FLEXTRONICS INTERNATIONAL LTD, S-1, 1997-12-16

FLEXTRONICS INTERNATIONAL LTD
S-1, 1997-12-16
PRINTED CIRCUIT BOARDS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997

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

FORM S-1
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 NO.)
INCORPORATION)
</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:
GORDON K. DAVIDSON, ESQ.
DAVID K. MICHAELS, ESQ.
TRAM T. PHI, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time 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. [X]

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. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
================================================================================================================================
TITLE OF EACH PROPOSED PROPOSED AMOUNT OF
CLASS OF SECURITIES SHARES TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------------------------------------------------------
Ordinary Shares, par value S$0.01.................... 3,288,459 $36.75 $120,850,868 $35,651
================================================================================================================================
</TABLE>

THE FILING FEE OF $35,651 ON THE 3,288,459 SHARES REGISTERED HEREBY IS BEING
PAID CONCURRENTLY WITH THE FILING OF THIS FORM S-1, AND IS BASED ON THE AVERAGE
OF THE HIGH AND LOW PRICES FOR THE COMMON STOCK AS REPORTED ON THE NASDAQ
NATIONAL MARKET SYSTEM ON DECEMBER 10, 1997 PURSUANT TO RULE 457.

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 STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

3,288,459 SHARES

FLEXTRONICS INTERNATIONAL
ORDINARY SHARES

(S$.01 PAR VALUE PER SHARE)
------------------------
This Prospectus relates to the public offering, which is not being
underwritten, of 3,288,459 Ordinary Shares, S$.01 par value per share, of
Flextronics International Ltd. ("Flextronics," the "Company" or the
"Registrant"). All 3,288,459 shares (the "Shares") may be offered by certain
shareholders of the Company or by pledges, donees, transferees or other
successors in interest that receive such shares as a gift, partnership
distribution or other non-sale related transfer (the "Selling Shareholders") who
received such shares in connection with the acquisitions of Neutronics
Electronics Industries Holding AG ("Neutronics"), DTM Products, Inc. ("DTM"),
and Energipilot AB ("Energipilot"). The Shares were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Section 4(2) thereof.

The Shares may be offered by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). See "Plan of Distribution."

The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection with the
registration of the Shares being offered and sold by the Selling Shareholders.

The Ordinary Shares are quoted on the Nasdaq National Market under the
symbol FLEXF. On December 10, 1997 the average of the high and low price for the
Ordinary Shares was $36.75 per share.

See "Risk Factors" commencing on page 4 for a discussion of certain factors
that should be considered by prospective purchasers.
------------------------
The Selling Shareholders and any broker-dealers or agents that participate
with the Selling Shareholders in the distribution of the shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" herein for a description of
indemnification agreements.
------------------------
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.
------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER , 1997
<PAGE> 3

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this Prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.

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-1 (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.

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<PAGE> 4

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. 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.

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 "Karlskrona 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 -- Recent Acquisitions."

On October 30, 1997 the Company acquired 92% of the outstanding ordinary
shares of Neutronics Electronics Industries Holding AG ("Neutronics"), an
Austrian PCB assembly company with operations in Austria and Hungary, in
exchange for 2,806,000 Ordinary Shares of the Company. Neutronics' subsidiaries
have three manufacturing facilities in Hungary (including a campus in Sarvar)
and one manufacturing facility in Austria. These facilities, which total 718,000
square feet and have a total of approximately 3,500 employees, are engaged
primarily in PCB assembly, as well as related activities such as engineering and
design, and injection molded plastics.

Since 1994, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, both through
acquisitions and internal growth. In fiscal 1997, in addition to the acquisition
of the Karlstrona Facilities, the Company expanded its advanced PCB design
capabilities by acquiring Fine Line Printed Circuit Design, Inc. ("Fine Line")
for 223,321 Ordinary Shares; 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. In fiscal 1998, in addition to the
Neutronics acquisition, the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB, a Swedish company
principally engaged in providing cables and cable assemblies for Northern
European OEMs, in exchange for 229,990 Ordinary Shares. The Company intends to
continue to pursue attractive acquisition opportunities in the future. See "Risk
Factors -- Acquisitions."

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<PAGE> 5

RISK FACTORS

SIGNIFICANT LEVERAGE

The Company has significant amounts of outstanding indebtedness and
interest cost. The Company's level of indebtedness presents risks to investors,
including the possibility that the Company may be unable to generate cash
sufficient to pay the principal of and interest on the indebtedness when due. At
September 30, 1997, on a pro forma basis after giving effect to the sale of the
senior subordinated notes and the equity offering and the application of the net
proceeds therefrom to reduce indebtedness of approximately $169.6 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) compared to
$52.6 million as at September 30, 1996. The Company's indebtedness at September
30, 1997, included $111.0 million borrowed on March 27, 1997, and an additional
$36.0 million borrowed during the six months ended September 30, 1997 which
substantially increased the Company's leverage. See "Description of the Credit
Facility."

Additionally, the Company's level of Indebtedness could have a material
adverse effect on the Company's future operating performance, including, but not
limited to, the following: (i) a significant portion of the Company's cash flow
from operations will be dedicated to debt service payments, thereby reducing the
funds available to the Company for other purposes; (ii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or general corporate purposes or other purposes may
be impaired; (iii) the Company's leverage may place the Company at a competitive
disadvantage; (iv) the Company's leverage may limit its ability to expand and
otherwise meet its growth objectives; and (v) the Company's leverage may hinder
its ability to adjust rapidly to changing market conditions and could make it
more vulnerable in the event of a downturn in general economic conditions or its
business.

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 increase.

MANAGEMENT OF EXPANSION AND CONSOLIDATION

The Company is currently experiencing a period of rapid expansion through
both internal growth and acquisitions, with net sales increasing from $80.7
million in fiscal 1992 to $490.6 million in fiscal 1997 and $407.0 million in
the first six months of fiscal 1998. 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 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, its results of operations,
prospects or debt service ability. In addition, the Company's results of
operations, prospects or debt service ability 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. 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 its expansion efforts. See "-- Acquisitions." In addition,
the Company has recently completed the construction of significant new
facilities in Guadalajara, Mexico, Doumen, China, and San Jose, California,
resulting in new fixed costs and other operating expenses, including substantial
increases in depreciation expense that will increase the Company's cost of
sales. There can be no assurances that the

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<PAGE> 6

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 results of operations, prospects or debt service ability 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 and the operations of Neutronics, 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, its results of operations, prospects or debt service ability 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. 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
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, its
results of operations, prospects or debt service ability, or that any such
acquisition will enhance the Company's business.

The March 27, 1997 acquisition of the Karlskrona Facilities and the
execution of a multi-year purchase agreement (the "Karlskrona Purchase
Agreement") between the Company and Ericsson (together the "Karlskrona
Acquisition") and the October 30, 1997 acquisition of Neutronics each represent
a significant expansion of the Company's operations and entail a number of
risks. The acquired operations 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. The
difficulties of this integration may be further complicated by the geographical
distance of the Karlskrona Facilities and Neutronics' operations from the
Company's current operations in East Asia and North America. In addition, these
acquisitions have increased and will continue to increase the Company's expenses
and working capital requirements, and place burdens on the

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<PAGE> 7

Company's management resources. In the event the Company is unsuccessful in
integrating the acquired operations, the Company would be materially adversely
affected. In addition, prior to the acquisitions of the Karlskrona Facilities
and Neutronics, the Company had no experience operating in Sweden or in Central
Europe, and there can be no assurance that the Company will achieve acceptable
levels of profitability at the acquired operations, or that the acquisitions
will not adversely affect its gross margins.

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. Further, no assurances can be given as to the Company's
ability to expand manufacturing capacity at the Karlskrona Facilities.

In the second quarter of fiscal 1998, the Company revised its estimate of
the useful lives of certain long-lived intangible assets (consisting of
goodwill, customer lists and trademarks and tradenames) associated with the
Astron acquisition, reducing the useful lives from 20 and 25 years to 10 years.
This revision will increase the Company's amortization expense by approximately
$279,000 per quarter beginning in the second quarter of fiscal 1998.

RISKS OF KARLSKRONA PURCHASE AGREEMENT

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. Prior to the Karlskrona
Acquisition, Ericsson was not a substantial customer of the Company. There can
be no assurance that the Company can reduce costs and prices to Ericsson over
time as contemplated by the Karlskrona 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, its results of operations, prospects or debt service
ability. 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. Ericsson has certain rights to be
consulted on the management of the Karlskrona Facilities and to

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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.

The Karlskrona 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 Karlskrona Purchase Agreement or
reduce costs and prices to Ericsson over time as contemplated by the Karlskrona
Purchase Agreement. In addition, the Karlskrona 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 Karlskrona
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 Karlskrona 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 Karlskrona 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 Karlskrona 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."

CUSTOMER CONCENTRATION; DEPENDENCE ON ELECTRONICS INDUSTRY

A small number of customers are currently responsible for a significant
portion of the Company's net sales. The Company's largest customer in the three
months ended September 30, 1997 was Ericsson, with net sales to Ericsson
accounting for approximately 30% of its total net sales. See "-- Risks of
Karlskrona Purchase Agreement." Net sales to Advanced Fibre Communications were
approximately 11% and 3% for the three months ending September 30, 1997 and
September 30, 1996 respectively. Net sales to the Company's top five customers
during the six months ended September 30, 1997 accounted for approximately 63%
of consolidated sales compared to 46.5% during the six months ended September
30, 1996. In fiscal 1997 the Company's five largest customers accounted for
approximately 46% 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 30.9% and 10.6% of the Company's net sales for the
first six months of fiscal 1998 were derived from sales to Ericsson and Advanced
Fibre Communications, respectively. The Company 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. See
"Business -- Customers" and "-- Karlskrona Acquisition."

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,
its results of operations, prospects or debt service ability. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

7
<PAGE> 9

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, its results of operations, prospects or debt service
ability. 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, its results of operations, prospects or debt service ability. 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.
The Company anticipates charges in the third quarter of fiscal 1997 of
approximately $4.0 million as a result of its acquisition of Neutronics in
October 1997 and Neutronics' cancellation of its planned initial public
offering. 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, its results of operations, prospects or debt service ability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

8
<PAGE> 10

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, results of operations, prospects
or debt service ability 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, its results of operations, prospects or debt
service ability. 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, cash flow and debt service
ability 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, cash flow and debt service ability would be
adversely affected. The expansion by the Company of its operations

9
<PAGE> 11

in North America and 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 Austria,
China, Hungary, 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 $302.0
million in the six months ended September 30, 1997, $107.8 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,
its results of operations, prospects or debt service ability. 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 United

10
<PAGE> 12

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, its results of operations, prospects or debt service ability. There
can be no assurance, however, that changes in political, legal or other
conditions will not result in any such 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.

Risks Relating to Hungary. A majority of Neutronics' manufacturing
operations are located in Hungary. Hungary has undergone significant political
and economic change in recent years. Political, economic, social and other
developments in Hungary may in the future have a material adverse effect on the
Company's business. In particular, changes in laws or regulations (or in the
interpretation of existing laws or regulations), whether caused by change in the
Hungarian government or otherwise, could materially adversely affect the
Company's operations and business. Annual inflation and interest rates in
Hungary have been much higher than those in Western Europe. Exchange rate
policies have not always allowed for the free conversion of currencies at the
market rate. Fluctuations of inflation and exchange rates could have an adverse
effect on the Neutronics operations business and the market value of the Shares.

Corporate contract, property, insolvency, competition and securities and
other laws and regulations in Hungary have been, and continue to be,
substantially revised during its transition to a market economy. Therefore, the
interpretation and procedural safeguards of the new legal and regulatory system
are in the process of being developed and defined and existing laws and
regulations may be applied inconsistently. Also, in some circumstances, it may
not be possible to obtain the legal remedies provided for under those laws and
regulations in a reasonably timely manner, if at all.

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 entered into
forward exchange contracts with respect to the kronor to reduce foreign exchange
risks arising from a kronor-denominated intercompany loan. These contracts were
settled in September 1997 and did not have a material effect on the Company's
results of operations or cash flow. The Company from time to time may enter into
forward exchange contracts or other hedging activities with respect to other
specific, fixed foreign currency obligations. Because the Company only hedges
fixed obligations, the Company does not expect that these hedging activities
will have a material effect on its results of operations or cash flow. However,
there can be no assurance that the Company will engage in any hedging activities
in the future or that any of its hedging activities will be successful. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Foreign Exchange Gain (Loss)."

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

11
<PAGE> 13

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, its results of operations, prospects or
debt service ability.

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 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 Company, its
results of operations, prospects or debt service ability. 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, its
results of operations, prospects or debt service ability.

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 printed circuit board 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,
its results of operations, prospects or debt service ability.

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

12
<PAGE> 14

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, its results of operations, prospects or debt service ability.

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.

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 terms of the Company's senior
subordinated notes 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" and "Description of the Credit
Facility." The Company anticipates that all earnings in the foreseeable future
will be retained to finance the continuing development of its business.

13
<PAGE> 15

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 1/2
Second Quarter............................................ $47 3/8 $26 3/8
Third Quarter(through December 10, 1997).................. $49 1/2 $34 1/2
</TABLE>

On December 10, 1997, the closing sale price of the Ordinary Shares was
$35.75 per share.

14
<PAGE> 16

SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company as of
and for each of the six months ended September 30, 1996 and 1997 and the fiscal
years ended March 31, 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 for the fiscal year ended March 31, 1994 have been derived from
audited financial statements not included in this Prospectus. The selected
financial data as of September 30, 1997 and for the six months ended September
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>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------------- ----------------------------
1994 1995 1996(1) 1997(2) 1996 1997
-------- -------- ------------- ------------- ------------- ------------
(RESTATED)(3) (RESTATED)(3)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $131,345 $237,386 $ 448,346 $ 490,585 $ 240,359 $406,970
Cost of sales.............................. 117,392 214,865 407,457 440,448 214,350 366,018
-------- -------- -------- -------- -------- --------
Gross profit............................. 13,953 22,521 40,889 50,137 26,009 40,952
Selling, general and administrative
expenses................................. 8,667 11,468 18,787 26,765 12,179 20,016
Acquired in-process research and
development.............................. 202 91 29,000 -- -- --
Goodwill amortization...................... 398 510 739 989 485 970
Intangible assets amortization............. 21 245 544 1,646 834 778
Provision for plant closings............... 830 -- 1,254 5,868 -- --
-------- -------- -------- -------- -------- --------
Operating income (loss).................. 3,835 10,207 (9,435) 14,869 12,511 19,188
Net interest expense....................... (1,778) (774) (2,380) (3,885) (2,127) (7,116)
Merger expenses............................ -- (816) -- -- -- --
Foreign exchange gain (loss)............... 402 (303) 872 1,168 218 944
Income (loss) from associated company...... (70) (729) -- 241 -- 650
Other income (expense)..................... -- 34 (398) (2,718) 355 (176)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ 2,389 7,619 (11,341) 9,675 10,957 13,490
Provision for income taxes................. 654 1,463 3,791 2,212 1,622 1,653
Extraordinary gain......................... 416 -- -- -- -- --
Net income (loss)........................ $ 2,151 $ 6,156 $ (15,132) $ 7,463 $ 9,335 $ 11,837
======== ======== ======== ======== ======== ========
Weighted average Ordinary Shares and
equivalents.............................. 7,730 12,103 12,684 14,877 14,372 15,107
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30, 1997
--------------------------------------------------- ----------------------------
1994 1995 1996 1997 ACTUAL PRO FORMA(4)
-------- -------- ------------- ------------- ------------- ------------
(RESTATED)(3) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................... $ 30,669 $ 33,425 $ 30,801 $ (25,047) $ (12,847) 165,332
Total assets................................. 103,129 116,117 231,024 359,234 426,300 526,860
Long-term debt and capital lease obligations
including current portion.................. 4,755 6,890 17,674 12,302 166,644 169,644
Shareholders' equity (deficit)............... 46,703 57,717 73,059 83,592 96,367 193,927
</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.

(3) The consolidated financial statements of the Company for the fiscal year
ended March 31, 1996 and the six months ended September 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

15
<PAGE> 17

Consolidated Financial Statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Changes in
Accounting for Astron Acquisition."

(4) Gives pro forma effect to (i) the October 15, 1997 sale by the Company of
$150.0 million principal amount of 8 3/4% senior subordinated notes due 2007
and the Company's public offering of 2,185,000 Ordinary Shares completed in
October 1997 and (ii) the application of the net proceeds therefrom to repay
outstanding loans under the Credit Facility and for working capital, all as
if such transactions had occurred at September 30, 1997 for purposes of the
pro forma balance sheet data.

16
<PAGE> 18

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) $13.4 million 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

17
<PAGE> 19

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 (although the Company does not currently expect that such
event will have a significant long-term effect on Astron's business, customer
base or intangible assets); (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, materials 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 -- Acquired In-Process 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 and accrued the $2.2
million balance in the fourth quarter of fiscal 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 Company's credit facility, which the Company repaid in October 1997 with the
net proceeds from the Company's debt and equity offerings. The transaction has
been accounted for under the purchase method. As a result, the purchase price
was allocated to the assets acquired

18
<PAGE> 20

based on their estimated fair market values at the date of acquisition. See
"Risk Factors -- Acquisitions" and "Business -- Recent Acquisitions."

On October 30, 1997 the Company acquired 92% of the outstanding ordinary
shares of Neutronics, an Austrian PCB assembly company with operations in
Austria and Hungary, for 2,806,000 Ordinary Shares of the Company. Neutronics'
sales in the 12 months ended June 30, 1997 were approximately $142.6 million.
Neutronics' largest customer is Philips Electronics which accounted for
approximately 60% of its net sales for the six month period ended June 30, 1997.

The acquisition of Neutronics will be accounted for as a
pooling-of-interests, and the Company will restate its prior period financial
statements to give effect to this acquisition when it reports its results for
the fiscal quarter ended December 31, 1997. The combined company anticipates
incurring expenses of approximately $4.0 million during the quarter ending
December 31, 1997 associated with this transaction and the cancellation of
Neutronics' planned initial public offering. The ability of the Company to
obtain the benefits of the Neutronics acquisition is subject to a number of
risks and uncertainties, including the Company's ability to successfully
integrate the operations of Neutronics and its ability to maintain, and
increase, sales to Neutronics customers. See "Risk Factors -- Acquisitions" and
"Business -- Recent Acquisitions."

On December 1, 1997 the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB, a Swedish company
principally engaged in providing cables and cable assemblies for Northern
European OEMs, in exchange for 229,990 Ordinary Shares. The acquisitions of DTM
and Energipilot will be accounted for as poolings-of-interests. The Company does
not intend to restate its prior period financial statements with respect to
these acquisitions because they will not have a material impact on its
consolidated results.

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, Asia and 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, 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, Mexico. In Asia,
the Company has expanded its Doumen facilities by developing an additional
224,000 square feet for miniaturized gold-finished PCB fabrication and for PCB
and full system assembly. The Company completed the construction of this
expanded facility in June 1997 and has commenced production at these new and
expanded 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-

19
<PAGE> 21

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>
FISCAL YEAR ENDED MARCH 31, NINE MONTHS ENDED DECEMBER 31,
1996 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
</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 would not seek re-election at
the Company's next Annual General Meeting, which was held on October 14, 1997.
Accordingly, the engagement of Ernst & Young terminated at the time of the
Annual General Meeting. The nomination of Arthur Andersen LLP as the Company's
independent public accountants was approved by the holders of a majority of the
Company's Ordinary Shares 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 October 14, 1997
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.

20
<PAGE> 22

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>
SIX MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, SEPTEMBER 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 89.2 89.9
----- ----- ----- ----- -----
Gross profit....................................... 9.5 9.1 10.2 10.8 10.1
Selling, general and administrative expenses....... 4.8 4.2 5.5 5.1 4.9
Goodwill and intangible assets amortization........ 0.4 0.2 0.5 0.5 0.5
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 5.2 4.7
Net interest expense............................... (0.4) (0.5) (0.8) (0.8) (1.7)
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) 0.1 --
----- ----- ----- ----- -----
Income (loss) before income taxes........ 3.2 (2.5) 1.9 4.6 3.3
Provision for income taxes......................... 0.6 0.9 0.4 0.7 0.4
----- ----- ----- ----- -----
Net income (loss)........................ 2.6% (3.4%) 1.5% 3.9% 2.9%
===== ===== ===== ===== =====
</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 six
months ended September 30, 1997 increased 69.3% to $407.0 million from $240.4
million for the six months ended September 30, 1996. The increase in sales for
the
six months 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 including Advanced Fibre Communications, Microsoft
and Thermoscan. This increase was partially offset by reduced sales to certain
customers, including Microcom, Visioneer, US Robotics and Global Village. See
"Risk Factors -- Customer Concentration; Dependence on Electronics Industry" and
"Risk Factors -- Risks of Karlskrona Acquisition."

The Company's largest customers during the six month period ending
September 30, 1997 were Ericsson and Advanced Fibre Communications. Net sales to
Ericsson for the six month period accounted for approximately 30% of net
consolidated sales while net sales to Advanced Fibre Communications for the six
month period accounted for approximately 11% of net consolidated sales for the
periods. No other customer accounted for more than 10% of consolidated net sales
for the six month periods ending September 30, 1997.

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, 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

21
<PAGE> 23

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 decreased to
10.1% for the six months ended September 30, 1997 as compared to 10.4% for the
six months ended September 30, 1996. The decrease in the gross profit margin for
the six months ended September 30, 1997 was mainly due to increased depreciation
and other fixed expenses as the Company commenced volume production in the new
facilities in Doumen, China and Mexico. The decrease in the gross profit margin
was offset slightly by the inclusion of the Sweden facility which manufactures
high rmaragin products. In addition, the Company has begun manufacturing several
products on a consignment basis. Consignment projects typically have higher
gross profit margin than turnkey projects.

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.

Cost of sales included research and development costs of approximately
$561,000 and $458,000 in the six months ended September 30, 1997 and 1996,
respectively, and $913,000 and $153,000 in fiscal 1997 and 1996, respectively.
The increase from fiscal 1996 to fiscal 1997 was primarily due to the inclusion
of Astron's results following its acquisition in February 1996.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended
September 30, 1997 increased to $20.0 million from $12.2 million for the six
months ended September 30, 1996 but decreased as a percentage of net sales to
4.9% for the six months ended September 30, 1997 from 5.1% for the six months
ended September 30, 1996. The increase in selling expenses were mainly 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 the growth in infrastructure including the hiring of additional internal
support, personnel and increases in related department 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 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

22
<PAGE> 24

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 six months ended September 30, 1997 increased to
$1.7 million from $1.3 million for the six months ended September 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.

23
<PAGE> 25

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 $7.1 million for the six months ended
September 30, 1997 from $2.1 million for the six months ended September 30,
1996. The increase was primarily due to increased bank borrowings to finance the
Karlskrona Acquisition capital expenditures. The Company anticipates that its
interest expense will increase in future periods as a results of borrowings
under its credit facility and its issuance in October 1997 of $150.0 million
principal amount of senior subordinated notes. See "-- Liquidity and Capital
Resources."

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 $944,000 in the six months ended
September 30, 1997 from $218,000 in the six months ended September 30, 1996. The
increase in the exchange gains for the six months ended September 30, 1997 was
mainly due to the strengthening of the U.S. dollar against Asian currencies and
the Swedish kronor. Foreign exchange gain (loss) increased to $1.2 million in
fiscal 1997 from $872,000 in fiscal 1996 and 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.

24
<PAGE> 26

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
$650,000 in the six months ended September 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 $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 a $3.2 million write-off of publicly traded common
stock received from a customer in 1997 in payment of $3.2 million in accounts
receivable. As a result of a significant decline in the market value of this
common stock following its receipt by the Company, this common stock was
subsequently deemed to be permanently impaired in 1997 resulting in a $3.2
million increase in other expense. Other expense in fiscal 1997 also included
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 $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.

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 Austria, China, Hungary,
Malaysia, Mauritius, Mexico, 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%.

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<PAGE> 27

The Company's consolidated effective tax rate was 12.3% for the six months
ended September 30, 1997 compared to 14.8% in the six months ended September 30,
1996 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%.

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 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%.

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.

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<PAGE> 28

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, mix of orders filled, timing of acquisitions and related expenses,
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 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 $147.5 million at September 30, 1997 and $81.0
million at September 30, 1996. Backlog consists of contracts or purchase orders
with delivery dates scheduled within the next sixty days as customers have the
right to typically change their orders beyond 60 days. 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, the sale of
senior subordinated notes 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. At September 30, 1997 the
Company had cash balances totaling $17.8 million, outstanding bank borrowings of
$147.0 million and an aggregate of $9.0 million available for borrowing under
the Credit Facility.

Net cash provided by operating activities was $19.1 million for the six
months ended September 30, 1997, consisting of $58.8 million of cash provided by
net income, depreciation, increases in accounts payable and other sources,
offset by $39.7 million of cash used for increases in inventory and accounts
receivable and other operating activities. Depreciation expense was $9.7 million
and $6.5 million for the six months ended September 30, 1997 and September 30,
1996, respectively. Net cash provided by operating activities was $17.9 million
for the six months ended September 30, 1996, consisting of $30.6 million of cash
provided by net income before depreciation and including decreases in accounts
receivable, offset by $12.7 million of cash used for operating activities,
primarily payments of 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.

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<PAGE> 29

Accounts receivable, net of allowance for doubtful accounts increased to
$90.3 million at September 30, 1997 from $65.3 million at March 31, 1997. The
increase in accounts receivable was primarily due to increased sales in the
second quarter of fiscal 1998. Inventories increased to $112.9 million at
September 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
the growing sales. The Company's allowance for doubtful accounts decreased from
$5.7 million at March 31, 1997 to $5.1 million at September 30, 1997. The
Company's allowance for inventory obsolescence decreased from $6.3 million at
March 31, 1997 to $6.0 million at September 30, 1997. The decreases in the
allowances were due to the write-offs of accounts receivable and inventories
during the six months ended September 30, 1997.

Accounts receivable, net of allowance for doubtful accounts, decreased to
$65.3 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 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 six months ended
September 30, 1997 was $54.2 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 six months ended
September 30, 1996 was $12.4 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 $29.9 million for the six
months ended September 30, 1997 and $2.2 million for the six months ended
September 30, 1996, in each case consisting primarily of proceeds from bank
borrowings offset in part by a reduction in capital lease obligations. Bank
borrowings increased from $18.0 million at September 30, 1996 to $147.0 million
at September 30, 1997 due primarily to bank borrowings to fund the purchase
price for the Karlskrona Facilities.

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<PAGE> 30

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 a $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. Under the Credit
Facility, subject to compliance with certain financial ratios and the
satisfaction of customary borrowing conditions, the Company borrowed a $70.0
million term loan on March 27, 1997 and the 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
September 30, 1997, $77.0 million of revolving credit loans and a $70.0 million
term loan were outstanding, and bore interest at a variable rate equal, as of
September 30, 1997, to approximately 8.4% per annum. Loans under the revolving
credit facility will mature in March 2000. 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 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. The credit
facility contains a number of operating and financial covenants and provisions.
The Company was in compliance with all financial covenants and provisions as of
September 30, 1997.

Subsequent to September 30, 1997, the Company completed an equity offering,
selling 2,185,000 Ordinary Shares for net proceeds of approximately $96.0
million. On October 15, 1997, the Company also completed the sale of $150.0
million principal amount of senior subordinated notes. The proceeds from both
equity and debt offerings were used to pay off the $70.0 million term loan and
the $77.0 million outstanding balance of the revolving credit facility. The
Company intends to continue to borrow revolving credit loans under the Credit
Facility. See "Risk Factors -- Significant Leverage" and "Description of the
Credit Facility."

The Company's capital expenditures in the first six months of fiscal 1998
were approximately $46.3 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

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<PAGE> 31

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, net proceeds of its debt offering and amounts
available under the Credit Facility, will be sufficient to fund its operations
through fiscal 1998.

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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 $60.0 billion.
According to this study, the industry is expected to grow to approximately
$110.0 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
advanced, high

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<PAGE> 33

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,
adding facilities in San Jose, California, and acquiring the Karlskrona
Facilities in Karlskrona, Sweden and acquiring Neutronics, with
manufacturing operations in Austria and Hungary. 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, BGA 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 believes that it

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can enhance responsiveness and flexibility, increase manufacturing
efficiency and reduce total cycle times.

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 has incorporated suppliers of custom components
in its facilities in China and Mexico to further reduce material and
transportation costs. The Company has established 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 device
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 six months of fiscal 1998, the Company's five largest
customers accounted for approximately 46% and 63%, respectively, of net sales.
The loss of one or more major customers would have a material adverse effect on
the Company, its results of operations, prospects or debt service ability. 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 two quarters 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."

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SALES AND MARKETING

The Company achieves worldwide sales coverage through a direct sales force,
which focuses on generating new accounts, and through 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 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

34
<PAGE> 36

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.

With its acquisitions of Neutronics and DTM, the Company gained significant
plastic injection molding capabilities. In addition, the Company has a 40%
investment in FICO, which produces injection molded plastics for Asian
companies. Neutronics offers a wide range of custom-manufactured plastic
components for various sectors of the electronics industry, including consumer,
computer, telecommunications, medical and industrial. The Company's plastic
component manufacturing operations in Hungary utilize highly automated injection
molding processes.

The electronic products market is directly dependent on the plastic
components market for the packaging of an electronic product. The design of
plastic components for a new electronic product, and the associated sourcing of
plastic molds, normally involves a substantial lead time. As a result, plastic
suppliers with technical capabilities, such as Neutronics and DTM, are able to
provide additional services to electronic product manufacturers, such as the
development of plastic components and electronics assembly and development, to
improve the production process and reduce the finished product's time to market.

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

35
<PAGE> 37

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 ("COB") and ball grid array ("BGA")
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 technology
for packaging semiconductors that can provide higher interconnect density and
improved assembly yields and reliability by assembling surface-mount packages to
the circuit board through an array of solder balls, rather than pin leads. The
Company has recently begun utilizing BGA technology to manufacture 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

36
<PAGE> 38

services available. Failure to satisfy any of the foregoing requirements could
materially adversely affect the Company's competitive position, its results of
operations, prospects or debt service ability.

EMPLOYEES

As of October 31, 1997, the Company employed approximately 10,296 persons,
including approximately 995 employees in Sweden who were added with the
Karlskrona Acquisition and 3,485 employees in Austria and Hungary who were added
with the Neutronics acquisition. Most of the Company's non-management employees
outside of the United States 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, its results of operations, prospects
or debt service ability. To date, the Company has not experienced significant
difficulties in attracting or retaining such 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."

RECENT ACQUISITIONS

On October 30, 1997 the Company acquired 92% of the outstanding ordinary
shares of Neutronics, an Austrian contract manufacturer with operations in
Austria and Hungary, for 2,806,000 Ordinary Shares of the Company. Neutronics'
net sales in the 12 months ended June 30, 1997 were approximately $142.6
million. Neutronics' customers include Philips Electronics, Nokia and other OEMs
in the consumer electronics, business electronics, computer telecommunications,
primary care, medical appliances and automotive electronics industries.
Approximately 80% of Neutronic's net sales for the year ended December 31, 1996
and 60% of its net sales for the six months ended June 30, 1997 were derived
from sales to Philips Electronics.

Neutronics conducts its operations through four manufacturing facilities,
one in Austria and three in Hungary. These facilities, which total 718,000
square feet and have a total of approximately 3,500 employees are engaged
primarily in PCB assembly, as well as injection molded plastics. Neutronics also
provides engineering services at its Althofen, Austria facility. The Company
believes that Neutronics' manufacturing sites in Hungary (at Tab, Sarvar and
Zalaegerszag) benefit from a relatively low cost of labor compared to Western
Europe and the United States. There can be no assurance that real wages in
Hungary will not rise to a level comparable to Western Europe or the United
States.

Neutronics commenced operations in July 1994 as a joint venture between a
subsidiary of Philips Electronics and Sandaplast B.V. ("Sandaplast"), a Dutch
company corporation based in Malaysia. Neutronics initially acquired Philips'
existing facility in Althofen, Austria, and subsequently established the three
Hungarian facilities, modernized the Austrian facility and added plastic
injection molding capabilities. Accordingly, Neutronics has a limited operating
history. At the time of the acquisition, Neutronics was owned by Philips,
Malaysian businessman Shing Leong Hui and Neutronics' management. Neutronics'
management retained ownership of eight percent of the shares of Neutronics and
S.L. Hui has joined the Company's Board of Directors.

On December 1, 1997, the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB, a Swedish company
principally engaged in providing cables and cable assemblies for Northern
European OEMs, in exchange for 229,990 Ordinary Shares.

The ability of the Company to obtain the benefits of the acquisitions of
Neutronics, DTM, and Energipilot is subject to a number of risks and
uncertainties, including the Company's ability to successfully integrate the
acquired operations and its ability to maintain, and increase, sales to
customers of the acquired companies. See "Risk Factors -- Acquisitions" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

37
<PAGE> 39

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
related Karlskrona 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 Neutronics 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, the Neutronics 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 and the Neutronics Acquisition, including
the Company's ability to reduce costs at the Karlskrona Facilities, the
Company's lack of experience operating in Sweden, Austria and Hungary, 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. Further, changes in exchange rates between Swedish kronor and the
Austrian Schilling on the one hand, and U.S. dollars on the other, will affect
the Company's operating results. See "Risk Factors -- Risks of Karlskrona
Acquisition."

38
<PAGE> 40

prices to Ericsson over time as contemplated by the Karlskrona Purchase
Agreement. In addition, the Karlskrona 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 Karlskrona
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 Karlskrona 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 Karlskrona 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 Karlskrona 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 Austria, China,
Hungary, Malaysia, Mexico, Singapore, Sweden, the United Kingdom and the United
States. In addition, the Company provides engineering services at its facilities
in Austria, 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 December 15, 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
Althofen, Austria(3).......... 1997 153,000 Owned Full system manufacturing; PCB
assembly.
Xixiang, China................ 1995 90,000 Leased High volume PCB assembly.
Hong Kong, China(4)........... 1996 45,000 Leased Fabrication of high density
PCBs
Doumen, China(4).............. 1996 330,000(4) Owned(5) Fabrication of high density,
miniaturized PCBs. High volume
PCB assembly.
Sarvar, Hungary(3)............ 1997 298,000 Owned(6) Full system manufacturing; PCB
assembly; plastic injection
molding.
Tab, Hungary(3)............... 1997 170,000 Owned Full system manufacturing; PCB
assembly.
Zalaegerszeg, Hungary(3)...... 1997 97,000 Owned Full system manufacturing; PCB
assembly.
Johore, Malaysia.............. 1991 80,000 Owned Full system manufacturing; PCB
assembly.
Guadalajara, Mexico........... 1997 101,000 Owned High volume PCB assembly.
Singapore(7).................. 1982 47,000 Leased Complex, high value-added PCB
assembly.
Karlskrona, Sweden............ 1997 330,000 Owned(8) Assembly and test of complex
PCBs and systems.
Stockholm, Sweden(9).......... 1997 70,000 Leased Assembly of cables and cable
assemblies.
Tonypandy, Wales(10).......... 1995 50,000 Owned Full system manufacturing;
medium complexity PCB assembly.
San Jose, California.......... 1994 65,000 Leased Full system manufacturing; PCB
assembly.
San Jose, California.......... 1996 32,500 Leased Complex, high value-added PCB
assembly.
San Jose, California.......... 1997 73,000 Owned Complex, high value-added PCB
assembly.
Niwot, Colorado(11)........... 1997 40,000 Leased Plastic injection molding.
Engineering Facilities
Althofen, Austria............. 1997 --(12) Owned Design, prototype and
engineering services.
Singapore..................... 1982 --(13) -- Design and prototype services.
Karlskrona, Sweden............ 1997 --(14) -- Design and prototype services.
Westford, Massachusetts....... 1987 9,112 Leased Design and prototype services.
San Jose, California.......... 1996 71,000 Leased Engineering services and
corporate functions.
</TABLE>

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

(1) Refers to year acquired, leased or constructed by the Company or its
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 Neutronics
acquisition.

(4) Acquired by the Company in fiscal 1996 in connection with the Astron
acquisition.

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

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<PAGE> 42

(6) The Company currently owns the land and certain of the buildings located in
the Sarvar Industrial Park and leases other buildings at this location.

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

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

(9) Acquired by the Company in fiscal 1998 in connection with the Energipilot
acquisition.

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

(11) Acquired by the Company in fiscal 1998 in connection with the DTM
acquisition.

(12) Located within the 153,000 square foot manufacturing facility in Althofen.

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

(14) 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 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% 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
October 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. 48 Senior Vice President of Finance and
Dykes Administration
Ronny Nilsson 49 Senior Vice President, Europe
Michael McNamara 40 Vice President, President North American
Operations
Stephen J. L. 36 Senior Vice President, Worldwide Sales and
Rees Marketing and Director
Michael J. Moritz 42 Director
Richard L. Sharp 50 Director
Patrick Foley 65 Director
Alain Ahkong 50 Director
Shing Leong Hui 39 Director
</TABLE>

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 served as a Director of the Company from
January 1994 until August 1997 and since February 1997 he has served as its
Senior Vice President of Finance and Administration. 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 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

42
<PAGE> 44

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 is Chairman of the Board and Chief Executive Officer of Circuit
City Stores, Inc., a consumer electronics and appliance retailer. He joined
Circuit City as an Executive Vice President in 1982. He was President from June
1984 to March 1997 and became Chief Executive Officer in 1986 and Chairman of
the Board in 1994. Mr. Sharp also serves as a director of Fort James
Corporation.

Patrick Foley -- Mr. Foley has been a Director of the Company since October
1997. Mr. Foley is Chairman, President and Chief Executive Officer of DHL
Corporation, Inc. and its major subsidiary, DHL Airways, Inc., a global
document, package and airfreight delivery company. He joined DHL in September
1988 with more than 30 years experience in hotel and airline industries. Mr.
Foley also serves as a director of Continental Airlines, Inc., Del Monte
Corporation, DHL International, Foundation Health Systems, Inc. and Glenborough
Realty Trust, Inc.

Alain Ahkong -- Mr. Ahkong has served as a Director of the Company since
October 1997. Mr. Ahkong is a founder of Pioneer Management Services Pte. Ltd.
("Pioneer"), a Singapore-based 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.

Shing Leong Hui -- Mr. Hui has served as a Director of the Company since
October 1997. Since 1996 he has been Managing Director of CS Hui Holdings in
Malaysia. Between 1984 and 1994 he was Managing Director of Samda Plastics
Industries Ltd., a plastic injection molding company in Malaysia. Since 1994 Mr.
S.L. Hui has also been a committee member of the Penang, Malaysia Industrial
Council, Vice-Chairman of the SMI Center in Malaysia, and Chairman of the
Sub-Committee Plastics Technology Training Center in Malaysia. Since 1990 he has
been President of the North Malaysian Small and Medium Enterprises Association.

43
<PAGE> 45

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth information concerning the compensation paid
or accrued by the Company for services rendered during fiscal 1997, 1996 and
1995 by the Chief Executive Officer and each of the four most highly compensated
executive officers as of March 31, 1997 whose total salary and bonus for fiscal
1997 exceeded $100,000 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------ ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks........ 1997 $300,000 $ 80,400 $234,052(1) 250,000 $ 8,351(2)
Chairman of the Board 1996 $275,000 $132,500 -- 150,000 $ 10,209(3)
and Chief Executive 1995 $250,000 $ 45,750 -- 25,000 $ 9,170(4)
Officer
Tsui Sung Lam........... 1997 $256,791 $ 87,180 -- 20,000 $ 28,757(5)
President, 1996 $249,176 $143,313 -- 40,000 $ 39,988(6)
Asia-Pacific
Operations 1995 $216,028 $ 67,533 -- -- $ 18,288(7)
Michael McNamara........ 1997 $199,999 $ 30,642 $ 5,337(8) 21,000 $ 3,958(9)
Vice President, 1996 $173,250 $ 53,626 -- 15,000 --
President
of U.S. Operations 1995 $165,000 $ 15,468 -- -- --
Dennis Stradford(10).... 1997 $191,100 $ 33,634 -- -- $ 8,290(11)
Senior Vice President, 1996 $191,100 $ 65,066 -- 13,000 $ 9,419(12)
Sales and Marketing 1995 $182,000 $ 45,018 -- -- $ 8,800(13)
Goh Chan Peng(14)....... 1997 $174,283 $ 44,870 -- 16,000 $ 24,449(15)
Senior Vice President of 1996 $163,718 $ 65,976 -- 15,000 $ 24,217(16)
Finance and 1995 $134,193 $ 49,544 -- -- $ 14,122(17)
Operations,
Asia-Pacific
</TABLE>

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

(1) Includes an auto allowance of $7,712, forgiveness of a promissory note due
to a subsidiary of the Company of $200,000 and forgiveness of interest
payment of $26,340 on the promissory note payable to a subsidiary of the
Company.

(2) Includes Company contributions to the Company's 401(k) plan of $4,750 and
life and disability insurance premium payments of $3,601.

(3) Includes Company contributions to the Company's 401(k) plan of $4,370 and
life and disability insurance premium payments of $5,839.

(4) Includes Company contributions to the Company's 401(k) plan of $4,520 and
life insurance premium payments of $4,650.

(5) Includes life insurance payments of $736 and Company contributions to the
Central Provident Fund of $28,021. The Central Provident Fund is a
Singapore statutory savings plan to which contributions may be made to
provide for employees' retirement.

(6) Includes life insurance payments of $736 and Company contributions to the
Central Provident Fund of $39,252.

(7) Includes life insurance premium payments of $671 and Company contributions
to the Central Provident Fund of $17,617.

(8) Represents forgiveness of interest payment due on a promissory note payable
to a subsidiary of the Company.

(9) Represents Company contributions to the Company's 401(k) plan.

(10) Mr. Stradford was the Company's Vice President, Sales and Marketing through
April 1997. Mr. Stradford is now responsible for sales in Europe and is no
longer deemed an executive officer of the Company.

(11) Includes Company contributions to the Company's 401(k) plan of $4,750 and
life insurance premium payments of $3,540.

44
<PAGE> 46

(12) Includes Company contributions to the Company's 401(k) plan of $3,832 and
life insurance premium payments of $5,587.

(13) Includes Company contributions to the Company's 401(k) plan of $5,460 and
life insurance premium payments of $3,340.

(14) Mr. Goh was the Company's Chief Financial Officer for fiscal 1997. Mr. Goh
is no longer deemed an executive officer of the Company.

(15) Includes life insurance payments of $736 and Company contributions to the
Central Provident Fund of $23,713.

(16) Includes life insurance premium payments of $736 and Company contributions
to the Central Provident Fund of $23,481.

(17) Includes life insurance premium payments of $671 and Company contributions
to the Central Provident Fund of $13,451.

OPTION GRANT TABLE

The following table sets forth information regarding option grants during
fiscal 1997 to each of the Named Executive Officers. All options were granted
pursuant to the Company's 1993 Share Option Plan. In accordance with the rules
of the Securities and Exchange Commission, the table sets forth the hypothetical
gains or "option spreads" that would exist for the options at the end of their
respective five-year terms. These gains are based on assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted to the end of the option term.

OPTION GRANTS IN FISCAL 1997

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
PERCENTAGE AT ASSUMED ANNUAL RATES
NUMBER OF OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) IN 1997 SHARE(2) DATE 5% 10%
- ------------------------------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks............... 250,000 34.7% $ 23.125 11/08/01 $1,597,244 $3,529,511
Tsui Sung Lam.................. 20,000 2.8% $ 23.125 11/08/01 127,780 282,361
Michael McNamara............... 1,000 0.1% $ 19.75 08/27/01 5,457 12,058
20,000 2.1% $ 23.125 11/08/01 127,780 282,361
Dennis P. Stradford............ -- -- -- -- -- --
Goh Chan Peng.................. 1,000 0.1% $ 19.75 08/27/01 5,457 12,058
15,000 2.1% $ 23.125 11/08/01 95,835 211,771
</TABLE>

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

(1) The options shown in the table were granted at fair market value, are
incentive stock options and will expire five years from the date of grant,
subject to earlier termination upon termination of the optionee's
employment. The options become exercisable over a four-year period, with 25%
of the shares vesting on the first anniversary of the date of grant and
1/36th of the shares vesting for each full calendar month that an optionee
renders services to the Company thereafter. All of the options shown in the
table will become immediately exercisable for all of the option shares in
the event the Company is acquired by merger or sale of substantially all of
the Company's assets or outstanding Ordinary Shares, unless the options are
assumed or otherwise replaced by the acquiring entity. The Compensation
Committee has authority to provide for the acceleration of each option in
connection with certain hostile tender offers or proxy contests for Board
membership. Each option includes a limited stock appreciation right pursuant
to which the option will automatically be canceled upon the occurrence of
certain hostile tender offers, in return for a cash distribution from the
Company based on the tender offer price per share. In the case of Messrs.
Tsui and Goh, all of the options shown in the table will become immediately
exercisable in the event of termination of employment for any reason.

(2) The exercise price of the option may be paid in cash or through a cashless
exercise procedure involving a same-day sale of the purchased shares.

(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of share price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future Ordinary Share prices.

45
<PAGE> 47

YEAR-END OPTION TABLE

The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during fiscal 1997, including
the aggregate amount of gains on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of March 31, 1997. Also reported are values of "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding stock options and $19.875 per share, which was the closing
price of the Company's Ordinary Shares as reported on the Nasdaq National Market
on March 31, 1997, the last day of trading for fiscal 1997.

AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND YEAR-END VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(2) FISCAL YEAR-END(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(1) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks............ 10,000 286,700 132,002 349,998 1,196,977 692,213
Tsui Sung Lam............... 10,000 310,800 63,355 43,645 830,253 150,482
Michael McNamara............ -- -- 30,418 35,582 403,468 114,257
Dennis P. Stradford......... 16,000 416,648 6,105 6,895 44,970 52,915
Goh Chan Peng............... -- -- 35,230 27,770 502,256 70,529
</TABLE>

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

(1) "Value Realized" represents the fair market value of the Company's Ordinary
Shares underlying the option on the date of exercise less the aggregate
exercise price of the option.

(2) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's Ordinary Shares on March 31,
1997, the last day of trading for fiscal 1997.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee during fiscal 1997 were Mr. Dykes
and Mr. Sharp. Mr. Dykes resigned his position on the Compensation Committee
upon becoming an officer of the Company in February 1997. The current members of
the Compensation Committee are Mr. Sharp and Mr. Moritz. No officers of the
Company serve on the Compensation Committee.

EMPLOYMENT AND CONSULTING AGREEMENTS

In July 1993, the Company entered into employment agreements with Messrs.
Tsui and Goh. Under these agreements, Messrs. Tsui and Goh were entitled to
receive an annual salary (in Singapore dollars) of S$344,539 and S$207,103,
respectively. In April 1997, the Compensation Committee increased the base
salaries (in Singapore dollars) of Messrs. Tsui and Goh to S$429,000 and
S$304,499, respectively. In addition, the Company entered into revised
employment agreements with Messrs. Tsui and Goh as President, Asia Pacific
Operations and Senior Vice President of Finance and Operations, Asia Pacific,
respectively, effective April 1, 1997. Pursuant to the new employment
agreements, the employment of Messrs. Tsui and Goh will continue until either
the Company or the employee gives the other 12 months' notice of termination (or
pays the other 12 months' base salary in lieu of notice). The Company is
required to pay one month's salary for each year of employment by Messrs. Tsui
and Goh upon termination of their respective employment by the Company. The
Company also agreed that upon termination of employment of Messrs. Tsui or Goh
by the Company for any reason, any options to purchase Ordinary Shares then held
by them would immediately vest and become exercisable for all of the shares
subject to such option.

In connection with the Company's acquisition of Astron, Astron Technologies
Limited, a subsidiary of the Company ("ATL"), entered into a Services Agreement
(the "Services Agreement") with Croton Technology Ltd., a company under the
management and control of Mr. Rees ("Croton"), and Astron entered into a
Supplemental Services Agreement (the "Supplemental Services Agreement") with Mr.
Rees. Under the terms of the Services Agreement, Mr. Rees acted as President of
ATL, and Croton was responsible for

46
<PAGE> 48

developing the business of ATL through June 1998. The Services Agreement
provided that Croton will receive (i) a payment of $15.0 million on June 30,
1998, $5.0 million of which was to be payable in cash and $10.0 million of which
was to be payable in cash or the Ordinary Shares of the Company at the option of
the Company and (ii) an annual fee in the amount of $90,000. Payment of the
$15.0 million lump sum payment was conditioned upon, among other things, Mr.
Rees' continuing as Chairman of Astron through June 1998. The Services Agreement
was to terminate on June 30, 1998 but may be terminated for cause under the
terms described therein. Pursuant to the terms of the Supplemental Services
Agreement, Mr. Rees acted as Chairman of Astron and was responsible for
maintaining and developing the business of Astron, and, in exchange, received an
annual salary of $140,000. The Supplemental Services Agreement was to terminate
on June 30, 1998.

Effective March 27, 1997, the Company revised the Services Agreement and
the Supplemental Services Agreement, and appointed Mr. Rees as the Company's
Senior Vice President - Worldwide Sales and Marketing. In connection with this
revision, the amount of the payment due on June 30, 1998 was reduced from $15.0
million to $14.0 million and the remaining conditions to the Company's payment
of the fee were removed. Of the $14.0 million, $5.0 million remains payable in
cash, and $9.0 million remains payable in cash or, at the option of the Company,
in Ordinary Shares. This reduction was negotiated in view of (i) a negotiated
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 earnout payment, and
(ii) the elimination of the conditions to payment and of Mr. Rees' ongoing
obligations under the Services Agreement and the Supplemental Services
Agreement.

In connection with the acquisition of two manufacturing facilities from
Ericsson Business Networks AB located in Karlskrona, Sweden, the Company and Mr.
Ronny Nilsson entered into an Employment and Noncompetition Agreement
("Employment Agreement") and a Services Agreement (the "Nilsson Services
Agreement"), both dated as of April 30, 1997. Pursuant to the Employment
Agreement, Mr. Nilsson (a) was appointed as the Company's Senior Vice President,
Europe for a four-year period, (b) receives an annual salary of $250,000, and
(c) is entitled to a bonus of up to 45% of his annual salary upon the successful
completion of certain performance criteria. Pursuant to the Nilsson Services
Agreement, Mr. Nilsson is to perform management consultation and guidance
services to the Company in consideration of (a) an aggregate of $775,000 to be
paid between March 31, 1997 and April 15, 1998, and (b) the issuance by the
Company to Mr. Nilsson of an interest-free loan in the amount of $415,000 to be
repaid by Mr. Nilsson in two installments of $210,000 and $205,000 on September
15, 1997 and April 15, 1998, respectively.

On November 6, 1997, the Company's U.S. subsidiary loaned $1.5 million to
Mr. Marks, the Chairman of the Board and Chief Executive Officer of the Company.
Mr. Marks executed a promissory note in favor of Flextronics International USA,
Inc. which bears interest at a rate of 7.25% and matures on November 6, 1998.
This loan is secured by certain assets owned by Mr. Marks.

DESCRIPTION OF THE CREDIT FACILITY

The Credit Facility was established on March 27, 1997 and, subject to
compliance with certain financial covenants and the satisfaction of customary
borrowing conditions, provides for borrowings by the Company and Flextronics
International USA, Inc., a California corporation and wholly-owned Subsidiary of
the Company (the "United States Subsidiary") of an aggregate of $175.0 million.
BankBoston, N.A. (the "Bank"), an affiliate of BancBoston Securities, Inc., is
the lead agent and a lender under the Credit Facility.

The Credit Facility consists of two separate credit agreements, one
providing for up to $85.0 million principal amount of revolving credit loans and
a $70.0 million term loan to the Company and one providing for up to $20.0
million principal amount of revolving credit loans to the United States
Subsidiary. The ability of the Company and the United States Subsidiary to
borrow under the Credit Facility is subject to, among other things, compliance
with covenants, and financial ratios contained in the Credit Facility. The
revolving credit loans are subject to a borrowing base equal to 70% of
consolidated accounts receivable and 20% of consolidated inventory. As of
September 30, 1997, $77.0 million of revolving credit loans and the $70.0
million term loan were outstanding, and bore interest at a variable rate equal
to approximately 8.4% per annum. The

47
<PAGE> 49

term loan amortizes over a five-year period and is subject to certain mandatory
prepayment provisions. Loans under the revolving credit facility will mature in
March 2000. The Company used the net proceeds from the recently completed Equity
Offering and the sale of the Notes to repay in full the outstanding term loan
and revolving credit loans. The Company anticipates that it will from time to
time borrow revolving credit loans to fund its operations and growth.

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 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 under the Credit Facility bear interest at the lender's base rate
plus an applicable margin, depending on the Company's consolidated Leverage
Ratio (the ratio of Total Funded Indebtedness to EBITDA (each as defined
therein)). The Credit Facility further provides for the payment by the Company
of a commitment fee on the available and unused portion of the credit line and
certain other fees.

The Credit Facility contains covenants and provisions that, among other
things, prohibit the Company and its Subsidiaries from (i) incurring additional
indebtedness, subject to certain exceptions such as Subordinated Debt (as
defined therein) 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 and
other debt not to exceed $15.0 million; (ii) incurring liens on their property
(subject to certain exceptions); (iii) making Capital Expenditures (as defined
therein) exceeding $65.0 million in fiscal 1998 and $25.0 million annually
thereafter; (iv) engaging in certain dispositions 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
by the Company or its Subsidiaries, except that the Company's Subsidiaries are
permitted to pay dividends to the Company or to any Subsidiary that is a
Guarantor (as defined therein).

The Credit Facility also requires that the Company satisfy certain
financial covenants and tests on a consolidated basis that, among other things,
provide that the Company's: (i) Leverage Ratio must not exceed 4.25 : 1.00
(reducing to 2.75 : 1.00 by October 1, 1998), (ii) Interest Coverage Ratio (the
ratio of EBITDA to Consolidated Total 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 be less than 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 the sum of (a) 95% of Consolidated Tangible Net
Worth at March 31, 1997 plus (b) on a cumulative basis, 75% of positive
Consolidated Net Income (as defined therein) for each fiscal year subsequent to
the fiscal year ended 1997, plus (c) 100% of the proceeds of any Equity Issuance
(as defined therein).

48
<PAGE> 50

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Ordinary Shares as of December
1, 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 1997, (ii) all directors and
executive officers as a group, (iii) each person who is known by the Company to
own beneficially more than 5% of the Company's Ordinary Shares, and (iv) each
Selling Shareholder. 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>
SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF SHARES BENEFICIALLY
OFFERING(1) SHARES OWNED AFTER OFFERING(1)
----------------------- BEING -----------------------
NAMES AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
- ----------------------------------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS
Ronald Baron(3)................................ 1,754,700 9.1% -- 1,754,700 9.1%
c/o Baron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
New York, New York 10153
Putnam Investments, Inc.(4).................... 1,722,843 8.9% -- 1,722,843 8.9%
One Post Office Square
Boston, Massachusetts 02109
The Capital Group Companies(5)................. 1,125,000 5.8% -- 1,125,000 5.8%
333 South Hope Street
Los Angeles, California 90071
Richard L. Sharp(6)............................ 933,644 4.8% -- 933,644 4.8%
c/o Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
Sequoia Capital(7)............................. 818,956 4.2% -- 818,956 4.2%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, California 94025
Michael E. Marks(8)............................ 476,946 2.4% -- 476,946 2.4%
Tsui Sung Lam(9)............................... 72,627 * -- 72,627 *
Michael McNamara(10)........................... 92,768 * -- 92,768 *
Robert R.B. Dykes(11).......................... 38,664 * -- 38,664 *
Ronny Nilsson.................................. -- -- -- -- --
Michael Moritz(12)............................. 818,956 6.1% -- 818,956 6.1%
Stephen J.L. Rees(13).......................... 21,589 * -- 21,589 *
Richard L. Sharp(6)............................ 933,644 4.8% -- 933,644 4.8%
Patrick Foley(14).............................. 3,750 * -- 3,750 *
Alain Ahkong................................... -- -- -- -- --
Shing Leong Hui(15)............................ 1,650,250 8.6% 1,647,000 3,750 *
All directors and executive officers as a group
(11 persons)(16)............................. 4,109,694.. 20.8% -- 2,462,694 12.5%
SELLING SHAREHOLDERS
Bo Sjunnesson.................................. 229,990 1.2% 229,990 -- --
Osterreichische Philips Industrie GmbH......... 831,125 4.3% 831,125 -- --
Philips Beteiligungs GmbH...................... 266,875 1.4% 266,875 -- --
Shing Leong Hui(15)............................ 1,650,750 8.6% 1,647,000 3,750 *
Walter Mayrhofer............................... 61,000 * 61,000 -- --
Robert J. Grubb................................ 165,245 * 165,245 -- --
John W. Grubb.................................. 26,254 * 26,254 -- --
Nicole Leann Grubb Trust....................... 3,930 * 3,930 -- --
Kristen Lee Grubb Trust........................ 3,930 * 3,930 -- --
Kenneth Garrett Grubb Trust.................... 2,620 * 2,620 -- --
Capone Investments, Inc........................ 16,830 * 16,830 -- --
Plum Street Investments, Ltd................... 33,660 * 33,660 -- --
</TABLE>

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

* Less than 1%.

49
<PAGE> 51

(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 December 1, 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 19,289,077 outstanding Ordinary Shares
as of December 1, 1997.

(3) Based on information supplied by Mr. Baron in a Schedule 13G filed with the
Securities and Exchange Commission on September 10, 1997, includes (i)
204,700 shares held by the investment advisory clients of Baron Capital
Management, Inc. ("BCM"), a wholly-owned subsidiary of Baron Capital, Inc.
("BCI"), and (ii) 1,550,000 shares held by the investment advisory clients
of BAMCO, Inc. ("BAMCO") and Baron Asset Fund ("BAF"). BAF is an advisory
client of BAMCO. Pursuant to discretionary agreements, BCM and BAMCO hold
the power to vote and dispose of the shares in the advisory accounts. BCI
and BAMCO are wholly-owned subsidiaries of Baron Capital Group, Inc.
("BCG"). BAF and BCG are controlled by Mr. Baron, and Mr. Baron may be
deemed to share power to vote and dispose of such shares.

(4) Based on information supplied by Putnam Investments, Inc. ("PI") in a
Schedule 13G filed with the Securities and Exchange Commission on November
10, 1997, includes (i) 1,505,815 shares held by Putnam Investment
Management, Inc. ("PIM"), an investment adviser to the Putnam family of
mutual funds, and (ii) 217,028 shares held by The Putnam Advisory Company,
Inc. ("PAC"), an investment adviser to Putnam's institutional clients. PIM
and PAC are wholly-owned subsidiaries of PI and have dispository power over
the shares as investment managers. The Putnam mutual fund trustees hold
voting power with respect to the shares held by PIM; PAC shares voting
power with respect to the securities held by Putnam's institutional
clients, and PI may be deemed to share such powers to vote and dispose of
the shares.

(5) Based on information supplied by The Capital Group Companies, Inc. ("CGC")
in a Schedule 13G filed with the Securities and Exchange Commission on
February 13, 1997, includes 1,125,000 shares held by Capital Research and
Management Company ("CRM"), of which 824,000 shares are held by SMALLCAP
World Fund, Inc., an investment advisory client of CRM. CRM is a
wholly-owned subsidiary of CGC, which may be deemed to share power to vote
and dispose of the shares.

(6) Includes 210,000 shares beneficially owned by Bethany Limited Partnership
as of December 1, 1997. Mr. Sharp, the general partner of Bethany Limited
Partnership, may be deemed to shares voting and investment power with
respect to such shares. Mr. Sharp disclaims beneficially ownership of all
such shares except to the extent of his proportionate interest therein.
Also includes 38,125 shares subject to options exercisable within 60 days
after December 1, 1997 held by Mr. Sharp.

(7) Includes 709,540 shares held by Sequoia Capital Growth Fund, a limited
partnership and 45,291 shares held by Sequoia Technology Partners III, a
limited partnership. Sequoia Partners (CF) is the general partner of
Sequoia Capital Growth Fund and has sole voting and investment power over
such shares. Mr. Moritz is a general partner of Sequoia Partners (CF). The
general partner of Sequoia Capital VII and Sequoia Technology Partners VII
is Sequoia Capital VII-A Management, LLC. Mr. Moritz is a general partner
of Sequoia Capital VII-A Management, LLC. Also includes 28,125 shares
subject to options exercisable within 60 days after December 1, 1997 held
by Mr. Moritz.

(8) Includes 5,000 shares held by the Justin Caine Marks Trust and 5,000 shares
held by the Amy G. Marks Trust. Also includes 255,439 shares subject to
options exercisable within 60 days after December 1, 1997 held by Mr.
Marks.

(9) Includes 48,333 shares subject to options exercisable within 60 days after
December 1, 1997 held by Mr. Tsui.

50
<PAGE> 52

(10) Includes 45,356 shares subject to options exercisable within 60 days after
December 1, 1997 held by Mr. McNamara.

(11) Includes 38,125 shares subject to options exercisable within 60 days after
December 1, 1997 held by Mr. Dykes.

(12) Includes 709,540 shares held by Sequoia Capital Growth Fund, a limited
partnership and 45,291 shares held by Sequoia Technology Partners III, a
limited partnership. Sequoia Partners (CF) is the general partner of
Sequoia Capital Growth Fund and has sole voting and investment power over
such shares. Mr. Moritz is a general partner of Sequoia Partners (CF). The
general partner of Sequoia Capital VII and Sequoia Technology Partners VII
is Sequoia Capital VII-A Management, LLC. Mr. Moritz is a general partner
of Sequoia Capital VII-A Management, LLC. Also includes 28,125 shares
subject to options exercisable within 60 days after December 1, 1997 held
by Mr. Moritz.

(13) Includes 3,754 shares held by Mrs. Janine Margaret Rees. Also includes
3,542 shares subject to options exercisable within 60 days after August 31,
1997 held by Mr. Rees.

(14) Includes 3,750 shares subject to options exercisable within 60 days after
December 1, 1997 held by Mr. Foley.

(15) Includes 3,750 shares subject to options exercisable within 60 days after
December 1, 1997 held by Mr. Hui.

(16) Includes 464,545 shares subject to options exercisable within 60 days after
December 1, 1997.

51
<PAGE> 53

PLAN OF DISTRIBUTION

The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Shareholders from time to time in transactions
in the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

The Selling Shareholders and any broker-dealers or agents that participate
with the Selling Shareholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Ordinary Shares of the Company for
a period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7 and
any successors thereto, which provisions may limit the timing of purchases and
sales of the Company's Ordinary Shares by the Selling Shareholders.

The Shares were originally issued to former shareholders of Neutronics, DTM
and Energipilot in connection with the acquisitions of such companies pursuant
to exemptions from the registration requirements of the Securities Act provided
by Section 4(2) thereof. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" and "Business -- Recent
Acquisitions." The Company has agreed to pay all fees and expenses incident to
the filing of this Registration Statement.

52
<PAGE> 54

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.

53
<PAGE> 55

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.

54
<PAGE> 56

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.

55
<PAGE> 57

TAXATION

This summary of Singapore and U.S. tax considerations is based on current
law and is provided for general information. Insofar as the following discussion
summarizes the tax considerations applicable to the Company's shareholders under
Singapore law, it is based on the opinion of Low Yap & Associates, Singapore tax
advisors to the Company, and insofar as the following discussion summarizes the
tax considerations applicable to the Company's shareholders under United States
federal law, it is based on the opinion of Fenwick & West LLP, United States
counsel to the Company. 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%. 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 is able to exercise 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

56
<PAGE> 58

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 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% of the
Company's stock (by vote or value) were owned by U.S. Shareholders who
individually held 10% 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% 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 1297(b) of the Code (e.g., certain forms of dividends, interest and
royalties), or 75% 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% on the first S$12,000,000 of the individual's Singapore chargeable
assets and thereafter at a rate equal to 10%. 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.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for the
Company by Allen & Gledhill, Singapore.

57
<PAGE> 59

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
Flextronics International Ltd. Condensed Consolidated Balance Sheets as of March 31,
1997 and September 30, 1997 (unaudited)............................................. F-29
Flextronics International Ltd. Condensed Consolidated Statements of Income for the
three and six months ended September 30, 1996 and 1997 (unaudited).................. F-30
Flextronics International Ltd. Condensed Consolidated Statements of Cash Flows for the
six months ended September 30, 1996 and 1997 (unaudited)............................ F-31
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-32
</TABLE>

F-1
<PAGE> 60

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> 61

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> 62

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> 63

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> 64

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> 65

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> 66

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> 67

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> 68

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> 69

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> 70

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.

Research and development

Research and development costs are recorded as such costs are incurred.
Cost of sales included research and development costs of approximately $913,000
and $153,000 in fiscal 1997 and 1996, respectively.

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.

F-12
<PAGE> 71

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

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;

(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.

F-13
<PAGE> 72

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

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 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> 73

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> 74

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> 75

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> 76

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> 77

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> 78

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

Pro forma 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> 79

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 nChip and Texas facilities have been
written off. The provision also includes severance payments amounting to $560
for the employees of the Texas and nChip facility. The Company has not recorded
the remaining costs related to existing leases at the Texas facility as the
Company is continuing to use the facility for certain administrative and
warehousing functions, and believes it is probable that it will sublease this
facility and that the sublease income will not be materially less than the
remaining obligations under the lease.

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.

F-21
<PAGE> 80

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

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

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

F-22
<PAGE> 81

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

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.

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.

F-23
<PAGE> 82

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

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
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.

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.

In March 1997, management negotiated with Stephen Rees, Chairman of Astron
who was representing the former shareholders of Astron, a settlement of the
earnout condition of the Astron purchase agreement discussed above, the amount
of which was in dispute. Substantially all of the former shareholders of Astron
were affiliates of Mr. Rees or members of his family. Concurrently with
negotiation of the earnout payment, management and Mr. Rees renegotiated the
terms and conditions of the Services Agreement among the Company and an
affiliate of Mr. Rees. As a result of these negotiations, management agreed to
pay to the former shareholders of Astron an earnout in the amount of $6.25
million, and Mr. Rees agreed to reduce to $14 million, the amount due to the
affiliate under the Services Agreement. Because of the contemporaneous nature of
these negotiations and the relationship of Mr. Rees to the parties to the
agreements, management determined that the resulting adjustments should each be
accounted for as an adjustment to the cost of

F-24
<PAGE> 83

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

acquiring Astron. Accordingly, $5.25 million has been added in March 1997 to the
goodwill acquired. This amount represents the agreed upon $6.25 million payment
due under the earnout agreement less the $1.0 million reduction in the amount
due under the Services 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.

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

F-25
<PAGE> 84

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

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 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>

F-26
<PAGE> 85

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

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>

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
======== ======== ========
</TABLE>

F-27
<PAGE> 86

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>
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>

<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> 87

PART I -- FINANCIAL INFORMATION

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
------------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current assets
Cash............................................................ $ 17,825 $ 23,645
Accounts receivable, net........................................ 90,270 69,331
Inventories..................................................... 112,906 106,583
Other current assets............................................ 18,055 10,769
-------- --------
Total current assets.................................... 239,056 210,328
-------- --------
Property and equipment
At cost......................................................... 196,147 153,137
Accumulated depreciation........................................ (48,540) (42,172)
-------- --------
Net property and equipment...................................... 147,607 110,965
-------- --------
Other non-current assets.......................................... 39,637 37,941
-------- --------
Total Assets............................................ $ 426,300 $ 359,234
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings................................................. $ 81,500 $ 111,075
Current portion of capital lease and long-term debt............. 10,727 12,233
Accounts payable................................................ 96,683 73,631
Other current liabilities....................................... 62,993 38,436
-------- --------
Total current liabilities....................................... 251,903 235,375
-------- --------
Long term debt, less current portion.............................. 66,680 2,165
Other long term payable........................................... -- 23,547
Obligations under capital leases and deferred income taxes........ 10,750 13,847
Notes payable to shareholders..................................... 115 223
Minority interest................................................. 485 485
Shareholders' equity Ordinary shares, $0.01 par value:
Authorized -- 100,000,000 shares at September 30, 1997 and March
31, 1997
Issued and outstanding -- 13,806,855 shares at September 30,
1997 and 13,676,243 shares at March 31, 1997................. 89 88
Additional paid-in capital...................................... 96,559 95,570
Accumulated deficit............................................. (281) (12,066)
-------- --------
Total shareholders' equity...................................... 96,367 83,592
-------- --------
Total Liabilities and Shareholders' Equity.............. $ 426,300 $ 359,234
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-29
<PAGE> 88

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $210,087 $122,470 $406,970 $240,359
Costs and expenses:
Cost of sales................................. 188,806 108,207 366,018 214,350
Selling, general and administrative
expenses................................... 9,467 6,568 20,016 12,179
Goodwill and intangible assets amortization... 1,006 660 1,748 1,319
Interest expense, net......................... 4,169 1,078 7,116 2,127
Other income, net............................. (803) (40) (1,418) (573)
-------- -------- -------- --------
202,645 116,473 393,480 229,402
Income before income taxes...................... 7,442 5,997 13,490 10,957
Provision for income taxes...................... 917 859 1,653 1,622
-------- -------- -------- --------
Net income...................................... 6,525 5,138 11,837 9,335
======== ======== ======== ========
Earnings per share:
Net income per share.......................... $ 0.43 $ 0.36 $ 0.78 $ 0.65
======== ======== ======== ========
Weighted average ordinary shares and
equivalents................................... 15,152 14,277 15,107 14,372
======== ======== ======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-30
<PAGE> 89

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by operating activities.............................. $ 19,131 $ 17,880
-------- --------
Investing activities:
Purchases of property and equipment.................................. (43,950) (12,511)
Proceeds from sale of property and equipment......................... 177 70
Payment for Astron earnout........................................... (6,250) --
Remaining payment to FICO for 40% interest........................... (2,200) --
Other investment..................................................... (2,000) --
-------- --------
Net cash used for investing activities................................. (54,223) (12,441)
-------- --------
Financing activities:
Proceeds from bank borrowings........................................ 147,000 3,553
Repayment of bank borrowings......................................... (111,075) --
Repayment of capital lease obligations............................... (5,820) (2,518)
Repayment of long-term debt.......................................... (1,101) (517)
Proceeds from loan to related party.................................. 17 1,381
Repayment of notes payable........................................... (108) (306)
Net proceeds from issuance of share capital.......................... 989 650
-------- --------
Net cash provided by financing activities.............................. 29,902 2,243
-------- --------
Effect of exchange rate changes on cash................................ (630) --
-------- --------
Net increase/(decrease) in cash........................................ (5,820) 7,682
Cash, beginning of period.............................................. 23,645 6,546
-------- --------
Cash, end of period.................................................... $ 17,825 $ 14,228
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-31
<PAGE> 90

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 six month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ending March 31, 1998.

NOTE B -- INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
------------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................... $ 90,335 $ 64,213
Work-in-process............................. 20,740 16,561
Finished goods.............................. 1,831 25,809
-------- --------
Total....................................... $ 112,906 $ 106,583
======== ========
</TABLE>

NOTE C -- SUBSEQUENT EVENTS

On October 8, 1997, the Company completed an equity offering of 2,185,000
Ordinary Shares including 285,000 shares issued upon the exercise of the
underwriters' over-allotment option. The net proceeds from this offering were
approximately $96.0 million.

On October 15, 1997, the Company completed the sale of $150 million in
senior subordinated notes due 2007. The notes bear interest at 8.75% per annum.

On October 20, 1997, the Company entered into an exchange agreement with
Neutronics Electronic Industries Holding AG (Neutronics), an Austrian PCB
assembly company with operations in Austria and Hungary. Under this exchange
agreement, 92% of the outstanding shares of Neutronics were exchanged for
2,806,000 Ordinary Shares of Flextronics International Ltd on October 30, 1997.
The acquisition will be accounted for as a pooling-of-interests. The combined
company will incur expenses of approximately $4.0 million during the fiscal
quarter ending December 31, 1997 associated with this transaction.

NOTE D -- RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share". 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 third fiscal quarter ending
December 31, 1997 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 net income per share for the three month
periods ended September 30, 1997 and September 30, 1996, would have been $0.47
and $0.39, respectively and basic

F-32
<PAGE> 91

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

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

net income per share for the six month periods ended September 30, 1997 and
September 30, 1996 would have been $0.86 and $0.70, respectively. The primary
net income per share presented herein is equal to the diluted net income per
share calculated in accordance with SFAS No. 128.

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.

In June 1997, FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. The Company does not anticipate that SFAS No.
131 will have a material impact on its financial statements.

NOTE E -- 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> 92

======================================================
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED 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 THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN
THE ORDINARY SHARES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Summary............................... 3
Risk Factors.......................... 4
Enforcement of Civil Liabilities...... 13
Dividends............................. 13
Price Range of Ordinary Shares........ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 31
Management............................ 42
Executive Compensation................ 44
Description of the Credit Facility.... 47
Principal and Selling Shareholders.... 49
Plan of Distribution.................. 52
Description of Capital Shares......... 53
Taxation.............................. 56
Legal Matters......................... 57
Consolidated Financial Statements..... F-1
</TABLE>

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

[LOGO]

FLEXTRONICS
INTERNATIONAL LTD.

------------------------------
PROSPECTUS
------------------------------

DECEMBER , 1997

======================================================
<PAGE> 93

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:

<TABLE>
<S> <C>
SEC Registration fee.............................................. $ 35,651
Printing and engraving expenses................................... 10,000
Legal expenses.................................................... 10,000
Blue Sky expenses................................................. 5,000
Accounting fees and expenses...................................... 25,000
Miscellaneous..................................................... 9,349
--------
Total................................................... $ 95,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In February 1996, the Company acquired Astron Group Limited in exchange for
(i) $13.4 million 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. On
November 25, 1996, the Company acquired Fine Line for an aggregate of 223,321
Ordinary Shares. On October 30, 1997, the Company acquired 92% of the
outstanding ordinary shares of Neutronics, an Austrian contract manufacturer
with operations in Austria and Hungary, for 2,806,000 Ordinary Shares of the
Company. On December 1, 1997, the Company acquired DTM, a Colorado-based
producer of injection molded plastics for North American OEMs, in exchange for
252,469 Ordinary Shares, and Energipilot, a Swedish company principally engaged
in providing cables and cable assemblies for Northern European OEMs, in exchange
for 229,990 Ordinary Shares. The Ordinary Shares issued in connection with these
acquisitions were issued pursuant to an exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
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
supple=mentally 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.)
</TABLE>

II-1
<PAGE> 94

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
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. 3385842.)
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. (Incorporated by reference to Exhibit
2.6 of the Registrant's registration statement on Form S-3, No. 333-21715.)
2.7 Exchange Agreement dated October 19, 1997 by and among Registrant, Neutronics
Electronic Industries Holding A.G. and the named Shareholders of Neutronics
Electronic Industries Holding A.G. (Incorporated by reference to Exhibit 2 of
the Registrant's Current Report on Form 8-K for event reported on October 30,
1997.)
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.)
4.1 Indenture dated as of October 15, 1997 between Registrant and State Street Bank
and Trust Company of California, N.A., as trustee. (Incorporated by reference
to Exhibit 10.1 of the Registrant's Current Report on Form 8-K for event
reported on October 15, 1997.)
5.1** Opinion and Consent of Allen & Gledhill with respect to the Ordinary Shares
being registered.
10.1 Form of Indemnification Agreement between the Registrant and its Directors and
certain officers. (Incorporated by reference to Exhibit 10.1 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.2 1993 Share Option Plan. (Incorporated by reference to Exhibit 10.2 of the
Company's registration statement on Form S-1, No. 33-74622.)
10.3 Executives' Share Option Scheme, as amended. (Incorporated by reference to
Exhibit 10.3 of the Company's registration statement on Form S-1, No.
33-74622.)
10.4 Executives' Incentive Share Scheme, as amended. (Incorporated by reference to
Exhibit 10.4 of the Company's registration statement on Form S-1, No.
33-74622.)
10.5 nCHIP, Inc. Amended and Restated 1988 Stock Option Plan. (Incorporated by
reference to Exhibit 10.5 of the Company's registration statement on Form S-4,
No. 33-85842.)
10.6* Agreement to Grant Options dated as of June 9, 1995 between the Company and
Lifescan. (Incorporated by reference to Exhibit 10.7 of the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995.)
10.7 Lease Agreement dated as of October 1, 1994 among Shenzhen Xinan Industrial
Shareholdings Limited, Flextronics Industrial (Shenzhen) Limited and
Flextronics Singapore Pte Ltd. (Incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1995.)
</TABLE>

II-2
<PAGE> 95

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
10.8 Lease Agreement dated as of January 2, 1995 between Shenzhen Xinan Industrial
Shareholdings Limited and Flextronics Industrial (Shenzhen) Limited.
(Incorporated by reference to Exhibit 10.25 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995.)
10.9 Services Agreement between the Registrant and Stephen Rees dated as of January
6, 1996. (Incorporated by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K for the event reported on February 2, 1996.)
10.10 Supplemental Services Agreement between Astron and Stephen Rees dated as of
January 6, 1996. (Incorporated by reference to Exhibit 10.2 of the Company's
Current Report on Form 8-K for the event reported on February 2, 1996.)
10.11 Promissory Note dated April 17, 1995 executed by Michael E. Marks in favor of
Flextronics Technologies, Inc. (Incorporated by reference to Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1995.)
10.12 Service Agreement dated July 8, 1993 between the Registrant and Dennis P.
Stradford. (Incorporated by reference to Exhibit 10.36 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.13 Service Agreement dated July 8, 1993 between the Registrant and Tsui Sung Lam.
(Incorporated by reference to Exhibit 10.37 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.14 Service Agreement dated July 8, 1993 between the Registrant and Goh Chan Peng.
(Incorporated by reference to Exhibit 10.38 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.15* Printed Circuit Board Assembly Services Agreement between Lifescan Inc., a
Johnson & Johnson Company, and the Registration dated November 1, 1992.
(Incorporated by reference to Exhibit 10.41 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.16 Tenancy of Flatted Factory Unit dated February 28, 1996 between Jurong Town
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.44 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1990.)
10.17 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong Town
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.45 of
the Company's registration statement on Form S-1, No. 33-74622.)
10.18 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference to Exhibit
10.52 of the Company's registration statement on Form S-1, No. 33-74622.)
10.19 Acquisition and Subscription Agreement dated June 30, 1993 between FI
Liquidating Company, Inc., Asian Oceanic Nominees and Custodians Limited, N.T.
Butterfield Trustee (Bermuda) Limited, Overseas Asset Holdings, Inc., JF Asia
Select Limited, the Executive Representative, Flex Holdings Pte Limited, CLG
Partners, L.P. and the Liquidators of Asian Oceanic Nominees and Custodians
Limited. (Incorporated by reference to Exhibit 10.53 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.20 Revolving Credit and Term Loan Agreement dated as of March 27, 1997 among the
Company, The First National Bank of Boston, as Agent, and the other lending
institutions listed on Schedule 1 attached thereto. The Company agrees to
furnish a copy of the omitted schedule to the Commission upon request.
(Incorporated by reference to Exhibit 5(a) of the Company's Current Report on
Form 8-K for the event reported on March 27, 1997.)
</TABLE>

II-3
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
10.21 Revolving Credit Agreement dated as of March 27, 1997 among Flextronics
International USA, Inc., The First National Bank of Boston, as Agent, and the
other lending institutions listed of Schedule 1 attached thereto. (Incorporated
by reference to Exhibit 5(b) of the Company's Current Report on Form 8-K for
the event reported on March 27, 1997.)
10.22 Employment and Noncompetition Agreement dated as of April 30, 1997 between
Flextronics International Sweden AB and Ronny Nilsson. (Incorporated by
reference to Exhibit 10.29 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.23 Services Agreement dated as of April 30, 1997 between Flextronics International
USA, Inc. and Ronny Nilsson. (Incorporated by reference to Exhibit 10.30 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.24 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in favor of
Flextronics International USA, Inc. (Incorporated by reference to Exhibit 10.31
of the Company's Annual Report on Form 10-K for fiscal year ended March 31,
1997.)
10.25 Letter Agreement dated March 27, 1997 among the Company, Astron Technologies
Limited, Croton Technology Ltd. and Stephen Rees regarding the termination of
the Services Agreement. (Incorporated by reference to Exhibit 10.32 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.26 Letter Agreement dated March 27, 1997 between Astron Group Limited and Stephen
Rees regarding the termination of the Supplemental Services Agreement.
(Incorporated by reference to Exhibit 10.33 of the Company's Annual Report on
Form 10-K for fiscal year ended March 31, 1997.)
10.27 Services Agreement between Flextronics Singapore Pte Limited and Goh Chan Peng
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.34 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.28 Services Agreement between Astron Technologies Limited and Goh Chan Peng
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.35 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.29 Services Agreement between Astron Technologies Limited and Tsui Sung Lam
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.36 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.30 Services Agreement between Flextronics Singapore Pte Limited and Tsui Sung Lam
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.37 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.31 First Amendment to Revolving Credit and Term Loan Agreement dated as of May 19,
1997 among the Company, BankBoston, N.A. (formerly known as The First National
Bank of Boston), as Agent, and the other lending institutions listed on
Schedule 1 attached thereto. (Incorporated by reference to Exhibit 10.38 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.32 First Amendment to Revolving Credit Agreement dated as of May 19, 1997 among
Flextronics International USA, Inc., BankBoston, N.A., as Agent, and the other
lending institutions listed on Schedule 1 attached thereto. (Incorporated by
reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.33 Second Amendment to Revolving Credit and Term Loan Agreement dated as of June
30, 1997 among the Company, BankBoston, N.A., as Agent, and the other lending
institutions listed on Schedule 1 attached thereto. (Incorporated by reference
to Exhibit 10.40 of the Company's Annual Report on Form 10-K for fiscal year
ended March 31, 1997.)
</TABLE>

II-4
<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
10.34 Second Amendment to Revolving Credit Agreement dated as of June 30, 1997 among
Flextronics International USA, Inc., BankBoston N.A. as Agent, and the other
lending institutions listed on Schedule 1 attached thereto. (Incorporated by
reference to Exhibit 10.41 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.35 Loan Agreement between Flextronics International USA, Inc. as lender, and
Michael E. Marks, as borrower dated November 6, 1997. (Incorporated by
reference to Exhibit 10.35 of the Company's Registration Statement on Form S-4,
No. 333-41293.)
10.36 Secured Full Recourse Promissory Note, dated November 6, 1997, executed by
Michael E. Marks in favor of Flextronics International USA, Inc. (Incorporated
by reference to Exhibit 10.36 to the Company's Registration Statement on Form
S-4, No. 333-41293.)
11.1 Statement regarding computation of earnings per share.
21.1 Subsidiaries of Registrant.
23.1** Consent of Independent Auditors.
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).
</TABLE>

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

* Confidential treatment requested for portions of agreement.

** To be filed by Amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i)
and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with

II-5
<PAGE> 98

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 Securities Act and will be
governed by the final adjudication of such issue.

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

II-6
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Menlo Park, State of California on
this 15th day of December, 1997.

FLEXTRONICS INTERNATIONAL LTD.

By: /s/ MICHAEL E. MARKS
------------------------------------
Michael E. Marks
Chairman of the Board and Chief
Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Michael E. Marks
and Robert R.B. Dykes and each one of them, his attorneys-in-fact, each with the
amendments to this registration statement (including any and all amendments,
including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ----------------------------------- ------------------

/s/ MICHAEL E. MARKS Chairman of the Board, and Chief December 15, 1997
- ----------------------------------- Executive Officer (principal
Michael E. Marks executive officer)

President, Asia Pacific Operations
- ----------------------------------- and Director
Tsui Sung Lam

/s/ ROBERT R.B. DYKES Senior Vice President of Finance December 15, 1997
- ----------------------------------- and Administration (principal
Robert R.B. Dykes financial and accounting officer)

/s/ MICHAEL J. MORITZ Director December 15, 1997
- -----------------------------------
Michael J. Moritz

/s/ STEPHEN J.L. REES Senior Vice President, December 15, 1997
- ----------------------------------- Worldwide Sales and Marketing
Stephen J.L. Rees and Director

/s/ RICHARD L. SHARP Director December 15, 1997
- -----------------------------------
Richard L. Sharp

/s/ PATRICK FOLEY Director December 15, 1997
- -----------------------------------
Patrick Foley

Director
- -----------------------------------
Alain Ahkong

Director
- -----------------------------------
Shing Leong Hui
</TABLE>

II-7
<PAGE> 100

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
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
supple=mentally 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. 3385842.)
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. (Incorporated by reference to Exhibit 2.6 of the
Registrant's registration statement on Form S-3, No. 333-21715.)
2.7 Exchange Agreement dated October 19, 1997 by and among Registrant,
Neutronics Electronic Industries Holding A.G. and the named
Shareholders of Neutronics Electronic Industries Holding A.G.
(Incorporated by reference to Exhibit 2 of the Registrant's Current
Report on Form 8-K for event reported on October 30, 1997.)
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.)
4.1 Indenture dated as of October 15, 1997 between Registrant and State
Street Bank and Trust Company of California, N.A., as trustee.
(Incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K for event reported on October 15, 1997.)
5.1** Opinion and Consent of Allen & Gledhill with respect to the Ordinary
Shares being registered.
</TABLE>
<PAGE> 101

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
10.1 Form of Indemnification Agreement between the Registrant and its
Directors and certain officers. (Incorporated by reference to
Exhibit 10.1 of the Company's registration statement on Form S-1,
No. 33-74622.)
10.2 1993 Share Option Plan. (Incorporated by reference to Exhibit 10.2
of the Company's registration statement on Form S-1, No. 33-74622.)
10.3 Executives' Share Option Scheme, as amended. (Incorporated by
reference to Exhibit 10.3 of the Company's registration statement on
Form S-1, No. 33-74622.)
10.4 Executives' Incentive Share Scheme, as amended. (Incorporated by
reference to Exhibit 10.4 of the Company's registration statement on
Form S-1, No. 33-74622.)
10.5 nCHIP, Inc. Amended and Restated 1988 Stock Option Plan.
(Incorporated by reference to Exhibit 10.5 of the Company's
registration statement on Form S-4, No. 33-85842.)
10.6* Agreement to Grant Options dated as of June 9, 1995 between the
Company and Lifescan. (Incorporated by reference to Exhibit 10.7 of
the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.)
10.7 Lease Agreement dated as of October 1, 1994 among Shenzhen Xinan
Industrial Shareholdings Limited, Flextronics Industrial (Shenzhen)
Limited and Flextronics Singapore Pte Ltd. (Incorporated by
reference to Exhibit 10.25 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1995.)
10.8 Lease Agreement dated as of January 2, 1995 between Shenzhen Xinan
Industrial Shareholdings Limited and Flextronics Industrial
(Shenzhen) Limited. (Incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.)
10.9 Services Agreement between the Registrant and Stephen Rees dated as
of January 6, 1996. (Incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K for the event reported on
February 2, 1996.)
10.10 Supplemental Services Agreement between Astron and Stephen Rees
dated as of January 6, 1996. (Incorporated by reference to Exhibit
10.2 of the Company's Current Report on Form 8-K for the event
reported on February 2, 1996.)
10.11 Promissory Note dated April 17, 1995 executed by Michael E. Marks in
favor of Flextronics Technologies, Inc. (Incorporated by reference
to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995.)
10.12 Service Agreement dated July 8, 1993 between the Registrant and
Dennis P. Stradford. (Incorporated by reference to Exhibit 10.36 of
the Company's registration statement on Form S-1, No. 33-74622.)
10.13 Service Agreement dated July 8, 1993 between the Registrant and Tsui
Sung Lam. (Incorporated by reference to Exhibit 10.37 of the
Company's registration statement on Form S-1, No. 33-74622.)
10.14 Service Agreement dated July 8, 1993 between the Registrant and Goh
Chan Peng. (Incorporated by reference to Exhibit 10.38 of the
Company's registration statement on Form S-1, No. 33-74622.)
</TABLE>
<PAGE> 102

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
10.15* Printed Circuit Board Assembly Services Agreement between Lifescan
Inc., a Johnson & Johnson Company, and the Registration dated
November 1, 1992. (Incorporated by reference to Exhibit 10.41 of the
Company's registration statement on Form S-1, No. 33-74622.)
10.16 Tenancy of Flatted Factory Unit dated February 28, 1996 between
Jurong Town Corporation and the Registrant. (Incorporated by
reference to Exhibit 10.44 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1990.)
10.17 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong
Town Corporation and the Registrant. (Incorporated by reference to
Exhibit 10.45 of the Company's registration statement on Form S-1,
No. 33-74622.)
10.18 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference to
Exhibit 10.52 of the Company's registration statement on Form S-1,
No. 33-74622.)
10.19 Acquisition and Subscription Agreement dated June 30, 1993 between
FI Liquidating Company, Inc., Asian Oceanic Nominees and Custodians
Limited, N.T. Butterfield Trustee (Bermuda) Limited, Overseas Asset
Holdings, Inc., JF Asia Select Limited, the Executive
Representative, Flex Holdings Pte Limited, CLG Partners, L.P. and
the Liquidators of Asian Oceanic Nominees and Custodians Limited.
(Incorporated by reference to Exhibit 10.53 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.20 Revolving Credit and Term Loan Agreement dated as of March 27, 1997
among the Company, The First National Bank of Boston, as Agent, and
the other lending institutions listed on Schedule 1 attached
thereto. The Company agrees to furnish a copy of the omitted
schedule to the Commission upon request. (Incorporated by reference
to Exhibit 5(a) of the Company's Current Report on Form 8-K for the
event reported on March 27, 1997.)
10.21 Revolving Credit Agreement dated as of March 27, 1997 among
Flextronics International USA, Inc., The First National Bank of
Boston, as Agent, and the other lending institutions listed of
Schedule 1 attached thereto. (Incorporated by reference to Exhibit
5(b) of the Company's Current Report on Form 8-K for the event
reported on March 27, 1997.)
10.22 Employment and Noncompetition Agreement dated as of April 30, 1997
between Flextronics International Sweden AB and Ronny Nilsson.
(Incorporated by reference to Exhibit 10.29 of the Company's Annual
Report on Form 10-K for fiscal year ended March 31, 1997.)
10.23 Services Agreement dated as of April 30, 1997 between Flextronics
International USA, Inc. and Ronny Nilsson. (Incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.24 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in
favor of Flextronics International USA, Inc. (Incorporated by
reference to Exhibit 10.31 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.25 Letter Agreement dated March 27, 1997 among the Company, Astron
Technologies Limited, Croton Technology Ltd. and Stephen Rees
regarding the termination of the Services Agreement. (Incorporated
by reference to Exhibit 10.32 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
</TABLE>
<PAGE> 103

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
10.26 Letter Agreement dated March 27, 1997 between Astron Group Limited
and Stephen Rees regarding the termination of the Supplemental
Services Agreement. (Incorporated by reference to Exhibit 10.33 of
the Company's Annual Report on Form 10-K for fiscal year ended March
31, 1997.)
10.27 Services Agreement between Flextronics Singapore Pte Limited and Goh
Chan Peng effective as of April 1, 1997. (Incorporated by reference
to Exhibit 10.34 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.28 Services Agreement between Astron Technologies Limited and Goh Chan
Peng effective as of April 1, 1997. (Incorporated by reference to
Exhibit 10.35 of the Company's Annual Report on Form 10-K for fiscal
year ended March 31, 1997.)
10.29 Services Agreement between Astron Technologies Limited and Tsui Sung
Lam effective as of April 1, 1997. (Incorporated by reference to
Exhibit 10.36 of the Company's Annual Report on Form 10-K for fiscal
year ended March 31, 1997.)
10.30 Services Agreement between Flextronics Singapore Pte Limited and
Tsui Sung Lam effective as of April 1, 1997. (Incorporated by
reference to Exhibit 10.37 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.31 First Amendment to Revolving Credit and Term Loan Agreement dated as
of May 19, 1997 among the Company, BankBoston, N.A. (formerly known
as The First National Bank of Boston), as Agent, and the other
lending institutions listed on Schedule 1 attached thereto.
(Incorporated by reference to Exhibit 10.38 of the Company's Annual
Report on Form 10-K for fiscal year ended March 31, 1997.)
10.32 First Amendment to Revolving Credit Agreement dated as of May 19,
1997 among Flextronics International USA, Inc., BankBoston, N.A., as
Agent, and the other lending institutions listed on Schedule 1
attached thereto. (Incorporated by reference to Exhibit 10.39 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31,
1997.)
10.33 Second Amendment to Revolving Credit and Term Loan Agreement dated
as of June 30, 1997 among the Company, BankBoston, N.A., as Agent,
and the other lending institutions listed on Schedule 1 attached
thereto. (Incorporated by reference to Exhibit 10.40 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31,
1997.)
10.34 Second Amendment to Revolving Credit Agreement dated as of June 30,
1997 among Flextronics International USA, Inc., BankBoston N.A. as
Agent, and the other lending institutions listed on Schedule 1
attached thereto. (Incorporated by reference to Exhibit 10.41 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31,
1997.)
10.35 Loan Agreement between Flextronics International USA, Inc. as
lender, and Michael E. Marks, as borrower dated November 6, 1997.
(Incorporated by reference to Exhibit 10.35 of the Company's
Registration Statement on Form S-4, No. 333-41293.)
10.36 Secured Full Recourse Promissory Note, dated November 6, 1997,
executed by Michael E. Marks in favor of Flextronics International
USA, Inc. (Incorporated by reference to Exhibit 10.35 of the
Company's Registration Statement on Form S-4, No. 333-41293.)
</TABLE>
<PAGE> 104

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
11.1 Statement regarding computation of earnings per share.
21.1 Subsidiaries of Registrant.
23.1** Consent of Independent Auditors.
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).
</TABLE>

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

* Confidential treatment requested for portions of agreement.

** To be filed by Amendment.

<PAGE> 1

EXHIBIT 11.1

FLEXTRONICS INTERNATIONAL LTD.

COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
1995 1996 1997 1996 1997
------- --------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Shares issued and outstanding(1)................ 11,404 12,684 14,299 13,292 13,731
Shares due to Astron(2)......................... -- -- -- 447 447
Common stock equivalent warrants and stock
options(3).................................... 699 -- 578 633 929
------- -------- ------- ------- -------
12,103 12,684 14,877 14,372 15,107
======= ======== ======= ======= =======
Net income/(loss)............................... $ 6,156 $ (15,132) $ 7,463 $ 9,335 $11,837
======= ======== ======= ======= =======
Earnings per share.............................. $ 0.51 $ (1.19) $ 0.50 $ 0.65 $ 0.78
======= ======== ======= ======= =======
</TABLE>

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

Note:

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

The computations of the respective years give retroactive effect to the
acquisition of nCHIP, Inc. which was accounted for under the pooling of interest
method. Hence, the number of share equivalents and net income are restated as if
the acquisition took place on April 1, 1993.

(1) Shares issued and outstanding -- based on the weighted average method.

(2) Shares due to Astron in June 1998.

(3) Stock options -- based on the treasury stock method using average market
price for the six month periods ending September 30, 1997 and 1996.

<PAGE> 1

EXHIBIT 21.1

<TABLE>
<CAPTION>
SUBSIDIARY ----------------------------------------------------- DOMICILED ------------------
<S> <C>
Althofen Electronics GmbH Austria
Neutronics Electronics Industries Holding AG Austria
Astron Group Limited Hong Kong
Flextronics Manufacturing (KH) Ltd. Hong Kong
Ecoplast Muanyagipari Termekeket Gyarto Kft. Hungary
Euroton Electroni Kai Ipari es Kareskedelmi Kft Hungary
HTR Technikai Rendszerazolgaltato Kft. Hungary
Flextronics International Latin America (L) Ltd. Malaysia
Flextronics Malaysia Sdn. Bhd. Malaysia
Flex International Marketing (L) Ltd. Malaysia
Astron Technologies Ltd. Mauritius
Flextronics de Mexico, S.A. de C.V. Mexico
Flextronics Computer (Shakou) Ltd. Peoples' Republic of China
Flextronics Industrial (Shenzhen) Co., Ltd. Peoples' Republic of China
Flextronics Technology (Zhuhai) Limited Peoples' Republic of China
Zhuhai Dao Men Chao Yi Electronics Co., Ltd. Peoples' Republic of China
Flextronics Singapore Pte Ltd. Singapore
F.L. Tronics Holdings AB (aka Flextronics Holdings AB) Sweden
F.L. Tronics International Sweden AB (aka Flextronics
International Sweden AB) Sweden
Flextronics Holding UK Limited United Kingdom
Flextronics International (UK) Ltd. United Kingdom
Flextronics International USA, Inc. United States of America
</TABLE>