FLEXTRONICS INTERNATIONAL LTD, S-3/A, 1997-09-18

FLEXTRONICS INTERNATIONAL LTD
S-3/A, 1997-09-18
PRINTED CIRCUIT BOARDS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997

REGISTRATION NO. 333-21715
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 4

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

FLEXTRONICS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
SINGAPORE 0-23354 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION) NO.)
</TABLE>

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

514 CHAI CHEE LANE #04-13
BEDOK INDUSTRIAL ESTATE
SINGAPORE 469029
(65) 449-5255
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

MICHAEL E. MARKS
CHIEF EXECUTIVE OFFICER
FLEXTRONICS INTERNATIONAL LTD.
514 CHAI CHEE LANE #04-13
BEDOK INDUSTRIAL ESTATE
SINGAPORE 469029
(65) 449-5255
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
GORDON K. DAVIDSON, ESQ. DANIEL J. WINNIKE, ESQ.
DAVID K. MICHAELS, ESQ. RICHARD G. COSTELLO, ESQ.
CARLTON X. OSBORNE, ESQ. HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN,
FENWICK & WEST LLP A PROFESSIONAL CORPORATION
TWO PALO ALTO SQUARE THREE EMBARCADERO CENTER, 7TH FLOOR
PALO ALTO, CALIFORNIA 94306 SAN FRANCISCO, CALIFORNIA 94111
</TABLE>

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

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

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.

SUBJECT TO COMPLETION SEPTEMBER , 1997

1,750,000 SHARES

LOGO

ORDINARY SHARES

All of the 1,750,000 Ordinary Shares offered hereby are being sold by
Flextronics International Ltd. The Company's Ordinary Shares are traded on the
Nasdaq National Market under the symbol "FLEXF." On September 17, 1997, the last
reported sale price for the Ordinary Shares was $39 7/8 per share. See "Price
Range of Ordinary Shares."

SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE ORDINARY
SHARES OFFERED HEREBY.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Per Share................................... $ $ $
Total(3).................................... $ $ $
=========================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $1,590,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 262,500 additional Ordinary Shares solely to cover over-allotments, if
any. If this option is exercised in full, the Price to Public will total
$ , the Underwriting Discount will total $ , and the
Proceeds to Company will total $ .

The Ordinary Shares are offered by the Underwriters subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that delivery of the certificates representing such shares
will be made against payment therefor at the office of Montgomery Securities on
or about , 1997.

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

MONTGOMERY SECURITIES
COWEN & COMPANY
UBS SECURITIES

The date of this Prospectus is , 1997.
<PAGE> 3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company are hereby
incorporated by reference into this Prospectus except as superseded or modified
herein: (1) the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997, as amended on Form 10-K/A; (2) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1997; (3) the Company's Report
on Form 8-K as amended on Form 8-K/A for the event reported on February 2, 1996;
(4) the Company's Report on Form 8-K for the event report on April 11, 1997; (5)
the Company's Report on Form 8-K as amended on Form 8-K/A for the event reported
on August 11, 1997; and (6) the description of the Company's Ordinary Shares set
forth in the Company's Registration Statement on Form 8-A filed with the
Commission on January 28, 1994. All documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the shares offered hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus. The Company will provide without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all of the
documents that have been or may be incorporated by reference herein (other than
exhibits to such documents which are not specifically incorporated by reference
into such documents). Such requests should be directed to Flextronics
International Ltd., Investor Relations, 2090 Fortune Drive, San Jose, California
95131, telephone number (408) 428-1300.

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

In this Prospectus, references to "U.S. Dollars" and "$" are to United
States currency and references to "Singapore dollars" and "S$" are to Singapore
currency. Except as otherwise noted, (i) all monetary amounts in this Prospectus
are presented in U.S. dollars and (ii) all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE ORDINARY SHARES,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the consolidated financial statements
and notes thereto, appearing elsewhere in this Prospectus or incorporated by
reference in this Prospectus. This Prospectus contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended. In
this Prospectus, the words "expects," "anticipates," "believes," "intends" and
similar expressions identify forward-looking statements, which speak only as of
the date hereof, and are subject to certain risks and uncertainties. These
include the factors set forth in "Risk Factors" and elsewhere in this
Prospectus.

THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") is a
provider of advanced contract manufacturing services to original equipment
manufacturers ("OEMs") in the communications, computer, consumer electronics and
medical device industries. Flextronics offers a full range of services including
product design, printed circuit board ("PCB") fabrication and assembly,
materials procurement, inventory management, final system assembly and testing,
packaging and distribution. The components, subassemblies and finished products
manufactured by Flextronics incorporate advanced interconnect, miniaturization
and packaging technologies, such as surface mount ("SMT"), chip-on-board
("COB"), ball grid array ("BGA") and miniaturized gold-plated PCB technology.
The Company's strategy is to use its global manufacturing capabilities and
advanced technological expertise to provide its customers with a complete
manufacturing solution, highly responsive and flexible service, accelerated time
to market and reduced production costs. The Company targets leading OEMs, in
growing vertical markets, with which it believes it can establish long-term
relationships, and serves its customers on a global basis from its strategically
located facilities in North America, East Asia and Northern Europe. The
Company's customers include Advanced Fibre Communications, Ascend
Communications, Braun/ThermoScan, Cisco Systems, Diebold, Ericsson, Harris DTS,
Lifescan (a Johnson & Johnson company), Microsoft, Philips and U.S. Robotics.

On March 27, 1997, the Company acquired from Ericsson Business Networks AB
("Ericsson") two manufacturing facilities (the "Karlskrona Facilities") located
in Karlskrona, Sweden and related inventory, equipment and other assets for
approximately $82.4 million in cash. The Karlskrona Facilities include a 220,000
square foot facility and a 110,000 square foot facility, each of which is ISO
9002 certified. The Company is currently utilizing the Karlskrona Facilities to
assemble and test PCBs, network switches, cordless base stations and other
components for business communications systems sold by Ericsson pursuant to a
multi-year purchase agreement (the "Purchase Agreement"). The Company intends to
also use the Karlskrona Facilities to offer advanced contract manufacturing
services to other European OEMs in the telecommunications and other industries,
which the Company believes are beginning to outsource the manufacture of
significant product lines. See "Business -- Karlskrona Acquisition" and "Risk
Factors -- Risks of Karlskrona Acquisition."

Since 1994, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, both through
acquisitions and internal growth. In fiscal 1994, the Company added U.S.
manufacturing capabilities by acquiring Relevant Industries, Inc. ("Relevant"),
a final assembly contract manufacturer located in San Jose, California. In
fiscal 1995, the Company acquired nCHIP, Inc. ("nCHIP"), a designer and
manufacturer of multichip modules ("MCMs"); added Northern European
manufacturing capabilities through the acquisition of Assembly & Automation
(Electronics) Ltd. ("A&A"), a contract manufacturer located in the United
Kingdom; and opened new facilities in China and Texas. In fiscal 1996, the
Company obtained miniature gold-finished PCB fabrication capabilities and
expanded its presence in China by acquiring Astron Group Ltd. ("Astron"). In
fiscal 1997, the Company expanded its advanced PCB design capabilities by
acquiring Fine Line Printed Circuit Design, Inc. ("Fine Line"); expanded its
presence in China by investing in FICO Investment Holding Limited ("FICO"), a
producer of injection molded plastics for Asian electronics companies; opened an
additional manufacturing facility in San Jose, California; closed its plant in
Texas; and downsized manufacturing operations in Singapore. The Company has
recently substantially expanded its manufacturing operations by expanding its
integrated campus in Doumen, China, constructing a new manufacturing campus in
Guadalajara, Mexico and adding facilities in San Jose, California.

3
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Ordinary Shares offered by the Company....... 1,750,000 shares
Ordinary Shares to be outstanding after the
offering................................... 15,542,487 shares(1)
Use of proceeds.............................. Repayment of indebtedness
Nasdaq National Market symbol................ FLEXF
</TABLE>

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996(2) 1997(2) 1997
-------- -------- -------- -------- -------- 1996 --------
(RESTATED)(3) --------
(RESTATED)(3)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data(2):
Net sales.............. $100,759 $131,345 $237,386 $448,346 $490,585 $117,889 $196,883
Operating income (loss)... 1,365 3,835 10,207 (9,435) 14,869 5,476 8,380
Net income (loss)...... (1,228) 2,151 6,156 (15,132) 7,463 4,197 5,312
Net income (loss) per
share............... $ (0.17) $ 0.28 $ 0.51 $ (1.19) $ 0.50 $ 0.28 $ 0.36
Weighted average
outstanding Ordinary
Shares and
equivalents......... 7,382 7,730 12,103 12,684 14,877 14,914 14,955
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED)
---------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
Balance Sheet Data:
Working capital(5)............................................... $ 1,324 $ 1,324
Total assets..................................................... 402,131 402,131
Long-term debt and capital lease obligations, less current
portion(5).................................................... 82,886 18,184
Shareholders' equity............................................. 88,542 153,244
</TABLE>

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

(1) Based on the number of shares outstanding as of August 31, 1997. Does not
include options outstanding as of August 31, 1997 to acquire 1,851,231
shares with a weighted average exercise price of $20.05 per share.

(2) Expansion through acquisitions and internal growth has contributed, and may
continue to contribute, to the Company's incurring significant accounting
charges and experiencing volatility in its operating results. In fiscal
1996, the Company wrote off $29.0 million of in-process research and
development associated with the acquisition of Astron and also recorded
charges totaling $1.3 million for costs associated with the closing of one
of the Company's Malaysian plants and its Shekou, China operations. In
fiscal 1997, the Company incurred plant closing expenses aggregating $5.9
million in connection with closing its Texas facility, downsizing its
Singapore manufacturing operation and writing off obsolete equipment and
incurring severance obligations at the nCHIP semiconductor fabrication
facility. See "Risk Factors -- Management of Expansion and Consolidation"
and
"-- Acquisitions."

(3) The consolidated financial statements of the Company for the fiscal year
ended March 31, 1996 and the three months ended June 30, 1996 have been
restated as a result of changes in the Company's accounting for the
acquisition of Astron. See Note 14 of Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Recent Changes in Accounting for Astron
Acquisition."

(4) Adjusted to reflect the sale of the 1,750,000 Ordinary Shares offered by the
Company hereby (at an assumed public offering price of $39 7/8 per share and
after deducting the estimated underwriting discount and offering expenses
payable by the Company) and the application of the net proceeds therefrom to
repay $64,702 of borrowings under the Company's credit facility, which are
classified as long-term debt. See "Use of Proceeds" and "Capitalization."

(5) Although not reflected in this table, the Company anticipates issuing from
$100.0 million to $125.0 million principal amount of Senior Subordinated
Notes due 2007 (the "Senior Subordinated Notes") following this offering.
The Company anticipates using the net proceeds of the Senior Subordinated
Notes to repay the $75,298 of borrowings remaining after this offering
(based on outstanding balances as of August 31, 1997) and for working
capital. No assurances can be given as to whether, or on what terms, the
Senior Subordinated Notes will be issued. See "Use of Proceeds."

4
<PAGE> 6

THE COMPANY

Flextronics is incorporated in Singapore under the Companies Act, Chapter
50 of Singapore (the "Companies Act"). The Company's principal executive offices
are located at 514 Chai Chee Lane #04-13, Bedok Industrial Estate, Singapore
469029, and its telephone number is (65) 449-5255. The address of the Company's
principal U.S. office is 2090 Fortune Drive, San Jose, California 95131, and its
telephone number is (408) 428-1300. "Flextronics" is a trademark of Flextronics.
This Prospectus also contains trademarks of other companies. Flextronics
prepares its consolidated financial statements in U.S. dollars.

5
<PAGE> 7

RISK FACTORS

The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Ordinary Shares
offered hereby. The discussion in this Prospectus contains certain
forward-looking statements, and the following risk factors should be read as
being applicable to all related forward-looking statements wherever they appear
in this Prospectus. The Company's actual results could differ materially from
those discussed in this Prospectus. Factors that could cause or contribute to
such differences include those discussed below, as well as those discussed
elsewhere herein.

RISKS OF KARLSKRONA ACQUISITION

The acquisition of the Karlskrona Facilities and the execution of the
Purchase Agreement (together the "Karlskrona Acquisition") represent a
significant expansion of the Company's operations, and entail a number of risks.
In particular, the Karlskrona Facilities had operated as captive manufacturing
facilities for Ericsson prior to March 27, 1997 and are now being integrated
into the Company's ongoing manufacturing operations. This requires optimizing
production lines, implementing new management information systems, implementing
the Company's operating systems, and assimilating and managing existing
personnel. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview." The difficulties of this integration may be
further complicated by the geographical distance of the Karlskrona Facilities
from the Company's other operations in East Asia and North America. In addition,
the Karlskrona Acquisition has increased and will continue to increase the
Company's expenses and working capital requirements, and has burdened the
Company's management resources. In the event the Company is unsuccessful in
integrating these operations, the Company would be materially adversely
affected.

As a result of the Karlskrona Acquisition, sales to Ericsson represent, and
the Company expects will continue to represent, a large portion of its net
sales. The Company currently anticipates that sales to Ericsson will represent
from 25% to 40% of its net sales in fiscal 1998. See "-- Customer Concentration;
Dependence on Electronics Industry" and "Business -- Karlskrona Acquisition."
Prior to the Karlskrona Acquisition, Ericsson was not a substantial customer of
the Company. The Company has no experience operating in Sweden, and there can be
no assurance that the Company can achieve acceptable levels of profitability, or
reduce costs and prices to Ericsson over time as contemplated by the Purchase
Agreement. In addition, there can be no assurance that the Company will not
encounter difficulties in meeting Ericsson's expectations as to product quality
and timeliness. If Ericsson's requirements exceed the volume anticipated by the
Company, the Company may be unable to meet these requirements on a timely basis.
The Company's inability to meet Ericsson's volume, quality, timeliness and cost
requirements, and to quickly resolve any other issues with Ericsson, could have
a material adverse effect on the Company and its results of operations. There
can also be no assurance that Ericsson will purchase a sufficient quantity of
products from the Company to meet the Company's expectations or that the Company
will utilize a sufficient portion of the capacity of the Karlskrona Facilities
to achieve profitable operations.

The Company intends to use the Karlskrona Facilities to manufacture
products for OEMs other than Ericsson. The Company has no commitments by any
third party to purchase manufacturing services to be provided at the Karlskrona
Facilities, and no assurance can be given that the Company will be successful in
marketing and providing manufacturing services to third parties from the
Karlskrona Facilities. Ericsson also has certain rights to be consulted on the
management of the Karlskrona Facilities and to approve the use of the Karlskrona
Facilities for Ericsson's competitors, or for other customers where such use
might adversely affect Ericsson's access to production capacity at the
facilities. Further, no assurances can be given as to the Company's ability to
expand manufacturing capacity at the Karlskrona Facilities.

6
<PAGE> 8

acquired in the transaction without Ericsson's consent. A material breach by the
Company of any of the terms of the Purchase Agreement could allow Ericsson to
repurchase the assets conveyed to the Company at the Company's book value or to
obtain other relief, including the cancellation of outstanding purchase orders
or termination of the Purchase Agreement. Ericsson also has certain rights to be
consulted on the management of the Karlskrona Facilities and to approve the use
of the Karlskrona Facilities for Ericsson's competitors or for other customers
where such use might adversely affect Ericsson's access to production capacity
at the facilities. In addition, without Ericsson's consent, the Company may not
enter into any transactions that could adversely affect its ability to continue
to supply products and services to Ericsson under the Purchase Agreement or its
ability to reduce costs and prices to Ericsson. As a result of these rights,
Ericsson may, under certain circumstances, retain a significant degree of
control over the Karlskrona Facilities and their management. See
"Business -- Karlskrona Acquisition."

INCREASED LEVERAGE

At June 30, 1997, the Company had consolidated indebtedness of
approximately $163.6 million (including bank borrowings, long-term debt and
capitalized lease obligations, and excluding $9.0 million of liabilities
relating to the Astron acquisition that the Company intends to repay in the
Company's Ordinary Shares). The Company's indebtedness at June 30, 1997 included
$111.0 million borrowed on March 27, 1997, which substantially increased the
Company's leverage. The Company's ratio of indebtedness to shareholders' equity
increased from approximately 75.6% at June 30, 1996 to 184.8% at June 30, 1997.
See "Management's Discussion and Analysis of Financial Condition and Result of
Operations -- Liquidity and Capital Resources."

The Company currently anticipates issuing from $100.0 million to $125.0
million principal amount of Senior Subordinated Notes, and applying
approximately $140.0 million from the net proceeds from the sale of the Senior
Subordinated Notes and the Ordinary Shares offered hereby to repay outstanding
borrowings under its credit facility. Following such repayment, the Company
anticipates increasing the aggregate principal amount of revolving credit loans
that may be made under its credit facility (although no assurances can be given
as to the availability or amount of any such increase). The Company anticipates
that it will from time to time borrow revolving credit loans under its credit
facility to finance its operations and growth, and such borrowings will further
increase the Company's leverage.

The degree to which the Company is leveraged could have important
consequences to the Company and its shareholders, including the following: (i)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, product development, acquisitions or other
purposes may be limited or impaired; (ii) the Company's operating flexibility
with respect to certain matters will be limited by covenants that limit the
ability of the Company and certain of its subsidiaries to incur additional
indebtedness, grant liens, pay dividends, redeem capital stock or prepay certain
subordinated indebtedness and enter into sale and leaseback transactions; and
(iii) the Company's degree of leverage may make it more vulnerable to economic
downturns, may limit its ability to pursue other business opportunities and may
reduce its flexibility in responding to changing business and economic
conditions.

The Company's ability to generate cash for the repayment of debt will be
dependent upon the future performance of the Company's business, which will in
turn be subject to financial, business, economic and other factors affecting the
business and operations of the Company, including factors beyond its control,
such as prevailing economic conditions.

The Company may seek growth through selective acquisitions, including
significant acquisitions. The Company could incur substantial additional
indebtedness in connection with a significant acquisition, in which event the
Company's leverage would be further increased.

MANAGEMENT OF EXPANSION AND CONSOLIDATION

The Company has experienced rapid expansion in recent years through both
internal growth and acquisitions, with net sales increasing from $100.8 million
in fiscal 1993 to $490.6 million in fiscal 1997, and reaching $196.9 million in
the three months ended June 30, 1997. There can be no assurance that the
Company's historical growth will continue or that the Company will successfully
manage the integration of acquired operations. Expansion has caused, and is
expected to continue to cause, strain on the Company's

7
<PAGE> 9

infrastructure, including its managerial, technical, financial and other
resources. To manage further growth, the Company must continue to enhance
financial controls and hire additional engineering and sales personnel. The
Company's ability to manage any future growth effectively will require it to
attract, train, motivate and manage new employees successfully, to integrate new
employees into its overall operations and to continue to improve its operational
systems. The Company may experience certain inefficiencies as it integrates new
operations and manages geographically dispersed operations. There can be no
assurance that the Company will be able to manage its expansion effectively, and
a failure to do so could have a material adverse effect on the Company's results
of operations. In addition, the Company's results of operations would be
adversely affected if its new facilities do not achieve growth sufficient to
offset increased expenditures associated with expansion.

Expansion through acquisitions and internal growth has contributed to the
Company's incurring significant accounting charges and experiencing volatility
in its operating results. In the fourth quarter of fiscal 1996, the Company
reported a substantial loss as a result of the write-off of in-process research
and development charges related to the Astron acquisition and closure of a
facility in Malaysia and a facility in China. In fiscal 1997, the Company
reported charges associated with closing its manufacturing facility in Texas,
downsizing manufacturing operations in Singapore, and writing off obsolete
equipment and incurring severance obligations at the nCHIP semiconductor
fabrication facility. There can be no assurance that the Company will not
continue to experience volatility in its operating results or incur write-offs
in connection with expansion, acquisitions and consolidation. Furthermore, the
Company has recently completed the construction of significant new facilities in
Guadalajara, Mexico, Doumen, China, and San Jose, California, resulting in new
fixed and operating expenses, including substantial increases in depreciation
expense that will increase the Company's cost of sales. There can be no
assurances that the Company will utilize a sufficient portion of the capacity of
these facilities to offset the impact of these expenses on its gross margins and
operating income. If revenue levels do not increase sufficiently to offset these
new expenses, the Company's operating results could be materially adversely
affected.

The Company is beginning the process of replacing its management
information systems. The new systems will significantly affect many aspects of
the Company's business including its manufacturing, sales and marketing, and
accounting functions, and the Company's ability to integrate the Karlskrona
Facilities, which must be converted to the new system, and the successful
implementation of these systems will be important to facilitate future growth.
The Company intends to implement the new system incrementally on a regional
basis and currently anticipates that the implementation of the new management
information systems will take at least 18 months. The Company anticipates
expending from $7.0 million to $15.0 million in fiscal 1998 and 1999 to
implement the new management information system, and anticipates funding these
expenditures with cash from operations and borrowings under its credit facility.
Delays or difficulties could be encountered in the implementation process, which
could cause significant disruption in operations, including problems with the
delivery of its products or an adverse impact on its ability to access timely
and accurate financial and operating information and could materially increase
the cost of implementing the new management information system. If the Company
is not successful in implementing its new systems or if the Company experiences
difficulties in such implementation, the Company's operating results could be
materially adversely affected.

ACQUISITIONS

Acquisitions have represented a significant portion of the Company's growth
strategy, and the Company intends to continue to pursue attractive acquisition
opportunities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview." Acquisitions involve a number of risks
in addition to those described under "-- Management of Expansion and
Consolidation" that could adversely affect the Company, including the diversion
of management's attention, the integration and assimilation of the operations
and personnel of the acquired companies, the amortization of acquired intangible
assets and the potential loss of key employees of the acquired companies. The
Company may not have had any experience with technologies, processes and markets
involved with the acquired business and accordingly may lack the management and
marketing experience that will be necessary to successfully operate and
integrate the business. The successful operation of an acquired business will
require communication and

8
<PAGE> 10

cooperation in product development and marketing among senior executives and key
technical personnel. Given the inherent difficulties involved in completing a
major business combination, there can be no assurance that such cooperation will
occur or that integration of the respective businesses will be successful and
will not result in disruption in one or more sectors of the Company's business.
In addition, there can be no assurance that the Company will retain key
technical, management, sales and other personnel, that the market will favorably
view the Company's entry into a new industry or market or that the Company will
realize any of the other anticipated benefits of the acquisition. Furthermore,
additional acquisitions would require investment of financial resources, and may
require debt or equity financing. No assurance can be given that the Company
will consummate any acquisitions in the future, that any past or future
acquisition by the Company will not materially adversely affect the Company or
that any such acquisition will enhance the Company's business.

CUSTOMER CONCENTRATION; DEPENDENCE ON ELECTRONICS INDUSTRY

A small number of customers are currently responsible for a significant
portion of the Company's net sales. In fiscal 1997 and the first three months of
fiscal 1998, the Company's five largest customers accounted for approximately
46% and 61%, respectively, of net sales. Approximately 13% and 11% of the
Company's net sales for fiscal 1997 were derived from sales to Lifescan and U.S.
Robotics, respectively. Approximately 30% and 10% of the Company's net sales for
the first three months of fiscal 1998 were derived from sales to Ericsson and
Advanced Fibre Communications, respectively. See "Business -- Karlskrona
Acquisition." Flextronics anticipates that a small number of customers will
continue to account for a large portion of its net sales as it focuses on
strengthening and broadening relationships with leading OEMs.

The composition of the group comprising the Company's largest customers has
varied from year to year, and there can be no assurance that the Company's
principal customers will continue to purchase products and services from the
Company at current levels, if at all. For example, the Company expects that its
sales to Global Village Communications in fiscal 1998 will be significantly
lower than in recent periods. Significant reductions in sales to any of these
customers, or the loss of one or more major customers, would have a material
adverse effect on the Company. The Company generally does not obtain firm
long-term volume purchase commitments from its customers, and over the past few
years has experienced reduced lead-times in customer orders. In addition,
customer contracts can be canceled and volume levels can be changed or delayed.
The timely replacement of canceled, delayed, or reduced contracts with new
business cannot be assured. These risks are exacerbated because a majority of
the Company's sales are to customers in the electronics industry, which is
subject to rapid technological change and product obsolescence. The factors
affecting the electronics industry in general, or any of the Company's major
customers in particular, could have a material adverse effect on the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

9
<PAGE> 11

Credit terms are extended to customers after performing credit evaluations,
which continue throughout a customer's contract period. Credit losses have
occurred in the past, and no assurances can be given that credit losses, which
could be material, will not occur in the future. The Company's concentration of
customers increases the risk that any credit loss would have a material adverse
effect on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

VARIABILITY OF CUSTOMER REQUIREMENTS AND OPERATING RESULTS

Contract manufacturers must provide increasingly rapid product turnaround
and respond to ever-shorter lead times. The Company generally does not obtain
long-term purchase orders but instead works with its customers to anticipate the
volume of future orders. In certain cases, the Company will procure components
without a customer commitment to pay for them, and the Company must continually
make other significant decisions for which it is responsible, including the
levels of business that it will seek and accept, production schedules, personnel
needs and other resource requirements. A variety of conditions, both specific to
the individual customer and generally affecting the industry, may cause
customers to cancel, reduce or delay orders. Cancellations, reductions or delays
by a significant customer or by a group of customers would adversely affect the
Company. On occasion, customers may require rapid increases in production, which
can stress the Company's resources and reduce margins. Although the Company has
increased its manufacturing capacity, there can be no assurance that the Company
will have sufficient capacity at any given time to meet its customers' demands
if such demands exceed anticipated levels.

In addition to the variability resulting from the short-term nature of its
customers' commitments, other factors have contributed, and may contribute in
the future to significant periodic and quarterly fluctuations in the Company's
results of operations. These factors include, among other things: timing of
orders; volume of orders relative to the Company's capacity; customers'
announcements, introductions and market acceptance of new products or new
generations of products; evolution in the life cycles of customers' products;
timing of expenditures in anticipation of future orders; effectiveness in
managing manufacturing processes; changes in cost and availability of labor and
components; product mix; and changes or anticipated changes in economic
conditions. In addition, the Company's net sales are adversely affected by the
observance of local holidays during the fourth fiscal quarter in Malaysia and
China, reduced production levels in Sweden in July, and the reduction in orders
by certain customers in the fourth fiscal quarter reflecting a seasonal slowdown
following the Christmas holiday.

Expansion through acquisition and internal growth has contributed to the
Company's incurring significant accounting charges and to volatility in its
operating results. In the fourth quarter of fiscal 1996, the Company reported a
substantial loss as a result of the write off of in-process research and
development charges related to the Astron acquisition and the closing of
facilities in Malaysia and China. In fiscal 1997, the Company reported charges
associated with closing of its manufacturing facility in Texas, downsizing
manufacturing operations in Singapore and writing-off of obsolete equipment and
incurring severance obligations at the nCHIP semiconductor fabrication facility.
There can be no assurance that the Company will not continue to experience
volatility in its operating results or incur write-offs in connection with
expansion, acquisitions and consolidation.

The market segments served by the Company are also subject to economic
cycles and have in the past experienced, and are likely in the future to
experience, recessionary periods. A recessionary period affecting the industry
segments served by the Company could have a material adverse effect on the
Company's results of operations. Results of operations in any period should not
be considered indicative of the results to be expected for any future period,
and fluctuations in operating results may also result in fluctuations in the
price of the Company's Ordinary Shares. In future periods, the Company's net
sales or results of operations may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Ordinary
Shares would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

10
<PAGE> 12

RAPID TECHNOLOGICAL CHANGE

The markets in which the Company's customers compete are characterized by
rapidly changing technology, evolving industry standards and continuous
improvements in products and services. These conditions frequently result in
short product life cycles. The Company's success will depend to a significant
extent on the success achieved by its customers in developing and marketing
their products, some of which are new and untested. If technologies or standards
supported by customers' products become obsolete or fail to gain widespread
commercial acceptance, the Company's business may be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."

The Company has made substantial investments in developing advanced
interconnect technological capabilities. See "Business -- Services." These
capabilities, primarily MCMs, miniature gold-finished PCBs and epoxy molding
conductive compounds, currently account for a relatively small portion of the
overall market for electronic interconnect products. The ability of the Company
to achieve desired operating results will depend upon the extent to which
customers design, manufacture and adopt systems based on these advanced
technologies. There can be no assurance that the Company will be able to develop
and exploit these technologies successfully. In addition, there can be no
assurance that the Company will be able to exploit new technologies as they are
developed or to adapt its manufacturing processes, technologies and facilities
to address emerging customer requirements.

COMPETITION

The electronics contract manufacturing industry is extremely competitive
and includes hundreds of companies, several of whom have achieved substantial
market share. The Company competes against numerous domestic and foreign
contract manufacturers, and current and prospective customers also evaluate the
Company's capabilities against the merits of internal production. In addition,
in recent years the electronics contract manufacturing industry has attracted a
significant number of new entrants, including large OEMs with excess
manufacturing capacity, and many existing participants, including the Company,
have substantially expanded their manufacturing capacity by expanding their
facilities and adding new facilities. In the event of a decrease in overall
demand for contract manufacturing services, this increased capacity could result
in substantial pricing pressures, which could adversely affect the Company's
operating results. Certain of the Company's competitors, including Solectron
Corporation and SCI Systems, have substantially greater manufacturing,
financial, research and development and marketing resources than the Company.
The Company believes that the principal competitive factors in the segments of
the contract manufacturing industry in which it operates are cost, technological
capabilities, responsiveness and flexibility, delivery cycles, location of
facilities, product quality and range of services available. Failure to satisfy
any of the foregoing requirements could materially adversely affect the
Company's competitive position. See "Business -- Competition."

RISK OF INCREASED TAXES

The Company has structured its operations in a manner designed to maximize
income in countries where tax incentives have been extended to encourage foreign
investment or where income tax rates are low. If these tax incentives are not
renewed upon expiration, if the tax rates applicable to the Company are
rescinded or changed, or if tax authorities successfully challenge the manner in
which profits are recognized among the Company's subsidiaries, the Company's
taxes would increase and its results of operations and cash flow would be
adversely affected. Substantially all of the products manufactured by the
Company's Asian subsidiaries are sold to U.S.-based customers. While the Company
believes that profits from its Asian operations are not sufficiently connected
to the U.S. to give rise to U.S. federal or state income taxation, there can be
no assurance that U.S. tax authorities will not challenge the Company's position
or, if such challenge is made, that the Company would prevail in any such
dispute. If the Company's Asian profits became subject to U.S. income taxes, the
Company's worldwide effective tax rate would increase and its results of
operations and cash flow would be adversely affected. The expansion by the
Company of its operations in North America and

11
<PAGE> 13

Northern Europe may increase its worldwide effective tax rate. See "Management's
Discussion and Analysis of Financial Condition and Result of
Operations -- Provision for Income Taxes."

RISKS OF INTERNATIONAL OPERATIONS

The Company has substantial manufacturing operations located in China,
Malaysia, Sweden and the United States. In addition, the Company has recently
constructed a manufacturing campus in Mexico, where the Company has never
manufactured products. The Company's net sales derived from operations outside
of the United States was $327.0 million in fiscal 1997, $161.8 million of which
was derived from operations in Hong Kong and China, and was $148.4 million in
the three months ended June 30, 1997, $50.0 million of which was derived from
operations in Hong Kong and China. The geographical distances between Asia,
North America and Europe create a number of logistical and communications
challenges. Because of the location of manufacturing facilities in a number of
countries, the Company is affected by economic and political conditions in those
countries, including fluctuations in the value of currency, duties, possible
employee turnover, labor unrest, lack of developed infrastructure, longer
payment cycles, greater difficulty in collecting accounts receivable, the
burdens and costs of compliance with a variety of foreign laws and, in certain
parts of the world, political instability. Changes in policies by the U.S. or
foreign governments resulting in, among other things, increased duties, higher
taxation, currency conversion limitations, restrictions on the transfer of
funds, limitations on imports or exports, or the expropriation of private
enterprises could also have a material adverse effect on the Company. The
Company could also be adversely affected if the current policies encouraging
foreign investment or foreign trade by its host countries were to be reversed.
In addition, the attractiveness of the Company's services to its U.S. customers
is affected by U.S. trade policies, such as "most favored nation" status and
trade preferences for certain Asian nations. For example, trade preferences
extended by the United States to Malaysia in recent years were not renewed in
1997.

In particular, the Company's operations and assets are subject to
significant political, economic, legal and other uncertainties in China and
Mexico, where the Company is substantially expanding its operations.

Risks Relating to China. The Company's operations and assets are subject to
significant political, economic, legal and other uncertainties in China,
where the Company is substantially expanding its operations. Under its
current leadership, the Chinese government has been pursuing economic
reform policies, including the encouragement of foreign trade and
investment and greater economic decentralization. No assurance can be
given, however, that the Chinese government will continue to pursue such
policies, that such policies will be successful if pursued, or that such
policies will not be significantly altered from time to time. Despite
progress in developing its legal system, China does not have a
comprehensive and highly developed system of laws, particularly with
respect to foreign investment activities and foreign trade. Enforcement of
existing and future laws and contracts is uncertain, and implementation and
interpretation thereof may be inconsistent. As the Chinese legal system
develops, the promulgation of new laws, changes to existing laws and the
preemption of local regulations by national laws may adversely affect
foreign investors.

The Company could also be adversely affected by the imposition of austerity
measures intended to reduce inflation, the inadequate development or
maintenance of infrastructure or the unavailability of adequate power and
water supplies, transportation, raw materials and parts, or a deterioration
of the general political, economic or social environment in China.

In addition, China currently enjoys Most Favored Nation ("MFN") status
granted by the United States, pursuant to which the United States imposes
the lowest applicable tariffs on Chinese exports to the United States. The
United States annually reconsiders the renewal of MFN trading status for
China. No assurance can be given that China's MFN status will be renewed in
the future years. China's loss of MFN status could adversely affect the
Company by increasing the cost to the U.S. customers of products
manufactured by the Company in China.

The Company maintains certain administrative, procurement and manufacturing
operations in Hong Kong, which may be influenced by the changing political
situation in Hong Kong and by the general state of the Hong Kong economy.
On July 1, 1997, sovereignty over Hong Kong was transferred from the

12
<PAGE> 14

United Kingdom to China, and Hong Kong became a Special Administrative
Region ("SAR"). Based on current political conditions and the Company's
understanding of the Basic Law of the Hong Kong SAR of China, the Company
does not believe that the transfer of sovereignty over Hong Kong will have
a material adverse effect on the Company. There can be no assurance,
however, that changes in political, legal or other conditions will not
result in such an adverse effect.

Risks Relating to Mexico. The Mexican government exercises significant
influence over many aspects of the Mexican economy. Accordingly, the
actions of the Mexican government concerning the economy could have a
significant effect on private sector entities in general and the Company in
particular. In addition, during the 1980s, Mexico experienced periods of
slow or negative growth, high inflation, significant devaluations of the
peso and limited availability of foreign exchange. As a result of the
Company's recent expansion in Mexico, economic conditions in Mexico will
affect the Company.

CURRENCY FLUCTUATIONS

While Flextronics transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of Flextronics' costs
such as payroll, rent and indirect operation costs, are denominated in other
currencies such as Singapore dollars, Swedish kronor, Hong Kong dollars,
Malaysian ringgit, British pounds sterling and Chinese renminbi. Historically,
fluctuations in foreign currency exchange rates have not resulted in significant
exchange losses to the Company. As a result of the Karlskrona Acquisition, a
significant portion of the Company's business has been, and is expected to
continue to be, conducted in Swedish kronor. Changes in the relation of these
and other currencies to the U.S. dollar will affect the Company's cost of goods
sold and operating margins and could result in exchange losses. The impact of
future exchange rate fluctuations on the Company's results of operations cannot
be accurately predicted. The Company has historically not actively engaged in
substantial exchange rate hedging activities. However, in August 1997 the
Company began to engage in hedging activities with respect to its fixed kronor
obligations in Sweden in order to minimize its exposure to fluctuations in
exchange rates for Swedish kronor. There can be no assurance that the Company
will implement any additional hedging techniques or that any of its hedging
activities will be successful.

Over the last five years, the Chinese renminbi has experienced significant
devaluation against most major currencies. The establishment of the current
exchange rate system as of January 1, 1994 produced a significant devaluation of
the renminbi from $1.00 to Rmb 5.7 to approximately $1.00 to Rmb 8.7. The rates
at which exchanges of renminbi into U.S. dollars may take place in the future
may vary, and any material increase in the value of the renminbi relative to the
U.S. dollar would increase the Company's costs and expenses and therefore would
have a material adverse effect on the Company.

LIMITED AVAILABILITY OF COMPONENTS

A substantial majority of the Company's net sales are derived from turnkey
manufacturing in which the Company is responsible for procuring materials, which
typically results in the Company bearing the risk of component price increases.
At various times there have been shortages of certain electronics components,
including DRAMs, memory modules, logic devices, ASICs, laminates, specialized
capacitors and integrated circuits in bare-die form. Component shortages could
result in manufacturing and shipping delays or higher prices which could have a
material adverse effect on the Company.

DEPENDENCE ON KEY PERSONNEL AND SKILLED EMPLOYEES

The Company's success depends to a large extent upon the continued services
of key executives and skilled personnel. Generally, the Company's employees are
not bound by employment or noncompetition agreements. The Company has entered
into service agreements with certain officers, including Ronny Nilsson, Teo Buck
Song, Michael McNamara and Tsui Sung Lam, some of which contain non-competition
provisions and provides its officers and key employees with stock options that
are structured to incentivize such employees to remain with the Company.
However, there can be no assurance as to the ability of the Company to retain
its officers and key employees. The loss of such personnel could have a material
adverse effect on the

13
<PAGE> 15

Company. The Company's business also depends upon its ability to continue to
recruit, train and retain skilled and semi-skilled employees, particularly
administrative, engineering and sales personnel. There is intense competition
for skilled and semi-skilled employees, particularly in the San Jose, California
market, and the Company's failure to recruit, train and retain such employees
could adversely affect the Company's results of operations.

ENVIRONMENTAL COMPLIANCE RISKS

The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing process. Substrates for its MCMs are manufactured on a
semiconductor-type fabrication line in California owned by the Company. The
Company is also expanding its PCB fabrication operations in China. Proper
handling, storage and disposal of the metals and chemicals used in these
manufacturing processes are important considerations in avoiding environmental
contamination. Although the Company believes that its facilities are currently
in material compliance with applicable environmental laws, and it monitors its
operations to avoid violations arising from human error or equipment failures,
there can be no assurances that violations will not occur. In the event of a
violation of environmental laws, the Company could be held liable for damages
and for the costs of remedial actions and could also be subject to revocation of
its effluent discharge permits. Any such revocations could require the Company
to cease or limit production at one or more of its facilities, thereby having a
material adverse effect on the Company's operations. Environmental laws could
also become more stringent over time, imposing greater compliance costs and
increasing risks and penalties associated with any violation, which could have a
material adverse effect on the Company.

PROTECTION OF INTELLECTUAL PROPERTY

The Company relies on a combination of patent, trade secret and trademark
laws, confidentiality procedures and contractual provisions to protect its
intellectual property. The Company seeks to protect certain of its technology
under trade secret laws, which afford only limited protection. There can be no
assurance that any of the Company's pending patent applications will be issued
or that intellectual property laws will protect the Company's intellectual
property rights. In addition, there can be no assurance that any patent issued
to the Company will not be challenged, invalidated or circumvented or that the
rights granted thereunder will provide competitive advantages to the Company.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to obtain and use information that the Company regards as
proprietary. Furthermore, there can be no assurance that others will not
independently develop similar technology or design around any patents issued to
the Company. Moreover, effective protection of intellectual property rights may
be unavailable or limited in certain foreign countries in which the Company
operates. In particular, the Company may be afforded only limited protection of
its intellectual property rights in China.

The Company may in the future be notified that it is infringing certain
patent or other intellectual property rights of others, although there are no
such pending lawsuits against the Company or unresolved notices that it is
infringing intellectual property rights of others. No assurance can be given
that in the event of such infringement, licenses could be obtained on
commercially reasonable terms, if at all, or that litigation will not occur. The
failure to obtain necessary licenses or other rights or the occurrence of
litigation arising out of such claims could materially adversely affect the
Company.

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

Certain provisions of the Singapore Companies Act (Chapter 50) and the
Singapore Code on Takeovers and Mergers could make it more difficult for a third
party to acquire control of the Company. Such provisions could limit the price
that certain investors might be willing to pay in the future for Ordinary Shares
of the Company. Certain of such provisions impose various procedural and other
requirements which could make it more difficult for shareholders to effect
certain corporate actions. See "Description of Capital Shares -- Takeovers."

14
<PAGE> 16

VOLATILITY OF MARKET PRICE OF ORDINARY SHARES

The stock market in recent years has experienced significant price and
volume fluctuations that have affected the market prices of technology companies
and that have often been unrelated to or disproportionately impacted by the
operating performance of such companies. There can be no assurance that the
market for the Ordinary Shares will not be subject to similar fluctuations.
Factors such as fluctuations in the operating results of the Company,
announcements of technological innovations or events affecting other companies
in the electronics industry, currency fluctuations and general market conditions
may have a significant effect on the market prices of the Company's securities,
including the Ordinary Shares.

ENFORCEMENT OF CIVIL LIABILITIES

The Company is incorporated in Singapore under the Companies Act. Certain
of its directors and executive officers (and certain experts named in this
Prospectus) reside in Singapore. All or a substantial portion of the assets of
such persons, and a substantial portion of the assets of the Company (other than
its U.S. subsidiaries), are located outside the United States. As a result, it
may not be possible for persons purchasing Ordinary Shares to effect service of
process within the United States upon such persons or the Company or to enforce
against them, in the United States courts, judgments obtained in such courts
predicated upon the civil liability provisions of the federal securities laws of
the United States. The Company has been advised by its Singapore legal advisors,
Allen & Gledhill, that there is doubt as to the enforceability in Singapore,
either in original actions or in actions for the enforcement of judgments of
United States courts, of civil liabilities predicated upon the federal
securities laws of the United States.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Ordinary Shares
offered hereby are estimated to be approximately $64.7 million. The Company
expects to use all of such net proceeds to repay outstanding term loans under
the Company's credit facility, which consists of a revolving credit and term
loan agreement and a revolving credit loan agreement, each provided by
BankBoston, N.A., as agent (together the "Credit Facility"). The Company also
anticipates issuing from $100.0 million to $125.0 million principal amount of
Senior Subordinated Notes in fiscal 1998, and intends to use the net proceeds
from the Senior Subordinated Notes to repay the remaining $75.3 million of
outstanding borrowings (including $5.3 million of term loans and $70.0 million
of revolving credit loans) under the Credit Facility (based on amounts
outstanding on August 31, 1997) and for working capital. No assurances can be
given as to whether, or on what terms, the Senior Subordinated Notes will be
issued. The term loans under the Credit Facility are payable in installments
over a five-year period, and the revolving credit loans mature in March 2000.
$111.0 million of the loans outstanding on August 31, 1997 were borrowed on
March 27, 1997 to pay the purchase price of the Karlskrona Facilities and for
working capital and the remainder was borrowed subsequently for working capital
and for capital expenditures. These loans bear interest at a variable rate equal
to approximately 8.4% per annum as of August 31, 1997. Following such repayment,
the Company anticipates increasing the aggregate principal amount of revolving
credit loans that may be borrowed under the Credit Facility. No assurances can
be given, however, as to the availability or amount of any such increase, and
the Company anticipates that it will from time to time borrow such revolving
credit loans to fund its operations and growth. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

DIVIDENDS

Since inception, the Company has not declared or paid any cash dividends on
its Ordinary Shares, and the Credit Facility prohibits the payment of cash
dividends without the lenders' prior consent. The Company anticipates that the
terms of the Senior Subordinated Notes will also restrict the Company's ability
to pay cash dividends. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
Company anticipates that all earnings in the foreseeable future will be retained
to finance the continuing development of its business.

15
<PAGE> 17

PRICE RANGE OF ORDINARY SHARES

The Company's Ordinary Shares are traded on the Nasdaq National Market
under the symbol "FLEXF." The following table shows the high and low closing
sale prices of the Company's Ordinary Shares since the beginning of the
Company's 1996 fiscal year.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Fiscal 1996
First Quarter............................................. $21 7/8 $13 1/2
Second Quarter............................................ $26 3/4 $21 3/4
Third Quarter............................................. $30 $21
Fourth Quarter............................................ $35 3/4 $25 3/4

Fiscal 1997
First Quarter............................................. $39 $25
Second Quarter............................................ $28 1/4 $17
Third Quarter............................................. $37 1/4 $21
Fourth Quarter............................................ $29 3/4 $19 5/8

Fiscal 1998
First Quarter............................................. 27 17 1/
Second Quarter (through September 17, 1997)............... 41 26 3/
</TABLE>

On September 17, 1997, the closing sale price of the Ordinary Shares was
$39 7/8 per share.

16
<PAGE> 18

CAPITALIZATION

The following table sets forth the Company's capitalization as of June 30,
1997, as adjusted to give effect to the application of the estimated net
proceeds from the sale by the Company of the 1,750,000 Ordinary Shares offered
hereby at an assumed public offering price of $39 7/8 per share. Although not
reflected in the following table, the Company anticipates issuing from $100.0
million to $125.0 million principal amount of Senior Subordinated Notes
following this offering. The Company anticipates using the net proceeds of the
Senior Subordinated Notes to repay an additional $74,298 of outstanding loans
under the Company's Credit Facility ($4,298 of which are included in short-term
bank borrowings in the following table and $70,000 of which are included in
long-term debt in the following table) and for working capital. No assurance can
be given as to whether, or on what terms, the Senior Subordinated Notes will be
issued.

<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED)
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term bank borrowings......................... 69,000 69,000
Current portion of long-term debt and capital
leases........................................... 11,754 11,754
Long-term debt, less current portion............... 72,018 7,316
Notes payable to shareholders...................... 223 223
Capital leases..................................... 10,645 10,645
-------- --------
Total long-term debt..................... 82,886 18,184
-------- --------
Total indebtedness and capital leases.... 163,640 98,938
======== ========
Shareholders' equity:
Ordinary Shares, S$0.01 par value; 100,000,000
shares authorized, 13,752,293 shares issued
and outstanding, 15,502,293 shares issued and
outstanding as adjusted....................... 89 101
Additional paid-in capital....................... 95,207 159,897
Accumulated deficit.............................. (6,754) (6,754)
-------- --------
Total shareholders' equity............... 88,542 153,244
======== ========
Total capitalization..................... 252,182 252,182
======== ========
</TABLE>

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

(1) Adjusted to reflect the sale of the 1,750,000 Ordinary Shares offered hereby
(at an assumed public offering price of $39 7/8 per share and after
deducting the estimated underwriting discount and offering expenses payable
by the Company) and the receipt of the estimated net proceeds therefrom. See
"Use of Proceeds."

17
<PAGE> 19

SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company as of
and for each of the three months ended June 30, 1996 and 1997 and the fiscal
years ended March 31, 1993, 1994, 1995, 1996 and 1997. The selected financial
data set forth below as of March 31, 1996 and 1997 and for the fiscal years
ended March 31, 1995, 1996 and 1997, have been derived from consolidated
financial statements of the Company which have been audited by Ernst & Young,
independent auditors, whose report thereon is included elsewhere herein. The
selected financial data set forth below as of March 31, 1993 and 1994 and for
the fiscal years ended March 31, 1993 and 1994 have been derived from audited
financial statements not included in this Prospectus. The selected financial
data as of June 30, 1997 and for the three months ended June 30, 1996 and 1997
has been derived from the unaudited financial statements of the Company for such
periods. In the opinion of management, all adjustments, consisting of only
normal recurring adjustments, considered necessary for a fair presentation have
been made. These historical results are not necessarily indicative of the
results to be expected in the future. The following table is qualified by
reference to and should be read in conjunction with the consolidated financial
statements, related notes thereto and other financial data included elsewhere
herein.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
-------------------------------------------------------------- ---------------------------
1993 1994 1995 1996(1) 1997(2) 1997
-------- -------- -------- ------------- ------------- -----------
(RESTATED)(3)
1996
-------------
(RESTATED)(3)
(IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $100,759 $131,345 $237,386 $ 448,346 $ 490,585 $ 117,889 $ 196,883
Cost of sales.................... 91,794 117,392 214,865 407,457 440,448 106,143 177,212
-------- -------- -------- -------- -------- -------- --------
Gross profit................... 8,965 13,953 22,521 40,889 50,137 11,746 19,671
Selling, general and
administrative expenses........ 7,131 8,667 11,468 18,787 26,765 5,611 10,549
Acquired in-process research and
development.................... 81 202 91 29,000 -- -- --
Goodwill amortization............ 388 398 510 739 989 243 388
Intangible assets amortization... -- 21 245 544 1,646 416 354
Provision for plant closings..... -- 830 -- 1,254 5,868 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)........ 1,365 3,835 10,207 (9,435) 14,869 5,476 8,380
Net interest income (expense).... (2,628) (1,778) (774) (2,380) (3,885) (595) (2,938)
Merger expenses.................. -- -- (816) -- -- -- --
Foreign exchange gain (loss)..... 299 402 (303) 872 1,168 79 306
Income (loss) from associated
company........................ -- (70) (729) -- 241 -- 300
Other income (expense)........... -- -- 34 (398) (2,718) -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes........................ (964) 2,389 7,619 (11,341) 9,675 4,960 6,048
Provision for income taxes....... 264 654 1,463 3,791 2,212 763 736
Extraordinary gain............... -- 416 -- -- -- -- --
Net income (loss).............. $ (1,228) $ 2,151 $ 6,156 $ (15,132) $ 7,463 $ 4,197 $ 5,312
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share...... $ (0.17) $ 0.28 $ 0.51 $ (1.19) $ 0.50 $ 0.28 $ 0.36
======== ======== ======== ======== ======== ======== ========
Weighted average Ordinary Shares
and equivalents................ 7,382 7,730 12,103 12,684 14,877 14,914 14,955
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1997
-------- -------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(RESTATED)(3) (UNAUDITED)

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......... (1,201) 30,669 33,425 30,801 (25,047) 1,324
Total assets....................... 52,430 103,129 116,117 231,024 359,234 402,131
Long-term debt and capital lease
obligations, less current
portion.......................... 17,243 4,755 6,890 17,674 12,302 82,886
Shareholders' equity (deficit)..... (2,256) 46,703 57,717 73,059 83,592 88,542
</TABLE>

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

(1) In fiscal 1996, the Company wrote off $29.0 million of in-process research
and development associated with the acquisition of Astron and also recorded
charges totaling $1.3 million for costs associated with the closing of one
of the Company's Malaysian plants and its Shekou, China operations.

(2) In fiscal 1997, the Company incurred plant closing expenses aggregating $5.9
million in connection with closing its manufacturing facility in Texas,
downsizing manufacturing operations in Singapore, and writing off obsolete
equipment and incurring severance obligations at the nCHIP semiconductor
fabrication operations.

18
<PAGE> 20

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

Except for historical information contained herein, the matters discussed
below and elsewhere herein are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. The words "expects," "anticipates,"
"believes," "intends" and similar expressions identify forward-looking
statements, which speak only as of the date hereof. These forward-looking
statements are subject to certain risks and uncertainties, including, without
limitation, those discussed in "Risk Factors," that could cause future results
to differ materially from historical results or those anticipated.

OVERVIEW

The Company was organized in Singapore in 1990 to acquire the Asian
contract manufacturing operations and certain U.S. design, sales and support
operations of Flextronics, Inc. (the "Predecessor"), which had been in the
contract manufacturing business since 1982. The acquisition of the selected
operations of the Predecessor for approximately $39.0 million was completed in
June 1990 and was financed with approximately $20.0 million of secured long-term
bank debt, $4.0 million of subordinated debt and $15.0 million of equity. After
such acquisition, the equity investors held approximately 55% of the outstanding
share capital of the Company. The Company's results of operations for periods
following the 1990 acquisition and through March 1994 reflect the interest
expense associated with the indebtedness incurred in connection with this
transaction.

In July 1993, a group of new investors acquired a controlling interest in
the Company through the acquisition of substantially all of the interest in the
Company that had been retained by the Predecessor, a direct equity investment of
$3.2 million in the Company and the purchase of a portion of the shares acquired
by the investors in the 1990 acquisition. In December 1993, the Company raised
an additional $7.0 million of equity capital from investors ($3.7 million of
which represented the conversion of its outstanding subordinated debt into
equity). In March 1994, the Company raised $32.5 million in an initial public
offering of Ordinary Shares. In August 1995, the Company raised an additional
$22.3 million in a public offering of Ordinary Shares.

In recent years, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, through both
acquisitions and internal growth. See "Risk Factors -- Management of Expansion
and Consolidation," "Risk Factors -- Acquisitions" and Note 14 of Notes to
Consolidated Financial Statements.

In February 1996, the Company acquired Astron Group Limited in exchange for
(i) $13,440,605 in cash, (ii) $15.0 million in 8% promissory notes, ($10.0
million of which was paid in February 1997 and $5.0 million of which is payable
in February 1998), (iii) 238,684 Ordinary Shares issued at closing and (iv)
Ordinary Shares with a value of $10.0 million to be issued on June 30, 1998. The
Company also paid an earnout of an additional $6.25 million in cash in April
1997, based on the pre-tax profit of Astron for the calendar year ended December
31, 1996. In addition, the Company agreed to pay a $15.0 million consulting fee
in June 1998 to an entity affiliated with Stephen Rees, a former shareholder and
the Chairman of Astron, pursuant to a services agreement among the Company, one
of its subsidiaries and the affiliate of Mr. Rees (the "Services Agreement").
Payment of the fee was conditioned upon, among other things, Mr. Rees'
continuing as Chairman of Astron through June 1998. Mr. Rees currently also
serves as a director and executive officer of the Company.

In March 1997, the Company and Mr. Rees' affiliate agreed to remove the
remaining conditions to payment of the fee and to reduce the amount of the fee,
which remains payable in June 1998, to $14.0 million. This reduction was
negotiated in view of (i) a settlement in March 1997 of the amount of the
earnout payable by the Company to the former shareholders of Astron in which the
Company agreed to certain matters, previously in dispute, affecting the amount
of the earn-out payment, and (ii) the elimination of the conditions to payment
and of Mr. Rees' ongoing obligations under the Services Agreement. Substantially
all of the former shareholders of Astron were affiliates of Mr. Rees or members
of his family. See "-- Results of

19
<PAGE> 21

Operations -- Goodwill and Intangible Assets Amortization." Accordingly, the
only remaining obligation of either party is the Company's unconditional
obligation to pay the $14.0 million fee in June 1998. Of the $14.0 million, $5.0
million must be paid in cash. The remainder may be paid in either cash or
Ordinary Shares at the option of the Company, and the Company intends to pay
such amount in Ordinary Shares. See "-- Recent Changes in Accounting for Astron
Acquisition."

Since the Company's acquisition of Astron, the net sales generated by
Astron's then-existing products and services, and by its products and services
then under development, have grown at rates significantly lower than those
anticipated by the Company at the time of the acquisition and significantly
lower than those assumed in the independent valuation used by the Company in
allocating the purchase price of Astron to the assets acquired. The Company
believes that this is attributable primarily to (i) delays in developing certain
new technologies as a result of several factors, including the unanticipated
complexity of many of the new technologies, difficulties in achieving expected
production yields, changes in the Company's development priorities and
unavailability of certain materials; (ii) interruptions in production and
diversions of resources, resulting from a fire in Astron's facilities in Doumen,
China in April 1996; (iii) reduced sales of certain products to end-users by
certain of Astron's customers; and (iv) changes in product mix that adversely
affected production efficiency. The Company estimates that, at the time of the
acquisition, the average remaining economic life of Astron's developed process
technologies was seven years. While the Company has completed the development of
certain of the technologies that were under development at the time of the
acquisition, the Company has not yet completed development of other technologies
that were material to its valuation of Astron and which it initially anticipated
completing in fiscal 1996 and 1997. The Company currently anticipates that
completion of these technologies will require the expenditure of approximately
$5.0 million through fiscal 1999, consisting primarily of the cost of internal
engineering staff and related overhead, material costs and other expenses. The
completion of such development is subject to a number of uncertainties,
including potential difficulties in optimizing manufacturing processes and the
potential development of alternative technologies by competitors that could
render Astron's technologies uncompetitive or obsolete. Accordingly, no
assurances can be given as to whether, or when, the Company will be able to
complete the development of such technologies, as to the cost of such
development, or as to potential sales of products based on such technologies.
The capabilities provided by the technologies under development may not
otherwise be available to the Company. Accordingly, the failure by the Company
to successfully develop such technologies would limit the Company's ability to
compete effectively for business requiring certain advanced capabilities, and
would prevent it from achieving the anticipated benefits of the Astron
acquisition. See "Risk Factors -- Acquisitions" and "-- Results of
Operations -- Research and Development."

In the fourth quarter of fiscal 1996, the Company recorded charges totaling
$1.3 million for costs associated with the closing of one of the Company's
Malaysia plants and its Shekou, China operations in addition to the write-off of
$29.0 million of in-process research and development associated with the
acquisition of Astron. Without taking into account these write-offs and charges,
the Company's net income and earnings per share in fiscal 1996 would have been
$15.1 million and $1.13, respectively.

On November 25, 1996, the Company acquired Fine Line for an aggregate of
223,321 Ordinary Shares in a transaction accounted for as pooling of interest.
The Company's prior financial statements were not restated because the financial
results of Fine Line did not have a material impact on the consolidated results.

On December 20, 1996, the Company acquired 40% of FICO for $5.2 million. Of
this, the Company paid $3.0 million in December 1996, accrued the $2.2 million
balance in the fourth quarter of fiscal 1997 and paid the $2.2 million balance
in June 1997. The Company also has an option to purchase the remaining 60%
interest of FICO in 1998 for a price that is dependent on the financial
performance of FICO for the year ending December 31, 1997.

On March 27, 1997, the Company acquired the Karlskrona Facilities for
approximately $82.4 million. The acquisition was financed by borrowings under
the Credit Facility, which the Company intends to repay with the net proceeds
from this offering and the anticipated sale of the Senior Subordinated Notes.
The transaction has been accounted for under the purchase method. As a result,
the purchase price was allocated

20
<PAGE> 22

to the assets acquired based on their estimated fair market values at the date
of acquisition. See "Risk Factors -- Risks of Karlskrona Acquisition."

During fiscal 1997, the Company incurred plant closing expenses totalling
$5.9 million relating to the closing of its Texas facility, the downsizing of
manufacturing at its Singapore facilities and the write-off of obsolete
equipment and incurrence of severance obligations at the nCHIP semiconductor
fabrication operation. The Company has transferred the nCHIP wafer fabrication
operations to a third party and is currently engaged in negotiations with
respect to the sale of certain related assets (having an aggregate book value of
approximately $500,000 as of June 30, 1997) to such party. See "--Provision for
Plant Closings."

In the first quarter of fiscal 1998, the Company completed construction of
a new 101,000 square foot manufacturing campus in Guadalajara, Mexico. In
addition, in July 1997 the Company completed construction of a new 224,000
square foot facility on its campus located in Doumen, China and a new 73,000
square foot facility in San Jose, and leased a new 71,000 square foot facility
in San Jose. See "Business -- Facilities."

The Company intends to continue to pursue attractive acquisition
opportunities in the future. The Company has no understandings, commitments or
agreements with respect to any acquisitions. Acquisitions present a number of
risks, and there can be no assurance that the Company will complete any future
acquisitions or that any future acquisitions will not materially adversely
affect the Company. See "Risk Factors -- Acquisitions."

RECENT CHANGES IN ACCOUNTING FOR ASTRON ACQUISITION

The Company has restated its financial results for the fiscal year ended
March 31, 1996 and for the first three reported quarters of the fiscal year
ended March 31, 1997 to reflect corrections to its accounting for the
acquisition of Astron. The acquisition of Astron has been accounted for under
the purchase method, and accordingly the purchase price had been allocated to
the assets and liabilities assumed based upon their estimated fair values at the
date of acquisition. The revisions include an increase in the initially recorded
purchase price to include the payment to be made in June 1998 to an affiliate of
Stephen Rees pursuant to the Services Agreement. In addition, a second valuation
was obtained and used to allocate the purchase price to the assets acquired,
including current assets, net property, plant and equipment, developed
technologies, in-process research and development, assembled workforce,
tradenames and trademarks, customer list and other intangible assets. As a
consequence, in-process research and development written off in the fiscal year
ended March 31, 1997 (the "In-Process R&D") was reduced from $31.6 million to
$29.0 million and the fair value of other assets recorded at the date of the
close of the transaction was increased by $16.7 million, representing $4.8
million of goodwill and $11.9 million of identified intangible assets. See Note
14 of Notes to Consolidated Financial Statements. The effect of the restatement
on the Company's previously reported statement of operations data is as follows
(in thousands except per share data):

<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1996
FISCAL YEAR ENDED MARCH 31, 1996
-------------------------------- -----------------------------------
PREVIOUSLY REPORTED RESTATED PREVIOUSLY REPORTED RESTATED
------------------- -------- ------------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Gross profit...................... $ 41,889 $ 40,889 $36,437 $36,057
Operating income (loss)........... (11,775) (9,435) 14,152 12,656
Net income (loss)................. (17,412) (15,132) 10,536 9,026
Net income (loss) per share....... (1.39) (1.19) 0.73 0.61
Weighted average Ordinary Shares
and equivalents................. 12,536 12,684 14,377 14,889
</TABLE>

CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS

On August 1, 1997, the Audit Committee of the Board of Directors of the
Company approved the engagement of Arthur Andersen LLP, San Jose, California as
independent public accountants to audit and report on the financial statements
of the Company and its subsidiaries for the year ended March 31, 1998. On August
5, 1997, Ernst & Young advised the Company that it will not seek re-election at
the Company's next

21
<PAGE> 23

Annual General Meeting scheduled for September 26, 1997. Accordingly, the
engagement of Ernst & Young will terminate at the time of the Annual General
Meeting. The Company will nominate Arthur Andersen LLP as the Company's
independent public accountants for approval by the shareholders at the Company's
Annual General Meeting.

There were no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures with respect to the Company's consolidated financial statements for
the fiscal years ended March 31, 1995, 1996 and 1997 or through the date of the
Audit Committee's approval of the engagement of Arthur Andersen which, if not
resolved to the former auditors' satisfaction, would have caused them to make
reference to the subject matter of the disagreement in connection with their
report.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of net sales.

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, JUNE 30,
------------------------- ---------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 90.5 90.9 89.8 90.0 90.0
----- ----- ----- ----- -----
Gross profit....................................... 9.5 9.1 10.2 10.0 10.0
Selling, general and administrative expenses....... 4.8 4.2 5.5 4.8 5.3
Goodwill and intangible assets amortization........ 0.4 0.2 0.5 0.6 0.4
Provision for plant closings....................... -- 0.3 1.2 -- --
Acquired in-process research and development....... -- 6.5 -- -- --
----- ----- ----- ----- -----
Operating income (loss).................. 4.3 (2.1) 3.0 4.6 4.3
Net interest expense............................... (0.4) (0.5) (0.8) (0.5) (1.5)
Merger expenses.................................... (0.3) -- -- -- --
Foreign exchange gain (loss)....................... (0.1) 0.2 0.3 0.1 0.2
Income (loss) from associated company.............. (0.3) -- -- -- 0.1
Other income (expense)............................. -- (0.1) (0.6) -- --
----- ----- ----- ----- -----
Income (loss) before income taxes........ 3.2 (2.5) 1.9 4.2 3.1
Provision for income taxes......................... 0.6 0.9 0.4 0.6 0.4
----- ----- ----- ----- -----
Net income (loss)........................ 2.6% (3.4%) 1.5% 3.6% 2.7%
===== ===== ===== ===== =====
</TABLE>

NET SALES

Substantially all of the Company's net sales have been derived from the
manufacture and assembly of products for OEM customers. Net sales for the three
months ended June 30, 1997 increased 67.0% to $196.9 million from $117.9 million
for the three months ended June 30, 1996. The increase in sales was primarily
due to (i) sales to Ericsson following the March 27, 1997 acquisition of the
Karlskrona Facilities, (ii) an increase in sales to certain existing customers,
and (iii) sales to new customers. This increase was partially offset by reduced
sales to certain existing customers, including Minebea, Apple Computer,
Visioneer and Global Village. See "Risk Factors -- Customer Concentration;
Dependence on Electronics Industry" and "Risk Factors -- Risks of Karlskrona
Acquisition."

Net sales in fiscal 1997 increased 9.4% to $490.6 million from $448.3
million in fiscal 1996. This increase was primarily due to higher sales to
existing customers, including U.S. Robotics, Microsoft, Advanced Fibre
Communications and Braun/Thermoscan, sales to new customers such as Cisco and
Auspex, and the inclusion of Astron's sales following its acquisition in
February 1996. This increase was partially offset by reduced sales to certain
existing customers, including Visioneer, Apple Computer, Houston Tracker
Systems,

22
<PAGE> 24

Logitech, Voice Powered Technology and Fast Multimedia. The Company believes
that the reduction in sales to these customers was due in part to reductions in
these customers' sales to end-users. See "Risk Factors -- Rapid Technological
Change."

Net sales in fiscal 1996 increased 88.9% to $448.3 million from $237.4
million in fiscal 1995. This increase was primarily the result of higher sales
to existing customers, including Lifescan (a Johnson & Johnson Company),
Visioneer, Microcom and Global Village Communications, sales to new customers in
the computer and medical industries such as Apple Computer and Thermoscan and
the inclusion of A&A's and Astron's sales after their acquisitions in April 1995
and February 1996, respectively. This was partially offset by a significant
decline in sales to IBM due to IBM's efforts to consolidate more of its
manufacturing business internally.

GROSS PROFIT

Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, product life cycles, unit volumes,
startup, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin remained constant
at 10.0% for both the three months ended June 30, 1997 and the three months
ended June 30, 1996. Gross profit margin in the three months ended June 30, 1997
was favorably affected by cash payments due from a customer under the Company's
agreement with that customer as a result of production volumes for that customer
that were lower than previously scheduled. The Company's new and expanded
facilities provide capacity for production volumes significantly greater than
current levels. As a result of this expansion, the Company anticipates increased
depreciation and other fixed expenses, and expects that its gross profit margin
will be adversely affected in the remainder of fiscal 1998 as it commences
volume production in the new facilities.

Gross margin increased to 10.2% in fiscal 1997 compared to 9.1% in fiscal
1996. The increase was mainly attributable to (i) the inclusion of Astron's
printed circuit board business, which has historically had a relatively higher
gross profit margin than the Company, (ii) the concentration of more sales in
the Company's facility in China which has a lower manufacturing cost compared to
the Company's facilities in other locations, and (iii) increased sales,
resulting in increased labor and overhead absorption. This benefit was partially
offset by underutilization of the nCHIP semiconductor fabrication facility and
the Company's Texas facility (which has been closed), and the related inventory
write-offs. See "Risk Factors -- Management of Expansion and Consolidation."

Gross profit margin declined slightly to 9.1% in fiscal 1996 as compared to
9.5% in fiscal 1995 mainly due to the additional costs associated with new
manufacturing facilities in Texas and China that were opened in the fourth
quarter of fiscal 1995 and the expansion of nCHIP's semiconductor fabrication
facility. The decrease in gross profit margin was also attributable to a
reduction in certain selling prices in order to remain competitive.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the three months ended
June 30, 1997 increased to $10.5 million from $5.6 million for the three months
ended June 30, 1996 and increased as a percentage of net sales to 5.3% for the
three months ended June 30, 1997 from 4.8% for the three months ended June 30,
1996. Of the $4.9 million increase in selling, general and administrative
expenses, $800,000 resulted from increased selling expenses, $2.6 million
resulted from increased general and administrative expenses and $1.5 million
resulted from increased corporate expenses. The increase in selling expenses is
primarily due to the addition of new sales personnel in the United States and
Europe and the inclusion of Fine Line's selling expenses; the increase in
general and administrative expenses is primarily due to the inclusion of the
operations of the Karlskrona Facilities; and the increase in corporate expenses
is primarily due to an increase in staffing levels, primarily personnel related
to implementation of new information systems as well as increased corporate
staff, and to increased legal and other professional expenses.

Selling, general and administrative expenses in fiscal 1997 increased to
$26.8 million from $18.8 million in fiscal 1996 and increased as percentage of
net sales to 5.5% in fiscal 1997 from 4.2% in fiscal 1996. The increase was
mainly due to: (i) the inclusion of Astron's selling and general administrative
expenses for all of

23
<PAGE> 25

fiscal 1997; (ii) increased consulting fees; and (iii) increased sales and
marketing expenses. The increased consulting fees resulted from financial
consulting services provided by two banks for a total of $719,000 in fiscal
1997. The Company also recorded $362,000 in March 1997 for compensation for
management services paid to a new executive officer who was formerly a key
employee of Ericsson in Sweden and who joined the Company upon the acquisition
of the Karlskrona Facilities.

Selling, general and administrative expenses in fiscal 1996 increased to
$18.8 million from $11.5 million in fiscal 1995, but decreased as percentage of
net sales to 4.2% in fiscal 1996 from 4.8% in fiscal 1995. The increase in
absolute dollars was principally due to costs associated with the expanded
facilities in China and Texas, increased sales personnel and market research
activities in the U.S. and the inclusion of A&A's and Astron's selling and
general administrative expenses after their acquisitions in April 1995 and
February 1996, respectively.

GOODWILL AND INTANGIBLE ASSETS AMORTIZATION

Goodwill (which represents the excess of the purchase price of an acquired
company over the fair market value of its net assets) and intangible assets are
amortized on a straight line basis over the estimated life of the benefits
received, which ranges from three to twenty-five years. Goodwill and intangible
assets amortization for the three months ended June 30, 1997 increased to
$742,000 from $659,000 for the three months ended June 30, 1996. Goodwill
amortization increased to $989,000 in fiscal 1997 from $739,000 in fiscal 1996
and intangible asset amortization increased to $1.6 million in fiscal 1997 from
$544,000 in fiscal 1996. These increases were due to the amortization of
additional goodwill and intangible assets which arose from the Astron
acquisition in 1996. In fiscal 1997, the Company recognized approximately $8.5
million of additional goodwill, as a result of the acquisition of the 40%
interest in FICO and the Astron earnout payment of $6.25 million (which was
accrued to goodwill in March 1997 when the conditions to payment were resolved),
partially offset by the effect of the $1.0 million reduction in the payment due
in June 1998 to an affiliate of Stephen Rees. See "-- Overview" and Note 14 of
Notes to Consolidated Financial Statements.

Goodwill amortization increased to $739,000 in fiscal 1996 from $510,000 in
fiscal 1995 primarily due to the goodwill from the Company's acquisition of A&A
and Astron. Intangible assets amortization increased to $544,000 in fiscal 1996
from $245,000 in fiscal 1995 primarily due to the acquisition of A&A and Astron.

PROVISION FOR PLANT CLOSINGS

The provision for plant closings of $5.9 million in fiscal 1997 consists of
the costs incurred in closing the Texas facility, downsizing the Singapore
manufacturing operations and writing off obsolete equipment and incurring
certain severance obligations at the nCHIP semiconductor fabrication facility.
The $5.9 million provision includes $2.8 million for the write-off of obsolete
equipment, and $560,000 for severance payments to former employees, at the nCHIP
and Texas facilities. The Texas facility had been primarily dedicated to
production for Global Village Communications and Apple Computer, to whom the
Company does not anticipate making substantial sales in future periods. The
nCHIP semiconductor fabrication facility was primarily dedicated to producing
PCBs for nCHIP's MCMs, and the Company has transferred these operations to a
third party. The provision also includes $2.0 million for severance payments and
$500,000 for the write-off of fixed assets in the Singapore manufacturing
facilities in connection with the shift of manufacturing operations to lower
cost manufacturing locations. See Note 11 of Notes to Consolidated Financial
Statements.

The provision for plant closings of $1.3 million in fiscal 1996 was
associated with the write-off of certain obsolete equipment at one of the
Company's facilities in Malaysia and in Shekou, China. The provision for plant
closings were related to the Company ceasing its satellite receiver product line
in Malaysia and the closing of its manufacturing operations in Shekou, China.
Production from the Shekou facility has been moved to the Company's plant in
Xixiang, China.

24
<PAGE> 26

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

In June 1997, the Company obtained an independent valuation of certain of
the assets of Astron and the In-Process R&D as of the date of Astron's
acquisition. This valuation determined that the fair value of the In-Process R&D
was $29.0 million. Accordingly, the Company adjusted the amount of In-Process
R&D written off in fiscal 1996 to $29.0 million. See " -- Overview" and
" -- Recent Changes in Accounting for Astron Acquisition."

NET INTEREST EXPENSE

Net interest expense increased to $2.9 million for the three months ended
June 30, 1997 from $595,000 for the three months ended June 30, 1996, due to
interest and amortization of commitment fees related to borrowings under the
Credit Facility, primarily incurred to finance the Karlskrona Acquisition. See
"-- Liquidity and Capital Resources" and "Risk Factors -- Increased Leverage."

Net interest expense increased to $3.9 million in fiscal 1997 from $2.4
million in fiscal 1996 mainly due to increases in interest expense in connection
with additional indebtedness used to finance working capital requirements, to
finance acquisitions and to purchase machinery and equipment for capacity
expansion. The Company also recorded approximately $363,000 of interest expense
in fiscal 1997 related to the cash portion of the Company's obligations to an
affiliate of Stephen Rees, a former shareholder and the Chairman of Astron,
pursuant to the Services Agreement. See "-- Overview."

Net interest expense increased to $2.4 million in fiscal 1996 from $774,000
in fiscal 1995. The increase reflects interest incurred in connection with
additional indebtedness used to finance the cash portion of the A&A and Astron
acquisitions, to purchase machinery and equipment for capacity expansion and to
finance the Company's working capital requirements.

MERGER EXPENSES

The Company recorded a one-time non-operating charge of approximately
$816,000 as a result of the nCHIP acquisition in January 1995, which was
accounted for as a pooling of interest.

FOREIGN EXCHANGE GAIN (LOSS)

Foreign exchange gain increased to $306,000 in the three months ended June
30, 1997 from $79,000 in the three months ended June 30, 1996, and increased to
$1.2 million in fiscal 1997 from $872,000 in fiscal 1996. Foreign exchange gain
(loss) increased to a gain of $872,000 in fiscal 1996 from a loss of $303,000 in
fiscal 1995. In each case, the changes resulted from changes in the rates of
exchange between the U.S. dollar and local currencies of the Company's
international operations such as the Malaysia ringgit and Singapore dollar. See
Note 2 of Notes to Consolidated Financial Statements.

INCOME (LOSS) FROM ASSOCIATED COMPANY

The Company acquired a 40% interest in FICO in December 1996. According to
the equity method of accounting, the Company did not recognize revenue from
sales by FICO, but based on its ownership interest recognized 40% of the net
income or loss of the associated company. The Company has recorded its 40% share
of FICO's post-acquisition net income, amounting to $241,000 in fiscal 1997 and
$300,000 in the three months ended June 30, 1997.

Flextracker, the joint venture with HTS in which the Company previously
owned a 49% interest, commenced operations in June 1993. According to the equity
method of accounting, the Company previously did not recognize revenue from
sales by Flextracker, but based on its ownership interest recognized 49% of the
net income or loss of the joint venture. Due to start-up costs and manufacturing
inefficiencies, the Company recognized a loss of $729,000 and $70,000 associated
with its interest in Flextracker in fiscal 1995 and fiscal 1994 respectively.
The Company initially contributed $2.5 million for a 49% interest in Flextracker
and HTS contributed $2.6 million for the remaining 51% interest. In April 1994
the Company and HTS each loaned

25
<PAGE> 27

$1.0 million to Flextracker. In December 1994, the Company acquired all of the
net assets of Flextracker (except the $1.0 million loan made by HTS to
Flextracker) for approximately $3.3 million.

OTHER INCOME (EXPENSE)

Other expense increased to $2.7 million in fiscal 1997 from $398,000 in
fiscal 1996, mainly due to bank commitment fees of $750,000 written off in March
1997 when the bank's commitment expired unused. See "-- Liquidity and Capital
Resources." These increased expenses in 1997 were offset by a write-off of
common stock received from a customer in payment of $3.2 million in accounts
receivable. This Common Stock was subsequently deemed to be permanently impaired
in 1997 resulting in a $3.2 million increase in other expense. Other expense
also included $898,000 received in fiscal 1997 under the Company's business
interruption insurance policy as a result of an April 1996 fire at its
facilities in Doumen, China and $276,000 of grants to the Company from the local
government in Wales. See "-- Liquidity and Capital Resources."

Other income (expense) decreased from income of $34,000 in fiscal 1995 to
an expense of $398,000 in fiscal 1996.

PROVISION FOR INCOME TAXES

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in China, Hong Kong, Malaysia,
Mauritius, The Netherlands, Singapore, Sweden, the United Kingdom, and the
United States. Each of these subsidiaries is subject to taxation in the country
in which it has been formed. The Company's Asian manufacturing subsidiaries have
at various times been granted certain tax relief in each of these countries,
resulting in lower taxes than would otherwise be the case under ordinary tax
rates. See Note 7 of Notes to Consolidated Financial Statements.

The Company's consolidated effective tax rate for any given period is
calculated by dividing the aggregate taxes incurred by each of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculation of
their respective local taxes. For example, the charge for the closing of the
Texas facility in fiscal 1997 was incurred by a U.S. subsidiary that did not
have income against which this charge could be offset. The ordinary corporate
tax rates for calendar 1997 were 26%, 16.5% and 15% in Singapore, Hong Kong and
China, respectively, and 30% on manufacturing operations in Malaysia. In
addition, the tax rate is de minimis in Labuan, Malaysia and Mauritius where the
Company's offshore marketing and distribution subsidiaries are located. The
Company's U.S. and U.K. subsidiaries are subject to ordinary corporate tax rates
of 35% and 33% respectively. However, these tax rates did not have any material
impact on the Company's taxes in fiscal 1997 due to the operating losses of
these two subsidiaries in this period. The Company's Swedish subsidiary, which
began operation on March 27, 1997 with the acquisition of the Karlskrona
Facilities, will be subject to an ordinary corporate tax rate of 28%.

The Company's consolidated effective tax rate was 12.2% for the three
months ended June 30, 1997 and 22.9% in fiscal 1997. In the three months ended
June 30, 1997, the Company reduced the effective tax rate on certain of its
subsidiaries that had certain profitable operations by applying net loss carry
forwards. In addition, the Company has reduced its effective tax rate by
shifting some of its manufacturing operations from Singapore, which has an
ordinary corporate tax rate of 26%, to locations having lower corporate tax
rates. The provision for plant closings of $1.3 million and the $29.0 million
write-off of In-Process R&D in fiscal 1996 resulted in aggregate net losses for
that year, but the Company incurred taxes on the profitable operations of
certain of its subsidiaries. If the provision for plant closings and In-Process
R&D written off are excluded from such calculation, the Company's fiscal 1996
effective tax rate would have been 20.0%.

The Company has structured its operations in Asia in a manner designed to
maximize income in countries where tax incentives have been extended to
encourage foreign investment or where income tax rates are low. The Company's
Singapore subsidiary was granted an investment allowance incentive in respect of
approved fixed capital expenditures subject to certain conditions. These
allowances have been utilized to reduce its taxable income since fiscal 1991,
and were fully utilized at the end of fiscal 1996. The Company's investments in
its plants in Xixiang and Doumen, China fall under the "Foreign Investment
Scheme" which

26
<PAGE> 28

entitles the Company to apply for a five year tax incentive. The Company
obtained the tax incentive for the Doumen plant in December 1995 and the Xixiang
plant in October 1996. With the approval, the Company's tax rates on income from
these facilities during the incentive period will be 0% in years 1 and 2 and
7.5% in years 3 through 5, commencing in the first profitable year. In fiscal
1993, the Company transferred its offshore marketing and distribution functions
to a newly formed marketing subsidiary located in Labuan, Malaysia, where the
tax rate is de minimis. In February 1996, the Company transferred Astron's sales
and marketing business to a newly formed subsidiary in Mauritius, where the tax
rate is 0%. The Company's Malaysian manufacturing subsidiary has obtained a five
year pioneer certificate from the relevant authority that provides a tax
exemption on manufacturing income from certain products in Johore, Malaysia. To
date, this incentive has had a limited impact on the Company due to the
relatively short history of its Malaysian operations and its tax allowances and
losses carry forward. The Company's facility in Shekou, China, which was closed
in fiscal 1996, was located in a "Special Economic Zone" and was an approved
"Product Export Enterprise" that qualified for a special corporate income tax
rate of 10.0%.

If tax incentives are not renewed upon expiration, if the tax rates
applicable to the Company are rescinded or changed, or if tax authorities were
to challenge successfully the manner in which profits are recognized among the
Company's subsidiaries, the Company's worldwide effective tax rate would
increase and its results of operations and cash flow would be adversely
affected. Substantially all of the products manufactured by the Company's Asian
subsidiaries are sold to U.S. based customers. While the Company believes that
profits from its Asian operations are not sufficiently connected to the U.S. to
give rise to U.S. federal or state income taxation, there can be no assurance
that U.S. tax authorities will not challenge the Company's position or, if such
challenge is made, that the Company will prevail in any such disagreement. If
the Company's Asian profits became subject to U.S. income taxes, the Company's
taxes would increase and its results of operations and cash flow would be
adversely affected. In addition, the expansion by the Company of its operations
in North America and Northern Europe may increase its worldwide effective tax
rate. See "Risk Factors -- Risk of Increased Taxes."

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $30.7 million for U.S. federal income tax purposes which will
expire between 2003 and 2011 if not previously utilized. Utilization of the U.S.
net operating loss carryforwards may be subject to an annual limitation due to
the change in ownership rules provided by the Internal Revenue Code of 1986.
This limitation and other restrictions provided by the Internal Revenue Code of
1986 may reduce the net operating loss carryforward such that it would not be
available to offset future taxable income of the U.S. subsidiary. At March 31,
1997, the Company had net operating loss carryforwards of approximately $10.0
million and $632,000 in the U.K. and Malaysia, respectively. The utilization of
these net operating loss carryforwards is limited to the future operations of
the Company in the tax jurisdictions in which such carryforwards arose. These
losses carryforward indefinitely. See Note 8 of Notes to Consolidated Financial
Statements.

VARIABILITY OF RESULTS

The Company has experienced, and expects to continue to experience,
significant periodic and quarterly fluctuations in the Company's results of
operations due to a variety of factors. These factors include, among other
things, timing of orders, the short-term nature of most customers' purchase
commitments, volume of orders relative to the Company's capacity, customers'
announcement and introduction and market acceptance of new products or new
generations of products, evolutions in the life cycles of customers' products,
timing of expenditures in anticipation of future orders, effectiveness in
managing manufacturing processes, changes in cost and availability of labor and
components, product mix, and changes or anticipated changes in economic
conditions. In addition, the Company's net sales are adversely affected by the
observance of local holidays during the fourth fiscal quarter in Malaysia and
China, reduced production levels in Sweden in July, and the reduction in orders
by certain customers in the fourth quarter reflecting a seasonal slowdown
following the Christmas holiday. The market segments served by the Company are
also subject to economic cycles and have in the past experienced, and are likely
in the future to experience, recessionary periods. A recessionary period
affecting the industry segments served by the Company could have a material
adverse effect on the Company's results of operations. Results of operations in
any period should not be considered indicative of the results to

27
<PAGE> 29

be expected for any future period, and fluctuations in operating results may
also result in fluctuations in the price of the Company's Ordinary Shares. In
future periods, the Company's net sales or results of operations may be below
the expectations of public market analysts and investors. In such event, the
price of the Company's Ordinary Shares would likely be materially adversely
affected. See "Risk Factors -- Variability of Customer Requirements and
Operating Results."

BACKLOG

The Company's backlog was $194.8 million at June 30, 1997 and $173.3
million at June 30, 1996. Backlog consists of contracts or purchase orders with
delivery dates scheduled within the next six months. Because of the timing of
orders, overall decreasing lead times and delivery intervals, customer and
product mix and the possibility of customer changes in delivery schedules, the
Company's backlog as of any particular date is not indicative of actual sales
for any succeeding period.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations from the proceeds of public offerings
of equity securities, cash generated from operations, bank debt and lease
financing of capital equipment. In March 1997, the Company terminated its $48.0
million line of credit from several banks and obtained a new $175.0 million
credit facility from BankBoston, N.A. At June 30, 1997 the Company had cash
balances totaling $33.1 million, outstanding bank borrowings of $139.0 million
and an aggregate of $3.7 million available for borrowing under the Credit
Facility. See "Risk Factors -- Increased Leverage."

Net cash provided by operating activities was $18.0 million for the three
months ended June 30, 1997, consisting of $26.2 million of cash provided by net
income, depreciation, increases in accounts payable and other sources, offset by
$8.3 million of cash used for increases in inventory and accounts receivable and
other operating activities. Net cash provided by operating activities was $3.5
million for the three months ended June 30, 1996, consisting of $18.7 million of
cash provided by net income, depreciation and decreases in accounts receivable,
partially offset by $15.2 million of cash used for operating activities,
primarily decreases in accounts payable.

Net cash provided by operating activities in fiscal 1997 was $46.7 million,
consisting primarily of net income, depreciation, provision for plant closing
and decreases in accounts receivable.

Net cash used for operating activities in fiscal 1996 was $710,000,
consisting primarily of a net loss of $15.1 million and increases in accounts
receivable and inventories, largely offset by the $29.0 million write-off of
In-Process R&D, as well as by depreciation, amortization and allowance for
doubtful debt and obsolescence.

Accounts receivable, net of allowance for doubtful accounts, increased to
$74.0 million at June 30, 1997 from $69.3 million at March 31, 1997. The
increase in accounts receivable was primarily due to increased sales for the
first quarter of fiscal 1998. Inventories increased to $108.9 million at June
30, 1997 from $106.6 million at March 31, 1997. The increase in inventories was
mainly a result of increased purchases of material to support growing sales. The
Company's allowance for doubtful accounts decreased to $5.3 million at June 30,
1997 from $5.7 million at March 31, 1997. The Company's allowance for inventory
obsolescence decreased to $6.0 million at June 30, 1997 from $6.2 million at
March 31, 1997. The decreases in the allowances were due to the write-offs of
accounts receivable and inventories during the three months ended June 30, 1997.

Accounts receivable, net of allowance for doubtful accounts, decreased to
$69.3 million at March 31, 1997 from $78.1 million at March 31, 1996. The
decrease in accounts receivable was primarily due to improved collection of
accounts receivable during fiscal 1997. Inventories increased to $106.6 million
at March 31, 1997 from $52.6 million at March 31, 1996. The increase in
inventories was mainly a result of the acquisition of the $55.0 million of
inventories at the Karlskrona Facilities. The Company's allowances for doubtful
accounts increased to $5.7 million at March 31, 1997 from $3.6 million at March
31, 1996. The Company's allowance for inventory obsolescence increased to $6.2
million at March 31, 1997 from $4.6 million at March 31, 1996. The increases in
the allowances were due to the increases in sales and

28
<PAGE> 30

inventories during fiscal 1997 and the $3.2 million provision for doubtful
debts, and write-off shares taken in payment of receivables, related to one
specific customer and inventory exposure relating to the closing of the Texas
facility.

Accounts receivable, net of allowance for doubtful accounts, increased to
$78.1 million at March 31, 1996 from $44.3 million at March 31, 1995 and
inventories increased to $52.6 million at March 31, 1996 from $30.2 million at
March 31, 1995. The increase in accounts receivable and inventories was mainly
due to the 88.9% increase in sales during fiscal 1996. The Company's allowances
for doubtful accounts increased from $1.8 million at March 31, 1995 to $3.6
million at March 31, 1996. The Company's allowance for inventory obsolescence
increased from $1.9 million at March 31, 1995 to $4.6 million at March 31, 1996.
The increases in the allowances were due to the increases in sales and
inventories during fiscal 1996 and the $1.0 million provision for inventory
exposure relating to the closing of the satellite receiver product line in one
of the Company's Malaysia plants.

Net cash used for investing activities during the three months ended June
30, 1997 was $34.3 million, consisting primarily of expenditures for new and
expanded facilities, including the construction of new facilities in Doumen,
China, Guadalajara, Mexico and San Jose, California and the acquisition of
machinery and equipment in the San Jose, California and Karlskrona, Sweden
facilities. Net cash used for investing activities during the three months ended
June 30, 1996 was $5.7 million, consisting primarily of equipment acquisitions
and building construction.

Net cash used for investing activities in fiscal 1997 was $112.0 million,
consisting primarily of $82.4 million for the acquisition of the Karlskrona
Facilities, and $27.0 million of expenditures for machinery and equipment in the
Company's, China, Mexico and California manufacturing facilities and $3.0
million cash paid in November for the 40% interest in FICO.

Net cash used for investing activities in fiscal 1996 was $29.0 million,
consisting primarily of $15.8 million of expenditures for machinery and
equipment in the Company's Texas, China and California manufacturing facilities
as well as $15.2 million for the cash portion of the purchase prices paid in
fiscal 1996 for the A&A and Astron acquisitions.

Net cash provided by financing activities was $25.8 million for the three
months ended June 30, 1997 and $4.5 million for the three months ended June 30,
1996, in each case consisting primarily of bank borrowings. Bank borrowings
increased from $19.0 million at June 30, 1996 to $139.0 million at June 30, 1997
due primarily to borrowings under the Credit Facility to fund the purchase price
for the Karlskrona Facilities.

Net cash provided by financing activities in fiscal 1997 was $82.4 million,
consisting primarily of bank borrowings of $152.8 million and capital lease
financing. This was partially offset by $56.0 million in repayments of bank
borrowings, $10.5 million in repayments of notes to Astron's ex-shareholders and
$8.0 million in repayments of capital lease obligations.

Net cash provided by financing activities in fiscal 1996 was $31.6 million,
consisting primarily of $22.3 million from the sale of 1,000,000 newly issued
Ordinary Shares and net bank borrowings of $12.3 million.

During the quarter ended March 31, 1997, the Company obtained a commitment
for a new $100.0 million credit facility for which it paid commitment fees of
$750,000. Ultimately, however, the Company required a larger credit facility in
order to fund the acquisition of the Karlskrona Facilities. As a result, the
$100.0 million facility was never consummated and expired during the quarter
unused. Instead of consummating this $100.0 million credit facility and
borrowing under this commitment, the Company entered into the $175.0 million
Credit Facility in March 1997 to provide funding for the acquisition of the
Karlskrona Facilities, for capital expenditures and for general working capital.
The Company paid a separate $2.2 million fee for the Credit Facility, which,
together with other direct costs of the facility, was capitalized and is being
amortized over the term of the Credit facility.

The Credit Facility consists of two loan agreements provided by the
BankBoston, N.A. as agent. Under the Credit Facility, subject to compliance with
certain financial ratios and the satisfaction of customary borrowing conditions,
the Company borrowed $70.0 million of term loans as of March 27, 1997 and the

29
<PAGE> 31

Company and its United States subsidiary may borrow up to an aggregate of $105.0
million of revolving credit loans. The revolving credit loans are subject to a
borrowing base equal to 70% of consolidated accounts receivable and 20% of
consolidated inventory. As of June 30, 1997, $69.0 million of revolving credit
loans and $70.0 million of term loans were outstanding, and bore interest at a
variable rate equal, as of June 30, 1997, to approximately 8.4% per annum. The
term loans amortize over a five-year period and are subject to certain mandatory
prepayment provisions. Loans under the revolving credit facility will mature in
March 2000. The Company intends to use the net proceeds from this offering to
repay a portion of the outstanding term loans, and intends to use the net
proceeds from the anticipated issuance of the Senior Subordinated Notes to repay
all of the remaining outstanding borrowings under the Credit Facility. See "Use
of Proceeds." Following such repayment, the Company anticipates increasing the
aggregate principal amount of revolving credit loans that may be made under the
Credit Facility and the Company anticipates that it will from time to time
borrow such revolving credit loans to fund its operations and growth. No
assurances can be given, however, as to the availability or amount of any such
increase.

The Credit Facility is secured by a lien on substantially all accounts
receivable and inventory of the Company and its subsidiaries, as well as a
pledge of the Company's shares in certain of its subsidiaries. Loans to the
Company are guaranteed by certain of its subsidiaries and loans to the Company's
United States subsidiary are guaranteed by the Company and by certain of the
Company's subsidiaries. The Credit Facility contains covenants and provisions
that, among other things, prohibit the Company and its subsidiaries from (i)
incurring additional indebtedness, except for subordinated debt evidenced by the
Subordinated Notes (as defined therein) in an aggregate principal amount of not
more than $150.0 million, certain purchase money debt and leases not to exceed
$25.0 million and certain subsidiary debt not to exceed $15.0 million; (ii)
incurring liens on their property (subject to certain exceptions); (iii) making
capital investments exceeding $65.0 million in fiscal 1998 and $25.0 million
annually thereafter; (iv) engaging in certain sales of assets; (v) making
acquisitions that do not meet certain criteria; and (vi) making certain other
investments. In addition, the Credit Facility prohibits the payment of dividends
or other distributions by the Company to its shareholders.

The Credit Facility also requires that the Company satisfy certain
financial covenants and tests on a consolidated basis which, among other things,
provide that the Company's: (i) Leverage ratio (the ratio of Total Debt to
EBITDA (each as defined therein)) must not exceed 4.25 : 1.00 (reducing to 2.75
: 1.00 by April 1, 1999), (ii) Interest Coverage Ratio (the ratio of EBITDA to
Consolidated Interest Expense (as defined therein)) must not be less than 3.00 :
1.00 (increasing to 4.00 : 1.00 by January 1, 1999), (iii) Fixed Charge Coverage
Ratio (the ratio of EBITDA to Fixed Charges (as defined therein)) must not
exceed 1.15 : 1.00 (increasing to 1.25 : 1.00 by April 1, 1999) and (iv)
Consolidated Tangible Net Worth (as defined therein) must not be less than (a)
95% of Consolidated Tangible Worth at March 31, 1997 plus (b) 75% of positive
Consolidated Net Income (as defined therein) plus (c) 100% of the proceeds of
any Equity Issuance (as defined therein).

The Company anticipates issuing in fiscal 1998 from $100.0 million to
$125.0 million aggregate principal amount of Senior Subordinated Notes due 2007.
The indenture governing the Senior Subordinated Notes is expected to impose
certain restrictions on the Company and its subsidiaries, including restrictions
on their ability to incur indebtedness, pay dividends, make certain investments,
and engage in certain other activities. In particular, the Company expects that
the indenture will restrict the Company's and its subsidiaries' ability to incur
additional indebtedness unless on a pro forma basis, after giving effect to such
indebtedness, the Company's ratio of consolidated cash flow to consolidated
fixed charges (including consolidated interest expense) for the preceding four
quarters is at least 2.00 to 1.00. The Company expects that the indenture will
contain certain exceptions to this restriction, permitting it and its
subsidiaries to, among other things, incur revolving credit indebtedness in an
amount not to exceed the greater of $125.0 million or the sum of 80% of its
consolidated accounts receivable and 35% of its consolidated inventory, and to
incur obligations under capitalized leases and purchase money indebtedness in an
amount not to exceed $15.0 million. Under these anticipated provisions, as of
June 30, 1997, and giving pro forma effect to the issuance of the Senior
Subordinated Notes and the Ordinary Shares offered hereby and the application of
the net proceeds therefrom, the indenture would have permitted the Company and
its subsidiaries to incur additional

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<PAGE> 32

indebtedness requiring the payment of up to an aggregate of $2.2 million per
quarter in interest under the consolidated cash flow to consolidated fixed
charge ratio (based on the Company's annualized consolidated cash flow for the
three months ended June 30, 1997), and would have permitted the incurrence of up
to $100.7 million of revolving credit indebtedness regardless of such ratio. The
indenture is also expected to require that the Company offer to repurchase the
Senior Subordinated Notes upon certain transactions involving a change in
control of the Company, and in certain circumstances with the proceeds of asset
sales. No assurances can be given as to whether, or on what terms, the Senior
Subordinated Notes will be issued.

The Company's capital expenditures in the first quarter of fiscal 1998 were
approximately $28.2 million and the Company anticipates that its capital
expenditures in fiscal 1998 will be approximately $65.0 million, primarily
relating to the development of new and expanded facilities in San Jose,
California, Guadalajara, Mexico and Doumen, China. In addition, the Company
anticipates expending from $7.0 million to $15.0 million in fiscal 1998 and 1999
to implement the new management information system, and anticipates funding
these expenditures with cash from operations and borrowings under the Credit
Facility. The Company also expended cash in the fourth quarter of fiscal 1997
and will be required to expend cash in fiscal 1998 pursuant to the terms of the
Astron acquisition. The Company paid an earnout of $6.25 million in cash in
April 1997, and will be required to make a principal payment of $5.0 million in
February 1998, pursuant to the terms of a note issued by it in connection with
the Astron acquisition. The Company is also required to make a $14.0 million
payment to an entity affiliated with Stephen Rees in June 1998. Of this amount,
$5.0 million is payable in cash and $9.0 million is payable in cash or, at the
option of the Company, in Ordinary Shares, and the Company intends to pay the
$9.0 million portion in Ordinary Shares. The Company also anticipates that its
working capital requirements will increase in order to support anticipated
volumes of business. Future liquidity needs will depend on, among other factors,
the timing of expenditures by the Company on new equipment, levels of shipments
by the Company and changes in volumes of customer orders. The Company believes
that the existing cash balances, together with anticipated cash flow from
operations and amounts available under the Credit Facility, will be sufficient
to fund its operations through fiscal 1998.

RECENT ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128")
which requires disclosure of basic earnings per share and diluted earnings per
share and is effective for periods ending subsequent to December 15, 1997. The
pro forma effect of adoption of SFAS No. 128 is included in the table below.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
---------------------------- -------------------
1995 1997 1997
------ 1996 ------ 1996 ------
---------- ----------
(RESTATED) (RESTATED)
(UNAUDITED)
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
AS REPORTED:
Net income per share......................... $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955
PRO FORMA (UNAUDITED):
Basic net income per share................... $.54 $(1.19) $.56 $.30 $.38
Weighted average number of common shares
outstanding............................... 11,404 12,684 13,413 13,824 14,159
Diluted net income per share................. $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955
</TABLE>

31
<PAGE> 33

BUSINESS

The Company is a provider of advanced contract manufacturing services to
OEMs in the communications, computer, consumer electronics and medical device
industries. Flextronics offers a full range of services including product
design, PCB fabrication and assembly, materials procurement, inventory
management, final system assembly and test, packaging and distribution. The
components, subassemblies and finished products manufactured by Flextronics
incorporate advanced interconnect, miniaturization and packaging technologies,
such as SMT, MCM, COB, BGA and miniaturized gold-plated PCB technologies. The
Company's strategy is to use its global manufacturing capabilities and advanced
technological expertise to provide its customers with a complete manufacturing
solution, highly responsive and flexible service, accelerated time to market and
reduced production costs. The Company targets leading OEMs in growing vertical
markets with which it believes it can establish long-term relationships, and
serves its customers on a global basis from its strategically located facilities
in North America, East Asia and Northern Europe. The Company's customers include
Advanced Fibre Communications, Ascend Communications, Braun/ThermoScan, Cisco
Systems, Diebold, Ericsson, Harris DTS, Lifescan (a Johnson & Johnson company),
Microsoft, Philips Electronics and U.S. Robotics.

INDUSTRY OVERVIEW

Many OEMs in the electronics industry are increasingly utilizing contract
manufacturing services in their business and manufacturing strategies, and are
seeking to outsource a broad range of manufacturing and related engineering
services. Outsourcing allows OEMs to take advantage of the manufacturing
expertise and capital investments of contract manufacturers, thereby enabling
OEMs to concentrate on their core competencies. According to an independent
industry study, these trends and overall growth in OEMs' markets have resulted
in a compound annual growth rate in the electronics contract manufacturing
industry of over 30% from 1992 through 1996, to approximately $60 billion.
According to this study, the industry is expected to grow to approximately $110
billion by 1999. OEMs utilize contract manufacturers to:

Reduce Production Costs. The competitive environment for OEMs requires
that they achieve a low-cost manufacturing solution, and that they
quickly reduce production costs for new products. Due to their
established manufacturing expertise and infrastructure, contract
manufacturers can frequently provide OEMs with higher levels of
responsiveness, increased flexibility and reduced overall production
costs than in-house manufacturing operations. The production scale,
infrastructure, purchasing volume and expertise of leading contract
manufacturers can further enable OEMs to reduce costs earlier in the
product life cycle.

Accelerate Time to Market. Rapid technological advances and shorter
product life cycles require OEMs to reduce the time required to bring a
product to market in order to remain competitive. By providing
engineering services, established infrastructure and advanced
manufacturing expertise, contract manufacturers can help OEMs shorten
their product introduction cycles.

Access Advanced Manufacturing and Design Capabilities. As electronic
products have become smaller and more technologically advanced,
manufacturing processes have become more automated and complex, making
it increasingly difficult for OEMs to maintain the design and
manufacturing expertise necessary to remain competitive. Contract
manufacturers enable OEMs to gain access to advanced manufacturing
facilities, packaging technologies and design expertise.

Focus Resources. Because the electronics industry is experiencing
increased competition and technological change, many OEMs are focusing
their resources on activities and technologies where they add the
greatest value. Contract manufacturers that offer comprehensive services
allow OEMs to focus on their core competencies.

Reduce Investment. As electronic products have become more
technologically advanced, internal manufacturing has required
significantly increased investment for working capital, capital
equipment, labor, systems and infrastructure. Contract manufacturers
enable OEMs to gain access to

32
<PAGE> 34

advanced, high volume manufacturing capabilities without making the
capital investments required for internal production.

Improve Inventory Management and Purchasing Power. OEMs are faced with
increasing challenges in planning, procuring and managing their
inventories efficiently due to frequent design changes, short product
life cycles, large investments in electronic components, component price
fluctuations and the need to achieve economies of scale in materials
procurement. Contract manufacturers' inventory management expertise and
volume procurement capabilities can reduce OEM production and inventory
costs, helping them respond to competitive pressures and increase their
return on assets.

Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign
markets. Contract manufacturers with worldwide capabilities are able to
offer such OEMs a variety of options on manufacturing locations to
better address their objectives regarding costs, shipment location,
frequency of interaction with manufacturing specialists and local
content requirements of end-market countries. In addition, OEMs in
Europe and other international markets are increasingly recognizing the
benefits of outsourcing.

STRATEGY

The Company's objective is to enhance its position as a provider of
advanced contract manufacturing and design services to OEMs worldwide. The
Company's strategy to meet this objective includes the following key elements:

Leverage Global Presence. The Company has established a manufacturing
presence in the world's major electronics markets -- Asia, North America
and Europe -- in order to serve the increasing outsourcing needs of
regional OEMs and to provide the global, large scale capabilities required
by larger OEMs. The Company has recently substantially expanded its
manufacturing operations by expanding its integrated campus in Doumen,
China, constructing a new manufacturing campus in Guadalajara, Mexico and
adding facilities in San Jose, California. By increasing the scale and the
scope of the services offered in each site, the Company believes that it
can better address the needs of leading OEMs that are increasingly seeking
to outsource high volume production of advanced products.

Provide a Complete Manufacturing Solution. The Company believes that
OEMs are increasingly requiring a wider range of advanced services from
contract manufacturers. Building on its integrated engineering and
manufacturing capabilities, the Company provides its customers with
services ranging from initial product design and development and prototype
production to final product assembly and distribution to OEMs' customers.
The Company believes that this provides greater control over quality,
delivery and cost, and enables the Company to offer its customers a
complete cost-effective solution.

Provide Advanced Technological Capabilities. Through its continuing
investment in advanced packaging and interconnect technologies (such as
MCM, COB and miniature gold-finished PCB capabilities), as well as its
investment in advanced design and engineering capabilities (such as those
offered by Fine Line), the Company is able to offer its customers a variety
of advanced design and manufacturing solutions. In particular, the Company
believes that its ability to meet growing market demand for miniaturized
electronic products will be critical to its ongoing success, and has
developed and acquired a number of innovative technologies to address this
demand.

Accelerate Customers' Time to Market. The Company's engineering
services group provides integrated product design and prototyping services
to help customers accelerate their time to market for new products. By
participating in product design and prototype development, the Company
often reduces the costs of manufacturing the product. In addition, by
designing products to improve manufacturability and by participating in the
transition to volume production, the Company believes that its engineering
services group can significantly accelerate the time to volume production.
By working closely with its suppliers and customers throughout the design
and manufacturing process, the Company can enhance responsiveness and
flexibility, increase manufacturing efficiency and reduce total cycle
times.

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<PAGE> 35

Increase Efficiency Through Logistics. The Company is streamlining and
simplifying production logistics at its large, strategically located
facilities to decrease the costs associated with the handling and managing
of materials. The Company plans to incorporate suppliers of custom
components in its facilities in China and Mexico to further reduce material
and transportation costs. The Company also intends to establish warehousing
capabilities from which it can ship products into customers' distribution
channels.

Target Leading OEMs in Growing Vertical Markets. The Company has
focused its marketing efforts on fast growing industry sectors that are
increasingly outsourcing manufacturing operations, such as the
communications, computer, consumer electronics and medical industries. The
Company seeks to maintain a balance of customers among these industries,
establishing long-term relationships with leading OEMs to become an
integral part of their operations.

There can be no assurance that the Company's strategy, even if successfully
implemented, will reduce the risks associated with the Company's business. See
"Risk Factors."

CUSTOMERS

The Company's customers consist of a select group of OEMs in the
communications, computer, consumer electronics and medical device industries.
Within these industries, the Company's strategy is to seek long-term
relationships with leading companies that seek to outsource significant
production volumes of complex products. The Company has increasingly focused on
sales to larger companies and to customers in the communications industries. In
fiscal 1997 and the first quarter of fiscal 1998, the Company's five largest
customers accounted for approximately 46% and 61%, respectively, of net sales.
The loss of one or more major customers would have a material adverse effect on
the Company. See "Risk Factors -- Customer Concentration; Dependence on
Electronics Industry" and "-- Variability of Customer Requirements and Operating
Results."

The following table lists in alphabetical order certain of the Company's
largest customers with which the Company expects to continue to conduct
significant business in fiscal 1998 and the products for which the Company
provides manufacturing services.

<TABLE>
<CAPTION>
CUSTOMER END PRODUCTS
------------------------------------------------- -------------------------------------
<S> <C>
Advanced Fibre Communications.................... Local line loop carriers
Braun/ThermoScan................................. Temperature monitoring systems
Compaq........................................... Modems
Diebold.......................................... Automatic teller machines
Ericsson......................................... Business telecommunications systems
Lifescan (a Johnson & Johnson company)........... Portable glucose monitoring system
Microsoft........................................ Computer peripheral devices
U.S. Robotics.................................... Pilot electronic organizers
</TABLE>

In addition, in fiscal 1997 and the first quarter of fiscal 1998, the
Company began manufacturing products for a number of new customers, including
Ascend Communications (telecommunications products), Auspex (drive carriers),
Cisco Systems (data communications products), Harris DTS (network switches),
Philips Electronics (video cameras for personal computers), Philips Consumer
Products (telephones), Bay Networks (data communications products) and Nokia
(consumer electronics products). None of these customers are expected to
represent more than 10% of the Company's net sales in fiscal 1998.

In connection with the Karlskrona Acquisition, the Company and Ericsson
entered into a multi-year purchase agreement. Sales to Ericsson accounted for
approximately 30% of the Company's net sales in the first quarter of fiscal
1998, and the Company believes that sales to Ericsson will account for a
significant portion of its net sales in fiscal 1998. See "-- Karlskrona
Acquisition" and "Risk Factors -- Risks of Karlskrona Acquisition."

34
<PAGE> 36

SALES AND MARKETING

The Company achieves worldwide sales coverage through a 37-person direct
sales force, which focuses on generating new accounts, and through 20 program
managers, who are responsible for managing relationships with existing customers
and making follow-on sales. In North America, the Company maintains sales
offices in California and Massachusetts, as well as a recently established sales
office in Florida. The Company's Asian sales offices are located in Singapore
and Hong Kong. In Europe, the Company maintains sales offices in England,
Germany and the Netherlands. The Company is expanding its European sales force,
and intends to establish additional European sales offices in France and Sweden.
In addition to its sales force, the Company's executive staff plays an integral
role in the Company's marketing efforts.

SERVICES

The Company provides a broad range of advanced engineering, manufacturing
and distribution services to OEM customers. These services are provided on a
turnkey basis and, to a lesser extent, on a consignment basis, and include
product design, PCB fabrication and assembly, materials procurement, inventory
management, final system assembly and test, packaging and distribution. The
components, subassemblies and complete products manufactured by the Company for
its OEM customers incorporate advanced interconnect, miniaturization and
packaging technologies, such as SMT, MCM, COB and BGA technologies. An
increasing portion of the Company's net sales (a majority of its net sales in
fiscal 1997 and the first quarter of fiscal 1998) were derived from the
manufacture and assembly of complete products that are substantially ready for
distribution by the OEM to its customers. The Company also designs and
manufactures miniature gold-finished PCBs that OEMs then incorporate into their
products.

Engineering Services

The engineering services group coordinates and integrates the Company's
worldwide design, prototype and other engineering capabilities. Its focused,
integrated approach provides the Company's customers with advanced service and
support and leverages the Company's technological capabilities. As a result, the
engineering services group enables the Company to strengthen its relationship
with manufacturing customers as well as to attract new customers who require
advanced design services.

The engineering services group actively assists customers with initial
product design in order to reduce the time from design to prototype, improve
product manufacturability and reduce product costs. The Company provides a full
range of electrical, thermal and mechanical design services, including CAE and
CAD-based design services, manufacturing engineering services, circuit board
layout and test development. The engineering services group also coordinates
industrial design and tooling for product manufacturing. After product design,
the Company provides prototype assemblies for fast turnaround. During the
prototype process, Company engineers work with customer engineers to enhance
production efficiency and improve product design. The engineering services group
then assists with the transition to volume production. By participating in
product design and prototype development, the Company can reduce manufacturing
costs and accelerate the time to volume production.

The Company's recent acquisitions have provided it with substantial
advanced engineering capabilities. The Company's 1996 acquisition of Fine Line,
a leading San Jose-based provider of quick-turn circuit board layout and
prototype services, provides the Company with substantial expertise in a broad
range of advanced circuit board designs, and the Company's 1995 acquisition of
nCHIP provides advanced MCM design capabilities. The Company has integrated the
nCHIP capabilities, and is integrating the Fine Line capabilities, with the
Company's existing design and prototype capabilities in its engineering services
group. The Company plans to expand its design and prototype capabilities in
Westford, Massachusetts and San Jose, California, and also intends to establish
design and prototype capabilities in the Karlskrona Facilities.

Materials Procurement and Management

Materials procurement and management consists of the planning, purchasing,
expediting and warehousing of the components and materials used in the
manufacturing process. The Company's inventory management expertise and volume
procurement capabilities contribute to cost reductions and reduce total

35
<PAGE> 37

cycle time. The Company generally orders components after it has a firm purchase
order or letter of authorization from a customer. However, in the case of long
lead-time items, the Company will occasionally order components in advance of
orders, based on customer forecasts, to ensure adequate and timely supply.
Although the Company works with customers and third-party suppliers to reduce
the impact of component shortages, such shortages may occur from time to time
and may have a material adverse effect on the Company. See "Risk
Factors -- Limited Availability of Components." The campuses in China and Mexico
are designed to provide many of the custom components used by the Company
on-site, in order to reduce material and transportation costs, simplify
logistics and facilitate inventory management.

Assembly and Manufacturing

The Company's assembly and manufacturing operations include PCB assembly
and, increasingly, the manufacture of subsystems and complete products. Its PCB
assembly activities primarily consist of the placement and attachment of
electronic and mechanical components on printed circuit boards using both SMT
and traditional pin-through-hole ("PTH") technology. The Company also assembles
subsystems and systems incorporating PCBs and complex electromechanical
components, and, increasingly, manufactures and packages final products for
shipment directly to the customer or its distribution channels. The Company
employs just-in-time, ship-to-stock and ship-to-line programs, continuous flow
manufacturing, demand flow processes and statistical process control. The
Company has expanded the number of production lines for finished product
assembly, burn-in and test to meet growing demand and increased customer
requirements. In addition, the Company has invested in FICO, a producer of
injection molded plastic for Asia electronics companies with facilities in
Shenzhen, China.

As OEMs seek to provide greater functionality in smaller products, they
increasingly require advanced manufacturing technologies and processes. Most of
the Company's PCB assembly involves the use of SMT, which is the leading
electronics assembly technique for more sophisticated products. SMT is a
computer-automated process which permits attachment of components directly on
both sides of a PCB. As a result, it allows higher integration of electronic
components, offering smaller size, lower cost and higher reliability than
traditional manufacturing processes. By allowing increasingly complex circuits
to be packaged with the components placed in closer proximity to each other, SMT
greatly enhances circuit processing speed, and therefore board and system
performance. The Company also provides traditional PTH electronics assembly
using PCBs and leaded components for lower cost products.

In addition, the Company has invested in emerging technologies that extend
its miniaturization capabilities. The Company's 1995 acquisition of nCHIP
provided it with advanced capabilities to design and assemble MCMs (collections
of integrated circuit chips interconnected within a single package), and the
Company now offers a range of MCM technologies from low-cost laminate MCMs to
high-performance, deposited thin-film MCMs. The Company assembles completed MCMs
in its San Jose, California facilities and also utilizes an outside assembly
company for assembly of completed MCMs.

The Company's 1996 acquisition of Astron provided it with significant
capabilities to fabricate miniature gold-finished PCBs for specialized
applications such as cellular phones, optoelectronics, LCDs, pagers and
automotive electronics. These advanced laminate substrates can significantly
improve a product's performance, while reducing its size and cost. The Company's
miniature, gold-finished PCBs are fabricated in the Company's facility in China.
The Company is currently expanding this facility to provide the capacity to
fabricate other complex PCBs.

The Company is also increasingly focusing on advanced interconnect and
packaging technologies such as chip on board and ball grid array technology. COB
technology represents a configuration in which a bare, unpackaged semiconductor
is attached directly onto a PCB, wire bonded and then encapsulated with a
polymeric material. COB technology facilitates miniaturized, low-profile
assemblies, and can result in lower component costs and reduced time to market.
The Company has significant experience in utilizing COB technology to
manufacture a wide range of products. BGA technology is an emerging packaging
technology that provides higher interconnect density by assembling surface-mount
packages to the circuit board through

36
<PAGE> 38

an array of solder balls, rather than pin leads. The Company has recently begun
utilizing BGA technology to manufcture products for OEMs.

Test

After assembly, the Company offers computer-aided testing of PCBs,
subsystems and systems, which contributes significantly to the Company's ability
to deliver high-quality products on a consistent basis. Working with its
customers, the Company develops product-specific test strategies. The Company's
test capabilities include management defect analysis, in-circuit tests and
functional tests. In-circuit tests verify that all components have been properly
inserted and that the electrical circuits are complete. Functional tests
determine if the board or system assembly is performing to customer
specifications. The Company either designs and procures test fixtures and
develops its own test software or utilizes its customers' existing test fixtures
and test software. In addition, the Company also provides environmental stress
tests of the board or system assembly.

Distribution

The Company offers its customers flexible, just-in-time delivery programs
allowing product shipments to be closely coordinated with customers' inventory
requirements. Increasingly, the Company is warehousing products for customers
and shipping those products directly into their distribution channels. The
Company believes that this service can provide customers with a more
comprehensive solution and enable them to be more responsive to market demands.

COMPETITION

The electronics contract manufacturing industry is extremely competitive
and includes hundreds of companies, several of whom have achieved substantial
market share. The Company competes against numerous domestic and foreign
contract manufacturers, and current and prospective customers also evaluate the
Company's capabilities against the merits of internal production. In addition,
in recent years the electronics contract manufacturing industry has attracted a
significant number of new entrants, including large OEMs with excess
manufacturing capacity, and many existing participants, including the Company,
have significantly increased their manufacturing capacity by expanding their
facilities and adding new facilities. In the event of a decrease in overall
demand for contract manufacturing services, this increased capacity could result
in substantial pricing pressures which could adversely affect the Company's
operating results. Certain of the Company's competitors, including Solectron
Corporation and SCI Systems, have substantially greater manufacturing,
financial, research and development and marketing resources than the Company.
Others, such as Jabil Circuits and Celestica, are rapidly increasing their sales
and capacity. As competitors increase the scale of their operations, they may
increase their ability to realize economies of scale, to reduce their prices and
to more effectively meet the needs of large OEMs. The Company believes that the
principal competitive factors in the segments of the contract manufacturing
industry in which it operates are cost, technological capabilities,
responsiveness and flexibility, delivery cycles, location of facilities, product
quality and range of services available. Failure to satisfy any of the foregoing
requirements could materially adversely affect the Company's competitive
position.

EMPLOYEES

As of July 31, 1997, the Company employed approximately 5,500 persons,
including approximately 870 employees in Sweden who were added with the
Karlskrona Acquisition. The Company's non-management employees located in
Singapore, Sweden and China, and the Company's hourly employees in the United
Kingdom, are represented by labor unions. The Company has never experienced a
work stoppage or strike. The Company believes that its employee relations are
good.

The Company's success depends to a large extent upon the continued services
of key managerial and technical employees. The loss of such personnel could have
a material adverse effect on the Company's results of operations. To date, the
Company has not experienced significant difficulties in attracting or retaining
such

37
<PAGE> 39

personnel. Although the Company is not aware that any of its key personnel
currently intend to terminate their employment, their future services cannot be
assured. See "Risk Factors -- Dependence on Key Personnel and Skilled
Employees."

KARLSKRONA ACQUISITION

On March 27, 1997, the Company acquired from Ericsson the Karlskrona
Facilities located in Karlskrona, Sweden and related inventory, equipment and
other assets for approximately $82.4 million in cash. The Karlskrona Facilities
include a 220,000 square foot facility and a 110,000 square foot facility, each
of which is ISO 9002 certified. These facilities currently assemble PCBs,
network switches, cordless base stations and other components for business
communications systems sold by Ericsson. Approximately 870 Ericsson employees
based at the Karlskrona Facilities became employees of the Company at the
facilities. In addition, Ronny Nilsson, previously the Vice President and
General Manager, Supply and Distribution of Ericsson, was appointed President of
Flextronics International Sweden AB and Senior Vice President, Europe of the
Company.

The Company, certain of its subsidiaries and Ericsson also entered into the
Purchase Agreement, under which the Company will manufacture and Ericsson will
purchase, for a three-year period, certain products used in Ericsson's business
communications systems. The Company believes that, as a result, sales to
Ericsson will account for a large portion of its net sales in fiscal 1998. The
Karlskrona Facilities' cost of sales and services (including certain overhead
allocations) for the year ended December 31, 1996 was approximately 2.1 billion
Swedish kronor (approximately $310.0 million based on exchange rates at December
31, 1996). However, there can be no assurance as to the volume of Ericsson's
purchases, or the mix of products that it will purchase, from the Karlskrona
Facilities in any future period.

By acquiring the Karlskrona Facilities, the Company substantially increased
its worldwide capacity, obtained a strong base in Northern Europe and enhanced
its position as a contract manufacturer for the telecommunications industry,
which is increasingly outsourcing manufacturing. The Company also intends to use
the manufacturing resources provided by the Karlskrona Facilities to offer
services to other European OEMs, which it believes are also beginning to
outsource the manufacture of significant product lines.

Assuming Ericsson's sales of those products that the Company will
manufacture remain at current levels, the Company anticipates realizing
approximately $300.0 million of sales (based on current exchange rates) to
Ericsson in fiscal 1998; however, there can be no assurance that the Company's
sales to Ericsson will not be materially less than those anticipated. Although
the Company expects that its gross margin percentage on sales to Ericsson will
be less than that realized by the Company in fiscal 1996 and 1997, it also
expects that the impact of lower gross margins may be partially offset by the
effect of anticipated lower overhead and sales expenses, as a percentage of net
sales, associated with supplying products to Ericsson relative to supplying
products to other OEMs. To the extent that the Company is successful in
increasing the capacity of the Karlskrona Facilities and in using these
facilities to provide services to other OEMs, the Company anticipates increased
operating efficiencies. There can be no assurance that the Company will realize
lower overhead or sales expenses or increased operating efficiencies as
anticipated.

The foregoing, and discussions elsewhere in this Prospectus, contain a
number of forward-looking statements relative to the benefits and effects of the
Karlskrona Acquisition, and the Company's relationship with Ericsson including
the Company's anticipated sales to Ericsson, the Company's net sales, gross
margins and results of operations, and no assurances can be given as to the
Company's ability to achieve such benefits and results. The Karlskrona
Acquisition and the Company's business are subject to a number of risks that
could adversely affect the Company's ability to achieve these operating results
and the anticipated benefits of the Karlskrona Acquisition, including the
Company's ability to reduce costs at the Karlskrona Facilities, the Company's
lack of experience operating in Sweden, the Company's ability to transition the
Karlskrona Facilities from captive manufacturing for Ericsson to manufacturing
for third parties and to expand capacity at these facilities and to integrate
these facilities into its global operations. In addition, there can be no
assurance that the Company will utilize a sufficient portion of the capacity of
the Karlskrona Facilities to achieve profitable operations. Further, changes in
exchange rates between Swedish kronor and U.S. dollars will affect

38
<PAGE> 40

the Company's operating results at the Karlskrona Facilities. See "Risk
Factors -- Risks of Karlskrona Acquisition."

The Purchase Agreement contains cost reduction targets and price
limitations and imposes on the Company certain manufacturing quality
requirements, and there can be no assurance that the Company can achieve
acceptable levels of profitability under the Purchase Agreement or reduce costs
and prices to Ericsson over time as contemplated by the Purchase Agreement. In
addition, the Purchase Agreement requires that the Company maintain a ratio of
equity to total liabilities, debt and equity of at least 25%, and a current
ratio of at least 120%. Further, the Purchase Agreement prohibits the Company
from selling or relocating the equipment acquired in the transaction without
Ericsson's consent. A material breach by the Company of any of the terms of the
Purchase Agreement could allow Ericsson to repurchase the assets conveyed to the
Company at the Company's book value or to obtain other relief, including the
cancellation of outstanding purchase orders or termination of the Purchase
Agreement. Ericsson also has certain rights to be consulted on the management of
the Karlskrona Facilities and to approve the use of the Karlskrona Facilities
for Ericsson's competitors or for other customers where such use might adversely
affect Ericsson's access to production capacity at the facilities. In addition,
without Ericsson's consent, the Company may not enter into any transactions that
could adversely affect its ability to continue to supply products and services
to Ericsson under the Purchase Agreement or its ability to reduce costs and
prices to Ericsson. As a result of these rights, Ericsson may, under certain
circumstances, retain a significant degree of control over the Karlskrona
Facilities and their management. However, the Company understands that it is
Ericsson's intention that the Company utilize the Karlskrona Facilities to
provide services not just to Ericsson, but also to other OEMs, and Ericsson will
receive price reductions if the Company is able to reduce costs at the
Karlskrona Facilities through any resulting volume efficiencies.

FACILITIES

The Company has manufacturing facilities located in China, Malaysia,
Mexico, Singapore, Sweden, the United Kingdom and the United States. In
addition, the Company provides engineering services at its facilities in
Singapore, California and Massachusetts. All of the Company's manufacturing
facilities are registered to the quality requirements of the International
Organization for Standardization (ISO 9002) or are in the process of final
certification.

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<PAGE> 41

Certain information about the Company's manufacturing and engineering
facilities as of June 30, 1997 is set forth below:

<TABLE>
<CAPTION>
YEAR APPROXIMATE OWNED/
LOCATION COMMENCED(1) SQUARE FEET LEASED(2) SERVICES
- --------------------------- ------------ ----------- --------- ----------------------------
<S> <C> <C> <C> <C>
Manufacturing Facilities
Xixiang, China........... 1995 90,000 Leased High volume PCB assembly.
Hong Kong, China(3)...... 1996 45,000 Leased Fabrication of high density
PCBs
Doumen, China(3)......... 1996 330,000(4) Owned(4) Fabrication of high density,
miniaturized PCBs. High
volume PCB assembly.
Johore, Malaysia......... 1991 80,000 Owned Full system manufacturing;
PCB assembly.
Guadalajara, Mexico...... 1997 101,000 Owned High volume PCB assembly.
Singapore(5)............. 1982 47,000 Leased Complex, high value-added
PCB assembly.
Karlskrona, Sweden....... 1997 330,000 Owned(6) Assembly and test of complex
PCBs and systems.
Tonypandy, Wales(7)...... 1995 50,000 Owned Full system manufacturing;
medium complexity PCB
assembly.
San Jose, CA............. 1994 65,000 Leased Full system manufacturing;
PCB assembly.
San Jose, CA............. 1996 32,500 Leased Complex, high value-added
PCB assembly.
San Jose, CA............. 1997 73,000 Owned Complex, high value-added
PCB assembly.
Engineering Facilities
Westford, MA............. 1987 9,112 Leased Design and prototype
services.
Singapore................ 1982 --(8) -- Design and prototype
services.
San Jose, CA............. 1996 71,000 Leased Engineering services and
corporate functions.
Karlskrona, Sweden....... 1997 --(9) -- Design and prototype
services.
</TABLE>

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

(1) Refers to year acquired, leased or constructed by the Company or the
Predecessor.

(2) The leases for the Company's leased facilities expire between December 1997
and July 2005. In addition, the Company has a 47,000 square foot
manufacturing facility in Richardson, Texas that has been closed. The
Company leases this facility under a lease that expires in April 2000, and
the Company is seeking to sublet this facility.

(3) Acquired by the Company in fiscal 1998 in connection with the Astron
acquisition.

(4) Excludes approximately 370,000 square feet used for dormitories,
infrastructure and other functions. The Company has land use rights for this
facility through 2020.

(5) The Company downsized manufacturing operations at this facility in fiscal
1997.

(6) Ericsson has retained certain rights with respect to the Company's use and
disposition of the Karlskrona Facilities. See "-- Karlskrona Acquisition."

(7) Acquired by the Company in fiscal 1996 in connection with the A&A
acquisition.

(8) Located within the 47,000 square foot manufacturing facility in Singapore.

(9) Located within the 330,000 square foot manufacturing facilities in
Karlskrona.

The Company has recently consolidated and expanded its manufacturing
facilities, with the goal of concentrating its activities in a smaller number of
larger, strategically located sites. The Company has closed its Richardson,
Texas facility and downsized manufacturing operations at its Singapore facility,
while substantially increasing overall capacity by expanding operations in North
America, East Asia and Northern

40
<PAGE> 42

Europe. In North America, the Company has recently leased a new 71,000 square
foot facility, from which the Company offers a wide range of engineering
services, including product design and prototype development, and in July 1997
the Company completed construction of a new 73,000 square foot facility,
dedicated to high volume PCB assembly. These new facilities are located adjacent
to the Company's other San Jose operations. Also in July 1997, the Company
completed construction of a 101,000 square foot manufacturing facility on a
32-acre campus site in Guadalajara. This new facility currently has over 200
employees and has begun PCB assembly operations.

In Asia, the Company has expanded its Doumen facilities by developing an
additional 240,000 square feet of facilities for fabrication of miniaturized
gold-finished PCB fabrication and for PCB and full system assembly. The Company
completed this expansion in June 1997. The Doumen campus, located on a 15-acre
site, now includes approximately 330,000 square feet of manufacturing facilities
as well as approximately 370,000 square feet of facilities used for dormitories,
infrastructure and other functions, with over 1,000 employees. The Company is
currently installing equipment and infrastructure at its new facilities in
Doumen, Guadalajara, and San Jose.

The campus facilities in Doumen and Guadalajara are designed to be
integrated facilities that can produce many of the custom components used by the
Company, manufacture complete products for customers, warehouse the products and
distribute them directly to customer's distribution channels. The Company
believes that by offering all of those capabilities at the same site, it can
reduce material and transportation costs, simplify logistics and communications,
and improve inventory management, providing customers with a more complete,
cost-effective manufacturing solution.

FICO, in which the Company has a 40.0% investment, produces injection
molded plastics for Asian companies from its 120,000 square foot facilities in
Shenzhen, China. The Company anticipates that FICO will relocate certain of its
operations to the Doumen campus.

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<PAGE> 43

MANAGEMENT

DIRECTORS AND OFFICERS

The names, ages and positions of the Company's directors and officers as of
July 31, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- -------------------------------------------
<S> <C> <C>
Michael E. Marks 46 Chief Executive Officer and Director
Tsui Sung Lam 47 President, Asia Pacific Operations and
Director
Robert R. B. Dykes 48 Senior Vice President of Finance and
Administration and Director
Ronny Nilsson 49 Senior Vice President, Europe
Michael McNamara 40 Vice President, President North American
Operations
Stephen J. L. Rees 36 Senior Vice President, Worldwide Sales and
Marketing and Director
Michael J. Moritz(1)(2) 42 Director
Richard L. Sharp(2) 50 Director
Bernard J. Lacroute(1) 53 Director
</TABLE>

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

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

Michael E. Marks. Mr. Marks has been the Company's Chief Executive Officer
since January 1994 and its Chairman of the Board since July 1993. He has been a
Director of the Company since December 1991. From November 1990 to December
1993, Mr. Marks was President and Chief Executive Officer of Metcal, Inc., a
precision heating instrument company ("Metcal"). Mr. Marks received a B.A. and
M.A. from Oberlin College and an M.B.A. from the Harvard Business School.

Tsui Sung Lam. Mr. Tsui has been the Company's President, Asia-Pacific
since April 1997, and a Director since 1991. From January 1994 to April 1997, he
served as the Company's President and Chief Operating Officer. From June 1990 to
December 1993, he was the Company's Managing Director and Chief Executive
Officer. From 1982 to June 1990, Mr. Tsui served in various positions for
Flextronics, Inc., the Company's predecessor, including Vice President of Asian
Operations. Mr. Tsui received Diplomas in Production Engineering and Management
Studies from Hong Kong Polytechnic, and a Certificate in Industrial Engineering
from Hong Kong University.

Robert R. B. Dykes. Mr. Dykes has been the Company's Senior Vice President
of Finance and Administration since February 1997 and served as a Director of
the Company from January 1994 to August 1997. Mr. Dykes was Executive Vice
President, Worldwide Operations and Chief Financial Officer of Symantec
Corporation, an application and system software products company, from 1988 to
February 1997. Mr. Dykes received a Bachelor of Commerce and Administration
degree from Victoria University in Wellington, New Zealand. Mr. Dykes is on the
board of directors of Symantec Corporation.

Ronny Nilsson. Mr. Nilsson has served as the Company's Senior Vice
President, Europe since April 1997. From May 1995 to April 1997, he was Vice
President and General Manager, Supply & Distribution and Vice President,
Procurement, of Ericsson Business Networks where he was responsible for
facilities in Sweden, Austria, China, the Netherlands, Mexico and Australia.
From January 1991 to May 1995, he was Director of Production at the EVOX+RIFA
Group, a manufacturer of components, and Vice President of RIFA AB where he was
responsible for factories in Sweden, Finland, Singapore and Indonesia. Mr.
Nilsson received a certificate in Mechanical Engineering from the Lars Kagg
School in Kalmar, Sweden and certificates from the Swedish Management Institute
and the Ericsson Management Program.

Michael McNamara. Mr. McNamara has served as Vice President, President
North American Operations since April 1994. From May 1993 to March 1994, he was
President and Chief Executive Officer of

42
<PAGE> 44

Relevant Industries, Inc., which was acquired by the Company in March 1994. From
May 1992 to May 1993, he was Vice President, Manufacturing Operations at Anthem
Electronics, an electronics distributor. From April 1987 to May 1992, he was a
Principal of Pittiglo, Rabin, Todd & McGrath, an operations consulting firm. Mr.
McNamara received a B.S. from the University of Cincinnati and an M.B.A. from
Santa Clara University.

Stephen J. L. Rees. Mr. Rees has served as a Director of the Company since
April 1996, as Senior Vice President, Worldwide Sales and Marketing since May
1997, and as Chairman and Chief Executive Officer of Astron since the
acquisition of Astron by the Company in February 1996. Mr. Rees has been
Chairman and Chief Executive Officer of Astron since November 1991. Mr. Rees
holds a B.A. in Finance from the City of London Business School and graduated in
Production Technology and Mechanical Engineering from the HTL St. Polten
Technical Institute in Austria.

Michael J. Moritz. Mr. Moritz has served as a Director of the Company since
July 1993. Mr. Moritz has been a General Partner of Sequoia Capital, a venture
capital firm, since 1988. Mr. Moritz also serves as director of Yahoo, Inc.,
Neomagic and several privately-held companies.

Richard L. Sharp. Mr. Sharp has served as a Director of the Company since
July 1993. He has been the Chairman, President, Chief Executive Officer and a
director of Circuit City Stores, Inc., a consumer electronics and appliances
retailer, since June 1986. Mr. Sharp also serves as a director of S&K Famous
Brands, Inc. and the Fort James Corporation.

Bernard J. Lacroute. Mr. Lacroute has served as a Director of the Company
since July 1993. Mr. Lacroute has been a partner of Kleiner Perkins Caufield &
Byers, a Northern California venture capital firm, since 1989. Mr. Lacroute also
serves as a director of several privately-held companies. Mr. Lacroute will
retire from the Board of Directors at the Company's next Annual General Meeting,
scheduled for October 14, 1997.

The Company's Board of Directors has approved the addition of two
additional outside directors. Alain Ahkong and Patrick Foley, effective at the
meeting of the Board of Directors following the Company's Annual General Meeting
scheduled for October 14, 1997, and Mr. Ahkong and Mr. Foley have agreed to
serve in such capacity.

Mr. Ahkong is a founder of Pioneer Management Services Pte. Ltd.
("Pioneer"), a Singapore-based tax consultancy firm, and has been the Managing
Director of Pioneer since 1990. Pioneer provides advice to the Company, and
other multinational corporations, on matters related to international taxation.

Mr. Foley has been the Chairman, President and Chief Executive Officer of
DHL Airways, Inc., a global document, package and airfreight delivery company,
since 1988. Mr. Foley is also a director of Continental Airlines, Del Monte
Corporation, Glenborough Realty Trust and Foundation Health Services.

43
<PAGE> 45

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Ordinary Shares as of August 31,
1997, and as adjusted to reflect the sale of shares offered by the Company
pursuant to this Prospectus, by (i) each of the Company's directors, the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers in fiscal 1996, (ii) all directors and
executive officers as a group, and (iii) each person who is known by the Company
to own beneficially more than 5% of the Company's Ordinary Shares. Unless
otherwise indicated below, the persons and entities named in the table have sole
voting and sole investment power with respect to all the shares beneficially
owned, subject to community property laws where applicable.

<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NUMBER OF SHARES PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING(2) OFFERING(3)
- -------------------------------------------------- --------------------- ------------- -------------
<S> <C> <C> <C>
Ronald Baron(4)................................... 1,931,600 14.01% 12.43%
c/o Baron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
New York, New York 10153
Sequoia Capital(5)................................ 953,693 6.90% 6.13%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, California 94025
The Capital Group Companies(6).................... 781,500 5.67% 5.03%
333 South Hope Street
Los Angeles, California 90071
Richard L. Sharp(7)............................... 933,269 6.75% 5.99%
c/o Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
Michael E. Marks(8)............................... 394,968 2.83% 2.51%
Tsui Sung Lam(9).................................. 58,450 *
Michael McNamara(10).............................. 37,277 *
Robert R.B. Dykes(11)............................. 38,149 *
Bernard J. Lacroute(12)........................... 62,980 *
Michael Moritz(13)................................ 953,693 6.90% 6.13%
Stephen J.L. Rees(14)............................. 63,756 *
All directors and executive officers as a group (8
persons)(15).................................... 2,542,502 17.90% 15.94%
</TABLE>

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

* Less than 1.0%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has voting or investment power with respect to such
shares. Ordinary Shares subject to options that are currently exercisable
or exercisable within 60 days after August 31, 1997 are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Percentage ownership is based upon 13,792,487 outstanding Ordinary Shares
as of August 31, 1997.

(3) Assumes that the Underwriters' over-allotment option to purchase up 262,500
shares is not exercised.

(4) Based on information supplied by Mr. Baron in a Schedule 13D filed with the
Securities and Exchange Commission on January 26, 1997. Includes 205,000
shares held by Baron Capital Partners, L.P. and Baron Investment Partners,
L.P., of which Mr. Baron is a general partner. Mr. Baron may be deemed to
have sole power to vote and direct the disposition of such shares. Also
includes 1,465,000 shares held by Baron Asset Fund and Baron Growth &
Income Fund, which are advised by BAMCO, Inc., and 261,600 shares held by
investment advisory clients of Baron Capital Management, Inc. BAMCO, Inc.
and Baron Capital Management, Inc. are controlled by Mr. Baron, and Mr.
Baron may be deemed to share power to vote and dispose of such shares.

44
<PAGE> 46

(5) Includes 788,985 shares held by Sequoia Capital Growth Fund, a limited
partnership, 50,291 shares held by Sequoia Technology Partners III, a
limited partnership, 80,167 shares held by Sequoia Capital VII, a limited
partnership, 3,900 shares held by Sequoia Technology Partners VII, a
limited partnership and 2,600 shares held by Sequoia 1995, a limited
corporation. Sequoia Partners (CF) is the general partner of Sequoia
Capital Growth Fund and has sole voting and investment power over such
shares. The general partners of Sequoia Partners (CF) are Donald T.
Valentine, Pierre R. Lamond, Thomas F. Stephenson, Michael J. Moritz and
Gordon Russell. The general partners of Sequoia Technology Partners III are
Donald T. Valentine, Pierre R. Lamond, Thomas F. Stephenson and Gordon
Russell. The general partner of Sequoia Capital VII and Sequoia Technology
Partners VII is Sequoia Capital VII-A Management, LLC. The general partners
of Sequoia Capital VII-A Management, LLC are Mr. Moritz, Douglas Leone,
Mark Stevens, Thomas Stephenson and J. Thomas McMurray. Also includes
27,750 shares subject to options exercisable within 60 days after August
31, 1997 held by Mr. Moritz.

(6) Includes 781,500 shares beneficially owned by Capital Research and
Management Company.

(7) Includes 205,000 shares beneficially owned by Bethany Limited Partnership
as of August 31, 1997. Since August 31, 1997, Bethany Limited Partnership
has sold 5,000 of such shares. Mr. Sharp, the general partner of Bethany
Limited Partnership, may be deemed to share voting and investment power
with respect to such shares. Mr. Sharp disclaims beneficial ownership of
all such shares except to the extent of his proportionate interest therein.
Also includes 37,750 shares subject to options exercisable within 60 days
after August 31, 1997 held by Mr. Sharp.

(8) Includes 168,461 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. Marks.

(9) Includes 39,375 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. Tsui. Since August 31, 1997, Mr. Tsui has sold
10,000 shares shown as beneficially owned by him.

(10) Includes 37,273 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. McNamara.

(11) Includes 37,750 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. Dykes.

(12) Includes 14,503 shares held by KPCB Zaibatsu Fund I. KPCB IV Associates,
L.P., of which Mr. Lacroute is a limited partner, is the general partner of
KPCB Zaibatsu Fund I. Mr. Lacroute disclaims beneficial ownership of such
shares. Also includes 10,727 shares held by the Bernard and Ronni Lacroute
Trust and 37,750 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. Lacroute.

(13) Includes 788,985 shares held by Sequoia Capital Growth Fund, a limited
partnership, 50,291 shares held by Sequoia Technology Partners III, a
limited partnership, 80,167 shares held by Sequoia Capital VII, a limited
partnership, 3,900 shares held by Sequoia Technology Partners VII, a
limited partnership and 2,600 shares held by Sequoia 1995, a limited
corporation. Sequoia Partners (CF) is the general partner of Sequoia
Capital Growth Fund and has sole voting and investment power over such
shares. The general partners of Sequoia Partners (CF) are Donald T.
Valentine, Pierre R. Lamond, Thomas F. Stephenson, Michael J. Moritz and
Gordon Russell. The general partners of Sequoia Technology Partners III are
Donald T. Valentine, Pierre R. Lamond, Thomas F. Stephenson and Gordon
Russell. The general partner of Sequoia Capital VII and Sequoia Technology
Partners VII is Sequoia Capital VII-A Management, LLC. The general partners
of Sequoia Capital VII-A Management, LLC are Mr. Moritz, Douglas Leone,
Mark Stevens, Thomas Stephenson and J. Thomas McMurray. Also includes
27,750 shares subject to options exercisable within 60 days after August
31, 1997 held by Mr. Moritz.

(14) Also includes 3,754 shares held by Mrs. Janine Margaret Rees. Includes
22,709 shares subject to options exercisable within 60 days after August
31, 1997 held by Mr. Rees. Since August 31, 1997, Mr. Rees has sold 15,000
shares shown as beneficially owned by him.

(15) Includes 408,818 shares subject to options exercisable within 60 days after
August 31, 1997.

45
<PAGE> 47

DESCRIPTION OF CAPITAL SHARES

The following statements are brief summaries of the capital structure of
the Company and of the more important rights and privileges of shareholders
conferred by the laws of Singapore and the Company's Articles of Association
(the "Articles"). These statements summarize the material provisions of the
Articles but are qualified by reference to the Articles, which have been
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Articles are available at the Company's San
Jose, California office and at the registered office of the Company in
Singapore.

ORDINARY SHARES

The authorized capital of the Company consists of 100,000,000 Ordinary
Shares, par value S$0.01. There is a provision in the Articles to enable the
Company in certain circumstances to issue shares with preferential, deferred or
other special rights or restrictions as the directors may determine. The
directors may issue shares at a premium and a sum equal to the aggregate amount
or value of the premium will, subject to certain exceptions, be transferred to a
share premium account.

All shares presently issued are fully paid and existing shareholders are
not subject to any calls on such shares. All shares are in registered form. The
shares offered hereby, when issued, will be fully paid and future shareholders
will not be subject to any calls on such shares. All shares offered hereby also
will be in registered form. The Company can neither purchase its own shares nor,
except in the circumstances permitted by the Companies Act, grant any financial
assistance for the acquisition or proposed acquisition of its own shares.

NEW SHARES

New shares may only be issued with the prior approval of the Company in a
general meeting. General approval may be sought from the Company in a general
meeting for the issue of shares. Such approval, if granted, will lapse at the
next Annual General Meeting or the expiration of the period within which the
next Annual General Meeting is required to be held, whichever is the earlier.
The shareholders have provided general authority to issue any remaining unissued
shares, up to 100,000,000 Ordinary Shares, prior to the next Annual General
Meeting. Unless otherwise determined by the Company in a general meeting, any
new shares shall, before they are issued, be offered to existing shareholders in
proportion, as nearly as may be, to the number of shares then held by them
respectively. Subject to this and the provisions of the Companies Act, all new
shares are under the control of the directors who may allot and issue the same
with such rights and restrictions as they may think fit.

SHAREHOLDERS

Only persons who are registered in the books of the Company are recognized
as shareholders and absolute owners of the shares. On June 30, 1997, there were
approximately 480 holders of Ordinary Shares. The Company may, on giving not
less than 14 days' notice, close the register of members for any time or times
but the register may not be closed for more than 30 days in any calendar year.
Such closure is normally made for the purpose of determining shareholders'
entitlement to receive dividends and other distributions and would, in the usual
case, not exceed 10 days.

TRANSFER OF SHARES

Subject to applicable securities laws, shares are freely transferable but
the directors may decline to register any transfer of shares on which the
Company has a lien, and in the case of shares not fully paid up the directors
may refuse, at their discretion, to register or transfer shares to a transferee
of whom they do not approve. Shares may be transferred by a duly signed
instrument of transfer in a form approved by the directors. The directors may
decline to register any transfer unless, among other things, it has been duly
stamped and is presented for registration together with the share certificate
and such other evidence of title as they may require. The Company will replace
lost or destroyed certificates for shares upon notice to the Company and upon,
among other things, the applicant furnishing such evidence and indemnity as the
directors may require.

46
<PAGE> 48

SHAREHOLDERS' MEETINGS

The Company is required to hold an Annual General Meeting in each year. The
directors may convene an Extraordinary General Meeting whenever they think fit
and they must do so upon the request in writing of shareholders representing not
less than one-tenth of the total voting rights of all shareholders. In addition,
two or more shareholders holding not less than one-tenth of the issued share
capital of the Company may call a meeting of the Company. Unless otherwise
required by law or by the Articles, voting at general meetings is by ordinary
resolution (requiring an affirmative vote of a simple majority of the votes cast
at a meeting of which at least 14 days' written notice is given). An ordinary
resolution suffices, for example, in respect of appointments of directors. A
special resolution (requiring an affirmative vote of at least 75% of the votes
cast at the meeting of which at least 21 days' written notice is given) is
necessary for certain matters under Singapore law, such as an alteration of the
Articles.

VOTING RIGHTS

Voting at any meeting of shareholders is by a show of hands unless a poll
is duly demanded. If voting is by a show of hands, every shareholder who is
present in person or by proxy at the meeting has one vote. On a poll every
shareholder who is present in person or by proxy has one vote for every share
held by him. A poll may be demanded by the chairman of the meeting or by not
less than three members present in person or by proxy and entitled to vote or by
shareholders present in person or by proxy and representing in the aggregate not
less than one-tenth of the total voting rights of all shareholders having the
right to attend and vote at the meeting.

DIVIDENDS

Since inception, the Company has not declared or paid any cash dividends on
its Ordinary Shares, and the Company's current loan agreements prohibit the
payment of cash dividends without the lenders' prior consent. The Company
anticipates that all earnings in the foreseeable future will be retained to
finance the continuing development of its business.

BONUS AND RIGHTS ISSUE

The Company in a general meeting may, upon the recommendation of the
directors, capitalize any reserves or profits (including profits or monies
carried and standing to any reserve or to the share premium account) and
distribute the same as bonus shares credited as paid-up to the shareholders in
proportion to their shareholdings. The directors may also issue to shareholders
rights to take up additional shares, in proportion to their shareholdings. Such
rights are subject to any conditions attached to such issue and the regulations
of the stock exchange on which the shares are listed.

TAKEOVERS

The acquisition of shares of public companies is regulated by, inter alia,
the Singapore Companies Act (Chapter 50) and the Singapore Code on Takeovers and
Mergers (the "Takeovers Code"). Any person acquiring an interest in 25% or more
of the voting rights in the Company is obliged to extend a takeover offer for
the remaining shares which carry voting rights in accordance with the provisions
of the Takeovers Code. "Parties acting in concert" include related and
associated companies, directors (including their relatives), pension funds,
discretionary funds and financial advisers (in respect of shares held by them
and funds managed by them on a discretionary basis). An offer for consideration
other than cash must be accompanied by a cash alternative at not less than the
highest price (excluding stamp duty and commission) paid by the offeror or
parties acting in concert with him for shares of that class within the preceding
12 months. A mandatory takeover offer is also required to be made if a person
holding between 25% and 50% of the voting rights (either on his own or together
with parties acting in concert with him) acquires additional shares representing
more than 3% of the voting rights in any 12-month period.

47
<PAGE> 49

LIQUIDATION OR OTHER RETURN OF CAPITAL

On a winding-up or other return of capital, subject to any special rights
attaching to any other class of shares, holders of Ordinary Shares will be
entitled to participate in any surplus assets in proportion to their
shareholdings.

INDEMNITY

As permitted by the laws of Singapore, the Articles provide that, subject
to the Companies Act, the Company's directors and officers will be indemnified
by the Company against any liability incurred by them in defending any
proceedings, whether civil or criminal, which relate to anything done or omitted
to have been done as an officer, director or employee of the Company and in
which judgment is given in their favor or in which they are acquitted or in
connection with any application under any statute for relief from liability in
respect thereof in which relief is granted by the court. Directors and officers
may not be indemnified by the Company against any liability which by law would
otherwise attach to them in respect of any negligence, default, breach of duty
or breach of trust of which they may be guilty in relation to the Company.

LIMITATIONS ON RIGHTS TO HOLD OR VOTE ORDINARY SHARES

Except as discussed in "Takeovers," there are no limitations imposed by the
laws of Singapore or by the Articles on the right of nonresident shareholders to
hold or vote Ordinary Shares.

TRANSFER AGENT

The Company's transfer agent is Boston EquiServe, P.O. Box 8040, Boston,
Massachusetts 02266-8040.

48
<PAGE> 50

TAXATION

This summary of Singapore and U.S. tax considerations is based on current
law and is provided for general information. The discussion does not purport to
deal with all aspects of taxation that may be relevant to particular
shareholders in light of their investment or tax circumstances, or to certain
types of shareholders (including insurance companies, tax-exempt organizations,
regulated investment companies, financial institutions or broker-dealers, and
shareholders that are not U.S. Shareholders (as defined below)) subject to
special treatment under the U.S. federal income tax laws. Such shareholders
should consult their own tax advisors regarding the particular tax consequences
to such shareholders of any investment in the Ordinary Shares.

INCOME TAXATION UNDER SINGAPORE LAW

Under current provisions of the Income Tax Act, Chapter 134 of Singapore,
corporate profits are taxed at a rate equal to 26.0%. Under Singapore's taxation
system, the tax paid by a company is deemed paid by its shareholders. Thus, the
shareholders receive dividends net of the tax paid by the Company. Dividends
received by either a resident or a nonresident of Singapore are not subject to
withholding tax. Shareholders are taxed on the gross amount of dividends (i.e.,
the cash amount of the dividend plus the amount of corporate tax paid by the
Company). The tax paid by the Company will be available to shareholders as a tax
credit to offset the Singapore income tax liability on their overall income
(including the gross amount of dividends). No tax treaty currently exists
between the Republic of Singapore and the U.S.

Under current Singapore tax law there is no tax on capital gains, and,
thus, any profits from the disposal of shares are not taxable in Singapore
unless the vendor is regarded as carrying on a trade in shares in Singapore (in
which case, the disposal profits would be taxable as trade profits rather than
capital gains).

There is no stamp duty payable in respect of the holding and disposition of
shares. No duty is payable on the acquisition of new shares. Where existing
shares are acquired in Singapore, stamp duty is payable on the instrument of
transfer of the shares at the rate of S$2 for every S$1,000 of the market value
of the shares. The stamp duty is borne by the purchaser unless there is an
agreement to the contrary. Where the instrument of transfer is executed outside
of Singapore, stamp duty must be paid if the instrument of transfer is received
in Singapore. Under Article 22 (iii) of the Articles of Association of the
Company, its directors are authorized to refuse to register a transfer unless
the instrument of transfer has been duly stamped.

INCOME TAXATION UNDER UNITED STATES LAW

Individual shareholders that are U.S. citizens or resident aliens (as
defined in Section 7701(b) of the Internal Revenue Code of 1986 (the "Code")),
corporations or partnerships or other entities created or organized under the
laws of the United States, or any political subdivision thereof, an estate the
income of which is subject is subject to U.S. federal income taxation regardless
of its source or a trust if a U.S. court exercises primary jurisdiction over its
administration and one or more U.S. fiduciaries have the authority to control
all of its substantial decisions ("U.S. Shareholders") will, upon the sale or
exchange of a share, recognize gain or loss for U.S. income tax purposes in an
amount equal to the difference between the amount realized and the U.S.
Shareholder's tax basis in such a share. If paid in currency other than U.S.
dollars, the U.S. dollar amount realized (as determined on the trade date) is
determined by translating the foreign currency into U.S. dollars at the spot
rate in effect on the settlement date of the sale in the case of a U.S.
Shareholder that is a cash basis taxpayer. An accrual basis taxpayer may elect
to use the spot rate in effect on the settlement date of the sale by filing a
statement with the U.S. Shareholder's first return in which the election is
effective clearly indicating that the election has been made. Such an election
must be applied consistently from year to year and cannot be changed without the
consent of the Internal Revenue Service. Such gain or loss will be capital gain
or loss if the share was a capital asset in the hands of the U.S. Shareholder
and will not be short-term capital gain or loss if the share has been held for
more than one year. If a U.S. Shareholder receives any currency other than U.S.
dollars on the sale of a share, such U.S. Shareholder

49
<PAGE> 51

may recognize ordinary income or loss as a result of currency fluctuations
between the date of such sale and the date such sale proceeds are converted into
U.S. dollars.

U.S. Shareholders will be required to report as income for U.S. income tax
purposes the amount of any dividend received from the Company to the extent paid
out of the current or accumulated earnings and profits of the Company, as
determined under current U.S. income tax principles. If over 50.0% of the
Company's stock (by vote or value) were owned by U.S. Shareholders who
individually held 10.0% or more of the Company's voting stock, such U.S.
Shareholders potentially would be required to include in income a portion or all
of their pro rata share of the Company's and its non-U.S. subsidiaries' earnings
and profits. If 50.0% or more of the Company's assets during a taxable year
produced or were held for the production of passive income, as defined in
section 1296(b) of the Code (e.g., certain forms of dividends, interest and
royalties), or 75.0% or more of the Company's gross income for a taxable year
was passive income, adverse U.S. tax consequences could result to U.S.
shareholders of the Company. As of June 30, 1997, the Company was aware of only
one U.S. Shareholder who individually held 10% or more of its voting stock. See
"Principal Shareholders."

Shareholders that are not U.S. Shareholders ("non-U.S. shareholders") will
not be required to report for U.S. federal income tax purposes the amount of any
dividend received from the Company. Non-U.S. shareholders, upon the sale or
exchange of a share, would not be required to recognize gain or loss for U.S.
federal income tax purposes.

ESTATE TAXATION

In the case of an individual who is not domiciled in Singapore, a Singapore
estate tax is imposed on the value of all movable and immovable properties
situated in Singapore. The shares of the Company are considered to be situated
in Singapore. Thus, an individual shareholder who is not domiciled in Singapore
at the time of his or her death will be subject to Singapore estate tax on the
value of any such shares held by the individual upon the individual's death.
Such a shareholder will be required to pay Singapore estate tax to the extent
that the value of the shares (or in aggregate with any other assets subject to
Singapore estate tax) exceeds S$600,000. Any such excess will be taxed at a rate
equal to 5.0% on the first S$12,000,000 of the individual's Singapore chargeable
assets and thereafter at a rate equal to 10.0%. An individual shareholder who is
a U.S. citizen or resident (for U.S. estate tax purposes) also will have the
value of the shares included in the individual's gross estate for U.S. estate
tax purposes. An individual shareholder generally will be entitled to a tax
credit against the shareholder's U.S. estate tax to the extent the individual
shareholder actually pays Singapore estate tax on the value of the shares;
however, such tax credit is generally limited to the percentage of the U.S.
estate tax attributable to the inclusion of the value of the shares included in
the shareholder's gross estate for U.S. estate tax purposes, adjusted further by
a pro rata apportionment of available exemptions. Individuals who are domiciled
in Singapore should consult their own tax advisors regarding the Singapore
estate tax consequences of their investment.

50
<PAGE> 52

UNDERWRITING

The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions in the underwriting agreement (the
"Underwriting Agreement") by and among the Company and the Underwriters, to
purchase from the Company the number of Ordinary Shares indicated below opposite
their respective names, at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to purchase
all of the Ordinary Shares offered hereby (other than those covered by the
Underwriters' over-allotment option described below) if they purchase any.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities.....................................................
Cowen & Company...........................................................
UBS Securities............................................................
---------
Total........................................................... 1,750,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Ordinary Shares
being sold pursuant to such Agreement if any of the Ordinary Shares being sold
pursuant to such Agreement are purchased. Under certain circumstances, the
commitments of non-defaulting Underwriters may be increased.

The Underwriters have advised the Company that they propose initially to
offer the Ordinary Shares to the public on the terms set forth on the cover page
of this Prospectus. The Underwriters may allow selected dealers a concession of
not more than $ per share; and the Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriters. The Ordinary Shares are
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.

The Company has granted to the Underwriters an over-allotment option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 262,500 additional Ordinary Shares at the same price per share as
the initial shares to be purchased by the Underwriters. The Underwriters may
exercise such option only to cover over-allotments made in the sale of the
Ordinary Shares that the Underwriters have agreed to purchase. To the extent the
Underwriters exercise such option, each Underwriter will be committed, subject
to certain conditions, to purchase such additional shares in approximately the
same proportion as set forth in the above table.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.

The Company has agreed, following completion of this offering, not to
issue, offer, sell, contract to sell or otherwise dispose of any Ordinary Shares
or securities convertible into or exchangeable or exercisable for Ordinary
Shares without the prior written consent of Montgomery Securities for a period
of 90 days after the date of this Prospectus, except that the Company may,
without such consent, (i) grant options pursuant to its existing employee
benefit plans or issue Ordinary Shares upon exercise of outstanding stock
options, and (ii) issue Ordinary Shares in connection with acquisitions. The
officers and directors of the Company have agreed that they will not sell
Ordinary Shares beneficially owned by them without the prior written consent of
Montgomery Securities for a period of 90 days after the date of this Prospectus.

In connection with the offering of the Ordinary Shares contemplated by this
Prospectus (the "Offering") and in compliance with applicable law, the
Underwriters may over-allot (i.e., sell more Ordinary Shares than they have
agreed to purchase from the Company) and may effect transactions which
stabilize, maintain or otherwise affect the market price of the Ordinary Shares,
which may be higher than the price that might

51
<PAGE> 53

otherwise prevail in the open market. Such transactions may include placing bids
for or effecting purchases of Ordinary Shares for the purpose of pegging, fixing
or maintaining the market price of the Ordinary Shares or for the purpose of
reducing a syndicate short position created in connection with the Offering. A
syndicate short position also may be covered by exercise of the over-allotment
option described above rather than, or in combination with, open market
purchases. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the Offering may be reclaimed by the syndicate if such
securities are repurchased by the syndicate in stabilizing or covering
transactions. The Underwriters are not required to engage in any of these
activities, and any such activities, if commenced, may be discontinued at any
time.

CERTAIN LEGAL MATTERS

The validity of the Ordinary Shares offered hereby will be passed upon on
behalf of the Company by Allen & Gledhill, Singapore, legal advisors to the
Company, and on behalf of the Underwriters by Arfat Selvam & Gunasingham,
Singapore legal advisors to the Underwriters. Certain United States legal
matters in connection with this offering will be passed upon for the Company by
Fenwick & West LLP and for the Underwriters by Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, a Professional Corporation.

EXPERTS

The consolidated financial statements and schedules of Flextronics at March
31, 1996 and 1997 and for each of the three years in the period ended March 31,
1997 included in this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their reports thereon
included herein and in the Registration Statement, and are included in reliance
upon such reports given upon the authority of such Firm as experts in accounting
and auditing.

The financial statements and schedules of Astron at December 31, 1995 and
for each of the two years in the period ended December 31, 1995 incorporated by
reference into this Prospectus and Registration Statement have been audited by
Deloitte Touche Tomatsu International, independent auditors, as set forth in
their report thereon incorporated by reference herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

52
<PAGE> 54

AVAILABLE INFORMATION

Flextronics International Ltd. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's
Ordinary Shares are quoted for trading on the Nasdaq National Market and
reports, proxy statements and other information concerning the Company also may
be inspected at the offices of the National Association of Securities Dealers,
9513 Key West Avenue, Rockville, Maryland 20850. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement. Statements made in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance in which a copy of such
contract is filed as an exhibit to the Registration Statement, reference is made
to such copy, and each such statement shall be deemed qualified in all respects
by such reference. Copies of the Registration Statement may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth above.

53
<PAGE> 55

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ F-2
Flextronics International Ltd. Consolidated Balance Sheets as of March 31, 1996 and
1997................................................................................ F-3
Flextronics International Ltd. Consolidated Statements of Operations for the fiscal
years ended March 31, 1995, 1996 and 1997........................................... F-5
Flextronics International Ltd. Consolidated Statements of Shareholders' Equity for the
fiscal years ended March 31, 1995, 1996 and 1997.................................... F-6
Flextronics International Ltd. Consolidated Statements of Cash Flows for the fiscal
years ended March 31, 1995, 1996 and 1997........................................... F-7
Notes to Consolidated Financial Statements............................................ F-9
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
Flextronics International Ltd.

We have audited the accompanying consolidated balance sheets of Flextronics
International Ltd as of March 31, 1996 and 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended March 31, 1997. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with United States Generally Accepted
Auditing Standards. 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 consolidated financial position of
Flextronics International Ltd at March 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1997, in conformity with United States Generally Accepted
Accounting Principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

As discussed in Note 14 of the notes to consolidated financial statements,
the 1996 financial statements have been restated to correct the Company's
accounting for the acquisition of the Astron Group Limited to conform to United
States Generally Accepted Accounting Principles.

/s/ ERNST & YOUNG

ERNST & YOUNG

Singapore
July 31, 1997

F-2
<PAGE> 57

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996* 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................................. $ 6,546 $ 23,645
Accounts receivable, net of allowance for doubtful accounts of $3,576
and $5,658 at March 31, 1996 and 1997 respectively................ 78,114 69,331
Inventories.......................................................... 52,637 106,583
Other current assets................................................. 3,827 10,361
Deferred income taxes................................................ 260 408
-------- --------
Total current assets................................................... 141,384 210,328
-------- --------
PROPERTY AND EQUIPMENT:
Machinery and equipment.............................................. 77,771 100,795
Building............................................................. 5,975 37,758
Leasehold improvements............................................... 15,491 14,584
-------- --------
99,237 153,137
Accumulated depreciation and amortization............................ (37,896) (42,172)
-------- --------
Net property and equipment............................................. 61,341 110,965
-------- --------
OTHER NON-CURRENT ASSETS:
Goodwill, net of accumulated amortization of $2,715 and $3,704, at
March 31, 1996 and 1997 respectively.............................. 13,407 20,865
Intangible assets, net of accumulated amortization of $850 and
$2,496, at March 31, 1996 and 1997 respectively................... 12,227 10,469
Deposits and other................................................... 580 1,812
Receivables from related party....................................... 2,085 2,554
Investment in associated company..................................... -- 2,241
-------- --------
Total other non-current assets....................................... 28,299 37,941
-------- --------
TOTAL ASSETS................................................. $231,024 $359,234
======== ========
</TABLE>

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

* Restated -- See Note 14

See accompanying notes.

F-3
<PAGE> 58

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996* 1997
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Bank borrowings...................................................... $ 14,379 $111,075
Current portion of long-term debt.................................... 11,073 5,758
Current portion of capital lease.................................. 6,736 6,475
Accounts payable.................................................. 64,625 73,631
Accrued payroll................................................... 5,606 10,680
Other accrued liabilities......................................... 5,389 23,039
Income taxes payable.............................................. 2,775 4,171
Payables to associated company....................................... -- 546
-------- --------
Total current liabilities.............................................. 110,583 235,375
-------- --------
NON CURRENT LIABILITIES:
Notes payable to shareholders........................................ 686 223
Long-term debt, less current portion................................. 7,554 2,165
Other payable........................................................ 24,184 23,547
Capital lease, less current portion.................................. 10,120 10,137
Deferred income taxes................................................ 4,353 3,710
-------- --------
Total non-current liabilities.......................................... 46,897 39,782
-------- --------
Minority interests..................................................... 485 485
-------- --------
SHAREHOLDERS' EQUITY:
Ordinary Shares, S$.01 par value:
Authorized -- 100,000,000 shares at March 31, 1996 and 1997
Issued and outstanding -- 13,213,289 shares at March 31, 1996 and
13,676,243 shares at March 31, 1997.............................. 85 88
Additional paid-in capital........................................ 93,634 95,570
Accumulated deficit............................................... (20,660) (12,066)
-------- --------
Total shareholders' equity............................................. 73,059 83,592
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $231,024 $359,234
======== ========
</TABLE>

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

* Restated -- See Note 14

See accompanying notes.

F-4
<PAGE> 59

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

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
----------------------------------
1995 1996* 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $237,386 $448,346 $490,585
Cost of sales.............................................. 214,865 407,457 440,448
-------- -------- --------
Gross profit............................................... 22,521 40,889 50,137
Selling, general and administrative expenses............... 11,468 18,787 26,765
Goodwill amortization...................................... 510 739 989
Intangible assets amortization............................. 245 544 1,646
Provision for plant closings............................... -- 1,254 5,868
Acquired in-process research and development............... 91 29,000 --
-------- -------- --------
Operating income/(loss).................................... 10,207 (9,435) 14,869
Net interest expense....................................... (774) (2,380) (3,885)
Merger expenses............................................ (816) -- --
Foreign exchange gain/(loss)............................... (303) 872 1,168
Income/(loss) from associated company...................... (729) -- 241
Other income/(expense)..................................... 34 (398) (2,718)
-------- -------- --------
Income/(loss) before income taxes.......................... 7,619 (11,341) 9,675
Provision for income taxes................................. 1,463 3,791 2,212
-------- -------- --------
Net income/(loss).......................................... $ 6,156 $(15,132) $ 7,463
======== ======== ========
Earnings per share:
Net income/(loss) per share................................ $0.51 $(1.19) $0.50
======== ======== ========
Weighted average outstanding Ordinary Shares and
equivalents.............................................. 12,103 12,684 14,877
======== ======== ========
</TABLE>

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

* Restated -- See Note 14

See accompanying notes.

F-5
<PAGE> 60

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ORDINARY SHARES ADDITIONAL TOTAL
--------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1994...................... 11,304 $ 71 $ 57,430 $(10,798) $46,703
nCHIP fiscal year conversion................... -- -- -- (596) (596)
Issuance of Ordinary Shares.................... 300 2 925 -- 927
Expenses related to issuance of Ordinary
Shares....................................... -- -- (968) -- (968)
Net income for the year........................ -- -- -- 6,156 6,156
Transactions by pooled companies:
Issuance of common stock....................... -- -- 37 -- 37
Issuance of preference stock................... -- -- 5,458 -- 5,458
------ --- ------- -------- -------
BALANCE AT MARCH 31, 1995...................... 11,604 $ 73 $ 62,882 $ (5,238) $57,717
Issuance of Ordinary Shares for acquisition of
subsidiaries................................. 305 2 7,443 -- 7,445
Issuance of Ordinary Shares.................... 304 2 1,007 -- 1,009
Sale of shares for cash in public offering..... 1,000 8 23,492 -- 23,500
Expenses related to sale of shares for cash in
public offering.............................. -- -- (1,190) -- (1,190)
Currency translation adjustments............... -- -- -- (290) (290)
Net loss for the year.......................... -- -- -- (15,132) (15,132)
------ --- ------- -------- -------
BALANCE AT MARCH 31, 1996*..................... 13,213 $ 85 $ 93,634 $(20,660) $73,059
Issuance of Ordinary Shares and Options........ 240 2 1,740 -- 1,742
Currency translation adjustments............... -- -- -- 112 112
Net income for the year........................ -- -- -- 7,463 7,463
Issuance of common stock for Fine Line Printed
Circuit Design Inc........................... 223 1 196 1,019 1,216
------ --- ------- -------- -------
BALANCE AT MARCH 31, 1997...................... 13,676 $ 88 $ 95,570 $(12,066) $83,592
====== === ======= ======== =======
</TABLE>

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

* Restated -- See Note 14

See accompanying notes.

F-6
<PAGE> 61

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------------------------
1995 1996* 1997
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)........................................... $ 6,156 $(15,132) $ 7,463
Adjustments to reconcile net income to cash provided by
operating activities:
nCHIP fiscal year conversion............................. (596) -- --
Depreciation and amortization of equipment and leasehold
improvements........................................... 5,370 9,344 10,940
Amortization of goodwill................................. 510 739 989
Amortization of intangible assets........................ 245 544 1,646
Loss/(gain) on disposal of property and equipment........ 56 (121) (85)
Loss on disposal of investment........................... -- 266 --
Allowance for doubtful debts............................. 1,211 1,675 2,866
Allowance for stock obsolescence......................... 43 1,631 4,228
Loss/(income) from associated company.................... 729 -- (241)
In process research and development written off.......... -- 29,000 --
Provision for plant closure.............................. -- 1,254 5,308
Deferred income taxes.................................... 237 84 (791)
Amortization of discount................................. -- 60 363
Issuance of non-employee stock options................... -- -- 380
-------- -------- ---------
13,961 29,344 33,066
Changes in operating assets and liabilities:
Trade accounts receivable................................ (15,057) (28,965) 7,007
Notes receivable......................................... -- (500) (586)
Inventories.............................................. (3,156) (19,209) (2,533)
Other accounts receivable................................ (2,430) 2,889 (5,678)
Deposits and other....................................... 311 (140) (1,208)
Accounts payable......................................... 2,995 14,143 7,991
Other accrued liabilities................................ (984) 607 6,666
Income taxes payable..................................... 933 1,121 1,396
Amount due from associated company....................... -- -- 546
-------- -------- ---------
Cash provided by (used for) operating activities....... $ (3,427) $ (710) $ 46,667
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................... $ (7,536) $(15,812) $ (26,984)
Proceeds from sale of property and equipment................ 38 228 816
Intangibles arising from acquisition of subsidiaries........ (62) -- --
Investment in associated company............................ -- 886 (3,000)
Loan to joint venture....................................... (1,000) -- --
Redemption of preference shares in joint venture............ 1,730 -- --
Payment for business acquired, net of cash acquired......... (3,343) (15,152) --
Repayment of loan from related party........................ -- 815 --
Loan to related party....................................... -- -- (469)
Purchase of assets from Ericsson............................ -- -- (82,354)
-------- -------- ---------
Cash used for investing activities............................ (10,173) (29,035) (111,991)
-------- -------- ---------
</TABLE>

F-7
<PAGE> 62

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1995 1996* 1997
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from banks....................................... 7,000 43,980 152,761
Repayments to banks......................................... (16,417) (31,700) (56,041)
Proceeds from long-term debt................................ -- 2,873 776
Repayment of long-term debt................................. (8) (1,070) (1,536)
Refinancing of lease assets................................. -- -- 3,509
Repayment of capital lease obligations...................... (4,310) (5,767) (7,991)
Proceeds from issuance of share capital..................... 5,454 1,009 1,362
Payments on notes payable................................... (2,535) (17) (10,463)
Proceeds from secondary listing............................. -- 22,310 --
-------- -------- ---------
Cash provided by/(used for) financing activities......... (10,816) 31,618 82,377
-------- -------- ---------
Increase (decrease) in cash and cash equivalents............ (24,416) 1,873 17,053
Effect of exchange rate changes on cash and cash
equivalents.............................................. -- (78) 46
Cash and cash equivalents at beginning of period............ 29,167 4,751 6,546
-------- -------- ---------
Cash and cash equivalents at end of period............... $ 4,751 $ 6,546 $ 23,645
======== ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest................................................. $ 779 $ 2,482 $ 3,025
Income taxes............................................. 297 2,656 1,717
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Equipment acquired under capital lease obligations.......... 8,338 11,556 6,387
Purchase of subsidiaries financed by issuance of 66,908
ordinary shares valued at $14.019........................ -- 938 --
238,684 ordinary shares valued at $27.262................... -- 6,507 --
223,321 ordinary shares valued at $25.524................... -- -- 5,700
Promissory notes valued at $10 million payable in February
1997..................................................... -- 10,000 --
Promissory notes valued at $5 million payable in February
1998..................................................... -- 5,000 --
Ordinary Shares with a value of $10 million to be issued on
June 30, 1998............................................ -- 10,000 --
Cash and Ordinary Shares valued at $14.124 million to
Stephen Rees at the option of the Company due on June 30,
1998..................................................... -- 14,124 (1,000)
Contingent earnout of $6.25 million payable to Astron
shareholders in April 1997............................... -- -- 6,250
</TABLE>

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

* Restated -- See Note 14

See accompanying notes.

F-8
<PAGE> 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

1. ORGANIZATION OF THE COMPANY

Flextronics International Ltd. was incorporated in the Republic of
Singapore on May 31, 1990 as Flex Holdings Pte Limited. The subsidiary companies
are located in Singapore, Malaysia, Hong Kong, the People's Republic of China,
United Kingdom, Mauritius, Sweden and the United States. The Company was
incorporated to acquire the Asian and certain U.S. operations of Flextronics
Inc. (the "Predecessor"). The Predecessor had been involved in contract
manufacturing operations in Singapore since 1982, Hong Kong since 1983 and the
People's Republic of China since 1987.

The Company provides advanced contract manufacturing services to
sophisticated original equipment manufacturers (OEMs) in the communications,
computer, consumer and medical electronics industries. Flextronics offers a full
range of services including product design, printed circuit board (PCB) assembly
and fabrication, material procurement, inventory management, final system
assembly and test, packaging and distribution.

The components, subassemblies and finished products manufactured by the
Company incorporate advanced interconnect, miniaturization and packaging
technologies such as SMT, MCM and COB technologies.

The Company's fiscal year-end is March 31. The Company follows accounting
policies which are in accordance with principles generally accepted in the
United States.

2. SUMMARY OF ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements include the accounts of
Flextronics International Ltd. and its subsidiaries (together "the Company"),
after elimination of all significant intercompany balances and transactions.
Investments in affiliates owned 20% or more and corporate joint ventures in
which the Company does not have control, but has the ability to exercise
significant management influence over operating and financial policies, are
accounted for by the equity method. Other securities and investments are
generally carried at cost.

All dollar amounts included in the financial statements and in the notes
herein are U.S. dollars unless designated as Singapore dollars (S$).

Foreign exchange

The Company, with the exception of certain subsidiaries, considers the U.S.
dollar as its functional currency. This is because the majority of the Company's
sales are billed and collected in U.S. dollars, and the majority of the
Company's purchases, such as raw materials, are invoiced and paid in U.S.
dollars.

Accordingly, transactions in currencies other than the functional currency
are measured and recorded in U.S. dollars using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded monetary
balances that are denominated in currencies other than the functional currency
are adjusted to reflect the rate at the balance sheet date. All gains and losses
resulting from the remeasurement of accounts denominated in other than the
functional currency are reflected in the determination of net income in the year
in which they occur.

For inclusion in the consolidated financial statements, all assets and
liabilities of foreign subsidiaries having a functional currency other than the
U.S. dollar are translated into U.S. dollars at the exchange rate ruling at the
balance sheet date and the results of these foreign subsidiaries are translated
into U.S. dollars at the weighted average exchange rates for the period.
Exchange differences due to such currency translations are recorded in
shareholders' equity.

F-9
<PAGE> 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Cash and cash equivalents

For purposes of statement of cash flows, the Company considers highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.

Property and equipment

Property and equipment is stated at cost. Depreciation and amortization are
provided on a straight-line basis over the estimated useful lives of the related
assets (two to fifty years).

Concentration of credit risk

The Company is a manufacturer of sophisticated electronics for original
equipment manufacturers engaged in the computer, medical, consumer and
communications industries. Financial instruments which potentially subject the
Company to concentration of credit risk are primarily accounts receivable and
cash equivalents. The Company performs ongoing credit evaluations of its
customers' financial conditions and, generally, requires no collateral from its
customers. The Company maintains cash and cash equivalents with various
financial institutions. These financial institutions are located in many
different geographic locations throughout the world.

The allowance for doubtful accounts the Company maintains is based upon the
expected collectibility of all accounts receivable.

Goodwill

Goodwill represents the excess of the purchase price of acquired companies
over the fair value of the net assets acquired. Goodwill is amortized on a
straight line basis over the estimated life of the benefits received which
ranges from ten to twenty-five years. On an annual basis, the Company evaluates
recorded goodwill for potential impairment against the current and estimated
future operating income before goodwill amortization of the businesses to which
the goodwill relates.

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Cost
Balance at beginning of the year....................... $ 6,939 $16,122
Additions.............................................. 9,183 8,447
------ -------
Balance at end of the year............................. 16,122 24,569
------ -------
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Amortization
Balance at beginning of the year....................... $ 1,976 $ 2,715
Charge for the year.................................... 739 989
------- -------
Balance at end of the year............................. 2,715 3,704
------- -------
Net book value at end of the year........................ $13,407 $20,865
======= =======
</TABLE>

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 and
accompanying notes. Actual results could differ from those estimates.

F-10
<PAGE> 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Intangible assets

Intangible assets comprise technical agreements, patents, trademarks,
developed technologies and identifiable intangible assets in a subsidiary's
assembled work force, its favourable lease and its customer list.

Technical agreements are being amortized on a straight line basis over
periods not exceeding five years. Patents and trademarks are being amortized on
a straight line basis over periods not exceeding twenty-five years. Purchased
developed technologies are being amortised on a straight line basis over periods
not exceeding seven years. The identifiable intangible assets in the
subsidiary's assembled work force, its favourable lease and its customer list
are amortized on a straight line basis over the estimated life of the benefits
received of three to twenty years.

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Cost
Balance at beginning of the year..................... $ 933 $13,077
Additions............................................ 12,144 --
Written off during the year.......................... -- (112)
------- -------
Balance at end of the year........................... 13,077 12,965
------- -------
Amortization
Balance at beginning of the year..................... $ 306 $ 850
Charge for the year.................................. 544 1,646
------- -------
Balance at end of the year........................... 850 2,496
------- -------
Net book value at end of the year...................... $12,227 $10,469
======= =======
</TABLE>

Inventories

Inventories are stated at the lower of cost or market value. Cost is
comprised of direct materials on a first-in-first-out basis and in the case of
finished products and work-in-progress includes direct labor and attributable
production overheads based on normal levels of activity. The components of
inventories are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1997
------- --------
<S> <C> <C>
Raw materials......................................... $42,202 $ 70,384
Work-in-process....................................... 14,049 16,561
Finished goods........................................ 962 25,809
------- --------
57,213 112,754
Less: allowance for obsolescence...................... (4,576) (6,171)
------- --------
$52,637 $106,583
======= ========
</TABLE>

Revenue recognition

Revenue from product sales and services are recognized on delivery and
acceptance of the goods.

Associated companies

An associated company is a company, not being a subsidiary, in which the
Group has a long-term interest of not less than 20% of the equity and in whose
financial and operating policy decisions the Group exercises significant
influence.

F-11
<PAGE> 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

The Group's share of the results of associated companies is included in the
consolidated statement of operations. Where the audited accounts are not
co-terminous with those of the Group, the share of profits is arrived at from
the last audited accounts.

Shares in associated companies are stated in the Company's balance sheet at
cost and equity in post-acquisition earnings/(losses). Provision is made for
other than temporary declines in values.

Income taxes

Income taxes have been provided using the liability method in accordance
with SFAS Statement No. 109, "Accounting for Income Taxes".

Stock based compensation

The Company has elected to follow APB opinion 25 "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its employee
options because, as discussed below (see note 10), the alternative fair value
accounting provided for under SFAS 123, "Accounting for Stock-Based
Compensation", requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognised.

Net income per share

Net income per share is computed using the weighted average number of
Ordinary Shares and Ordinary Share equivalents outstanding during the respective
periods. Ordinary Share equivalents include Ordinary Shares issuable upon the
exercise of stock options (using the treasury stock method).

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in primary earnings per share for the years ended March 31, 1995 and
1997 to $0.54 and $0.56 per share, respectively. Statement 128 should have no
effect on primary loss per share for the year ended March 31, 1996. The impact
of Statement 128 on the calculation of fully diluted earnings per share for
these years is not expected to be material.

Financial statement prepared in accordance with accounting principles accepted
in Singapore

A separate financial statement for the same period has been prepared in
accordance with accounting principles accepted in Singapore.

3. BANK BORROWINGS

Line of Credit

In March 1997 the Company terminated its $48 million US Dollar line of
credit with the group of banks and obtained a new credit facility totalling $175
million representing $105 million revolving credit and $70 million through term
loans amortized over a 5 year period and subject to mandatory prepayment
provisions. As at March 31, 1997, the Company has utilized $111 million of the
new credit facility.

The lines of credits are collateralized by:

(a) A floating charge over all the assets and the entire undertaking of the
holding company;

(b) Corporate guarantees from the Company and several of its subsidiaries;

F-12
<PAGE> 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

(d) A lien on all accounts receivable and inventory of the Company and
certain of its subsidiaries.

The new credit facilities require that the Company maintains certain
financial ratios and other covenants. In addition, the Company and its
subsidiaries are not allowed to declare dividends for distribution out of
retained earnings. As at March 31, 1997, the Company was in compliance with its
covenants.

In addition, five of the Company's subsidiaries have obtained from several
banks working capital lines of credit, totalling approximately US$10.3 million,
representing overdraft facilities, bridging loan, short term cash advances,
letters of credit and letters of guarantee and trust receipts. Interest on
borrowings is charged within the range 5.75% to 7% per annum.

As of March 31, 1997, the Group had utilized the following credit
facilities under the above lines of credit (in thousands):

<TABLE>
<S> <C>
Short term cash advances.......................................... $111,075
Letters of credits and guarantees................................. $ 985
========
</TABLE>

The remaining unused portion of lines of credit total $64 million.

<TABLE>
<CAPTION>
MARCH 31,
---------------
1996 1997
----- -----
<S> <C> <C>
The weighted average interest rate per annum on all short
term borrowings outstanding as at year end are as
follows:.................................................. 6.41% 8.50%
===== =====
</TABLE>

4. LONG TERM DEBT

Long-term debt consisted of the following at March 31, 1996 and 1997.

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1997
-------- -------
<S> <C> <C>
Term loan at 4.5%....................................... 333 83
Mortgage loans at 11.4%................................. 2,244 1,886
Other loans at 8% -- 9%................................. 1,050 954
Notes payable to Astron's former shareholders at 8%..... 15,000 5,000
-------- -------
18,627 7,923
Less: current portion................................... (11,073) (5,758)
-------- -------
$ 7,554 $ 2,165
======== =======
</TABLE>

Maturities of long-term debt for the five years succeeding March 31, 1997
are $5,758 by March 31, 1998, $469 by March 31, 1999, $469 by March 31, 2000,
$469 by March 31, 2001, $469 by March 31, 2002 and the balance thereafter.

The notes payable is payable to the former shareholders of Astron as part
of the purchase consideration.

5. OTHER PAYABLES

In accordance to the agreement signed to acquire Astron in February 1996,
the Company will issue Ordinary Shares with a value of $10 million to the former
Astron shareholders on June 30, 1998.

In addition the Company agreed to pay $15 million in June 1998 to an entity
affiliated with Stephen Rees as a consulting fee subject to certain conditions.
In March 1997, the agreement with Mr. Rees' affiliate was

F-13
<PAGE> 68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

revised, the conditions eliminated and the fee was reduced to $14 million. The
cash portion of $5 million has been discounted at 8% over the period of the
agreement and the remaining $9 million has not been discounted on the basis of
the Company's intention to pay that portion in stock. The payment to former
Astron shareholders and Mr. Rees' affiliate is interest-free and secured.

The components of Other Payables are as follows:

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Balance at beginning of the year......................... -- $24,184
Additions during the year.............................. $24,124 --
Amortization of discount............................... 60 363
Amendment of agreement................................. -- (1,000)
------- -------
Balance at end of the year............................... $24,184 $23,547
======= =======
</TABLE>

6. LEASE COMMITMENTS

Capital Lease

Following is a schedule by fiscal year, of future minimum lease payments
under capital lease obligations for certain machinery and equipment, together
with the present value of the net minimum lease payments (in thousands):

Fiscal Years Ending March 31,

<TABLE>
<S> <C>
1998............................................................... $ 7,749
1999............................................................... 5,514
2000............................................................... 3,282
2001............................................................... 2,164
2002............................................................... 562
Thereafter......................................................... --
-------
Total installment payments......................................... 19,271
Amount representing interest....................................... (2,659)
-------
Present value of net installment payments.......................... 16,612
Less: current portion.............................................. 6,475
-------
Long-term portion of capital lease................................. $10,137
=======
</TABLE>

Items costing $29,912 (1996: $28,387) with accumulated amortization $11,389
(1996: $8,781) purchased under capital leases have been included in machinery
and equipment as of March 31, 1997. Lease amortization is included in
depreciation expense.

F-14
<PAGE> 69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Operating Leases

The Company leases some of its facilities under operating leases. Future
minimum lease payments under operating leases with a term of more than one year
are as follows (in thousands):

Fiscal Years Ending March 31,

<TABLE>
<S> <C>
1998............................................... 3,302
1999............................................... 3,078
2000............................................... 2,404
2001............................................... 1,697
2002............................................... 1,406
Thereafter......................................... 5,518
-------
$17,405
=======
</TABLE>

The facilities lease of one of the subsidiaries provides for escalating
rental payments over the lease period. Rent expense for the lease is being
recognized on a straight-line basis over the term of the lease period. Total
operating lease expenses were $1,957, $2,211 and $2,593 for the years ended
March 31, 1995, 1996 and 1997 respectively.

7. CAPITAL COMMITMENTS

Two of the subsidiaries, Flextronics (Malaysia) Sdn. Bhd. and Astron Group
Limited have contracted to purchase $111 and $10,007 respectively, of fixed
assets as of March 31, 1997. These fixed assets have not been delivered and are
therefore not provided for in the accounts as of March 31, 1997.

Astron Group Limited has authorised but not contracted to purchase $28,927
of fixed assets as at March 31, 1997. A commitment of $9,710 has also been made
to contribute to a subsidiary of Astron Group Limited in PRC China for
construction in progress in relation to the factory in Doumen.

8. INCOME TAXES

The domestic and foreign components of income/(loss) before taxes are as
follows:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------------
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Singapore.................................... $(1,529) $(21,977) $ (392)
Foreign...................................... 9,148 10,636 10,067
------- -------- -------
$ 7,619 $(11,341) $ 9,675
======= ======== =======
</TABLE>

F-15
<PAGE> 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Income tax expense consists of the following:

<TABLE>
<CAPTION>
MARCH 31,
----------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Singapore...................................... $ 366 $1,441 $1,608
Foreign........................................ 860 2,266 1,395
------ ------ ------
1,226 3,707 3,003
------ ------ ------
Deferred:
Singapore...................................... 237 74 (559)
Foreign........................................ -- 10 (232)
------ ------ ------
237 84 (791)
------ ------ ------
$1,463 $3,791 $2,212
====== ====== ======
</TABLE>

Total income tax expense differs from the amount computed by applying the
Singapore statutory income tax rate of 26% (1996 and 1995: 26% and 27%) to
income before taxes as follows:

<TABLE>
<CAPTION>
MARCH 31,
-------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Computed expected income taxes................ $ 2,057 $(2,950) $ 2,516
Effect of Singapore income tax incentives..... -- (82) --
Effect of losses from non-incentive Singapore
operations.................................. 367 7,822 498
Effect of foreign operations.................. (1,609) (1,785) (2,336)
Non-deductible items:
Amortization of goodwill and intangibles.... 205 329 436
Loss on sale of investments................. -- 69 --
Joint venture losses........................ 216 -- --
Bank commitment fee......................... -- -- 382
Others........................................ 227 388 716
------- ------- -------
$ 1,463 $ 3,791 $ 2,212
======= ======= =======
</TABLE>

F-16
<PAGE> 71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets......................................... $ 1,343 $ 801
Intangible assets.................................... 3,097 2,751
Others............................................... 169 237
-------- --------
4,609 3,789
-------- --------
Deferred tax assets
Fixed assets......................................... (207) (311)
Provision for stock obsolescence..................... (683) (1,364)
Provision for doubtful debts......................... (361) (1,636)
Net operating loss carry forwards.................... (13,805) (16,665)
Unabsorbed capital allowances carry forwards......... (539) (606)
Others............................................... (611) (645)
-------- --------
(16,206) (21,227)
-------- --------
Valuation allowance.................................... 15,690 20,740
-------- --------
Net deferred tax liability............................. $ 4,093 $ 3,302
======== ========
The net deferred tax liability is classified as
follows:
Non-current liability................................ $ 4,353 $ 3,710
Current asset........................................ (260) (408)
-------- --------
$ 4,093 $ 3,302
======== ========
</TABLE>

The Company's net deferred tax assets consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1997
-------- --------
<S> <C> <C>
Net operating loss carried forward
UK................................................. 2,596 3,291
USA................................................ 11,020 13,185
Malaysia........................................... 189 189
Others............................................... 2,145 4,483
-------- --------
Total deferred tax assets............................ 15,950 21,148
Valuation allowance.................................. (15,690) (20,740)
-------- --------
Net deferred tax assets.............................. $ 260 $ 408
======== ========
</TABLE>

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $30,663 for U.S. federal income tax purposes which will expire
between 2003 and 2011 if not previously utilized. Utilization of the U.S. net
operating loss carryforwards may be subject to an annual limitation due to the
change in ownership rules provided by the Internal Revenue Code of 1986. This
limitation and other restrictions provided by the Internal Revenue Code of 1986
may reduce the net operating loss carryforward such that it would not be
available to offset future taxable income of the U.S. subsidiary.

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $9,973 and $632 in U.K. and Malaysia respectively. The utilization
of these net operating loss carryforwards is limited to the future operations of
the Company in the tax jurisdictions in which such carryforwards arose. These
losses carryforward indefinitely.

F-17
<PAGE> 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

The Company has been granted the following tax incentives:

(i) Investment allowance on approved fixed capital expenditure
incurred within 5 years after August 1, 1990 subject to a maximum of $2,700
for its Singapore operations was granted by the Economic Development Board
of Singapore. This investment allowance has been utilized by the Company to
reduce taxable income of its Singapore subsidiary since 1991. This
allowance is however fully utilized at the end of fiscal 1996.

(ii) Pioneer status granted to one of its Malaysian subsidiary for a
period of 5 years under the Promotion of Investment Act, 1986. This pioneer
incentive provides a tax exemption on manufacturing income of this
subsidiary.

(iii) Product Export Enterprise incentive for a lower rate for its
facility at Shekou. The Company's operations in Shekou is located in a
"Special Economic Zone" and is an approved "Product Export Enterprise"
which qualifies for a special corporate income tax rate of 10%. This
special tax rate is subject to the Company exporting more than 70% of its
total value of products manufactured in China. The Company's status as a
Product Export Enterprise is reviewed annually by the Chinese government
authorities.

The Company's investments in its plants in Xixiang and Doumen, China fall
under the "Foreign Investment Scheme" that entitles the Company to apply for a
five-year tax incentive. The Company obtained the incentive for the Doumen plant
in December 1995 and the Xixiang plant in October 1996. With the approval, the
Company's tax rates on income from these facilities during the incentive period
will be 0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in the
first profitable year.

A portion of the Company's sales are carried out by its subsidiary in
Labuan, Malaysia where the Company has opted to pay the Labuan tax authorities a
fixed amount of US$8 tax each year in accordance with the Labuan tax
legislation.

A portion of the Company's sales are carried out by its subsidiary, an
offshore ordinary company, in Mauritius where the tax rate is at 0% for such
companies.

The potential deferred tax asset arises substantially from tax losses
available for carry-forward. These tax losses can only be set off against future
income of the operations in respect of which the tax losses arose.

As a result, management is uncertain as to when or whether these operations
will generate sufficient profit to realise the deferred tax asset benefit.

9. SHAREHOLDERS' EQUITY

Exercise of Options

During the financial year ended March 31, 1997, certain employees exercised
their options to purchase 239,633 Ordinary Shares at an exercise price of
US$0.77 -- US$24.00 per share.

Declaration of Dividends

The Company in a general meeting may by ordinary resolution declare
dividends but no dividend will be payable in excess of the amount recommended by
the directors. As the Company is incorporated in Singapore, all dividends
declared will be denominated in Singapore currency. The Company has not declared
any dividends to date.

F-18
<PAGE> 73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Acquisition of Flextronics International (UK) Limited ("FILUK) (formerly known
as Assembly & Automation (Electronics) Limited)

On April 12, 1995, the Company acquired all the outstanding stock of FILUK
in exchange for $2,879 in cash and 66,908 Ordinary Shares of the Company, valued
at $14.019 per share.

Acquisition of Astron Group Limited ("Astron")

On February 2, 1996, the Company acquired all the outstanding stock of
Astron in exchange for $13,440 in cash; 238,684 Ordinary Shares of the Company,
valued at $27.262 per share; issuance of a $10 million promissory note due one
year after acquisition date; issuance of a $5 million promissory note due two
years after acquisition date and the issuance of $10 million of Ordinary Shares
of the capital of the Company on June 30, 1998. The promissory notes bear
interest at the rate of 8% per annum.

In addition, the Company will issue $9 million of Ordinary Shares of the
Company on June 30, 1998, in accordance to the revised agreement with Mr.
Stephen Rees' affiliate in March 1997.

Acquisition of Fine Line Printed Circuit Design Inc. ("Fine Line")

On November 25, 1996, the Company acquired all the outstanding stock of
Fine Line in exchange for 223,321 Ordinary Shares of the Company, valued at
$25.52 per share.

Foreign Currency Payments in the Company's subsidiaries operating in the
People's Republic of China

The Company's subsidiaries operating in the People's Republic of China are
required to obtain approval from the relevant authorities when making foreign
currency payments.

Issuance of non-employee stock options

On June 3, 1996, the Company issued 20,000 stock options with an exercise
price of $31.25 to a customer under a sales agreement with the customer that
provided for the issuance of such options upon that customer's reaching a
specified sales target.

These options were valued as of the grant date using the Black-Scholes
model. The resulting value of $380,000 was recorded as a discount in the
accompanying fiscal 1997 income statement.

10. SHARE OPTION PLANS

In July 1993, the Company adopted an Executives' Share Option Scheme
("SOS") and an Executives' Incentive Share Scheme ("ISS") for selected
management employees of the Company. The Company granted stock options for
344,520 Ordinary Shares exercisable at $2.92 per share (fair market value at
date of the grant) under the SOS and stock options for 54,618 Ordinary Shares at
S$0.01 per share (fair market value at date of grant was $2.92 per share) under
the ISS.

The Company's 1993 Share Option Plan (the "Plan") that provides for the
grant of incentive stock options, automatic option grants and non-statutory
stock options to employees and other qualified individuals to purchase Ordinary
Shares of the Company. In August 1996 the Company's 1993 Share Option Plan was
amended to reserve an additional 500,000 Ordinary Shares for issuance. At March
31, 1997, the Company had reserved 2,000,000 Ordinary Shares for issuance under
the Plan.

In January 1995, the Company acquired nCHIP and thereby assumed the
existing nCHIP stock option plan and employee stock options outstanding
thereunder. The outstanding nCHIP employee stock options were converted into
options to purchase approximately 345,389 of the Company's Ordinary Shares.

F-19
<PAGE> 74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Proforma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to March 31, 1995 under the fair value method of this Statement. The fair value
of these options was estimated at the date of grant using the Black-Scholes
multiple option pricing model with the following weighted average assumptions:
risk-free interest rates ranging from 5.31% to 5.66% and from 5.40% to 5.77% for
1996 and 1997, respectively; a dividend yield of 0.0%, a volatility factor of
the expected market price of the Company's common stock of 0.67, and a
weighted-average expected life of the option of 0.13 years beyond each
respective vesting period.

<TABLE>
<CAPTION>
MARCH 31,
-------------
1996 1997
---- ----
<S> <C> <C>
Options granted 4 year vesting................................. 628 705
Options granted 2 year vesting................................. 15 15
---- ----
Total granted.................................................. 643 720
==== ====
Weighted average vesting period (years)........................ 3.96 3.96
</TABLE>

The weighted average vesting period is rounded to 4 years.

The amount of compensation expense recognized under all Flextronics Share
Option Plans is $1,453 in 1996 and $3,290 in 1997.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those traded options, and because the changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Had the compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the SFAS 123, the Company's net income and earnings
per share would have been reduced to the proforma amounts indicated below:

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
-------- ------
<S> <C> <C>
Net income/(loss):
As reported............................................ $(15,132) $7,463
Proforma............................................... (16,052) 5,380
Net income/(loss) per share
Primary
As reported......................................... $ (1.19) $ 0.50
Proforma............................................ (1.27) 0.36
</TABLE>

Because SFAS 123 is applicable only to awards granted subsequent to
December 30, 1994, the proforma effect will not be fully reflected until 1998.

F-20
<PAGE> 75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

The following table presents the activity for options.

<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of year.... 1,004,902 $ 3.47 1,026,052 $ 4.76 1,315,970 $12.52
Granted............................. 231,249 8.97 641,783 20.63 721,203 25.10
Exercised........................... (143,699) 2.96 (304,201) 3.30 (239,633) 5.86
Forfeited........................... (66,400) 3.88 (47,664) 11.03 (124,629) 17.81
Outstanding -- end of year.......... 1,026,052 4.76 1,315,970 12.60 1,672,911 18.57
Exercisable at end of year.......... 394,535 414,855 576,896
Weighted average fair value of
options granted during the year... 9.67 9.22 11.25
</TABLE>

11. PROVISION FOR PLANT CLOSURE

The provision for plant closure of $5,868 in fiscal 1997 relates to the
costs incurred in the closure of the Texas facility, the write-off of obsolete
equipment at the nChip semiconductor fabrication facility and downsizing the
Singapore manufacturing operations. The provision includes $2 million provision
for severance payment and $500 provision for the write-off of fixed assets in
the Singapore manufacturing facilities. An amount of $2,808 associated with
certain obsolete equipment at the Company's facilities nChip and Texas have been
written off. The provision also includes severance payments amounting to $560
for the employees of the Texas and nChip facility.

The provision for plant closure of $1,254 in fiscal 1996 was associated
with the write off of certain obsolete equipment at the Company's facilities in
Malaysia and Shekou, China.

The components of plant closure costs are as follows:

<TABLE>
<CAPTION>
MARCH 31,
-----------------
1996 1997
------ ------
<S> <C> <C>
Assets write-off........................................... $1,254 $3,308
Severance payment to employees............................. -- 2,560
------ ------
1,254 5,868
------ ------
Severance payment made during the year..................... -- $ 560
====== ======
</TABLE>

12. BANK COMMITMENT FEES

In March 1997, the Company incurred bank commitment fees of $750 which were
related to a proposed $100.0 million credit facility. This proposed credit
facility was not consummated, and the bank's commitment expired unused at the
end of March, 1997. Accordingly, such fees were included in other expense in the
fiscal 1997 income statement.

13. RELATED PARTY TRANSACTIONS

For the year ended March 31, 1997, the Company had net sales of $1,548 to
Metcal, Inc., a precision heating instrument company. The Company's Chairman and
Chief Executive Officer, Michael E. Marks has a beneficial interest in Metcal,
Inc.

For the year ended March 31, 1996, the Company had net sales of $2,133 to
Metcal, Inc.

F-21
<PAGE> 76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

Prior to becoming the Company's Chief Officer in January 1994, Michael E.
Marks was the President and Chief Executive Officer of Metcal, Inc. Michael E.
Marks remained as a director of Metcal, Inc. during the year ended March 31,
1997.

In March 1997, the Company revised the agreement to pay in June 1998 a $15
million consulting fee to an entity affiliated with Stephen JL Rees Senior Vice
President, Worldwide Sales and Marketing. The Company and Mr. Rees agreed to
remove the remaining conditions to payment of the fee and to reduce this amount
of the fee which remains payable in June 1998 to $14 million.

For the year ended March 31, 1997, the Company transacted with Croton Ltd
and Mayfield International Limited ('Mayfield'), both companies of which Stephen
JL Rees has beneficial interests. During the current fiscal year, $118 was paid
for services rendered by Croton Ltd under a management service contract. Astron
has also rented an office from Mayfield, and rentals charged to Astron during
the period amounted to $208. At March 31, 1997 a loan balance in the amount of
$2,554 was due from Mayfield. The loan is unsecured, interest bearing at 7.15%
per annum and is wholly repayable by February 4, 1999.

14. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS

Restatement

The Company has reconsidered its accounting treatment for the acquisition
of the Astron Group Limited ("Astron") and a new independent valuation was
performed as of the date of the acquisition to address certain matters not
addressed in the original valuation. The cost of acquiring Astron has also been
changed from amounts previously reported to correct certain errors. The
allocation of the revised purchase price to the assets acquired is based on the
new valuation report.

The originally reported consideration paid to acquire Astron at February 2,
1996 and the revised cost are as follows:

<TABLE>
<CAPTION>
AS ORIGINALLY
REPORTED AS RESTATED
------------- -----------
<S> <C> <C>
Cash................................................ $13,440 $13,440
Ordinary shares..................................... 6,507 6,507
Ordinary shares to be issued June 30, 1998.......... 10,000 10,000
Promissory notes.................................... 15,000 15,000
Contingent ("earnout") consideration................ 3,125 --(i)
Service agreement................................... -- 14,124(ii)
Direct costs........................................ 700 700
------- -------
Total purchase consideration........................ $48,772 $59,771
======= =======
</TABLE>

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

(i) Part of the conditions for the contingent earnout have been deemed by
management to have been met based on the management accounts of Astron at
March 31, 1996, but this amount was not accounted for as required by
generally accepted accounting principles where any contingent additional
consideration should be disclosed but not recorded as a liability.

(ii) The consultant and service agreement with an affiliate of the former
Chairman of Astron ("Service Agreement") required a $15 million payment on
June 30, 1998, of which $5 million is payable in cash and the balance in
Ordinary Shares. The Service Agreement was originally deemed a contingent
compensation agreement. However, no compensation expense was recorded in
1996 and no effect was given in the computation of earnings per share to
the portion payable in Ordinary Shares as required by generally accepted
accounting principles. On reconsideration, it was determined that the
agreement should be accounted for as the payment of purchase consideration.
The cash portion is included at its present value as of February 2, 1996,
and the stock portion has been included in the computation of earnings per
share. This Service Agreement was subsequently revised on March 27, 1997 to
remove the remaining conditions to payment of the fee and reduce the amount
payable to $14 million.

F-22
<PAGE> 77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

In the Company's original accounting for the allocation of the purchase
price, certain intangible assets had been identified and valued. However, due to
an oversight, no value was recorded. The allocation of the purchase price as
originally reported and as reallocated on the basis of the new valuation are as
follows:

<TABLE>
<CAPTION>
AS ORIGINALLY
REPORTED AS RESTATED
------------- -----------
<S> <C> <C>
Astron's net assets at fair value................... $16,960 $17,200
In-process research and development................. 31,562 29,000
Intangible assets................................... 250 11,910
Goodwill............................................ -- 4,758
Less: deferred tax liability........................ -- (3,097)
------- -------
Total............................................... $48,772 $59,771
======= =======
</TABLE>

The Company has restated its March 31, 1996 financial statements to give
effect to the above changes in the consideration, and the new allocation of the
purchase price. The $17.4 million net loss previously reported for the year
ended March 31, 1996 has been reduced by $2.3 million ($0.20 per share) to give
effect to the change in the amount of in-process research and development
written off on acquisition offset in part by the amortization of the recorded
goodwill and the increase in the acquired intangible assets. The per share
amount also includes the effect of restating the weighted average number of
outstanding Ordinary Shares and equivalents.

The effects of the adjustments described above are as follows:

<TABLE>
<S> <C>
Restatement of 1996 Net Loss

Net loss as originally reported.................................. $(17,412)

Decrease in amount of in-process research and development written
off............................................................ 2,562
Increase in:
Intangible asset amortization.................................. (208)
Goodwill amortization.......................................... (14)
Interest expense due from discounting of $5 million cash....... (60)
--------
Net loss as restated............................................. $(15,132)
========
</TABLE>

The discussion of the Astron acquisition below gives effect to the
restatement of the 1996 amounts.

Current Year

In November 25, 1996, the Company acquired Fine Line Printed Circuit
Design, Inc. ("Fine Line"), a circuit board layout and prototype operation
located in San Jose, California. The acquisition was accounted for as a pooling
of interests and the Company has issued 223,321 Ordinary Shares in exchange for
all of the outstanding capital stock of Fine Line. Prior period financial
statements were not restated because the financial results of Fine Line do not
have a material impact on the consolidated result.

On December 20, 1996, the Company acquired 40% of FICO Investment Holding
Limited ("FICO") for $5.2 million of which $3 million was paid in December 1996
and the balance payment of $2.2 million which was paid in June 1997 was accrued
for in March 1997. The excess of the purchase price over the fair market value
of the net tangible assets acquired amounted to $3.2 million which are being
amortized over ten years. The Company has an option to purchase the remaining of
60% of FICO in 1998; the consideration for the remaining 60% is dependent on the
financial performance of FICO for the period ending December 31, 1997.

On March 27, 1997, the Company acquired the manufacturing facilities in
Karlskrona, Sweden and related inventory, equipment and assets from Ericsson
Business Networks AB ("Ericsson") for $82,354 which was financed by a bank loan.
The transaction has been accounted for under the purchase method and

F-23
<PAGE> 78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

accordingly, the purchase price has been allocated to the assets based on their
estimated fair market values at the date of acquisition.

The consolidated financial statements contain the results of the acquired
companies from the date of acquisition.

Previous Years

On April 12, 1995, the Company acquired all of the issued share capital of
Assembly & Automation (Electronics) Limited, a private limited company
incorporated in the UK that provides contract manufacture of electronics and
telecommunications equipment, for a total consideration of $4.1 million by way
of cash and the issuance of 66,908 Ordinary Shares. The transaction has been
accounted for under the purchase method, and accordingly, the purchase price has
been allocated to the assets and liabilities assumed based upon their estimated
fair market values at the date of acquisition. The excess of the purchase price
over the fair market value of the net tangible assets acquired aggregated
approximately $4.6 million of which $237 was allocated to intangibles which are
being amortized on a straight line basis over their estimated useful life of
three years. Goodwill is amortized over twenty years.

On February 2, 1996, the Company acquired all of the issued share capital
of Astron Group Limited, a private limited company incorporated in the Hong Kong
who is a manufacturer of circuit boards used in electronics and
telecommunications, for a consideration of $59.8 million by way of cash;
issuance of 238,684 Ordinary Shares and $10 million of Ordinary Shares of the
Company on June 30, 1998; and the issuance of promissory notes bearing interest
at 8%. The Company had originally agreed to pay an earnout of up to $12.5
million contingent upon Astron meeting certain pre-tax profit for calendar year
1996.

In March 1997, management negotiated with the stockholders of Astron and an
earnout of $6.25 million was agreed. This amount has been added, in March 1997
to goodwill acquired.

The transaction was accounted for under the purchase method, and
accordingly, the purchase price has been allocated to the assets and liabilities
assumed based upon their estimated fair market values at the date of
acquisition. The valuation of Astron's in-process research & development was
determined by an independent valuation firm to be $29 million, and the Company
has written off this $29 million in the consolidated Statement of Operations for
the year ended March 31, 1996. The valuation has also resulted in the allocation
of $16.7 million to goodwill and identifiable intangible assets. Goodwill of
$4.8 million and $11.9 million of identifiable intangible assets principally
related to developed technology, customer list, assembly workforce and
trademarks were recorded.

The consulting and service agreements with an affiliate of the former
Chairman of Astron, provided for an annual fee, plus a $15 million payment to be
made on June 30, 1998 subject to certain terms and conditions. A new agreement
was signed between the two parties in March 1997 which reduced the amount to $14
million and removed the original terms and conditions. This revision to the
agreement has been accounted for as a reduction in the purchase price and
goodwill as of this date of the new agreement.

The consolidated financial statements contain the results of the acquired
companies from the date of acquisition.

In January 1995, the Company acquired nCHIP by the issuance of 2,104,602
ordinary shares of S$0.01 par value each, in exchange for all of the outstanding
capital stock of nCHIP. In addition, outstanding nCHIP employee stock options
were converted into options to purchase approximately 345,389 of the Company's
ordinary shares. The transaction was accounted for as a pooling of interests and
therefore, all prior period financial statements presented have been restated as
if the acquisition took place at the beginning of such periods.

F-24
<PAGE> 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

nCHIP has a calendar year end and, accordingly, the nCHIP statement of
income for the year ended December 31, 1993 have been combined with the
Company's statement of income for the fiscal years ended March 1994. Effective
April 1, 1994 nCHIP's fiscal year end has been changed from December 31 to March
31 to conform to the Company's fiscal year-end. Accordingly, nCHIP's operations
for the three months ended March 31, 1994 including net sales of $2,302 and net
loss of $596 have been excluded from consolidated results and have been reported
as an adjustment to the April 1, 1994 consolidated retained earnings.

Separate results of operations for the period prior to the acquisition are
as follows:

<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED
DECEMBER 31,
1994
------------
<S> <C>
Net sales
Company....................................................... $163,249
nCHIP......................................................... 7,623
--------
Combined...................................................... $170,872
========
Net income
Company....................................................... $ 7,626
nCHIP......................................................... (3,400)
--------
Combined...................................................... $ 4,226
========
Other changes in shareholders' equity
Company....................................................... $ (144)
nCHIP......................................................... 5,287
--------
Combined...................................................... $ 5,143
========
</TABLE>

As of December 20, 1994, the Company had a 49% interest in FlexTracker and
accounted for this investment using the equity method. On December 30, 1994, the
Company acquired the net assets (except the $1.0 million loan made by the joint
venture partner, HTS, to FlexTracker) for approximately $3.3 million.

On March 1, 1994, the Company acquired all of the outstanding stock of FTI,
a company that provides high value-added, high quality, just-in-time
manufacturing services to original equipment manufacturers in the computer and
electronics industry, for approximately $4.0 million. The transaction has been
accounted for under the purchase method, and accordingly, the purchase price has
been allocated to the assets acquired and liabilities assumed based upon their
estimated fair market values at the date of acquisition. Such allocation has
been based on the valuation by an independent corporate valuation firm. The
excess of the purchase price over the fair market value of the net tangible
assets acquired resulting in goodwill aggregated approximately $2.4 million and
has been allocated to goodwill which is being amortized on a straight-line basis
over its estimated useful life of twenty-five years.

The operating results of FTI are included in the Company's consolidated
results of operations from the date of acquisition.

The following unaudited pro forma information of the Company reflects the
results of operations for the years ended March 31, 1995 and 1996 as if the
acquisitions of Assembly & Automation (Electronics) Limited and Astron Group
Limited had occurred as of April 1, 1994 and as if the acquisitions of the net
assets and business of Flextracker and FTI also had, occurred as of April 1,
1994 and after giving effect to certain adjustments including amortization of
intangibles and goodwill. The unaudited proforma information does not include
the effects of acquiring the Karlskrona Facilities in March 1997 because
information relating to its

F-25
<PAGE> 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

operation prior to the company's acquisition is not available. The unaudited pro
forma information is based on the acquired entities' results of operations for
the years ended December 31, 1994 and 1995 as the fiscal year end of these
entities and the rest of the group are not co-terminus. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of what operating results would have been had the acquisition
actually took place at April 1, 1994 or 1995 or of operating results which may
occur in the future.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995 1996
-------------------------------------------------------- -------- -------
<S> <C> <C>
Net sales............................................... $292,219 466,039
Net income.............................................. (872)* 11,977*
Net income per share.................................... (0.07) 0.89
</TABLE>

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

* Excludes the effects of the write-off of $29,000 of in-process research and
development at the date of the acquisition of Astron.

15. SEGMENT REPORTING

The Company operates in one primary business segment -- providing
sophisticated electronics assembly and turnkey manufacturing services to a
select group of original equipment manufacturers engaged in the computer,
medical, consumer electronics and communications industries. Sales to major
customers who accounted for more than 10% of net sales were as follows:

<TABLE>
<CAPTION>
MARCH 31,
------------------------
CUSTOMER 1995 1996 1997
----------------------------------------------------- ---- ----- -----
<S> <C> <C> <C>
Visioneer............................................ 1.70% 13.14% 7.00%
Lifescan............................................. 20.1% 14.10% 13.34%
Global Village....................................... 4.50% 10.50% 8.26%
U.S. Robotics........................................ 0.00% 0.00% 10.63%
</TABLE>

Sales for similar classes of products within the Company's business segment
is presented below (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
----------------------------------
PRODUCT TYPE 1995 1996 1997
------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Medical.................................... $ 49,152 $ 78,322 $ 89,682
Computer................................... 77,419 220,930 250,498
Telecommunication.......................... 43,399 60,466 75,947
PCB........................................ -- 4,485 28,470
Industrial................................. -- 9,664 6,832
Consumer products.......................... 47,515 23,858 12,495
MCMs....................................... 11,847.. 19,817 19,214
Others..................................... 8,054 30,804 7,447
-------- -------- --------
$237,386 $448,346 $490,585
======== ======== ========
</TABLE>

F-26
<PAGE> 81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

A summary of the Company's operations by geographical area for the three
years ended March 31, 1995, 1996 and 1997 was as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
----------------------------------
PRODUCT TYPE 1995 1996 1997
------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
NET SALES:
Singapore:
Unaffiliated customers
Domestic............................ $ 3,596 $ 653 $ 1,401
Export.............................. 7,358 9,277 851
Intercompany.......................... 67,572 77,899 88,054
-------- -------- --------
78,526 87,829 90,306
Hong Kong/China/Mauritius:
Unaffiliated customers
Domestic............................ 17,757 11,838 11,398
Export.............................. -- 2,980 21,203
Intercompany.......................... 29,353 60,780 129,162
-------- -------- --------
47,110 75,598 161,763
USA/Europe/Mexico:
Unaffiliated customers
Domestic............................ $ 50,506 $207,961 $208,225
Export.............................. -- 13,767 2,431
Intercompany.......................... -- 27 9
-------- -------- --------
50,506 221,755 210,665
Malaysia:
Unaffiliated customers
Domestic............................ -- -- --
Export.............................. 158,168 $201,870 $245,075
Intercompany.......................... 4 -- --
-------- -------- --------
158,172 201,870 245,075
Eliminations............................... (96,928) (138,706) (217,224)
-------- -------- --------
$237,386 $448,346 $490,585
======== ======== ========
INCOME/(LOSS) FROM OPERATIONS:
Singapore................................ $ 90 $(25,334) $ (184)
Hong Kong/China/Mauritius................ 638 (6,110) 4,787
USA/Mexico............................... (1,290) 4,570 (5,531)
Europe................................... 15 (1,514) (1,829)
Malaysia................................. 10,754 18,953 17,626
-------- -------- --------
$ 10,207 $ (9,435) $ 14,869
======== ======== ========
</TABLE>

F-27
<PAGE> 82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

<TABLE>
<CAPTION>
MARCH 31,
----------------------------------
PRODUCT TYPE 1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Singapore................................ $ 23,426 $ 48,434 $ 50,118
Hong Kong/China/Mauritius................ 17,020 50,284 68,695
USA/Mexico............................... 26,354 73,552 74,884
Europe................................... 22 11,060 116,919
Malaysia................................. 49,295 47,694 48,618
-------- -------- --------
$116,117 $231,024 $359,234
======== ======== ========
</TABLE>

Geographic revenue transfers are based on selling prices to unaffiliated
companies, less discounts. Income (loss) from operations is net sales less
operating expenses, goodwill amortization and provision for plant closings, but
prior to interest or other expenses and income taxes.

The Company's subsidiaries, with the exception of Astron Group Limited, are
interdependent and are not managed for stand alone results. Certain operational
functions for the entire Company, such as marketing and administration, may be
carried out by a subsidiary in one country. In addition, the Company may from
time to time shift responsibilities from a subsidiary in one country to a
subsidiary in another country, thereby changing the operating results of the
impacted subsidiaries but not the Company as a whole. For these reasons, the
Company believes that changes in results of operations in the individual
countries in which it operates are not necessarily reflective of material
changes in the Company's overall results.

F-28
<PAGE> 83

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30,
1997
MARCH 31, ------------
1997*
----------- (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS

Current assets
Cash................................................................ $ 23,645 $ 33,092
Accounts receivable, net............................................ 69,331 74,001
Inventories......................................................... 106,583 108,926
Other current assets................................................ 10,769 12,308
-------- --------
Total current assets........................................ 210,328 228,327
-------- --------
Property and equipment
At cost............................................................. 153,137 180,255
Accumulated depreciation............................................ (42,172) (44,420)
-------- --------
Net property and equipment.......................................... 110,965 135,835
-------- --------
Other non-current assets............................................ 37,941 37,969
-------- --------
TOTAL ASSETS................................................ $ 359,234 $ 402,131
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings..................................................... $ 111,075 $ 69,000
Current portion of capital lease and long-term debt................. 12,233 11,754
Accounts payable.................................................... 73,631 82,881
Other current liabilities........................................... 38,436 63,368
-------- --------
Total current liabilities................................... 235,375 227,003
-------- --------
Long term debt, less current portion.................................. 25,712 72,018
Obligations under capital leases and deferred income taxes............ 13,847 13,860
Notes payable to shareholders......................................... 223 223
Minority interest..................................................... 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized -- 100,000,000 shares at March 31, 1997 and June 30, 1997
Issued and outstanding -- 13,676,243 shares at March 31, 1997 and
13,752,293 shares at June 30, 1997............................... 88 89
Additional paid-in capital.......................................... 95,570 95,207
Accumulated deficit................................................. (12,066) (6,754)
-------- --------
Total shareholders' equity.................................. 83,592 88,542
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................ $ 359,234 $ 402,131
======== ========
</TABLE>

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

* The balance sheet at March 31, 1997 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

F-29
<PAGE> 84

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
1996 1997
-------- --------
RESTATED
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales............................................................ $117,889 $196,883
Costs and expenses:
Cost of sales...................................................... 106,143 177,212
Selling, general and administrative expenses....................... 5,611 10,549
Goodwill and intangibles amortization.............................. 659 742
Net interest expense............................................... 595 2,938
Foreign exchange gain.............................................. 79 306
Income from associated company..................................... -- 300
-------- --------
112,929 190,835
Income before income taxes......................................... 4,960 6,048
Provision for income taxes......................................... 763 736
-------- --------
Net income after income taxes........................................ 4,197 5,312
======== ========
Earnings per share:
Net income per share............................................... $ 0.28 $ 0.36
======== ========
Weighted average ordinary shares and equivalents..................... 14,914 14,955
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-30
<PAGE> 85

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------
1996 1997
-------- --------
RESTATED
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by operating activities............................ $ 3,455 $ 17,955
Investing activities:
Purchases of property and equipment................................ (5,739) (28,173)
Proceeds from sale of property and equipment....................... 39 88
Payment for Astron................................................. -- (6,250)
-------- --------
Net cash used for investing activities............................... (5,700) (34,335)
======== ========
Financing activities:
Borrowings from banks, net......................................... 4,605 27,925
Repayment of capital lease obligations............................. (701) (2,129)
Repayment of long-term debt........................................ (342) (277)
Repayment of loan from related party............................... 350 --
Net proceeds from issuance of share capital........................ 547 308
-------- --------
Net cash provided by financing activities............................ 4,459 25,827
======== ========
Net increase in cash................................................. 2,214 9,447
Cash, beginning of period............................................ 6,546 23,645
-------- --------
Cash, end of period.................................................. $ 8,760 $ 33,092
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-31
<PAGE> 86

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1998.

NOTE B -- INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is
comprised of direct materials on a first-in-first-out basis and, in the case of
finished products and work-in-progress, direct labor and attributable production
overheads based on normal levels of activity. The components of inventory
consist of the following:

<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1997 1997
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................... $ 64,213 $ 95,612
Work-in-process........................................ 16,561 10,753
Finished goods......................................... 25,809 2,561
-------- --------
Total........................................ $ 106,583 $108,926
======== ========
</TABLE>

NOTE C -- RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 establishes a different method of computing net income per share
than is currently required under the provisions of Accounting Principles Board
Opinion No. 15. Under SFAS No. 128, the Company will be required to present both
basic net income per share and diluted net income per share.

The Company plans to adopt SFAS No. 128 in its fourth fiscal quarter ending
March 31, 1998 and at that time all historical net income per share data
presented will be restated to conform to the provisions of SFAS No. 128. Under
the provisions of SFAS 128, basic and diluted net income per share for the three
month periods ended June 30, 1997 and June 30, 1996, would have been $0.38 and
$0.36 and $0.30 and $0.28, respectively.

In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which will be adopted by the Company in the fourth
quarter of 1998. SFAS No. 129 requires companies to disclose certain information
about their capital structure. The Company does not anticipate that SFAS No. 129
will have a material impact on its financial statements.

In July 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years ending after December 15, 1997. The Company
does not anticipate that SFAS No. 130 will have a material effect on its
financial position, results of operations, or cash flows.

F-32
<PAGE> 87

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

NOTE D -- NET INCOME PER SHARE

Net income per share for each period is calculated by dividing net income
by the weighted average shares of common stock and common stock equivalents
outstanding during the period using the treasury stock method. Common stock
equivalents consist of shares issuable upon the exercise of outstanding common
stock options and warrants. Fully diluted net income per share is substantially
the same as primary net income per share.

F-33
<PAGE> 88

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

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or by any of the Underwriters. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the dates as of which information is given in this Prospectus. This
Prospectus does not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such solicitation.

----------------------------
TABLE OF CONTENTS
----------------------------

<TABLE>
<CAPTION>
Page
<S> <C>
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
The Company........................... 5
Risk Factors.......................... 6
Enforcement of Civil Liabilities...... 15
Use of Proceeds....................... 15
Dividends............................. 15
Price Range of Ordinary Shares........ 16
Capitalization........................ 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 32
Management............................ 42
Principal Shareholders................ 44
Description of Capital Shares......... 46
Taxation.............................. 49
Underwriting.......................... 51
Certain Legal Matters................. 52
Experts............................... 52
Available Information................. 53
Consolidated Financial Statements..... F-1
</TABLE>

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

======================================================
1,750,000 SHARES

LOGO

ORDINARY SHARES
-------------------------
PROSPECTUS
-------------------------
MONTGOMERY SECURITIES

COWEN & COMPANY

UBS SECURITIES
Dated , 1997
===================================================
<PAGE> 89

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses to be paid by the
Registrant in connection with the sale of the Ordinary Shares being registered.
All amounts are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market filing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 16,085
NASD filing fee.......................................................... 5,808
Nasdaq National Market filing fee........................................ 17,500
Accounting fees and expenses............................................. 540,000
Legal fees and expenses.................................................. 750,000
Printing................................................................. 250,000
Blue sky fees and expenses............................................... 10,000
Miscellaneous............................................................ 607
-----
Total.......................................................... $1,590,000
=====
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article 155 of the Company's Articles of Association provides that, subject
to the Companies Act, every director or officer shall be entitled to be
indemnified by the Company against all liabilities incurred by him in the
execution and discharge of his duties or in relation thereto including any
liability in defending any proceedings, civil or criminal, which relate to
anything done or omitted or alleged to have been done or omitted by him as an
officer or employee of the Company and (i) in which judgment is given in his
favor (or the proceedings otherwise disposed of without finding or admission of
any material breach of duty), (ii) in which he is acquitted or (iii) in
connection with any application under any statute for relief from liability in
respect of any such act or omission in which relief is granted to him by the
court and further, that no director or other officer shall be liable for the
acts, receipts, neglects or defaults of any other director or officer or for
joining in any receipt or other act for conformity or for any loss or expense
happening to the Company through the insufficiency or deficiency of title to any
property acquired by order of the directors for the Company or for the
insufficiency or deficiency of any security upon which any of the monies of the
Company are invested or for any loss or damage arising from the bankruptcy,
insolvency or tortious act of any person with whom any monies, securities or
effects are deposited or for any other loss or misfortune which happens in the
execution of his duties unless the same happens through his own negligence,
willful default, breach of duty or breach of trust. Section 172 of the Companies
Act prohibits a company from indemnifying its directors or officers against
liability which by law would otherwise attach to them in respect of any
negligence, default, breach of duty or breach of trust of which they may be
guilty in relation to a Company, except to the extent permitted under Article
155 of the Company's Articles of Association, and any such indemnity is void and
unenforceable. The Company has entered into Indemnification Agreements with its
officers and directors. The Indemnification Agreements provide the Company's
officers and directors with indemnification to the maximum extent permitted by
the Companies Act.

The Company has obtained a policy of directors' and officers' liability
insurance that will insure directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances.

II-1
<PAGE> 90

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed herewith or incorporated by reference
herein:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994 among the
Registrant, nCHIP Acquisition Corporation and nCHIP (the "Reorganization
Agreement"). Certain
Disclosure Schedules of nCHIP and the Registrant setting forth various exceptions to
the representations and warranties pursuant to the Reorganization Agreement have
been omitted. The Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request. (Incorporated by reference to Exhibits 2.1
through 2.6 of the Registrant's registration statement on Form S-4, No. 33-85842.)
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December 8, 1994 among
the Registrant, nCHIP Acquisition Corporation and nCHIP. (Incorporated by reference
to Exhibit 2.7 of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the Registrant, A&A and
all of the shareholders of A&A. (Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K for the event reported on April 12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker Sdn. Bhd. and
Flextronics Malaysia Sdn. Bhd. (Incorporated by reference to Exhibit 10.19 of the
Registrant's registration statement on Form S-4, No. 33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales Limited
dated as of January 6, 1996. (Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K for the event reported on February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and Flextronics
International Sweden AB dated as February 12, 1997. Certain schedules have been
omitted. The Company agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.+
3.1 Memorandum of Association of the Registrant. (Incorporated by reference to Exhibit
3.1 of the Registrant's registration statement on Form S-1, No. 33-74622.)
3.2 Articles of Association of the Registrant. (Incorporated by reference to Exhibit 3.2
of the Registrant's registration statement on Form S-4, No. 33-85842.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary Shares being
registered.+
11.1 Statement regarding computation of per share earnings.+
23.1 Consent of Ernst & Young.*
23.2 Consent of Allen & Gledhill (included in Exhibit 5.1).+
24.1 Power of Attorney (included in the signature page of this Registration Statement).+
99.1 Consent of Proposed Directors.
99.2 Consent of Proposed Directors.
</TABLE>

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

+ Previously filed.

* To be filed by amendment.

II-2
<PAGE> 91

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, 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 of 1933, 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, 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 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 such director, officer or controlling person in
connection with the securities being registered, 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 Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement 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-3
<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of San Jose,
State of California, on September 18, 1997.

FLEXTRONICS INTERNATIONAL LTD.

By: /s/ MICHAEL E. MARKS

------------------------------------
Michael E. Marks
Chairman of the Board of Directors
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>

/s/ MICHAEL E. MARKS Chairman of the Board, and September 18, 1997
- ------------------------------------------ Chief Executive Officer
Michael E. Marks (principal executive officer)

* President, Chief Operating September 18, 1997
- ------------------------------------------ Officer and Director
Tsui Sung Lam
* Senior Vice President of September 18, 1997
- ------------------------------------------ Finance and Administration and
Robert R.B. Dykes Director (principal financial
and accounting officer)

* Director September 18, 1997
- ------------------------------------------
Bernard J. Lacroute

* Director September 18, 1997
- ------------------------------------------
Michael J. Moritz

* Chairman, Astron Group Limited September 18, 1997
- ------------------------------------------ Director
Stephen J.L. Rees

* Director September 18, 1997
- ------------------------------------------
Richard L. Sharp

*By: /s/ MICHAEL E. MARKS
- ------------------------------------------
Michael E. Marks
Attorney-in-fact
</TABLE>

II-4
<PAGE> 93

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994 among
the Registrant, nCHIP Acquisition Corporation and nCHIP (the
"Reorganization Agreement"). Certain Disclosure Schedules of nCHIP and the
Registrant setting forth various exceptions to the representations and
warranties pursuant to the Reorganization Agreement have been omitted. The
Company agrees to furnish supplementally a copy of any omitted schedule to
the Commission upon request. (Incorporated by reference to Exhibits 2.1
through 2.6 of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December 8,
1994 among the Registrant, nCHIP Acquisition Corporation and nCHIP.
(Incorporated by reference to Exhibit 2.7 of the Registrant's registration
statement on Form S-4, No. 33-85842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the Registrant,
A&A and all of the shareholders of A&A. (Incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K for the event
reported on April 12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker Sdn. Bhd.
and Flextronics Malaysia Sdn. Bhd. (Incorporated by reference to Exhibit
10.19 of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales
Limited dated as of January 6, 1996. (Incorporated by reference to Exhibit
2.1 of the Registrant's Current Report on Form 8-K for the event reported
on February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and
Flextronics International Sweden AB dated as February 12, 1997. Certain
schedules have been omitted. The Company agrees to furnish supplementally
a copy of any omitted schedule to the Commission upon request.+
3.1 Memorandum of Association of the Registrant. (Incorporated by reference to
Exhibit 3.1 of the Registrant's registration statement on Form S-1, No.
33-74622.)
3.2 Articles of Association of the Registrant. (Incorporated by reference to
Exhibit 3.2 of the Registrant's registration statement on Form S-4, No.
33-85842.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary
Shares being registered.+
11.1 Statement regarding computation of per share earnings.+
23.1 Consent of Ernst & Young.*
23.2 Consent of Allen & Gledhill (included in Exhibit 5.1).+
24.1 Power of Attorney (included in the signature page of this Registration
Statement).+
99.1 Consent of Proposed Directors.
99.2 Consent of Proposed Directors.
</TABLE>

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

+ Previously filed.

* To be filed by amendment.

<PAGE> 1
EXHIBIT 1.1

1,750,000 SHARES
FLEXTRONICS INTERNATIONAL LTD.
ORDINARY SHARES

_____________________

UNDERWRITING AGREEMENT

_____________________

______ __, 1997

MONTGOMERY SECURITIES
COWEN & COMPANY
UBS SECURITIES
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, CA 94111

Dear Sirs:

1. Introductory. Flextronics International Ltd., a Singapore
company (the "Company"), proposes to issue and sell 1,750,000 of its authorized
but unissued Ordinary Shares S$.01 par value each in the capital of the Company
(the "Ordinary Shares") to the several underwriters named in Schedule A annexed
hereto (the "Underwriters"), for whom you are acting as Representatives. The
1,750,000 shares to be sold by the Company are referred to as the "Firm Common
Shares." In addition, the Company proposes to grant to the Underwriters an
option to purchase up to 262,500 additional Ordinary Shares (the "Optional
Common Shares"), as provided in Section 4 hereof. The Firm Common Shares and,
to the extent such option is exercised, the Optional Common Shares are
hereinafter collectively referred to as the "Common Shares."

-1-

<PAGE> 2
You have advised the Company that the Underwriters propose to
make a public offering of the Common Shares on the effective date of the
registration statement hereinafter referred to, or as soon thereafter as in
your judgment is advisable.

The Company hereby confirms its agreement with respect to the
purchase of the Common Shares by the Underwriters as follows:

2. Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to each Underwriter as follows:

(a) A registration statement on Form S-3 (File No.
333-21715) with respect to the Common Shares has been prepared by the Company
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission. The Company has prepared and has filed or proposes
to file prior to the effective date of such registration statement an amendment
or amendments to such registration statement, which amendment or amendments
have been or will be similarly prepared. There have been delivered to you four
signed copies of such registration statement and amendments, together with four
copies of each exhibit filed therewith. Conformed copies of such registration
statement and amendments (but without exhibits) and of the related preliminary
prospectus have been delivered to you in such reasonable quantities as you have
requested for each of the Underwriters. The Company will next file with the
Commission one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the form of
final prospectus, (ii) a final prospectus in accordance with Rules 430A and
424(b) of the Rules and Regulations, or (iii) a term sheet (the "Term Sheet")
as described in and in accordance with Rules 434 and 424(b) of the Rules and
Regulations. As filed, the final prospectus, if one is used, or the Term Sheet
and Preliminary Prospectus, if a final prospectus is not used, shall include
all Rule 430A Information and, except to the extent that you shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the date and time that this Agreement was executed
and delivered by the parties hereto, or, to the extent not completed at such
date and time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus) as
the Company shall have previously advised you in writing would be included or
made therein.

The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment thereto
becomes effective prior to the First Closing Date (as hereinafter defined),
shall also mean such registration statement

-2-
<PAGE> 3
as so amended; provided, however, that such term shall also include (i) all
documents incorporated or deemed to be incorporated by reference therein
pursuant to the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Exchange Act"), (ii) all
Rule 430A Information deemed to be included in such registration statement at
the time such registration statement becomes effective as provided by Rule 430A
of the Rules and Regulations, and (iii) a registration statement, if any, filed
pursuant to Rule 462(b) of the Rules and Regulations relating to the Common
Shares. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used in
this Agreement shall mean either (i) the prospectus relating to the Common
Shares in the form in which it is first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, (ii) if a Term Sheet is not used
and no filing pursuant to Rule 424(b) of the Rules and Regulations is required,
the form of final prospectus included in the Registration Statement at the time
such registration statement becomes effective, or (iii) if a Term Sheet is
used, the Term Sheet in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, together with the
Preliminary Prospectus included in the Registration Statement at the time it
becomes effective. The term "Rule 430A Information" means information with
respect to the Common Shares and the offering thereof permitted to by omitted
from Registration Statement when it becomes effective pursuant to Rule 430A of
the Rules and Regulations.

All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include
the filing of any document under the Exchange Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.

(b) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements of the
Act and the Rules and Regulations and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to and
including each Closing Date hereinafter mentioned, the Registration Statement
and the Prospectus, and any amendments or supplements thereto, will contain all
material statements and information required to be included therein by the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or

-3-
<PAGE> 4
supplement thereto, will include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, no
representation or warranty contained in this subsection 2(b) shall be
applicable to information contained in or omitted from any Preliminary
Prospectus, the Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter, directly or
through the Representatives, specifically for use in the preparation thereof.

(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21.1 to the Company's Annual Report on Form 10-K
for the Company's fiscal year ended March 31, 1997. The Company has been duly
incorporated and is validly existing as a public company under the laws of
Singapore. Each of the subsidiaries of the Company has been duly incorporated
and is validly existing in their respective jurisdictions of incorporation or
formation. The Company and each of its subsidiaries has full power and
authority (corporate and other) to own and lease their respective properties
and conduct their respective businesses; the Company owns all of the
outstanding capital stock or joint venture interests of its subsidiaries, free
and clear of all claims, liens, charges and encumbrances; the Company and each
of its subsidiaries are in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders material
to the conduct of their respective businesses, all of which are valid and in
full force and effect; the Company and each of its subsidiaries are duly
qualified to do business and in good standing as foreign corporations in each
jurisdiction in which the ownership or leasing of properties or the conduct of
their respective businesses requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company or the subsidiary; and no proceedings has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification.

(d) The Company has an authorized and issued share
capital as set forth under the heading "Capitalization" in the Prospectus; the
issued and outstanding Ordinary Shares have been duly authorized and validly
issued, are fully paid, have been issued in compliance with all federal and
state securities laws, whether of Singapore, the United States or otherwise,
were not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and conform to the description
thereof contained in the Prospectus. All issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. Except as disclosed in
the Prospectus and the financial statements of the Company, and the related
notes thereto, included in the Prospectus, neither the Company nor any
subsidiary has outstanding any options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock schemes, plans or arrangements, and the options or other rights
granted and exercised thereunder, set

-4-
<PAGE> 5
forth in the Prospectus accurately and fairly presents the information required
to be shown with respect to such schemes, plans, arrangements, options and
rights.

(e) The Common Shares to be purchased by the
Underwriters from the Company have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be duly
authorized, validly issued and fully paid, and will conform to the description
thereof contained in the Prospectus. No preemptive rights or other rights to
subscribe for or purchase exist with respect to the issuance and sale of the
Common Shares by the Company pursuant to this Agreement. No shareholder of the
Company has any right which has not been waived to require the Company to
register the sale of any shares owned by such shareholder under the Act in the
public offering contemplated by this Agreement. No further approval or
authority of the shareholders or the Board of Directors of the Company will be
required for the issuance and sale of the Common Shares to be sold by the
Company as contemplated herein other than the Board of Directors' approval of
the list of purchasers of the Common Shares, which will occur prior to the
First Closing.

(f) The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company in accordance with its terms. The making and performance of this
Agreement by the Company and the consummation of the transactions herein
contemplated will not violate any provisions of the Memorandum and Articles of
Association, Certificate of Incorporation, or other organizational documents,
of the Company or any of its subsidiaries, and will not conflict with, result
in the breach or violation of, or constitute, either by itself or upon notice
or the passage of time or both, a default under any agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or any of its respective properties may be bound or
affected (except as to conflicts, breaches, violations or defaults of any of
the foregoing that individually or in the aggregate would not be material to
the Company), any statute or any authorization, judgment, decree, order, rule
or regulation of any court or any regulatory body, administrative agency or
other governmental body applicable to the Company or any of its subsidiaries or
any of their respective properties. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this Agreement
or the consummation of the transactions contemplated by this Agreement, except
for compliance with the Act, the Blue Sky laws applicable to the public
offering of the Common Shares by the several Underwriters and the clearance of
such offering with the National Association of Securities Dealers, Inc. (the
"NASD").

(g) Ernst & Young LLP, who have expressed their opinion
with respect to the consolidated financial statements and schedules filed with
the Commission as a part of the Registration Statement and included in the
Prospectus and in the Registration Statement, are independent accountants as
required by the Act, the Rules and Regulations and the Exchange Act.

-5-
<PAGE> 6
(h) The consolidated financial statements and schedules
of the Company and its subsidiaries, and the related notes thereto, included in
the Registration Statement and the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of the respective
dates of such financial statements and schedules, and the results of operations
and changes in financial position of the Company and its subsidiaries for the
respective periods covered thereby. Such statements, schedules and related
notes have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis as certified by the independent
accountants named in subsection 2(g). No other financial statements or
schedules are required to be included in the Registration Statement. The
selected financial data set forth in the Prospectus under the captions
"Prospectus Summary--Summary Selected Financial Data," "Capitalization" and
"Selected Financial Data" fairly present the information set forth therein on
the basis stated in the Registration Statement.

(i) Except as disclosed in the Prospectus, and except as
to defaults which individually or in the aggregate would not be material to the
Company, neither the Company nor any of its subsidiaries is in violation or
default of any provision of its memorandum and Articles of Association,
Certificate of Incorporation, or other organizational documents, or is in
breach of or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which it is a party or by which it or any of its
properties are bound; and there does not exist any state of facts which
constitutes an event of default on the part of the Company or any such
subsidiary as defined in such documents or which, with notice or lapse of time
or both, would constitute such an event of default.

(j) There are no contracts or other documents required
to be described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which have
not been described or filed as required. The descriptions of the contracts so
described in the Prospectus are accurate; all such contracts are in full force
and effect on the date hereof; and neither the Company nor any of its
subsidiaries, nor to the best of the Company's knowledge, any other party is in
breach of or default under any of such contracts.

(k) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge, threatened to
which the Company or any of its subsidiaries is or may be a party or of which
property owned or leased by the Company or any of its subsidiaries is or may be
the subject, or related to environmental or discrimination matters, which
actions, suits or proceedings might, individually or in the aggregate, prevent
or adversely affect the transactions contemplated by this Agreement or result
in a material adverse change in the condition (financial or otherwise),
properties, business, results of operations or, to the best of the Company's
knowledge, prospects of the Company and its subsidiaries; and no labor
disturbance by the employees of the Company or any of its subsidiaries exists
or is imminent which might be expected to affect adversely such condition,
properties, business, results of operations or, to the best of Company's
knowledge, prospects. Neither the Company nor any of its subsidiaries is a
party or subject to the

-6-
<PAGE> 7
provisions of any material injunction, judgment, decree or order of any court,
regulatory body, administrative agency or other governmental body.

(l) The Company or the applicable subsidiary has good
and marketable title to all the properties and assets reflected as owned in the
financial statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements (or elsewhere in the
Prospectus), or (ii) those which are not material in amount and do not
adversely affect the use made and proposed to be made of such property by the
Company and its subsidiaries. The Company or the applicable subsidiary holds
its leased properties under valid and binding leases, with such exceptions as
are not materially significant in relation to the business of the Company.
Except as disclosed in the Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted or as proposed
to be conducted as described in the Registration Statement.

(m) Since the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as described
in or specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business;
(ii) the Company and its subsidiaries have not sustained any material loss or
interference with their respective businesses or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance;
(iii) the Company has not paid or declared any dividends or other distributions
with respect to its issued share capital and the Company and its subsidiaries
are not in default in the payment of principal or interest on any outstanding
debt obligations; (iv) there has not been any change in the share capital
(other than upon the sale of the Common Shares hereunder and the exercise of
options disclosed in the Prospectus) or indebtedness material to the Company
and its subsidiaries (other than in the ordinary course of business); and (v)
there has not been any material adverse change in the condition (financial or
otherwise), business, properties, results of operations or, to the best of the
Company's knowledge, prospects of the Company and its subsidiaries.

(n) Except as disclosed in or specifically contemplated
by the Prospectus, the Company and its subsidiaries have sufficient trademarks,
trade names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted; the
expiration of any trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals or governmental authorizations would not have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or, to the best of the Company's knowledge, prospects of
the Company or its subsidiaries; and the Company has no knowledge of any
material infringement by it or its subsidiaries of trademark, trade name
rights, patent rights, mask works, copyrights, licenses, trade secret or other
similar rights of others, and there is no claim being made against the Company
or its subsidiaries regarding trademark, trade name, patent, mask work,
copyright, license, trade secret or other infringement which could have a
material

-7-
<PAGE> 8
adverse effect on the condition (financial or otherwise), business, results of
operations or, to the best of the Company's knowledge, prospects of the Company
and its subsidiaries.

(o) The Company has not been advised, and has no reason
to believe, that either it or any of its subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not materially
adversely affect the condition (financial or otherwise), business, results of
operations or, to the best of the Company's knowledge, prospects of the Company
and its subsidiaries.

(p) The Company and its subsidiaries have filed all
necessary federal, national, state, provincial, foreign and other income and
franchise tax returns and have paid all taxes shown as due thereon; and the
Company has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company or its subsidiaries which could
materially and adversely affect the business, operations or properties of the
Company and its subsidiaries.

(q) The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.

(r) The Company has not distributed and will not
distribute prior to the First Closing Date any offering material in connection
with the offering and sale of the Common Shares other than the Prospectus, the
Registration Statement and the other materials permitted by the Act.

(s) Each of the Company and its subsidiaries maintain
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.

(t) Neither the Company nor any of its subsidiaries has
at any time during the last five years (i) made any unlawful contribution to
any candidate for public office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.

(u) The Company has not taken and will not take,
directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the price of
the Ordinary Shares to facilitate the sale or resale of the Common Shares.

-8-
<PAGE> 9
(v) Subject to the approval of the list of purchasers by
the Board of Directors of the Company as referred to in (e) above, no transfer
taxes are required to be paid in connection with the sale and delivery of the
Common Shares to the Underwriters hereunder.

(w) The Ordinary Shares (including the Common Shares)
are registered pursuant to Section 12(g) of the Exchange Act and are listed on
the Nasdaq National Market, and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Ordinary
Shares under the Exchange Act or delisting the Ordinary Shares from the Nasdaq
National Market, nor has the Company received any notification that the
Commission or the NASD is contemplating terminating such registration or
listing.

(x) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all material
respects with the requirements of the Exchange Act, and, when read together
with the other information in the Prospectus, at the time the Registration
Statement and any amendments thereto become effective and at the First Closing
Date and the Second Closing Date, as the case may be, will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

Any certificate signed by an officer of the Company and delivered
to the Representatives or to counsel for the Underwriters shall be deemed to be
a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.

3. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant
to the Company that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus was furnished
to the Company by and on behalf of the Underwriters for use in connection with
the preparation of the Registration Statement and the Prospectus and is correct
in all material respects. The Representatives represent and warrant that they
have been authorized by each of the other Underwriters as the Representatives
to enter into this Agreement on its behalf and to act for it in the manner
herein provided.

4. Purchase, Sale and Delivery of Common Shares. On the basis
of the representations, warranties and agreements herein contained, and upon
the terms but subject to the conditions herein set forth, (i) the Company
agrees to issue and sell to the several Underwriters an aggregate of 1,750,000
Firm Common Shares and (ii) the Underwriters agree, severally and not jointly,
to purchase from the Company the respective number of Firm Common Shares set
forth opposite their names on Schedule A. The purchase price per Firm Common
Share to be paid by the several Underwriters to the Company shall be $[_____]
per share.

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<PAGE> 10
Delivery of certificates for the Firm Common Shares to be
purchased by the Underwriters and payment therefor shall be made at the offices
of Montgomery Securities, 600 Montgomery Street, San Francisco, California (or
such other place as may be agreed to by the Company and the Representatives) at
6:00 a.m., on [_____], or such other time and date not later than 10:30 a.m.,
on the later of the fifth full business day following the first date that any
of the Common Shares are released by you for sale to the public or the date
that is 48 hours after the date that the Prospectus has been recirculated, if
applicable (the time and date of such closing are called the "First Closing
Date"). The Company hereby acknowledges that circumstances under which the
Representatives may provide notice to postpone the First Closing Date as
originally scheduled include, but are in no way limited to, any determination
by the Company or the Representatives to recirculate to the public copies of an
amended or supplemented Prospectus or a delay due to the issuance of a stop
order as contemplated by the provisions of Section 9.

In addition, on the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the conditions
herein set forth, the Company hereby grants an option to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
262,500 Optional Common Shares from the Company at the purchase price per share
to be paid by the Underwriters for the Firm Common Shares. The option granted
hereunder is for use by the Underwriters solely in covering any over-allotments
in connection with the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
upon notice by the Representatives to the Company, which notice may be given at
any time within 30 days from the date of this Agreement. Such notice shall set
forth (i) the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the certificates for the Optional Common Shares are to be registered and
(iii) the time, date and place at which such certificates will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of certificates for the Firm Common Shares and the
Optional Common Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called the "Second Closing Date" and shall be determined
by the Representatives and shall not be earlier than three nor later than five
full business days after delivery of such notice of exercise. If any Optional
Common Shares are to be purchased, each Underwriter agrees, severally and not
jointly, to purchase the number of Optional Common Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Optional
Common Shares to be purchased as the number of Firm Common Shares set forth on
Schedule A opposite the name of such Underwriter bears to the total number of
Firm Common Shares. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to the
Company.

The Representatives hereby advise the Company that the
Underwriters intend to offer for sale to the public, as described in the
Prospectus, the Common Shares as soon after this Agreement has been executed
and the Registration Statement

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<PAGE> 11
has been declared effective as the Representatives, in their sole judgment,
have determined is advisable and practicable. The Representatives hereby
further advise the Company that (i) the Underwriters will offer the Common
Shares for sale to the public initially at a price of $[_____] per share and to
certain dealers selected by the Representatives at a price that represents a
concession of not more than $[_____] per share from such initial public
offering price and (ii) any Underwriter may allow, and such dealers may
reallow, a concession of not more than $[_____] per share to any other
Underwriter or to certain other dealers.

Payment for the Common Shares to be sold by the Company shall be
made at the First Closing Date (and, if applicable, at the Second Closing Date)
by wire transfer of immediately available funds to the order of the Company.

It is understood that the Representatives have been authorized,
for their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Common Shares and any Optional Common Shares the Underwriters have agreed
to purchase. Montgomery Securities, individually and not as a Representative
of the Underwriters, may (but shall not be obligated to) make payment for any
Common Shares to be purchased by any Underwriter whose funds shall not have
been received by the Representatives by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.

The Company shall deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters certificates for
the Firm Common Shares to be sold by it at the First Closing Date, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The Company shall also deliver, or
cause to be delivered, to the Representatives for the accounts of the several
Underwriters, certificates for the Optional Common Shares the Underwriters have
agreed to purchase at the First Closing Date or the Second Closing Date, as the
case may be, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The
certificates for the Common Shares shall be in definitive form and registered
in such names and denominations as the Representatives shall have requested at
least two full business days prior to the First Closing Date (or the Second
Closing Date, as the case may be) and shall be made available for inspection on
the business day preceding the First Closing Date (or the Second Closing Date,
as the case may be) at a location in New York City as the Representatives may
designate. Time shall be of the essence, and delivery at the time and place
specified in this Agreement is a further condition of the obligations of the
Underwriters.

Not later than 12:00 Noon San Francisco time on the second
business day following later of the date of this Agreement or the date the
Common Shares are released by the Underwriters for sale to the public, the
Company shall deliver, or cause to be delivered, copies of the Prospectus in
such quantities and at such places as the Representatives shall request.

-11-
<PAGE> 12
5. Covenants of the Company. The Company covenants and agrees
that:

(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto,
to become effective. If the Registration Statement has become or becomes
effective pursuant to Rule 430A of the Rules and Regulations, or the filing of
the Prospectus is otherwise required under Rule 424(b) of the Rules and
Regulations, the Company will file the Prospectus, properly completed, pursuant
to the applicable paragraph of Rule 424(b) of the Rules and Regulations within
the time period prescribed and will provide evidence satisfactory to you of
such timely filing. The Company will promptly advise you in writing (i) of the
receipt of any comments of the Commission, (ii) of any request of the
Commission for amendment of or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus or for additional information, (iii) when the Registration Statement
shall have become effective, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose. If the Commission shall enter
any such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The Company
will not file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus (including any amendment or supplement through incorporation by
reference of any report filed under the Exchange Act) of which you have not
been furnished with a copy a reasonable time prior to such filing or to which
you reasonably object or which is not in compliance with the Act and the Rules
and Regulations.

(b) The Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable the several Underwriters to continue the
distribution of the Common Shares and will use its best efforts to cause the
same to become effective as promptly as possible. The Company will fully and
completely comply with the provisions of Rules 424(b), 430A and 434, as
applicable, of the Rules and Regulations with respect to information omitted
from the Registration Statement in reliance upon such Rule.

(c) If at any time within the nine-month period referred
to in Section 10(a)(3) of the Act during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event occurs, as a
result of which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or if it is necessary at any time to amend the Prospectus,
including any amendments or supplements, to comply with the Act or the Rules
and Regulations, the Company will promptly advise you thereof and will promptly
prepare and file with the Commission, at its own expense, an amendment or
supplement which will correct such statement or omission or an amendment or
supplement which will effect such compliance and

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<PAGE> 13
will use its best efforts to cause the same to become effective as soon as
possible; and, in case any Underwriter is required to deliver a prospectus
after such nine-month period, the Company upon request, but at the expense of
such Underwriter, will promptly prepare such amendment or amendments to the
Registration Statement and such Prospectus or Prospectuses as may be necessary
to permit compliance with the requirements of Section 10(a)(3) of the Act.

(d) As soon as practicable, but not later than 45 days
after the end of the first quarter ending after one year following the
"effective date of the Registration Statement" (as defined in Rule 158(c) of
the Rules and Regulations), the Company will make generally available to its
security holders an earning statement (which need not be audited) covering a
period of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last paragraph
of Section 11(a) of the Act.

(e) During such period as a prospectus is required by
law to be delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to in
Section 10(a)(3) of the Act, will furnish to you or mail to your order copies
of the Registration Statement, the Prospectus, the Preliminary Prospectus and
all amendments and supplements to any such documents (including any documents
incorporated or deemed incorporated by reference therein) in each case as soon
as available and in such quantities as you may request, for the purposes
contemplated by the Act.

(f) The Company shall cooperate with you and your
counsel in order to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions as you designate (including those of Canada) and under the
applicable securities laws of such other nations as you may designate, will
comply with such laws and will continue such qualifications, registrations and
exemptions in effect so long as reasonably required for the distribution of the
Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified. The Company will advise you
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company, with your cooperation,
will use its best efforts to obtain the withdrawal thereof.

(g) During the period of five years hereafter, the
Company will furnish to the Representatives and, upon request of the
Representatives, to each of the other Underwriters: (i) as soon as practicable
after the end of each fiscal year, copies of the Annual Report of the Company
containing the balance sheet of the Company as of the close of such fiscal year
and statements of income, shareholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly

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<PAGE> 14
Report on Form 10-Q, Report on Form 8-K or other report filed by the Company
with the Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Ordinary Shares.

(h) During the period of 90 days after the first date
that any of the Common Shares are released by you for sale to the public,
without the prior written consent of either Montgomery Securities or each of
the Representatives (which consent may be withheld at the sole discretion of
Montgomery Securities or the Representatives, as the case may be), the Company
will not issue, offer, sell, grant options to purchase or otherwise dispose of
any of the Company's equity securities or any other securities convertible into
or exchangeable with its Ordinary Shares or other equity security, other than
pursuant to outstanding stock options and warrants disclosed in the Prospectus
and other than the grant of options or the issuance of the Company's equity
securities pursuant to the Company's employee share option plans described in
the Prospectus or the issuance of Ordinary Shares in connection with
acquisitions.

(i) The Company will apply the net proceeds of the sale
of the Common Shares sold by it substantially in accordance with its statements
under the caption "Use of Proceeds" in the Prospectus.

(j) During such period as a prospectus is required by
law to be delivered in connection with sales by an Underwriter or dealer, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.

The Representatives, on behalf of the Underwriters, may, in their
sole discretion, waive in writing the performance by the Company of any one or
more of the foregoing covenants set forth in Section 5 herein or extend the
time for their performance.

6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or
is terminated, the Company agrees to pay all costs, fees and expenses incurred
in connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including without
limiting the generality of the foregoing (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and
engraving costs), (ii) all fees and expenses of the registrar and transfer
agent of the Ordinary Shares, (iii) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Common Shares to
the Underwriters, (iv) all fees and expenses of the Company's counsel and the
Company's independent accountants, including fees of counsel or independent
accountants with respect to any subsidiary of the Company, (v) all costs and
expenses incurred in connection with the printing, filing, shipping and
distribution of the Registration Statement, each Preliminary Prospectus and the
Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all
filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the

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<PAGE> 15
Common Shares for offer and sale under the Blue Sky laws (including those of
Canada) and under the applicable securities laws of such other nations as you
may designate, (vii) the filing fee incident to the review and approval of the
Underwriters' participation in the offering and distribution of the Common
Shares by the NASD, and (viii) all other fees, costs and expenses referred to
in Item 13 of the Registration Statement. Except as provided in this Section
6, Section 8 and Section 10 hereof, the Underwriters shall pay all of their own
expenses, including the fees and disbursements of their counsel (excluding
those relating to qualification, registration or exemption under the Blue Sky
laws (including those of Canada) and under the applicable securities laws of
such other nations as you may designate, and the Blue Sky memorandum referred
to above).

7. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm
Ordinary Shares on the First Closing Date and the Optional Ordinary Shares on
the Second Closing Date shall be subject to the accuracy of the representations
and warranties on the part of the Company herein set forth as of the date
hereof and as of the First Closing Date or the Second Closing Date, as the case
may be, to the accuracy of the statements of Company officers made pursuant to
the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:

(a) The Registration Statement shall have become
effective not later than 5:00 p.m., Washington, D.C. time, on the date of this
Agreement, or at such later time as shall have been consented to by you; if the
filing of the Prospectus, or any supplement thereto, is required pursuant to
Rule 424(b) of the Rules and Regulations, the Prospectus shall have been filed
in the manner and within the time period required by Rule 424(b) of the Rules
and Regulations; and prior to such Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or,
to the knowledge of the Company or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your satisfaction.

(b) You shall be satisfied that since the respective
dates as of which information is given in the Registration Statement and
Prospectus, (i) there shall not have been any change in the authorized or
issued share capital of the Company or any of its subsidiaries other than
pursuant to the exercise of outstanding options disclosed in the Prospectus or
any material change in the indebtedness (other than in the ordinary course of
business) of the Company or any of its subsidiaries, (ii) except as set forth
or contemplated by the Registration Statement or the Prospectus, no material
verbal or written agreement or other transaction shall have been entered into
by the Company or any of its subsidiaries, which is not in the ordinary course
of business or which could result in a material reduction in the future
earnings of the Company and its subsidiaries, (iii) no loss or damage (whether
or not insured) to the property of the Company or any of its subsidiaries shall
have been sustained which materially and adversely affects the condition
(financial or otherwise), business, results of operations or prospects of the
Company and its subsidiaries, (iv) no legal or

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<PAGE> 16
governmental action, suit or proceeding affecting the Company or any of its
subsidiaries which is material to the Company and its subsidiaries or which
affects or may affect the transactions contemplated by this Agreement shall
have been instituted or threatened, and (v) there shall not have been any
material change in the condition (financial or otherwise), business,
management, results of operations or prospects of the Company and its
subsidiaries which makes it impractical or inadvisable in the judgment of the
Representatives to proceed with the public offering or purchase the Common
Shares as contemplated hereby.

(c) There shall have been furnished to you, as
Representatives of the Underwriters, on each Closing Date, in form and
substance satisfactory to you, except as otherwise expressly provided below:

(i) (A) An opinion of Allen & Gledhill,
counsel for the Company, addressed to the Underwriters and dated the First
Closing Date, or the Second Closing Date, as the case may be, to the effect
that:

(1) Each of the Company and its
Singapore subsidiary has been duly incorporated and is validly existing as a
corporation (public corporation in the case of the Company) under the laws of
its jurisdiction of incorporation, and has full corporate power and authority
to own its properties and conduct its business as described in the Registration
Statement;

(2) As of the respective Closing
Date, the authorized issued and outstanding capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus as the same
refers to "Actual" authorized, issued and outstanding shares; all necessary and
proper corporate proceedings have been taken in order to authorize validly such
authorized Ordinary Shares; all outstanding Ordinary Shares have been duly and
validly issued, are fully paid and nonassessable, and were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase any securities contained in the Memorandum and Articles of
Association of the Company or Singapore law or any material agreement to which
the Company or any subsidiary is a party; the outstanding Ordinary Shares were
issued in compliance with all laws of Singapore, that impose any restrictions
or requirements on, or otherwise regulate, the sale of securities; and the
Ordinary Shares conform to the description thereof contained in the Prospectus;

(3) All of the issued and
outstanding shares of the Company's Singapore subsidiary have been duly and
validly authorized and issued and are fully paid; to such counsel's knowledge
all shares of the Company's subsidiaries are owned beneficially by the Company
free and clear of all liens, encumbrances, equities, claims, security
interests, voting trusts or other defects of title whatsoever, except as
described in the Registration Statement;

(4) The certificates evidencing the
Common Shares to be delivered by the Company hereunder are in due and proper
form under Singapore law, and when the Company's seal thereon has been affixed
in accordance

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<PAGE> 17
with the Company's Articles of Association, and delivered to you or upon your
order against payment of the agreed consideration therefor in accordance with
the provisions of this Agreement, the Ordinary Shares represented thereby will
be duly authorized and validly issued and fully paid, will not have been issued
in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities and will conform in all respects to the
description thereof contained in the Prospectus;

(5) Except as disclosed in or
specifically contemplated by the Prospectus, to such counsel's knowledge, there
are no outstanding options, warrants or other rights calling for the issuance
of, and no commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any security convertible into or exchangeable for
capital stock of the Company;

(6) To the best of such counsel's
knowledge, there are no legal or governmental actions, suits or proceedings
pending against the Company which are required to be described in the
Prospectus which are not described as required;

(7) The Company has full right,
power and authority under Singapore law to enter into this Agreement and to
sell and deliver the Ordinary Shares to be sold by it to the several
Underwriters; this Agreement has been duly and validly authorized by all
necessary corporate action by the Company, has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company in accordance with its terms, except as enforceability
may be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act as to which no opinion need be expressed; and
no approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body in Singapore is required for the
execution and delivery of this Agreement by the Company or the consummation of
the transactions contemplated by this Agreement;

(8) The execution and performance of
this Agreement and the consummation of the transactions herein contemplated
will not violate any of the provisions of the Memorandum and Articles of
Association of the Company or its Singapore subsidiary or, so far as is known
to such counsel, violate any decree, statute or rule of Singapore or any
material agreement to which the Company or its Singapore subsidiary is a party;

(9) To such counsel's knowledge,
neither the Company nor its Singapore subsidiary is in violation of its
Memorandum and Articles of Association, or other organizational documents, or
in breach of or default with respect to any provision of any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument known to such counsel to which the Company or any such subsidiary is
a party or by which it or any of its properties may

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<PAGE> 18
be bound or affected, except where such default would not materially adversely
affect the Company and its subsidiaries; and, to such counsel's knowledge, the
Company and its Singapore subsidiary are in compliance with all decrees,
statutes or governmental rule of Singapore, to which they are subject, except
where noncompliance would not materially adversely affect the Company and its
subsidiaries;

(10) The statements made in the
Prospectus under "Enforcement of Civil Liabilities," "Description of Capital
Shares" and "Taxation," to the extent they constitute summaries of the laws of
Singapore, are accurate, complete and fair summaries;

(11) The choice of California law as
the law governing this Agreement is valid and binding under the laws of
Singapore, except to the extent that any term of this Agreement or provision of
California law applicable to this Agreement is incompatible with the public
policy of Singapore; the consent to jurisdiction as provided in Section 19 of
this Agreement is valid and binding upon the Company under the laws of
Singapore.

(12) No stamp or other issuance or
transaction taxes or duties and no capital gains, income, withholding or other
taxes are payable by or on behalf of the Underwriters to the government of
Singapore or any subdivision or taxing authority thereof or therein in
connection with (a) the sale and delivery by the Company of the Common Shares
to or for the accounts of the Underwriters and (b) the sale and delivery of the
Common Shares inside or outside of Singapore by the Underwriters to the
purchasers thereof (excluding any Singapore income tax on the income of any
Underwriter whose net income is subject to tax by the government of Singapore).

In rendering such opinion, such counsel may state that with
respect to all matters of the laws of the United States, they are relying on
the opinion of Fenwick & West LLP, provided that such counsel states they
believe that both you and they are justified in relying on such opinion.

(B) An opinion of Fenwick & West LLP,
special counsel to the Company, addressed to the Underwriters and dated the
First Closing Date or the Second Closing Date, as the case may be, to the
effect that:

(1) Flextronics International (USA),
Inc. (the "U.S. Sub") has been duly incorporated and is validly existing and in
good standing as a corporation under the laws of the jurisdiction of its
incorporation; the Company and each of its subsidiaries is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction, if
any, in the United States in which the failure to so qualify would not have a
material adverse effect on the Company and its subsidiaries; and the U.S. Sub
has full corporate power and authority to own its properties and conduct its
business as currently conducted;

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<PAGE> 19
(2) To such counsel's knowledge, the
issued and outstanding Ordinary Shares issued after August 2, 1995 were issued
in compliance with United States federal and California securities laws;

(3) All of the issued and
outstanding shares of the U.S. Sub have been duly and validly authorized and
issued and are fully paid and nonassessable and to such counsel's knowledge are
owned beneficially by the Company free and clear of all liens, encumbrances,
equities, claims, security interests, voting trusts or other defects of title
whatsoever;

(4) Except as disclosed in or
specifically contemplated by the Prospectus, to such counsel's knowledge, there
are no outstanding options, warrants or other rights calling for the issuance
of, and no commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any security convertible into or exchangeable for
capital stock of the Company;

(5) a. The Registration Statement
has become effective under the Act, and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement or preventing
the use of the Prospectus has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated by the Commission; any
required filing of the Prospectus and any supplement thereto pursuant to Rule
424(b) of the Rules and Regulations has been made in the manner and within the
time period required by such Rule 424(b);

b. The Registration Statement, the
Prospectus (including any document incorporated by reference therein) and each
amendment or supplement thereto (except for the financial statements and
schedules included therein as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the Act,
the Rules and Regulations and the Exchange Act;

c. To such counsel's knowledge,
there are no franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement which are not
disclosed or filed or incorporated by reference, as required;

d. To such counsel's knowledge,
there are no legal or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be described in the
Prospectus which are not described as required;

(6) The Company has full right,
power and authority to enter into this Agreement and to sell and deliver the
Ordinary Shares to be sold by it to the several Underwriters; this Agreement
has been duly and validly authorized by all necessary corporate action by the
Company, has been duly and validly executed and delivered by and on behalf of
the Company, and is a valid and

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<PAGE> 20
binding agreement of the Company in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and except as to those provisions relating to indemnity or
contribution for liabilities arising under the Act as to which no opinion need
be expressed; and no approval, authorization, order, consent, registration,
filing, qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required under United States
federal or California law for the execution and delivery of this Agreement by
the Company or the consummation of the transactions contemplated by this
Agreement, except such as have been obtained and are in full force and effect
under the Act and such as may be required under applicable Blue Sky laws in
connection with the purchase and distribution of the Common Shares by the
Underwriters and the clearance of such offering with the NASD;

(7) The execution and performance of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with, result in the breach of, or constitute, either by
itself or upon notice or the passage of time or both, a default under, any
agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument listed on an appendix to such opinion, and
reasonably acceptable to counsel to the Underwriters, to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of its or their property may be bound or affected which is
material to the Company and its subsidiaries, or violate any of the provisions
of the Memorandum and Articles of Association, or other organizational
documents, of the Company or the U.S. Sub or, so far as is known to such
counsel, violate any statute, judgment, decree, order, rule or regulation of
any court or governmental body having jurisdiction over the Company or the U.S.
Sub or any of their respective property;

(8) No U.S. Sub is in violation of
its Articles or Certificate of Incorporation, as the case may be;

(9) Each document filed pursuant to
the Exchange Act (other than the financial statements and supporting schedules
included therein, as to which no opinion need be rendered) and incorporated or
deemed to be incorporated by reference in the Prospectus complied when so filed
as to form in all material respects with the Exchange Act.

In rendering such opinion, such counsel may state that with
respect to all matters of the laws of Singapore or pertaining to the Memorandum
or Articles of Association of the Company, they are relying solely on the
opinion of Allen & Gledhill.

Fenwick & West LLP shall also include a statement to the effect
that nothing has come to such counsel's attention that would lead such counsel
to believe that, either at the effective date of the Registration Statement or
at the applicable Closing Date, the Registration Statement or the Prospectus,
or any amendment or supplement thereto, contains any untrue statement of a
material fact or omits to state

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<PAGE> 21
a material fact required to be stated therein or necessary to make the
statements therein not misleading.

Fenwick & West LLP shall also provide a separate opinion, dated
the First Closing Date or the Second Closing Date, as the case may be, to the
effect that the statements in the Prospectus under "Taxation," to the extent
they constitute summaries of tax laws of the United States, are accurate,
complete and fair summaries as of the applicable Closing Date.

(C) Opinions of counsel in Hong Kong,
Malaysia, the People's Republic of China and Sweden regarding certain matters
relating to the subsidiaries incorporated in, or the laws of, such countries
that would constitute significant subsidiaries as referred to in Regulation
S-X of the Rules and Regulations, in form reasonably acceptable to counsel
for the Underwriters.

(D) In rendering the foregoing opinions,
such counsel may rely as to matters of fact on certificates of officers of the
Company and of governmental officials.

(ii) Such opinion or opinions of Howard, Rice,
Nemerovski, Canady, Falk & Rabkin, a Professional Corporation, and Arfat Selvam
& Gunasingham, counsel for the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the incorporation
of the Company, the sufficiency of all corporate proceedings and other legal
matters relating to this Agreement, the validity of the Common Shares, the
Registration Statement and the Prospectus and other related matters as you may
reasonably require, and the Company shall have furnished to such counsel such
documents and shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon such matters.
In connection with such opinions, such counsel may rely on representations or
certificates of officers of the Company and governmental officials.

(iii) A certificate of the Company executed by the
Chairman of the Board, the President and the Chief Financial Officer of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, to the effect that:

(1) The representations and warranties of
the Company set forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied on or prior to such Closing Date;

(2) The Commission has not issued any
order preventing or suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the Registration
Statement has been issued; and to the best of the knowledge of the respective
signers, no proceedings for that purpose have been instituted or are pending
under the Act;

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<PAGE> 22
(3) Each of the respective signers of the
certificate has carefully examined the Registration Statement and the
Prospectus; to the best of his knowledge, the Registration Statement and the
Prospectus and any amendments or supplements thereto contain all statements
required to be stated therein regarding the Company and its subsidiaries; and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;

(4) Since the initial date on which the
Registration Statement was filed, no agreement, written or oral, transaction or
event has occurred which should have been set forth in an amendment to the
Registration Statement or in a supplement to or amendment of any prospectus
which has not been disclosed in such a supplement or amendment:

(5) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there has not been
any material adverse change or a development involving a material adverse
change in the condition (financial or otherwise), business, properties, results
of operations, management or, to the best knowledge of the respective signing
officers, prospects of the Company and its subsidiaries; and no legal or
governmental action, suit or proceeding is pending or threatened against the
Company or any of its subsidiaries which is material to the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course
of business, or which may adversely affect the transactions contemplated by
this Agreement; since such dates and except as so disclosed, neither the
Company nor any of its subsidiaries has entered into any verbal or written
agreement or other transaction not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company or
incurred any material liability or obligation, direct, contingent or indirect,
made any change in its capital stock, made any material change in its
short-term debt or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and the Company has not declared or paid any dividend,
or made any other distribution, upon its outstanding capital stock payable to
shareholders of record on a date prior to the First Closing Date or Second
Closing Date; and

(6) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and
except as disclosed in or contemplated by the Prospectus, the Company and its
subsidiaries have not sustained a material loss or damage by strike, fire,
flood, windstorm, accident or other calamity (whether or not insured).

(iv) On the date before this Agreement is executed
and also on the First Closing Date and the Second Closing Date a letter
addressed to you, as Representatives of the Underwriters, from each of Ernst &
Young LLP and Arthur Andersen LLP, independent accountants, the first one as to
each to be dated the day before the date of this Agreement, the second one as to
each to be dated the First Closing Date and the third one as to each (in the
event of a

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<PAGE> 23
Second Closing) to be dated the Second Closing Date, in each case in form and
substance satisfactory to the Representatives.

(v) On or before the First Closing Date, letters
from each officer and director and certain other employees of the Company, in
form and substance satisfactory to you, confirming that for a period of 90 days
after the first date that any of the Common Shares are released by you for sale
to the public, such person will not directly or indirectly sell or offer to sell
or otherwise dispose of any Ordinary Shares or any right to acquire such shares
without the prior written consent of either Montgomery Securities or each of the
Representatives, which consent may be withheld at the sole discretion of
Montgomery Securities or each of the Representatives, as the case may be,
subject to exceptions allowing the sale of an aggregate of approximately 80,000
Ordinary Shares within 30 days of the date hereof by certain of said
individuals.

All such opinions, certificates, letters and documents shall be
in compliance with the provisions hereof only if they are satisfactory to you
and to Howard, Rice, Nemerovski, Canady, Falk & Rabkin, a Professional
Corporation, counsel for the Underwriters. The Company shall furnish you with
such manually signed or conformed copies of such opinions, certificates,
letters and documents as you request.

If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company without liability on the part of any Underwriter
or the Company except for the expenses to be paid or reimbursed by the Company
pursuant to Sections 6 and 8 hereof and except to the extent provided in
Section 10 hereof.

8. Reimbursement of Underwriters' Expenses. Notwithstanding
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Sections 7 or 13, or if the sale to the Underwriters of the Common
Shares at the First Closing is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or to comply with any provision hereof, the Company agrees to reimburse you and
the other Underwriters upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by you and them in connection with the proposed
purchase and the sale of the Common Shares, including but not limited to fees
and disbursements of counsel, printing expenses, travel expenses, postage,
telegraph charges and telephone charges relating directly to the offering
contemplated by the Prospectus. Any such termination shall be without
liability of any party to any other party except that the provisions of this
Section, Section 6 and Section 10 shall at all times be effective and shall
apply.

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<PAGE> 24
9. Effectiveness of Registration Statement. The parties will
use their best efforts to cause the Registration Statement to become effective,
to prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement and, if such stop order be issued, to obtain as soon as
possible the lifting thereof.

10. Indemnification.

(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them not misleading, or arise out of or are based in whole
or in part on any inaccuracy in the representations and warranties of the
Company contained herein or any failure of the Company to perform its
obligations hereunder or under law; and will reimburse each Underwriter and
each such controlling person for any legal and other expenses as such expenses
are reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
the information furnished to the Company pursuant to Section 3 hereof; and
provided further, that the indemnity provided in this Section 10(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any loss, claim, charge, liability
or litigation based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state therein a material fact
purchased Ordinary Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected was not sent or given to such person within the time required by the
Act and the Rules and Regulations thereunder. In addition to its other
obligations under this Section 10(a), the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, or any inaccuracy in the representations and
warranties of the Company herein or failure to perform its obligations
hereunder, all as described in this Section 10(a), it will reimburse each
Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or

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<PAGE> 25
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of its obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank
of America NT&SA, San Francisco, California (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within 30
days of a request for reimbursement, shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.

(b) Each Underwriter will severally indemnify and hold
harmless the Company, each of its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages, liabilities
or expenses to which the Company, or any such director, officer or controlling
person may become subject, under the Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with the information furnished to the Company pursuant to Section 3
hereof; and will reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action. In addition to its other
obligations under this Section 10(b), each Underwriter severally agrees that,
as an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section 10(b)
which relates to information furnished to the Company pursuant to Section 3
hereof, it will reimburse the Company (and, to the extent applicable, each
officer, director or controlling person) on a quarterly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company (and,
to the extent applicable, each officer, director or

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<PAGE> 26
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Company (and, to the extent applicable, each officer,
director or controlling person) shall promptly return it to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the
Company within 30 days of a request for reimbursement, shall hear interest at
the Prime Rate from the date of such request. This indemnity agreement will be
in addition to any liability which such Underwriter may otherwise have.

(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained in
this Section or to the extent it is not prejudiced as a proximate result of
such failure. In case any such action is brought against any indemnified party
and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with all other indemnifying
parties similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a),
representing the indemnified parties who are parties to such action) or (ii)
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying party.

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<PAGE> 27
(d) If the indemnification provided for in this Section
10 is required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company, on the one hand, and the Underwriters, on the other hand, from
the offering of the Common Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received
by the Company, on the one hand, and the Underwriters, on the other hand, shall
be deemed to be in the same proportion, in the case of the Company, as the
total price paid to the Company for the Common Shares sold by it to the
Underwriters (net of underwriting commissions but before deducting expenses)
bears to the total price to the public set forth on the cover of the
Prospectus, and in the case of the Underwriters as the underwriting commissions
received by them bears to the total of such amounts paid to the Company and
received by the Underwriters as underwriting commissions. The relative fault
of the Company, on the one hand, and the Underwriters, on the other hand, shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company,
on the one hand, or the Underwriters, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
subparagraph (c) of this Section 10, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in subparagraph (c) of this
Section 10 with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this subparagraph (d); provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under subparagraph (c) for purposes of
indemnification. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 10 were determined
solely by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 10, no
Underwriter shall be required to contribute any amount in excess of the amount
of the total underwriting commissions received by such Underwriter in
connection with the Common Shares underwritten by it and distributed to the
public. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act)

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<PAGE> 28
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 10 are several in proportion to their respective
underwriting commitments and not joint.

(e) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections 10(a)
and 10(b) hereof, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 10(a) and 10(b)
hereof and would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of such
Sections 10(a) and 10(b) hereof.

11. Default of Underwriters. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares in the
manner as described herein, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all the Common
Shares agreed to be purchased by such Underwriter hereunder upon tender to the
Representatives of all such shares in accordance with the terms hereof. If any
Underwriter or Underwriters default in their obligations to purchase Common
Shares hereunder on either the First or Second Closing Date and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase on such Closing Date does not exceed 10% of the
total number of Common Shares which the Underwriters are obligated to purchase
on such Closing Date, the non-defaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Common Shares which such defaulting Underwriters agreed but failed to
purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company except for the expenses to be paid by the Company pursuant to
Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof.

In the event that Common Shares to which a default relates are to
be purchased by the non-defaulting Underwriters or by another party or parties,
the Representatives or the Company shall have the right to postpone the First
or Second

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<PAGE> 29
Closing Date, as the case may be, for not more than five business days in order
that the necessary changes in the Registration Statement, Prospectus and any
other documents, as well as any other arrangements, may be effected. As used
in this Agreement, the term "Underwriter" includes any person substituted for
an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.

12. Effective Date. This Agreement shall become effective
immediately as to Sections 6, 8, 10, 13 and 15 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement
has not become effective, at 2:00 p.m., California time, on the first full
business day following the effectiveness of the Registration Statement, or (ii)
if at the time of execution of this Agreement the Registration Statement has
been declared effective, at 2:00 p.m., California time, on the first full
business day following the date of execution of this Agreement; but this
Agreement shall nevertheless become effective at such earlier time after the
Registration Statement becomes effective as you may determine on and by notice
to the Company or by release of any of the Common Shares for sale to the
public. For the purposes of this Section 12, the Common Shares shall be deemed
to have been so released upon the release for publication of any newspaper
advertisement relating to the Common Shares or upon the release by you of
telegrams (i) advising Underwriters that the Common Shares are released for
public offerings or (ii) offering the Common Shares for sale to securities
dealers, whichever may occur first.

13. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:

(a) This Agreement may be terminated by the Company by
notice to you or by you by notice to the Company at any time prior to the time
this Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company to any
Underwriter (except for the expenses to be paid or reimbursed by the Company
pursuant to Sections 6 and 8 hereof and except to the extent provided in
Section 10 hereof) or of any Underwriter to the Company (except to the extent
provided in Section 10 hereof).

(b) This Agreement may also be terminated by you prior
to the First Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over the counter market by the NASD,
or trading in securities generally shall have been suspended on either such
Exchange or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Representatives, to affect
adversely the marketability of the Common Shares, (iii) if any adverse event
shall have occurred or shall exist which makes untrue or incorrect in any
material respect

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<PAGE> 30
any statement or information contained in the Registration Statement or
Prospectus or which is not reflected in the Registration Statement or
Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv)
if there shall be any action, suit or proceeding pending or threatened, or
there shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall be without liability on the part of any Underwriter
to the Company or on the part of the Company to any Underwriter (except for
expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8
hereof and except to the extent provided in Section 10 hereof).

(c) This Agreement shall also terminate at 5:00 p.m.,
California time, on the tenth full business day after the Registration
Statement shall have become effective if the initial public offering price of
the Common Shares shall not then as yet have been determined. Any termination
pursuant to this subsection (c) shall be without liability on the part of any
Underwriter to the Company or on the part of the Company to any Underwriter
(except for expenses to be paid or reimbursed by the Company pursuant to
Sections 6 and 8 hereof and except to the extent provided in Section 10
hereof).

14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.

15. Notices. All communications hereunder shall be in writing
and, if sent to the Representatives shall be mailed, delivered or telegraphed
and confirmed to you at 600 Montgomery Street, San Francisco, California 94111,
Attention: Richard A. Smith, with a copy to Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, Three Embarcadero Center, Seventh Floor, San Francisco, CA
94111, Attention: Daniel J. Winnike; and if sent to the Company shall be
mailed, delivered or telegraphed and confirmed to the Company at 514 Chai Chee
Lane, #04-13, Bedok Industrial Estate, Singapore 1646, Attention: President and
Chief Operating Officer and 2241 Lundy Avenue, San Jose, CA 95131, Attention:
Chief Executive Officer, with a copy to Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, CA 94306, Attention: Gordon Davidson. Any of the parties
hereto may change the address for receipt of communications hereunder by giving
notice to the others.

16. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to

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<PAGE> 31
Section 11 hereof, and to the benefit of the officers and directors and
controlling persons referred to in Section 10, and in each case their
respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. No such assignment shall
relieve any party of its obligations hereunder. The term "successors" shall
not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.

17. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representatives, will be binding upon
all the Underwriters.

18. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.

19. Applicable Law.

(a) This Agreement shall be governed by and construed in
accordance with the internal laws (and not the laws pertaining to conflicts of
laws) of the State of California.

(b) The Company, by the execution and delivery of this
Agreement, agrees that, until the fifth anniversary date of the First Closing
Date, service of process may be made upon it at 2241 Lundy Avenue, San Jose, CA
95131 (or any successor pursuant to the last sentence of this paragraph) in San
Jose, California in any suit or proceeding against the Company instituted by
any Underwriter or by any person controlling any Underwriter based on or
arising under this Agreement in any United States federal or state court in the
State of California, City and County of San Francisco, and expressly accepts
and submits to the nonexclusive jurisdiction of any such court in respect of
any such suit or proceeding. The Company, by the execution and delivery of
this Agreement, irrevocably designates and appoints until the fifth anniversary
date of the First Closing Date (or until a successor is appointed pursuant to
the last sentence of this paragraph) Michael Marks and all other persons who
are the Chief Executive Officer, the President, the Secretary or a Vice
President of the Company during the five year period following the First
Closing Date as the authorized agents of the Company upon whom process may be
served in any suit or proceeding, it being understood that the designation and
appointment of Mr. Marks and other persons presently serving as such officers
as such authorized agent shall become effective immediately without any further
action on the part of the Company and shall become effective as to each other
person who is hereafter elected or appointed to any such office by the Company
upon such election or appointment. The Company represents to each Underwriter
that they have notified Mr. Marks and other persons presently serving as such
officers of such designation and appointment and that all such persons have
accepted the same in

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<PAGE> 32
writing and that it will so notify, and obtain the consent in writing of, each
person so elected or appointed to any such office in the future. The Company
further agrees that, to the extent permitted by law, service of process upon
any such person shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. The Company further agrees to
take any and all action, including the execution and filing of all such
instruments and documents, as may be necessary to continue such designation and
appointment in full force and effect for five years from the First Closing
Date. Notwithstanding the foregoing the Company agrees, if requested by you,
to appoint CT Corporation System in San Francisco, California as successor to
such persons on the terms provided above, provided such successor accepts such
appointment in writing.

Nothing in this Section 19 should be construed as a general
consent to service of process as to which any shareholder of the Company or any
other person may rely in connection with any suit or proceeding against the
Company.

20. General. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in
several counterparts, each one of which shall be an original, and all of which
shall constitute one and the same document.

In this Agreement, the masculine, feminine and neuter genders and
the singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company and you.

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<PAGE> 33
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon
it will become a binding agreement between the Company and the several
Underwriters including you, all in accordance with its terms.

Very truly yours,

FLEXTRONICS INTERNATIONAL LTD.

By:
---------------------------------------
Chairman of the Board and
Chief Executive Officer

The foregoing Underwriting
Agreement is hereby confirmed and
accepted by us in San Francisco,
California as of the date first above
written.

MONTGOMERY SECURITIES
COWEN & COMPANY
UBS SECURITIES

By MONTGOMERY SECURITIES

By:
--------------------------------------
Senior Managing Director

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<PAGE> 34
SCHEDULE A

<TABLE>
<CAPTION>
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
<S> <C>
Montgomery Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______
Cowen & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______
UBS Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000
</TABLE>

-34-

<PAGE> 1

EXHIBIT 99.1

CONSENT OF PROPOSED DIRECTOR

I hereby consent to become a director of Flextronics International Ltd.
(the "Company"), effective immediately following the next Annual General Meeting
(currently scheduled for October 14, 1997), and also hereby consent to being
named in the Prospectus constituting part of the Registration Statement on Form
S-3 (File No. 333-21715) of the Company as a proposed member of the Board of
Directors of the Company and as having agreed to serve in such capacity.

Dated: September 11, 1997

/s/ Patrick Foley
------------------
Patrick Foley

<PAGE> 1

EXHIBIT 99.2

CONSENT OF PROPOSED DIRECTOR

Dated: September 13, 1997

/s/ Chuen Fah Alain Ahkong
--------------------------
Chuen Fah Alain Ahkong

NRIC: S22212772