO USE SUBSTANTIALLY ALL OF THE NET PROCEEDS OF THIS OFFERING TO REPAY
INDEBTEDNESS AND, AS A RESULT, WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL AND
LIQUIDITY REQUIREMENTS.

We expect to use substantially all of the net proceeds of this offering to
repay indebtedness and redeem our preferred stock. We expect that our principal
sources of funds following this offering will be cash generated from operating
activities and borrowings under our senior credit facility. As adjusted for this
offering and our application of the proceeds, at August 31, 2000, we would have
had approximately $ million available to borrow under our senior credit
facility. These funds may not provide us with sufficient liquidity and capital
resources to meet future financial needs. We may require additional equity or
debt financing to meet our working capital and capital expenditure requirements
or to finance acquisitions. We may be unable to obtain additional financing when
required or, if available, on terms satisfactory to us.

OUR CURRENT AND FUTURE INDEBTEDNESS COULD SEVERELY LIMIT OUR ABILITY TO PLAN FOR
OR RESPOND TO CHANGES IN OUR BUSINESS.

We are highly leveraged and plan to continue to incur indebtedness from
time to time to finance acquisitions, working capital or capital expenditures or
for other purposes. This debt has contributed to our shareholders' deficit which
we expect will continue to exist following this offering and which could have
adverse consequences for our business, including:

- we may be more vulnerable to adverse general economic conditions;

- we will be required to dedicate a substantial portion of our cash flow
from operations to repayment of debt, limiting the availability of cash
for other purposes;

- we may have limited flexibility in planning for, or reacting to, changes
in our business and industry;

- we could be limited by financial and other restrictive covenants in our
credit arrangements in borrowing additional funds; and

- we may fail to comply with the covenants under which we borrowed our
indebtedness which could result in an event of default. If an event of
default occurs and is not cured or waived, it could result in all amounts
outstanding, together with accrued interest, becoming immediately due and
payable. If we were unable to repay such amounts, the lenders could
proceed against any collateral granted to them to secure that
indebtedness.

Our ability to pay principal and interest on our indebtedness, to meet our
financial and restrictive covenants and to satisfy our other debt obligations
will depend upon our future operating performance, which will be affected by
prevailing economic conditions that are beyond our control, as well as the
availability of revolving credit borrowings under our senior credit facility or
successor facilities. If cash flows from operating activities and availability
under our senior credit facility are not sufficient to meet these obligations,
we may require additional equity or debt financing. There can be no assurance
that additional financing will be available on satisfactory terms when required.

THE TERMS OF OUR INDEBTEDNESS AGREEMENTS SIGNIFICANTLY RESTRICT OUR OPERATIONS.

The terms of our current indebtedness agreements restrict, among other
things, our ability to incur additional indebtedness, pay dividends or make
other restricted payments, consummate asset sales, enter into

13
<PAGE> 16

transactions with affiliates, merge, consolidate or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our assets. We
are also required to maintain specified financial ratios and satisfy financial
condition tests, which further restrict our ability to operate as we choose.
Substantially all our assets and those of our subsidiaries are pledged as
security under our senior credit facility. Please see "Description of
Indebtedness."

CORNERSTONE EQUITY INVESTORS WILL CONTINUE TO HAVE SIGNIFICANT INFLUENCE OVER
OUR BUSINESS AFTER THIS OFFERING, AND COULD DELAY, DETER OR PREVENT A CHANGE OF
CONTROL OR OTHER BUSINESS COMBINATION.

Upon completion of this offering, an investment fund affiliated with
Cornerstone Equity Investors will hold approximately % of our total
outstanding common stock and approximately % of our Class A common stock.
Following this offering, pursuant to a shareholders agreement, three of our
seven directors will be representatives of Cornerstone Equity Investors.
Following completion of this offering, we expect to appoint at least one
additional independent director. By virtue of such stock ownership and board
representation, Cornerstone Equity Investors will continue to have a significant
influence over all matters submitted to our stockholders, including the election
of our directors, and to exercise significant control over our business,
policies and affairs. Such concentration of voting power could have the effect
of delaying, deterring or preventing a change of control or other business
combination that might otherwise be beneficial to our stockholders. Please see
"Related Party Transactions."

RISKS RELATING TO THIS OFFERING

THE INITIAL PUBLIC OFFERING PRICE IS SIGNIFICANTLY HIGHER THAN THE BOOK VALUE OF
OUR COMMON STOCK, AND YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN
THE BOOK VALUE OF YOUR INVESTMENT.

Prior investors paid a lower per share price than the price in this
offering. The initial public offering price is substantially higher than the net
book value per share of our outstanding common stock immediately after this
offering. Accordingly, if you purchase common stock in this offering, you will
incur immediate and substantial dilution of $ per share. In addition, we
have issued options and warrants to acquire common stock at prices significantly
below the initial public offering price. To the extent these outstanding options
or warrants are exercised, there will be further dilution to investors in this
offering. Please see "Dilution."

FUTURE SALES OF OUR COMMON STOCK, INCLUDING THE SHARES PURCHASED IN THIS
OFFERING, MAY DEPRESS OUR STOCK PRICE.

Sales of a substantial number of shares of our common stock in the public
market by our shareholders after this offering, or the perception that such
sales are likely to occur, could depress the market price of our common stock
and could impair our ability to raise capital through the sale of additional
equity securities. Based on shares outstanding as of October 31, 2000, upon
completion of this offering we will have outstanding shares of common
stock, assuming no exercise of the underwriters' over-allotment option. Of these
shares, the shares of common stock sold in this offering and shares
held by existing shareholders will be freely tradable, without restriction, in
the public market. After the lockup agreements pertaining to this offering
expire 180 days from the date of this prospectus, an additional million
shares will be eligible for sale in the public market. In addition, million
of the shares subject to outstanding options will be exercisable, and if
exercised, available for sale 90 days after the date of this prospectus. Please
see "Shares Eligible for Future Sale."

AN ACTIVE MARKET FOR OUR SHARES MAY NOT DEVELOP, AND YOU MAY BE UNABLE TO SELL
THE SHARES YOU PURCHASE.

Prior to this offering, there has been no public market for our shares. We
cannot assure you that an active trading market for our shares will develop or
be sustained after this offering. The initial public offering price for our
shares will be determined by negotiations between the underwriters and us. We
cannot assure you that the initial public offering price will correspond to the
price at which our shares will trade in the

14
<PAGE> 17

public market subsequent to the offering or that the price of our shares
available in the public market will reflect our actual financial performance.

OUR SHARE PRICE COULD BE VOLATILE AND COULD DROP UNEXPECTEDLY FOLLOWING THIS
OFFERING, POSSIBLY SUBJECTING US TO SECURITIES LITIGATION.

Historically, stock prices and trading volumes for newly public companies
fluctuate widely for a number of reasons, including some reasons that may be
unrelated to their businesses or results of operations. This type of market
volatility could depress the price of our shares without regard to our operating
performance. In addition, our operating results may be below the expectations of
public market analysts or investors. If this were to occur, the market price of
our shares could decrease, perhaps significantly.

In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. Many companies have been subject to this type
of litigation. We may also become involved in this type of litigation.
Litigation is often expensive and diverts management's attention and resources.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
UNSOLICITED TAKEOVER EFFORT TO ACQUIRE OUR COMPANY, WHICH COULD INHIBIT YOUR
ABILITY TO RECEIVE AN ACQUISITION PREMIUM FOR YOUR SHARES.

Provisions in our charter, by-laws and provisions under Delaware law may
have the effect of delaying or preventing a change of control or changes in our
management that stockholders consider favorable or beneficial. If a change of
control or change in management is delayed or prevented, the market price of our
shares could suffer. Please see "Description of Capital Stock."

15
<PAGE> 18

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately
$ million, or approximately $ million if the underwriters exercise their
over-allotment option in full, based on an assumed public offering price of
$ per share and after deducting our estimated underwriting and offering
expenses.

We intend to use approximately $ million of the net proceeds from this
offering to redeem all of our outstanding redeemable preferred stock and
approximately $ million to pay down our senior credit facility. The
senior credit facility had an outstanding balance of approximately $85.8 million
on October 30, 2000. Borrowings under the facility mature in 2004, and as of
October 31, 2000 bore interest at an average rate of 11.56% per annum. Some of
the borrowings under our senior credit facility were used to repay existing
indebtedness. Please see "Related Party Transactions." Pending use of the net
proceeds of this offering, we intend to invest the net proceeds in short-term,
investment bearing, investment grade marketable securities.

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. We have
paid quarterly stock dividends on our redeemable preferred stock, which will be
redeemed in full with the proceeds of this offering. We currently expect to
retain future earnings, if any, for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future.

THE RECLASSIFICATION

Until September 2000, our company was incorporated in Idaho. In September
2000, we merged with a newly formed, wholly owned Delaware subsidiary,
effectively becoming a Delaware corporation. In connection with the merger, each
share of each class of capital stock of MCMS Idaho became one share of capital
stock of MCMS Delaware of the same class or series. As a result of this merger,
stockholders of MCMS Idaho became stockholders of MCMS Delaware. Immediately
prior to this offering, we will amend our certificate of incorporation to make
the following changes to our capital stock:

- each share of Class C common stock will become one share of Class A
common stock;

- each share of Series A convertible preferred stock will become one share
of Class A common stock;

- each share of Series B convertible preferred stock will become one share
of Class B common stock; and

- each share of Series C convertible preferred stock will become one share
of Class A common stock.

The foregoing is referred to throughout this prospectus as the
reclassification.

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<PAGE> 19

CAPITALIZATION

The following table sets forth our capitalization as of August 31, 2000 (i)
on an actual basis and (ii) on a pro forma as adjusted basis to reflect the
reclassification and to give effect to the receipt by us of the estimated net
proceeds from the sale of shares of Class A common stock in this
offering at an assumed initial public offering price of $ per share and
the application of the net proceeds of this offering described under "Use of
Proceeds."

The outstanding share information in the table excludes, as of August 31,
2000, 1,968,625 shares of Class A common stock subject to outstanding stock
options under our 1998 Stock Option Plan.

<TABLE>
<CAPTION>
AS OF AUGUST 31, 2000
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -------------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
Long-term debt (including current portion):
Senior credit facility:
Revolving credit facility.............................. $ 12,445
Equipment loan facility................................ 5,230
Shareholder loans......................................... 23,326
Other..................................................... 1,175
Floating interest rate subordinated term securities....... 30,000
Senior subordinated notes................................. 145,000
--------- --------
Total debt.................................................. 217,176
Redeemable preferred stock, no par value, 750,000 shares
authorized; 340,619 shares issued and outstanding on an
actual basis; 0 shares issued and outstanding on an as
adjusted basis; mandatory redemption value of $34.1
million on an actual basis; $0 on an as adjusted basis.... 33,295
Shareholders' deficit:
Series A convertible preferred stock, par value $0.001 per
share, 6,000,000 shares authorized; 3,261,177 shares
issued and outstanding on an actual basis; aggregate
liquidation preference of $36,949,135; 0 shares
outstanding on an as adjusted basis.................... 3 --
Series B convertible preferred stock, par value $0.001 per
share, 6,000,000 shares authorized; 863,823 shares
issued and outstanding on an actual basis; aggregate
liquidation preference of $9,787,115; 0 shares
outstanding on an as adjusted basis.................... 1 --
Series C convertible preferred stock, par value $0.001 per
share, 1,000,000 shares authorized; 874,999 shares
issued and outstanding on an actual basis; aggregate
liquidation preference of $9,913,739; 0 shares
outstanding on an as adjusted basis.................... 1 --
Class A common stock, par value $0.001 per share,
30,000,000 shares authorized; 3,322,990 shares issued
and outstanding on an actual basis; shares
issued and outstanding on an as adjusted basis......... 3
Class B common stock, par value $0.001 per share,
12,000,000 shares authorized, 863,823 shares issued and
outstanding on an actual basis; shares issued
and outstanding on an as adjusted basis................ 1
Class C common stock, par value $0.001 per share,
2,000,000 shares authorized; 874,999 shares issued and
outstanding on an actual basis; 0 shares outstanding on
an as adjusted basis................................... 1 --
Additional paid-in capital, net of treasury stock......... 56,159
Accumulated deficit, including other comprehensive loss... (214,283)
--------- --------
Total shareholders' deficit................................. (158,114)
--------
Total capitalization........................................ $ 92,357
========= --------
</TABLE>

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<PAGE> 20

DILUTION

Our pro forma net tangible book value as of August 31, 2000 was
approximately a $158 million deficiency or a $15.71 deficiency per share of
common stock. Pro forma net tangible book value per share is determined by
dividing the amount of our total tangible assets less total liabilities by the
number of shares of common stock outstanding as of August 31, 2000 on a pro
forma basis including conversion of all of our convertible series A, B and C
preferred stock into shares of common stock. Dilution in net tangible book value
per share represents the difference between the assumed initial public offering
price and the net tangible book value per share of common stock immediately
after the completion of this offering.

After giving effect to the sale of the shares of common stock offered
by us at an assumed initial public offering price of $ per share and after
deducting underwriting discounts and estimated offering expenses, the pro forma
or adjusted net tangible book value at August 31, 2000 would have been $ ,
or approximately $ per share of common stock. This represents an immediate
increase in net tangible book value of $ per share to existing stockholders
and an immediate dilution in net tangible book value of $ per share to new
investors of common stock in this offering. The following table illustrates this
dilution on a per share basis:

<TABLE>
<S> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at August 31,
2000................................................... $
Increase per share attributable to this offering.......... --
Pro forma as adjusted net tangible book value per share
after this offering....................................... --
Dilution per share to new investors......................... $
---
</TABLE>

The table above excludes, as of August 31, 2000, 1,968,625 shares of common
stock subject to outstanding options under our 1998 stock plan and 500,000
shares of common stock issuable upon exercise of warrants. To the extent options
are exercised, there will be further dilution to new investors.

The following table sets forth, on a pro forma as adjusted basis as of
August 31, 2000, the differences between the number of shares of common stock
purchased from us, the total consideration paid and the average price per share
paid by existing stockholders and by new investors, before deducting
underwriting discounts and commissions and estimated offering expenses, at an
assumed initial public offering price of $ per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------------- ------- -------------- ------- -------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 10,062 % $68,140 % $6.77
New investors.....................
--- ---
Total........................ 100% 100%
</TABLE>

If the underwriters' over-allotment option is exercised in full, the
percentage of shares of common stock held by existing stockholders after this
offering would be reduced to approximately % and the number of shares of
common stock held by new investors would increase to or
approximately % of the total number of shares of common stock outstanding
after this offering.

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<PAGE> 21

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated financial statements and related notes and other
financial information appearing elsewhere in this prospectus. The selected
statements of operations data for the fiscal years ended September 3, 1998,
September 2, 1999 and August 31, 2000 and the selected historical consolidated
balance sheet data as of September 2, 1999 and August 31, 2000 were derived from
the consolidated financial statements that were audited by KPMG LLP, independent
accountants, whose report appears elsewhere in this prospectus. The selected
historical statement of operations data for the fiscal years ended August 29,
1996 and August 28, 1997 and the selected historical balance sheet data as of
August 29, 1996, August 28, 1997 and September 3, 1998 were derived from audited
financial statements that are not included in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------
AUG. 29, AUG. 28, SEPT. 3, SEPT. 2, AUG. 31,
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................ $374,116 $292,379 $333,920 $432,715 $472,448
Cost of goods sold............................... 341,110 258,982 303,251 407,354 449,957
-------- -------- -------- -------- --------
Gross profit..................................... 33,006 33,397 30,669 25,361 22,491
Selling, general and administrative expenses..... 9,303 12,560 15,798 22,491 23,940
-------- -------- -------- -------- --------
Income (loss) from operations.................... 23,703 20,837 14,871 2,870 (1,449)
Other expense (income):
Interest expense (income), net................. (482) (380) 9,212 19,652 22,038
Transaction expenses(1)........................ -- -- 8,398 45 --
-------- -------- -------- -------- --------
Income (loss) before taxes and extraordinary
item........................................... 24,185 21,217 (2,739) (16,827) (23,487)
Income tax provision (benefit)................... 9,190 8,465 (930) (3,497) 163
-------- -------- -------- -------- --------
Income (loss) before extraordinary item and
redeemable preferred stock dividends and
accretion of preferred stock discount.......... $ 14,995 $ 12,752 $ (1,809) $(13,330) $(23,650)
======== ======== ======== ======== ========
Net income (loss) to common stockholders(2)...... $ 14,995 $ 12,752 $ (3,459) $(17,539) $(27,679)
======== ======== ======== ======== ========
Net income (loss) to common stockholders per
share before extraordinary item and redeemable
preferred stock dividends and accretion of
preferred stock discount per share -- basic and
diluted........................................ $ 14,995 $ 12,752 $ (0.71) $ (2.66) $ (4.69)
======== ======== ======== ======== ========
Net income (loss) to common stockholders per
share before extraordinary item -- basic and
diluted........................................ $ 14,995 $ 12,752 $ (1.36) $ (3.38) $ (5.49)
======== ======== ======== ======== ========
Net income (loss) to common stockholders per
share -- basic and diluted(2).................. $ 14,995 $ 12,752 $ (1.36) $ (3.50) $ (5.49)
======== ======== ======== ======== ========
Weighted average common shares
outstanding -- basic and diluted(3)............ 1,000 1,000 2,534,183 5,008,598 5,041,001

OTHER FINANCIAL DATA:
EBITDA(4)........................................ $ 29,128 $ 29,656 $ 27,263 $ 17,943 $ 15,522
Adjusted EBITDA(4)............................... 29,128 29,656 27,463 19,420 17,410
Cash flow provided by (used in)
Operating activities........................... 33,620 20,723 1,363 (11,004) (822)
Investing activities........................... (25,643) (23,969) (19,752) (17,085) (7,900)
Financing activities........................... (6,687) 592 12,508 20,502 8,630
Capital expenditures............................. 31,229 24,120 20,111 17,111 7,973
Depreciation and amortization(5)................. 5,425 8,819 12,392 15,073 16,971
</TABLE>

19
<PAGE> 22

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------
DECEMBER 2, MARCH 2, JUNE 1, AUGUST 31,
1999 2000 2000 2000 TOTAL
----------- -------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
QUARTERLY FINANCIAL INFORMATION:
Net sales....................................... $100,016 $99,055 $113,474 $159,903 $472,448
Gross profit.................................... 6,104 3,062 5,379 7,946 22,491
EBITDA(4)....................................... 4,485 640 4,010 6,387 15,522
Adjusted EBITDA(4).............................. 5,064 985 4,245 7,116 17,410
</TABLE>

<TABLE>
<CAPTION>
AS OF
-------------------------------------------------------
AUG. 29, AUG. 28, SEPT. 3, SEPT. 2, AUG. 31,
1996 1997 1998 1999 2000
-------- -------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 16,290 $ 13,636 $ 7,542 $ -- $ --
Working capital, excluding cash and cash
equivalents.................................. 10,065 15,454 21,929 36,403 30,085
Total assets................................... 113,245 124,862 145,052 166,542 217,502
Total debt..................................... -- 1,049 185,157 207,279 217,176
Redeemable preferred stock..................... -- -- 25,675 29,267 33,295
Shareholders' equity (deficit)................. 65,881 78,191 (113,051) (130,497) (158,114)
</TABLE>

------------

(1) Transaction expenses include expenses incurred in conjunction with our
recapitalization, including transaction agreement fees, bank fees, the
termination of employment agreements, the buyback of employee stock options,
and other miscellaneous expenses.

(2)After giving proforma effect of the sale of shares of Class A common
stock in this offering and the receipt and use of proceeds as if they had
occurred on August 31, 2000, our fiscal 2000 interest expense and net loss
would have decreased by and our net loss per share to common
stockholders would have reduced by .

(3)The 1996 and 1997 fiscal year weighted average common share outstanding do
not reflect the shares issued in conjunction with the February 1998
recapitalization and are therefore not comparable to subsequent periods.

(4) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because we believe it is frequently used
by investors in the evaluation of companies. Adjusted EBITDA is defined as
EBITDA adjusted for management fees and other charges described in the
following table. Neither EBITDA nor adjusted EBITDA should be considered as
an alternative to cash flow from operating activities, as a measure of
liquidity or as an alternative to net income as a measure of operating
results in accordance with United States GAAP. Our definition of adjusted
EBITDA may differ from definitions of adjusted EBITDA used by other
companies.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------------------------
AUGUST 29, AUGUST 28, SEPTEMBER 3, SEPTEMBER 2, AUGUST 31,
1996 1997 1998 1999 2000
---------- ---------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA........................ $29,128 $29,656 $27,263 $17,943 $15,522
Infrequent management
expenses(a)................. -- -- 231 395 510
Consulting/management
fees(b)..................... -- -- 125 263 393
Non-capitalized ERP
expenses(c)................. -- -- -- 272 113
Non-cash foreign exchange
(gain)/loss................. -- -- (156) 547 365
Nonrecurring charge(d)........ -- -- -- -- 507
------- ------- ------- ------- -------
Total adjustments........... -- -- 200 1,477 1,888
------- ------- ------- ------- -------
Adjusted EBITDA............... $29,128 $29,656 $27,463 $19,420 $17,410
======= ======= ======= ======= =======
</TABLE>

20
<PAGE> 23

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
DECEMBER 2, MARCH 2, JUNE 1, AUGUST 31,
1999 2000 2000 2000 TOTAL
----------- -------- ------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA.................................. $4,485 $640 $4,010 $6,387 $15,522
Infrequent management expenses(a)....... 290 109 92 19 510
Consulting/management fees(b)........... 123 146 62 62 393
Non-capitalized ERP expenses(c)......... 76 25 12 -- 113
Non-cash foreign exchange (gain)/loss... 90 65 69 141 365
Nonrecurring charge(d).................. -- -- -- 507 507
------ ---- ------ ------ -------
Total adjustments..................... 579 345 235 729 1,888
------ ---- ------ ------ -------
Adjusted EBITDA......................... $5,064 $985 $4,245 $7,116 $17,410
====== ==== ====== ====== =======
</TABLE>

--------------------------
(a) Includes recruiting fees and severance costs incurred for
several of our senior managers.

(b) Includes fees incurred for the use of outside consultants as
well as the management fees paid to Cornerstone Equity
Investors.

(d)Non-recurring charge incurred in connection with our
disengagement with Fore Systems.

(5) In the fiscal years ended September 3, 1998, September 2, 1999 and
August 31, 2000, depreciation and amortization excludes $526,000,
$943,000, and $954,000, respectively, of deferred loan amortization
that was included in interest expense.

21
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this discussion and analysis of financial condition
and results of operations should be read in conjunction with the financial
statements and the notes to those statements included elsewhere in this
prospectus. Statements that are not purely historical are forward-looking
statements. All forward-looking statements are made as of the date hereof and
are based on current management expectations and information available to us as
of such date. We assume no obligation to update any forward-looking statements.
It is important to note that actual results could differ materially from
historical results or those contemplated in the forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, and
include trend information. Factors that could cause actual results to differ
materially include, but are not limited to, those identified herein under "Risk
Factors" and in our filings with the Securities and Exchange Commission.

OVERVIEW

Our principal operations were established in 1984 as the Memory
Applications Group of Micron Technology, Inc. We began providing electronics
manufacturing services to external customers in 1989, were incorporated as a
wholly owned subsidiary of Micron Technology, Inc. in 1992 and became a wholly
owned subsidiary of Micron Electronics, Inc., which is a majority owned
subsidiary of Micron Technology, in 1995. On February 26, 1998, a group of
investors led by an affiliate of Cornerstone Equity Investors acquired a 90%
equity interest in MCMS. Since the acquisition was structured as a
recapitalization with Micron Electronics continuing to hold a 10% equity
interest, our financial statements still reflect our historical basis of
accounting. In connection with the recapitalization, our name was changed from
Micron Custom Manufacturing Services, Inc. to MCMS, Inc.

Since the recapitalization in 1998, we have undertaken a number of
initiatives to grow and expand our business. We have expanded our global
infrastructure to include a significantly larger facility in Penang, Malaysia
and new operations in Monterrey, Mexico and San Jose, California. We have
invested in additional manufacturing and test equipment and upgraded and
enhanced our information systems in part by installing a common technology and
system platform across all of our facilities. We have continued to strengthen
both the management and technical staffs at all levels of the organization and
have aligned our organization into customer-focused teams to enhance customer
satisfaction. We have hired a number of senior management personnel, including
Richard Rowe as our Chief Executive Officer in November 1999 and Tony Nicholls
as our Chief Operating Officer in October 2000.

Our strategic initiatives and customer focus have allowed us to
significantly increase our customer base. During the past fiscal year, we have
been awarded new programs from numerous new customers, including Alidian
Networks, AT&T Wireless, Digital Lightwave, JDS Uniphase and Tachion Networks.
The addition of these new customers reflects our strategy of targeting long-term
relationships with original equipment manufacturers in high growth markets. In
addition, these new customers complement relationships we already have with
industry leading original equipment manufacturers in the data communications,
telecommunications and computer/memory module industries, such as Cisco Systems,
Extreme Networks, Nokia, Alcatel and Micron Technology.

Our revenue growth during fiscal year 2000 was adversely affected by our
disengagement with Fore Systems, a significant customer. Our relationship with
Fore Systems ended in fiscal 2000 as a result of a number of factors, including
a change of control of Fore and Fore's desire to engage with electronics
manufacturing services providers with greater global scale. We completed our
manufacturing services for Fore Systems during the fourth quarter of fiscal year
2000. Sales to Fore Systems were $24.6 million during fiscal year 2000, $78.7
million in fiscal year 1999 and $80.6 million in fiscal year 1998. Excluding our
sales to Fore Systems, our revenue grew 26.5% in fiscal year 2000 compared to
fiscal year 1999 and 39.8% in fiscal year 1999 compared to fiscal year

22
<PAGE> 25

1998. The following table shows our revenue on a quarterly basis during fiscal
year 2000, excluding revenue derived from our relationship with Fore Systems and
our percentage sequential revenue growth.

<TABLE>
<CAPTION>
THREE MONTHS ENDED,
------------------------------------------------------------------
DECEMBER 2, MARCH 2, JUNE 1, AUGUST 31,
1999 2000 2000 2000
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue excluding Fore
Systems....................... $87.5 million $92.3 million $110.8 million $157.2 million
Sequential revenue growth....... -- 5.5% 20.0% 41.8%
</TABLE>

Our gross profit and operating income during fiscal year 2000 were
adversely impacted by the costs associated with our launching new manufacturing
facilities in Monterrey, Mexico and San Jose, California and reduced utilization
of our facility in Durham, North Carolina as a result of our disengagement with
Fore Systems. We elected to incur the expenses associated with maintaining our
capability in Durham and with expanding our capacity through our new and
enlarged facilities in anticipation of our commencement of the programs we were
recently awarded from both new and existing customers.

We intend to use substantially all of the net proceeds from this offering
to redeem our outstanding redeemable preferred stock and partially pay down our
senior credit facility. As a result, we expect to incur one-time charges
totaling approximately $2.6 million related to prepayment penalties and the
expensing of previously deferred loan costs. We expect to record these charges
as extraordinary expenses on our income statement in the quarter in which they
occur.

We provide our services on both a turnkey and consignment basis. Under a
turnkey arrangement, we assume responsibility for both the procurement of
components and their assembly. Turnkey manufacturing generates higher net sales
than consignment manufacturing due to the generation of revenue from materials
as well as labor and manufacturing overhead. Turnkey manufacturing also
typically results in lower gross margins than consignment manufacturing. Under a
consignment arrangement, the original equipment manufacturer procures the
components and we assemble and test them in exchange for a service fee.
Consignment revenues accounted for 7.1% of our net sales for the fiscal year
ended August 31, 2000 compared to 6.4% in each of fiscal 1999 and 1998.

We sell to our customers from both domestic and foreign operations. Net
sales from our foreign operations accounted for 25.4% of our net sales for the
fiscal year ended August 31, 2000 compared to 8.3% in fiscal 1999 and 7.3% in
fiscal 1998.

RESULTS OF OPERATIONS

The following table sets forth statements of operations data expressed as a
percentage of net sales for the periods indicated. For the years ended September
3, 1998, September 2, 1999 and August 31, 2000, the information is derived from
our audited consolidated statements of operations. This information is expressed
as a percentage of net sales and should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
prospectus.

23
<PAGE> 26

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
SEPTEMBER 3, SEPTEMBER 2, AUGUST 31,
1998 1999 2000
------------ ------------ ----------
<S> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0%
Cost of sales........................................... 90.8 94.1 95.2
----- ----- -----
Gross margin............................................ 9.2 5.9 4.8
Selling, general and administrative expenses............ 4.7 5.2 5.1
----- ----- -----
Income (loss) from operations........................... 4.5 0.7 (0.3)
Interest expense, net................................... 2.8 4.6 4.7
Transaction expenses(1)................................. 2.5 -- --
----- ----- -----
Loss before taxes and extraordinary item................ (0.8) (3.9) (5.0)
Income tax benefit...................................... (0.3) (0.8) --
----- ----- -----
Loss before extraordinary item.......................... (0.5) (3.1) (5.0)
Extraordinary item -- loss on early extinguishment of
debt.................................................. -- (0.1) --
----- ----- -----
Net loss................................................ (0.5)% (3.2)% (5.0)%
===== ===== =====
Depreciation and amortization(2)........................ 3.7% 3.5% 3.6%
===== ===== =====
</TABLE>

------------

(2) In fiscal years 1998, 1999 and 2000, depreciation and amortization excludes
$526,000, $943,000 and $954,000, respectively, of deferred loan amortization
that was expensed as interest.

Fiscal Year 2000 Compared to Fiscal Year 1999

Net Sales. Net sales for fiscal year 2000 increased by $39.7 million, or
9.2%, to $472.4 million from $432.7 million for fiscal year 1999. The increase
in net sales is primarily the result of higher volumes of printed circuit board
assemblies and system level shipments to customers in the networking and
telecommunications industries. These increases were partially offset by
significantly lower sales to Fore Systems, who was historically our second
largest customer. Net sales to Fore Systems for fiscal year 2000 decreased by
$54.1 million to $24.6 million from $78.7 million for fiscal year 1999. We
substantially completed manufacturing services for Fore Systems during the third
quarter of fiscal year 2000.

Net sales attributable to foreign subsidiaries totaled $119.9 million for
fiscal year 2000, compared to $36.0 million for the corresponding period of
fiscal year 1999. The growth in foreign subsidiary net sales is primarily the
result of increased complex printed circuit board assemblies shipments at our
Malaysian operation. During fiscal year 2000, our Monterrey, Mexico operation
recognized its first sales, which totaled $3.5 million.

Gross Profit. Gross profit for fiscal year 2000 decreased by $2.9 million,
or 11.4%, to $22.5 million from $25.4 million for fiscal year 1999. Gross margin
for fiscal year 2000 decreased to 4.8% of net sales from 5.9% for fiscal year
1999. Gross profit and gross margin were adversely affected, most significantly
by a decrease in the capacity utilization at our Durham, North Carolina
facility, due to a significant decline in sales to Fore Systems. In addition,
during fiscal year 2000, we incurred start-up costs at our new facilities in
Monterrey, Mexico and San Jose, California.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal year 2000 increased by $1.4 million, or 6.2%,
to $23.9 million from $22.5 million for fiscal year 1999. This increase was
primarily the result of start-up costs associated with new facilities. In
addition, during fiscal year 2000, we incurred more expenses in program
management, information technology and executive management to support our
global expansion and anticipated growth. We also incurred non-cash foreign
currency adjustments related to an inter-company loan between the Company and
its Belgian subsidiary. During fiscal year 2000, SG&A expenses included a
non-cash foreign currency expense of $0.4 million, while fiscal year 1999 SG&A
expenses included a non-cash foreign currency expense of $0.5 million.

24
<PAGE> 27

Interest Expense. Interest expense for fiscal year 2000 increased $2.3
million, or 11.7%, to $22.0 million from $19.7 million for fiscal year 1999. The
increase was primarily due to a higher level of overall borrowing and higher
interest rates on our variable interest rate borrowings.

Provision for Income Taxes. Income tax expense for fiscal year 2000 was
$0.2 million compared to a benefit of $3.5 million for fiscal year 1999. The
income tax expense for fiscal year 2000 resulted primarily from a mandatory
minimum foreign income tax on its Mexico subsidiary. The effective rate of tax
expense for fiscal year 2000 was approximately 0.7%, compared to a 22.3% income
tax benefit for fiscal year 1999. The overall decrease in the effective tax rate
during fiscal year 2000, relative to fiscal year 1999, was primarily due to an
increase in the valuation allowance. During fiscal year 2000, the valuation
allowance eliminated any income tax benefit that would have otherwise resulted
from the losses. We do not provide for U.S. tax on the earnings of our foreign
subsidiaries and, therefore, the effective rate may vary significantly from
period to period.

Extraordinary Loss. The extraordinary after tax loss of $0.6 million for
fiscal year 1999 resulted from the write-off of deferred financing costs related
to the early retirement of a revolving credit facility.

Net Loss. For the reasons stated above, net loss for fiscal year 2000
increased by $9.7 million to a loss of $23.6 million from a loss of $13.9
million for fiscal year 1999. As a percentage of net sales, net loss for fiscal
year 2000 was 5.0% compared to 3.2% for fiscal year 1999.

Fiscal Year 1999 Compared to Fiscal Year 1998

Net Sales. Net sales for fiscal year 1999 increased by $98.8 million, or
29.6%, to $432.7 million from $333.9 million for fiscal year 1998. The increase
in net sales resulted primarily from higher volumes of printed circuit board
assembly and system level shipments to customers in the networking and
telecommunications industries. These increases were partially offset by lower
printed circuit board assembly prices, lower volumes and prices of custom
turnkey memory modules, and lower prices on consigned memory modules.

Net sales of foreign subsidiaries for fiscal year 1999 increased $11.5
million, or 46.9%, to $36.0 million from $24.5 million in fiscal year 1998. The
growth in foreign subsidiary net sales resulted primarily from additional sales
of printed circuit board assembly shipments at our Malaysian operation. This
increase was partially offset by lower volumes of custom turnkey memory modules
at the Malaysian facility. The increase was also offset as a result of a
significant customer of the Belgium operation shifting from a turnkey to
consignment model early in the second quarter of fiscal year 1999.

Gross Profit. Gross profit for fiscal year 1999 decreased by $5.3 million,
or 17.3%, to $25.4 million from $30.7 million for fiscal year 1998. Gross margin
for fiscal year 1999 decreased to 5.9% of net sales from 9.2% in fiscal year
1998. The decrease in gross margin resulted primarily from demand volatility in
our North Carolina operation, higher volumes of printed circuit board assembly
sales with lower average selling prices, lower prices on consigned memory
modules, a decline in custom turnkey memory module sales and increased system
level shipments, which typically have lower margins.

Selling, General and Administrative Expenses. SG&A for fiscal year 1999
increased by $6.7 million, or 42.4%, to $22.5 million from $15.8 million for
fiscal year 1998. This increase resulted primarily from additional senior
management to support future growth and an increase in depreciation expense and
other expenses and headcount associated with our operation as a stand alone
entity following the recapitalization. We also incur non-cash foreign currency
adjustments related to an inter-company loan between us and our Belgian
subsidiary. During fiscal year 1999, SG&A expenses included a non-cash foreign
currency expense of $0.5 million, while fiscal year 1998 SG&A expenses included
a non-cash foreign currency gain of $0.2 million.

Interest Expense. Interest expense for fiscal year 1999 increased to $19.7
million from $9.2 million in fiscal year 1998, due primarily to the full year
impact of $175 million in long-term debt issued in February of 1998 in
conjunction with the recapitalization.

25
<PAGE> 28

Provision (Benefit) for Income Taxes. We had an income tax benefit in each
of fiscal year 1998 and 1999 generated primarily through utilization of net
operating losses and non-taxable foreign income. The fiscal year 1999 income tax
benefit increased by $3.0 million to a benefit of $3.9 million from a benefit of
$0.9 million for fiscal year 1998. Our effective income tax rate for its benefit
for fiscal year 1999 decreased to 22.3% from 33.9% for fiscal year 1998. The
decrease in the effective rate relates primarily to increases in the valuation
allowance in fiscal year 1999 offset in part by nondeductible transaction costs
associated with our recapitalization in fiscal year 1998.

During fiscal year 1999, we set up a valuation allowance of $4.7 million
for the amount of the deferred tax asset which may not be realizable through
either carryback of its net operating losses or through future income.

Extraordinary Loss. The extraordinary after tax loss of $0.6 million in
fiscal year 1999 resulted from the write-off of deferred financing costs related
to the early extinguishment of a revolving credit facility.

Net Loss. For the reasons stated above, net loss for fiscal year 1999
increased by $12.1 million to a loss of $13.9 million from a loss of $1.8
million for fiscal year 1998. As a percentage of net sales, net loss for fiscal
year 1999 increased to 3.2% from 0.5% for fiscal year 1998.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our unaudited historical quarterly financial
information for each of the seven quarters in the period ended August 31, 2000.
This information has been derived from our monthly consolidated financial
statements which are unaudited, but, in the opinion of management, fairly
represent our financial performance. This information should be read in
conjunction with our consolidated financial statements and the related notes
contained elsewhere in this prospectus. The operating results for any previous
quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------
DEC. 3, MARCH 4, JUNE 3, SEPT. 2, DEC. 2, MAR. 2, JUNE 1, AUG. 31,
1998 1999 1999 1999 1999 2000 2000 2000
------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $91,243 $116,348 $110,305 $114,819 $100,016 $ 99,055 $113,474 $159,903
Cost of goods sold.......... 86,056 110,337 103,917 107,044 93,912 95,993 108,095 151,957
------- -------- -------- -------- -------- -------- -------- --------
Gross profit................ 5,187 6,011 6,388 7,775 6,104 3,062(1) 5,379 7,946
Selling general and
administrative............ 4,219 6,790 5,846 5,636 5,833 6,706 5,586 5,815
------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations................ 968 (779) 542 2,139 271 (3,644) (207) 2,131
Interest expenses, net...... 4,721 4,925 5,023 4,983 5,335 5,336 5,669 5,698
Transaction expenses(2)..... 45 -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- --------
Loss before taxes........... (3,798) (5,704) (4,481) (2,844) (5,064) (8,980) (5,876) (3,567)
Income tax provision
(benefit)................. (1,775) (1,722) -- -- -- 30 64 69
------- -------- -------- -------- -------- -------- -------- --------
Loss before extraordinary
item...................... (2,023) (3,982) (4,481) (2,844) (5,064) (9,010) (5,940) (3,636)
Extraordinary item net of
tax....................... -- (617) -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- --------
Net loss.................... $(2,023) $ (4,599) $ (4,481) $ (2,844) $ (5,064) $ (9,010) $ (5,940) $ (3,636)
Redeemable preferred stock
dividends and accretion of
amortization.............. (882) (918) (945) (847) (962) (992) (1,022) (1,053)
------- -------- -------- -------- -------- -------- -------- --------
Net loss to common
stockholders.............. $(2,905) $ (5,517) $ (5,426) $ (3,691) $ (6,026) $(10,002) $ (6,962) $ (4,689)
======= ======== ======== ======== ======== ======== ======== ========
Net loss per share -- basic
and diluted:
Loss before extraordinary
item...................... $ (0.58) $ (0.98) $ (1.08) $ (0.74) $ (1.20) $ (1.99) $ (1.38) $ (0.92)
Extraordinary item.......... $ -- $ (0.12) $ -- $ -- $ -- $ -- $ -- --
------- -------- -------- -------- -------- -------- -------- --------
</TABLE>

26
<PAGE> 29

------------

(1)For the three months ended March 2, 2000, gross profit and gross margin were
adversely affected by reduced capacity utilization at our Durham, North
Carolina operation due to the significant decline in sales to Fore Systems,
start-up costs at the Monterrey, Mexico operation and lower prices on printed
circuit boards.

(2) Transaction expenses include expenses incurred in conjunction with our
recapitalization, including transaction agreement fees, bank fees, the
termination of employment agreements, the buyback of employee stock options,
and other miscellaneous expenses.

(3) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because we believe it is frequently used
by investors in the evaluation of companies. Adjusted EBITDA is defined as
EBITDA adjusted for management fees and other charges described in the
following table. Neither EBITDA nor adjusted EBITDA should be considered as
an alternative to cash flow from operating activities, as a measure of
liquidity or as an alternative to net income as a measure of operating
results in accordance with United States GAAP. Our definition of adjusted
EBITDA may differ from definitions of adjusted EBITDA used by other
companies.

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------
DEC. 3, MARCH 4, JUNE 3, SEPT. 2, DEC. 2, MAR. 2, JUNE 1, AUG. 31,
1998 1999 1999 1999 1999 2000 2000 2000
------- -------- ------- -------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA............................... $ 4,434 $ 2,818 $ 4,388 $ 6,303 $ 4,485 $ 640 $ 4,010 6,387
------- ------- ------- ------- ------- ------- ------- ------
Infrequent management expenses(a).... 102 120 103 71 290 109 92 19
Consulting/management fees(b)........ 63 63 63 76 123 146 62 62
Non-capitalized ERP expenses(c)...... 57 52 86 77 76 25 12 --
Non-cash foreign exchange
(gain)/loss........................ (464) 754 425 (169) 90 65 69 141
Non-recurring charge(d).............. -- -- -- -- -- -- -- 507
------- ------- ------- ------- ------- ------- ------- ------
Total adjustments.................. (242) 989 677 55 579 345 235 729
------- ------- ------- ------- ------- ------- ------- ------
Adjusted EBITDA...................... $ 4,192 $ 3,807 $ 5,065 $ 6,358 $ 5,064 $ 985 $ 4,245 7,116
======= ======= ======= ======= ======= ======= ======= ======
</TABLE>

-------------------
(a) Includes recruiting fees and severance costs incurred for several of our
senior managers.

(b) Includes fees incurred for the use of outside consultants as well as the
management fees charged by Cornerstone Equity Investors.

(d)Non-recurring charge incurred in connection with our disengagement with
Fore Systems.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal year 2000, net cash provided by operating activities was $0.8
million. Net cash used by investing activities was $7.9 million and net cash
provided by financing activities was $8.6 million. Exchange rate changes had a
nominal effect on cash. Net cash used by investing activities during fiscal year
2000 primarily consisted of capital expenditures to upgrade, expand and
establish manufacturing capacity in Nampa, Idaho, Penang, Malaysia and
Monterrey, Mexico. Net cash generated from financing activities primarily
resulted from an $23.7 million in loans from some of our stockholders, off-set
in part by repayments on our existing credit facility.

The $0.8 million of cash used by operations during fiscal 2000 was the
result of a combination of factors. During the fiscal year ended August 31,
2000, accounts receivable increased by $13.1 million, primarily due to a $45.1
million increase in sales for the three months ended August 31, 2000 over the
corresponding period of fiscal 1999. For the three and twelve months ended
August 31, 2000, the average

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accounts receivable collection period was 29.2 days and 33.6 days, respectively,
compared to 37.1 days and 37.5 days for the corresponding periods of fiscal
1999. The fiscal year 2000 improvement in the average accounts receivable
collection period is due primarily to increased collection efforts. During the
fiscal year ended August 31, 2000, inventory increased by $45.6 million. For the
three and twelve months ended August 31, 2000, the average inventory turns were
7.8 and 7.4, respectively, compared to 9.6 for both corresponding periods of
fiscal 1999. The fiscal year 2000 inventory increased primarily due to our
increase in operations over fiscal year 1999. In addition, during fiscal 2000,
we experienced longer lead times and restricted availability on certain critical
components, which has resulted in a general increase in inventory levels and has
negatively impacted our inventory turns. The fiscal year 2000 inventory increase
primarily resulted in a $49.1 million increase in accounts payable and a $5.0
million customer advance to fund inventory purchases. For the three and twelve
months ended August 31, 2000, the average trade accounts payable payment period
was 49.9 days and 48.5 days, respectively, compared to 43.1 days and 44.0 days
for the corresponding periods of fiscal 1999. In addition, the timing of
interest payments subsequent to year end and advance payments from customers of
$9.4 million and $5.0 million, respectively contributed to our cash flow from
operations.

As of August 31, 2000, we had a $60.0 million senior credit facility, which
was scheduled for maturity on February 26, 2004. On September 29, 2000, we
amended and restated the senior credit facility to provide up to $125.0 million
to further support our growth. The senior credit facility matures in 2004 and
consists of a $70.0 million revolving credit facility, a $10.0 million equipment
loan facility restricted to the purchase of property, plant and equipment, an
$8.0 million term loan A and a $37.0 million term loan B. Amounts available to
borrow under the revolving credit facility vary depending on domestic accounts
receivable, inventory and equipment balances, which serve as collateral along
with substantially all of our other assets. The $45 million proceeds of the term
loans were used to repay $23.7 million of shareholder notes, plus $0.6 million
in accrued interest, pay closing costs of approximately $3.3 million and
partially pay down the revolving credit facility. As of October 30, 2000,
availability under the senior credit facility consisted of $34.8 million under
the revolving facility and $4.0 million under the equipment loan facility. The
credit facility restricts our ability:

- to incur additional indebtedness,

- to create liens or other encumbrances,

- to make investments, loans and guarantees, and

- to sell or otherwise dispose of a substantial portion of our assets or to
enter into any merger or consolidation.

The credit facility also contains a covenant requiring that we maintain a
fixed charge ratio, as defined, based upon EBITDA minus unfinanced capital
expenditures, cash dividends and cash taxes divided by debt service.

Our principal sources of future liquidity are cash flows from operating
activities and borrowings under the credit facility. We have recently
experienced longer lead times and restricted availability on critical
components, which has resulted in an increase in the level of inventory and a
decrease in inventory turns. The current supply environment may continue to
drive higher than normal inventory levels and effect our overall liquidity. We
believe that future cash flows from operating activities and availability under
our credit facility will provide sufficient liquidity to meet our current and
future interest payments, working capital and capital expenditure obligations.
We expect that these capital expenditures will consist of acquisition and
upgrades of equipment, acquisition and upgrades of information technology
systems and expansion of our facilities. If cash flows from operating activities
and availability under the credit facility are not sufficient to meet these
obligations, we will require additional equity or debt financing. Additional
financing may not be available on satisfactory terms when required.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. Subsequently, the SEC
released Staff Accounting Bulletin No. 101B, which delayed the implementation
date of Staff Accounting Bulletin No. 101 until no later that the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. We do not believe
that SAB No. 101 will have a material effect on our financial position or
results of operation.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes accounting reporting standards for
derivative instruments and hedging activities. As amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of
Effective Date of FASB Statement No. 133," and SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of
FASB Statement No. 133" SFAS No. 133 and SFAS No. 138 are effective for all
quarters and fiscal years beginning after June 15, 2000. We will adopt SFAS No.
133 effective at the beginning of our fiscal year 2001. We do not believe the
adoption of SFAS No. 133 and SFAS No. 138 will have a material effect on our
financial position or results of operations.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation -- and interpretation of APB Opinion No. 25," or FIN 44. This
interpretation provides guidance on the accounting for certain stock option
transactions and subsequent amendments to stock option transactions. FIN 44 is
effective July 1, 2000, but certain conclusions cover specific events that occur
after either December 15, 1998 or January 12, 2000. To the extent that FIN 44
covers events occurring during the period from December 15, 1998 and January 12,
2000, but before July 1, 2000, the effects of applying this Interpretation are
to be recognized on a prospective basis. The adoption of FIN 44 on July 1, 2000
did not have a material effect on our financial position or results of
operation.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of August 31, 2000, we had $217.2 million of total debt outstanding, of
which $71.0 million is floating interest rate borrowings and is subject to
periodic adjustment. As interest rates fluctuate we may experience interest
expense increases that may materially impact financial results. For example, if
interest rates were to increase or decrease by 1%, the result would be an
increase or decrease of approximately $710,000 to interest expense.

We use the U.S. dollar as our functional currency, except for our
operations in Belgium, Malaysia and Mexico. Direct labor, manufacturing
overhead, and selling, general and administrative costs of the international
operations are denominated in local currencies. We have evaluated the potential
costs and benefits of hedging potential adverse changes in the exchange rates
between the U.S. dollar, Belgian franc, Malaysian ringgit and Mexican peso.
Currently, we do not enter into derivative financial instruments because a
substantial portion of our sales in these foreign operations are in U.S.
dollars. The assets and liabilities of the Belgian, Malaysian and Mexican
operations are translated into U.S. dollars at exchange rates in effect at the
period end date. Income and expense items are translated at the year-to-date
average rate. Aggregate transaction losses included in net loss for the fiscal
year ended August 31, 2000 were $0.4 million.

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BUSINESS

OVERVIEW

We are a global leading provider of advanced electronics manufacturing
services to original equipment manufacturers who primarily serve the data
communications, telecommunications, and computer/memory module industries. We
target customers that are technology leaders in rapidly growing markets, such as
Internet infrastructure, wireless communications and optical networking, that
have complex manufacturing services requirements and that seek to form long-term
relationships with their electronics manufacturing services providers. We offer
a broad range of electronics manufacturing services, including:

- pre-production engineering and product design support;

- prototyping;

- supply chain management;

- manufacturing and testing of printed circuit board assemblies;

- full system assembly;

- end-order fulfillment; and

- after-sales product support.

We deliver this broad range of services through six strategically located
facilities in the United States, Mexico, Asia and Europe. We have long-standing
relationships with networking and telecommunications industry leaders such as
Cisco Systems, Extreme Networks, Alcatel and Nokia, and have recently
established relationships with several companies in the emerging areas of
wireless communications and optical networking, including AT&T Wireless, JDS
Uniphase, Alidian Networks, Digital Lightwave and Tachion Networks. We believe
that our competitive advantages in the areas of engineering, advanced
manufacturing capabilities and operational flexibility position us to capitalize
on the accelerating trend among original equipment manufacturers to outsource a
broad range of manufacturing and related services for technologically advanced
products.

INDUSTRY BACKGROUND

Electronics manufacturing services providers offer a broad spectrum of
manufacturing and manufacturing-related services to original equipment
manufacturers in a variety of end-markets. In addition to traditional
manufacturing services, which include printed circuit board assembly, final
systems assembly and product testing, electronics manufacturing services
companies also increasingly provide:

- design and engineering support;

- supply chain management;

- end-order fulfillment; and

- after-sales services.

According to Technology Forecasters, the global electronics manufacturing
and related services industry is expected to grow at a compounded annual growth
rate of 27% from $78 billion in revenues in 1999 to $260 billion in 2004, as
depicted in the bar chart below. In its 1999 global report, Technology
Forecasters projects that the larger electronics manufacturing services
providers, those with annual revenues in excess of $500 million, will grow at a
compounded annual growth rate of 35% from 1998 to 2003. The TFI monitored actual
rate of growth for those companies were 42% between 1998 and 1999. We believe
that the growth for larger electronics manufacturing services companies is
projected to be greater than the industry average because original equipment
manufacturers are increasingly outsourcing production to larger manufacturers
that have the manufacturing capacity and ability to provide a total service
solution. In addition, we believe that electronics manufacturing services
companies focused on the Internet infrastructure, wireless communications and
optical networking markets will experience a higher rate of growth than the
industry average.

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PROJECTED ELECTRONICS MANUFACTURING SERVICES INDUSTRY REVENUE GROWTH

[BAR CHART DEPICTING THE PROJECTED 27% 5 YEAR COMPOUNDED ANNUAL ELECTRONICS
MANUFACTURING SERVICES INDUSTRY REVENUE GROWTH RATE FROM $78 BILLION IN 1999 TO
ESTIMATES OF $101 BILLION IN 2000, $130 BILLION IN 2001, $165 BILLION IN 2002,
$207 BILLION IN 2003 AND $260 BILLION IN 2004.]

Source: Technology Forecasters, Inc., Contract Manufacturing from a Global
Perspective -- 2000 Update.

Growth in the electronics manufacturing services industry is primarily
being driven by the overall growth of the electronics industry and the increased
reliance on outsourcing among original equipment manufacturers. We believe that
original equipment manufacturers will continue to increase their use of
outsourcing as electronics manufacturing services providers enhance and broaden
their value-added service offerings, enabling original equipment manufacturers
to focus their resources increasingly on their core competencies, including
research and development, sales, marketing and customer service. Technology
Forecasters also estimates that the percentage of cost of goods sold in the
electronics industry that is outsourced for manufacture by original equipment
manufacturers will increase from 11% in 1999 to 26% by 2004. This trend is
portrayed in the pie charts illustrated below.

PROJECTED PERCENTAGE OF COST OF GOODS SOLD OUTSOURCED
BY ELECTRONICS ORIGINAL EQUIPMENT MANUFACTURERS AND

SIZE OF THE ELECTRONICS MANUFACTURING SERVICES INDUSTRY

[PIE CHART DEPICTING 89% OF COGS PRODUCED IN-HOUSE BY ORIGINAL EQUIPMENT
MANUFACTURERS AND 11% OF COGS OUTSOURCED BY ORIGINAL EQUIPMENT MANUFACTURERS IN
1999, WITH AN ELECTRONICS MANUFACTURING SERVICES MARKET SIZE OF $78 BILLION.]
[PIE CHART DEPICTING 74% OF COGS PRODUCED IN-HOUSE BY ORIGINAL EQUIPMENT
MANUFACTURERS AND 26% OF COGS OUTSOURCED BY ORIGINAL EQUIPMENT MANUFACTURERS
ESTIMATED FOR 2004, WITH AN ESTIMATED ELECTRONICS MANUFACTURING SERVICES MARKET
SIZE OF $260 BILLION.]

Source: Technology Forecasters, Inc., Contract Manufacturing from a Global
Perspective -- 2000 Update.

Electronics manufacturing services providers' growth is related to the
growth rates of their customers' and their customers' end-markets. The data
communications and telecommunications industries and, in particular, the
Internet infrastructure, wireless communications and optical networking markets,
are experiencing rapid growth. Established original equipment manufacturers in
these markets are increasingly outsourcing a broadening array of complex design
and manufacturing services to electronics manufacturing service providers. In
addition, emerging companies in these markets typically maintain little or no
internal manufacturing capability, relying instead on the manufacturing
resources of their sophisticated electronics manufacturing services providers.

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Demand for manufacturing services by original equipment manufacturers in
data communications is being driven by the growing global demand for
communications bandwidth. Ryan, Hankin & Kent, a market research firm, forecasts
that Internet traffic in North America will increase at a compound annual
average growth rate of 156% as measured in terabytes, or trillions of bytes, for
the period beginning with calendar year 2000 and ending with 2003. Additionally,
businesses and other organizations continue to become increasingly dependent on
their networks to provide connectivity for internal and external communications.
Essential computing applications, such as enterprise resource planning, large
enterprise databases and sophisticated on-line connections with vendors, as well
as the increased use of communication applications such as e-mail, require
significant networking capabilities from networking companies such as Cisco
Systems, Nokia and Extreme Networks, three of our largest customers.

The wireless communications industry has grown rapidly in the past few
years, hitting record highs in 1999 in terms of total subscribers and
penetration growth and setting the stage for future industry expansion.
Increased competition continues to spur a corresponding increase in advertising,
thus raising general awareness of the diverse array of wireless communications
products available. The advent of useful wireless communications products and
the prototypes of next generation products, in addition to positive reviews of
existing equipment, have been well received by both commercial and personal
users, and are expected to grow in popularity as functionality continues to
improve. Strategis Group, a market research firm, estimates that the compounded
annual worldwide subscriber growth rate for wireless communication services will
be 25.9% from 1999 through 2004, and the total worldwide minutes of use of
wireless subscribers will grow at a compounded annual growth rate of 22.9% from
1999 to 2004. Furthermore, International Data Corporation, a market research
firm, estimates that the number of wireless handsets worldwide will increase at
a 26.5% compounded annual growth rate from 1999 to 2003 to 539 million handsets.
We believe the increasing number of wireless minutes used will drive rapid
future growth of companies serving the wireless industry, such as AT&T Wireless,
one of our newest customers.

To address expanding bandwidth and transmission distance requirements, new
communication equipment using optical technology has been developed. As a
result, fiber optic systems are replacing copper wire networks and have become
the primary medium for long-haul (greater than 600 kilometers)
telecommunications and cable television networks. In addition, fiber optics are
used in high data rate networking and data storage applications. At the end of
calendar year 1999, over 63 million kilometers of fiber optic systems were
installed throughout the world, and KMI Market Research, a market research firm,
estimates that this figure will grow to 235 million kilometers by 2004, a 30.0%
compounded annual growth rate. We believe the continued deployment of optical
technology should result in rapid growth of companies serving the optical
industry, such as Alidian Networks, Digital Lightwave and JDS Uniphase, some of
our newest customers.

The demand for memory modules in electronic systems is also growing.
Dataquest, a market research firm, forecasts that the size of the worldwide
market for dynamic random access memory modules will increase from $23.1 billion
in 1999 to $48.0 billion in 2004, a 15.7% compounded annual growth rate. Memory
modules are an assembly consisting of memory chips, such as dynamic random
access memory chips, placed on and integrated with a printed circuit board.
Several factors contribute to the increasing use of memory, such as the
development of high-performance computers and servers, the greater complexity of
software, the development of high-bandwidth and graphics-intensive applications,
and evolving Internet and telecommunications infrastructure requirements. In
addition, digital computing and processing have extended beyond established
platforms such as computers and servers to include a wide array of electronic
equipment, such as routers, switches, hubs, digital cameras, digital video
recorders, digital audio players, personal digital assistants and "smart"
appliances. We believe the increasing use of memory components should continue
to drive the growth of companies serving the memory modules industry, such as
Micron Technology, one of our largest customers.

Accelerating technological requirements of end products in these markets
are driving original equipment manufacturers to choose those electronics
manufacturing services providers who possess the sophisticated skills in radio
frequency, optical and other advanced technologies to rapidly validate the
design and facilitate the manufacturing of these complex products from prototype
to volume production. Additionally, the rapid new product introduction cycle,
frequent engineering changes and unpredictable market acceptance rates that

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characterize these products require a high level of manufacturing flexibility.
As a result, original equipment manufacturers in these markets are seeking
long-term strategic relationships with electronics manufacturing services
providers who have the requisite technological capability and are nimble enough
to handle manufacturing in this dynamic environment.

As the electronics manufacturing services industry has grown and developed,
there has emerged a stratification of its participants. The largest
participants, who have annual revenues in excess of $2 billion, tend to
concentrate on the largest customer programs, which commonly provide annual
revenue in excess of $100 million. As a result of the concentration on bigger
programs by these participants, the opportunity has arisen for other electronics
manufacturing services providers who possess advanced execution and engineering
skills comparable to those of the largest providers to win contracts from
high-growth emerging electronics companies and small to mid-sized programs from
large established original equipment manufacturers. In many cases, these
customers also recognize and value the focused senior management attention and
service flexibility that electronics manufacturing services providers such as
MCMS can provide.

THE MCMS SOLUTION

We have established strong, long-term relationships with numerous original
equipment manufacturers who concentrate on the data communications,
telecommunications and computer/memory module industries, particularly in the
markets of Internet infrastructure, wireless communications and optical
networking. The strength of these relationships has been built by our ability to
consistently provide our customers with:

- advanced engineering capabilities;

- expertise in Internet infrastructure, wireless communications and optical
networking markets;

- memory module expertise;

- a broad range of advanced manufacturing and fulfillment services;

- global scale and infrastructure; and

- fully integrated worldwide facilities.

Our broad array of service capabilities allows us to reduce our customers'
overall costs and resources committed to working capital and manufacturing,
while improving time to market and time to global production. Our capabilities
enable our customers to focus on their core competencies of research and
development, sales, marketing and customer service.

Advanced Engineering Capabilities. We have secured programs with advanced
technical requirements from industry-leading data communications and
telecommunications companies and emerging participants in the Internet
infrastructure, wireless communications and optical networking markets. We have
developed these customer relationships as a result of our advanced technical
capabilities in such areas as:

- fiber optic cable connectorization and fusion splicing, which is a method
of manufacturing passive optical components to be used in metropolitan
networks;

- specialized radio frequency and optical testing, which includes automated
x-ray and optical inspection techniques and test instrumentation
requiring specialized software development;

- complex board and system level functional testing, which searches for
defects by using external instrumentation to simulate the ultimate
end-use functionality of a complete assembly;

- ultra high pin count ball grid array assembly, which enables the surface
mount soldering of high density integrated circuits to printed circuit
boards in small spaces thereby enabling more interconnections in the same
space than less advanced alternatives; and

- ultra fine pitch chip scale packaging, which results in a smaller spacing
of component leads and, therefore, higher board densities and smaller
products.

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We support and develop these advanced technical capabilities with our staff
of over 360 engineers and technicians and a patent portfolio consisting of 43
patents and 22 patent applications covering a range of manufacturing and test
processes.

Expertise in Internet Infrastructure, Wireless Communications and Optical
Networking Markets. We focus substantial resources and have developed specific
expertise to serve the rapidly expanding Internet infrastructure, wireless
communications and optical networking markets. We have accumulated a deep body
of experience with Internet infrastructure products as a result of our
longstanding relationships with such industry-leading technology companies as
Cisco Systems, Extreme Networks, Nokia and Alcatel. We have leveraged our
Internet infrastructure, technical and manufacturing capabilities to develop
advanced skills in the areas of wireless communications and optical networking.
We use our wireless and optical capabilities to build a variety of advanced
wireless and optical products for established and emerging original equipment
manufacturers, including AT&T Wireless, JDS Uniphase, Digital Lightwave and
Alidian Networks. We believe that our experience and our early entry into the
Internet infrastructure, wireless communications and optical networking markets
makes us one of the few electronics manufacturing services providers capable of
offering original equipment manufacturers advanced wireless and optical design
and manufacturing services. We also believe that this experience will enable us
to continue to attract new customers and increase our sales to existing
customers in the highest growth areas of the communications marketplace.

Memory Module Expertise. We have been a leading provider of memory modules
since our inception in 1984. We believe our memory module expertise provides us
with a competitive advantage because we are one of a limited number of
electronics manufacturing services providers with significant memory module
design, assembly and test capabilities. We are the sole third party memory
module supplier for Micron Technology, one of the largest dynamic random access
memory manufacturers in the world.

A Broad Range of Advanced Manufacturing and Fulfillment Services. We offer
our customers a broad range of advanced manufacturing and fulfillment services
that support our customers' products from initial design and development through
prototyping, assembly, testing and final system assembly. We also provide a
variety of fulfillment services, including supply chain management, product
packaging, worldwide distribution and after-sale support. Our ability to deliver
a complete manufacturing solution from design through end-order fulfillment and
after-sales support reduces our original equipment manufacturer's time to market
and time to volume.

Global Scale and Infrastructure. We operate engineering and manufacturing
facilities in the United States, Malaysia, Mexico and Belgium. These facilities
are in close proximity to the world's major electronics markets. Our global
presence allows us to shift manufacturing resources to the areas where our
customers and their end-markets are located, reduce the time and cost required
to bring our customers' products to market and simultaneously introduce our
customers' products in major global markets. Our global reach enables us to
provide original equipment manufacturers with the flexibility to manufacture
products locally in several regions of the world.

Fully Integrated Worldwide Facilities. We utilize the same or functionally
similar assembly and test equipment, information systems and quality procedures
in all of our locations, which allow for a smooth transfer of production between
our facilities, unlike many of our competitors who have achieved their global
reach through acquisitions of manufacturing facilities with varying
manufacturing platforms. These capabilities give our customers greater
flexibility and the opportunity to reduce their costs by transferring production
to the facility that best suits their needs. The fact that each of our
facilities operate similarly:

- enhances communications among facilities;

- allows our employees to work effectively at any of our sites;

- improves quality control;

- allows us to acquire equipment at volume discounts; and

- promotes adoption of best practices at each of our facilities.

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These factors improve our efficiencies and product quality and ultimately
reduce costs and enhance our margins.

OUR STRATEGY

Target Long-Term Relationships with Original Equipment Manufacturers in
High Growth Markets. We plan to continue to develop and pursue long-term
relationships with promising, rapidly growing established and
emerging-technology companies who are leaders in the Internet infrastructure,
wireless communications and optical networking markets. We focus on serving
original equipment manufacturers that seek long-term comprehensive solutions for
their complex manufacturing requirements. We believe that by involving ourselves
early in the product design phase and tightly integrating our operations with
these original equipment manufacturers we are able to develop strong sustainable
relationships. For example, we have used this strategy to provide advanced
electronics manufacturing services to Cisco Systems since 1995. We plan to
expand our relationships with both new and existing customers by offering a wide
array of advanced manufacturing and engineering capabilities combined with the
senior management focus necessary to support these original equipment
manufacturers' dynamic manufacturing requirements.

Provide a Comprehensive Set of Advanced Flexible Manufacturing
Services. We have developed a comprehensive array of advanced engineering and
manufacturing capabilities. Our customers can utilize our expertise in virtually
every phase of the product's lifecycle, from design and new product development
to distribution and after-market services. We intend to continue to develop
these advanced engineering and manufacturing services in order to proactively
address the future requirements of new and existing customers.

In addition, our capabilities in advanced technologies give us the
flexibility to address our customers' complex and shifting needs. We have
developed manufacturing processes focused on a high degree of flexibility to
allow us to efficiently manufacture products characterized by short
manufacturing runs and rapid design and configuration changes. We have the
capability to customize and configure products to the single unit level. Our
ability to provide a wide range of services, our flexibility to rapidly adjust
to customer needs and our ability to deliver these services across a global
footprint provides the foundation to strengthen our relationships with our
existing customer base and attract additional customers.

Maintain Our Position as a Manufacturing Technology Leader. We believe
that remaining at the leading edge of production technology and delivering
excellence in manufacturing are critical success factors in providing
electronics manufacturing services to data communications, telecommunications
and computer/memory module original equipment manufacturers. We have leveraged
our experience with our Internet infrastructure customers to further advance our
skills in the areas of wireless communications and optical networking. We have
also invested significantly in our infrastructure and our personnel to further
develop manufacturing processes and expertise.

Provide Advanced Supply Chain Management. Our objectives in the area of
supply chain management include procuring required materials on time, in the
desired quantity and at the most attractive terms, as well as optimizing the
speed of our inventory turns. By consolidating our procurement through a select
number of distributors and direct suppliers, we believe we have been able to
improve our allocation of scarce components and the quality of the service we
have received from our distributors and suppliers, including the terms of our
purchases. Furthermore, a number of our leading original equipment manufacturers
are able to use their buying power to secure advantageous materials pricing. As
a result of our relationship with these customers, we often gain access to this
advantageous pricing which we are able to utilize on behalf of other customers.
To improve the speed of our inventory turns and improve our materials management
flexibility, we have agreements with a number of our suppliers which require
them to maintain an inventory of components in a distribution facility managed
by a third party and located in close proximity to our manufacturing locations.
This "superstore" concept, which is described below in the section entitled "Our
Services",

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reduces the length of the overall supply chain and improves visibility into
component availability while also reducing on-hand inventory.

Expand our Global Presence. We situate our manufacturing facilities in
locations which provide our customers with:

- proximity to their engineering resources;

- proximity to their end users' markets; and

- access to lower operational cost structures.

We anticipate that we will support our growth by expanding the capacity of our
existing locations, establishing facilities at new locations which diversify our
geographic offerings, and undertaking selective acquisitions of independent
electronics manufacturing services providers or manufacturing operations of
electronics original equipment manufacturers. The implementation of our
expansion strategy will be a function of where we can effectively provide
electronics manufacturing services to our expanding customer base.

OUR SERVICES

We are a provider of manufacturing solutions for leading technology
original equipment manufacturers in the data communications, telecommunications
and computer/memory module industries, particularly in the Internet
infrastructure, wireless communications and optical networking markets, that
have complex manufacturing needs and that benefit from our full spectrum of
electronics manufacturing services. We believe that our ability to deliver this
wide array of services to our original equipment manufacturer customers in a
flexible and efficient manner provides us with a competitive advantage over
other electronics manufacturing services providers focused in few service areas.
Our full range of manufacturing services include:

Pre-Production Engineering and Product Design Support. Our advanced
engineering team works with original equipment manufacturers early in the
product development cycle for new products. This work includes:

- concurrent electrical design;

- printed circuit board design;

- component engineering;

- design for manufacturing and logistics analysis;

- design verification testing;

- reliability testing and analysis;

- product assurance; and

- packaging design.

Our pre-production engineering and product design support is used by our
customers to reduce the overall product development time thereby speeding time
to market, and to help lower the product cost.

Prototyping. Our dedicated new product introduction teams provide
comprehensive pre-production manufacturing services centered around fully
automated, quick turnaround printed circuit board assembly. Additional services
include prototype materials procurement, automated optical and X-ray inspection,
flying probe testing and rework services. These services are provided with all
of the systems and controls used for volume production, thereby assuring
performance, quality and smooth scaling to production level quantities.

Supply Chain Management. We utilize our fully integrated enterprise
resource planning and supply chain management system to enable us to optimize
materials management from supplier to end-customer. Effective management of the
supply chain is critical to the success of original equipment manufacturers as
it directly impacts the time required to deliver product to market and the
capital requirements associated with carrying inventory.

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To improve the speed of our inventory turns and improve our materials
management flexibility, we have deployed "superstores." These superstores are
managed by third parties and are located in close proximity to our manufacturing
locations. They serve as inventory locations where suppliers store a supply of
materials determined by us. Given the geographic proximity of these superstores
to our facilities, we are able to purchase required materials and have them
delivered to our manufacturing floors in a compressed time frame, thus reducing
our working capital requirements and improving the flexibility and
responsiveness of our manufacturing capability.

We are in the process of implementing a software solution provided by
webPLAN Corp. to optimize our supply chain management performance. webPLAN is a
user-configurable advanced planning software designed to interface with our
enterprise and material resource planning systems and provide, among other
things:

- collaborative planning with customers, suppliers and other partners;

- real-time visibility into inventory, production, demand and supply
levels;

- an ability to measure and analyze key performance indicators through
extensive reporting capabilities; and

- a more closely integrated supply chain resulting in improved customer,
supplier and production management.

Once implemented, we believe webPLAN will provide us with an enhanced
planning and scheduling capability. In addition to providing traditional
materials resource planning, capacity planning and production scheduling,
webPLAN's flexibility and broad functionality will assist us by adding
simulation and impact analysis to our scheduling, material and capacity
planning. We believe this will significantly increase our ability to effectively
manage inventory, improve production efficiency and optimize the utilization of
our facilities.

Manufacturing and Testing of Printed Circuit Board Assemblies. We use
sophisticated technology in the assembly and testing of our printed circuit
board assemblies, and have continually made significant investments in
developing new assembly and test process techniques and improving product
quality. These investments have helped to reduce and improve delivery time to
customers. We work both independently of and in cooperation with customers and
suppliers to develop leading assembly and test technologies.

Full System Assembly. We provide full system assembly services, which
entail our integrating a product's various sub-assemblies into a complete end
product ready for customer use. These services require sophisticated logistics
capabilities to rapidly procure components, assemble products, perform complex
testing and distribute products to customers around the world. Our full system
assembly services involve combining a wide range of sub-assemblies and employing
advanced test techniques to various sub-assemblies and final end products.
Increasingly, our customers require build-to-order system solutions which can
entail unit-level customization with very short lead times. Our highly scalable
and flexible manufacturing processes enable us to address this rapidly growing
market opportunity.

End-Order Fulfillment. We design and test packaging of products for bulk
shipment or single end-customer use. We have a sophisticated integrated system
for managing complex international order fulfillment, allowing us to ship
worldwide and, in many cases, directly to the original equipment manufacturers'
end-customers.

After-Sales Product Support. We offer a wide range of after-sales support
services. This support can be individualized to meet each customer's
requirements and includes product upgrades, repair and engineering change
management.

37
<PAGE> 40

OUR MANUFACTURING TECHNOLOGIES

We intend to continue both to maintain our technical expertise in
established methods and processes as well as to develop the additional expertise
required to serve advanced emerging markets such as Internet infrastructure,
wireless communications and optical networking.

Our technology expertise includes the following advanced areas:

- Advanced and Specialized Testing, which is used for wireless and optical
assemblies, where in-circuit tests often cannot be used. Automated x-ray
and optical inspection techniques are used to structurally examine the
completed assembly. Wireless and optical products may also require
functional and parametric testing utilizing specialized test
instrumentation. This test instrumentation requires that specialized
software be developed to allow these instruments to perform as necessary.

- Fiber Optic Cable Connectorization and Fusion Splicing, which is
typically used to manufacture passive optical components such as optical
couplers, splitters, filters and attenuators.

- Advanced Area Array, which includes ball grid arrays, column grid arrays
and chip scale packages. Advanced area array enables the surface mount
soldering of high density integrated circuits to printed circuit boards
in less space than fine pitch component alternatives. This method enables
more interconnections in the same space than do less advanced techniques.
Advanced area array components connect the integrated circuit board
through an array of small solder balls or columns on the bottom side of
the component package, instead of the fine leads of a fine pitch device
on the periphery of the component package. Advanced area array components
require fully automated assembly and soldering processes for assembly
onto printed circuit boards. We maintain, and continue to develop,
processes for current and next generation advanced area array components.

- Complex Board and System Level Functional Testing, which searches for
defects by using external instrumentation to simulate the ultimate
end-use functionality of a completed assembly.

Our technology expertise also includes the following traditional areas:

- Surface Mount Technology, which involves soldering component leads to a
circuit board that does not have any leads protruding through it or holes
in it, which allows for the utilization of both sides of the circuit
board.

- Fine Pitch, which is used in the soldering of components to a circuit
board. The smaller spacing, or pitch, of component leads or patterns
allows for higher board densities and smaller products.

- In-Circuit Test, which is an automated technique designed to electrically
analyze printed circuit board assemblies for quality and completion to
the bill of materials and schematic. In addition to identifying
manufacturing related defects, in-circuit testing can functionally test
individual components on the printed circuit board, as well as download
software to programmable devices including flash memory and field
programmable gate arrays.

- Stress Testing, which introduces adverse environmental conditions to
detect potential failures of completed printed circuit boards.

OUR CUSTOMERS

Our customers include established original equipment manufacturers in the
data communications, telecommunications and computer/memory module industries,
including Alcatel, Cisco Systems, Extreme Networks, Micron Technology, Nokia,
Ramp Networks and Tachion Networks. We also have relationships with a number of
wireless communications and optical networking original equipment manufacturers,
including Alidian Networks, AT&T Wireless, Digital Lightwave, and JDS Uniphase.
The following table shows the percentage of our sales in each of the markets we
serve for the fiscal years ended September 3, 1998, September 2, 1999 and August
31, 2000.

38
<PAGE> 41

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
SEPTEMBER 3, SEPTEMBER 2, AUGUST 31,
MARKETS 1998 1999 2000
------- ------------ ------------ ----------
<S> <C> <C> <C>
Data communications................................. 67% 78% 70%
Telecommunications.................................. 7 5 6
Computer/memory module.............................. 21 10 14
Other............................................... 5 7 10
--- --- ---
Total..................................... 100% 100% 100%
=== === ===
</TABLE>

Outlined below is a list of both our established customers and new customer
relationships and the industry or market which they serve.

<TABLE>
<CAPTION>
DATA COMPUTER/
COMMUNICATIONS TELECOMMUNICATIONS WIRELESS OPTICAL MEMORY MODULE
-------------------- ------------------ ------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Cisco Systems Alcatel AT&T Wireless* Alidian Networks* Micron Technology
Extreme Networks Comverse Network Harris Corporation* Digital Lightwave* Kentron Technologies
Nokia Systems G-Tran* Xircom
Ramp Networks Tachion Networks* JDS Uniphase* Ciprico
Ixia Communications*
Ziatech*
Phobos*
</TABLE>

------------

* New relationships established over the last twelve months

In fiscal year 2000, Cisco Systems represented approximately 40.8% of our
net sales. In the fourth quarter of fiscal year 2000, Cisco Systems represented
approximately 37.8% of our net sales, Extreme Networks represented approximately
14.8% of our net sales and Nokia represented approximately 12.7% of our net
sales.

SALES AND MARKETING

We use a direct sales force of senior sales professionals located in North
America, Europe and Asia to market our broad array of electronics manufacturing
services. We augment our North American direct sales force with a network of
manufacturers sales representatives from twelve organizations. We organize our
North American sales efforts on a regional basis, with each region managed by an
experienced director of sales. Each director of sales is assisted by a director
of engineering who participates in the technical sales process in all regions.
Our senior management team participates heavily both in the initial customer
sales process as well as in ongoing customer account management.

Our sales and marketing professionals target original equipment
manufacturers that require comprehensive outsourcing solutions in the data
communications, telecommunications and computer/memory module industries in
general, and in the Internet infrastructure, wireless communications and optical
networking markets in particular. Within these target markets, we focus our
sales efforts on securing programs with high growth potential from large
established original equipment manufacturers and emerging electronics companies.
We focus on developing close collaborative relationships with our customers
early in the design phase and throughout the life cycle of a product. To
facilitate these relationships, a customer team is formed to support each
customer's needs throughout the outsourcing process. Each customer team is led
by a business unit manager and consists of professionals from the procurement,
engineering, manufacturing, testing and quality areas.

INTELLECTUAL PROPERTY

Our intellectual property portfolio consists of patents, patent
applications, trademarks, trade secrets and other proprietary information. We
currently have 43 patents and 22 patent applications covering a range of
manufacturing and test processes. "MCMS" and the MCMS logo are U.S. registered
trademarks.

39
<PAGE> 42

Our patent portfolio, trade secrets and other proprietary information cover
proprietary manufacturing processes that improve our ability to deliver high
quality services in a timely and cost-effective manner. They include
methodologies relating to, among other things, the soldering of components to
printed circuit boards, the calibration and enhancement of assembly equipment,
and the testing of printed circuit board assemblies and memory modules. When a
new proprietary manufacturing process is implemented successfully for a given
application at a manufacturing location, we endeavor to deploy its application
across all manufacturing locations. Through our multi-disciplined engineering
teams, we will continue to develop new manufacturing and testing processes to
meet our customers' changing needs and requirements, improve efficiencies and
reduce costs.

To protect our proprietary rights, we rely largely upon a combination of
patents, trade secret laws, non-disclosure agreements, our internal
confidentiality procedures and employee confidentiality agreements. Although we
take steps to protect our proprietary information and trade secrets,
misappropriation may still occur. We believe that our proprietary manufacturing
processes do not infringe on the proprietary rights of others.

EMPLOYEES

As of August 31, 2000, we had 2,484 full-time employees. Given the variable
nature of our project flow and the quick response time required by our
customers, it is critical that we be able to quickly ramp-up and ramp-down our
production capacities to maximize efficiency. We satisfy our varying labor
requirements by employing a skilled temporary labor force as needed. Except for
239 employees located in Colfontaine, Belgium and Monterrey, Mexico, our
employees are not unionized. We believe our employee relations are good, and we
have not experienced any work stoppages at any of our facilities.

GLOBAL OPERATIONS

Our strategy is to maintain standardization of our worldwide operations
around common equipment, information systems, procedures and information
technology. Such standardization reduces the complexity of our operations,
permits us to shift production as well as personnel from facility to facility to
optimize the utilization of capacity without significant equipment modification,
allows us to apply best management practices and enables us to accommodate our
customers' choice of facilities. With the exception of our new facility in San
Jose, each of our facilities is ISO 9001 certified and employs standard hardware
platforms.

40
<PAGE> 43

Our executive offices are located in San Jose, California. We have two
other U.S. facilities located in Nampa, Idaho and Durham, North Carolina as well
as facilities in Malaysia, Mexico and Belgium. Information about these
facilities is set forth below:

<TABLE>
<CAPTION>
LEASED/OWNED
LOCATION SQUARE FEET (EXPIRATION DATE) PRINCIPAL USES
-------- ----------- ----------------- ------------------------------------------
<S> <C> <C> <C>
San Jose, California........... 16,000 Leased (3/1/07) executive offices, design, prototyping,
engineering
Nampa, Idaho................... 216,000 Owned design, prototyping, engineering, printed
circuit board assembly & test, system
assembly & test, end order fulfillment
Durham, North Carolina......... 110,000 Leased (12/31/05) design, prototyping, engineering, printed
circuit board assembly & test, system
assembly & test, end order fulfillment
Penang, Malaysia............... 118,000 Leased (12/1/02) design, prototyping, engineering, printed
circuit board assembly & test, system
assembly & test, end order fulfillment
Monterrey, Mexico.............. 112,000 Leased (7/30/07) engineering, printed circuit board
assembly & test
Colfontaine, Belgium........... 91,500 Owned design, prototyping, engineering, printed
circuit board assembly & test, system
assembly & test
</TABLE>

A key element in our business strategy is to expand our global presence to
provide engineering, manufacturing and fulfillment services in locations that
meet our customers' requirements. Consistent with this strategy, we have
established engineering and manufacturing facilities in Malaysia, Mexico and
Belgium. The establishment of our Mexican and Malaysian facilities has enabled
us to provide low-cost manufacturing services.

We believe our facilities are adequate for our operating needs. We
anticipate that as our business grows, we will need to acquire, lease or build
additional facilities.

COMPETITION

The electronics manufacturing services industry is intensely competitive
and highly fragmented. Competition consists of numerous regional, national and
international participants as well as, indirectly, the manufacturing operations
of a large number of original equipment manufacturers who elect to perform their
manufacturing internally rather than through an outside electronic manufacturing
services provider. We compete directly with a number of electronics
manufacturing services providers, including Celestica Inc., Flextronics
International, Ltd., Jabil Circuit, Inc., SCI Systems, Inc., Sanmina Corporation
and Solectron Corporation. To be competitive, we must provide technologically
advanced manufacturing services, high quality products, flexible production
schedules and reliable delivery of finished products on a timely and price
competitive basis. Some of the large electronics manufacturing service providers
with whom we compete have similar capabilities to those described above under
the caption "The MCMS Solution." Many of our competitors have more
geographically diversified manufacturing facilities, international procurement
capabilities, research and development capabilities and sales and marketing
resources. In addition, we may be at a competitive disadvantage because many of
our competitors are less financially leveraged, resulting in, among other
things, greater operational and financial flexibility.

BACKLOG

Our backlog as of August 31, 2000 was approximately $160.8 million. Our
backlog as of September 2, 1999 was approximately $112.4 million. Backlog
consists of purchase orders received and that are expected to be filled,
typically within three months. Because of variations in the timing of orders,
quantities ordered,

41
<PAGE> 44

delivery intervals and customer and product mix, our backlog as of any
particular date may not be representative of actual sales for any subsequent
period. In addition, subject to conditions and limitations, customer orders can
be canceled and volume levels can be changed or delayed. From time to time, some
of our customers have terminated their manufacturing arrangements with us, while
other customers have reduced or delayed the volume of design and manufacturing
services performed by us. We may not be able to replace terminated programs,
terminated relationships or canceled, delayed or reduced contracts with new
business. Termination of a manufacturing relationship or changes, reductions or
delays in orders could have a material adverse effect on our business, financial
condition and results of operations.

GOVERNMENTAL REGULATION

Our operations are subject to federal, state and local regulatory
requirements relating to environmental, waste management and health and safety
measures relating to the use, release, storage, treatment, transportation,
discharge, disposal and clean-up of hazardous substances and wastes, as well as
practices and procedures applicable to the construction and operation of our
plants. We do not regard our current costs of compliance as material, and we are
not presently aware of any factors or circumstances that would cause us to incur
significant costs or liabilities in the future related to environmental, health
and safety law compliance.

LEGAL PROCEEDINGS

From time to time, we are a party to various legal actions arising in the
ordinary course of business. To the best of our knowledge, we have no material
legal proceedings currently pending or threatened.

42
<PAGE> 45

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information with respect to our executive
officers and directors as of October 30, 2000.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard L. Rowe...................... 51 Chief Executive Officer, Director
Robert F. Subia...................... 38 President, Chief Sales and Marketing Officer and Director
Tony L. Nicholls..................... 36 Executive Vice President, Chief Operating Officer
Chris J. Anton....................... 38 Executive Vice President, Finance and Chief Financial
Officer
Angelo M. Ninivaggi.................. 33 Executive Vice President, General Counsel and Corporate
Secretary
R. Stephen Cheheyl................... 55 Director
John A. Downer....................... 42 Chairman, Director
C. Nicholas Keating.................. 58 Director
Michael E. Najjar.................... 34 Director
Mark Rossi........................... 44 Director
</TABLE>

Richard L. Rowe was appointed our Chief Executive Officer in November 1999.
Prior to joining us, he held a number of senior management positions in
Honeywell, Inc. from 1977 to 1999, most recently serving, from December 1998 to
August 1999, as Vice President and General Manager of Honeywell-Measurex,
headquartered in Cupertino, California, with operations in Ireland, Germany,
Finland, Japan, Asia-Pacific and Latin America, along with six North America
operations. He has served on numerous boards, including the board of directors
of the Silicon Valley Manufacturing Group. Mr. Rowe holds a B.S. in Engineering
from the U.S. Military Academy at West Point, and an M.S. in Engineering
Management from George Washington University in Washington, D.C.

Robert F. Subia joined us from Micron Technology, Inc. in February 1993 as
Director of Sales. In November 1999, he was appointed and continues to serve as
President and Chief Sales and Marketing Officer. From April 1995 to November
1999, he served as our President and Chief Executive Officer. Mr. Subia holds a
B.S. in Business Administration with an emphasis in Marketing from Boise State
University.

Tony L. Nicholls joined us in October 2000 as our Executive Vice President,
Chief Operating Officer. From January 1999 until joining us, he served as Vice
President of Operations of Plexus Corp. From 1993 to January 1999, Mr. Nicholls
held a number of manufacturing and quality management positions at SCI Systems.
Mr. Nicholls holds a degree in Mechanical Engineering from South Dakota School
of Mines and Technology.

Chris J. Anton joined us in July 1996 and now serves as our Executive Vice
President, Finance and Chief Financial Officer. From July 1996 to October 1997,
he served as our Corporate Controller. He was appointed Vice President, Finance
and Chief Financial Officer in October 1997 and Executive Vice President,
Finance in September 2000. Prior to joining us, Mr. Anton served as the Chief
Financial Officer of Futura Corporation from February 1996 to July 1996. From
September 1994 to February 1996, he held the positions of President and General
Manager of Image National, Inc., and prior to joining Image National he served
as Vice President of Engineering and New Product Development at Morrison Knudsen
Corporation. Mr. Anton's background also includes five years of industry
experience in financial and technical positions with Hewlett Packard Company and
Micron Technology, Inc. Mr. Anton received a B.S. in Chemistry from the
University of Idaho and an M.B.A. from the Columbia University School of
Business.

43
<PAGE> 46

Angelo M. Ninivaggi joined us in January 1998 and now serves as our
Executive Vice President, General Counsel and Corporate Secretary. From January
1998 to September 1998, he served as our Chief Corporate Counsel. He was
appointed Corporate Secretary in May 1998, Vice President and General Counsel in
September 1998, and Executive Vice President in September 2000. From March 1996
until joining us, Mr. Ninivaggi served as Corporate Counsel with Micron
Electronics, Inc. Prior to Mr. Ninivaggi's employment with Micron Electronics,
Inc., he worked as an associate with the law firm of Weil, Gotshal & Manges in
New York. Mr. Ninivaggi holds a B.A. in Economics from Columbia University, an
M.B.A. in Finance from Fordham University, and a J.D. from Fordham University.

R. Stephen Cheheyl joined our board of directors in connection with the
recapitalization. Since his retirement in December 1995, Mr. Cheheyl has been a
private investor and independent consultant. From October 1994 to December 1995,
he served as Executive Vice President, Business Operations of Bay Networks,
Inc., which was formed through the merger of Wellfleet Communications, Inc. and
Synoptics Communications, Inc. From December 1990 to October 1994, Mr. Cheheyl
served as Senior Vice President of Finance and Administration of Wellfleet. He
also serves as a director of Sapient Corporation. Mr. Cheheyl received an A.B.
from Dartmouth College and an M.B.A. from Northwestern University.

John A. Downer joined our board of directors in connection with the
recapitalization and has been Chairman since September 2000. Since December
1996, Mr. Downer has served as a Managing Director of Cornerstone. From 1989 to
December 1996, Mr. Downer was a partner of various venture capital funds managed
by Prudential Equity Investors, Inc. Mr. Downer is also a director of several
privately held companies. Mr. Downer received an A.B., M.B.A. and J.D. from
Harvard University.

C. Nicholas Keating joined our board of directors in connection with the
recapitalization. Mr. Keating is currently the President, CEO and Director of IP
Fusion Inc., an Internet Protocol software developer. Mr. Keating has been an
independent business advisor since 1993 to a number of companies principally in
the networking, software, semiconductor and imaging industries. From February
1999 to January 2000, Mr. Keating was President and CEO of US Search.com Inc.
Mr. Keating was Vice President of Network Equipment Technologies, a wide area
networking company, from 1987 to 1993. Mr. Keating currently serves as a
Director of Energy Solutions International, a European systems company serving
the global energy market, and Foundry Networks, Inc., a supplier of high
performance networking products. Mr. Keating holds a B.A. and an M.A. from
American University and was a former Fulbright Scholar.

Michael E. Najjar joined our board of directors in connection with the
recapitalization. Mr. Najjar has served as a Managing Director of Cornerstone
since February 1997. From January 1996 to February 1997, Mr. Najjar was a
partner at Advanta Partners LP, a private equity firm. Prior to 1996, Mr. Najjar
worked in the Corporate Finance Department of Donaldson, Lufkin & Jenrette
Securities Corporation. Mr. Najjar is also a director of several privately held
companies. Mr. Najjar received a B.A. from Cornell University and an M.B.A. from
The Wharton School at the University of Pennsylvania.

Mark Rossi joined our board of directors in connection with the
recapitalization. Since December 1996, Mr. Rossi has served as a Managing
Director of Cornerstone Equity Investors, LLC. Prior to joining Cornerstone,
from 1994 to 1996, Mr. Rossi served as President of Prudential Equity Investors,
Inc. Mr. Rossi currently serves as Director of Maxwell Technologies, Inc.,
Centurion Wireless Technologies, Inc., Novatel Wireless, Inc., True Temper
Sports, Inc. and several other private companies. Mr. Rossi holds a B.A. from
Saint Vincent College and an M.B.A. from Northwestern University.

Following completion of this offering, we expect to appoint at least one
additional independent director.

DIRECTOR COMPENSATION

Our board members receive no remuneration for their services as directors.
We reimburse our directors for travel and lodging expenses, if any, incurred in
connection with attendance at Board meetings. On September 14, 2000, we granted
options for the purchase of 40,000 shares of our common stock to each of

44
<PAGE> 47

our five outside directors. Following this offering, directors who are not
employees of our company will receive compensation that is commensurate with
arrangements offered to directors of companies that are similar to our company.
Compensation arrangements for independent directors established by our board
could be in the form of cash payments, option grants or both.

COMMITTEES OF THE BOARD

Our board of directors has authority to appoint committees to perform
management and administration functions. Following this offering, the board will
continue to have an audit committee, a compensation committee and an executive
committee. The functions of the audit committee include reviewing the adequacy
of our system of internal accounting controls; reviewing the results of the
independent auditors' annual audit, including any significant adjustments,
management judgments and estimates, new accounting policies and disagreements
with management; reviewing our audited financial statements and discussing them
with management; reviewing the audit reports submitted by the independent
auditors; reviewing disclosures by independent auditors concerning relationships
with our company and the performance of our independent auditors and annual
recommending independent auditors; adopting and annually assessing our charter;
and preparing such reports or statements as may be required by the Nasdaq
National Market or the securities laws. Upon completion of this offering, the
audit committee will continue to include at least three independent directors.
The compensation committee reviews and makes recommendations to the board
regarding our compensation policies and all forms of compensation to be provided
to our executive officers and directors. In addition, the compensation committee
reviews bonus and stock compensation arrangements for all of our employees and
directors. Upon the completion of this offering, the compensation committee will
continue to consist of at least two non-employee directors (as defined in Rule
16b-3 under the Exchange Act). The functions of the executive committee include
the oversight of general corporate matters and approval of all major capital
expenditures. The executive committee consists of three members.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 2000, Mark Rossi and C. Nicholas Keating, each a
non-executive director of MCMS, served on our compensation committee. Mr. Rossi
is a managing director of Cornerstone Equity Investors, LLC, the sole general
partner of our largest shareholder. No interlocking relationship exists between
our compensation committee and the compensation committee of any other company.

EMPLOYMENT AGREEMENTS

During fiscal 2000, we entered into an employment agreement with Richard L.
Rowe governing the terms and conditions of Mr. Rowe's employment with us as our
Chief Executive Officer. During fiscal year 1999, we entered into employment
agreements with Richard Downing, David Garcia and Angelo M. Ninivaggi, which
provided for employment periods of two, three, and three years, respectively.
During fiscal year 1998 and in connection with the recapitalization, we entered
into employment agreements with each of Robert F. Subia and Chris J. Anton,
which provided for employment periods ending on the third anniversary date of
the closing of the recapitalization. As described below, Messrs. Downing and
Garcia are no longer employed by us. Under the employment agreements, the
individuals:

- receive an annual base salary (as set by our board of directors or
compensation committee but subject to minimum amount);

- are eligible to participate in all of our employee benefit programs for
which our senior executive employees are generally eligible, including
the 1998 Stock Option Plan;

- receive other employee benefits; and

- have employment periods which will automatically terminate upon
resignation, death or permanent disability or incapacity, or upon
termination by us, with or without cause.

45
<PAGE> 48

If we terminate the employment period without cause, or if we
constructively terminate the individual, the affected individual, in the case of
Messrs. Subia, Anton and Ninivaggi, is entitled to receive his base salary plus
all fringe benefits (but no bonuses) for 18 months following termination in the
case of Mr. Subia, and up to 12 months following termination for the other
individuals. If we terminate Mr. Rowe without cause, or if we constructively
terminate Mr. Rowe, Mr. Rowe is entitled to receive his base salary and health
and welfare benefits for 12 months following termination plus a pro rata bonus
based upon Mr. Rowe's duration of employment during the fiscal year in which his
employment terminated and our performance through the date of termination. If
the employment period terminates upon the individual's death or permanent
disability, the individual, in the case of Messrs. Subia, Anton, and Ninivaggi,
is entitled to receive his base salary for 12 months following such termination.
If the employment period terminates upon the individual's resignation (other
than if we constructively terminate) or incapacity, or is terminated by us for
cause, the individual will be entitled to receive his base salary through the
date of termination. Under the employment agreements, the individuals agree not
to:

- compete with us during the period in which he is employed by us and for
12 months thereafter in the case of Mr. Rowe, 18 months thereafter in the
case of Mr. Subia, and either 6 or 12 months thereafter for the other
individuals;

- disclose any confidential information;

- solicit or hire any of our employees or our subsidiary' employees during
the noncompete period; and

- induce or attempt to induce any of our customers, suppliers, licensees,
licensors, franchisees or other business relations to cease doing
business with us during the noncompete period.

In connection with Mr. Garcia's termination of employment in September
1999, we entered into a severance agreement and release, requiring among other
things, for a period of approximately 10 months following his employment
termination, that we continue to pay wages to Mr. Garcia and that he not compete
with us, solicit or hire our employees, or induce or attempt to induce any of
our customers, suppliers, licensees, licensors, franchisees or other business
relations to cease doing business with us. The scope of these conditions are
consistent with his employment agreement.

In connection with Mr. Downing's termination of employment in January 2000,
we entered into a severance agreement and release under which we paid wages to
Mr. Downing for two months following his employment termination.

EXECUTIVE COMPENSATION

The following table summarizes the annual and long-term compensation for
services in all capacities rendered to us for each of fiscal years 2000, 1999
and 1998, by those who served as (i) chief executive officer during fiscal years
1998, 1999 and 2000 and (ii) the four most highly compensated executive officers

46
<PAGE> 49

for the fiscal years ended 1998, 1999 and 2000. In this prospectus, we sometimes
refer to the individuals in this table as the "named executive officers."

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------------------------
------------------------------------------------ SECURITIES
SALARY BONUS OTHER COMPENSATION UNDERLYING ALL OTHER COM-
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) OPTIONS(#)(3) PENSATION($)(4)
--------------------------- ---- -------- --------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Rowe........... 2000 $222,115 $ -- $21,087 250,000 $ 503
Chief Executive Officer 1999 -- -- -- -- --
1998 -- -- -- -- --
Robert F. Subia........... 2000 250,000 135 29,326 37,500 1,717
President and Chief 1999 260,096 510 29,326 -- 1,741
Sales and Marketing 1998 245,051 1,226,686 36,107 250,000 4,700
Officer
Chris J. Anton............ 2000 156,153 135 18,191 15,000 1,615
Executive Vice President, 1999 154,903 879 16,621 -- 1,622
Finance and Chief 1998 130,616 37,506 5,250 145,000 3,408
Financial Officer
Angelo M. Ninivaggi(5).... 2000 135,077 135 15,902 -- 1,583
Executive Vice President, 1999 118,250 1,641 12,547 50,000 1,563
General Counsel and 1998 85,199 14,416 8,089 40,000 1,500
Corporate Secretary
Richard Downing(6)........ 2000 138,462 135 10,038 -- 1,068
President and Chief 1999 175,385 20,094 14,826 200,000 1,924
Operating Officer 1998 -- -- -- -- --
William Anderson(7)....... 2000 165,000 20,000 14,855 75,000 2,013
Vice President, 1999 -- -- -- -- --
Materials and Supply 1998 -- -- -- -- --
Chain Management
</TABLE>

------------
(1) In connection with the recapitalization, Robert F. Subia entered into an
agreement with Micron Electronics, Inc., effective as of the closing date of
the recapitalization, terminating his employment relationship with Micron
Electronics, Inc. Pursuant to the termination agreement, Mr. Subia received
a lump-sum payment of $1,026,223 in fiscal 1998.

(2) Represents amounts paid to named executive officers for accrued vacation
time.

(3) Fiscal year 1998 and 1999 options were issued pursuant to our 1998 Stock
Option Plan.

(4) Fiscal years 1998 and 1999 represent amounts paid on behalf of each of the
officers under our defined contribution plan.

(5) Mr. Ninivaggi was appointed Vice President, General Counsel and Corporate
Secretary effective September 1998.

(6) Mr. Downing was President and Chief Operating Officer of our company. Mr.
Downing's employment with us ceased on January 24, 2000.

(7)Mr. Anderson ceased to be an executive officer effective September 2000.

47
<PAGE> 50

The following table sets forth information regarding the options granted to
the named executive officers during fiscal year 2000 pursuant to our 1998 Stock
Option Plan.

OPTION GRANTS DURING FISCAL YEAR 2000

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR'S PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- -------------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Rowe(1)......... 250,000 23.8% 2.27 11/08/09 -- --
Robert F. Subia(1)......... 37,500 3.6% 2.27 11/08/09 -- --
Chris J. Anton(1).......... 15,000 1.4% 2.27 06/05/10 -- --
Angelo M. Ninivaggi........ -- -- -- -- -- --
Richard Downing............ -- -- -- -- -- --
William Anderson(1)........ 75,000 7.1% 2.27 08/23/09 -- --
</TABLE>

------------

(1)With respect to the options in this table, options under the plan are
subject to vesting based on time, performance or a combination of these
factors, as determined by the board of directors at the time of grant.

(2)All options were granted at an exercise price above the fair value of the
common stock.

1998 STOCK OPTION PLAN

In order to provide financial incentives for our senior executives and
other employees, the board of directors has adopted the 1998 Stock Option Plan
pursuant to which it will be able to grant options to purchase Class A common
stock to our senior executives and other employees of MCMS and its subsidiaries.
Under the plan, we will also be able to grant options to purchase Class A common
stock to our consultants. The plan provides for option grants representing
3,000,000 common stock, without giving effect to the reclassification being
effected immediately prior to the offering. Options under the plan are subject
to vesting based on time, performance or a combination of these factors, as
determined by the board of directors at the time of grant. Options granted to
other key employees vest over four years from the date of grant. As of October
31, 2000, we had 2,486,625 options outstanding under the plan, without giving
effect to the reclassification. Upon an employee's termination with us, all of
the employee's unvested options will expire and the exercise period of all the
employee's vested options will be reduced to a period ending no later than 30
days after such employee's termination. No future grants will be made under the
1998 Stock Option Plan upon the effectiveness of the 2000 Long-Term Equity
Incentive Plan.

2000 LONG-TERM EQUITY INCENTIVE PLAN

Prior to the closing of the offering, we will adopt the 2000 Long-Term
Equity Incentive Plan. The equity incentive plan provides for grants of stock
options, stock appreciation rights, restricted stock and performance awards.
Directors, officers and other employees of our company and its subsidiaries and
persons who engage in services for us are eligible for grants under the plan.
The purpose of the equity incentive plan is to provide these individuals with
incentives to maximize shareholder value and otherwise contribute to our success
and to enable us to attract, retain and reward the best available persons for
positions of responsibility.

We have set aside and reserved shares of common stock for
issuance under the equity incentive plan, subject to adjustment in the event of
a reorganization, stock split, merger or similar change in our corporate
structure or the outstanding shares of common stock. In the event of any of
these occurrences, we may make any adjustments we consider appropriate to, among
other things, the number and kind of shares, options or other property available
for issuance under the equity incentive plan or covered by grants previously
made under the plan.

48
<PAGE> 51

The following is a summary of the material terms of the equity incentive
plan, but does not include all of the provisions of the plan. For further
information about the plan, we refer you to the equity incentive plan, which we
have filed as an exhibit to the registration statement of which this prospectus
is a part.

Directors, officers and employees of our company and its subsidiaries, as
well as other individuals performing significant services for us, or to whom we
have extended an offer of employment, will be eligible to receive grants under
the equity incentive plan. However, only employees may receive grants of
incentive stock options. In each case, the compensation committee will select
the actual grantees.

Under the equity incentive plan, the compensation committee or the board
may award grants of incentive stock options conforming to the provisions of
Section 422 of the Internal Revenue Code, and other, non-qualified stock
options. The compensation committee will determine the exercise price of any
option in its discretion. However, the exercise price of any incentive option
may not be less than 100% of the fair market value of a share of common stock on
the date of grant, and the exercise price of an incentive option awarded to a
person who owns stock constituting more than 10% of our company's voting power
may not be less than 110% of such fair market value on such date.

The compensation committee will determine the term of each option in its
discretion. However, no term may exceed ten years from the date of grant or, in
the case of an incentive option granted to a person who owns stock constituting
more than 10% of the voting power of our company, five years from the date or
grant. In addition, all options under the equity incentive plan, whether or not
then exercisable, generally cease vesting when a grantee ceases to be a
director, officer or employee of, or to otherwise perform services for, our
company or its subsidiaries. Options generally expire 30 days after the date of
cessation of service, so long as the grantee does not compete with us during the
30-day period. In the event of death, disability or retirement, a grantee's
vested options will remain exercisable for up to 90 days after the date of
death, disability or retirement, while his or her unvested options may become
fully vested and exercisable in the discretion of the compensation committee.
Upon termination for cause, all options will terminate immediately.

The compensation committee may grant stock appreciation rights, or SARs,
alone or in tandem with stock options, subject to the terms and conditions it
determines under the equity incentive plan. SARs granted in tandem with options
become exercisable only when, to the extent and on the conditions that the
related options are exercisable, and they expire at the same time the related
options expire. The exercise of any option results in the immediate forfeiture
of any related SAR to the extent the option is exercised, and the exercise of an
SAR results in the immediate forfeiture of any related option to the extent the
SAR is exercised.

Upon exercise of an SAR the grantee will receive an amount in cash and/or
shares of common stock or other securities, equal to the difference between the
fair market value of a share of common stock on the date of exercise and the
exercise price of the SAR or, in the case of an SAR granted in tandem with
options, of the option to which the SAR relates, multiplied by the number of
shares as to which the SAR is exercised.

Under the equity incentive plan, the compensation committee may award
restricted stock subject to the conditions and restrictions, and for the
duration, which will generally be at least six months, that it determines in its
discretion. A grantee will be required to pay to us at least the aggregate par
value of any shares of restricted stock within ten days of the date of grant,
unless the shares are treasury shares. Unless the compensation committee
determines otherwise, upon death, disability or termination of employment or
service for any reason, all of a grantee's restricted stock as to which the
applicable restrictions have not lapsed will be forfeited immediately.

Under the equity incentive plan, the compensation committee may grant
performance awards, contingent upon achievement by the grantee, our company
and/or its subsidiaries or divisions of set goals and objectives regarding
specified performance criteria, such as return on equity, over a specified
performance cycle as designated by the compensation committee. Performance
awards may include specific dollar-value target awards, performance units, the
value of which is established by the compensation committee at the time of
grant, and/or performance shares, the value of which is equal to the fair market
value of a share of common stock on the date of grant. The value of a
performance award may be fixed or fluctuate on the basis of

49
<PAGE> 52

specified performance criteria. A performance award may be paid out in cash,
shares of common stock or both or other securities.

Unless the compensation committee determines otherwise, if a grantee ceases
to be a director, officer or employee of, or to otherwise perform services for,
our company and its subsidiaries prior to completion of a performance cycle,
because of termination within on year after a change in control of our company
or due to death, disability or retirement, the grantee will receive the portion
of the performance award payable to him or her based on achievement of the
applicable performance criteria over the elapsed portion of the performance
cycle. If termination of employment or service occurs for any other reason prior
to completion of a performance cycle, the grantee will become ineligible to
receive any portion of a performance award.

Unless the compensation committee determines otherwise, no award made under
the equity incentive plan will be transferable other than by will or the laws of
descent and distribution or to a grantee's family member by gift or a qualified
domestic relations order, and each award may be exercised only by the grantee,
his or her qualified family member transferee, or his or her executor,
administrator, guardian, or legal representative.

The board may amend or terminate the equity incentive plan in its
discretion, except that no amendment will become effective without prior
approval of our shareholders if such approval is necessary for continued
compliance with the performance-based compensation exception of Section 162(m)
of the Internal Revenue Code or any stock exchange listing requirements.
Furthermore, any termination may not materially and adversely affect any
outstanding rights or obligations under the equity incentive plan without the
affected participant's consent. If not previously terminated by the board, the
equity incentive plan will terminate on the tenth anniversary of its adoption.

The Revenue Reconciliation Act of 1933 limits the annual deduction a
publicly held company may take for compensation paid to its chief executive
officer or any of its four other highest compensated officers in excess of
$1,000,000 per year, excluding for this purpose compensation that is
"performance-based" within the meaning of Internal Revenue Code Section 162(m).
We intend that compensation realized upon the exercise of an option or SAR
granted under the plan be regarded as "performance-based" under Section 162(m)
and that such compensation be deductible without regard to the limits imposed by
Section 162(m) on compensation that is not "performance-based."

EMPLOYEE STOCK PURCHASE PLAN

The 2000 Employee Stock Purchase Plan is expected to be adopted by our
board of directors and our shareholders prior to the completion of this
offering. The stock purchase plan will be established to give employees desiring
to do so a convenient means of purchasing shares of common stock through payroll
deductions or lump sum cash payments. The stock purchase plan provides an
incentive to participate by permitting purchases at a discounted price. We
believe that ownership of stock by employees will foster greater employee
interest in the success, growth and development of our company.

50
<PAGE> 53

RELATED PARTY TRANSACTIONS

RECAPITALIZATION AGREEMENT

On February 26, 1998 we completed a recapitalization. Prior to the closing
of the recapitalization, we were a wholly owned subsidiary of MEI California,
Inc., a wholly owned subsidiary of Micron Electronics, Inc. Under the terms of
the amended and restated recapitalization agreement, a group of investors led by
Cornerstone Equity Investors acquired a controlling equity interest in us. In
order to complete the recapitalization, we arranged for additional financing in
the form of notes and redeemable preferred stock totaling $200.0 million. In
addition, we received cash equity contributions totaling $61.2 million, as
follows:

<TABLE>
<S> <C>
Cornerstone Equity Investors IV, L.P. ...................... $35,000,000
August Capital.............................................. 5,775,000
BT Investment Partners...................................... 13,400,000
Oak Investment Funds........................................ 5,775,000
Robert Subia................................................ 200,000
Chris Anton................................................. 100,000
C. Nicholas Keating......................................... 50,000
R. Stephen Cheheyl.......................................... 100,000
Other....................................................... 600,000
-----------
61,200,000
===========
</TABLE>

We used $264.5 million, comprised of proceeds from the investors' equity
investment and the issuance of notes and redeemable preferred stock and $3.3
million of cash on hand, to pay to MEI California $249.2 million to redeem a
portion of its outstanding equity interest, repay existing indebtedness and pay
related fees and expenses, which included approximately $11 million to
affiliates.

MANAGEMENT SERVICES AGREEMENT

In connection with the recapitalization, we entered into a five-year
management services agreement with Cornerstone Equity Investors pursuant to
which Cornerstone agreed to provide:

- general management services;

- assistance with the identification, negotiation and analysis of
acquisitions and dispositions;

- assistance with the negotiation and analysis of financial alternatives;
and

- other services agreed upon by us and Cornerstone.

In exchange for such services, Cornerstone receives an annual management fee of
$250,000, plus reasonable out-of-pocket expenses (payable quarterly) and a
transaction fee in an amount equal to 1.0% of the aggregate transaction value in
connection with the consummation of any material acquisition, divestiture,
financing or refinancing by us or any of it subsidiaries. In calendar years
1998, 1999 and 2000, we paid Cornerstone fees aggregating $2,960,000, $850,000
and $557,500, respectively. These fees reflected the 1998 and 1999 annual
management fees and the portion of the 2000 management fee paid to date, plus
transaction fees for our 1998 recapitalization and our February 1999 and
September 2000 refinancings. We believe that our agreement with Cornerstone is
on terms that are no less favorable than could be obtained with unaffiliated
third parties.

STOCKHOLDERS AGREEMENT

Upon the completion of the recapitalization, we and all of our
stockholders, including Cornerstone and MEI California entered into a
stockholders agreement. The stockholders agreement:

- requires that each of the parties thereto vote all of its voting
securities and take all other necessary or desirable actions to cause the
size of our Board of Directors to be established at seven members and to
cause three designees of Cornerstone to be elected to the Board of
Directors;

- grants us and Cornerstone a right of first refusal on any proposed
transfer of shares of our capital stock held by MEI California and any of
the other stockholders;

51
<PAGE> 54

- grants tag-along rights on some transfers of shares of our capital stock;
and

- requires the stockholders to consent to a sale of MCMS to an independent
third party if such sale is approved by some of the holders of the then
outstanding shares of our voting common stock.

The provisions of the Stockholders Agreement mentioned in all but the first
bullet point above will terminate upon completion of this offering. The
Stockholders Agreement will also be amended to allow the expansion of the Board
of Directors to eight members after this offering. The current Cornerstone
designees on the Board are Messrs. Downer, Najjar and Rossi.

REGISTRATION RIGHTS AGREEMENT

Upon the consummation of the recapitalization, we and all of our common
stockholders including Cornerstone and MEI California, entered into a
registration rights agreement. Under the agreement, the holders of a majority of
the Cornerstone registrable securities or registrable securities held by Bankers
Trust and/or its affiliates have the right, subject to customary conditions, to
require us to register any or all of their shares of our common stock under the
Securities Act at our expense. In addition, all holders of registrable
securities may require the inclusion of any shares of our common stock subject
to the registration rights agreement in any registration statement at our
expense whenever we propose to register any of our common stock under the
Securities Act. In connection with all such registrations, we agreed to
indemnify all holders of registrable securities against certain liabilities,
including liabilities under the Securities Act. These holders have waived their
right to include their shares in this registration statement.

STOCKHOLDER NOTES

Under a loan agreement with some of our stockholders dated February 29,
2000, we issued notes in the aggregate principal amount of $8.7 million. Under a
separate agreement with the same stockholders and some additional stockholders
dated August 29, 2000, we issued additional notes in the aggregate principal
amount of $15.0 million.

In connection with the $15.0 million aggregate principal of notes, we
issued warrants to purchase 500,000 shares of common stock for a price of $0.001
per share. On September 29, 2000 we repaid the stockholder notes in full
together with accrued interest. The following chart sets forth the amounts paid
to our significant stockholders, executive officers and directors and the number
of warrants held by each.

<TABLE>
<CAPTION>
WARRANTS
STOCKHOLDER AMOUNT PAID HELD
----------- ----------- --------
<S> <C> <C>
Cornerstone Equity Investors IV, L.P........................ $14,334,387 296,028
BT Investment Partners...................................... 5,488,023 113,336
Oak Investment Funds........................................ 1,896,120 48,845
August Capital, L.P......................................... 2,364,174 33,333
Robert Subia................................................ 51,195 1,692
Chris Anton................................................. 25,605 846
Stephen Cheheyl............................................. 25,598 846
Nicholas Keating............................................ 12,799 423
</TABLE>

SENIOR CREDIT FACILITY

An affiliate of Lehman Brothers Inc. is the lender of the $37.0 million
term loan B under our senior credit facility, which matures on August 26, 2004.
The loan bears interest at the lesser of PNC Bank's base rate plus 4.25% or the
one, two or three month LIBOR plus 6.50%. At the closing of the amended senior
credit facility, we paid Lehman Brothers a commitment fee of $1.3 million.

PATENT AND INVENTION DISCLOSURE ASSIGNMENT AND LICENSE AGREEMENT

In connection with the recapitalization, MCMS and Micron Electronics, Inc.
entered into a patent and invention disclosure assignment and license agreement.
Pursuant to this agreement, MEI assigned certain patents, patent applications
and invention disclosures to MCMS, and MCMS granted MEI and its affiliates a
non-exclusive, paid-up, worldwide license to practice the inventions covered by
the patents, patent applications and invention disclosures, including the right
to make, have made, use, offer for sale, sell and lease products

52
<PAGE> 55

that would otherwise infringe the patents. The agreement is perpetual but may be
terminated by either party on 90 days written notice in the event the other
party is in material breach and does not cure the breach within such 90 day
period. We believe this agreement is on terms that are no less favorable to us
than could be obtained with unaffiliated third parties.

KNOW-HOW LICENSE AGREEMENT

In connection with the recapitalization, MCMS and MEI entered into a
know-how license agreement pursuant to which MEI granted to MCMS a
non-exclusive, paid-up, worldwide license to use in its business any trade
secrets and know-how conceived by MCMS prior to the closing or utilized by MCMS
as of the closing which relate to its business. The know-how agreement will be
perpetual but may be terminated by either party on 90 days written notice in the
event the other party is in material breach and does not cure the breach within
such 90 day period. We believe this agreement is on terms that are no less
favorable to us than could be obtained with unaffiliated third parties.

FORBEARANCE AGREEMENT

In connection with the recapitalization, MCMS and Micron Technology, Inc.
entered into a forbearance agreement pursuant to which MTI agreed to forbear
from taking any action or instituting any claim or other legal proceeding
against MCMS or its subsidiaries with respect to their use of any MTI trade
secrets, know-how or technology that was developed in conjunction with, with the
input of or at the request of MTI and which was used by MCMS as of the closing
in the conduct of its business. The forbearance agreement does not apply to:

- certain semiconductor manufacturing, processing and packaging technology;

- the testing or assembly of semiconductor components for sale by MCMS
other than as part of a memory module; and

- technology developed by MCMS at MTI's request and expense for use in
association with the design, assembly and testing of products manufactured
by MCMS for MTI.

MCMS is not obligated under the forbearance agreement to make any payments
to MTI. The forbearance agreement will remain in effect until terminated by both
MTI and MCMS. We believe this agreement is on terms that are no less favorable
to us than could be obtained with unaffiliated third parties.

TRANSITION SERVICES AGREEMENT

In connection with the recapitalization, we entered into a transition
services agreement with MTI and MEI. Pursuant to the transition services
agreement, MTI and MEI agreed to provide a variety of services (including
payroll, financial accounting and benefits, among others) at prices set forth in
the transition services agreement for a period of six months after the closing
date, except that MTI agreed to provide us with services in connection with
certain proprietary MTI software for a period of 12 months. Pursuant to the
transition services agreement, we agreed to provide certain accounting and
software support services to MEI at prices set forth in the transition services
agreement for a period of six months after the closing date of the
recapitalization. In connection with the transition services agreement, MEI and
MTI have each granted MCMS a perpetual, royalty-free license to use certain of
their proprietary software and customized software applications in the operation
of our business. As of September 3, 1998, substantially all services under this
agreement were terminated. We believe this agreement is on terms that are no
less favorable to us than could be obtained with unaffiliated third parties.

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<PAGE> 56

PRINCIPAL STOCKHOLDERS

The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of October 31, 2000 and as adjusted
to reflect the sale of Class A common stock in this offering by:

- each stockholder known by us to own beneficially more than 5% of the
common stock;

- each of the named executive officers currently employed by us;

- each of our directors; and

- all of our directors and executive officers as a group.

The table below assumes no exercise of the underwriters' over-allotment
option. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after
October 31, 2000 are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to community property laws where applicable
and the address of each of the individuals listed in the table is MCMS, Inc., 83
Great Oaks Boulevard, San Jose, California 95119. As of October 31, 2000, there
were 8,581,223 shares of Class A common stock outstanding and 480,588 shares of
Class B common stock outstanding, each as adjusted to reflect the
reclassification to be effected immediately prior to this offering.

<TABLE>
<CAPTION>
SHARES OF CLASS B
SHARES OF CLASS A SHARES OF CLASS A COMMON STOCK
COMMON STOCK COMMON STOCK BENEFICIALLY OWNED
BENEFICIALLY OWNED BENEFICIALLY OWNED BEFORE AND AFTER
BEFORE OFFERING AFTER OFFERING OFFERING
------------------- ------------------- -------------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
PRINCIPAL STOCKHOLDERS --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Cornerstone Equity Investors IV,
L.P.(1).......................... 5,443,086 59.1% 5,443,086 -- --
c/o Cornerstone Equity Investors,
L.L.C.
717 Fifth Avenue (Suite 1100)
New York, New York 10022
BT Investment Partners(2,3)........ 490,000 5.3% 490,000 1,593,924 100%
130 Liberty Street
New York, New York 10006
Lehman Brothers Inc. .............. 1,000,000 10.9% 1,000,000 -- --
3 World Financial Center
New York, New York 10285
Oak Investment Funds(4,5).......... 898,109 9.8% 898,109 -- --
c/o Oak Investment Partners
525 University Avenue, Suite 1300
Palo Alto, California 94301
August Capital, L.P.(6)............ 882,597 9.6% 882,597 -- --
2480 Sand Hill Road, Suite 101
Menlo Park, California 94025
</TABLE>

54
<PAGE> 57

<TABLE>
<CAPTION>
SHARES OF SHARES OF CLASS B
CLASS A COMMON STOCK
SHARES OF CLASS A COMMON STOCK BENEFICIALLY
COMMON STOCK BENEFICIALLY OWNED BEFORE
BENEFICIALLY OWNED OWNED AFTER AND AFTER
BEFORE OFFERING OFFERING OFFERING
------------------- ----------------- ------------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
--------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Richard L. Rowe(7)....................... 33,854 * 33,854 -- --
Robert F. Subia(8)....................... 134,646 1.5% 134,646 -- --
Tony L. Nicholls......................... -- * -- -- --
Chris J. Anton(9)........................ 66,906 * 66,906 -- --
Angelo M. Ninivaggi(10).................. 41,875 * 41,875 -- --
R. Stephen Cheheyl(11)................... 15,552 * 15,552 -- --
John A. Downer(12)....................... -- 59.1% -- -- --
C. Nicholas Keating(13).................. 7,776 * 7,776 -- --
Michael E. Najjar(12).................... -- 59.1% -- -- --
Mark Rossi(12)........................... -- 59.1% -- -- --
Richard Downing(14)...................... -- -- -- -- --
William Anderson(15)..................... 12,500 * 12,500 -- --
All directors and executive officers as a
group (12 persons)(16)................. 5,756,195 62.5% 313,109 -- --
</TABLE>

------------
* Less than 1% of the outstanding shares of common stock.

(1) Includes 296,028 shares of Class A common stock issuable upon exercise of
warrants.

(2) Includes shares beneficially owned by Bankers Trust Company, an affiliate
of BT Investment Partners.

(3) Includes 113,336 shares of Class B common stock issuable upon exercise of
warrants.

(4) Includes shares owned by Oak VII Affiliate Fund and Oak Investment
Partners, which are affiliates of Oak Investment Funds. Mr. Frederic W.
Harman is a principal of Oak Investment Partners, and accordingly, may be
deemed to beneficially own shares owned by these entities. Mr. Harman
disclaims beneficial ownership of any of those shares in which he does not
have a pecuniary interest.

(5) Includes 48,845 shares of Class A common stock issuable upon exercise of
warrants.

(6) Includes 33,333 shares of Class A common stock issuable upon exercise of
warrants. Messrs. David Marquardt, John Johnston and Andy Rappaport are
principals of August Capital L.P. Accordingly, Messrs. Marquardt, Johnston
and Rappaport may be deemed to beneficially own shares owned by this
entity. Each such person disclaims beneficial ownership of any of those
shares in which he does not have a pecuniary interest.

(7) Reflects 33,854 shares of Class A common stock issuable upon exercise of
options.

(8) Includes 105,234 shares of Class A common stock issuable upon exercise of
options and warrants.

(9) Includes 52,200 shares of Class A common stock issuable upon exercise of
options and warrants.

(10) Reflects 41,875 shares of Class A common stock issuable upon exercise of
options.

(11)Includes 846 shares of Class A common stock issuable upon exercise of
warrants.

(12) Messrs. Downer, Rossi and Najjar are each managing directors of Cornerstone
Equity Investors, L.L.C., the sole general partner of Cornerstone Equity
Investors IV, L.P. Accordingly, Messrs. Downer, Najjar and Rossi may be
deemed to beneficially own shares owned by this fund. Each such person
disclaims beneficial ownership of any of those shares in which he does not
have a pecuniary interest.

(13)Includes 423 shares of Class A common stock issuable upon exercise of
warrants.

(14)Mr. Downing's employment with us ceased on January 24, 2000.

(15)Reflects 12,500 shares of Class A common stock issuable upon exercise of
options. Mr. Anderson ceased to be an executive officer effective September
2000.

(16) See Notes (1) through (11), (13) and (15). Includes an aggregate of 738,474
shares issuable upon the exercise of currently exercisable options and
warrants held by Cornerstone and our executive officers and directors.

55
<PAGE> 58

DESCRIPTION OF INDEBTEDNESS

GENERAL MATTERS

As of August 31, 2000, we had approximately $217.2 million of total
indebtedness.

SENIOR CREDIT FACILITY

We have an amended credit agreement with a group of lending institutions,
including PNC Bank, as a lender and administrative agent for the other lenders,
providing for a $125 million credit facility, which includes:

- a $70 million revolving credit facility;

- a $10 million equipment loan facility, restricted to the purchase of
qualifying property, plant and equipment;

- an $8 million term loan A; and

- a $37 million term loan B.

Borrowings under the credit agreement mature on August 26, 2004 and bear
interest at a rate of:

- the lesser of the PNC Bank's base rate plus 0.50% or the one, two or
three month LIBOR plus 2.75% for the amounts outstanding under the
revolving facility,

- the lesser of PNC's base rate plus 0.75% or the one, two or three month
LIBOR plus 3.00% for the amounts outstanding under the equipment facility,

- the lesser of PNC's base rate plus 1.25% or the one, two or three month
LIBOR plus 3.50% for the amounts outstanding under term loan A; and

- the lesser of PNC's base rate plus 4.25% or the one, two or three month
LIBOR plus 6.50% for the amounts outstanding under the term loan B.

Amounts available to borrow under the revolving credit facility vary
depending on accounts receivable and inventory balances, which serve as
collateral along with substantially all of our other assets. The credit facility
includes a quarterly commitment fee of 0.375% per annum based upon the average
unused portion and contains customary covenants such as restrictions on capital
expenditures, additional indebtedness and the payment of dividends. The credit
facility contains customary restrictions on our ability to incur additional
indebtedness or guarantee the indebtedness of others, create liens on our
assets, enter into business combinations, liquidate or dissolve, dispose of
assets other than in ordinary course of business, declare or pay cash dividends,
issue preferred stock, make capital expenditures in excess of established
limits, restrict the ability of our subsidiaries to make distributions to us,
engage in unrelated lines of business or enter into hedging agreements other
than in the ordinary course of business.

FIXED RATE NOTES

We issued $145 million of unsecured fixed rate notes under an Indenture
dated February 26, 1998 with United States Trust Company of New York, as
trustee. The notes mature March 1, 2008; however, we may redeem them any time
after March 1, 2003. Interest accrues at the rate of 9.75% per year and is due
semi-annually. The redemption rate, if redeemed during the twelve month period
commencing on March 1, decreases from 104.875% in 2003 to 100% in 2006
(expressed as percentages of the principal amount thereof). The notes contain
restrictive covenants on our ability to incur additional indebtedness, make
restricted payments, sell assets and pay dividends. The holders can require us
to purchase the notes at a purchase price of 101% of the principal amount if we
undergo a change of control.

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<PAGE> 59

FLOATING RATE NOTES

We issued $30 million of unsecured floating rate notes under an Indenture
dated February 26, 1998 with United States Trust Company of New York, as
trustee. The notes mature March 1, 2008 and bear interest (which is reset
semi-annually) per annum equal to LIBOR plus 4.625%. The redemption rate, if
redeemed during the twelve month period starting on March 1, decreases from 105%
in 1998 to 100% in 2003 (expressed as percentages of the principal amount
thereof). The notes contain restrictive covenants on our ability to incur
additional indebtedness, make restricted payments, sell assets and pay
dividends. The holders can require us to purchase the notes at a purchase price
of 101% of the principal amount if we undergo a change of control.

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<PAGE> 60

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

Upon completion of this offering, the total amount of our authorized
capital stock will consist of shares of common stock, par value
$0.01, and shares of one or more additional series of preferred
stock, par value $0.01.

After giving effect to this offering, we will have shares of
Class A common stock ( shares if the underwriters' over-allotment
option is exercised in full) and 1,480,588 shares of Class B common stock
outstanding. As of September 15, 2000, we had 15 stockholders of record with
respect to our common stock. The following summary of provisions of our capital
stock after giving effect to this offering describes all material provisions of,
but does not purport to be complete and is subject to, and qualified in its
entirety by, our certificate of incorporation and our bylaws, which are included
as exhibits to the registration statement of which this prospectus forms a part.

Our certificate and bylaws contain provisions that are intended to enhance
the likelihood of continuity and stability in the composition of the board of
directors and which may have the effect of delaying, deferring or preventing a
future takeover or change in control of us unless such takeover or change in
control is approved by our board of directors.

The following description of our capital stock and the provisions of our
restated certificate of incorporation and bylaws is made on the assumption that
the transactions and offering described in this prospectus have been given
effect.

CLASS A COMMON STOCK

The issued and outstanding shares of common stock are validly issued, fully
paid and nonassessable. Subject to the prior rights of the holders of any series
of preferred stock, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the board of directors may from time to time
determine. The shares of common stock are not convertible and the holders
thereof have no preemptive or subscription rights to purchase any of our
securities. Upon our liquidation, dissolution or winding up, the holders of
common stock are entitled to receive, pro rata, our assets which are legally
available for distribution, after payment of all debts and other liabilities and
subject to the prior rights of any holders of any series of preferred stock then
outstanding. Each outstanding share of common stock is entitled to one vote on
all matters submitted to a vote of stockholders. There is no cumulative voting.
Except as otherwise required by law or the restated certificate, the holders of
our common stock and the holders of any series of our preferred stock vote
together as a single class on all matters submitted to a vote of stockholders.

We have applied to have the Class A common stock approved for inclusion on
the Nasdaq National Market under the symbol "MCMS."

CLASS B COMMON STOCK

The holders of our Class B common stock will be entitled to the same
rights, privileges, benefits and notices as the holders of Class A common stock,
except the holders of Class B common stock will:

- not be entitled to vote, except as required by law; and

- be able to convert their shares into Class A common stock on a
share-for-share basis at any time.

REDEEMABLE PREFERRED STOCK

We had 340,619 shares of 12 1/2% Series B Senior Exchangeable Preferred
Stock outstanding as of August 31, 2000. The redeemable preferred stock is
redeemable in whole or in part within 120 days of the consummation of this
offering or at any time on or after March 1, 2003, but must be redeemed no later
than March 1, 2010. The holders of the redeemable preferred stock are entitled
to a cumulative 12 1/2% annual

58
<PAGE> 61

dividend, payable quarterly. All of the redeemable preferred stock is being
redeemed with the proceeds of this offering.

OTHER PREFERRED STOCK

Our board of directors may, without further action by our stockholders,
from time to time, direct the issuance of shares of any series of preferred
stock and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of any series of preferred stock would reduce the amount of
funds available for the payment of dividends on shares of common stock. Holders
of shares of any series of preferred stock may be entitled to receive a
preference payment in the event of our liquidation, dissolution or winding-up
before any payment is made to the holders of shares of our common stock. The
issuance of shares of a series of preferred stock may render more difficult or
tend to discourage a merger, tender offer or proxy contest, the assumption of
control by a holder of a large block of our securities or the removal of
incumbent management. Upon the affirmative vote of a majority of the total
number of directors then in office, our board of directors, without stockholder
approval, may issue shares of a series of preferred stock with voting and
conversion rights which could adversely affect the holders of shares of common
stock. Following completion of this offering, there will be no shares of any
series of preferred stock outstanding.

WARRANTS TO PURCHASE COMMON STOCK

There are currently warrants to purchase 500,000 shares of common stock
outstanding. The warrants have an exercise price of $2.27 and are exercisable
until August 29, 2005.

OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

The certificate of incorporation provides for the board to be divided into
three classes, as nearly equal in number as possible, serving staggered terms.
Approximately one-third of the board will be elected each year. The provision
for a classified board could prevent a party who acquires control of a majority
of the outstanding voting stock from obtaining control of the board until the
second annual shareholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could have the effect
of discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of our company and could increase the likelihood
that incumbent directors will retain their positions.

The certificate of incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. Only the board of directors will be
permitted to fill vacancies on the board of directors and stockholders will only
be permitted to remove a director for cause.

The certificate of incorporation contains a "fair price" provision pursuant
to which any business combination involving an interested stockholder and us or
any subsidiary of ours would require approval by the affirmative vote of the
holders of at least 95% of the shares of our voting stock. The fair price
provision of our certificate of incorporation provides that 95% stockholder vote
is not required if the business combination is approved by 70% of the continuing
directors or if other procedures and price requirements are satisfied. Instead,
the vote, if any, required by applicable Delaware law or by any other provision
of the certificate of incorporation would be necessary.

The by-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of our stockholders. Stockholders at an
annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of the
board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to our
secretary written notice no later than 60 days and no more than 90 days before
the meeting, in proper form, of the stockholder's intention to bring that
business before the meeting. The by-laws may have the effect of precluding the
conduct of business at a meeting if the proper

59
<PAGE> 62

procedures are not followed or may discourage or defer a potential acquiror from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of MCMS.

PROVISIONS OF DELAWARE LAW GOVERNING BUSINESS COMBINATIONS

Following the consummation of this offering, we will be subject to the
"Business Combination" provisions of the Delaware General Corporation Law. In
general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless:

- the transaction is approved by the board of directors prior to the date
the "interested stockholder" obtained such status;

- upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or

- on or subsequent to such date, the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."

A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns 15% or more of a corporation's voting stock or within three
years did own 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts with
respect to MCMS and, accordingly, may discourage attempts to acquire MCMS.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The certificate of incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the certificate of incorporation provides that we will indemnify our directors
and officers to the fullest extent permitted by the Delaware General Corporation
Law.

We have also entered into indemnification agreements with our directors and
executive officers containing provisions which may require us, among other
things, to indemnify our directors and executive officers against various
liabilities that may arise by virtue of their status or service as directors or
officers and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling MCMS pursuant to the foregoing provisions or
otherwise, MCMS has been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.

At the present time, there is no pending litigation or proceeding involving
any director, officer, employee or agent of MCMS as a result of which
indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation.

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<PAGE> 63

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there was no market for our common stock. We can
make no predictions as to the effect, if any, that sales of our shares of common
stock or the availability of our shares of common stock for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
significant amounts of our common stock in the public market, or the perception
that such sales may occur, could adversely affect prevailing market prices.

SALE OF RESTRICTED SHARES

Upon completion of this offering, we will have shares of
common stock outstanding. In addition, as of October 31, 2000, 2,486,625 shares
of common stock are issuable upon the exercise of outstanding stock options. Of
the shares outstanding after the offering, shares of common stock
( shares if the underwriters' over-allotment is exercised in full)
are freely tradeable without restriction under the Securities Act, except for
any such shares which may be held or acquired by an "affiliate" of MCMS, as that
term is defined in Rule 144 promulgated under the Securities Act, which shares
will be subject to the volume limitations and other restrictions of Rule 144
described below. An aggregate of 9,053,584 shares of common stock held by our
existing stockholders upon completion of the offering will be "restricted
securities" (as that phrase is defined in Rule 144) and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from such registration, including among others, the exemptions provided by Rule
144.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, if a period of at least one year has elapsed since
the later of the date the "restricted securities" were acquired from us or the
date they were acquired from an affiliate, then the holder of such restricted
securities (including an affiliate) is entitled to sell in the public market a
number of shares within any three-month period that does not exceed the greater
of 1% of the then outstanding shares of the common stock (approximately
shares immediately after this offering) or the average weekly
reported volume of trading of the common stock on the Nasdaq National Market
during the four calendar weeks preceding such sale. The holder may only sell
such shares through "brokers' transactions" or in transactions directly with a
"market maker" (as such terms are defined in Rule 144). Sales under Rule 144 are
also subject to requirements regarding providing notice of such sales and the
availability of current public information concerning us. Affiliates may sell
shares not constituting restricted securities in accordance with the foregoing
volume limitations and other requirements but without regard to the one-year
holding period.

Under Rule 144(k), if a period of at least two years has elapsed between
the later of the date restricted securities were acquired from us or the date
they were acquired from an affiliate, as applicable, a holder of such restricted
securities who is not an affiliate at the time of the sale and has not been an
affiliate for at least three months prior to the sale would be entitled to sell
the shares in the public market without regard to the volume limitations and
other restrictions described above. Beginning 90 days after the date of this
prospectus, approximately shares of common stock will be eligible
for sale in the public market pursuant to Rule 144(k).

Securities issued in reliance on Rule 701, such as shares of common stock
acquired upon exercise of certain options granted under our stock plans, are
also restricted and, beginning 90 days after the effective date of this
prospectus, may be sold by stockholders other than affiliates of MCMS subject
only to the manner of sale provisions of Rule 144 and by affiliates under Rule
144 without compliance with its one-year holding period requirement.

OPTIONS

We intend to file registration statements on Form S-8 under the Securities
Act to register approximately shares of common stock issued and
issuable under our stock plans. We expect to file these registration statements
within six months of the effective date of the registration statement of which
this prospectus is a part and will be effective upon filing. Shares issued upon
the exercise of stock options after the effective date of the Form S-8
registration statements will be eligible for resale in the public market without
restriction, subject to Rule 144 limitations applicable to affiliates and the
lock-up agreements described below.

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<PAGE> 64

UNDERWRITING

We are offering the shares of Class A common stock described in this
prospectus through a number of underwriters. Banc of America Securities LLC is
the representative of the underwriters. We have entered into an underwriting
agreement with the representative. Subject to the terms and conditions of the
underwriting agreement, we have agreed to sell to the underwriters, and each of
the underwriters has agreed to purchase, the number of shares of Class A common
stock listed next to its name in the following table:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Banc of America Securities LLC..............................
--------
Total.............................................
========
</TABLE>

The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters
also may allow, and any other dealers may reallow, a concession of not more than
$ per share to some other dealers. If all the shares are not sold at the
initial public offering price, the underwriters may change the offering price
and the other selling terms. The Class A common stock is offered subject to a
number of conditions, including:

- receipt and acceptance of our Class A common stock by the underwriters;
and

- the right to reject orders in whole or in part.

We have granted an option to the underwriters to buy up to
additional shares of Class A common stock. These additional shares would cover
sales of shares by the underwriters which exceed the number of shares specified
in the table above. The underwriters have 30 days to exercise this option. If
the underwriters exercise this option, they will each purchase additional shares
approximately in proportion to the amounts specified in the table above.

We and some of our stockholders and optionholders and all of our officers
and directors have entered into lock-up agreements with the underwriters. Under
those agreements, subject to customary exceptions, we and those holders of stock
and options may not dispose of or hedge any common stock or securities
convertible into or exchangeable for shares of common stock. These restrictions
will be in effect for a period of 180 after the date of this prospectus. At any
time and without notice, Banc of America Securities LLC may, in its sole
discretion, release all or some of the securities from these lock-up agreements.

We will indemnify the underwriters against some liabilities, including some
liabilities under the Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters may be required
to make in respect of those liabilities.

We have applied to have our shares of Class A common stock approved for
listing on the Nasdaq National Market under the symbol "MCMS."

In connection with this offering, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include:

- short sales;

- stabilizing transactions; and

- purchases to cover positions created by short sales.

Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. "Covered" short sales
are sales made in an amount not greater than the underwriters' "overallotment"
option to purchase additional shares in the offering. The underwriters may close
out any covered short position by either exercising their overallotment option
or purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to

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<PAGE> 65

the price at which they may purchase shares through the overallotment option.
"Naked" short sales are sales in excess of the overallotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the shares in the open market after pricing that could adversely affect
investors who purchase in the offering. Similar to other purchase transactions,
the underwriters' purchase to cover the syndicate short sales may have the
effect of raising or maintaining the market price of the issuer's stock or
preventing or retarding a decline in the market price of issuers' stock. As a
result, the price of the issuer's stock may be higher than the price that might
otherwise exist in the open market.

The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.

The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the Class A common stock, including:

- over-allotment;

- stabilization;

- syndicate covering transactions; and

- imposition of penalty bids.

As a result of these activities, the price of the Class A common stock may
be higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National Market,
in the over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of Class A common stock offered by this
prospectus.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be negotiated between us and the
underwriters. Among the factors to be considered in such negotiations are:

- our history and prospects, and the history and prospectus of the industry
in which we compete;

- our past and present financial performance;

- an assessment of our management;

- the present state of our development;

- our prospects for future earnings;

- the prevailing market conditions of the applicable U.S. securities market
at the time of this offer;

- market valuations of publicly traded companies that we and the
representatives believe to be comparable to us; and

- other factors deemed relevant.

The underwriters have reserved up to shares of the Class A common
stock sold in this offering for sale to some of our employees, directors,
officers, current stockholders and their associates and to other individuals or
companies who have commercial arrangements or personal relationships with us, at
the initial public offering price set forth on the cover page of this
prospectus. Such persons must commit to purchase no later than the close of
business on the day following the date of this prospectus. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase these reserved shares. The reserved shares will not be subject
to any lock-up agreements with the underwriters.

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<PAGE> 66

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Kirkland & Ellis, New York, New York. Some partners of Kirkland & Ellis are
partners in Randolph Street Partners, which owns 58,824 shares of Class A common
stock. Legal matters will be passed upon for the underwriters by Willkie Farr &
Gallagher, New York, New York.

EXPERTS

The financial statements and schedule of MCMS, Inc. as of September 2,
1999, September 3, 1998 and August 31, 2000 and for the years then ended, have
been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 with
respect to the shares offered hereby. This prospectus, which constitutes a part
of the registration statement, does not contain all of the information set forth
in the registration statement or the exhibits and schedules which are part of
the registration statement. For further information about us and our shares, you
should refer to the registration statement. Any statements made in this
prospectus as to the contents of any contract, agreement or other document are
necessarily incomplete. With respect to each such contract, agreement or other
document filed as an exhibit to the registration statement we refer you to the
exhibit for a more complete description of the matter involved, and each
statement in this prospectus shall be deemed qualified in its entirety by this
reference.

You may read and copy all or any portion of the registration statement or
any reports, statements or other information in the files at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C., 20549 and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee by writing to the SEC. You may
call the SEC at 1-800-SEC-0330 for further information on the operation of its
public reference rooms. Our filings, including the registration statement, will
also be available to you on the Internet site maintained by the SEC at
http://www.sec.gov.

We also file annual, quarterly and current reports, proxy statements and
other information with the SEC. You can request copies of these documents, for a
copying fee, by writing to the SEC. We intend to furnish our stockholders with
annual reports containing financial statements audited by our independent
auditors.

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<PAGE> 67

MCMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE II

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Consolidated Financial Statements:
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of August 31, 2000 and
September 2, 1999...................................... F-3
Consolidated Statements of Operations for the Fiscal Years
Ended August 31, 2000, September 2, 1999 and September
3, 1998................................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit)
and Comprehensive Loss for the Fiscal Years Ended
August 31, 2000, September 2, 1999 and September 3,
1998................................................... F-5
Consolidated Statements of Cash Flows for the Fiscal Years
Ended August 31, 2000, September 2, 1999 and September
3, 1998................................................ F-8
Notes to Consolidated Financial Statements................ F-9
Schedule II -- Valuation and Qualifying Accounts for the
fiscal years August 31, 2000, September 2, 1999 and
September 3, 1998......................................... F-24
</TABLE>

F-1
<PAGE> 68

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors
MCMS, Inc.

We have audited the accompanying consolidated balance sheets of MCMS, Inc.
and subsidiaries as of August 31, 2000 and September 2, 1999, and the related
consolidated statements of operations, shareholders' equity (deficit) and
comprehensive loss and cash flows for each of the years in the three-year period
ended August 31, 2000. In connection with our audits of the consolidated
financial statements, we also audited the financial statement schedule as listed
in the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MCMS, Inc.
and subsidiaries as of August 31, 2000 and September 2, 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended August 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

KPMG LLP

Denver, Colorado

October 20, 2000

F-2
<PAGE> 69

MCMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
AS OF
--------------------------
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
Current Assets
Trade accounts receivable, net of allowances for doubtful
accounts of $215 and $258, respectively................... $ 62,114 $ 49,469
Inventories................................................. 89,537 43,975
Other current assets........................................ 1,947 970
--------- ---------
Total current assets............................... 153,598 94,414
Property, plant and equipment, net.......................... 57,657 64,618
Other assets................................................ 6,247 7,510
--------- ---------
Total assets....................................... $ 217,502 $ 166,542
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses....................... $ 107,543 $ 57,355
Interest payable............................................ 9,419 334
Advance payment from customer............................... 5,000 --
Current portion of long-term debt........................... 1,551 322
--------- ---------
Total current liabilities.......................... 123,513 58,011
Long-term debt, net of current portion...................... 192,299 206,957
Long-term debt -- shareholders.............................. 23,326 --
Other liabilities........................................... 3,183 2,804
--------- ---------
Total liabilities.................................. 342,321 267,772
Redeemable preferred stock, no par value, 750,000 shares
authorized; 340,619 and 301,179 shares issued and
outstanding, respectively; mandatory redemption value of
$34.1 and $30.1 million, respectively..................... 33,295 29,267
--------- ---------
SHAREHOLDERS' DEFICIT
Series A convertible preferred stock, par value $0.001 per
share, 6,000,000 shares authorized; 3,261,177 shares
issued; aggregate liquidation preference of $36,949,135... 3 3
Series B convertible preferred stock, par value $0.001 per
share, 6,000,000 shares authorized; 863,823 shares issued;
aggregate liquidation preference of $9,787,115............ 1 1
Series C convertible preferred stock, par value $0.001 per
share, 1,000,000 shares authorized; 874,999 shares issued
and outstanding; aggregate liquidation preference of
$9,913,739................................................ 1 1
Class A common stock, par value $0.001 per share, 30,000,000
shares authorized; 3,322,990 and 3,296,490 shares issued,
respectively.............................................. 3 3
Class B common stock, par value $0.001 per share, 12,000,000
shares authorized; 863,823 shares issued and
outstanding............................................... 1 1
Class C common stock, par value $0.001 per share, 2,000,000
shares authorized; 874,999 shares issued and
outstanding............................................... 1 1
Additional paid-in capital.................................. 56,211 59,806
Accumulated other comprehensive loss........................ (2,577) (2,207)
Deficit..................................................... (211,706) (188,056)
Less treasury stock at cost:
Series A convertible preferred stock, 3,676 shares........ (42) (42)
Class A common stock, 4,551 and 3,676 shares,
respectively............................................ (10) (8)
--------- ---------
Total shareholders' deficit........................ (158,114) (130,497)
--------- ---------
Commitments and contingencies (Note 14)
Subsequent Event (Note 18)
Total liabilities and shareholders' deficit........ $ 217,502 $ 166,542
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.
F-3
<PAGE> 70

MCMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Net sales.............................................. $ 472,448 $ 432,715 $ 333,920
Cost of goods sold..................................... 449,957 407,354 303,251
--------- --------- ---------
Gross profit........................................... 22,491 25,361 30,669
Selling, general and administrative expenses........... 23,940 22,491 15,798
--------- --------- ---------
Income (loss) from operations.......................... (1,449) 2,870 14,871
Other expense:
Interest, net........................................ 22,038 19,652 9,212
Transaction expenses................................. -- 45 8,398
--------- --------- ---------
Loss before taxes and extraordinary item............... (23,487) (16,827) (2,739)
Income tax provision (benefit)......................... 163 (3,497) (930)
--------- --------- ---------
Loss before extraordinary item......................... (23,650) (13,330) (1,809)
--------- --------- ---------
Extraordinary item -- loss on early extinguishment of
debt, net of income tax benefit of $403.............. -- (617) --
--------- --------- ---------
Net loss............................................... (23,650) (13,947) (1,809)
Redeemable preferred stock dividends and accretion of
preferred stock discount............................. (4,029) (3,592) (1,650)
--------- --------- ---------
Net loss to common stockholders........................ $ (27,679) $ (17,539) $ (3,459)
========= ========= =========
Net loss per common share -- basic and diluted:
Loss before extraordinary item....................... $ (5.49) $ (3.38) $ (1.36)
Extraordinary item................................... -- (.12) --
--------- --------- ---------
Net loss per common share.............................. $ (5.49) $ (3.50) $ (1.36)
========= ========= =========
Weighted average common shares outstanding -- basic and
diluted:............................................. 5,041,001 5,008,598 2,534,183
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 71

MCMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREFERRED STOCK
--------------------------------------------------------
SERIES A SERIES B SERIES C
($0.001 PAR) ($0.001 PAR) ($0.001 PAR)
------------------ ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance as of August 28, 1997............. -- -- -- -- -- --
Comprehensive Income:
Net loss............................. -- -- -- -- -- --
Foreign currency translation
adjustment......................... -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- --
Capital contribution.................... -- -- -- -- -- --
Redemption of common stock and
recapitalization..................... 500,000 1 -- -- -- --
Issuance of Series A and B and C
preferred stock...................... 2,761,177 2 863,823 1 874,999 1
Issuance of Class A and B and C common
stock................................ -- -- -- -- -- --
Preferred stock dividends............... -- -- -- -- -- --
--------- -- ------- -- ------- --
Balance as of September 3, 1998........... 3,261,177 3 863,823 1 874,999 1
Comprehensive Income:
Net loss............................. -- -- -- -- -- --
Foreign currency translation
adjustment......................... -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- --
Issuance of Class A common stock........ -- -- -- -- -- --
Treasury stock purchases................ -- -- -- -- -- --
Preferred stock dividends............... -- -- -- -- -- --
Accretion of preferred stock discount... -- -- -- -- -- --
--------- -- ------- -- ------- --
Balance as of September 2, 1999........... 3,261,177 3 863,823 1 874,999 1
Comprehensive Income:
Net loss............................. -- -- -- -- -- --
Foreign currency translation
adjustment......................... -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- --
Issuance of Class A common stock........ -- -- -- -- -- --
Treasury stock purchases................ -- -- -- -- -- --
Preferred stock dividends............... -- -- -- -- -- --
Accretion of preferred stock discount... -- -- -- -- -- --
--------- -- ------- -- ------- --
Balance as of August 31, 2000............. 3,261,177 $3 863,823 $1 874,999 $1
========= == ======= == ======= ==
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 72

MCMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------------------------
CLASS A CLASS B CLASS C
($0.001 PAR) ($0.001 PAR) ($0.001 PAR) ($0.001 PAR)
--------------- ------------------ ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ --------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of August 28, 1997...... 1,000 -- -- -- -- -- -- --
Comprehensive Income:
Net loss....................... -- -- -- -- -- -- -- --
Foreign currency translation
adjustment................... -- -- -- -- -- -- -- --
Comprehensive loss........... -- -- -- -- -- -- -- --
Capital contribution............. -- -- -- -- -- -- -- --
Redemption of common stock and
recapitalization............... (1,000) -- 500,000 1 -- -- -- --
Issuance of Series A and B and C
preferred stock................ -- -- -- -- -- -- -- --
Issuance of Class A and B and C
common stock................... -- -- 2,761,177 2 863,823 1 874,999 1
Preferred stock dividends........ -- -- -- -- -- -- -- --
------ -- --------- -- ------- -- ------- --
Balance as of September 3, 1998.... -- -- 3,261,177 3 863,823 1 874,999 1
Comprehensive Income:
Net loss....................... -- -- -- -- -- -- -- --
Foreign currency translation
adjustment................... -- -- -- -- -- -- -- --
Comprehensive loss........... -- -- -- -- -- -- -- --
Issuance of Class A common
stock.......................... -- -- 35,313 -- -- -- -- --
Treasury stock purchases......... -- -- -- -- -- -- -- --
Preferred stock dividends........ -- -- -- -- -- -- -- --
Accretion of preferred stock
discount....................... -- -- -- -- -- -- -- --
------ -- --------- -- ------- -- ------- --
Balance as of September 2, 1999.... -- -- 3,296,490 3 863,823 1 874,999 1
Comprehensive Income:
Net loss....................... -- -- -- -- -- -- --
Foreign currency translation
adjustment................... -- -- -- -- -- -- -- --
Comprehensive loss........... -- -- -- -- -- -- -- --
Issuance of Class A common
stock.......................... -- -- 26,500 -- -- -- -- --
Treasury stock purchases......... -- -- -- -- -- -- -- --
Preferred stock dividends........ -- -- -- -- -- -- -- --
Accretion of preferred stock
discount....................... -- -- -- -- -- -- -- --
------ -- --------- -- ------- -- ------- --
Balance as of August 31, 2000...... -- $-- 3,322,990 $3 863,823 $1 874,999 $1
====== == ========= == ======= == ======= ==
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 73

MCMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND

COMPREHENSIVE LOSS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED TOTAL
(BALANCE ADDITIONAL OTHER RETAINED SHAREHOLDERS'
FORWARD) PAID-IN COMPREHENSIVE EARNINGS TREASURY EQUITY
AMOUNT CAPITAL LOSS (DEFICIT) SHARES (DEFICIT)
-------- ---------- ------------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of August 28, 1997......... $-- 35,813 (630) 43,008 -- 78,191
Comprehensive Income:
Net loss.......................... -- -- -- (1,809) -- (1,809)
Foreign currency translation
adjustment...................... -- -- (1,640) -- -- (1,640)
---------
Comprehensive loss.............. -- (3,449)
Capital contribution................ -- 1,786 -- -- -- 1,786
Redemption of common stock and
recapitalization.................. 2 (33,841) -- (215,308) -- (249,147)
Issuance of Series A and B and C
preferred stock................... 4 50,996 -- -- -- 51,000
Issuance of Class A and B and C
common stock...................... 4 10,196 -- -- -- 10,200
Preferred stock dividends........... -- (1,632) -- -- -- (1,632)
--- -------- ------- --------- ---- ---------
Balance as of September 3, 1998....... 10 63,318 (2,270) (174,109) -- (113,051)
Comprehensive Income:
Net loss.......................... -- -- -- (13,947) -- (13,947)
Foreign currency translation
adjustment...................... -- -- 63 -- -- 63
---------
Comprehensive loss.............. -- (13,884)
Issuance of Class A common stock.... -- 80 -- -- -- 80
Treasury stock purchases............ -- -- -- -- (50) (50)
Preferred stock dividends........... -- (3,509) -- -- -- (3,509)
Accretion of preferred stock
discount.......................... -- (83) -- -- -- (83)
--- -------- ------- --------- ---- ---------
Balance as of September 2, 1999....... 10 59,806 (2,207) (188,056) (50) (130,497)
Comprehensive Income:
Net loss.......................... -- -- -- (23,650) -- (23,650)
Foreign currency translation
adjustment...................... -- -- (370) -- -- (370)
---------
Comprehensive loss.............. -- (24,020)
Issuance of Class A common stock.... -- 60 -- -- -- 60
Issuance of stock purchase
warrants.......................... -- 374 -- -- -- 374
Treasury stock purchases............ -- -- -- -- (2) (2)
Preferred stock dividends........... -- (3,946) -- -- -- (3,946)
Accretion of preferred stock
discount.......................... -- (83) -- -- -- (83)
--- -------- ------- --------- ---- ---------
Balance as of August 31, 2000......... $10 $ 56,211 $(2,577) $(211,706) $(52) $(158,114)
=== ======== ======= ========= ==== =========
</TABLE>

See accompanying notes to consolidated financial statements.
F-7
<PAGE> 74

MCMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................ $(23,650) $(13,947) $ (1,809)
Adjustments to reconcile net loss to net cash provided
by (used for) operating activities:
Depreciation and amortization........................... 17,925 16,016 12,918
Loss (gain) on sale of property, plant and equipment.... (35) 11 (90)
Write-off of deferred loan costs........................ -- 617 206
Changes in operating assets and liabilities:
Receivables, net...................................... (13,146) (13,481) 419
Inventories........................................... (45,647) (14,168) (12,301)
Accounts payable and accrued expenses................. 49,087 12,841 5,372
Advance payment from customer......................... 5,000 -- --
Interest payable...................................... 9,086 137 --
Deferred income taxes................................. 1,993 (315) (2,577)
Other................................................. (1,435) 1,285 (775)
-------- -------- ---------
Net cash provided by (used for) operating activities.... (822) (11,004) 1,363
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment.......... (7,973) (17,111) (20,111)
Proceeds from sales of property, plant and equipment.... 73 26 359
-------- -------- ---------
Net cash used by investing activities................... (7,900) (17,085) (19,752)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions................................... 60 80 1,786
Repurchase of common stock and recapitalization......... -- -- (249,147)
Proceeds from issuance of common stock.................. -- -- 10,200
Proceeds from issuance of convertible preferred stock... -- -- 51,000
Proceeds from issuance of redeemable preferred stock.... -- -- 24,000
Proceeds from borrowings................................ -- 31,915 186,500
Proceeds from shareholder loans......................... 23,700 -- --
Repayments of debt...................................... (15,027) (10,169) (3,964)
Payment of deferred debt issuance costs................. (100) (1,272) (7,867)
Purchase of treasury shares............................. (2) (50) --
Other................................................... (1) (2) --
-------- -------- ---------
Net cash provided by financing activities............... 8,630 20,502 12,508
-------- -------- ---------
Effect of exchange rate changes on cash and cash
equivalents........................................... 92 45 (213)
-------- -------- ---------
Net decrease in cash and cash equivalents............... -- (7,542) (6,094)
Cash and cash equivalents at beginning of period........ -- 7,542 13,636
-------- -------- ---------
Cash and cash equivalents at end of period.............. $ -- $ -- $ 7,542
======== ======== =========
SUPPLEMENTAL DISCLOSURES
Income taxes paid....................................... $ 41 $ -- $ 792
Interest paid, net of amounts capitalized............... 12,042 18,717 9,023
Noncash investing and financing activities:
Preferred stock dividend paid in-kind................... 3,945 3,508 1,633
Discount on debt and increase in paid in capital for the
estimated fair market value of common stock purchase
warrants issued with shareholder loans................ 374 -- --
Foreign currency translation adjustment................. 370 (63) 1,640
Contracts payable and/or notes payable incurred for
insurance contracts and capitalized software.......... 1,597 376 1,659
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 75

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS: MCMS, Inc., (the "Company"), is a global provider of advanced
electronics manufacturing services to original equipment manufacturers primarily
in the data communications, telecommunications, and computer/memory module
industry. The Company targets customers that are technology leaders in rapidly
growing markets, such as Internet infrastructure, wireless communications and
optical networking, that have complex manufacturing services requirements and
that desire to form long-term partnerships with their electronics manufacturing
services provider. The Company offers a broad range of manufacturing management
services, including:

- pre-production engineering and product design support,

- prototyping;

- supply chain management;

- manufacturing and testing of printed circuit board assemblies;

- full system assembly;

- end-order fulfillment; and

- after sales product support.

The Company delivers this broad range of electronics manufacturing services
through six strategically located facilities in the United States, Mexico, Asia
and Europe.

On February 26, 1998 the Company completed a Recapitalization. Prior to the
closing of the Recapitalization, the Company was a wholly owned subsidiary of
MEI California, Inc. ("MEIC"), a wholly owned subsidiary of Micron Electronics,
Inc. ("MEI"). Under the terms of the amended and restated Recapitalization
Agreement, certain unrelated investors (the "Investors") acquired an equity
interest in the Company. In order to complete the Recapitalization, the Company
arranged for additional financing in the form of notes and redeemable preferred
stock totaling $200.0 million. The Company used the proceeds from the Investors'
equity investment and the issuance of notes and redeemable preferred stock to
redeem a portion of MEIC's outstanding equity interest for approximately $249.2
million. Subsequent to the Recapitalization, MEIC held a 10% equity interest in
the Company. In connection with the Recapitalization, the Company's name was
changed from Micron Custom Manufacturing Services, Inc. to MCMS, Inc.

BASIS OF PRESENTATION: The financial statements include the accounts of the
Company and its subsidiaries. All significant inter-company accounts and
transactions have been eliminated. The Company's fiscal year is the 52 or 53
week period ending on the Thursday closest to August 31.

USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Although, actual results could differ from those estimates,
management believes its estimates are reasonable.

REVENUE RECOGNITION: Revenue from product sales to customers is generally
recognized upon shipment. A provision for estimated sales returns under the
Company's 90-day manufacturer's warranty is recorded in the period in which the
sales are recognized.

LOSS PER SHARE: Basic loss per share is computed using the weighted-average
number of common shares outstanding. Diluted loss per share is computed using
the weighted average number of common and common stock equivalent shares
outstanding. Common stock equivalent shares result from the assumed exercise of

F-9
<PAGE> 76

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

outstanding stock options and affect loss per share when they have a dilutive
effect. The effect of potentially dilutive common stock equivalent was
antidilutive in fiscal 2000, 1999 and 1998.

STOCK OPTIONS: The Company has adopted the disclosure-only provisions of
SFAS 123, "Accounting for Stock-Based Compensation." The Company continues to
measure compensation expense for its stock-based employee compensation plans
using the intrinsic value method prescribed by APB No. 25, "Accounting for Stock
Issued to Employees."

CASH EQUIVALENTS: The Company considers all highly liquid debt instruments
with original maturities of three months or less to be cash equivalents.

FINANCIAL INSTRUMENTS: The Company invests it excess cash in overnight
repurchase agreements consisting of treasuries and government agency securities.

Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents and trade
accounts receivable. Because a significant portion of our business is conducted
with a small number of customers, a concentration of credit risk exists with
respect to trade receivables. The Company performs ongoing credit evaluations on
its customers and generally does not require collateral. Historically, the
Company has not experienced significant losses related to receivables from
individual customers or groups of customers in any particular industry or
geographic area.

The amounts reported as cash equivalents, receivables, other assets,
accounts payable, accrued expenses and debt are considered by the Company to be
reasonable approximations of their fair values, based on their short term nature
and floating interest rates, where applicable.

INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
computed using standard cost, which approximates actual cost on a first-in,
first-out basis.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of 5 to 30 years for buildings and 2 to 5 years for software and
equipment.

ACCOUNTING FOR LONG-LIVED ASSETS: The Company reviews property and
equipment for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
property and equipment is measured by comparison of its carrying amount to
future net cash flows the property and equipment are expected to generate. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the property and
equipment exceeds its fair market value. To date, the Company has made no
adjustments to the carrying value of its long-lived assets.

DEBT ISSUANCE COSTS: Costs incurred in connection with the issuance of new
debt instruments are deferred and included in other assets. Such costs are
amortized over the term of the related debt obligation.

COMPREHENSIVE LOSS: Comprehensive loss is included in the consolidated
statements of shareholders' equity (deficit). Comprehensive loss, in general,
includes all changes in stockholders' deficit, with the exception of stock
transaction activity. Comprehensive loss for the Company includes net loss and
other comprehensive income (loss). Other comprehensive income (loss) for the
Company consists only of foreign currency translation adjustments.

INCOME TAXES: The Company uses the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. When necessary, a valuation
allowance is recorded to reduce tax assets to an amount whose realization is
more likely than not.
F-10
<PAGE> 77

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

FOREIGN CURRENCY TRANSLATION: The functional currency of the Company's
international subsidiaries are the Belgian Franc and Malaysian Ringgit.
Financial statements of the international subsidiaries are translated into U.S.
dollars for consolidated financial reporting using the exchange rate in effect
at each balance sheet date for assets and liabilities. The resulting translation
adjustments are recorded as other comprehensive income (loss) and, accordingly,
have no effect on net loss. Revenues, expenses, gains and losses are translated
using a weighted-average exchange rate for each period. Transaction gains and
losses are included in the determination of consolidated net income. For the
fiscal years ended August 31, 2000, September 2, 1999 and September 3, 1998, the
Company incurred net transaction gains (losses) of $(365,000), ($529,000) and
$151,000, respectively.

RECENTLY ISSUED ACCOUNTING STANDARDS: In December 1999, the Securities and
Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements", which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. Subsequently, the SEC released SAB No. 101B, which delayed
the implementation date of SAB No. 101 until no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company does not
believe that SAB No. 101 will have a material effect on its financial position
or results of operations.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. As amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of Effective Date of FASB Statement No. 133" and SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of
FASB Statement No. 133," SFAS No. 133 and SFAS No. 138 are effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
will adopt SFAS No. 133 and No. 138 effective at the beginning of our fiscal
year end 2001. The Company does not believe the adoption of SFAS No. 133 and
SFAS No. 138 will have a material effect on its financial position or results of
operations.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). This
Interpretation provides guidance on the accounting for certain stock option
transactions and subsequent amendments to stock option transactions. FIN 44 is
effective July 1, 2000, but certain conclusions cover specific events that occur
after either December 15, 1998 or January 12, 2000. To the extent that FIN 44
covers events occurring during the period from December 15, 1998 and January 12,
2000, but before July 1, 2000, the effects of applying this Interpretation are
to be recognized on a prospective basis. The adoption of FIN 44 on July 1, 2000
did not have a material effect on the Company's financial position or results of
operations.

NOTE 2. INVENTORIES

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Raw materials............................................... $59,585 $27,720
Work in progress............................................ 28,596 14,901
Finished goods.............................................. 1,356 1,354
------- -------
$89,537 $43,975
======= =======
</TABLE>

F-11
<PAGE> 78

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

NOTE 3. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Land........................................................ $ 1,206 $ 1,295
Buildings................................................... 30,962 29,989
Equipment and software...................................... 80,689 74,817
Construction in progress.................................... 3,140 2,010
-------- --------
115,997 108,111
Less accumulated depreciation............................... (58,340) (43,493)
-------- --------
$ 57,657 $ 64,618
======== ========
</TABLE>

NOTE 4. OTHER ASSETS

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Deferred financing costs.................................... $6,069 $6,922
Deferred income taxes....................................... -- 343
Deferred patent costs....................................... 178 139
Other....................................................... -- 106
------ ------
$6,247 $7,510
====== ======
</TABLE>

NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Trade accounts payable...................................... $ 99,624 $51,562
Salaries, wages, and benefits............................... 4,321 4,579
Accrued and other........................................... 3,598 1,214
-------- -------
$107,543 $57,355
======== =======
</TABLE>

F-12
<PAGE> 79

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

NOTE 6. DEBT

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Revolving credit facility, principal payments at the
Company's option to February 26, 2004, interest due
monthly, 8.87% and 7.80% weighted average rate at August
31, 2000 and September 2, 1999, respectively.............. $ 12,445 $ 28,893
Equipment loan facility, principal payments, as defined,
through February 26, 2004, interest due monthly, 9.75% and
8.50% weighted average interest at August 31, 2000 and
September 2, 1999, respectively........................... 5,230 3,022
Senior subordinated notes (the "Fixed Rate Notes"),
unsecured, interest at 9.75% due semiannually, matures on
March 1, 2008............................................. 145,000 145,000
Floating interest rate subordinated term securities, (the
"Floating Rate Notes"), unsecured, interest due
semiannually, matures on March 1, 2008, variable interest
rate equal to LIBOR plus 4.63% (10.95% and 10.52% at
August 31, 2000 and September 2, 1999, respectively)...... 30,000 30,000
Other notes payable, due in varying installments through
November 1, 2001, interest rates ranging from 3.51% to
11.11%.................................................... 1,175 364
-------- --------
Total debt.................................................. 193,850 207,279
Less current portion........................................ (1,551) (322)
-------- --------
Long-term debt, net of current portion...................... $192,299 $206,957
======== ========
</TABLE>

Maturities of debt as of August 31, 2000 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
2001........................................................ $ 1,551
2002........................................................ 1,477
2003........................................................ 1,126
2004........................................................ 14,696
2005 and thereafter......................................... 175,000
--------
$193,850
========
</TABLE>

As of August 31, 2000, the Company had a $60 million Credit Facility (the
"Credit Facility"), which was scheduled for maturity on February 26, 2004. As of
August 31, 2000, the Company's Credit Facility included a $10 million equipment
loan facility restricted to the purchase of qualifying equipment and a $50
million revolving credit facility. Amounts outstanding under the equipment loan
facility bear interest at rates as defined in the agreement. Amounts available
to borrow under the equipment loan facility were limited to the first three loan
years commencing in February 1998. Amounts available to borrow under the
revolving credit facility vary depending on domestic accounts receivable,
inventory and equipment balances, which serve as collateral along with
substantially all of the other assets of the Company. The Credit Facility
restricts the Company's ability to incur additional indebtedness, create liens
or other encumbrances, to make certain investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of its assets or to enter
into any merger or consolidation. During fiscal year 2000, the Credit Facility
was amended to allow for loans from certain of the Company's shareholders (see
Note 7). The Credit Facility also contains a covenant requiring that the Company
maintain a fixed charge ratio of not less than 1.0 to 1.0, provided, however,
that this fixed charge ratio covenant will not be applied to any fiscal quarter
during the term as long as the gross borrowing availability exceeded $10
million. As of August 31, 2000, the Company had a $12.4 million outstanding
balance under the revolving credit facility and approximately $65.0 million of
gross availability, of which $37.6 million was available to borrow without
triggering the fixed charge ratio covenant. As of

F-13
<PAGE> 80

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

August 31, 2000, had the Company consumed its adjusted availability and been
required to test the fixed charge ratio covenant, the test would not have been
satisfied. Any default under the Credit Facility could have also resulted in
default of the Fixed Rate Notes, Floating Rate Notes and Redeemable Preferred
Stock. Subsequent to August 31, 2000, the Company amended and restated the
Credit Facility (See Note 18 -- Subsequent Event).

The Fixed Rate Notes are redeemable at the Company's option, in whole any
time or in part from time to time, on and after March 1, 2003, upon not less
than 30 nor more than 60 days notice. At any time, or from time to time, on or
prior to March 1, 2001, the Company may use the net cash proceeds of one or more
Public Equity Offerings to redeem the Fixed Rate Notes at a redemption price
equal to 109.750% of the principal amount thereof if certain restrictions
regarding principal amount and additional fixed rate notes are met. The
redemption rate, if redeemed during the twelve month period commencing on March
1, 2003, decreases from 104.875% in 2003 to 100.000% in 2006 and thereafter
(expressed as percentages of the principal amount thereof).

The Floating Rate Notes are redeemable, at the Company's option, in whole
at any time or in part from time to time, upon not less than 30 nor more than 60
days notice. The redemption price, if redeemed during the twelve month period
commencing on March 1, 1998, decreases from 105% in 1998 to 100% in 2003 and
thereafter (expressed as percentages of the principal amount thereof).

Among other restrictions, the Notes described above contain covenants
relating to limitation on incurrence of additional indebtedness, limitation on
restricted payments, limitation on asset sales and limitation on dividends.

In fiscal 1998, the Company incurred an extraordinary loss of $617,000, net
of tax, resulting from the write-off of deferred financing costs related to the
early retirement of outstanding debt.

Interest expense is net of interest income of $67,000, $185,000 and
$549,000 in the fiscal years ended August 31, 2000, September 2, 1999 and
September 3, 1998, respectively. Construction period interest of $0, $88,000 and
$34,000 was capitalized in fiscal years ended August 31, 2000, September 2, 1999
and September 3, 1998, respectively.

NOTE 7. LONG-TERM DEBT -- SHAREHOLDERS

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Notes from Shareholders, principal and unpaid interest due
on February 27, 2004, interest at LIBOR plus 3.25% (9.91%
at August 31, 2000)....................................... $23,700 $--
Less debt discount, net of amortization..................... (374) --
------- --
Long-term debt -- shareholders.............................. $23,326 $
======= ==
</TABLE>

On August 30, 2000 and February 29, 2000, the Company received loans from
certain of its shareholders totalling $15.0 million and $8.7 million,
respectively. Each loan is evidenced by separate note agreements with the
participating shareholders (the "Notes from Shareholders"). Subsequent to August
31, 2000, the Company repaid all Notes from Shareholders, plus $0.6 million in
accrued interest, from the proceeds received from term loans provided for in an
amended and restated credit facility (See Note 18 -- Subsequent Event). Interest
on the Notes from Shareholders accrued at 90 day LIBOR + 3.25% (9.91% at August
31, 2000). Interest was payable monthly if a fiscal month's fixed charge ratio,
as defined, exceeded 1.1 to 1.0, so long as no event of default had occurred
under the Credit Facility or would occur as a result of an interest payment
under these loans. Otherwise, interest was payable upon maturity of the notes in
February 2004.

F-14
<PAGE> 81

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

In connection with the $15 million Notes from Shareholders dated August 30,
2000, the Company issued to the participating shareholders warrants for the
purchase of 500,000 shares of the Company's common stock. The warrants issued on
August 30, 2000 were issued for the purchase of 90,636 shares of the Company's
Class A common stock and 409,364 shares of the Company's Class B common stock
each at a price of $.001 per share. These warrants are immediately exercisable
and expire on August 30, 2005. In accordance with Accounting Principles Board
Opinion No. 14 "Accounting for Convertible Debt and Debt issued with Stock
Purchase Warrants", the Company allocated $374,000 of the $15 million proceeds
from the Notes from Shareholders to the value of the warrants. The $374,000 is
treated as a debt discount and an increase in Additional Paid-in Capital and
will be amortized to interest over the term of the Notes from Shareholders. (See
Note 18 -- Subsequent Event).

NOTE 8. REDEEMABLE PREFERRED STOCK

At any time, or from time to time, prior to March 1, 2001, the Company may
use the net cash proceeds of one or more Public Equity Offerings to redeem the
Redeemable Preferred Stock at a redemption price of 112.50% of the then
effective liquidation preference thereof plus, without duplication, an amount
equal to all accumulated and unpaid dividends to the redemption date including
an amount equal to the prorated dividend for the period from the dividend
payment date immediately prior to the redemption date to the redemption date.
The Redeemable Preferred Stock is also redeemable at the Company's option, in
whole or in part, at any time on or after March 1, 2003. The redemption rate, if
redeemed during the twelve month period commencing on March 1, 2003 decreases
from 106.25% in 2003 to 100.00% in 2006 and thereafter (expressed in percentages
of the liquidation preference).

The Redeemable Preferred Stock will be subject to mandatory redemption in
whole on March 1, 2010 at a price equal to 100% of the liquidation preference
thereof plus all accumulated and unpaid dividends to the date of redemption. The
Redeemable Preferred Stock is recorded at its liquidation preference discounted
for issuance costs of $1,000,000. The preferred stock discount is being accreted
by charging additional paid-in capital over the twelve-year term of the
Redeemable Preferred Stock.

The Redeemable Preferred Stock, subject to certain restrictions, is
exchangeable for the Exchange Debentures at the option of the Company on any
dividend payment date on or after the issue date. The Redeemable Preferred Stock
has liquidation preferences over Common Stock and has a liquidation value of
$100 per share plus cumulative unpaid dividends thereon. Redeemable Preferred
Stockholders are entitled to a cumulative 12 1/2% annual dividend based upon the
liquidation preference per share of Redeemable Preferred Stock, payable
quarterly. To date, the Company has paid all dividends in kind.

Accrued dividends on the Redeemable Preferred Stock are payable upon
certain defined events which include: any voluntary or involuntary liquidation,
dissolution or winding up of the Company. At the Company's option, dividends may
be paid either in cash or by the issuance of additional shares of Redeemable
Preferred Stock with a liquidation preference equal to the amount of such
dividends through March 1, 2003, thereafter, dividends will be payable in cash.
All dividends are cumulative, whether or not earned or declared, on a daily
basis from February 26, 1998 and compound on a quarterly basis. Dividends on the
Redeemable Preferred Stock are accrued monthly to the liquidation preference
amount by charges to additional paid-in capital for dividends expected to be
paid by issuing additional shares of Redeemable Preferred Stock. The holders of
Redeemable Preferred Stock are not entitled to vote on any matter required or
permitted to be voted upon by the shareholders of the Company.

NOTE 9. SHAREHOLDERS' EQUITY

Each share of Series A, Series B, and Series C preferred stock (hereinafter
called the "Convertible Preferred Stock") is convertible into one share of Class
A, Class B and Class C common stock (hereinafter
F-15
<PAGE> 82

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

called the "Common Stock"), respectively. Holders of Series A preferred stock
and Class A common stock are entitled to one vote per share. Holders of Series B
preferred stock and Class B common stock do not have any voting rights. Holders
of Series C preferred stock and Class C common stock are entitled to two votes
per share. The holders of all voting series of Convertible Preferred Stock and
classes of Common Stock will vote as a single class on all matters.

Holders of Convertible Preferred Stock will be paid dividends, when and if
declared by the Company, on each share of Convertible Preferred Stock on the
liquidation value per share plus all declared and unpaid dividends. Such
dividends shall not be cumulative. Holders of Convertible Preferred Stock will
participate together with the shares of Common Stock as if such shares of
Convertible Preferred Stock had been converted into shares of Common Stock.

Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of Convertible Preferred Stock will be entitled to be paid,
out of the assets of the Company available for distribution to shareholders
after payment of amounts owed with respect to any stock senior to the
Convertible Preferred Stock (including the Redeemable Preferred Stock), the
liquidation preference per share of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all declared and unpaid dividends
thereon before any distribution is made on the Common Stock. As of August 31,
2000, the aggregate liquidation preference of the Convertible Preferred Stock is
approximately $34.1 million.

NOTE 10. TRANSACTION EXPENSES

Transaction expenses incurred in fiscal year 1998 associated with the
Recapitalization Agreement consisted of the following:

<TABLE>
<S> <C>
Transaction agreement fee (note 13)......................... $2,710
Bank fees................................................... 2,150
Termination agreements...................................... 1,400
MEI/MTI stock option buyback................................ 698
Other....................................................... 1,440
------
$8,398
======
</TABLE>

NOTE 11. STOCK PURCHASE AND INCENTIVE PLANS

In order to provide financial incentives for certain of the Company's
employees, the Company's board of directors adopted the 1998 Stock Option Plan
(the "Option Plan") pursuant to which it may grant options to purchase Class A
Common stock to senior executives and other employees of the Company. As of
August 31, 2000, the Plan provides for option grants representing 2,500,000
shares of Class A common stock. Subsequent to August 31, 2000, the Company's
Board of Directors approved a resolution to increase the option grants provided
for under the Plan to 3,000,000 shares of Class A common stock. Under the Plan
for certain executive officers, 50% of the options vest over four years from the
date of grant and the other 50% vest if certain financial performance targets
are met or at the end of seven years if such targets are not met and if the
grantee has remained continuously employed with the Company. Under each option
grant for other key employees, all options will vest over four years from the
date of grant. Upon an employee's termination with the Company, all of the
employee's unvested options will expire, the exercise period of all the
employee's vested options will be reduced to a period ending no later than 30
days after such employee's termination, and if such termination occurs prior to
an initial public offering of the Company's Class A Common stock, the Company
shall have the right to repurchase at fair market value the Class A Common stock
of the Company held by the employee.

F-16
<PAGE> 83

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

The following table summarizes information about the MCMS stock option
activity under the Option Plan as of August 31, 2000:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AUGUST 31, AVERAGE SEPTEMBER 2, AVERAGE SEPTEMBER 3, AVERAGE
2000 PRICE 1999 PRICE 1998 PRICE
---------- -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period:.................. 1,385,375 $2.27 1,060,000 $2.27 -- --
Granted.................... 1,052,500 2.27 793,375 2.27 1,240,000 $2.27
Exercised.................. (26,500) 2.27 (35,313) 2.27 -- --
Terminated or canceled..... (442,750) 2.27 (432,687) 2.27 (180,000) 2.27
--------- --------- --------- -----
Outstanding at end of
year..................... 1,968,625 $2.27 1,385,375 $2.27 1,060,000 $2.27
========= ========= ===== ========= =====
Exercisable at the end of
year..................... 425,333 $2.27 164,063 $2.27 --
========= ========= ===== =========
Options available for
future grants to
employees of the
Company.................. 469,562 1,079,312 1,440,000
========= ========= =========
</TABLE>

The minimum value of options outstanding at date of grant was estimated
using the Black-Scholes options pricing model. The weighted-average remaining
contractual life of the outstanding options was 3.5 years and all outstanding
options have an exercise price of $2.27 per share. The assumptions and resulting
fair values at date of grant for options granted during the fiscal years ended
August 31, 2000 follow:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Assumptions:
Expected life..................................... 4.5 years 4.5 years 4.5 years
Risk-free interest rate........................... 6.0% 5.90% 6.20%
Expected volatility............................... 0.0% 0.0% 0.0%
Dividend yield.................................... 0.0% 0.0% 0.0%
Weighted average fair values:
Exercise price greater than market price.......... $ -- n/a n/a
Exercise price equal to market price.............. n/a $ 0.49 $ 0.50
</TABLE>

Stock based compensation costs would have increased $63,000, $118,000 and
$85,000 in fiscal 2000, 1999 and 1998, respectively ($62,000, $92,000 and
$52,000, respectively, net of taxes), and pro forma net income (loss) per share
would have been $(5.50), ($3.52) and ($1.39) in fiscal 2000, 1999 and 1998,
respectively, if the fair values of all options granted to the Company's
employees had been recognized as a compensation expense on a straight-line basis
over the vesting period of the grants.

Prior to the Recapitalization, the Company participated in MEI's 1995 Stock
Option Plan, which provided for the granting of incentive and nonstatutory stock
options to eligible employees of both MEI and the Company. Exercise prices of
the incentive and nonstatutory stock options had generally been 100% and 85%,
respectively, of the fair market value of MEI's stock on the date of grant.
Options were granted subject to terms and conditions determined by MEI's Board
of Directors, and generally were exercisable in increments of 20% for each year
of employment beginning one year from date of grant and generally expired six
years from date of grant. As a result of the Recapitalization Agreement,
employees of the Company could no longer participate in the MEI stock option
plan. In accordance with the MEI option plan, employees had

F-17
<PAGE> 84

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

30 days from the date of Recapitalization to exercise any vested options. The
Company elected to pay employees who maintained continuous employment with the
Company for six months after the Recapitalization date $2.00 per option for any
options not exercised 30 days subsequent to the Recapitalization in return for
cancellation of those options. In September 1998, the Company paid $471,000
related to the cancellation of these options.

NOTE 12. EMPLOYEE SAVINGS PLAN

On July 1, 1998 the Company established a new 401(k) profit-sharing plan
(the "401k Plan") and the account balances for all eligible employees were
transferred from MEI's 401(k) profit-sharing plan (the "RAM Plan") to this plan.
Under the 401k Plan, employees may contribute from 2% to 16% of eligible pay, up
to IRS limitations, to various savings alternatives. The 401k Plan provides for
an annual match by the Company of the first $1,500 of eligible employee
contributions, and for additional contributions by the Company at its option
based upon the Company's financial performance. The Company's expense pursuant
to these plans was approximately $1,184,000, $1,638,000 and $1,333,000 in the
fiscal years ended August 31, 2000, September 2, 1999 and September 3, 1998,
respectively.

Prior to the Recapitalization, eligible employees of the Company could
participate in the RAM Plan. Under the RAM Plan, employees could contribute from
2% to 16% of eligible pay to various savings alternatives. The RAM Plan provided
for an annual match by the Company of the first $1,500 of eligible employee
contributions, and for additional contributions by the Company based upon MEI's
financial performance. In connection with the Recapitalization Agreement, the
RAM plan was modified to become a multi-employer plan and employees of the
Company continued to participate in the RAM plan until July 1, 1998.

NOTE 13. TRANSACTIONS WITH RELATED PARTIES

As part of the Recapitalization, the Company entered into a Management
Services Agreement ("MSA") with Cornerstone Equity Investors ("CEI"), the
primary stockholder, pursuant to which CEI agrees to provide general management
services. The MSA has an initial term of five years, subject to automatic one-
year extensions unless the Company or CEI provide written notice of termination.
Pursuant to the terms of the MSA, CEI earned a management fee of $250,000,
$250,000 and $125,000 in fiscal 2000, 1999 and 1998. Pursuant to the terms of
the MSA, CEI also earned a $600,000 transaction fee in fiscal 1999 in
association with the Company entering into the $60 million Credit
Facility -- See Note 6 Debt, and a $2,710,000 transaction arrangement fee in
fiscal 1998 in association with the Recapitalization -- See Note 10 Transaction
expenses. Subsequent to August 31, 2000, CEI earned a transaction fee in
connection with the Company amending and restating its Credit Facility (See Note
18 -- Subsequent Event).

NOTE 14. COMMITMENTS AND CONTINGENCIES

As of August 31, 2000, the Company had commitments of $2,513,000 for
equipment purchases and $2,543,000 for inventory purchases.

The Company's facilities in North Carolina, Malaysia and Mexico, and
certain other property and equipment, are leased under operating lease
agreements with non-cancelable terms expiring through 2005, with renewals
thereafter at the option of the Company. Future minimum lease payments total
approximately $17,342,000 and are as follows: $5,081,000 in 2001, $3,971,000 in
2002, $3,119,000 in 2003, $1,645,000 in 2004 and $3,526,000 in 2005 and
thereafter.

Rental expense was approximately $2,773,000, $1,635,000 and $863,000 in the
fiscal years ended August 31, 2000, September 2, 1999 and September 3, 1998,
respectively.

F-18
<PAGE> 85

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

The Company has contingent liabilities related to legal proceedings arising
out of the normal course of business. Although it is reasonably possible that
the Company may incur losses upon conclusion of such matters, an estimate of any
loss or range of loss can not be made. In the opinion of management, it is
expected that amounts, if any, which may be required to satisfy such
contingencies, will not be material in relation to the accompanying consolidated
financial statements.

NOTE 15. INCOME TAXES

Prior to the Recapitalization, the Company was included in the consolidated
U.S. federal income tax return of MEI's parent, MTI. The provision (benefit) for
income taxes is computed as if the Company were a separate taxpayer. Subsequent
to the Recapitalization, the Company became a separate taxable corporation.
Components of income tax expense are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Current:
U.S. federal.................................. $ -- $(3,197) $2,108
State......................................... 163 15 (460)
---- ------- ------
163 (3,182) 1,648
---- ------- ------
Deferred:
U.S. federal.................................. -- (634) (2,469)
State......................................... -- (84) (109)
---- ------- ------
-- (718) (2,578)
---- ------- ------
Income tax provision (benefit).................. $163 $(3,900) $ (930)
==== ======= ======
</TABLE>

The current portion of the fiscal 1998 income tax provision reflects the
agreed upon determination of income taxes owed to the Company's parent for the
period ended February 26, 1998, during which the Company was a member of the
parent's consolidated group, calculated as described above.

A reconciliation between the income tax provision (benefit) and income tax
computed using the federal statutory rate follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
U.S. federal income tax at statutory rate....... $(8,220) $(6,246) $ (959)
State taxes, net of federal benefit............. (1,529) (1,123) (53)
Nondeductible transaction costs................. -- -- 1,791
Rate adjustment -- foreign operations........... (2,950) (1,251) (435)
Change in valuation allowance................... 12,784 4,742 --
Other........................................... 78 (22) (1,274)
------- ------- -------
$ 163 $(3,900) $ (930)
======= ======= =======
</TABLE>

As a part of the Recapitalization, the Company revised its estimated
accrual for prior period's tax matters and recorded a decrease in such estimated
accrued taxes of $1,208,000. This adjustment is reflected in the reconciliation
shown above under Other for the fiscal year ended September 3, 1998.

F-19
<PAGE> 86

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and such amounts as measured by presently enacted tax rates
and laws. Deferred tax assets (liabilities), net of the valuation allowance, are
as follows:

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2,
2000 1999
---------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryover.............................. $ 20,097 $10,029
Inventory reserves and allowances......................... 2,660 765
Accrued compensation...................................... 716 834
Technology amortization................................... 537 273
Investment tax credits.................................... 307 246
Other..................................................... 385 289
-------- -------
Total deferred tax assets................................... 24,702 12,436
-------- -------
Deferred tax liabilities:
Property, plant and equipment............................. 4,509 5,610
Other..................................................... 1,371 1,397
-------- -------
Total deferred tax liabilities.............................. 5,880 7,007
-------- -------
Deferred tax asset valuation allowance...................... (20,128) (4,742)
-------- -------
Net deferred tax assets (liabilities)....................... $ (1,306) $ 687
======== =======
Current -- included in other current assets (liabilities)... $ (226) $ 344
Noncurrent -- included in other assets (liabilities)........ (1,080) 343
-------- -------
Net deferred tax assets (liabilities)..................... $ (1,306) $ 687
======== =======
</TABLE>

The Company intends to reinvest the unremitted earnings of its non-U.S.
subsidiaries and postpone their remittance indefinitely. Accordingly, no
provision for U.S. income taxes was required on such earnings during the three
years ended August 31, 2000. The cumulative amount of undistributed earnings of
foreign subsidiaries as of August 31, 2000 is approximately $13,486,000.

As of August 31, 2000, the Company has U.S. net operating loss, Idaho
investment tax credit and foreign tax credit carryovers of approximately
$49,072,000, $472,000 and $29,000, respectively. The U.S. net operating loss,
Idaho investment tax credit and foreign tax credit carryovers are available to
offset regular taxable income through the years 2020, 2007 and 2004,
respectively. During fiscal 2000, the Company increased the valuation allowance
by $15,386,000 to a total of $20,128,000 for the amount of deferred tax assets
which may not be realizable through either carryback of its net operating losses
or through future income generated by reversal of deferred tax liabilities
during the loss carry-forward periods.

NOTE 16. SEGMENT INFORMATION

As described in Note 1, the Company adopted SFAS No. 131 in fiscal year
1999. The Company operates principally in the electronics manufacturing services
industry. The Company serves the same or similar customers on a global basis and
is viewed by management as a global provider of manufacturing services. The
Company places primary importance on managing its worldwide services to
strategic customers. The categorization of net sales, as domestic or foreign, is
based on the location from which the product is manufactured.

F-20
<PAGE> 87

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

The Company's external sales and long-lived asset information associated
with its domestic and foreign operations are as follows:

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 2, SEPTEMBER 3,
2000 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Net sales:
Domestic...................................... $352,589 $396,739 $309,449
Foreign....................................... 119,859 35,976 24,471
-------- -------- --------
$472,448 $432,715 $333,920
======== ======== ========
Long-lived assets:
Domestic...................................... $ 45,821 $ 53,414 $ 53,024
Foreign....................................... 11,836 11,204 9,082
-------- -------- --------
$ 57,657 $ 64,618 $ 62,106
======== ======== ========
</TABLE>

NOTE 17. CUSTOMER CONCENTRATION

During fiscal 2000, 1999 and 1998, the Company had two customers, which
comprised more than 10% of the Company's net sales. In fiscal 2000, 1999 and
1998, the Company's largest customer, Cisco Systems, represented 40.8% 43.5% and
39.2%, respectively, of the Company's net sales. In fiscal 2000, the Company's
second largest customer, Extreme Networks, represented 12.1% of the Company's
net sales. In fiscal 1999 and 1998, the Company's second largest customer, Fore
Systems, represented 18.2% and 24.1%, respectively, of the Company's net sales.
No other customer accounted for more than 10% of consolidated sales for fiscal
year 2000, 1999 or 1998. During fiscal 2000, the Company's third largest
customer, Nokia, represented 9.9% of the Company's net sales compared to 2.5%
and 0.2% of the Company's consolidated sales in fiscal 1999 and 1998,
respectively.

NOTE 18. SUBSEQUENT EVENT

On September 29, 2000, the Company amended and restated the Credit Facility
(the "Amended and Restated Credit Facility") to provide up to $125 million in
secured financing. The Amended and Restated Credit Facility increased the
revolving credit facility to $70 million from $50 million, maintained the $10
million equipment loan facility, and provided for term loans of $8 million
("Term Loan A") and $37 million ("Term Loan B"). Amounts outstanding under the
Amended and Restated Credit Facility bear interest at rates ranging from the
lessor of LIBOR plus 2.75% or a base rate, as defined, plus 0.50% to LIBOR plus
6.50% or a base rate, as defined, plus 4.25%. The revolving credit facility,
equipment loan facility and Term Loan A are collateralized by a first priority
security interest in substantially all of the Company's assets, including real
property, and mature in February 2004. Term Loan B is collateralized by a second
priority lien on these same assets and matures in August 2004. Term Loan B is
subject to a mandatory prepayment, if at any time prior the maturity of Term
Loan B, the Company receives proceeds from the sale of its capital stock, a
public offering or cash equity contribution. If a mandatory prepayment on Term
Loan B is made during the twelve-month period commencing on September 29, 2000,
prepayment is due at a premium of 107.5% of face value and decreases annually at
a rate of 2.5% of face value to 100% on September 29, 2003. Other than a
mandatory prepayment or payment upon maturity, Term Loan B may not be prepaid,
in whole or in part, unless all amounts due under the revolving credit facility
and equipment loan facility have been paid in full and all commitments under the
Amended and Restated Credit Facility have been terminated. The equipment loan
facility and Term Loan A and B may not be reborrowed upon repayment. The Amended
and Restated Credit Facility restricts the Company's ability to incur additional
indebtedness, to create liens or other encumbrances, to make certain
investments, loans and guarantees and to sell or otherwise dispose of a

F-21
<PAGE> 88

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

substantial portion of its assets or to enter into any merger or consolidation.
The Amended and Restated Credit Facility also contains a covenant requiring that
the Company maintain a fixed charge ratio, based upon Earnings before Interest,
Taxes, Depreciation and Amortization minus unfinanced capital expenditures, cash
dividends and cash taxes, divided by debt service.

On September 29, 2000, Term Loan A and Term Loan B were fully funded, the
proceeds of which were used to repay the $23.7 million in Notes from
Shareholders, plus $0.6 million in accrued interest, pay closing costs of
approximately $3.3 million and partially pay down the revolving credit facility.
As of October 30, 2000, the Company had $35.2 million outstanding under the
revolving credit facility, $5.6 million outstanding under the equipment loan
facility, $8.0 million outstanding under Term Loan A and $37.0 million
outstanding under Term Loan B. As of October 30, 2000, the Company had $34.8
million available to borrow under its revolving credit facility.

Pursuant to the terms of an agreement with Cornerstone Equity Investors,
(Note 13 -- Transactions with Related Parties), the Company's primary
stockholder, Cornerstone Equity Investors earned a $370,000 transaction fee in
association with the funding of Term Loan B in the Amended and Restated Credit
Facility.

The early repayment of the Notes from Shareholders on September 29, 2000
resulted in a $347,000 extraordinary loss subsequent to August 31, 2000 for the
unamortized portion of a debt discount. The debt discount was recorded on August
30, 2000 for the estimated fair market value of the warrants issued with the
Notes from Shareholders dated August 30, 2000 (See Note 7-- Long-Term
Debt -- Shareholders).

NOTE 19. UNAUDITED QUARTERLY FINANCIAL INFORMATION

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FISCAL 2000
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales....................................... $100,016 $ 99,055 $113,474 $159,903
Cost of goods sold.............................. 93,912 95,993 108,095 151,957
-------- -------- -------- --------
Gross profit.................................... 6,104 3,062 5,379 7,946
Selling, general and administrative expenses.... 5,833 6,706 5,586 5,815
-------- -------- -------- --------
Income (loss) from operations................... 271 (3,644) (207) 2,131
Interest expense, net........................... 5,335 5,336 5,669 5,698
-------- -------- -------- --------
Loss before taxes............................... (5,064) (8,980) (5,876) (3,567)
Income tax expense.............................. -- 30 64 69
-------- -------- -------- --------
Net loss........................................ (5,064) (9,010) (5,940) (3,636)
Redeemable preferred stock dividends and
accretion of preferred stock discount......... (962) (992) (1,022) (1,053)
-------- -------- -------- --------
Net loss to common stockholders................. $ (6,026) $(10,002) $ (6,962) $ (4,689)
======== ======== ======== ========
Net loss per common share -- basic and
diluted....................................... $ (1.20) $ (1.99) $ (1.38) $ (0.92)
======== ======== ======== ========
</TABLE>

F-22
<PAGE> 89

MCMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR DOLLAR AMOUNTS IN THOUSANDS) -- (CONTINUED)

<TABLE>
<CAPTION>
FISCAL 1999
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $91,243 $116,348 $110,305 $114,819
Cost of goods sold............................... 86,056 110,337 103,917 107,044
------- -------- -------- --------
Gross profit..................................... 5,187 6,011 6,388 7,775
Selling, general and administrative expenses..... 4,219 6,790 5,846 5,636
------- -------- -------- --------
Income (loss) from operations.................... 968 (779) 542 2,139
Other expense (income):
Interest expense, net............................ 4,721 4,925 5,023 4,983
Other............................................ 45 -- -- --
------- -------- -------- --------
Loss before taxes and extraordinary item......... (3,798) (5,704) (4,481) (2,844)
Income tax benefit............................... (1,775) (1,722) -- --
------- -------- -------- --------
Loss before extraordinary item................... (2,023) (3,982) (4,481) (2,844)
Extraordinary item -- loss on early
extinguishment of debt, net of income tax
benefit of $403 in the second quarter.......... -- (617) -- --
------- -------- -------- --------
Net loss......................................... (2,023) (4,599) (4,481) (2,844)
Redeemable preferred stock dividends and
accretion of preferred stock discount.......... (882) (918) (945) (847)
------- -------- -------- --------
Net loss to common stockholders.................. $(2,905) $ (5,517) $ (5,426) $ (3,691)
======= ======== ======== ========
Net loss per common share-basic and diluted:
Loss before extraordinary item.............. $ (0.58) $ (0.98) $ (1.08) $ (0.74)
Extraordinary item.......................... -- (0.12) -- --
------- -------- -------- --------
Net loss per common share -- basic and diluted... $ (0.58) $ (1.10) $ (1.08) $ (0.74)
======= ======== ======== ========
</TABLE>

F-23
<PAGE> 90

SCHEDULE II
MCMS. INC

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS(A) DEDUCTIONS(B) PERIOD
----------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Allowance for trade receivables:
Year ended September 3, 1998............. $881 $(766) $(18) $ 97
Year ended September 2, 1999............. 97 217 (56) 258
Year ended August 31, 2000............... 258 (26) (17) 215
</TABLE>

---------------
Notes:

(a) Amounts charged (credited) to expense.

(b) Bad debt write-offs.

F-24
<PAGE> 91

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

[LOGO]

------------------------------

PROSPECTUS

, 2000
------------------------------

BANC OF AMERICA SECURITIES LLC

Until , 2000, all dealers that buy, sell or trade the common
stock may be required to deliver a prospectus, regardless of whether they are
participating in the offering. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 92

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by MCMS in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 30,360
NASD filing fee............................................. 14,875
Nasdaq listing fee.......................................... *
Printing and engraving costs................................ 460,000
Legal fees and expenses..................................... *
Accounting fees and expenses................................ 200,000
Transfer Agent and Registrar fees........................... 5,000
Miscellaneous expenses...................................... *
Total............................................. *
</TABLE>

------------
* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our certificate of incorporation limits the liability of our directors to
the fullest extent permitted by the Delaware General Corporation Law. We
anticipate entering into indemnification agreements with our current directors
and executive officers prior to the completion of the offering. In addition, the
certificate of incorporation will provide that we shall indemnify our directors
and officers to the fullest extent permitted by such law. Article Six of MCMS,
Inc.'s Certificate of Incorporation provides that:

Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee, fiduciary or agent or in any other capacity while serving as
a director, officer, employee, fiduciary or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent which it is empowered to do so
by the General Corporation Law of the State of Delaware, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 of this Article VI, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
only if such proceeding was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article Seven shall
be a contract right and, subject to Sections 2 and 5 of this Article VI, shall
include the right to payment by the Corporation of the expenses incurred in
defending any such proceeding in advance of its final disposition. The
Corporation may, by action of the Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.

II-1
<PAGE> 93

Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article VI or advance of expenses under Section 5 of this Article VI shall
be made promptly, and in any event within 30 days, upon the written request of
the director or officer. If a determination by the Corporation that the director
or officer is entitled to indemnification pursuant to this Article Seven is
required, and the Corporation fails to respond within sixty days to a written
request for indemnity, the Corporation shall be deemed to have approved the
request. If the Corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article VI shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the Corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the Corporation.
Neither the failure of the Corporation (including the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.

Section 3. Nonexclusivity of Article VI. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.

Section 4. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the Corporation or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article VI.

Section 5. Expenses. Expenses incurred by any person described in Section 1
of this Article VI in defending a proceeding shall be paid by the Corporation in
advance of such proceeding's final disposition, unless otherwise determined by
the Board of Directors in the specific case after consultation with legal
counsel, upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.

Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article VI and who are or were employees or agents
of the Corporation, or who are or were serving at the request of the Corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the Board of Directors.

Section 7. Contract Rights. The provisions of this Article VI shall be
deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article VI and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article VI or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.

II-2
<PAGE> 94

Section 8. Merger or Consolidation. For purposes of this Article VI,
references to 'the Corporation' shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
VI with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence had
continued.

Reference is also made to Section 8 of the Underwriting Agreement contained
in Exhibit 1.1 hereto, indemnifying officers and directors of MCMS against
certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we have issued unregistered securities to a
limited number of persons, as described below. None of these transactions
involved any underwriters, underwriting discounts or commissions, or any public
offering, and we believe that each transaction was exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof, Regulation
D promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof, and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.

From September 15, 1997 to September 15, 2000, we issued and sold an
aggregate of 61,813 shares of our Class A common stock to employees,
consultants, and directors for aggregate consideration of $140,315.51 pursuant
to exercise of options granted under our 1998 Stock Option Plan.

In connection with our recapitalization, on February 26, 1998 we issued
3,261,177 shares of Series A Convertible Preferred Stock, 863,823 shares of
Series B Convertible Preferred Stock, 874,999 shares of Series C Convertible
Preferred Stock, 3,261,177 shares of Class A common stock, 863,823 shares of
Class B common stock, 874,999 shares of Class C common stock and 330,297 shares
of 12 1/2% Senior Exchangeable Preferred Stock to 14 accredited investors for
aggregate gross proceeds of $93 million. The shares were issued in reliance on
the exemption from registration by Section 4(2) of the Securities Act, on the
basis that the transaction did not involve a public offering.

On February 29, 2000 we issued notes to certain of our stockholders with a
principal amount of $8.7 million and having a maturity date of February 27,
2004, with interest accruing at 90 day LIBOR plus 3.25%. The notes were issued
in reliance on the exemption from registration by Section 4(2) of the Securities
Act, on the basis that the transaction did not involve a public offering.

On August 29, 2000 we issued notes to certain of our stockholders with a
principal amount of $15 million and having a maturity date of February 27, 2004
with interest accruing at 90 day LIBOR plus 3.25%. The notes were issued in
reliance on the exemption from registration by Section 4(2) of the Securities
Act, on the basis that the transaction did not involve a public offering.

II-3
<PAGE> 95

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement among Banc of America
Securities LLC, as representative of the underwriters, and
MCMS, Inc.*
2.1 Recapitalization Agreement, dated as of December 21, 1997,
by and among MCMS, Inc., Micron Electronics, Inc. and
Cornerstone Equity Investors IV, L.P. incorporated by
reference to Exhibit 2.1 in Registration Statement on Form
S-4 (Registration No. 333-50981).
2.2 Amended and Restated Recapitalization Agreement, dated as of
February 1, 1998, by and among MCMS, Inc., Micron
Electronics, Inc., MEI California, Inc. and Cornerstone
Equity Investors IV, L.P. incorporated by reference to
Exhibit 2.2 in Registration Statement on Form S-4
(Registration No. 333-50981).
2.3 First Amendment to the Amended and Restated Recapitalization
Agreement, dated as of February 26, 1998, by and among MCMS,
Inc., Micron Electronics, Inc., MEI California, Inc. and
Cornerstone Equity Investors IV, L.P. incorporated by
reference to Exhibit 2.3 in Registration Statement on Form
S-4 (Registration No. 333-50981).
3.1 Form of Articles of Incorporation of MCMS, Inc.**
3.2 Form of By-laws of MCMS, Inc.**
4.1 Indenture, dated as of February 26, 1998, by and between
MCMS, Inc. and United States Trust Company of New York, as
trustee, paying agent and registrar, with respect to 9 3/4%
Senior Subordinated Notes due 2008 and the Floating Interest
Rate Subordinated Term Securities due 2008 incorporated by
reference to Exhibit 4.1 in Registration Statement on Form
S-4 (Registration No. 333-50981).
4.2 Exchange Indenture, dated as of February 26, 1998, by and
between MCMS, Inc. and United States Trust Company of New
York, as paying agent and registrar, with respect to the
12 1/2% Subordinated Exchange Debentures due 2010
incorporated by reference to Exhibit 4.2 in Registration
Statement on Form S-4 (Registration No. 333-50981).
4.3 Certificate of Designation, dated as of February 26, 1998,
with respect to the 12 1/2% Senior Exchangeable Preferred
Stock and 12 1/2% Series B Senior Exchangeable Preferred
Stock incorporated by reference to Exhibit 4.3 in
Registration Statement on Form S-4 (Registration No.
333-50981).
4.4 First Supplemental Indenture, dated as of April 23,1998 by
and between MCMS, Inc. and United States Trust Company of
New York, as trustee, with respect to 9 3/4% Senior
Subordinated Notes due 2008 and the Floating Interest Rate
Subordinated Term Securities due 2008 incorporated by
reference to Exhibit 4.4 in Amendment No. 1 to Registration
Statement on Form S-4 (Registration No. 333-50981).
5.1 Form of Opinion of Kirkland & Ellis.
10.1 Management Services Agreement, dated as of February 26,
1998, by and between MCMS, Inc. and Cornerstone Equity
Investors, LLC incorporated by reference to Exhibit 10.1 in
Registration Statement on Form S-4 (Registration No.
333-50981).
10.2 Purchase Agreement, dated February 19, 1998, by and between
MCMS, Inc. and BT Alex. Brown Incorporated incorporated by
reference to Exhibit 10.2 in Registration Statement on Form
S-4 (Registration No. 333-50981).
10.3 Registration Rights Agreement, dated as of February 26,
1998, by and between MCMS, Inc. and BT Alex. Brown
Incorporated incorporated by reference to Exhibit 10.3 in
Registration Statement on Form S-4 (Registration No.
333-50981).
</TABLE>

II-4
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4 Amended and Restated Revolving Credit, Equipment Loan, Term
Loan and Security Agreement, dated as of September 29, 2000,
by and among PNC Bank, as agent and co-lead arranger, and
Lehman Brothers Inc., as co-lead arranger, incorporated by
reference to Exhibit 10.4 to the Company's report on Form
10-K, dated November 16, 2000.
10.5 Loan Agreement, dated as of February 29, 2000, between MCMS,
Inc. and Cornerstone Equity Investors IV, L.P., Bankers
Trust Company, Oak Investment Funds and August Capital
incorporated by reference to Exhibit 10.4(d) to the
Quarterly Report on Form 10-Q for the quarter ended March 2,
2000.
10.6 Loan Agreement, dated as of August 29, 2000, between MCMS,
Inc. and Cornerstone Equity Investors IV, L.P., Bankers
Trust Company, Oak Investment Funds, August Capital, and
other lenders named therein.**
10.7 Warrant Purchase Agreement, dated August 29, 2000, between
MCMS, Inc. and Cornerstone Equity Investors IV, L.P.,
Bankers Trust Company, Oak Investment Funds, August Capital,
and other persons named therein.**
10.8 Employment Agreement, dated as of February 26, 1998, by and
between MCMS, Inc. and Robert F. Subia incorporated by
reference to Exhibit 10.7 in Registration Statement on Form
S-4 (Registration No. 333-50981).
10.9 Employment Agreement, dated as of February 26, 1998, by and
between MCMS, Inc. and Chris Anton incorporated by reference
to Exhibit 10.8 in Registration Statement on Form S-4
(Registration No. 333-50981).
10.10 Employment Agreement, dated as of October 12, 1998, by and
between MCMS, Inc. and David Garcia incorporated by
reference to Exhibit 10.9(a) in the Quarterly Report on Form
10-Q for the quarter ended December 3, 1998.
10.11 Employment Agreement, dated as of December 2, 1998, by and
between MCMS, Inc. and Richard Downing incorporated by
reference to Exhibit 10.9(b) in the Quarterly Report on Form
10-Q for the quarter ended December 3, 1998.
10.12 Employment Agreement, dated as of December 21, 1998, by and
between MCMS, Inc. and Angelo Ninivaggi incorporated by
reference to Exhibit 10.9(c) in the Annual Report on Form
10-K for the fiscal year ended September 2, 1999.
10.13 Employment Agreement, dated December 3, 1999, by and between
MCMS, Inc. and Richard Rowe incorporated by reference to
Exhibit 10.9(d) in the Quarterly Report on Form 10-Q for the
quarter ended December 2, 1999.
10.14 Termination Agreement, dated October 13, 1999, by and
between MCMS, Inc. and David Garcia.**
10.15 Termination Agreement, dated January 24, 2000, by and
between MCMS, Inc. and Richard Downing.**
10.16 Shareholders Agreement, dated as of February 26, 1998, by
and among MCMS, Inc., Cornerstone Equity Investors IV, L.P.,
MEI California, Inc., Randolph Street Partners II, BT
Investment Partners, Inc. and the other investors named
therein incorporated by reference to Exhibit 10.11 in
Registration Statement on Form S-4 (Registration No.
333-50981).
10.17 Registration Rights Agreement, dated as of February 26,
1998, by and among MCMS, Inc., Cornerstone Equity Investors
IV, L.P., MEI California, Inc., Randolph Street Partners II,
BT Investment Partners, Inc. and the other investors named
therein incorporated by reference to Exhibit 10.12 in
Registration Statement on Form S-4 (Registration No.
333-50981).
10.18 1998 Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.18 of the Company's report on Form
10-K, dated November 16, 2000.
</TABLE>

II-5
<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.19 Form of Stock Option Agreement for officers of MCMS, Inc.
under the 1998 Stock Option Plan incorporated by reference
to Exhibit 10.20(a) to the Quarterly Report on Form 10-Q for
the quarter ended December 3, 1998.
10.20 Form of 2000 Employee Stock Purchase Plan.**
10.21 Form of 2000 Long-Term Equity Incentive Plan.**
10.22 Form of Indemnification Agreement.
10.23 Patent and Invention Disclosure Assignment and License
Agreement, dated as of February 26, 1998, by and between
Micron Electronics, Inc. and MCMS, Inc. incorporated by
reference to Exhibit 10.22 in Amendment No. 2 to
Registration Statement on Form S-4 (Registration No.
333-50981).
10.24 Know-How License Agreement, dated as of February 26, 1998,
by and between Micron Electronics, Inc. and MCMS, Inc.
incorporated by reference to Exhibit 10.23 in Amendment No.
1 to Registration Statement on Form S-4 (Registration No.
333-50981).
10.25 Forbearance Agreement, dated as of February 26, 1998, by and
between Micron Electronics, Inc. and MCMS, Inc. incorporated
by reference to Exhibit 10.24 in Amendment No. 1 to
Registration Statement on Form S-4 (Registration No.
333-50981).
10.26 Lease, dated as of June 18, 1999, by and between MCMS, Sdn.
Bhd. and Klih Project Management, Sdn. Bhd. incorporated by
reference to Exhibit 10.17(a) in the Quarterly Report on
Form 10-Q for the fiscal quarter ended June 3, 1999.
10.27 Sublease Agreement, dated as of October 6, 1999, by and
between MCMS de Mexico S. de R.L. de C.V. and SMTC de Mexico
incorporated by reference to Exhibit 10.17(b) in the Annual
Report on Form 10-K for the fiscal year ended September 2,
1999.
10.28 Lease, dated as of December 1994, by and between MCMS, Inc.
and Tri-Center South Limited Partnership, as amended,
incorporated by reference to Exhibit 10.18 in Registration
Statement on Form S-4 (Registration No. 333-0981).
10.29 Lease Agreement, dated February 9, 2000, between MCMS, Inc.
and South San Jose, LLC, incorporated by reference to
Exhibit 10.29 of the Company's report on Form 10-K, dated
November 16, 2000.
16.1 Letter re Change in Certifying Accountant incorporated by
reference to Exhibit 16.1 in Amendment No. 2 to Registration
Statement on Form S-4 (Registration No. 333-50981).
21.1 Subsidiaries of MCMS, Inc.**
23.1 Consent of KPMG LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature pages to the
original Registration Statement).**
27.1 Financial Data Schedule incorporated by reference to Exhibit
27.1 in the Company's report on Form 10-K dated November 16,
2000.
</TABLE>

------------
* To be filed by amendment

** Previously filed

II-6
<PAGE> 98

(b) Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts. Included on page F-24.

ITEM 17. UNDERTAKINGS

We hereby undertake to provide to the Underwriters at the closing specified
in the Underwriting Agreement certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to each
purchaser.

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

We hereby undertake that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-7
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Nampa, State of Idaho, on the 21st day of November, 2000.

MCMS, Inc.

By: /s/ CHRIS J. ANTON
------------------------------------
Chris J. Anton

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by or on
behalf of the following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer and Director November 21, 2000
------------------------------------ (Principal Executive Officer)
Richard L. Rowe

* President, Chief Sales and Marketing November 21, 2000
------------------------------------ Officer and Director
Robert F. Subia

/s/ CHRIS J. ANTON Executive Vice President, Finance and November 21, 2000
------------------------------------ Chief Financial Officer (Principal
Chris J. Anton Financial and Accounting Officer)

* Director November 21, 2000
------------------------------------
R. Stephen Cheheyl

* Director November 21, 2000
------------------------------------
John A. Downer

* Director November 21, 2000
------------------------------------
C. Nicholas Keating

* Director November 21, 2000
------------------------------------
Michael E. Najjar

* Director November 21, 2000
------------------------------------
Mark Rossi

*/s/ CHRIS J. ANTON
------------------------------------
Chris J. Anton, attorney in fact
</TABLE>

II-8
<PAGE> 100

EXHIBIT INDEX

<PAGE> 101

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4 Amended and Restated Revolving Credit, Equipment Loan, Term
Loan and Security Agreement, dated as of September 29, 2000,
by and among PNC Bank, as agent and co-lead arranger, and
Lehman Brothers Inc., as co-lead arranger, incorporated by
reference to Exhibit 10.4 of the Company's report on Form
10-K, dated November 16, 2000.
10.5 Loan Agreement, dated as of February 29, 2000, between MCMS,
Inc. and Cornerstone Equity Investors IV, L.P., Bankers
Trust Company, Oak Investment Funds and August Capital
incorporated by reference to Exhibit 10.4(d) to the
Quarterly Report on Form 10-Q for the quarter ended March 2,
2000.
10.6 Loan Agreement, dated as of August 29, 2000, between MCMS,
Inc. and Cornerstone Equity Investors IV, L.P., Bankers
Trust Company, Oak Investment Funds, August Capital, and
other lenders named therein.**
10.7 Warrant Purchase Agreement, dated August 29, 2000, between
MCMS, Inc. and Cornerstone Equity Investors IV, L.P.,
Bankers Trust Company, Oak Investment Funds, August Capital,
and other persons named therein.**
10.8 Employment Agreement, dated as of February 26, 1998, by and
between MCMS, Inc. and Robert F. Subia incorporated by
reference to Exhibit 10.7 in Registration Statement on Form
S-4 (Registration No. 333-50981).
10.9 Employment Agreement, dated as of February 26, 1998, by and
between MCMS, Inc. and Chris Anton incorporated by reference
to Exhibit 10.8 in Registration Statement on Form S-4
(Registration No. 333-50981).
10.10 Employment Agreement, dated as of October 12, 1998, by and
between MCMS, Inc. and David Garcia incorporated by
reference to Exhibit 10.9(a) in the Quarterly Report on Form
10-Q for the quarter ended December 3, 1998.
10.11 Employment Agreement, dated as of December 2, 1998, by and
between MCMS, Inc. and Richard Downing incorporated by
reference to Exhibit 10.9(b) in the Quarterly Report on Form
10-Q for the quarter ended December 3, 1998.
10.12 Employment Agreement, dated as of December 21, 1998, by and
between MCMS, Inc. and Angelo Ninivaggi incorporated by
reference to Exhibit 10.9(c) in the Annual Report on Form
10-K for the fiscal year ended September 2, 1999.
10.13 Employment Agreement, dated December 3, 1999, by and between
MCMS, Inc. and Richard Rowe incorporated by reference to
Exhibit 10.9(d) in the Quarterly Report on Form 10-Q for the
quarter ended December 2, 1999.
10.14 Termination Agreement, dated October 13, 1999, by and
between MCMS, Inc. and David Garcia.**
10.15 Termination Agreement, dated January 24, 2000, by and
between MCMS, Inc. and Richard Downing.**
10.16 Shareholders Agreement, dated as of February 26, 1998, by
and among MCMS, Inc., Cornerstone Equity Investors IV, L.P.,
MEI California, Inc., Randolph Street Partners II, BT
Investment Partners, Inc. and the other investors named
therein incorporated by reference to Exhibit 10.11 in
Registration Statement on Form S-4 (Registration No.
333-50981).
10.17 Registration Rights Agreement, dated as of February 26,
1998, by and among MCMS, Inc., Cornerstone Equity Investors
IV, L.P., MEI California, Inc., Randolph Street Partners II,
BT Investment Partners, Inc. and the other investors named
therein incorporated by reference to Exhibit 10.12 in
Registration Statement on Form S-4 (Registration No.
333-50981).
10.18 1998 Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.18 of the Company's report on Form
10-K, dated November 16, 2000.
</TABLE>

<PAGE> 102

------------
* To be filed by amendment

** Previously filed