FLEXTRONICS INTERNATIONAL LTD, 424B4, 1997-10-02

FLEXTRONICS INTERNATIONAL LTD
424B4, 1997-10-02
PRINTED CIRCUIT BOARDS

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-21715

1,900,000 SHARES

LOGO

ORDINARY SHARES

All of the 1,900,000 Ordinary Shares offered hereby are being sold by
Flextronics International Ltd. The Company's Ordinary Shares are traded on the
Nasdaq National Market under the symbol "FLEXF." On September 30, 1997, the last
reported sale price for the Ordinary Shares was $47 5/8 per share. See "Price
Range of Ordinary Shares."

SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE ORDINARY
SHARES OFFERED HEREBY.

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

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

<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Per Share................................... $47.00 $2.35 $44.65
Total(3).................................... $89,300,000 $4,465,000 $84,835,000
=========================================================================================
</TABLE>

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

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

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 285,000 additional Ordinary Shares solely to cover over-allotments, if
any. If this option is exercised in full, the Price to Public will total
$102,695,000, the Underwriting Discount will total $5,134,750, and the
Proceeds to Company will total $97,560,250.

The Ordinary Shares are offered by the Underwriters subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that delivery of the certificates representing such shares
will be made against payment therefor at the office of Montgomery Securities on
or about October 6, 1997.

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

MONTGOMERY SECURITIES
COWEN & COMPANY
UBS SECURITIES

The date of this Prospectus is September 30, 1997.
<PAGE> 2

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

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

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

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

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

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

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE ORDINARY SHARES,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. IN CONNECTION WITH THIS OFFERING, CERTAIN
UNDERWRITERS (AND SELLING GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE ORDINARY SHARES ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

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

THE COMPANY

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

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

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

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Ordinary Shares offered by the Company....... 1,900,000 shares
Ordinary Shares to be outstanding after the
offering................................... 15,692,487 shares(1)
Use of proceeds.............................. Repayment of indebtedness
Nasdaq National Market symbol................ FLEXF
</TABLE>

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

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

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
(UNAUDITED)
<S> <C> <C>
Balance Sheet Data:
Working capital(5)............................................... $ (3,176) $ 14,569
Total assets..................................................... 402,131 402,131
Long-term debt and capital lease obligations, less current
portion(5).................................................... 78,386 12,886
Shareholders' equity............................................. 88,542 171,787
</TABLE>

- ---------------
(1) Based on the number of shares outstanding as of August 31, 1997. Does not
include options outstanding as of August 31, 1997 to acquire 1,851,231
shares with a weighted average exercise price of $20.15 per share.

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

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

(4) Adjusted to reflect the sale of the 1,900,000 Ordinary Shares offered by the
Company hereby (at the public offering price of $47 per share and after
deducting the underwriting discount and estimated offering expenses payable
by the Company) and the application of the approximately $83.2 million in
net proceeds therefrom to repay borrowings under the Company's credit
facility, approximately $65.5 million of which are classified as long-term
debt and approximately $17.7 million of which are classified as short-term
borrowings and included in working capital. See "Use of Proceeds" and
"Capitalization."

(5) Although not reflected in this table, the Company anticipates issuing from
$100.0 million to $125.0 million principal amount of Senior Subordinated
Notes due 2007 (the "Senior Subordinated Notes") following this offering.
The Company anticipates using the net proceeds of the Senior Subordinated
Notes to repay the $55.8 million of borrowings remaining after this offering
(based on outstanding balances as of June 30, 1997) and for working capital.
No assurances can be given as to whether, or on what terms, the Senior
Subordinated Notes will be issued. See "Use of Proceeds."

4
<PAGE> 5

RISK FACTORS

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

RISKS OF KARLSKRONA ACQUISITION

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

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

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

5
<PAGE> 6

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

INCREASED LEVERAGE

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

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

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

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

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

MANAGEMENT OF EXPANSION AND CONSOLIDATION

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

6
<PAGE> 7

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

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

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

ACQUISITIONS

Acquisitions have represented a significant portion of the Company's growth
strategy, and the Company intends to continue to pursue attractive acquisition
opportunities. 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

7
<PAGE> 8

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

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.

CUSTOMER CONCENTRATION; DEPENDENCE ON ELECTRONICS INDUSTRY

A small number of customers are currently responsible for a significant
portion of the Company's net sales. In fiscal 1997 and the first three months of
fiscal 1998, the Company's five largest customers accounted for approximately
46% and 61%, respectively, of net sales. Approximately 13% and 11% of the
Company's net sales for fiscal 1997 were derived from sales to Lifescan and U.S.
Robotics, respectively. Approximately 30% and 10% of the Company's net sales for
the first three months of fiscal 1998 were derived from sales to Ericsson and
Advanced Fibre Communications, respectively. 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

8
<PAGE> 9

affecting the electronics industry in general, or any of the Company's major
customers in particular, could have a material adverse effect on the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

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

VARIABILITY OF CUSTOMER REQUIREMENTS AND OPERATING RESULTS

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

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

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

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

9
<PAGE> 10

Ordinary Shares would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

RAPID TECHNOLOGICAL CHANGE

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

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

COMPETITION

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

RISK OF INCREASED TAXES

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

10
<PAGE> 11

income taxes, the Company's worldwide effective tax rate would increase and its
results of operations and cash flow would be adversely affected. The expansion
by the Company of its operations in North America and Northern Europe may
increase its worldwide effective tax rate. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations -- Provision for Income
Taxes."

RISKS OF INTERNATIONAL OPERATIONS

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

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

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

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

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

11
<PAGE> 12

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

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

CURRENCY FLUCTUATIONS

While Flextronics transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of Flextronics' costs
such as payroll, rent and indirect operation costs, are denominated in other
currencies such as Singapore dollars, Swedish kronor, Hong Kong dollars,
Malaysian ringgit, British pounds sterling and Chinese renminbi. Historically,
fluctuations in foreign currency exchange rates have not resulted in significant
exchange losses to the Company. As a result of the Karlskrona Acquisition, a
significant portion of the Company's business has been, and is expected to
continue to be, conducted in Swedish kronor. Changes in the relation of these
and other currencies to the U.S. dollar will affect the Company's cost of goods
sold and operating margins and could result in exchange losses. The impact of
future exchange rate fluctuations on the Company's results of operations cannot
be accurately predicted.

The Company has historically not actively engaged in substantial exchange
rate hedging activities. However, in August 1997 the Company 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 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.

12
<PAGE> 13

DEPENDENCE ON KEY PERSONNEL AND SKILLED EMPLOYEES

The Company's success depends to a large extent upon the continued services
of key executives and skilled personnel. Generally, the Company's employees are
not bound by employment or noncompetition agreements. The Company has entered
into service agreements with certain officers, including Ronny Nilsson, Teo Buck
Song, Michael McNamara and Tsui Sung Lam, some of which contain non-competition
provisions and provides its officers and key employees with stock options that
are structured to incentivize such employees to remain with the Company.
However, there can be no assurance as to the ability of the Company to retain
its officers and key employees. The loss of such personnel could have a material
adverse effect on the Company. The Company's business also depends upon its
ability to continue to recruit, train and retain skilled and semi-skilled
employees, particularly administrative, engineering and sales personnel. There
is intense competition for skilled and semi-skilled employees, particularly in
the San Jose, California market, and the Company's failure to recruit, train and
retain such employees could adversely affect the Company's results of
operations.

ENVIRONMENTAL COMPLIANCE RISKS

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

PROTECTION OF INTELLECTUAL PROPERTY

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

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

13
<PAGE> 14

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

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

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.

14
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Ordinary Shares
offered hereby are estimated to be approximately $83.2 million. The Company
expects to use $70.0 million of such net proceeds to repay in full the
outstanding term loan under the Company's credit facility and to use the
remaining net proceeds to repay $13.2 million of revolving credit loans under
the Company's credit facility. This credit facility consists of a revolving
credit and term loan agreement and a revolving credit loan agreement, each
provided by BankBoston, N.A., as agent (together the "Credit Facility"). The
Company also anticipates issuing from $100.0 million to $125.0 million principal
amount of Senior Subordinated Notes in fiscal 1998, and intends to use the net
proceeds from the Senior Subordinated Notes to repay the remaining $56.8 million
of outstanding revolving credit loans under the Credit Facility (based on
amounts outstanding on August 31, 1997) and for working capital. No assurances
can be given as to whether, or on what terms, the Senior Subordinated Notes will
be issued. The term loan under the Credit Facility is payable in installments
over a five-year period, and the revolving credit loans mature in March 2000. Of
the $140.0 million of loans outstanding on August 31, 1997, $111.0 million were
borrowed on March 27, 1997 to pay the purchase price of the Karlskrona
Facilities and for working capital and the remainder was borrowed subsequently
for working capital and for capital expenditures. These loans bear interest at a
variable rate equal to approximately 8.4% per annum as of August 31, 1997.
Following such repayment, the Company anticipates increasing the aggregate
principal amount of revolving credit loans that may be borrowed under the Credit
Facility. No assurances can be given, however, as to the availability or amount
of any such increase, and the Company anticipates that it will from time to time
borrow such revolving credit loans to fund its operations and growth. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DIVIDENDS

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

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 5/8 $26 3/8
</TABLE>

On September 30, 1997, the closing sale price of the Ordinary Shares was
$47 5/8 per share.

15
<PAGE> 16

CAPITALIZATION

The following table sets forth the Company's capitalization as of June 30,
1997, as adjusted to give effect to the application of the estimated net
proceeds from the sale by the Company of the 1,900,000 Ordinary Shares offered
hereby at the public offering price of $47 per share. Although not reflected in
the following table, the Company anticipates issuing from $100.0 million to
$125.0 million principal amount of Senior Subordinated Notes following this
offering. The Company anticipates using the net proceeds of the Senior
Subordinated Notes to repay an additional $55.8 million of outstanding loans
under the Company's Credit Facility, which are included in short-term bank
borrowings in the following table, and for working capital. No assurance can be
given as to whether, or on what terms, the Senior Subordinated Notes will be
issued.

<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED)
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term bank borrowings......................... 73,500 55,755
Current portion of long-term debt and capital
leases........................................... 11,754 11,754
Long-term debt, less current portion............... 67,518 2,018
Notes payable to shareholders...................... 223 223
Capital leases..................................... 10,645 10,645
-------- --------
Total long-term debt..................... 78,386 12,886
-------- --------
Total indebtedness and capital leases.... 163,640 80,395
======== ========
Shareholders' equity:
Ordinary Shares, S$0.01 par value; 100,000,000
shares authorized, 13,752,293 shares issued
and outstanding, 15,652,293 shares issued and
outstanding as adjusted....................... 89 101
Additional paid-in capital....................... 95,207 178,440
Accumulated deficit.............................. (6,754) (6,754)
-------- --------
Total shareholders' equity............... 88,542 171,787
======== ========
Total capitalization..................... 252,182 252,182
======== ========
</TABLE>

- ---------------
(1) Adjusted to reflect the sale of the 1,900,000 Ordinary Shares offered hereby
(at the public offering price of $47 per share and after deducting the
underwriting discount and estimated offering expenses payable by the
Company) and the application of the estimated net proceeds therefrom. See
"Use of Proceeds."

16
<PAGE> 17

SELECTED FINANCIAL DATA

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

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

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......... (1,201) 30,669 33,425 30,801 (25,047) (3,176)
Total assets....................... 52,430 103,129 116,117 231,024 359,234 402,131
Long-term debt and capital lease
obligations, less current
portion.......................... 17,243 4,755 6,890 17,674 12,302 78,386
Shareholders' equity (deficit)..... (2,256) 46,703 57,717 73,059 83,592 88,542
</TABLE>

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

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

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

17
<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

18
<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, material costs and other expenses. The
completion of such development is subject to a number of uncertainties,
including potential difficulties in optimizing manufacturing processes and the
potential development of alternative technologies by competitors that could
render Astron's technologies uncompetitive or obsolete. Accordingly, no
assurances can be given as to whether, or when, the Company will be able to
complete the development of such technologies, as to the cost of such
development, or as to potential sales of products based on such technologies.
The capabilities provided by the technologies under development may not
otherwise be available to the Company. Accordingly, the failure by the Company
to successfully develop such technologies would limit the Company's ability to
compete effectively for business requiring certain advanced capabilities, and
would prevent it from achieving the anticipated benefits of the Astron
acquisition. See "Risk Factors -- Acquisitions" and "-- Results of
Operations -- 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 Credit Facility, which the Company intends to repay with the net proceeds
from this offering and the anticipated sale of the Senior Subordinated Notes.
The transaction has been accounted for under the purchase method. As a result,
the purchase price was allocated

19
<PAGE> 20

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

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

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

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

RECENT CHANGES IN ACCOUNTING FOR ASTRON ACQUISITION

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

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

CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS

On August 1, 1997, the Audit Committee of the Board of Directors of the
Company approved the engagement of Arthur Andersen LLP, San Jose, California as
independent public accountants to audit and report on the financial statements
of the Company and its subsidiaries for the year ended March 31, 1998. On

20
<PAGE> 21

August 5, 1997, Ernst & Young advised the Company that it will not seek
re-election at the Company's next Annual General Meeting scheduled for October
14, 1997. Accordingly, the engagement of Ernst & Young will terminate at the
time of the Annual General Meeting. The Company will nominate Arthur Andersen
LLP as the Company's independent public accountants for approval by the
shareholders at the Company's Annual General Meeting.

There were no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures with respect to the Company's consolidated financial statements for
the fiscal years ended March 31, 1995, 1996 and 1997 or through September 29,
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.

RESULTS OF OPERATIONS

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

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

NET SALES

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

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

21
<PAGE> 22

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

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

GROSS PROFIT

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

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

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

Cost of sales included research and development costs of approximately
$271,000 and $229,000 in the three months ended June 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 three months ended
June 30, 1997 increased to $10.5 million from $5.6 million for the three months
ended June 30, 1996 and increased as a percentage of net sales to 5.3% for the
three months ended June 30, 1997 from 4.8% for the three months ended June 30,
1996. Of the $4.9 million increase in selling, general and administrative
expenses, $800,000 resulted from increased selling expenses, $2.6 million
resulted from increased general and administrative expenses and $1.5 million
resulted from increased corporate expenses. The increase in selling expenses is
primarily due to the addition of new sales personnel in the United States and
Europe and the inclusion of Fine Line's selling expenses; the increase in
general and administrative expenses is primarily due to the inclusion of the
operations of the Karlskrona Facilities; and the increase in corporate expenses
is primarily due to an increase in staffing levels,

22
<PAGE> 23

primarily personnel related to implementation of new information systems as well
as increased corporate staff, and to increased legal and other professional
expenses.

Selling, general and administrative expenses in fiscal 1997 increased to
$26.8 million from $18.8 million in fiscal 1996 and increased as percentage of
net sales to 5.5% in fiscal 1997 from 4.2% in fiscal 1996. The increase was
mainly due to: (i) the inclusion of Astron's selling and general administrative
expenses for all of fiscal 1997; (ii) increased consulting fees; and (iii)
increased sales and marketing expenses. The increased consulting fees resulted
from financial consulting services provided by two banks for a total of $719,000
in fiscal 1997. The Company also recorded $362,000 in March 1997 for
compensation for management services paid to a new executive officer who was
formerly a key employee of Ericsson in Sweden and who joined the Company upon
the acquisition of the Karlskrona Facilities.

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

GOODWILL AND INTANGIBLE ASSETS AMORTIZATION

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

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

PROVISION FOR PLANT CLOSINGS

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

23
<PAGE> 24

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.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

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

NET INTEREST EXPENSE

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

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

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

MERGER EXPENSES

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

FOREIGN EXCHANGE GAIN (LOSS)

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

24
<PAGE> 25

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.

INCOME (LOSS) FROM ASSOCIATED COMPANY

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

Flextracker, the joint venture with HTS in which the Company previously
owned a 49% interest, commenced operations in June 1993. According to the equity
method of accounting, the Company previously did not recognize revenue from
sales by Flextracker, but based on its ownership interest recognized 49% of the
net income or loss of the joint venture. Due to start-up costs and manufacturing
inefficiencies, the Company recognized a loss of $729,000 and $70,000 associated
with its interest in Flextracker in fiscal 1995 and fiscal 1994 respectively.
The Company initially contributed $2.5 million for a 49% interest in Flextracker
and HTS contributed $2.6 million for the remaining 51% interest. In April 1994
the Company and HTS each loaned $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 China, Hong Kong, Malaysia,
Mauritius, The Netherlands, Singapore, Sweden, the United Kingdom, and the
United States. Each of these subsidiaries is subject to taxation in the country
in which it has been formed. The Company's Asian manufacturing subsidiaries have
at various times been granted certain tax relief in each of these countries,
resulting in lower taxes than would otherwise be the case under ordinary tax
rates. See Note 7 of Notes to Consolidated Financial Statements.

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

25
<PAGE> 26

impact on the Company's taxes in fiscal 1997 due to the operating losses of
these two subsidiaries in this period. The Company's Swedish subsidiary, which
began operation on March 27, 1997 with the acquisition of the Karlskrona
Facilities, will be subject to an ordinary corporate tax rate of 28%.

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

The Company has structured its operations in Asia in a manner designed to
maximize income in countries where tax incentives have been extended to
encourage foreign investment or where income tax rates are low. The Company's
Singapore subsidiary was granted an investment allowance incentive in respect of
approved fixed capital expenditures subject to certain conditions. These
allowances have been utilized to reduce its taxable income since fiscal 1991,
and were fully utilized at the end of fiscal 1996. The Company's investments in
its plants in Xixiang and Doumen, China fall under the "Foreign Investment
Scheme" which entitles the Company to apply for a five year tax incentive. The
Company obtained the tax incentive for the Doumen plant in December 1995 and the
Xixiang plant in October 1996. With the approval, the Company's tax rates on
income from these facilities during the incentive period will be 0% in years 1
and 2 and 7.5% in years 3 through 5, commencing in the first profitable year. In
fiscal 1993, the Company transferred its offshore marketing and distribution
functions to a newly formed marketing subsidiary located in Labuan, Malaysia,
where the tax rate is de minimis. In February 1996, the Company transferred
Astron's sales and marketing business to a newly formed subsidiary in Mauritius,
where the tax rate is 0%. The Company's Malaysian manufacturing subsidiary has
obtained a five year pioneer certificate from the relevant authority that
provides a tax exemption on manufacturing income from certain products in
Johore, Malaysia. To date, this incentive has had a limited impact on the
Company due to the relatively short history of its Malaysian operations and its
tax allowances and losses carry forward. The Company's facility in Shekou,
China, which was closed in fiscal 1996, was located in a "Special Economic Zone"
and was an approved "Product Export Enterprise" that qualified for a special
corporate income tax rate of 10.0%.

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

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

26
<PAGE> 27

operations of the Company in the tax jurisdictions in which such carryforwards
arose. These losses carryforward indefinitely. See Note 8 of Notes to
Consolidated Financial Statements.

VARIABILITY OF RESULTS

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

BACKLOG

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

LIQUIDITY AND CAPITAL RESOURCES

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

Net cash provided by operating activities was $18.0 million for the three
months ended June 30, 1997, consisting of $31.6 million of cash provided by net
income, depreciation, increases in accounts payable and other sources, offset by
$13.6 million of cash used for increases in inventory and accounts receivable
and other operating activities. Net cash provided by operating activities was
$3.5 million for the three months ended June 30, 1996, consisting of $18.7
million of cash provided by net income, depreciation and decreases in accounts
receivable, partially offset by $15.2 million of cash used for operating
activities, primarily decreases in accounts payable.

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

Net cash used for operating activities in fiscal 1996 was $710,000,
consisting primarily of a net loss of $15.1 million and increases in accounts
receivable and inventories, largely offset by the $29.0 million write-off

27
<PAGE> 28

of In-Process R&D, as well as by depreciation, amortization and allowance for
doubtful debt and obsolescence.

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

Accounts receivable, net of allowance for doubtful accounts, decreased to
$69.3 million at March 31, 1997 from $78.1 million at March 31, 1996. The
decrease in accounts receivable was primarily due to improved collection of
accounts receivable during fiscal 1997. Inventories increased to $106.6 million
at March 31, 1997 from $52.6 million at March 31, 1996. The increase in
inventories was mainly a result of the acquisition of the $55.0 million of
inventories at the Karlskrona Facilities. The Company's allowances for doubtful
accounts increased to $5.7 million at March 31, 1997 from $3.6 million at March
31, 1996. The Company's allowance for inventory obsolescence increased to $6.2
million at March 31, 1997 from $4.6 million at March 31, 1996. The increases in
the allowances were due to the increases in sales and inventories during fiscal
1997 and the $3.2 million provision for doubtful debts, and write-off shares
taken in payment of receivables, related to one specific customer and inventory
exposure relating to the closing of the Texas facility.

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

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

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

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

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

Net cash provided by financing activities in fiscal 1997 was $82.4 million,
consisting primarily of bank borrowings of $152.8 million and capital lease
financing. This was partially offset by $56.0 million in

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<PAGE> 29

repayments of bank borrowings, $10.5 million in repayments of notes to Astron's
ex-shareholders and $8.0 million in repayments of capital lease obligations.

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

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

The Credit Facility consists of two loan agreements provided by the
BankBoston, N.A. as agent. Under the Credit Facility, subject to compliance with
certain financial ratios and the satisfaction of customary borrowing conditions,
the Company borrowed 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 June 30, 1997, $69.0 million of revolving credit loans and
$70.0 million of term loans were outstanding, and bore interest at a variable
rate equal, as of June 30, 1997, to approximately 8.4% per annum. The term loan
amortizes over a five-year period and are subject to certain mandatory
prepayment provisions. Loans under the revolving credit facility will mature in
March 2000. The Company intends to use the net proceeds from this offering to
repay the outstanding term loan and a portion of the outstanding revolving
credit loans, and intends to use the net proceeds from the anticipated issuance
of the Senior Subordinated Notes to repay all of the remaining outstanding
borrowings under the Credit Facility. See "Use of Proceeds." Following such
repayment, the Company anticipates increasing the aggregate principal amount of
revolving credit loans that may be made under the Credit Facility and the
Company anticipates that it will from time to time borrow such revolving credit
loans to fund its operations and growth. No assurances can be given, however, as
to the availability or amount of any such increase.

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

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

29
<PAGE> 30

positive Consolidated Net Income (as defined therein) plus (c) 100% of the
proceeds of any Equity Issuance (as defined therein).

The Company anticipates issuing in fiscal 1998 from $100.0 million to
$125.0 million aggregate principal amount of Senior Subordinated Notes due 2007.
The indenture governing the Senior Subordinated Notes is expected to impose
certain restrictions on the Company and its subsidiaries, including restrictions
on their ability to incur indebtedness, pay dividends, make certain investments,
and engage in certain other activities. In particular, the Company expects that
the indenture will restrict the Company's and its subsidiaries' ability to incur
additional indebtedness unless on a pro forma basis, after giving effect to such
indebtedness, the Company's ratio of consolidated cash flow to consolidated
fixed charges (including consolidated interest expense) for the preceding four
quarters is at least 2.00 to 1.00. The Company expects that the indenture will
contain certain exceptions to this restriction, permitting it and its
subsidiaries to, among other things, incur revolving credit indebtedness in an
amount not to exceed the greater of $125.0 million or the sum of 80% of its
consolidated accounts receivable and 35% of its consolidated inventory, and to
incur obligations under capitalized leases and purchase money indebtedness in an
amount not to exceed $15.0 million. Under these anticipated provisions, as of
June 30, 1997, and giving pro forma effect to the issuance of the Senior
Subordinated Notes and the Ordinary Shares offered hereby and the application of
the net proceeds therefrom, the indenture would have permitted the Company and
its subsidiaries to incur additional indebtedness requiring the payment of up to
an aggregate of $2.2 million per quarter in interest under the consolidated cash
flow to consolidated fixed charge ratio (based on the Company's annualized
consolidated cash flow for the three months ended June 30, 1997), and would have
permitted the incurrence of up to $100.7 million of revolving credit
indebtedness regardless of such ratio. The indenture is also expected to require
that the Company offer to repurchase the Senior Subordinated Notes upon certain
transactions involving a change in control of the Company, and in certain
circumstances with the proceeds of asset sales. No assurances can be given as to
whether, or on what terms, the Senior Subordinated Notes will be issued.

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

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<PAGE> 31

RECENT ACCOUNTING PRONOUNCEMENT

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

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
---------------------------- -------------------
1995 1997 1997
------ 1996 ------ 1996 ------
---------- ----------
(RESTATED) (RESTATED)
(UNAUDITED)
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
AS REPORTED:
Net income per share......................... $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955
PRO FORMA (UNAUDITED):
Basic net income per share................... $.54 $(1.19) $.56 $.32 $.39
Weighted average number of common shares
outstanding............................... 11,404 12,684 13,413 13,271 13,686
Diluted net income per share................. $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955
</TABLE>

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<PAGE> 32

BUSINESS

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

INDUSTRY OVERVIEW

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

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

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

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

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

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

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<PAGE> 33

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

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

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

STRATEGY

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

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

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

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

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

33
<PAGE> 34

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

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

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

CUSTOMERS

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

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

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

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

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

34
<PAGE> 35

SALES AND MARKETING

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

SERVICES

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

Engineering Services

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

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

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

Materials Procurement and Management

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

35
<PAGE> 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.

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

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

The Company is also increasingly focusing on advanced interconnect and
packaging technologies such as chip on board ("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

36
<PAGE> 37

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 services available. Failure to satisfy any of the foregoing
requirements could materially adversely affect the Company's competitive
position.

EMPLOYEES

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

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

37
<PAGE> 38

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

KARLSKRONA ACQUISITION

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

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

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

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

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

38
<PAGE> 39

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

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

FACILITIES

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

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<PAGE> 40

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

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

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

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

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

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

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

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

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

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

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

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

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

40
<PAGE> 41

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

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

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

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

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<PAGE> 42

MANAGEMENT

DIRECTORS AND OFFICERS

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

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

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

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

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

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

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

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

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

42
<PAGE> 43

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

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

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

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

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

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

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

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

43
<PAGE> 44

PRINCIPAL SHAREHOLDERS

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

<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NUMBER OF SHARES PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING(2) OFFERING(3)
- -------------------------------------------------- --------------------- ------------- -------------
<S> <C> <C> <C>
Ronald Baron(4)................................... 1,931,600 14.00% 12.31%
c/o Baron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
New York, New York 10153
Sequoia Capital(5)................................ 953,693 6.90% 6.07%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, California 94025
The Capital Group Companies(6).................... 781,500 5.67% 4.98%
333 South Hope Street
Los Angeles, California 90071
Richard L. Sharp(7)............................... 933,269 6.75% 5.93%
c/o Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
Michael E. Marks(8)............................... 394,968 2.83% 2.49%
Tsui Sung Lam(9).................................. 58,450 * *
Michael McNamara(10).............................. 37,277 * *
Robert R.B. Dykes(11)............................. 38,149 * *
Ronny Nilsson..................................... -- -- --
Bernard J. Lacroute(12)........................... 62,980 * *
Michael Moritz(13)................................ 953,693 6.90% 6.07%
Stephen J.L. Rees(14)............................. 63,756 * *
All directors and executive officers as a group (9
persons)(15).................................... 2,542,502 17.90% 15.79%
</TABLE>

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

* Less than 1.0%.

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

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

(3) Assumes that the Underwriters' over-allotment option to purchase up to
285,000 shares is not exercised.

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

44
<PAGE> 45

and Baron Capital Management, Inc. are controlled by Mr. Baron, and Mr.
Baron may be deemed to share power to vote and dispose of such shares.

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

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

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

(8) Includes 168,461 shares subject to options exercisable within 60 days after
August 31, 1997 held by Mr. Marks. Since August 31, 1997, Mr. Marks has
sold 5,000 shares shown as beneficially owned by him.

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

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

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

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

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

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

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

45
<PAGE> 46

DESCRIPTION OF CAPITAL SHARES

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

ORDINARY SHARES

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

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

NEW SHARES

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

SHAREHOLDERS

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

TRANSFER OF SHARES

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

46
<PAGE> 47

SHAREHOLDERS' MEETINGS

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

VOTING RIGHTS

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

DIVIDENDS

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

BONUS AND RIGHTS ISSUE

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

TAKEOVERS

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

47
<PAGE> 48

LIQUIDATION OR OTHER RETURN OF CAPITAL

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

INDEMNITY

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

LIMITATIONS ON RIGHTS TO HOLD OR VOTE ORDINARY SHARES

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

TRANSFER AGENT

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

48
<PAGE> 49

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

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

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

INCOME TAXATION UNDER UNITED STATES LAW

Individual shareholders that are U.S. citizens or resident aliens (as
defined in Section 7701(b) of the Internal Revenue Code of 1986 (the "Code")),
corporations or partnerships or other entities created or organized under the
laws of the United States, or any political subdivision thereof, an estate the
income of which is subject is subject to U.S. federal income taxation regardless
of its source or a trust if a U.S. court 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

49
<PAGE> 50

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 50.0% of the
Company's stock (by vote or value) were owned by U.S. Shareholders who
individually held 10.0% or more of the Company's voting stock, such U.S.
Shareholders potentially would be required to include in income a portion or all
of their pro rata share of the Company's and its non-U.S. subsidiaries' earnings
and profits. If 50.0% or more of the Company's assets during a taxable year
produced or were held for the production of passive income, as defined in
section 1297(b) of the Code (e.g., certain forms of dividends, interest and
royalties), or 75.0% or more of the Company's gross income for a taxable year
was passive income, adverse U.S. tax consequences could result to U.S.
shareholders of the Company. As of June 30, 1997, the Company was aware of only
one U.S. Shareholder who individually held 10% or more of its voting stock. See
"Principal Shareholders."

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

ESTATE TAXATION

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

50
<PAGE> 51

UNDERWRITING

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

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities..................................................... 798,000
Cowen & Company........................................................... 608,000
UBS Securities............................................................ 494,000
---------
Total........................................................... 1,900,000
=========
</TABLE>

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

The Underwriters have advised the Company that they propose initially to
offer the Ordinary Shares to the public on the terms set forth on the cover page
of this Prospectus. The Underwriters may allow selected dealers a concession of
not more than $1.35 per share; and the Underwriters may allow, and such dealers
may reallow, a concession of not more than $.10 per share to certain other
dealers. After the public offering, the offering price and other selling terms
may be changed by the Underwriters. The Ordinary Shares are offered subject to
receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part.

The Company has granted to the Underwriters an over-allotment option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 285,000 additional Ordinary Shares at the same price per share as
the initial shares to be purchased by the Underwriters. The Underwriters may
exercise such option only to cover over-allotments made in the sale of the
Ordinary Shares that the Underwriters have agreed to purchase. To the extent the
Underwriters exercise such option, each Underwriter will be committed, subject
to certain conditions, to purchase such additional shares in approximately the
same proportion as set forth in the above table.

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

The Company has agreed, following completion of this offering, not to
issue, offer, sell, contract to sell or otherwise dispose of any Ordinary Shares
or securities convertible into or exchangeable or exercisable for Ordinary
Shares without the prior written consent of Montgomery Securities for a period
of 90 days after the date of this Prospectus, except that the Company may,
without such consent, (i) grant options pursuant to its existing employee
benefit plans or issue Ordinary Shares upon exercise of outstanding stock
options, and (ii) issue Ordinary Shares in connection with acquisitions. The
executive officers and directors of the Company have agreed that they will not
sell in excess of an aggregate of 80,000 Ordinary Shares beneficially owned by
them without the prior written consent of Montgomery Securities for a period of
90 days after the date of this Prospectus.

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

51
<PAGE> 52

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

In connection with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Ordinary Shares
on the Nasdaq National Market immediately prior to the commencement of sales in
this offering, in accordance with Rule 103 of Regulation M. Passive market
making consists of displaying bids on the Nasdaq National Market that are
limited by the bid prices of independent market makers and completing purchases
in response to order flow at prices limited by such bids. Net purchases by a
passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Ordinary Shares
during a specified period and must be discontinued for any day in which such
limit is reached. Passive market making may stabilize the market price of the
Ordinary Shares at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

CERTAIN LEGAL MATTERS

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

EXPERTS

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

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

52
<PAGE> 53

AVAILABLE INFORMATION

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

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

53
<PAGE> 54

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 June 30, 1997 (unaudited).................................................. F-29
Flextronics International Ltd. Condensed Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1997 (unaudited)............................... F-30
Flextronics International Ltd. Condensed Consolidated Statements of Cash Flows for the
three months ended June 30, 1996 and 1997 (unaudited)............................... F-31
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-32
</TABLE>

F-1
<PAGE> 55

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> 56

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> 57

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> 58

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> 59

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> 60

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> 61

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> 62

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> 63

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> 64

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> 65

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> 66

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> 67

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> 68

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> 69

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> 70

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> 71

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> 72

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> 73

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

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

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

The weighted average vesting period is rounded to 4 years.

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

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

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

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

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

F-20
<PAGE> 74

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> 75

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> 76

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> 77

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> 78

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> 79

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> 80

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> 81

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> 82

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings..................................................... $ 111,075 $ 73,500
Current portion of capital lease and long-term debt................. 12,233 11,754
Accounts payable.................................................... 73,631 82,881
Other current liabilities........................................... 38,436 63,368
-------- --------
Total current liabilities................................... 235,375 231,503
-------- --------
Long term debt, less current portion.................................. 25,712 67,518
Obligations under capital leases and deferred income taxes............ 13,847 13,860
Notes payable to shareholders......................................... 223 223
Minority interest..................................................... 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized -- 100,000,000 shares at March 31, 1997 and June 30, 1997
Issued and outstanding -- 13,676,243 shares at March 31, 1997 and
13,752,293 shares at June 30, 1997............................... 88 89
Additional paid-in capital.......................................... 95,570 95,207
Accumulated deficit................................................. (12,066) (6,754)
-------- --------
Total shareholders' equity.................................. 83,592 88,542
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................ $ 359,234 $ 402,131
======== ========
</TABLE>

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

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

F-29
<PAGE> 83

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

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

See notes to condensed consolidated financial statements.

F-30
<PAGE> 84

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

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

See notes to condensed consolidated financial statements.

F-31
<PAGE> 85

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

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

NOTE A -- BASIS OF PRESENTATION

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

NOTE B -- INVENTORIES

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

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

NOTE C -- RECENT ACCOUNTING PRONOUNCEMENTS

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

The Company plans to adopt SFAS No. 128 in its fourth fiscal quarter ending
March 31, 1998 and at that time all historical net income per share data
presented will be restated to conform to the provisions of SFAS No. 128. Under
the provisions of SFAS 128, basic and diluted net income per share for the three
month periods ended June 30, 1997 and June 30, 1996, would have been $0.39 and
$0.36 and $0.32 and $0.28, respectively.

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

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

F-32
<PAGE> 86

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

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

NOTE D -- NET INCOME PER SHARE

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

F-33
<PAGE> 87

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

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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 5
Enforcement of Civil Liabilities...... 14
Use of Proceeds....................... 15
Dividends............................. 15
Price Range of Ordinary Shares........ 15
Capitalization........................ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 32
Management............................ 42
Principal Shareholders................ 44
Description of Capital Shares......... 46
Taxation.............................. 49
Underwriting.......................... 51
Certain Legal Matters................. 52
Experts............................... 52
Available Information................. 53
Consolidated Financial Statements..... F-1
</TABLE>

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1,900,000 SHARES

LOGO

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

COWEN & COMPANY

UBS SECURITIES
Dated September 30, 1997
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