FLEXTRONICS INTERNATIONAL LTD, POS AM, 1998-02-26

FLEXTRONICS INTERNATIONAL LTD
POS AM, 1998-02-26
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998

REGISTRATION NO. 333-42331
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

POST-EFFECTIVE AMENDMENT NO. 1

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

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

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

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

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

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

COPIES TO:
GORDON K. DAVIDSON, ESQ.
DAVID K. MICHAELS, ESQ.
TRAM T. PHI, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration
Statement.

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _____________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [X] 333-42331

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

3,288,459 SHARES

LOGO

ORDINARY SHARES
(S$.01 PAR VALUE PER SHARE)
------------------------

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

The Selling Shareholders may sell or distribute some or all of the Shares
from time to time through underwriters or dealers or brokers or other agents or
directly to one or more purchasers, including pledgees, in transactions (which
may involve crosses and block transactions) on Nasdaq, in privately negotiated
transactions (including sales pursuant to pledges) or in the over-the-counter
market, or in a combination of such transactions. Such transactions may be
effected by the Selling Shareholders at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices,
or at fixed prices, which may be changed. Brokers, dealers, agents or
underwriters participating in such transactions as agent may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders (and, if they act as agent for the purchaser of such
shares, from such purchaser). Such discounts, concessions or commissions as to a
particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved. See "Plan of Distribution."

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

The Ordinary Shares are quoted on the Nasdaq National Market under the
symbol FLEXF. On February 25, 1998 the average of the high and low price for the
Ordinary Shares was $44.625 per share.

See "Risk Factors" commencing on page 4 for a discussion of certain factors
that should be considered by prospective purchasers.
------------------------

The Selling Shareholders and any such underwriters, brokers, dealers or
agents that participate in such
distribution may be deemed to be "underwriters" within the meaning of the
Securities Act, and any discounts, commissions or concessions received by any
such underwriters, brokers, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. See "Plan of Distribution"
herein for a description of indemnification agreements.

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

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

THE DATE OF THIS PROSPECTUS IS FEBRUARY 26, 1998

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

AVAILABLE INFORMATION

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

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement. Statements made in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance in which a copy of such
contract is filed as an exhibit to the Registration Statement, reference is made
to such copy, and each such statement shall be deemed qualified in all respects
by such reference. Copies of the Registration Statement may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth above.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION THE STATEMENTS UNDER "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"BUSINESS," ARE, OR MAY BE DEEMED TO BE, FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). VARIOUS ECONOMIC AND
COMPETITIVE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS, INCLUDING FACTORS WHICH ARE
OUTSIDE THE CONTROL OF THE COMPANY, SUCH AS SIGNIFICANT LEVERAGE; MANAGEMENT OF
EXPANSION AND CONSOLIDATION; REPLACEMENT OF MANAGEMENT INFORMATION SYSTEMS; YEAR
2000 COMPLIANCE; ACQUISITIONS; RISKS OF KARLSKRONA PURCHASE AGREEMENT; CUSTOMER
CONCENTRATION AND DEPENDENCE ON ELECTRONICS IN-

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<PAGE> 4

DUSTRY; VARIABILITY OF CUSTOMER REQUIREMENTS AND OPERATING RESULTS; RAPID
TECHNOLOGICAL CHANGE; COMPETITION; RISKS OF INCREASED TAXES; RISKS OF
INTERNATIONAL OPERATIONS; CURRENCY FLUCTUATIONS; LIMITED AVAILABILITY OF
COMPONENTS; DEPENDENCE ON KEY PERSONNEL AND SKILLED EMPLOYEES; ENVIRONMENTAL
COMPLIANCE RISKS; PROTECTION OF INTELLECTUAL PROPERTY; AND THE OTHER FACTORS
NOTED IN THIS PROSPECTUS WITH RESPECT TO THE COMPANY'S BUSINESSES ("CAUTIONARY
STATEMENTS"). ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON BEHALF OF THE COMPANY ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH CAUTIONARY STATEMENTS.

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SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the consolidated financial statements
and notes thereto, appearing elsewhere in this Prospectus. In this Prospectus,
references to "U.S. dollars" and "$" are to United States currency and
references to "Singapore dollars" and "S$" are to Singapore currency.

THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") is a
provider of advanced contract manufacturing services to original equipment
manufacturers ("OEMs") in the communications, computer, consumer electronics and
medical device industries. Flextronics offers a full range of services including
product design, printed circuit board ("PCB") fabrication and assembly,
materials procurement, inventory management, final system assembly and testing,
packaging and distribution. The components, subassemblies and finished products
manufactured by Flextronics incorporate advanced interconnect, miniaturization
and packaging technologies, such as surface mount ("SMT"), chip-on-board
("COB"), ball grid array ("BGA") and miniaturized gold-plated PCB technology.
The Company's strategy is to use its global manufacturing capabilities and
advanced technological expertise to provide its customers with a complete
manufacturing solution, highly responsive and flexible service, accelerated time
to market and reduced production costs. The Company targets leading OEMs, in
growing vertical markets, with which it believes it can establish long-term
relationships, and serves its customers on a global basis from its strategically
located facilities in Asia, the United States, Mexico and Europe. The Company's
customers include Advanced Fibre Communications, Braun/ThermoScan, Cisco
Systems, Ericsson, Harris DTS, Lifescan (a Johnson & Johnson company),
Microsoft, Philips Electronics and 3Com/US 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 -- Recent Acquisitions."

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

Since 1994, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, both through
acquisitions and internal growth. In fiscal 1997, in addition to the acquisition
of the Karlstrona Facilities, the Company expanded its advanced PCB design
capabilities by acquiring Fine Line Printed Circuit Design, Inc. ("Fine Line")
for 223,321 Ordinary Shares; expanded its presence in China by investing in FICO
Investment Holding Limited ("FICO"), a producer of injection molded plastics for
Asian electronics companies; opened an additional manufacturing facility in San
Jose, California; closed manufacturing operations at its Richardson, Texas
facility; and downsized manufacturing operations in Singapore. The Company has
recently substantially expanded its manufacturing operations by expanding its
integrated campus in Doumen, China, constructing a new manufacturing campus in
Guadalajara, Mexico and adding facilities in San Jose, California. In fiscal
1998, in addition to the Neutronics acquisition, the Company acquired DTM
Products, Inc., a Colorado-based producer of injection molded plastics for North
American OEMs, in exchange for 252,469 Ordinary Shares, and Energipilot AB, a
Swedish company principally engaged in providing cables and engineering services
for Northern European OEMs, in exchange for 229,990 Ordinary Shares, and the
Company signed a definitive agreement to acquire Conexao Informatica Ltda., a
Brazil-based contract manufacturer. See "Risk Factors -- Acquisitions."

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RISK FACTORS

SIGNIFICANT LEVERAGE

The Company has significant amounts of outstanding indebtedness and
interest cost. The Company's level of indebtedness presents risks to investors,
including the possibility that the Company may be unable to generate cash
sufficient to pay the principal of and interest on the indebtedness when due.
The Company's indebtedness at December 31, 1997 included $150.0 million
principal amount of 8.75% senior subordinated notes due 2007, $14.5 million in
bank borrowings, $27.0 in capital lease obligations and $14.7 million of other
debt instruments compared to $72.0 million at December 31, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of the Credit
Facility."

Additionally, the Company's level of indebtedness could have a material
adverse effect on the Company's future operating performance, including, but not
limited to, the following: (i) a significant portion of the Company's cash flow
from operations will be dedicated to debt service payments, thereby reducing the
funds available to the Company for other purposes; (ii) the Company's leverage
may place the Company at a competitive disadvantage; (iii) the Company's
operating flexibility is limited by covenants that, among other things, limit
its ability to incur additional indebtedness, grant liens, make capital
expenditures and enter into sale and leaseback transactions; and (iv) 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 may seek growth through selective acquisitions, including
significant acquisitions. The Company could incur substantial additional
indebtedness in connection with a significant acquisition, in which event the
Company's leverage would increase.

MANAGEMENT OF EXPANSION AND CONSOLIDATION

The Company is currently experiencing a period of rapid expansion through
both internal growth and acquisitions, with net sales increasing from $81.0
million in fiscal 1992 to $640.0 million in fiscal 1997 and $782.0 million in
the first nine months of fiscal 1998. There can be no assurance that the
Company's historical growth will continue or that the Company will successfully
manage the integration of acquired operations. Expansion has caused, and is
expected to continue to cause, strain on the Company's infrastructure, including
its managerial, technical, financial and other resources. To manage further
growth, the Company must continue to enhance financial controls and hire
additional engineering and sales personnel. The Company's ability to manage any
future growth effectively will require it to attract, train, motivate and manage
new employees successfully, to integrate new employees into its overall
operations and to continue to improve its operational systems. The Company may
experience certain inefficiencies as it integrates new operations and manages
geographically dispersed operations. There can be no assurance that the Company
will be able to manage its expansion effectively, and a failure to do so could
have a material adverse effect on the Company, its results of operations,
prospects or debt service ability. In addition, the Company's results of
operations, prospects or debt service ability would be adversely affected if its
new facilities do not achieve growth sufficient to offset increased expenditures
associated with expansion.

Expansion through acquisitions and internal growth has contributed to the
Company's incurring significant accounting charges and experiencing volatility
in its operating results. There can be no assurance that the Company will not
continue to experience volatility in its operating results or incur write-offs
in connection with its expansion efforts. See "-- Acquisitions." In addition,
the Company has recently completed the construction of significant new
facilities in Guadalajara, Mexico, Doumen, China, and San Jose, California,
resulting in new fixed costs and other operating expenses, including substantial
increases in depreciation expense that will increase the Company's cost of
sales. There can be no assurance that the Company will utilize a sufficient
portion of the capacity of these new and expanded facilities to offset the
impact of these expenses on its gross margins and operating income. If revenue
levels do not increase

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sufficiently to offset these new expenses, the Company's results of operations,
prospects or debt service ability could be materially adversely affected.

The Company is in the process of substantially expanding its manufacturing
capacity at many of its facilities, and plans to significantly expand its
manufacturing campuses in Shenzhen, China, Sarvar, Hungary, Guadalajara, Mexico
and San Jose, California by adding new facilities and equipment. The Company
expects substantial new capital expenditures and operating lease commitments in
connection with this expansion. The Company intends to finance the capital
expenditures with net cash from operations, existing cash balances and
borrowings under the Credit Facility. No assurance can be given as to the
availability of such net cash from operations or borrowings, or as to the
availability or terms of any operating leases, and if such funds and leases are
not available, the Company could be required to curtail the construction of the
new facilities. There can be no assurance that the Company will not encounter
unforeseen difficulties, costs or delays in developing, constructing and
equipping the new manufacturing facilities, and there can be no assurance as to
when it will complete construction. Any such difficulties or delays could have a
material adverse effect on the Company's business, financial condition and
results of operations. The development and construction of the new facilities
are subject to significant risks and uncertainties, including cost estimation
errors and overruns, construction delays, weather problems, equipment delays or
shortages, labor shortages and disputes, production start-up problems and other
factors. As many of such factors are beyond the Company's control, the Company
cannot predict the length of any such delays, which could be substantial and
could result in substantial cost overruns. Such delays would adversely affect
the Company's sales growth and the Company's ability to timely meet delivery
schedules. Furthermore, the Company's development and construction of the new
facilities will result in new fixed and operating expenses, including
substantial increases in depreciation expense and rental expense that will
increase the Company's cost of sales. If revenue levels do not increase
sufficiently to offset these new expenses, the Company's operating results could
be materially adversely affected.

REPLACEMENT OF MANAGEMENT INFORMATION SYSTEMS; YEAR 2000 COMPLIANCE

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. In addition, the
successful implementation of these systems will be important to facilitate
future growth. The Company currently anticipates that the complete installation
of its new management information systems will take at least eighteen months,
and implementation of the new systems could cause significant disruption in
operations. If the Company is not successful in implementing its new systems or
if the Company experiences difficulties in such implementation, the Company
could experience problems with the delivery of its products or an adverse impact
on its ability to access timely and accurate financial and operating
information.

The Company is in the process of identifying operating issues related to
the ability of its information systems to process dates beginning with the year
2000 ("Year 2000 compliance"). The new management information systems are
designed to be Year 2000 compliant. However, there can be no assurance that the
management information systems will be Year 2000 compliant or that such systems
will be implemented by Year 2000, and any failure to be Year 2000 compliant or
to effectively implement the new management information systems by Year 2000
could have a material adverse effect on the Company's business and results of
operations. There can be no assurance that the Company's customers and suppliers
have, or will have, management information systems that are Year 2000 compliant.
However, the Company does not anticipate that any Year 2000 compliance problems
facing its customers or suppliers would have a material adverse effect on the
Company's business and results of operations.

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

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operations and personnel of the acquired companies, the amortization of acquired
intangible assets and the potential loss of key employees of the acquired
companies. The Company may not have had any experience with technologies,
processes and markets involved with the acquired business and accordingly may
lack the management and marketing experience that will be necessary to
successfully operate and integrate the business. The successful operation of an
acquired business will require communication and cooperation in product
development and marketing among senior executives and key technical personnel.
Given the inherent difficulties involved in completing a major business
combination, there can be no assurance that such cooperation will occur or that
integration of the respective businesses will be successful and will not result
in disruption in one or more sectors of the Company's business. In addition,
there can be no assurance that the Company will retain key technical,
management, sales and other personnel, that the market will favorably view the
Company's entry into a new industry or market or that the Company will realize
any of the other anticipated benefits of the acquisition. Furthermore,
additional acquisitions would require investment of financial resources, and may
require debt or equity financing. No assurance can be given that the Company
will consummate any acquisitions in the future, that any past or future
acquisition by the Company will not materially adversely affect the Company, its
results of operations, prospects or debt service ability, or that any such
acquisition will enhance the Company's business.

The March 27, 1997 acquisition of the Karlskrona Facilities and the
execution of a multi-year purchase agreement (the "Purchase Agreement") between
the Company and Ericsson (together the "Karlskrona Acquisition") and the October
30, 1997 acquisition of Neutronics each represent a significant expansion of the
Company's operations and entail a number of risks. The acquired operations are
now being integrated into the Company's ongoing manufacturing operations. This
requires optimizing production lines, implementing new management information
systems, implementing the Company's operating systems, and assimilating and
managing existing personnel. The difficulties of this integration may be further
complicated by the geographical distance of the Karlskrona Facilities and
Neutronics' operations from the Company's current operations in Asia and North
America. In addition, these acquisitions have increased and will continue to
increase the Company's expenses and working capital requirements, and place
burdens on the Company's management resources. In the event the Company is
unsuccessful in integrating these operations, the Company would be materially
adversely affected. In addition, prior to the acquisitions of the Karlskrona
Facilities and Neutronics, the Company had no experience operating in Sweden or
in Central Europe, and there can be no assurance that the Company will achieve
acceptable levels of profitability at the acquired operations, or that the
acquisitions will not adversely affect its gross margins.

The Company intends to use the Karlskrona Facilities to manufacture
products for OEMs other than Ericsson. The Company has no commitments by any
third party to purchase manufacturing services to be provided at the Karlskrona
Facilities, and no assurance can be given that the Company will be successful in
marketing and providing manufacturing services to third parties from the
Karlskrona Facilities. Further, no assurances can be given as to the Company's
ability to expand manufacturing capacity at the Karlskrona Facilities.

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<PAGE> 9

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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview."

In the second quarter of fiscal 1998, the Company reduced its estimate of
the useful lives of the goodwill and intangible assets (consisting of goodwill,
customer lists and trademarks and tradenames) arising from the Astron
acquisition from approximately twenty years to ten years. This reduction will
increase the Company's amortization assets per quarter by approximately
$279,000.

RISKS OF KARLSKRONA PURCHASE AGREEMENT

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

The Company intends to use the Karlskrona Facilities to manufacture
products for OEMs other than Ericsson. Ericsson has certain rights to be
consulted on the management of the Karlskrona Facilities and to approve the use
of the Karlskrona Facilities for Ericsson's competitors, or for other customers
where such use might adversely affect Ericsson's access to production capacity
at the facilities.

The 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. See "Business -- Karlskrona Acquisition."

CUSTOMER CONCENTRATION; DEPENDENCE ON ELECTRONICS INDUSTRY

A small number of customers are currently responsible for a significant
portion of the Company's net sales. The Company's largest customer in the three
and nine months ended December 31, 1997 was Ericsson,

8
<PAGE> 10

with net sales to Ericsson accounting for approximately 30% and 28% of its total
net sales, respectively. See "-- Risks of Karlskrona Purchase Agreement." Net
sales to Philips Electronics was approximately 11% for the nine months ended
December 31, 1997. Net sales to the Company's top five customers during the nine
months ended December 31, 1997 accounted for approximately 59% of consolidated
sales compared to 49% during the nine months ended December 31, 1997. In fiscal
1997, the Company's five largest customers accounted for approximately 46% of
net sales. Approximately 19% and 10% of the Company's net sales for fiscal 1997
were derived from sales to Philips Electronics and Lifescan, respectively, and
approximately 28% and 11% of the Company's net sales for the first nine months
of fiscal 1998 were derived from sales to Ericsson and Philips Electronics,
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
and such cancellations and delays could affect the ability of the Company to
forecast purchase commitments accurately. The timely replacement of canceled,
delayed, or reduced contracts with new business cannot be assured. These risks
are exacerbated because a majority of the Company's sales are to customers in
the electronics industry, which is subject to rapid technological change and
product obsolescence.

The factors affecting the electronics industry in general, or any of the
Company's major customers in particular, could have a material adverse effect on
the Company. 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."

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

VARIABILITY OF CUSTOMER REQUIREMENTS AND OPERATING RESULTS

Contract manufacturers must provide increasingly rapid product turnaround
and respond to ever-shorter lead times. The Company generally does not obtain
long-term purchase orders but instead works with its customers to anticipate the
volume of future orders. In certain cases, the Company will procure components
without a customer commitment to pay for them, and the Company must continually
make other significant decisions for which it is responsible, including the
levels of business that it will seek and accept, production schedules, personnel
needs and other resource requirements, based on estimates of future customer
requirements that are subject to significant change. A variety of conditions,
both specific to the individual customer and generally affecting the industry,
may cause customers to cancel, reduce or delay orders. Cancellations, reductions
or delays by a significant customer or by a group of customers would adversely
affect the Company, its results of operations, prospects or debt service
ability. On occasion, customers may require rapid increases

9
<PAGE> 11

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.
In the third quarter of fiscal 1998, the Company reported a merger-related
expenses of approximately $4.0 million as a result of its acquisitions of
Neutronics, DTM and Energipilot and Neutronics' cancellation of its planned
initial public offering. There can be no assurance that the Company will not
continue to experience volatility in its operating results or incur write-offs
in connection with expansion, acquisitions and consolidation.

The market segments served by the Company are also subject to economic
cycles and have in the past experienced, and are likely in the future to
experience, recessionary periods. A recessionary period affecting the industry
segments served by the Company could have a material adverse effect on the
Company, its results of operations, prospects or debt service ability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

RAPID TECHNOLOGICAL CHANGE

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

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

10
<PAGE> 12

COMPETITION

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

RISK OF INCREASED TAXES

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

RISKS OF INTERNATIONAL OPERATIONS

The Company has substantial manufacturing operations located in Austria,
China, Hungary, Malaysia, Sweden and the United States. In addition, the Company
has recently constructed a manufacturing campus in Mexico, where the Company has
never manufactured products. The Company's net sales derived from operations
outside of the United States was $476.0 million in fiscal 1997, $161.8 million
of which was derived from operations in Hong Kong, Mauritius and China, and was
$610.0 million in the nine months ended December 31, 1997, $156.0 million of
which was derived from operations in Hong Kong and China. The geographical
distances between Asia, the United States, Mexico and Europe create a number of
logistical and communications challenges. Because of the location of
manufacturing facilities in a number of countries, the Company is affected by
economic and political conditions in those countries, including fluctuations in
the value of currency, duties, possible employee turnover, labor unrest, lack of
developed infrastructure, longer payment cycles, greater difficulty in
collecting accounts receivable, the burdens and costs of compliance with a
variety of foreign laws and, in certain parts of the world, political
instability. Changes in policies by the U.S. or foreign governments resulting
in, among other things, increased duties, higher taxation, currency conversion
limitations, restrictions on the transfer of funds, limitations on imports or
exports, or the expropriation of private enterprises could also have a material
adverse effect on the Company, its results of operations, prospects or debt
service ability. The Company could also be adversely affected if the current
policies encouraging foreign investment or foreign trade by its host countries
were to be reversed. In addition, the

11
<PAGE> 13

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, Hungary
and Mexico, where the Company is substantially expanding its operations, as well
as in Hong Kong, where the Company maintains certain administrative and
procurement operations. 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.

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

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

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

The Company maintains certain administrative, procurement and manufacturing
operations in Hong Kong, which may be influenced by the changing political
situation in Hong Kong and by the general state of the Hong Kong economy. On
July 1, 1997, sovereignty over Hong Kong was transferred from the United Kingdom
to China, and Hong Kong became a Special Administrative Region ("SAR"). Based on
current political conditions and the Company's understanding of the Basic Law of
the Hong Kong SAR of China, the Company does not believe that the transfer of
sovereignty over Hong Kong will have a material adverse effect on the Company,
its results of operations, prospects or debt service ability. There can be no
assurance, however, that changes in political, legal or other conditions will
not result in any such adverse effect.

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

Risks Relating to Hungary. A majority of Neutronics' manufacturing
operations are located in Hungary. Hungary has undergone significant political
and economic change in recent years. Political, economic, social and other
developments in Hungary may in the future have a material adverse effect on the
Company's business. In particular, changes in laws or regulations (or in the
interpretation of existing laws or regulations),

12
<PAGE> 14

whether caused by change in the Hungarian government or otherwise, could
materially adversely affect the Company's operations and business. Annual
inflation and interest rates in Hungary have been much higher than those in
Western Europe. Exchange rate policies have not always allowed for the free
conversion of currencies at the market rate. Fluctuations of inflation and
exchange rates could have an adverse effect on the Neutronics operations
business and the market value of the Shares.

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

CURRENCY FLUCTUATIONS

While Flextronics transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of Flextronics' costs
such as payroll, rent and indirect operation costs, are denominated in other
currencies such as Singapore dollars, Swedish kronor, Hong Kong dollars,
Malaysian ringgit, British pounds sterling, Austrian schillings, Hungarian
forints 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. As a result of the acquisition of Neutronics, a portion of the
Company's business has been, and is expected to continue to be, conducted in
Hungarian forints. In recent years, the Hungarian forint has continued to
depreciate, principally by way of devaluation, against the major currencies of
Europe. 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 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's Austrian and Hungarian subsidiaries have
limited involvement in the normal course of business with derivative financial
instruments with off-balance sheet risks as a means of hedging its fixed
Japanese yen and U.S. dollar currency exposure in relation to trade accounts
payable and fixed purchase obligations. The Company had $6.8 million and $6.5
million of aggregate foreign currency forward exchange contracts outstanding at
the end of fiscal 1997 and 1996, respectively. 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 flows. 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.

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

13
<PAGE> 15

circuits in bare-die form. Component shortages could result in manufacturing and
shipping delays or higher prices which could have a material adverse effect on
the Company, its results of operations, prospects or debt service ability.

DEPENDENCE ON KEY PERSONNEL AND SKILLED EMPLOYEES

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

ENVIRONMENTAL COMPLIANCE RISKS

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

PROTECTION OF INTELLECTUAL PROPERTY

The Company relies on a combination of patent, trade secret and trademark
laws, confidentiality procedures and contractual provisions to protect its
intellectual property. The Company seeks to protect certain of its technology
under trade secret laws, which afford only limited protection. There can be no
assurance that any of the Company's pending patent applications will be issued
or that intellectual property laws will protect the Company's intellectual
property rights. In addition, there can be no assurance that any patent issued
to the Company will not be challenged, invalidated or circumvented or that the
rights granted 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

14
<PAGE> 16

not occur. The failure to obtain necessary licenses or other rights or the
occurrence of litigation arising out of such claims could materially adversely
affect the Company, its results of operations, prospects or debt service
ability.

VOLATILITY OF MARKET PRICE OF ORDINARY SHARES

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

ENFORCEMENT OF CIVIL LIABILITIES

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

DIVIDENDS

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

15
<PAGE> 17

PRICE RANGE OF ORDINARY SHARES

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

<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal 1996
First Quarter............................................. $21 7/8 $13 1/2
Second Quarter............................................ $26 3/4 $21 3/4
Third Quarter............................................. $30 $21
Fourth Quarter............................................ $35 3/4 $25 3/4
Fiscal 1997
First Quarter............................................. $39 $25
Second Quarter............................................ $28 1/4 $17
Third Quarter............................................. $37 1/4 $21
Fourth Quarter............................................ $29 3/4 $19 5/8
Fiscal 1998
First Quarter............................................. $27 $17 1/2
Second Quarter............................................ $47 3/8 $26 3/8
Third Quarter............................................. $49 1/2 $29
Fourth Quarter (through February 25, 1998)................ $45 $32
</TABLE>

On February 25, 1998, the closing sale price of the Ordinary Shares was
$44.625 per share.

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<PAGE> 18

SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company as of
and for each of the nine months ended December 31, 1996 and 1997 and as of and
for the fiscal years ended March 31, 1993, 1994, 1995, 1996 and 1997. The
selected financial data for the fiscal years ended March 31, 1995, 1996 and 1997
and as of March 31, 1996 and 1997 has been derived from the consolidated
financial statements of the Company which have been audited by Arthur Andersen
LLP, independent public accountants, whose report thereon is included elsewhere
herein. The selected financial data as of December 31, 1997 and 1996 and for the
nine months ended December 31, 1996 and 1997 has been derived from the unaudited
financial statements of the Company for such periods. The selected financial
data as of March 31, 1993, 1994 and 1995 and for the years ended March 31, 1993
and 1994 has been derived from the consolidated financial statements of the
Company which were audited by other auditors. 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>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------------------------ -------------------
1993 1994 1995 1996(1) 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................................... $100,759 $131,345 $292,149 $572,045 $640,007 $467,787 $782,013
Cost of sales.................................. 91,794 117,392 265,426 517,732 575,142 421,931 705,496
-------- -------- -------- -------- -------- -------- --------
Gross margin................................... 8,965 13,953 26,723 54,313 64,865 45,856 76,517
Selling, general and administrative............ 7,131 8,667 15,771 28,138 36,277 26,101 38,143
Goodwill and intangible amortization........... 388 419 762 1,296 2,648 2,152 2,704
Provision for plant closings................... -- 830 -- 1,254(1) 5,868(2) 2,321 --
Acquired in-process research and development... 81 202 91 29,000(1) -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations.................. 1,365 3,835 10,099 (5,375) 20,072 15,282 35,670
Merger-related expenses........................ -- -- (816) -- -- -- (4,000)
Other, net..................................... (2,329) (1,446) (1,814) (4,924) (6,425) (2,434) (9,705)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes.............. (964) 2,389 7,469 (10,299) 13,647 12,848 21,965
Provision for income taxes..................... 264 654 1,588 3,847 2,027 2,029 2,856
Extraordinary gain............................. -- 416 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss).............................. $ (1,228) $ 2,151 $ 5,881 $(14,146) $ 11,620 $ 10,819 $ 19,109
======== ======== ======== ======== ======== ======== ========
Diluted net income (loss) per share............ $ (0.17) $ 0.28 $ 0.40 $ (0.92) $ 0.67 $ 0.62 $ 1.03
======== ======== ======== ======== ======== ======== ========
Weighted average Ordinary Shares and
equivalents outstanding -- diluted........... 7,382 7,730 14,882 15,436 17,363 17,358 18,631
</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, the write-off of excess
equipment and severance obligations at the nCHIP semiconductor fabrication
operations.

17
<PAGE> 19

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," "plans" 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 11 of Notes to
Consolidated Financial Statements.

In January 1995, the Company acquired nCHIP, Inc. ("nCHIP") in exchange for
an aggregate of approximately 2,450,000 Ordinary Shares in a transaction
accounted for as a pooling-of-interests. The Company sold nCHIP's semiconductor
wafer fabrication facilities to a third party in February 1998.

In February 1996, the Company acquired Astron Group Limited ("Astron") 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 was paid 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,

18
<PAGE> 20

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. 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.

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

In the fourth quarter of fiscal 1996, the Company recorded charges totaling
$1.3 million for costs associated with the closing of one of the Company's
Malaysian 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
$16.1 million and $1.05, 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 interests.
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 paid the $2.2 million
balance in the third quarter of fiscal 1998. 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 from
banks, which the Company repaid in October 1997 with the net proceeds from the
Company's debt and equity offerings. The transaction has been accounted for
under the

19
<PAGE> 21

purchase method. As a result, the purchase price was allocated to the assets
based on their estimated fair market values at the date of acquisition. The
Karlskrona Facilities include a 220,000 square foot facility and a 110,000
square foot facility, each of which is ISO 9002 certified. At the same time, the
Company and Ericsson entered into a multi-year purchase agreement under which
the Company manufactures and Ericsson purchases certain products used in the
business communications systems sold by Ericsson. The Company is currently
utilizing the Karlskrona Facilities to assemble and test printed circuit boards,
network switches, cordless base stations and other components for these systems.
The Company also intends to use the Karlskrona Facilities to offer advanced
contract manufacturing services to other European OEMs. Approximately 965
employees are currently based at the Karlskrona Facilities. See "Risk Factors --
Acquisitions" and "Business -- Recent Acquisitions."

On October 30, 1997 the Company acquired 92% of the outstanding ordinary
shares of Neutronics, an Austrian PCB assembly company with operations in
Austria and Hungary, in exchange for 2,806,000 Ordinary Shares of the Company.
Shing Leong Hui, Neutronics' majority shareholder prior to the acquisition, has
been appointed to the Company's board of directors. Neutronics' subsidiaries
have three manufacturing facilities in Hungary (including a campus in Sarvar)
and one manufacturing facility in Austria. These facilities, which total 718,000
square feet and have a total of approximately 3,500 employees, are engaged
primarily in PCB assembly, as well as related activities such as engineering and
design and injection molded plastics. Neutronics' net sales in the twelve months
ended June 30, 1997 were approximately $142.6 million. Neutronics' largest
customer is Philips Electronics, which accounted for approximately 57% of its
net sales for the nine month period ended September 30, 1997.

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

On December 1, 1997 the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB, a Swedish company
principally engaged in providing cables and engineering services for Northern
European OEMs, in exchange for 229,990 Ordinary Shares. The acquisitions of DTM
and Energipilot have been accounted for as poolings-of-interests. The Company
did not restate its prior period financial statements with respect to these
acquisitions because they did not have a material impact on its consolidated
results. In January 1998, the Company signed a definitive agreement to acquire
Conexao Informatica Ltda., a Brazil-based contract manufacturer. The acquisition
will be accounted for as a pooling-of-interests and is scheduled to close on
April 1, 1998, subject to various conditions.

The Company incurred expenses of approximately $4.0 million during the
quarter ended December 31, 1997 associated with the acquisitions of Neutronics,
DTM and Energipilot. The ability of the Company to obtain the benefits of these
acquisitions is subject to a number of risks and uncertainties, including the
Company's ability to successfully integrate the acquired operations and its
ability to maintain, and increase, sales to customers of the acquired companies.
There can be no assurance that any mergers or acquisitions will not materially
affect the Company. See "Risk Factors -- Acquisitions."

In addition to acquisitions, the Company has also substantially increased
overall capacity by expanding operations in North America, Asia and Europe in
the nine months ended December 31, 1997. In North America, the Company has
recently leased a new 71,000 square foot facility from which the Company offers
a wide range of engineering services, and in July 1997 the Company completed
construction of a new 73,000 square foot facility dedicated to high volume PCB
assembly. These new facilities are located adjacent to the Company's other San
Jose operations. Also in July 1997, the Company completed construction of a
101,000 square foot manufacturing facility on a 32-acre campus site in
Guadalajara, Mexico. In Asia, the Company

20
<PAGE> 22

has expanded its Doumen facilities by developing an additional 224,000 square
feet for miniaturized gold-finished PCB fabrication and for PCB and full system
assembly. The Company completed the construction of this expanded facility in
June 1997 and has commenced production at the new and expanded facilities. The
Company plans to significantly expand its manufacturing campuses in Shenzhen,
China, Sarvar, Hungary, Guadalajara, Mexico and San Jose, California by adding
new facilities and equipment.

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>
NINE MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, DECEMBER 31,
------------------------ ----------------
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.......................................... 90.9 90.5 89.9 90.2 90.2
----- ----- ----- ----- -----
Gross margin........................................... 9.1 9.5 10.1 9.8 9.8
Selling, general and administrative.................... 5.4 4.9 5.7 5.6 4.9
Goodwill and intangible amortization................... 0.3 0.2 0.4 0.4 0.4
Provision for plant closings........................... -- 0.2 0.9 0.5 --
Acquired in-process research and development........... -- 5.1 -- -- --
----- ----- ----- ----- -----
Income(loss) from operations........................... 3.4 (0.9) 3.1 3.3 4.5
Merger-related expenses................................ (0.3) -- -- -- (0.5)
Other, net............................................. (0.6) (0.9) (1.0) (0.6) (1.2)
----- ----- ----- ----- -----
Income (loss) before income taxes...................... 2.5 (1.8) 2.1 2.7 2.8
Provision for income taxes............................. 0.5 0.7 0.3 0.4 0.4
----- ----- ----- ----- -----
Net income (loss)...................................... 2.0 (2.5) 1.8 2.3 2.4
===== ===== ===== ===== =====
</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 nine
months ended December 31, 1997 increased 67.2% to $782.0 million from $467.8
million for the nine months ended December 31, 1996. The increase in sales for
the nine months was primarily due to (i) sales to Ericsson following the March
27, 1997 acquisition of the Karlskrona Facilities, (ii) an increase in sales to
certain existing customers, including Advanced Fibre Communications, Microsoft
and Braun/Thermoscan. This increase was partially offset by reduced sales to
certain customers, including Minebea, Visioneer, 3Com/US Robotics and Global
Village. See "Risk Factors -- Customer Concentration; Dependence on Electronics
Industry" and "Risk Factors -- Risks of Karlskrona Acquisition."

The Company's largest customers during the nine month period ending
December 31, 1997 were Ericsson and Philips Electronics. Net sales to Ericsson
for the nine month period accounted for approximately 28% of net consolidated
sales while net sales to Phillips Electronics for the nine month period
accounted for approximately 11% of net consolidated sales for the period. No
other customer accounted for more than 10% of consolidated net sales for the
nine month period ending December 31, 1997.

Net sales in fiscal 1997 increased 11.9% to $640.0 million from $572.0
million in fiscal 1996. This increase was primarily due to higher sales to
existing customers, including US Robotics, Microsoft, Phillips Electronics,
Advanced Fibre Communications and Braun/Thermoscan, sales to new customers such
as Cisco and Auspex, and the inclusion of Astron's sales following its
acquisition in February 1996. This increase was partially offset by reduced
sales to certain existing customers, including Visioneer, Apple Computer,
Houston Tracker Systems, Logitech, Voice Powered Technology and Fast Multimedia.
The Company believes that the

21
<PAGE> 23

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 95.8% to $572.0 million from $292.1
million in fiscal 1995. This increase was primarily the result of higher sales
to existing customers, including Phillips Electronics, 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 at 9.8%
for the nine months ended December 31, 1997 and for the nine months ended
December 31, 1996. The gross profit margin for the nine months ended December
31, 1997 was unfavorably impacted by increased depreciation, rent and other
fixed expenses as the Company commenced volume production in the new facilities
in Doumen, China and Guadalajara, Mexico. These expenses are expected to
continue to increase in fiscal 1999. See "Risk Factors --Management of
Consolidation and Expansion." The effect of these expenses on the Company's
gross profit margin was partially offset by the Company's manufacturing several
products on a consignment basis, which typically has higher gross profit margins
than turnkey projects. The Company anticipates that consignment activities will
decline as a percentage of its net sales in future periods. Prices paid to the
Company by its significant customers can vary significantly based on the
customer's order level, with per unit prices typically declining as volumes
increase. These changes in price and volume can materially affect the Company's
gross profit margin.

Gross margin increased to 10.1% in fiscal 1997 compared to 9.5% 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 than the
Company's facilities in other locations, and (iii) increased sales, resulting in
increased labor and overhead absorption. This benefit was partially offset by
the closing of manufacturing operations at the Company's Richardson, Texas
facility and the closure of the Company's nCHIP fabrication facility, and the
related inventory write-offs. See "Risk Factors -- Management of Expansion and
Consolidation."

Gross profit margin increased slightly to 9.5% in fiscal 1996 as compared
to 9.1% in fiscal 1995 mainly due to the lower gross profits from the Neutronics
facilities in Hungary and Austria in fiscal 1995. The increase in gross profit
margin was partially offset by 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.

Cost of sales included research and development costs of approximately
$860,000 and $687,000 for the nine months ended December 31, 1997 and 1996,
respectively and $913,000 and $153,000 in fiscal 1997 and 1996, respectively.
These costs are associated with research and development expenditures in the
Company's Astron facility in Doumen, China.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended
December 31, 1997 increased to $38.1 million from $26.1 million for the nine
months ended December 31, 1996 but decreased as a percentage of net sales to
4.9% for the nine months ended December 31, 1997 from 5.6% for the nine months
ended December 31, 1996. The increase in selling expenses was 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 was primarily due to the inclusion of the operations of
the Karlskrona Facilities; and

22
<PAGE> 24

the increase in corporate expenses is primarily due to growth in infrastructure
including the hiring of additional internal support personnel.

Selling, general and administrative expenses in fiscal 1997 increased to
$36.3 million from $28.1 million in fiscal 1996 and increased as percentage of
net sales to 5.7% in fiscal 1997 from 4.9% 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
$28.1 million from $15.8 million in fiscal 1995, but decreased as percentage of
net sales to 4.9% in fiscal 1996 from 5.4% 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.

In addition, Neutronics was incorporated in the second half of fiscal 1995,
and thus only half a year of expenses were incurred compared to a full year for
fiscal 1996.

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 nine months ended December 31, 1997 increased to
$2.7 million from $2.2 million for the nine months ended December 31, 1996.
Goodwill and intangible assets amortization increased to $2.6 million in fiscal
1997 from $1.3 million in fiscal 1996. These increases were primarily 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".

Goodwill and intangible asset amortization increased to $1.3 million in
fiscal 1996 from $762,000 in fiscal 1995 primarily due to the goodwill from the
Company's acquisition of A&A and Astron.

In the second quarter of fiscal 1998, the Company reduced its estimate of
the useful lives of the goodwill and intangible assets (consisting of goodwill,
customer lists, trademarks and tradenames) arising from the Astron acquisition,
from approximately twenty years to ten years. This reduction increased the
goodwill and intangible amortization assets per quarter by approximately
$279,000.

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> 25

manufacturing operations to lower cost manufacturing locations. See Note 9 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."

Merger Expenses

In the quarter ended December 31, 1997, the Company recorded a one-time
charge of approximately $4.0 million related to the merger expenses associated
with the acquisitions of Neutronics, EnergiPilot, and DTM Products. Until it was
acquired by the Company, Neutonics had planned an initial public offering and
approximately $1.9 million of these merger expenses represented the costs paid
to the underwriters upon the cancellation of this offering.

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

Other Income and Expense

Other expense, net for the nine months ending December 31, 1997 increased
to $9.7 million from $2.4 million for the nine months ended December 31, 1996.
The following table sets forth information concerning the components of other
income and expense.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Interest expense...................... $(1,166) $(4,286) $(6,426) $(4,513) $(13,183)
Interest income....................... 407 756 706 437 2,040
Foreign exchange gain(loss)........... (708) (638) 1,665 (17) 1,201
Income(loss) from associated
company............................. (729) -- 133 (137) 1,162
Permanent impairment in investment.... -- -- (3,200) -- --
Bank commitment fees.................. -- -- (750) -- --
Gain on sale of subsidiary............ -- -- 1,027 1,027 --
Other, net............................ 408 (653) 814 950 (645)
Minority interest..................... (26) (103) (394) (181) (280)
------- ------- ------- ------- --------
$(1,814) $(4,924) $(6,425) $(2,434) $ (9,705)
======= ======= ======= ======= ========
</TABLE>

Net interest expense increased to $11.1 million for the nine months ended
December 31, 1997 from $4.1 million for the nine months ended December 31, 1996.
The increase was primarily due to increased bank borrowings to finance the
acquisition of the Karlskrona Facilities, capital expenditures and the issuance
of $150.0 million principal amount of 8.75% senior subordinated notes in October
1997. The Company anticipates that its interest expense will increase in future
periods as a result of borrowings under its credit facility. Interest income for
the nine months ended December 31, 1997 and December 31, 1996 was $2.0 million
and $0.4 million, respectively. See "-- Liquidity and Capital Resources."

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Net interest expense increased to $5.7 million in fiscal 1997 from $3.5
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 $3.5 million in fiscal 1996 from $759,000
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.

Foreign exchange gain increased to $1.2 million in the nine months ended
December 31, 1997 from $17,000 foreign exchange loss in the nine months ended
December 31, 1996. The increase in the exchange gains for the nine months ended
December 31, 1997 was mainly due to the strengthening of the U.S. dollar against
Asian currencies and the Swedish kronor. Foreign exchange gain increased to $1.7
million in fiscal 1997 from $638,000 loss in fiscal 1996. The foreign exchange
loss in fiscal 1996 was primarily due to the devaluation of the Hungarian
Forint. Before the establishment in late 1995 of customs-free zones at the
Company's sites in Hungary, the Company was obliged to prepay (and later
reclaim) customs duties to the Hungarian authorities on all imported materials.
As a result of the devaluation of the Hungarian Forint in 1995, the Company
incurred a loss of approximately $1.3 million on these receivables in calendar
1995. Since the Company no longer has to prepay such duties, depreciation of the
Hungarian Forint generally benefits the Company's results of operations as it
reduces the Company's personnel expenses. The foreign exchange loss was reduced
in fiscal 1996 to a loss of $638,000 from a loss of $708,000 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, Singapore dollar, and the Hungarian Forint. See
Note 2 of Notes to Consolidated Financial Statements.

Income from associated companies for the nine months ended December 31,
1997 was $1.2 million compared to a loss of $137,000 for the nine month period
ended December 31, 1996. The income from associated companies resulted primarily
from the Company's investment in FICO and, to a lesser extent, certain minority
investments of Neutronics. 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. Income from
associated companies was $133,000 in fiscal 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 associated with its
interest in Flextracker in fiscal 1995. The Company initially

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<PAGE> 27

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) increased to an expense of $1.8 million in fiscal
1997 from income of $653,000 in fiscal 1996, mainly due to permanent impairment
investments in fiscal 1997 represented by a write-off of publicly traded common
stock received from a customer in fiscal 1997 as 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
subsequently was deemed to be permanently impaired in fiscal 1997, resulting in
a $3.2 million expense. Bank commitment fees represented $750,000 of commitment
fees written off in March 1997 when the bank's commitment expired unused. See
'-- Liquidity and Capital Resources."

Gain on sale of subsidiary of $1.0 million in the nine months ending
December 31, 1996 and fiscal 1997 was due to a gain from the sale of a Hungarian
subsidiary.

Other, net in fiscal 1997 included $898,000 received under the Company's
business interruption insurance policy as a result of an April 1996 fire at its
facilities in Doumen, China.

The minority interest in the nine months ended December 1997 and fiscal
1997 comprised of the 8% minority interest in Neutronics not acquired by the
Company in October 1997 and 4.1% minority interest in Ecoplast, a subsidiary of
Neutronics held by a third party. The minority interest expense in the nine
months ended December 1997 and fiscal 1997 was $280,000 and $394,000,
respectively.

Provision for Income Taxes

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

The Company's consolidated effective tax rate for any given period is
calculated by dividing the aggregate taxes incurred by each of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculation of
their respective local taxes. For example, the charge for the closing of
manufacturing operations at the Company's facility in Richardson, Texas in
fiscal 1997 was incurred by a United States subsidiary that did not have income
against which this charge could be offset. The ordinary corporate tax rates for
calendar 1997 were 34%, 26%, 18.0%, 16.5% and 15% in Austria, Singapore,
Hungary, 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 Hungarian subsidiaries have been on a tax holiday
that expired on December 31, 1997. Effective January 1, 1998, the Company's
Hungarian subsidiaries will be subject to corporate income taxes at a flat rate
of 18%, which will effectively be reduced to 7.2% in the years 1998 through 2002
because a 60% exemption will apply. As a result of this change in tax status,
the Company expects to be subject to current income taxes in Hungary in future
years. The Company's U.S. and U.K. subsidiaries are subject to ordinary
corporate tax rates of 35% and 33% respectively. However, these tax rates did
not have any material impact on the Company's taxes in fiscal 1997 due to the
operating losses of these two subsidiaries in this period. The Company's Swedish
subsidiary, which began operation on March 27, 1997 with the acquisition of the
Karlskrona Facilities, will be subject to an ordinary corporate tax rate of 28%.

The Company's consolidated effective tax rate was 13% for the nine months
ended December 31, 1997 compared to 15.8% in the nine months ended December 31,
1996 and 14.9% in fiscal 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

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manufacturing operations from Singapore, which has an ordinary corporate tax
rate of 26%, to low cost manufacturing operations located in countries with
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 approximately 19%.

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 with respect
to 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 loss carry forwards. The Company's facility in Shekou, China,
which was closed in fiscal 1996, was located in a "Special Economic Zone" and
was an approved "Product Export Enterprise" that qualified for a special
corporate income tax rate of 10%.

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

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $30.7 million for U.S. federal income tax purposes which will
expire between 2003 and 2011 if not previously utilized. Utilization of the U.S.
net operating loss carryforwards may be subject to an annual limitation due to
the change in ownership rules provided by the Internal Revenue Code of 1986.
This limitation and other restrictions provided by the Internal Revenue Code of
1986 may reduce the net operating loss carryforward such that it would not be
available to offset future taxable income of the U.S. subsidiary. At March 31,
1997, the Company had net operating loss carryforwards of approximately $10.0
million and $632,000 in the U.K. and Malaysia, respectively. The utilization of
these net operating loss carryforwards is limited to the future operations of
the Company in the tax jurisdictions in which such carryforwards arose. These
losses carryforward indefinitely. See Note 7 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 results of operations due to
a variety of factors. These factors include, among other things,

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<PAGE> 29

timing of orders, the short-term nature of most customers' purchase commitments,
volume of orders relative to the Company's capacity, customers' announcement,
introduction 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, mix of orders filled, timing of acquisitions and related expenses
and changes or anticipated changes in economic conditions. In addition, the
Company's revenues 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
revenues 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."

The Company's recently acquired Neutronics subsidiary has experienced
fluctuations in its results of operations during the prior fiscal years,
principally due to the seasonality of its operations. Most of Neutronics sales
generally occurred in the quarter ending September and December of each year as
most of the Company's customers are concentrated in the consumer electronics
industry where new products tend to be introduced to the market in the autumn
and where sales of existing products are higher in the period preceding
Christmas. Neutronics operating expenses are relatively fixed resulting in
operations for the March and June quarters being significantly lower than the
operating results for the September and December quarters. The sales mix for
Neutronics has changed reducing the impact of seasonality. The Company does not
anticipate the historical seasonality of Neutronics sales to have a material
impact on consolidated sales and gross margins.

BACKLOG

The Company's backlog was approximately $196.0 million at December 31, 1997
and $114.9 million at December 31, 1996. Backlog consists of contracts or
purchase orders with delivery dates scheduled within the next 60 days as
customers have the right to typically change their orders beyond 60 days. Even
within this 60-day period, contracts and purchase orders are often subject to
rescheduling or cancellation. 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 and cash equivalents 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. At December 31, 1997 the Company had cash
and cash equivalents balances totaling $73.3 million, outstanding bank
borrowings of $14.5 million and an aggregate of $105.0 million available for
borrowing under the Credit Facility subject to compliance with certain financial
ratios. The Company also completed the issuance of $150.0 million principal
amount senior subordinated notes due in 2007.

Net cash and cash equivalents provided by operating activities for the nine
months ended December 31, 1997 decreased to $4.4 million from $42.1 million for
the nine month period ending December 31, 1996. The decrease in cash and cash
equivalents from operating activities was primarily due to increases in accounts
receivables and inventories of $73.7 million partially offset by a $40.4 million
increase in accounts payable.

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Depreciation and amortization expense was $22.0 million and $13.4 million for
the nine months ended December 31, 1997 and December 31, 1996, respectively.

Net cash and cash equivalents provided by operating activities in fiscal
1997 was $54.4 million, consisting primarily of net income of $11.6 million,
depreciation and amortization of $18.1 million, provision for plant closing of
$5.3 million and increases in accounts payable, accrued liabilities and others
of $25.7 million.

Net cash and cash equivalents provided by operating activities in fiscal
1996 was $2.4 million, consisting primarily of a net loss of $14.1 million,
largely offset by the $29.0 million write-off of In-Process R&D, depreciation
and amortization of $13.9 million, and increases in accounts payable, accrued
liabilities and others of $14.7 million. Cash flows from operating activities
were further reduced by increases in accounts receivables of $29.0 million and
increases in inventories of $19.6 million.

Net cash and cash equivalents used by operating activities in fiscal 1995
was $5.2 million, consisting primarily of increases in accounts receivables and
inventories of $36.8 million partially offset by increases in accounts payable
of $19.9 million and depreciation and amortization expense of $7.2 million.

Accounts receivable, net of allowance for doubtful accounts increased to
$122.6 million at December 31, 1997 from $87.5 million at March 31, 1997. The
increase in accounts receivable was primarily due to a 67% increase in sales for
the nine months ended December 31, 1997. Inventories increased to $147.1 million
at December 31, 1997 from $124.4 million at March 31, 1997. The increase in
inventories was mainly a result of increased purchases of material to support
the growing sales. The Company's allowance for doubtful accounts increased from
$6.1 million at March 31, 1997 to $7.1 million at December 31, 1997. The
Company's allowance for inventory obsolescence increased from $6.2 million at
March 31, 1997 to $7.1 million at December 31, 1997.

Accounts receivable, net of allowance for doubtful accounts, decreased to
$87.5 million at March 31, 1997 from $97.3 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 $124.4 million
at March 31, 1997 from $65.9 million at March 31, 1996. The increase in
inventories was mainly a result of the acquisition of $55.3 million of
inventories at the Karlskrona Facilities. The Company's allowances for doubtful
accounts increased to $6.1 million at March 31, 1997 from $3.8 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.

Accounts receivable, net of allowance for doubtful accounts, increased to
$97.3 million at March 31, 1996 from $58.1 million at March 31, 1995 and
inventories increased to $65.9 million at March 31, 1996 from $42.4 million at
March 31, 1995. The increase in accounts receivable and inventories was mainly
due to the 95.8% increase in sales during fiscal 1996. The Company's allowances
for doubtful accounts increased from $1.8 million at March 31, 1995 to $3.8
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 Malaysian plants.

Net cash and cash equivalents used in investing activities during the nine
months ended December 31, 1997 was $74.6 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 facility in San Jose,
California and the Karlskrona Facilities. Net cash and cash equivalents used in
investing activities during the nine months ended December 31, 1996 was $25.0
million, consisting primarily of acquisitions of equipment and building
construction.

Net cash and cash equivalents used in investing activities in fiscal 1997
was $117.6 million, consisting primarily of $82.4 million for the acquisition of
the Karlskrona Facilities, and $37.5 million of expenditures for machinery and
equipment in the Company's, China, Mexico and California manufacturing
facilities and $3.1 million cash paid in November for the 40% interest in FICO.

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Net cash and cash equivalents used in investing activities in fiscal 1996
was $39.8 million, consisting primarily of $23.5 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 and cash equivalents used in investing activities in fiscal 1995
was $22.3 million, consisting primarily of $21.8 million of expenditures for
buildings, machinery and equipment. Approximately $14.3 million in capital
expenditures relates to the recently acquired Neutronics operations.

Net cash and cash equivalents provided by financing activities was $120.2
million for the nine months ended December 31, 1997 compared to net cash and
cash equivalents used in financing activities of $11.7 million for the nine
months ended December 31, 1996. Net cash and cash equivalents provided by
financing activities for the nine months ended December 31, 1997 resulted
primarily from net proceeds of the issuance of senior subordinated notes of
$145.7 million and net proceeds from the equity offering of $95.3 million,
partially offset by repayments of bank borrowings, capital leases and long-term
debts of $128.0 million.

Net cash and cash equivalents provided by financing activities in fiscal
1997 was $79.0 million, consisting primarily of bank borrowings and proceeds
from long term debt of $160.9 million. This was partially offset by $64.0
million in repayments of bank borrowings, $10.0 million in repayments of notes
to Astron's former shareholders, $8.0 million in repayments of capital lease
obligations and $4.4 million in repayment of loan from a related company.

Net cash and cash equivalents provided by financing activities in fiscal
1996 was $34.0 million, consisting primarily of $22.3 million from the sale of
1,000,000 newly issued Ordinary Shares and net bank borrowings of $22.9 million.
This was partially offset by $5.8 million in repayments of capital lease
obligations and $6.4 million repayment of loan from a related company.

Net cash and cash equivalents provided by financing activities in fiscal
1995 was $10.4 million, consisting primarily of borrowings from a related party
which was repaid in fiscal 1996 and fiscal 1997.

During the quarter ended March 31, 1997, the Company obtained a commitment
for a new $100.0 million credit facility for which it paid commitment fees of
$750,000. Ultimately, however, the Company required a larger credit facility in
order to fund the acquisition of the Karlskrona Facilities. As a result, the
$100.0 million facility was never consummated and expired during the quarter
unused. Instead of consummating this $100.0 million credit facility and
borrowing under this commitment, the Company entered into a $175.0 million
credit facility with BankBoston, N.A. (the "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 Credit Facility, was capitalized and is being amortized over the term of the
Credit Facility.

The Credit Facility consists of two loan agreements. Under the Credit
Facility, the Company borrowed a $70.0 million term loan on March 27, 1997 and,
subject to compliance with certain financial ratios and the satisfaction of
customary borrowing conditions, 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
December 31, 1997, no balances were outstanding on the revolving credit loans
and the $70.0 million term loan was repaid in October 1997. Loans under the
Credit Facility will mature in March 2000. Loans to the Company are guaranteed
by certain of its subsidiaries and loans to the Company's United States
Subsidiary are guaranteed by the Company and by certain of the Company's
subsidiaries. The Credit Facility is secured by a lien on substantially all
accounts receivable and inventory of the Company and its subsidiaries, as well
as a pledge of the Company's shares in certain of its subsidiaries. The Credit
Facility contains a number of operating and financial covenants and provisions.
The Company was in compliance with all financial covenants and provisions as of
December 31, 1997. See "Description of the Credit Facility."

Proceeds from both the Company's October 1997 equity and senior
subordinated notes offerings were used to pay off the $70.0 million term loan
and the $77.0 million outstanding balance of the Credit Facility.

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The Company intends to continue to borrow revolving credit loans under the
Credit Facility. See "Risk Factors -- Significant Leverage."

The Company's capital expenditures in the first nine months of fiscal 1998
were approximately $65.9 million, excluding capital expenditures financed by
capital leases of $5.7 million and the Company anticipates that its capital
expenditures in fiscal 1999 will be approximately $98 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 implementat 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 of
business. Future liquidity needs will depend on, among other factors, the timing
of expenditures by the Company on new equipment, the timing of capital
expenditures and the extent to which the Company utilizes operating leases for
the new facilities and equipment, levels of shipments by the Company and changes
in volumes of customer orders. The Company believes that the existing cash
balances, together with anticipated cash flow from operations, net proceeds of
its debt offering and amounts available under the Credit Facility, will be
sufficient to fund its operations through fiscal 1998.

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BUSINESS

The Company is a provider of advanced contract manufacturing services to
OEMs in the communications, computer, consumer electronics and medical device
industries. Flextronics offers a full range of services including product
design, PCB fabrication and assembly, materials procurement, inventory
management, final system assembly and test, packaging and distribution. The
components, subassemblies and finished products manufactured by Flextronics
incorporate advanced interconnect, miniaturization and packaging technologies,
such as SMT, MCM, COB, BGA and miniaturized gold-plated PCB technologies. The
Company's strategy is to use its global manufacturing capabilities and advanced
technological expertise to provide its customers with a complete manufacturing
solution, highly responsive and flexible service, accelerated time to market and
reduced production costs. The Company targets leading OEMs in growing vertical
markets with which it believes it can establish long-term relationships, and
serves its customers on a global basis from its strategically located facilities
in North America, East Asia and Northern Europe. The Company's customers include
Advanced Fibre Communications, Braun/ThermoScan, Cisco Systems, Ericsson, Harris
DTS, Lifescan (a Johnson & Johnson company), Microsoft, Philips Electronics and
3Com/US Robotics.

INDUSTRY OVERVIEW

Many OEMs in the electronics industry are increasingly utilizing contract
manufacturing services in their business and manufacturing strategies, and are
seeking to outsource a broad range of manufacturing and related engineering
services. Outsourcing allows OEMs to take advantage of the manufacturing
expertise and capital investments of contract manufacturers, thereby enabling
OEMs to concentrate on their core competencies. According to an independent
industry study, these trends and overall growth in OEMs' markets have resulted
in a compound annual growth rate in the electronics contract manufacturing
industry of over 30% from 1992 through 1996, to approximately $60.0 billion.
According to this study, the industry is expected to grow to approximately
$110.0 billion by 1999. OEMs utilize contract manufacturers to:

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

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

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

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

Reduce Investment. As electronic products have become more
technologically advanced, internal manufacturing has required significantly
increased investment for working capital, capital equipment, labor, systems
and infrastructure. Contract manufacturers enable OEMs to gain access to
advanced, high volume manufacturing capabilities without making the capital
investments required for internal production.

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

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

STRATEGY

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

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

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

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

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

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<PAGE> 35

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

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

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

CUSTOMERS

The Company's customers consist of a select group of OEMs in the
communications, computer, consumer electronics and medical device industries.
Within these industries, the Company's strategy is to seek long-term
relationships with leading companies that seek to outsource significant
production volumes of complex products. The Company has increasingly focused on
sales to larger companies and to customers in the communications industries. In
fiscal 1997 and the first nine months of fiscal 1998, the Company's five largest
customers accounted for approximately 49% and 59%, respectively, of net sales.
The loss of one or more major customers would have a material adverse effect on
the Company, its results of operations, prospects or debt service ability. See
"Risk Factors -- Customer Concentration; Dependence on Electronics Industry" and
"-- Variability of Customer Requirements and Operating Results."

The following table lists in alphabetical order certain of the Company's
largest customers in the nine months ended December 31, 1997 and the products
for which the Company provides manufacturing services.

<TABLE>
<CAPTION>
CUSTOMER END PRODUCTS
------------------------------------------------- -------------------------------------
<S> <C>
Auspex........................................... Drive carriers
Advanced Fibre Communications.................... Local line loop carriers
Braun/ThermoScan................................. Temperature monitoring systems
Cisco Systems.................................... Data communications products
Compaq........................................... Modems
Diebold.......................................... Automatic teller machines
Ericsson......................................... Business telecommunications systems
Harris DTS....................................... Network switches
Lifescan (a Johnson & Johnson company)........... Portable glucose monitoring system
Microsoft........................................ Computer peripheral devices
Philips Electronics.............................. Consumer electronics products
3Com/US 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), Philips Consumer
Products/Lucent (telephones), Bay Networks (data communications products), Nokia
(consumer electronics products and WebTV/Microsoft (consumer internet devices).
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 28% of the Company's net sales in the first three quarters of
fiscal 1998, and the Company believes that sales to Ericsson will account for a
significant portion of its net sales in fiscal 1999. See "-- Karlskrona
Acquisition" and "Risk Factors -- Risks of Karlskrona Acquisition."

34
<PAGE> 36

SALES AND MARKETING

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

SERVICES

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

Engineering Services

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

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

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

Materials Procurement and Management

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

35
<PAGE> 37

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

Assembly and Manufacturing

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

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

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

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

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

The Company's 1996 acquisition of Astron provided it with significant
capabilities to fabricate miniature gold-finished PCBs for specialized
applications such as cellular phones, optoelectronics, LCDs, pagers and

36
<PAGE> 38

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 utilizing advanced interconnect and
packaging technologies such as chip on board ("COB") and ball grid array ("BGA")
technology. COB technology represents a configuration in which a bare,
unpackaged semiconductor is attached directly onto a PCB, wire bonded and then
encapsulated with a polymeric material. COB technology facilitates miniaturized,
low-profile assemblies, and can result in lower component costs and reduced time
to market. The Company has significant experience in utilizing COB technology to
manufacture a wide range of products. BGA technology is an emerging technology
for packaging semiconductors that can provide higher interconnect density and
improved assembly yields and reliability by assembling surface-mount packages to
the circuit board through an array of solder balls, rather than pin leads. The
Company has recently begun utilizing BGA technology to manufacture products for
OEMs.

Test

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

Distribution

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

COMPETITION

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

37
<PAGE> 39

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

EMPLOYEES

As of December 31, 1997, the Company employed approximately 11,300 persons,
including approximately 995 employees in Sweden who were added with the
Karlskrona Acquisition and 3,485 employees in Austria and Hungary who were added
with the Neutronics acquisition. Most of the Company's non-management employees
outside of the United States are represented by labor unions. The Company has
never experienced a work stoppage or strike. The Company believes that its
employee relations are good.

The Company's success depends to a large extent upon the continued services
of key managerial and technical employees. The loss of such personnel could have
a material adverse effect on the Company, its results of operations, prospects
or debt service ability. To date, the Company has not experienced significant
difficulties in attracting or retaining such personnel. Although the Company is
not aware that any of its key personnel currently intend to terminate their
employment, their future services cannot be assured. See "Risk
Factors -- Dependence on Key Personnel and Skilled Employees."

RECENT ACQUISITIONS

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

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

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

On December 1, 1997, the Company acquired DTM Products, Inc., a
Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 252,469 Ordinary Shares, and Energipilot AB, a Swedish company
principally engaged in providing cables and engineering services for Northern
European OEMs, in exchange for 229,990 Ordinary Shares. On January 16, 1998, the
Company entered into an agreement to acquire Conexao Informatica Ltda., a
Brazil-based contract manufacturer.

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

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<PAGE> 40

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

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

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

The Company anticipates realizing approximately $285.0 million of sales
(based on current exchange rates) to Ericsson of products manufactured in the
Karlskrona Facilities in fiscal 1998; however, there can be no assurance that
the Company's sales to Ericsson will not be materially less than those
anticipated. The Company expects that its gross margin percentage on products
manufactured for Ericsson in the Karlskrona Facilities in fiscal 1999 will be
less than that realized by the Company as a whole in fiscal 1997 and the nine
months ended December 31, 1997. To the extent that the Company is successful in
increasing the capacity of the Karlskrona Facilities and in using these
facilities to provide services to other OEMs, the Company anticipates increased
operating efficiencies. There can be no assurance that the Company will realize
lower overhead or sales expenses or increased operating efficiencies as
anticipated.

The foregoing, and discussions elsewhere in this Prospectus, contain a
number of forward-looking statements relative to the benefits and effects of the
Karlskrona Acquisition and the Neutronics Acquisition, and the Company's
relationship with Ericsson including the Company's anticipated sales to
Ericsson, the Company's net sales, gross margins and results of operations, and
no assurances can be given as to the Company's ability to achieve such benefits
and results. The Karlskrona Acquisition, the Neutronics Acquisition and the
Company's business are subject to a number of risks that could adversely affect
the Company's ability to achieve these operating results and the anticipated
benefits of the Karlskrona Acquisition and the Neutronics Acquisition, including
the Company's ability to reduce costs at the Karlskrona Facilities, the
Company's lack of experience operating in Sweden, Austria and Hungary, the
Company's ability to transition the Karlskrona Facilities from captive
manufacturing for Ericsson to manufacturing for third parties and to expand
capacity at these facilities and to integrate these facilities into its global
operations. Further, changes in exchange rates between the Swedish kronor, the
Austrian schilling and the Hungarian forint on the one hand, and U.S. dollars on
the other, will affect the Company's operating results. See "Risk Factors --
Risks of Karlskrona Acquisition."

The Karlskrona Purchase Agreement contains cost reduction targets and price
limitations and imposes on the Company certain manufacturing quality
requirements, and there can be no assurance that the Company can achieve
acceptable levels of profitability under the Karlskrona Purchase Agreement or
reduce costs and prices to Ericsson over time as contemplated by the Karlskrona
Purchase Agreement. In addition, the Karlskrona Purchase Agreement requires that
the Company maintain a ratio of equity to total liabilities, debt

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<PAGE> 41

and equity of at least 25%, and a current ratio of at least 120%. Further, the
Karlskrona Purchase Agreement prohibits the Company from selling or relocating
the equipment acquired in the transaction without Ericsson's consent. A material
breach by the Company of any of the terms of the Karlskrona Purchase Agreement
could allow Ericsson to repurchase the assets conveyed to the Company at the
Company's book value or to obtain other relief, including the cancellation of
outstanding purchase orders or termination of the Karlskrona Purchase Agreement.
Ericsson also has certain rights to be consulted on the management of the
Karlskrona Facilities and to approve the use of the Karlskrona Facilities for
Ericsson's competitors or for other customers where such use might adversely
affect Ericsson's access to production capacity at the facilities. In addition,
without Ericsson's consent, the Company may not enter into any transactions that
could adversely affect its ability to continue to supply products and services
to Ericsson under the Karlskrona Purchase Agreement or its ability to reduce
costs and prices to Ericsson. As a result of these rights, Ericsson may, under
certain circumstances, retain a significant degree of control over the
Karlskrona Facilities and their management. However, the Company understands
that it is Ericsson's intention that the Company utilize the Karlskrona
Facilities to provide services not just to Ericsson, but also to other OEMs, and
Ericsson will receive price reductions if the Company is able to reduce costs at
the Karlskrona Facilities through any resulting volume efficiencies.

FACILITIES

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

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<PAGE> 42

Certain information about the Company's manufacturing and engineering
facilities as of December 15, 1997 is set forth below:

<TABLE>
<CAPTION>
YEAR APPROXIMATE OWNED/
LOCATION COMMENCED(1) SQUARE FEET LEASED(2) SERVICES
- -------------------------------- ------------ ----------- --------- -------------------------------
<S> <C> <C> <C> <C>
Manufacturing Facilities
Althofen, Austria(3).......... 1997 153,000 Owned Full system manufacturing; PCB
assembly.
Shenzhen, China............... 1995 90,000 Leased High volume PCB assembly.
Hong Kong, China(4)........... 1996 45,000 Leased Fabrication of high density
PCBs
Doumen, China(4).............. 1996 330,000(4) Owned(5) Fabrication of high density,
miniaturized PCBs. High volume
PCB assembly.
Sarvar, Hungary(3)............ 1997 298,000 Owned(6) Full system manufacturing; PCB
assembly; plastic injection
molding.
Tab, Hungary(3)............... 1997 170,000 Owned Full system manufacturing; PCB
assembly.
Zalaegerszeg, Hungary(3)...... 1997 97,000 Owned Full system manufacturing; PCB
assembly.
Johore, Malaysia.............. 1991 80,000 Owned Full system manufacturing; PCB
assembly.
Guadalajara, Mexico........... 1997 101,000 Owned High volume PCB assembly.
Singapore(7).................. 1982 47,000 Leased Complex, high value-added PCB
assembly.
Karlskrona, Sweden............ 1997 330,000 Owned(8) Assembly and test of complex
PCBs and systems.
Stockholm, Sweden(9).......... 1997 70,000 Leased Assembly of cables and cable
assemblies.
Tonypandy, Wales(10).......... 1995 50,000 Owned Full system manufacturing;
medium complexity PCB assembly.
San Jose, California.......... 1994 65,000 Leased Full system manufacturing; PCB
assembly.
San Jose, California.......... 1996 32,500 Leased Complex, high value-added PCB
assembly.
San Jose, California.......... 1997 73,000 Owned Complex, high value-added PCB
assembly.
Niwot, Colorado(11)........... 1997 40,000 Leased Plastic injection molding.
Engineering Facilities
Althofen, Austria............. 1997 --(12) Owned Design, prototype and
engineering services.
Singapore..................... 1982 --(13) -- Design and prototype services.
Karlskrona, Sweden............ 1997 --(14) -- Design and prototype services.
Westford, Massachusetts....... 1987 9,112 Leased Design and prototype services.
San Jose, California.......... 1996 71,000 Leased Engineering services and
corporate functions.
</TABLE>

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

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

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

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

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

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

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<PAGE> 43

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

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

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

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

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

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

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

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

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

In fiscal 1998, the Company substantially increased overall capacity by
expanding operations in North America, East Asia and Northern Europe. As a
result of these expansions and the Company's acquisitions of the Karlskrona
Facilities, Neutronics, Energipilot and DTM, the Company has significantly
increased its manufacturing capacity, adding 1,005,000 square feet principally
dedicated to manufacturing operations. The Company plans to significantly expand
its manufacturing campuses in Shenzhen, China, Sarvar, Hungary, Guadalajara,
Mexico and San Jose, California by adding new facilities and equipment. There
can be no assurance that the Company will not encounter unforeseen difficulties,
costs or delays in developing, constructing and equipping the new and expanded
manufacturing facilities. See "Risk Factors -- Management of Expansion and
Consolidation."

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.

42
<PAGE> 44

no assurance that the Company will not encounter unforeseen difficulties, costs
or delays in developing, constructing and equipping the new manufacturing
facilities, and there can be no assurance as to when it will complete
construction. Any such difficulties or delays could have a material adverse
effect on the Company's business, financial condition and results of operations.
The development and construction of the new facilities are subject to
significant risks and uncertainties, including cost estimation errors and
overruns, construction delays, weather problems, equipment delays or shortages,
labor shortages and disputes, production start-up problems and other factors. As
many of such factors are beyond the Company's control, the Company cannot
predict the length of any such delays, which could be substantial and could
result in substantial cost overruns. Such delays would adversely affect the
Company's sales growth and the Company's ability to timely meet delivery
schedules. Furthermore, the Company's development and construction of the new
facilities will result in new fixed and operating expenses, including
substantial increases in depreciation expense and rental expense that will
increase the Company's cost of sales. If revenue levels do not increase
sufficiently to offset these new expenses, the Company's operating results could
be materially adversely affected.

43
<PAGE> 45

MANAGEMENT

DIRECTORS AND OFFICERS

The names, ages and positions of the Company's Directors and officers as of
January 31, 1998 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- --- ------------------------------------------------
<S> <C> <C>
Michael E. Marks 47 Chief Executive Officer and Director
Tsui Sung Lam 48 President, Asia Pacific Operations and Director
Robert R. B. 48 Senior Vice President of Finance and
Dykes Administration
Ronny Nilsson 49 Senior Vice President, Europe
Michael McNamara 41 Vice President, President North American
Operations
Stephen J. L. 36 Senior Vice President, Worldwide Sales and
Rees Marketing and Director
Michael J. Moritz 47 Director
Richard L. Sharp 50 Director
Patrick Foley 65 Director
Alain Ahkong 50 Director
Shing Leong Hui 39 Director
</TABLE>

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

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

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

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

Michael McNamara -- Mr. McNamara has served as Vice President, President
North American Operations since April 1994. From May 1993 to March 1994, he was
President and Chief Executive Officer of Relevant Industries, Inc., which was
acquired by the Company in March 1994. From May 1992 to May 1993, he was Vice
President, Manufacturing Operations at Anthem Electronics, an electronics
distributor. From

44
<PAGE> 46

April 1987 to May 1992, he was a Principal of Pittiglo, Rabin, Todd & McGrath,
an operations consulting firm. Mr. McNamara received a B.S. from the University
of Cincinnati and an M.B.A. from Santa Clara University.

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

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

Richard L. Sharp -- Mr. Sharp has served as a Director of the Company since
July 1993. He is Chairman of the Board and Chief Executive Officer of Circuit
City Stores, Inc., a consumer electronics and appliance retailer. He joined
Circuit City as an Executive Vice President in 1982. He was President from June
1984 to March 1997 and became Chief Executive Officer in 1986 and Chairman of
the Board in 1994. Mr. Sharp also serves as a director of Fort James
Corporation.

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

Alain Ahkong -- Mr. Ahkong has served as a Director of the Company since
October 1997. Mr. Ahkong is a founder of Pioneer Management Services Pte. Ltd.
("Pioneer"), a Singapore-based consultancy firm, and has been the Managing
Director of Pioneer since 1990. Pioneer provides advice to the Company, and
other multinational corporations, on matters related to international taxation.

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

45
<PAGE> 47

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

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

SUMMARY COMPENSATION TABLE

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

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

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

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

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

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

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

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

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

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

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

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

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

46
<PAGE> 48

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

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

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

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

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

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

OPTION GRANT TABLE

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

OPTION GRANTS IN FISCAL 1997

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

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

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

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

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

47
<PAGE> 49

YEAR-END OPTION TABLE

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

AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND YEAR-END VALUES

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

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

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

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

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

EMPLOYMENT AND CONSULTING AGREEMENTS

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

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

48
<PAGE> 50

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

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

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

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

DESCRIPTION OF THE CREDIT FACILITY

The Credit Facility was established on March 27, 1997 and, subject to
compliance with certain financial covenants and the satisfaction of customary
borrowing conditions, provides for revolving credit borrowings by the Company
and Flextronics International USA, Inc., a California corporation and a
wholly-owned subsidiary of the Company (the "United States Subsidiary") of an
aggregate of $105.0 million. BankBoston, N.A. (the "Bank") is the lead agent and
a lender under the Credit Facility. In January 1998, the Credit Facility was
amended to, among other things, (i) eliminate the term loan facility; (ii)
reduce the commitment fees and interest rate payable under the facility; (iii)
provide for loans directly to certain of the Company's subsidiaries; and (iv)
provide for loans in foreign currencies.

The Credit Facility consists of two separate credit agreements, one
providing for up to $85.0 million principal amount of revolving credit loans to
the Company and designated subsidiaries and one providing for up to $20.0
million principal amount of revolving credit loans to the Company's United
States subsidiary. Loans under the Credit Facility will mature in March 2000.
The Company anticipates that it will from time to time borrow revolving credit
loans to fund its operations and growth.

49
<PAGE> 51

Loans to the Company are guaranteed by certain of its subsidiaries and
loans to the Company's United States Subsidiary are guaranteed by the Company
and by certain of the Company's subsidiaries. The Credit Facility is secured by
a lien on substantially all accounts receivable and inventory of the Company and
its subsidiaries, as well as a pledge of the Company's shares in certain of its
subsidiaries. Loans under the Credit Facility bear interest at the lender's base
rate or eurocurrency rate, plus an applicable margin which depends on the
Company's consolidated Leverage Ratio (the ratio of Total Funded Indebtedness to
EBITDA (each as defined therein)). The Credit Facility further provides for the
payment by the Company of a commitment fee on the available and unused portion
of the credit line and certain other fees.

The Credit Facility contains covenants and provisions that, among other
things, prohibit the Company and its subsidiaries from (i) incurring additional
indebtedness, subject to certain exceptions such as subordinated debt (as
defined therein), certain unsecured debt, purchase money debt not to exceed
$25.0 million and capitalized leases; (ii) incurring liens on their property
(subject to certain exceptions); (iii) engaging in certain dispositions of
assets; (iv) making acquisitions that do not meet certain criteria; and (v)
making certain other investments. In addition, the Credit Facility prohibits the
payment of dividends by the Company.

The Credit Facility also requires that the Company satisfy certain
financial covenants on a consolidated basis that, among other things, provide
that the Company's: (i) Leverage Ratio must not exceed 3.5 : 1.00, (ii) Interest
Coverage Ratio (the ratio of EBITDA to consolidated total interest expense) must
not be less than 3.25 : 1, (iii) consolidated tangible net worth must not be
less than the sum of (a) 95% of consolidated tangible net worth at September 30,
1997 plus (b) on a cumulative basis, 75% of positive net income for each fiscal
year subsequent to the fiscal year ended 1997, plus (c) 100% of the proceeds of
any equity issuance. The Company was in compliance with these financial
covenants as of December 31, 1997.

50
<PAGE> 52

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Ordinary Shares as of January
31, 1998, and as adjusted to reflect the sale of shares offered by the Selling
Shareholders pursuant to this Prospectus, by (i) each of the Company's
directors, the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers in fiscal 1997, (ii) all
directors and executive officers as a group, (iii) each person who is known by
the Company to own beneficially more than 5% of the Company's Ordinary Shares,
and (iv) each Selling Shareholder (assuming each Selling Shareholder sells all
of the Ordinary Shares offered hereby). Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole investment
power with respect to all the shares beneficially owned, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF SHARES BENEFICIALLY
OFFERING(1) SHARES OWNED AFTER OFFERING(1)
----------------------- BEING -----------------------
NAMES AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
- ----------------------------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS
Ronald Baron(3).......................... 1,754,700 9.1% -- 1,754,700 9.1%
c/o Baron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
New York, New York 10153
Putnam Investments, Inc.(4).............. 1,722,843 8.9% -- 1,722,843 8.9%
One Post Office Square
Boston, Massachusetts 02109
The Capital Group Companies(5)........... 1,125,000 5.8% -- 1,125,000 5.8%
333 South Hope Street
Los Angeles, California 90071
Michael E. Marks(6)...................... 496,654 2.5% -- 476,946 2.5%
Tsui Sung Lam(7)......................... 70,128 * -- 72,627 *
Michael McNamara(8)...................... 94,268 * -- 92,768 *
Robert R.B. Dykes(9)..................... 38,914 * -- 38,664 *
Ronny Nilsson............................ -- -- -- -- --
Michael Moritz(10)....................... 819,831 4.2% -- 819,831 4.2%
Stephen J.L. Rees(11).................... 22,605 * -- 22,605 *
Richard L. Sharp(12)..................... 934,519 4.8% -- 934,519 4.8%
Patrick Foley(13)........................ 3,125 * -- 3,125 *
Alain Ahkong............................. -- -- -- -- --
Shing Leong Hui(14)...................... 1,649,500 8.5% 1,649,500 2,500 *
All directors and executive officers as a
group (11 persons)(15)................. 4,182,069.. 21.4% -- 2,482,069 12.8%
SELLING SHAREHOLDERS
Bo Sjunnesson............................ 229,990 1.2% 229,990 -- --
Osterreichische Philips Industrie GmbH... 831,125 4.3% 831,125 -- --
Philips Beteiligungs GmbH................ 266,875 1.4% 266,875 -- --
Shing Leong Hui(14)...................... 1,649,500 8.5% 1,649,500 3,750 *
Walter Mayrhofer......................... 61,000 * 61,000 -- --
Robert J. Grubb.......................... 165,245 * 165,245 -- --
John W. Grubb............................ 26,254 * 26,254 -- --
Nicole Leann Grubb Trust................. 3,930 * 3,930 -- --
Kristen Lee Grubb Trust.................. 3,930 * 3,930 -- --
Kenneth Garrett Grubb Trust.............. 2,620 * 2,620 -- --
Capone Investments, Inc.................. 16,830 * 16,830 -- --
Plum Street Investments, Ltd............. 33,660 * 33,660 -- --
</TABLE>

51
<PAGE> 53

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

* Less than 1%.

(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 January 31, 1998 are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Percentage ownership is based upon 19,303,547 outstanding Ordinary Shares
as of January 31, 1998.

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

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

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

(6) Includes 5,000 shares held by the Justin Caine Marks Trust and 5,000 shares
held by the Amy G. Marks Trust. Also includes 273,147 shares subject to
options exercisable within 60 days after January 31, 1998 held by Mr.
Marks.

(7) Includes 50,834 shares subject to options exercisable within 60 days after
January 31, 1998 held by Mr. Tsui.

(8) Includes 46,856 shares subject to options exercisable within 60 days after
January 31, 1998 held by Mr. McNamara.

(9) Includes 38,375 shares subject to options exercisable within 60 days after
January 31, 1998 held by Mr. Dykes.

(10) Includes 709,540 shares held by Sequoia Capital Growth Fund, a limited
partnership and 45,291 shares held by Sequoia Technology Partners III, a
limited partnership. Sequoia Partners (CF) is the general partner of
Sequoia Capital Growth Fund and has sole voting and investment power over
such shares. Mr. Moritz is a general partner of Sequoia Partners (CF). The
general partner of Sequoia Capital VII and Sequoia Technology Partners VII
is Sequoia Capital VII-A Management, LLC. Mr. Moritz is a

52
<PAGE> 54

general partner of Sequoia Capital VII-A Management, LLC. Also includes
29,000 shares subject to options exercisable within 60 days after January
31, 1998 held by Mr. Moritz.

(11) Includes 3,754 shares held by Mrs. Janine Margaret Rees. Also includes
3,958 shares subject to options exercisable within 60 days after January
31, 1998 held by Mr. Rees.

(12) Includes 225,000 shares beneficially owned by Bethany Limited Partnership.
Mr. Sharp, the general partner of Bethany Limited Partnership, may be
deemed to shares voting and investment power with respect to such shares.
Mr. Sharp disclaims beneficial ownership of all such shares except to the
extent of his proportionate interest therein. Also includes 39,000 shares
subject to options exercisable within 60 days after January 31, 1998 held
by Mr. Sharp.

(13) Includes 3,125 shares subject to options exercisable within 60 days after
January 31, 1998 held by Mr. Foley.

(14) Includes 2,500 shares subject to options exercisable within 60 days after
January 31, 1998 held by Mr. Hui.

(15) Includes 486,795 shares subject to options exercisable within 60 days after
January 31, 1998.

53
<PAGE> 55

PLAN OF DISTRIBUTION

The Selling Shareholders and any such underwriters, brokers, dealers or
agents that participate in such distribution may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither the Company nor the Selling Shareholders can presently estimate the
amount of such compensation.

The Company will pay substantially all of the expenses incident to this
Offering of the Shares by the Selling Shareholders to the public other than
commissions and discounts of underwriters, brokers, dealers or agents. The
Company has agreed to indemnify the Selling Shareholders against certain
liabilities, including liabilities arising under the Securities Act, in
connection with the offer and sale of the Shares, and Selling Shareholders may
indemnify brokers, dealers, agents or underwriters that participate in
transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act.

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

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

54
<PAGE> 56

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 January 31, 1998, there
were approximately 417 holders of record 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.

55
<PAGE> 57

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.

56
<PAGE> 58

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.

57
<PAGE> 59

TAXATION

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

INCOME TAXATION UNDER SINGAPORE LAW

Under current provisions of the Income Tax Act, Chapter 134 of Singapore,
corporate profits are taxed at a rate equal to 26%. Under Singapore's taxation
system, the tax paid by a company is deemed paid by its shareholders. Thus, the
shareholders receive dividends net of the tax paid by the Company. Dividends
received by either a resident or a nonresident of Singapore are not subject to
withholding tax. Shareholders are taxed on the gross amount of dividends (i.e.,
the cash amount of the dividend plus the amount of corporate tax paid by the
Company). The tax paid by the Company will be available to shareholders as a tax
credit to offset the Singapore income tax liability on their overall income
(including the gross amount of dividends). No tax treaty currently exists
between the Republic of Singapore and the U.S.

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

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

INCOME TAXATION UNDER UNITED STATES LAW

Individual shareholders that are U.S. citizens or resident aliens (as
defined in Section 7701(b) of the Internal Revenue Code of 1986 (the "Code")),
corporations or partnerships or other entities created or organized under the
laws of the United States, or any political subdivision thereof, an estate the
income of which is subject is subject to U.S. federal income taxation regardless
of its source or a trust if a U.S. court is able to exercise primary
jurisdiction over its administration and one or more U.S. fiduciaries have the
authority to control all of its substantial decisions ("U.S. Shareholders")
will, upon the sale or exchange of a share, recognize gain or loss for U.S.
income tax purposes in an amount equal to the difference between the amount
realized and the U.S. Shareholder's tax basis in such a share. If paid in
currency other than U.S. dollars, the U.S. dollar amount realized (as determined
on the trade date) is determined by translating the foreign currency into U.S.
dollars at the spot rate in effect on the settlement date of the sale in the
case of a U.S. Shareholder that is a cash basis taxpayer. An accrual basis
taxpayer may elect to use the spot rate in effect on the settlement date of the
sale by filing a statement with the U.S. Shareholder's first return in which the
election is effective clearly indicating that the election has been made. Such
an election must be applied

58
<PAGE> 60

consistently from year to year and cannot be changed without the consent of the
Internal Revenue Service. Such gain or loss will be capital gain or loss if the
share was a capital asset in the hands of the U.S. Shareholder and will not be
short-term capital gain or loss if the share has been held for more than one
year. If a U.S. Shareholder receives any currency other than U.S. dollars on the
sale of a share, such U.S. Shareholder may recognize ordinary income or loss as
a result of currency fluctuations between the date of such sale and the date
such sale proceeds are converted into U.S. dollars.

U.S. Shareholders will be required to report as income for U.S. income tax
purposes the amount of any dividend received from the Company to the extent paid
out of the current or accumulated earnings and profits of the Company, as
determined under current U.S. income tax principles. If over 50% of the
Company's stock (by vote or value) were owned by U.S. Shareholders who
individually held 10% or more of the Company's voting stock, such U.S.
Shareholders potentially would be required to include in income a portion or all
of their pro rata share of the Company's and its non-U.S. subsidiaries' earnings
and profits. If 50% or more of the Company's assets during a taxable year
produced or were held for the production of passive income, as defined in
section 1297(b) of the Code (e.g., certain forms of dividends, interest and
royalties), or 75% or more of the Company's gross income for a taxable year was
passive income, adverse U.S. tax consequences could result to U.S. shareholders
of the Company. As of June 30, 1997, the Company was aware of only one U.S.
Shareholder who individually held 10% or more of its voting stock. See
"Principal Shareholders."

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

ESTATE TAXATION

In the case of an individual who is not domiciled in Singapore, a Singapore
estate tax is imposed on the value of all movable and immovable properties
situated in Singapore. The shares of the Company are considered to be situated
in Singapore. Thus, an individual shareholder who is not domiciled in Singapore
at the time of his or her death will be subject to Singapore estate tax on the
value of any such shares held by the individual upon the individual's death.
Such a shareholder will be required to pay Singapore estate tax to the extent
that the value of the shares (or in aggregate with any other assets subject to
Singapore estate tax) exceeds S$600,000. Any such excess will be taxed at a rate
equal to 5% on the first S$12,000,000 of the individual's Singapore chargeable
assets and thereafter at a rate equal to 10%. An individual shareholder who is a
U.S. citizen or resident (for U.S. estate tax purposes) also will have the value
of the shares included in the individual's gross estate for U.S. estate tax
purposes. An individual shareholder generally will be entitled to a tax credit
against the shareholder's U.S. estate tax to the extent the individual
shareholder actually pays Singapore estate tax on the value of the shares;
however, such tax credit is generally limited to the percentage of the U.S.
estate tax attributable to the inclusion of the value of the shares included in
the shareholder's gross estate for U.S. estate tax purposes, adjusted further by
a pro rata apportionment of available exemptions. Individuals who are domiciled
in Singapore should consult their own tax advisors regarding the Singapore
estate tax consequences of their investment.

LEGAL MATTERS

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

59
<PAGE> 61

FLEXTRONICS INTERNATIONAL LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. 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-4
Flextronics International Ltd. Consolidated Statements of Shareholders' Equity for the
fiscal years ended March 31, 1995, 1996 and 1997.................................... F-5
Flextronics International Ltd. Consolidated Statements of Cash Flows for the fiscal
years ended March 31, 1995, 1996 and 1997........................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
Flextronics International Ltd. Condensed Consolidated Balance Sheets as of March 31,
1997 and September 30, 1997 (unaudited)............................................. F-25
Flextronics International Ltd. Condensed Consolidated Statements of Income for the
three and six months ended September 30, 1996 and 1997 (unaudited).................. F-26
Flextronics International Ltd. Condensed Consolidated Statements of Cash Flows for the
six months ended September 30, 1996 and 1997 (unaudited)............................ F-27
Notes to Condensed Consolidated Financial Statements (unaudited)...................... F-28
</TABLE>

F-1
<PAGE> 62

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Flextronics International Ltd:

We have audited the accompanying consolidated balance sheets of Flextronics
International Ltd. and subsidiaries (a Singapore company) 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. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Neutronics Electronics Industries Holding A.G., a company acquired on October
30, 1997 in a transaction accounted for as a pooling of interests, as discussed
in Note 2. Such statements are included in the consolidated financial statements
of Flextronics International Ltd. and reflect total assets of 25 percent and 20
percent, respectively, of the consolidated totals as of March 31, 1996 and 1997
and total revenues of 19 percent, 22 percent and 23 percent, respectively, of
the consolidated totals for the years ended March 31, 1995, 1996 and 1997. These
statements were audited by other auditors whose report has been furnished to us
and our opinion, insofar as it relates to amounts included for Neutronics
Electronics Industries Holding A.G., is based solely upon the report of the
other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Flextronics International Ltd. and subsidiaries as of
March 31, 1996 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 1997, in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a)2 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

San Jose, California
February 13, 1998

F-2
<PAGE> 63

FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31
---------------------
1996 1997
-------- --------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 8,647 $ 24,159
Accounts receivable, less allowances of $3,766 and $6,072.......... 97,274 87,507
Inventories........................................................ 65,945 124,362
Deferred tax asset................................................. 2,908 3,049
Other current assets............................................... 7,522 15,319
-------- --------
Total current assets....................................... 182,296 254,396
Property and equipment, net.......................................... 91,792 149,015
Goodwill and other intangibles, net.................................. 28,121 33,506
Related party receivables............................................ 2,085 2,554
Other assets......................................................... 4,973 6,821
-------- --------
Total assets............................................... $309,267 $446,292
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank borrowings and current portion of long-term debt.............. $ 37,532 $128,515
Capital lease obligations.......................................... 7,140 8,273
Accounts payable................................................... 86,532 97,917
Accrued liabilities and other...................................... 25,200 47,344
Payables to associated company..................................... -- 546
Deferred revenue................................................... 365 2,046
-------- --------
Total current liabilities.................................. 156,769 284,641
-------- --------
Long-term debt, net of current portion............................... 18,405 9,029
Capital lease obligations, net of current portion.................... 13,489 20,099
Deferred income taxes................................................ 4,353 3,710
Other long-term liabilities.......................................... 29,482 28,326
Minority interest.................................................... 1,198 1,142
-------- --------
Commitments (Note 6)
SHAREHOLDERS' EQUITY:
Ordinary Shares, S$.01 par value; Authorized -- 100,000,000 shares;
issued and outstanding -- 16,019,289 and 16,482,243 as of March
31, 1996 and 1997, respectively................................. 104 107
Additional paid-in capital.................................... 104,620 106,556
Accumulated deficit................................................ (19,659) (7,020)
Cumulative translation adjustment.................................. 506 (298)
-------- --------
Total shareholders' equity................................. 85,571 99,345
-------- --------
Total liabilities and shareholders' equity................. $309,267 $446,292
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 64

FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net Sales................................................ $292,149 $572,045 $640,007
Cost of Sales............................................ 265,426 517,732 575,142
-------- -------- --------
Gross margin................................... 26,723 54,313 64,865
-------- -------- --------
Operating Expenses:
Selling, general and administrative.................... 15,771 28,138 36,277
Goodwill and intangibles amortization.................. 762 1,296 2,648
Provision for plant closings........................... -- 1,254 5,868
Acquired in-process research and development........... 91 29,000 --
-------- -------- --------
Total operating expenses....................... 16,624 59,688 44,793
-------- -------- --------
Income(loss) from operations............................. 10,099 (5,375) 20,072
Other Expense:
Merger-related expenses................................ (816) -- --
Other expense, net..................................... (1,814) (4,924) (6,425)
-------- -------- --------
Income(loss) before income taxes 7,469 (10,299) 13,647
Provision for Income Taxes............................... 1,588 3,847 2,027
-------- -------- --------
Net income(loss)......................................... $ 5,881 $(14,146) $ 11,620
======== ======== ========

Basic net income (loss) per share................... $ 0.42 $ (0.92) $ 0.69
======== ======== ========
Diluted net income (loss) per share................. $ 0.40 $ (0.92) $ 0.67
======== ======== ========
Weighted average Ordinary Shares
outstanding -- basic.............................. 14,143 15,436 16,785
======== ======== ========
Weighted average Ordinary Shares and equivalents
outstanding -- diluted............................ 14,882 15,436 17,363
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 65

FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997

<TABLE>
<CAPTION>
ORDINARY SHARES ADDITIONAL CUMULATIVE TOTAL
--------------- PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
------ ------ ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1994.......... 14,110 $ 90 $ 73,911 $ (10,798) $ -- $ 63,203
NCHIP fiscal year conversion..... -- -- -- (596) -- (596)
Expenses related to issuance of
Ordinary Shares............... -- -- (968) -- -- (968)
Exercise of stock options........ 300 2 925 -- -- 927
Net income....................... -- -- -- 5,881 -- 5,881
Foreign exchange loss............ -- -- -- -- (12) (12)
------ ---- -------- -------- ----- -------
BALANCE AT MARCH 31, 1995.......... 14,410 92 73,868 (5,513) (12) 68,435
Issuance of Ordinary Shares for
acquisition of A&A............ 67 -- 938 -- -- 938
Issuance of Ordinary Shares for
acquisition of Astron......... 238 2 6,505 -- -- 6,507
Exercise of stock options........ 304 2 1,007 -- -- 1,009
Sale of shares in public
offering, net of $1,190 in
offering costs................ 1,000 8 22,302 -- -- 22,310
Net loss......................... -- -- -- (14,146) -- (14,146)
Foreign exchange gain............ -- -- -- -- 518 518
------ ---- -------- -------- ----- -------
BALANCE AT MARCH 31, 1996.......... 16,019 104 104,620 (19,659) 506 85,571
Issuance of Ordinary Shares for
Acquisition of Fine Line...... 223 1 196 1,019 -- 1,216
Exercise of stock options........ 240 2 1,740 -- -- 1,742
Net income....................... -- -- -- 11,620 -- 11,620
Foreign exchange loss............ -- -- -- -- (804) (804)
------ ---- -------- -------- ----- -------
BALANCE AT MARCH 31, 1997.......... 16,482 $107 $ 106,556 $ (7,020) $(298) $ 99,345
====== ==== ======== ======== ===== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 66

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------
1995 1996 1997
------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 5,881 $(14,146) $ 11,620
Adjustments to reconcile net income (loss) to net cash
provided by (used in) from operating activities:
nCHIP fiscal year conversion.......................... (596) -- --
Depreciation and amortization......................... 7,183 13,864 18,140
Gain on sale of subsidiary............................ -- -- (1,027)
Allowances for receivables and inventories............ 1,254 3,496 7,319
(Income) loss from associated company................. 729 -- (133)
In-process research and development................... 91 29,000 --
Provision for plant closure........................... -- 1,254 5,308
Minority interest expense and other expenses.......... 67 346 1,302
Changes in operating assets and liabilities (net of
effect of acquisitions):
Accounts receivable.............................. (23,409) (28,957) 4,290
Inventories...................................... (13,415) (19,553) (8,400)
Other Current Assets............................. (3,341) 2,126 (10,581)
Accounts payable, accrued liabilities and
other.......................................... 19,945 14,677 25,719
Deferred revenue................................. 2 171 1,788
Deferred income taxes............................ 366 140 (976)
-------- -------- --------
Net cash provided by (used in) operating activities........ (5,243) 2,418 54,369
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................... (21,848) (23,520) (37,503)
Proceeds from sale of property and equipment............. 77 630 4,827
Proceeds from sale of subsidiaries....................... 2,937 -- 1,012
Investment in associated company......................... (828) (1,408) (3,116)
Other investments........................................ -- (1,192) (25)
Loan to joint venture.................................... (1,000) -- --
Redemption of joint venture preference shares............ 1,730 -- --
Net cash paid for acquired businesses.................... (3,343) (15,152) (82,354)
Repayments from (loans to) related party................. -- 815 (469)
-------- -------- --------
Net cash used in investing activities...................... (22,275) (39,827) (117,628)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and long-term debt....................... 18,257 56,944 160,940
Repayment of bank borrowings and long-term debt.......... (17,296) (34,069) (63,957)
Borrowings from (payments to) related company............ 10,843 (6,440) (4,403)
Equipment refinanced under capital leases................ -- -- 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)
Net proceeds from secondary offering..................... -- 22,310 --
-------- -------- --------
Net cash provided by financing activities.................. 10,413 33,970 78,997
-------- -------- --------
Effect of exchange rate changes............................ 49 (70) (226)
-------- -------- --------
Increase (decrease) in cash and cash equivalents........... (17,056) (3,509) 15,512
Cash and cash equivalents, beginning of period............. 29,212 12,156 8,647
-------- -------- --------
Cash and cash equivalents, end of period................... $12,156 $ 8,647 $ 24,159
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 67

FLEXTRONICS INTERNATIONAL LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. ORGANIZATION OF THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") was
incorporated in the Republic of Singapore on May 31, 1990 as Flex Holdings Pte
Limited. Flextronics 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, plastic injection
molding, 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 surface mount ("SMT"), multichip modules ("MCM") and chip-on-board
("COB") technologies.

2. SUMMARY OF ACCOUNTING POLICIES

Principles of consolidation and basis of presentation

The accompanying consolidated financial statements include the accounts of
Flextronics and its wholly and majority-owned subsidiaries, after elimination of
all significant intercompany accounts and transactions.

As is more fully described in Note 11, Flextronics merged with Neutronics
Electronics Industries Holding A.G. ("Neutronics") on October 30, 1997. The
merger was accounted for as a pooling-of-interests and the consolidated
financial statements have been restated to reflect the combined operations of
Neutronics and Flextronics for all periods presented.

Neutronics has a calendar year end, and accordingly, Neutronics' statements
of operations, shareholders' equity and cash flows for the period from inception
(July 1, 1994) to December 31, 1994 and for the years ended December 31, 1995
and 1996 have been combined with the corresponding Flextronics statements for
the fiscal years ended March 31, 1995, 1996 and 1997, respectively. Neutronics'
balance sheets as of December 31, 1995 and 1996 have been combined with
Flextronics' balance sheets as of March 31, 1996 and 1997, respectively.

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

The Company's fiscal year ends on March 31.

Translation of Foreign Currencies

The functional currency of the majority of Flextronics' Asian subsidiaries
and certain other subsidiaries is the U.S. dollar. Accordingly, all of the
monetary assets and liabilities of these subsidiaries are remeasured into U.S.
dollars at the current exchange rate as of the applicable balance sheet date,
and all non-monetary assets and liabilities are remeasured at historical rates.
Revenues and expenses are remeasured at the average exchange rate prevailing
during the period. Gains and losses resulting from the remeasurement of these
subsidiaries' financial statements are included in the accompany consolidated
statements of operations.

The financial position and results of operations of the Company's Swedish,
UK, Austrian and Hungarian subsidiaries are measured using local currency as the
functional currency. Accordingly, for these subsidiaries all assets and
liabilities are translated into U.S. dollars at current exchange rates as of the
respective balance sheet date. Revenue and expense items are translated at the
average exchange rates prevailing during the period. Cumulative translation
gains and losses from the remeasurement of these subsidiaries' financial
statements are reported as a separate component of shareholders' equity.

F-7
<PAGE> 68

FLEXTRONICS INTERNATIONAL LTD

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

Gains (losses) from foreign exchange transactions were $(708), $(638) and
$1,165 in fiscal 1995, 1996 and 1997, respectively, and are included in other
income and expense in the accompanying consolidated statements of operations.

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 ten years, with the exception of building leasehold improvements,
which are amortized over the life of the lease). Property and equipment was
comprised of the following as of March 31:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Machinery and equipment.................................. $ 91,697 $120,743
Buildings................................................ 21,907 54,101
Leasehold improvements................................... 20,332 22,970
-------- --------
133,936 197,814
Accumulated depreciation and amortization................ (42,144) (48,799)
-------- --------
Property and equipment, net.............................. $ 91,792 $149,015
======== ========
</TABLE>

Concentration of credit risk

Financial instruments which potentially subject the Company to
concentration credit risk are primarily accounts receivable and cash
equivalents. The Company performs ongoing credit evaluations of its customers'
financial condition and maintains an allowance for doubtful accounts based on
the outcome of its credit evaluations. The Company maintains cash and cash
equivalents with various financial institutions. These financial institutions
are located in many different locations throughout the world.

Sales to customers who accounted for more than 10% of net sales were as
follows for the years ended March 31:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Philips Electronics Group (see Note 10)................ 16.1% 17.8% 18.8%
Lifescan............................................... 16.3 11.1 10.2
Visioneer.............................................. 1.4 10.3 5.4
</TABLE>

During fiscal 1995, 1996 and 1997, Philips Electronics Group ("Philips")
held a significant ownership interest in Neutronics (see Note 11). Sales to
Philips, which are included in net sales in the accompanying consolidated
statements of operations, totaled $47 million, $102 million, and $120 million
for fiscal 1995, 1996 and 1997, respectively. Neutronics also purchased raw
materials from Philips totaling $7 million, $9 million and $30 million for
fiscal 1995, 1996 and 1997, respectively.

In addition, Neutronics received an interest free loan from Philips in
fiscal 1994 of $10.8 million which was fully repaid by fiscal 1997.

Goodwill and other intangibles

Excess of cost over net assets acquired (goodwill) is amortized by the
straight-line method over estimated lives ranging from ten to twenty-five years.
The realizability of goodwill is evaluated periodically as events or
circumstances indicate a possible inability to recover its carrying amount. Such
evaluation is based on various analyses, including cash flow and profitability
projections that incorporate, as applicable, the impact

F-8
<PAGE> 69

FLEXTRONICS INTERNATIONAL LTD

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

on existing lines of business. The analyses involves a significant level of
management judgment in order to evaluate the ability of an acquired business to
perform within projections.

Intangible assets are comprised of technical agreements, patents,
trademarks, developed technologies and other acquired intangible assets
including assembled work forces, favorable leases and customer lists. Technical
agreements are being amortized on a straight-line basis over periods of up to
five years. Patents and trademarks are being amortized on a straight-line basis
over periods of up to ten years. Purchased developed technologies are being
amortized on a straight-line basis over periods of up to seven years. Intangible
assets related to assembled work forces, favorable leases and customer lists are
amortized on a straight-line basis over three to twenty years.

Goodwill and other intangibles were as follows as of March 31:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Goodwill................................................ $18,176 $ 26,483
Other intangibles....................................... 13,938 13,964
-------- --------
32,114 40,447
Accumulated amortization................................ (3,993) (6,941)
-------- --------
Goodwill and other intangibles, net..................... $28,121 $ 33,506
======== ========
</TABLE>

Long-Lived Assets

Effective December 1995 the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." This
statement requires that long-lived assets and certain identifiable intangibles
to be held and used or disposed of by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or
market value. Cost is comprised of direct materials, labor and overhead. As of
March 31, the components of inventories are as follows:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Raw materials........................................... $48,403 $ 80,010
Work-in-process......................................... 16,107 16,665
Finished goods.......................................... 1,435 27,687
------- --------
$65,945 $124,362
======= ========
</TABLE>

F-9
<PAGE> 70

FLEXTRONICS INTERNATIONAL LTD

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

Accrued liabilities

Accrued liabilities was comprised of the following as of March 31:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Income taxes............................................ $ 2,775 $ 4,171
Accrued payroll......................................... 11,341 15,443
Purchase price payable to Astron and FICO (See Note
11)................................................... -- 8,450
Other accrued liabilities............................... 11,084 19,280
------- -------
$25,200 $ 47,344
======= =======
</TABLE>

Revenue recognition

The Company's net sales are comprised of product sales and service revenue
earned from engineering and design services. Revenue from product sales is
recognized upon shipment of the goods. Service revenue is recognized as the
services are performed, or under the percentage-of-completion method of
accounting, depending on the nature of the arrangement. If total costs to
complete a project exceed the anticipated revenue from that project, the loss is
recognized immediately.

Research and development

Research and development costs arise from the Company's efforts to develop
new manufacturing processes and technologies and are expensed as incurred. Cost
of sales included research and development costs of approximately $153 and $913
in fiscal 1996 and 1997, respectively.

Other income and expense

In March 1997, the Company incurred bank commitment fees of $750 which were
related to a proposed $100 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 statement of operations.

Other income and expense was comprised of the following for the years ended
March 31:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Interest expense................................. $1,166 $4,286 $6,426
Interest income.................................. (407) (756) (706)
Foreign exchange (gain) loss..................... 708 638 (1,665)
(Income) loss from associated company............ 729 -- (133)
Permanent impairment in investment............... -- -- 3,200
Bank commitment fees............................. -- -- 750
Gain on sale of subsidiary....................... -- -- (1,027)
Minority interest................................ 26 103 394
Other, net....................................... (408) 653 (814)
------ ------ ------
Total other expense, net............... $1,814 $4,924 $6,425
====== ====== ======
</TABLE>

Net income per share

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is required to be adopted for interim and
annual periods ending after December 15, 1997. Restatement of all prior periods
in accordance with the new method proscribed by SFAS No. 128 is required

F-10
<PAGE> 71

FLEXTRONICS INTERNATIONAL LTD

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

upon adoption; accordingly, the Company has calculated net income per share in
accordance with SFAS No. 128.

Basic net income per share is computed using the weighted average number of
Ordinary Shares outstanding during the applicable periods.

Diluted net income per share is computed using the weighted average number
of Ordinary Shares and dilutive Ordinary Share equivalents outstanding during
the applicable periods. Ordinary Share equivalents include Ordinary Shares
issuable upon the exercise of stock options and are computed using the treasury
stock method.

Reconciliation between basic and diluted earnings per share is as follows
for the fiscal years ended March 31 (in thousands, except per share data):

<TABLE>
<CAPTION>
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Ordinary Shares issued and outstanding(1)................ 14,143 15,342 16,219
Ordinary Shares due to Astron(2)......................... -- 94 566
------ -------- -------
Weighted average Ordinary Shares -- basic................ 14,143 15,436 16,785
Ordinary Share equivalents -- stock options(3)........... 739 -- 578
------ -------- -------
Weighted average Ordinary Shares and
equivalents -- diluted................................. 14,882 15,436 17,363
====== ======== =======
Net income (loss)........................................ $ 5,881 $(14,146) $11,620
====== ======== =======
Basic net income (loss) per share........................ $ 0.42 $ (0.92) $ 0.69
====== ======== =======
Diluted net income (loss) per share...................... $ 0.40 $ (0.92) $ 0.67
====== ======== =======
</TABLE>

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

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

(2) Ordinary Shares due to Astron's former shareholders in June 1998.

(3) Stock options of the Company calculated based on the treasury method using
average market price for the period.

F-11
<PAGE> 72

FLEXTRONICS INTERNATIONAL LTD

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

3. SUPPLEMENTAL CASH FLOW DISCLOSURES

For purposes of the statement of cash flows, the Company considers highly
liquid investments with an original maturity of three months or less to be cash
equivalents. The following information relates to fiscal years ended March 31:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Cash paid for:
Interest............................................... $ 848 $4,035 $ 4,927
Income taxes........................................... 297 2,656 1,717
Non-cash investing and financing activities:
Equipment acquired under capital lease obligations........ 9,364 14,381 14,783
Acquisition related items:
Acquisitions financed with stock....................... 7,445 -- 5,700
Notes payable to Astron's shareholders................. -- 15,000 --
Ordinary Shares due to Astron's shareholders........... -- 10,000 --
Ordinary Shares due under the Services Agreement....... -- 14,124 --
Earnout of $6.25 million payable to Astron's
shareholders less reduction in amount due under
Services Agreement................................... -- -- 5,250
</TABLE>

4. BANK BORROWINGS AND LONG-TERM DEBT

In March 1997, the Company entered into a new line of credit agreement and
a five year, $70 million term loan with a bank (together "the Credit Facility").
The Company was able to borrow up to $175 million under the Credit Facility
which expires in March 2000 and bears interest at the lender's base rate plus an
applicable margin which depends on certain financial ratios. This interest rate
was 8.4% as of March 31, 1997. The Company had the option to repay the entire
Credit Facility balance in fiscal 1998, and during October 1997 the Company
repaid all amounts outstanding under the Credit Facility. As such, both the term
loan balance and the line of credit balance have been classified as a current
liability in the accompanying March 31, 1997 consolidated balance sheet. During
January 1998, the Credit Facility was amended to, among other things, provide
for loans directly to the Company's subsidiaries, allow for loans in foreign
currencies and to eliminate the term loan provision. After amendment, the Credit
Facility provides for up to $105 million in line of credit borrowings, subject
to certain financial ratios. The Credit Facility is secured by substantially all
of the Company's assets and requires that the Company maintain certain financial
ratios and other covenants.

As of March 31, 1997, the Company has $70 million of revolving credit
available under the Credit Facility, based on certain financial ratios, and
other unused credit facilities with interest rates ranging from 4.64% to 7.0%
per annum. These facilities expire on various dates through 2003. Due to the
subsequent amendment of the Credit Facility, the Company had $105 million in
available credit as of December 31, 1997 under the Credit Facility.

The Company has financed the purchase of certain facilities with mortgages
and incurred other debt for working capital purposes. The mortgages generally
have terms of 6 to 7 years and annual interest rates ranging from 4.4% to 11.4%.
The other debt includes term loans and other loans with interest rates generally
ranging from 6.75% to 9% with terms of up to 8 years.

Notes payable relate to amounts due to the former shareholders of Astron
Group Limited, a company acquired in February 1996. The notes were for a total
of $15 million and bear interest at 8%. Of the $15 million balance, $10 million
was paid in February 1997 and the remaining $5 million was paid in February 1998
(See Note 11).

F-12
<PAGE> 73

FLEXTRONICS INTERNATIONAL LTD

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

Bank borrowings and long-term debt was comprised of the following at March
31:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Outstanding under lines of credit..................... $ 22,956 $ 50,160
Credit Facility term loan............................. -- 70,000
Mortgages............................................. 12,522 7,770
Notes payable......................................... 15,686 5,223
Other debt............................................ 4,773 4,391
-------- --------
55,937 137,544
Current portion..................................... (37,532) (128,515)
-------- --------
Non-current portion................................. $ 18,405 $ 9,029
======== ========
</TABLE>

The weighted average interest rate for the current portion of bank
borrowings and other debt was 5.95% and 8.21% for the years ended March 31, 1996
and 1997, respectively.

Maturities for the bank borrowings and other debt are as follows for the
years ended March 31:

<TABLE>
<S> <C>
1998.............................................. $128,515
1999.............................................. 1,968
2000.............................................. 2,158
2001.............................................. 2,051
2002.............................................. 1,645
Thereafter........................................ 1,207
--------
$137,544
========
</TABLE>

The Company completed the sale of $150 million in senior subordinated notes
in October 1997. These notes mature in 2007 and bear interest at a rate of 8.75%
per annum. In addition, in October 1997, the Company repaid the outstanding term
loan and line of credit balance due under the Credit Facility.

5. OTHER LONG-TERM LIABILITIES

In accordance with the Astron acquisition agreement entered into in
February 1996, the Company is obligated to issue $10 million in Ordinary Shares
to the former Astron shareholders on June 30, 1998 (see Note 11).

Also in connection with the Astron acquisition in February 1996, the
Company agreed to pay a $15 million consulting fee to an entity affiliated with
Stephen Rees, who is a Director and Senior Vice President of the Company, under
a services agreement ("the Services Agreement") (See Note 11). The Services
Agreement was terminated in March 1997 at which time the Company unconditionally
agreed to pay to Mr. Rees' affiliate $14 million. This $14 million is comprised
of a $5 million payment in cash due on June 30, 1998 and $9 million which can be
paid in either cash or in Ordinary Shares at the Company's option, both due on
June 30, 1998. The Company intends to settle the $9 million portion of the fee
in stock. The Company has discounted the cash portion of the fee at 8% over the
period of the Services Agreement.

F-13
<PAGE> 74

FLEXTRONICS INTERNATIONAL LTD

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

Other long-term liabilities were comprised of the following as of March 31:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Ordinary Shares due to former Astron shareholders........ $10,000 $10,000
Due under the Services Agreement......................... 14,184 13,547
Other long-term liabilities.............................. 5,298 4,779
------- -------
$29,482 $28,326
======= =======
</TABLE>

6. COMMITMENTS

As of March 31, 1996 and 1997, the Company has financed a total of $32,331
and $40,467 in machinery and equipment purchases with capital leases,
respectively. Accumulated amortization for property and equipment under capital
leases totals $9,019 and $11,974 at March 31, 1996 and 1997, respectively. These
capital leases have interest rates ranging from 3.8% to 17.2%. The Company also
leases certain of its facilities under non-cancelable operating leases. The
capital and operating leases expire in various years through 2006 and require
the following minimum lease payments for the years ended March 31:

<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1998.................................................... $10,222 $ 3,885
1999.................................................... 7,648 3,476
2000.................................................... 5,416 2,687
2001.................................................... 4,108 1,926
2002.................................................... 2,294 1,589
Thereafter.............................................. 4,687 5,523
------- -------
Minimum lease payments.................................. 34,375 $19,086
=======
Amount representing interest............................ (6,003)
-------
Present value of minimum lease payments................. 28,372
Current portion......................................... (8,273)
-------
Capital lease obligations, net of current
portion.......................................... $20,099
=======
</TABLE>

Total rent expense was $2,410, $3,405 and $3,144 for the years ended March
31, 1995, 1996 and 1997, respectively.

As of March 31, 1997, the Company has outstanding purchase commitments for
fixed assets aggregating approximately $10,118.

7. INCOME TAXES

The domestic and foreign components of income (loss) before income taxes
were comprised of the following for the years ended March 31:

<TABLE>
<CAPTION>
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Singapore.................................... $(1,529) $(21,977) $ (392)
Foreign...................................... 8,998 11,678 14,039
------- ------- -------
$ 7,469 $(10,299) $13,647
======= ======= =======
</TABLE>

F-14
<PAGE> 75

FLEXTRONICS INTERNATIONAL LTD

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

The provision for income taxes consisted of the following for the years
ended March 31:

<TABLE>
<CAPTION>
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.................................... 125 66 (417)
------ ------ ------
362 140 (976)
------ ------ ------
$ 1,588 $ 3,847 $ 2,027
====== ====== ======
</TABLE>

The Singapore statutory income tax rates were 27%, 26% and 26% for the
years ended March 31, 1995, 1996 and 1997, respectively. The reconciliation of
income tax expense expected based on Singapore statutory income tax rates to the
provision for income taxes included in the consolidated statements of operations
for the years ended March 31 is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Income taxes based on Singapore statutory
rates...................................... $ 2,016 $ (2,678) $ 3,548
Losses from inactive Singapore operations.... 367 282 498
In-process research and development.......... -- 7,540 --
Foreign subsidiaries' earnings taxed at rates
below the Singapore statutory rate......... (1,568) (2,057) (3,368)
Amortization of goodwill and intangibles..... 205 329 436
Joint venture losses......................... 216 -- --
Bank commitment fees......................... -- -- 382
Other........................................ 352 431 531
------- ------- -------
Provision for income taxes......... $ 1,588 $ 3,847 $ 2,027
======= ======= =======
</TABLE>

F-15
<PAGE> 76

FLEXTRONICS INTERNATIONAL LTD

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

The components of deferred income taxes are as follows as of March 31:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................... $(1,547) $ (939)
Intangible assets............................................... (3,097) (2,751)
Others.......................................................... (181) (247)
------- -------
Total deferred tax liability............................ (4,825) (3,937)
------- -------
Deferred tax assets:
Depreciation.................................................... 513 591
Provision for stock obsolescence................................ 683 1,364
Provision for doubtful accounts................................. 361 1,636
Provision for severance payments and other employee related
costs........................................................ 2,232 1,760
Net operating loss carryforwards................................ 15,415 18,793
Unabsorbed capital allowances carryforwards..................... 539 606
Others.......................................................... 623 665
------- -------
20,366 25,415
Valuation allowance............................................... (16,986) (22,139)
------- -------
Net deferred tax asset.................................. 3,380 3,276
------- -------
Net deferred tax liability................................. $(1,445) $ (661)
======= =======
</TABLE>

The net deferred tax liability is classified as follows:

<TABLE>
<S> <C> <C>
Non-current liability........................................... $(4,353) $ (3,710)
Current asset................................................... 2,908 3,049
------- --------
$(1,445) $ (661)
======= ========
</TABLE>

The deferred tax asset arises substantially from tax losses available for
carryforward. These tax losses can only be offset against future income of
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 realize the deferred tax asset benefit. The valuation allowance provides a
reserve against deferred tax assets that may expire or go unutilized by the
Company. In accordance with the guidelines included in SFAS No. 109 "Accounting
for Income Taxes," management has determined that more likely than not the
Company will not realize these benefits and, accordingly, has provided a
valuation allowance for them. The amount of deferred tax assets considered
realizable, however, could be reduced or increased in the near-term if facts,
including the amount of taxable income or the mix of taxable income between
subsidiaries, differ from managements' estimates.

At March 31, 1997, the Company had 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 these net
operating loss carryforwards may be subject to an annual limitation due to the
change in ownership rules provided by the Internal Revenue Code (the "Code").
This limitation and other restrictions provided by the Code may reduce the net
operating loss carryforwards such that it would not be available to offset
future taxable income of the U.S. subsidiary.

At March 31, 1997, the Company had operating loss carryforwards of
approximately $9,973, $632 and $6,300 in U.K., Malaysia and Austria,
respectively and such losses carry forward indefinitely. 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.

F-16
<PAGE> 77

FLEXTRONICS INTERNATIONAL LTD

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

Distributions of earnings by the Austrian subsidiary are exempt from
Austrian income taxes under the international participation privilege. No
deferred tax liability has been provided for withholding taxes on distributions
of dividends by the Austrian subsidiary because earnings of foreign subsidiaries
are intended to be reinvested indefinitely.

The Company has been granted the following tax incentives:

(i) Pioneer status granted to one of its Malaysian subsidiaries for a
period of five years under the Promotion of Investment Act. This incentive
provides a tax exemption on manufacturing income for this subsidiary.

(ii) Product Export Enterprise incentive for the Shekou, China
facility. The Company's operation in Shekou, China 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.

The Company's investments in its plants in Xixiang, China 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 of the Chinese tax authorities, 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 $8 tax each year in accordance with Labuan tax legislation.

A portion of the Company's sales were carried out by its Mauritius
subsidiary which is not taxed.

8. SHAREHOLDERS' EQUITY

Issuance of non-employee stock options

In June 1996, the Company issued 20,000 stock options with an exercise
price of $31.25 to a customer as a result of that customer reaching a specified
sales target in accordance with an option agreement. These options were valued
as of the grant date using the Black-Scholes model. The resulting value of
$380,000 was recorded as a sales discount in the accompanying consolidated
statement of operations for fiscal 1997.

Secondary offerings

In August 1995, the Company completed a secondary offering of its Ordinary
Shares. A total of 1,000,000 Ordinary Shares were sold at a price of $23.50 per
share resulting in net proceeds to the Company of $22.3 million.

Subsequent to March 31, 1997, the Company completed another offering of its
Ordinary Shares. A total of 2,185,000 shares were sold at a price of $49.25 per
share resulting in net proceeds to the Company of $95.3 million.

Stock-based compensation

The Company has an Executives' Share Option Scheme ("SOS") and an
Executives' Incentive Share Scheme ("ISS") for selected management employees of
the Company. The ISS and SOS plans provide for the issuance of up to 58,800 and
474,000 options, respectively, at an exercise price of not less than 85% of the

F-17
<PAGE> 78

FLEXTRONICS INTERNATIONAL LTD

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

fair value of the underlying stock on the date of grant. Options issued under
these plans generally vest over 4 years and expire 5 years from the date of
grant.

The Company's 1993 Share Option Plan (the "Plan") provides for the grant of
incentive stock options and non-statutory stock options to employees and other
qualified individuals to purchase Ordinary Shares of the Company. As of March
31, 1997, the Company had reserved 2,000,00 Ordinary Shares for issuance under
the Plan at an exercise price of not less than 85% of the fair value of the
underlying stock on the date of grant. Options issued under these plans
generally vest over 4 years and expire 5 years from the date of grant.

The Company has assumed certain option plans and the underlying options of
companies which the Company has merged with or acquired (the "Assumed Plans").
Options under the Assumed Plans have been converted into the Company's options
and adjusted to effect the appropriate conversion ratio as specified by the
applicable acquisition or merger agreement, but are otherwise administered in
accordance with the terms of the Assumed Plans. Options under the Assumed Plans
generally vest over 4 years and expire 5 years from the date of grant.

The Company has elected to follow APB Opinion No. 25 "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its employee
stock option plans and has adopted the disclosure provisions of SFAS No. 123
"Accounting for Stock Based Compensation". Because the exercise price of the
Company's stock options has equaled the fair value of the underlying stock on
the date of grant, no compensation expense has been recognized under APB Opinion
No. 25.

In accordance with the disclosure provisions of SFAS No. 123, the fair
value of employee stock options granted during fiscal 1996 and 1997 was
estimated at the date of grant using the Black-Scholes model and the following
weighted average assumptions: risk-free interest rates ranging from 5.31% to
5.77%; dividend yield of 0.0%, volatility of 0.67, and a weighted-average
expected life of 4.13 years. The weighted average fair value of an option
granted during fiscal 1996 and 1997 was $9.22 and 11.25, respectively. Had the
compensation cost for the Company's stock-based compensation plans been
determined based on the fair values of these options, the Company's fiscal 1996
and 1997 net income(loss) and net income(loss) per share would have been
adjusted to the pro-forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Net income(loss):
As reported............................................. $(14,146) $11,620
Pro-forma............................................... (15,066) 9,537
Net income (loss) per share:
As reported.......................................... $ (0.92) $ 0.67
Pro-forma............................................ (0.98) 0.55
</TABLE>

Because SFAS No. 123 is applicable only to awards granted subsequent to
December 30, 1994, and due to the subjective nature of the assumptions used in
the Black-Scholes model, the pro-forma net income(loss) and net income(loss) per
share disclosures may not reflect the associated fair value of the outstanding
options.

F-18
<PAGE> 79

FLEXTRONICS INTERNATIONAL LTD

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

The following table presents the activity for options outstanding under the
SOS and ISS plans as well as the 1993 share Option Plan and the Assumed Plans as
of March 31 ("Price" reflects the weighted average exercise price):

<TABLE>
<CAPTION>
1995 1996 1997
----------------- ------------------ ------------------
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 $12.60
Granted................................. 231,249 8.97 641,783 20.63 723,314 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 1,675,022 18.57
========= ========= =========
</TABLE>

The following table presents the composition of options outstanding and
exercisable as of March 31, 1997("Price" and "Life" reflect the weighted average
exercise price and weighted average contractual life unless otherwise noted):

<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
RANGE OF EXERCISE ----------------------------- ------------------
PRICES AMOUNT PRICE LIFE AMOUNT PRICE
- ----------------------- --------- ------ ---- -------- -----
<S> <C> <C> <C> <C> <C>
$ .01 -- $11.75 428,698 $ 5.47 1.77 348,320 $5.43
11.76 -- 20.50 429,214 15.67 3.19 173,741 15.19
20.51 -- 27.75 585,097 24.21 4.52 23,082 25.03
27.76 -- 35.75 232,013 34.26 4.70 49,530 33.98
--------- -------
Total, March 31, 1997 1,675,022 18.57 594,673
========= =======
</TABLE>

As of March 31, 1997, the Company had reserved 2,500,779 Ordinary Shares
for future issuance under all stock option plans.

In addition, during the year ended March 31, 1995, 155,843 options granted
to Flextronics, Inc. (the Company's predecessor) in connection with the
Company's July 1993 reorganization were exercised.

9. PROVISION FOR PLANT CLOSINGS

The provision for plant closure of $5,868 in fiscal 1997 relates to the
costs incurred in downsizing the Texas facility, the write-off of equipment at
the nChip semiconductor fabrication facility and downsizing the Singapore
manufacturing operations. The provision includes $2 million for severance
payments and $500 for the write-off of fixed assets in the Singapore
manufacturing facilities. An additional 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 which were paid during fiscal
1997. 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.

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.

10. RELATED PARTY TRANSACTIONS AND NOTES PAYABLES TO SHAREHOLDERS

Prior to becoming the Company's Chief Executive Officer in January 1994,
Michael E. Marks was the President and Chief Executive Officer of Metcal, Inc.
("Metcal"). Michael E. Marks remains a director of and continues to hold a
beneficial interest in Metcal. The Company had net sales of $989, $2,133 and
$1,548 to Metcal during fiscal 1995, 1996 and 1997, respectively.

F-19
<PAGE> 80

FLEXTRONICS INTERNATIONAL LTD

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

Stephen Rees, a Director and Senior Vice President of the Company, holds a
beneficial interest in both Mayfield International Ltd. ("Mayfield") and Croton
Ltd. ("Croton"). During fiscal 1997, the Company paid $118 to Croton for
management services and $208 to Mayfield for the rental of certain office space.
Additionally, as of March 31, 1997, $2,554 was due from Mayfield under a note
receivable. The note is unsecured, bears interest at 7.15% per annum and matures
on February 4, 1999. The note is included in related party receivables on the
accompanying balance sheet.

As of March 31, 1997, the Company had notes receivable due from certain
executives and officers amounting to approximately $1.1 million. These notes
bear interest at rates ranging from 7.0% to 7.21% and have maturities of 6
months to 5 years and are reflected in other assets on the accompanying balance
sheet. Subsequent to March 31, 1997, $650,000 of the $1.1 million was repaid.

The Company also purchases materials from FICO Investment Holdings
("FICO"), an associated company in which the Company holds a 40% interest (see
Note 11). At March 31, 1997, the amount due to FICO for these purchases was
$546.

11. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS

Neutronics Holdings A.G.

On October 31, 1997, the Company acquired Neutronics Holdings A.G.
("Neutronics"), a contract manufacturer with operations located in Austria and
Hungary. The acquisition was accounted for as a pooling-of-interests and the
Company has issued 2,806,000 Ordinary Shares in exchange for 92% of the
outstanding shares of Neutronics. All financial statements presented have been
retroactively restated to include the results of Neutronics.

Separate results of operations for the periods presented are as follows for
the years ended March 31 and December 31:

<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Previously reported...................... $237,386 $448,346 $490,585
Neutronics............................... 54,763 123,699 149,422
--------- --------- ---------
As restated.............................. $292,149 $572,045 $640,007
========= ========= =========
Net income(loss):
Previously reported...................... $ 6,156 $(15,132) $ 7,463
Neutronics............................... (275) 986 4,157
--------- --------- ---------
As restated.............................. $ 5,881 $(14,146) $ 11,620
========= ========= =========
Shareholders' equity:
Previously reported...................... $ 57,717 $ 73,059 $ 83,592
Neutronics............................... 10,716 12,512 15,753
--------- --------- ---------
As restated.............................. $ 68,433 $ 85,571 $ 99,345
========= ========= =========
</TABLE>

Ericsson Business Networks AB

In March 1997, the Company acquired certain manufacturing facilities in
Karlskrona, Sweden and related inventory, equipment and assets ("The Karlskrona
Facilities") from Ericsson Business Networks AB ("Ericsson") for $82,354 which
was financed by the Credit Facility described in Note 4. The transaction has
been accounted for as a purchase and accordingly, the purchase price has been
allocated to the assets based on their estimated fair market values at the date
of acquisition. There was no material purchase price in excess of

F-20
<PAGE> 81

FLEXTRONICS INTERNATIONAL LTD

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

the fair value of the net assets acquired. The results of operations of the
Karlskrona Facilities have been included in the consolidated results of the
Company since the date of acquisition (March 27, 1997) and such results of these
facilities were immaterial for March 27, 1997 to March 31, 1997.

FICO Investment Holding Ltd.

In December 1996, the Company acquired 40% of FICO Investment Holding Ltd.
("FICO"), a plastic injection molding company located in Shenzhen, China for
$5.2 million of which $3 million was paid in December 1996. The remaining $2.2
million purchase price is included in accrued liabilities and other in the
accompanying consolidated balance sheets as of March 31, 1997 and was
subsequently paid in June 1997. Goodwill and other intangibles resulting from
this purchase totaled $3.2 million and is being amortized over ten years. The
Company has an option to purchase the remaining 60% of FICO in fiscal 1998; the
consideration for the remaining 60% is dependent on the financial performance of
FICO for the period ending December 31, 1997. The Company has not yet decided
whether to purchase the remaining 60% of FICO. The Company accounts for its
investment in FICO under the equity method and accordingly has included its 40%
share of FICO's operating results in its accompanying consolidated statement of
operations since the date of acquisition (December 20, 1996).

Fine Line Printed Circuit Design Inc.

In November 1996, the Company acquired Fine Line Printed Circuit Design,
Inc. ("Fine Line"), a circuit board layout and prototype operation company
located in San Jose, California. The Company issued 223,321 Ordinary Shares in
exchange for all of the outstanding capital stock of Fine Line. The merger was
accounted under the pooling-of-interests method of accounting; however, prior
period financial statements were not restated because the financial results of
Fine Line are not material to the consolidated financial statements.

Astron Group Ltd.

In February 1996, the Company acquired all the outstanding stock of Astron
Group Ltd. ("Astron") for $13.4 million in cash; 238,684 Ordinary Shares valued
at $6.5 million; issuance of $15 million in notes payable, $10 million of
Ordinary Shares to be issued on June 30, 1998 and $15 million due in June 1998
under a Services Agreement with an affiliate of Stephen Rees, the Chairman of
Astron. These components aggregated to a purchase price of approximately $59.9
million. This acquisition was accounted for as a purchase and accordingly, the
results of Astron have been included in the Company's consolidated statements of
operations since the date of acquisition (February 2, 1996).

The Services Agreement with an affiliate of Stephen Rees originally
provided for an annual fee, plus a $15 million payment to be made on June 30,
1998 subject to certain terms and conditions. As substantially all of the former
shareholders of Astron were affiliates of Mr. Rees, or members of his family,
the Company has accounted for the amounts due under the Services Agreement as
part of the Astron purchase price.

In addition, the purchase agreement required additional payments contingent
upon resolution of an earn-out provision based on the 1996 operating results of
Astron. In March 1997, the Company contemporaneously negotiated a $6.25 million
settlement of the earn-out provision and the termination of the Services
Agreement, removing the original terms and conditions and reducing the amount
due from $15 million to $14 million, $5 million of which is payable in cash and
$9 million of which may be settled in cash or Ordinary Shares at the Company's
option. Due to the interrelationship of these two settlements, the Company
determined that the resulting amounts should each be accounted for as an
adjustment to the purchase price of Astron. Accordingly, in March of 1997, the
purchase price of Astron was increased by a net amount of $5.25 million which
represents the agreed upon $6.25 million payment due under the earn-out
provision less the $1 million

F-21
<PAGE> 82

FLEXTRONICS INTERNATIONAL LTD

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

reduction due to the termination of the Services Agreement. The $6.25 million
due under the earn-out provision is included in accrued liabilities and other in
the accompanying consolidated balance sheets and was paid in April 1997. As a
result, the aggregate adjusted purchase price of Astron including the earn-out
consideration totaled $65 million.

The aggregate adjusted purchase price of $65 million was allocated based on
the relative fair value of the assets acquired as follows:

<TABLE>
<S> <C>
Astron's net assets at fair value.................................. $14,103
In-process research and development................................ 29,000
Goodwill and other intangible assets............................... 21,918
-------
Total purchase price..................................... $65,021
=======
</TABLE>

Goodwill and other intangible assets consist of goodwill, developed
technologies, customer lists, assembled workforce and trademarks which are being
amortized over 5 to 25 years.

As of the date of acquisition, the $29 million in purchase price allocated
to in-process research and development related to development projects which had
not reached technological feasibility and had no probable alternative future
uses; accordingly, the Company expensed the entire amount on the date of
acquisition as a one-time charge to operations.

Subsequent to March 31, 1997, the Company revised prospectively its
estimate of the useful lives associated with the Astron goodwill and other
intangible assets from 5 to 25 years to 5 to 10 years. This revision will
increase amortization expense by $279 per quarter beginning in the second
quarter of fiscal 1998.

Assembly & Automation (Electronics) Ltd.

In April 1995, the Company acquired all of the issued share capital of
Assembly & Automation (Electronics) Ltd. ("A&A"), a private limited company
incorporated in the United Kingdom that provided contract manufacturing services
for the electronics and telecommunications industries, for total consideration
of $4.1 million which included cash of $3.2 million and the issuance of 66,908
Ordinary Shares valued at $938. The transaction has been accounted for as a
purchase, and accordingly, the results of operations for A&A have been included
in the accompanying consolidated statements of operations since the date of
acquisition (April 12, 1995). The acquisition resulted in goodwill and other
intangible assets of $4.6 million which are being amortized over 3 to 20 years.

nCHIP, Inc.

In January 1995, the Company merged with nCHIP, Inc. ("nCHIP") through the
issuance of 2,104,602 Ordinary Shares 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 under the
pooling-of-interests method and accordingly, all prior period financial
statements have been restated to include the results of nCHIP. nCHIP had a
calendar year end and, accordingly, the nCHIP statement of operations for the
year ended December 31, 1993 has been combined with the Company's statement of
operations for the fiscal year ended March 31, 1994. Effective April 1, 1994,
nCHIP's fiscal year-end was 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 retained earnings.

F-22
<PAGE> 83

FLEXTRONICS INTERNATIONAL LTD

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

Other purchase acquisitions

Prior to December 1994, the Company owned 49% of Flextracker Sdn Bhd
("Flextracker"). On December 30, 1994, the Company acquired the remaining net
assets of Flextracker for approximately $3.3 million, with the exception of a $1
million loan payable to Flextracker's other investor which was not acquired.
Additionally, on March 1, 1994, the Company acquired all of the outstanding
stock of Relevant Technologies, Inc. ("RTI") for approximately $4.0 million.
Both of these transactions have been accounted for under the purchase method,
and accordingly, results for the periods since the date of acquisition have been
included in the consolidated statements of operations. Goodwill associated with
the RTI acquisition totaled $2.4 million and is being amortized over twenty-five
years.

Unaudited pro-forma results for purchase acquisitions

The following unaudited pro-forma information reflects the results of
operations for the years ended March 31, 1995 and 1996 as if the acquisitions of
Astron, A&A, Flextracker and RTI had occurred as of April 1, 1994. The pro-forma
information gives effect to certain adjustments including amortization of
intangibles and goodwill. The unaudited pro forma information is based on the
acquired entities' results of operations for the years ended December 31, 1994
and 1995. These pro-forma results have been prepared for comparative purposes
only and are not necessarily indicative of what the actual operating results
would have been had the acquisitions taken place on April 1, 1994 or of
operating results which may occur in the future.

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Net sales.............................................. $346,982 $589,738
Net income (loss)...................................... (1,147) (16,037)
Net income (loss) per share............................ (0.08) (1.04)
</TABLE>

The above pro-forma information does not include the effects of acquiring
the Karlskrona Facilities in March 1997 because information relating to the
Karlskrona operation prior to the company's acquisition is not available.

Acquisitions subsequent to March 31, 1997

Subsequent to March 31, 1997, the Company also merged with DTM Products,
Inc.("DTM") and EnergiPilot AB ("Energipilot"). DTM is based in Colorado and
produces injection molded plastics. Energipilot is based in Sweden and produces
cable and cable assemblies. All of the outstanding shares of DTM and Energipilot
were acquired in exchange for 252,469 and 229,990 Ordinary Shares, respectively.
Both transactions are to be accounted for as a pooling-of-interests; however, as
these acquisitions are not material individually or in the aggregate, the
accompanying consolidated financial statements have not been restated to include
the results of DTM and Energipilot.

12. SEGMENT REPORTING

The Company operates in one primary business segment: providing
sophisticated electronics assembly and turnkey contract manufacturing services
to a select group of original equipment manufacturers engaged in the computer,
medical, consumer electronics and communications industries.

F-23
<PAGE> 84

FLEXTRONICS INTERNATIONAL LTD

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

Sales for similar classes of products within the Company's business segment
is presented below for the years ended March 31:

<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Medical.................................... $ 49,161 $ 78,395 $ 94,238
Computer................................... 80,646 238,120 260,687
Telecommunication.......................... 44,034 67,254 110,093
PCB........................................ -- 4,485 28,470
Industrial................................. 79 10,691 8,612
Consumer products.......................... 93,724 105,204 110,397
MCMs....................................... 11,847 19,817 19,214
Others..................................... 12,658 48,079 8,296
-------- -------- --------
$292,149 $572,045 $640,007
======== ======== ========
</TABLE>

F-24
<PAGE> 85

FLEXTRONICS INTERNATIONAL LTD

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

The following tables summarize the Company's operations by geographical
area for the years ended March 31:

<TABLE>
<CAPTION>
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............................ 67,571 77,899 88,053
-------- -------- --------
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; Mexico:
Unaffiliated customers -
Domestic................................ 50,506 191,209 188,097
Export.................................. -- 11,178 --
Intercompany............................ -- 27 9
-------- -------- --------
50,506 202,414 188,106
-------- -------- --------
Europe:
Unaffiliated customers -
Domestic................................ 7,726 38,223 78,504
Export.................................. 47,037 104,817 93,477
Intercompany............................ -- -- --
-------- -------- --------
54,763 143,040 171,981
-------- -------- --------
Malaysia:
Unaffiliated customers -
Domestic................................ -- -- --
Export.................................. 158,168 $201,870 245,075
Intercompany............................ 4 -- --
-------- -------- --------
158,172 201,870 245,075
-------- -------- --------
Intercompany eliminations...................... (96,928) (138,706) (217,224)
-------- -------- --------
$292,149 $572,045 $640,007
======== ======== ========
</TABLE>

F-25
<PAGE> 86

FLEXTRONICS INTERNATIONAL LTD

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

<TABLE>
<CAPTION>
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
A; Mexico.................................... (1,290) 4,570 (5,531)
Europe....................................... (93) 2,546 3,374
Malaysia..................................... 10,754 18,953 17,626
-------- -------- --------
$ 10,099 $ (5,375) $ 20,072
======== ======== ========
IDENTIFIABLE ASSETS:
Singapore.................................... $ 23,426 $ 48,434 $ 50,118
Hong Kong; China; Mauritius.................. 17,020 50,284 68,695
Mexico....................................... 26,354 73,552 74,884
Europe....................................... 69,091 89,303 203,977
Malaysia..................................... 49,295 47,694 48,618
-------- -------- --------
$185,186 $309,267 $446,292
======== ======== ========
</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, 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-26
<PAGE> 87

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................... $ 73,333 $ 24,159
Accounts receivable, net........................................... 122,613 87,507
Inventories........................................................ 147,115 124,362
Deferred income taxed and other current assets..................... 35,697 18,368
-------- --------
Total current assets....................................... 378,758 254,396
-------- --------
Property and equipment, net.......................................... 204,996 149,015
Other non-current assets............................................. 50,244 42,881
-------- --------
Total assets............................................... $633,998 $ 446,292
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank borrowings and current portion of long term debt.............. $ 20,278 $ 128,515
Capital lease obligations.......................................... 8,483 8,273
Accounts payable and accrued liabilities........................... 131,663 141,090
Other current liabilities.......................................... 67,710 6,763
-------- --------
Total current liabilities.................................. 228,134 284,641
-------- --------
Long term debt, net of current portion............................... 158,998 9,029
Capital lease obligations, net of current portion.................... 18,483 20,099
Deferred income taxes................................................ 4,012 3,710
Other non-current liabilities........................................ 15,804 28,326
Minority interest.................................................... 1,160 1,142

SHAREHOLDERS' EQUITY:
Ordinary shares, S$0.01 par value; Authorized -- 100,000,000
Shares; issued and outstanding -- 19,292,214 and 16,482,243 as
of December 31, 1997 and March 31, 1997, respectively........... 125 107
Additional paid-in capital......................................... 204,263 106,556
Accumulated deficit................................................ 8,021 (7,020)
Accumulated translation adjustment................................. (5,002) (298)
-------- --------
Total shareholders' equity................................. 207,407 99,345
-------- --------
Total liabilities and shareholders' equity................. $633,998 $ 446,292
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements

F-27
<PAGE> 88

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES....................................... $295,000 $161,248 $782,013 $467,787
Cost of Sales................................... 266,192 148,614 705,496 421,931
--------- --------- --------- ---------
Gross Margin.......................... 28,808 12,634 76,517 45,856
OPERATING EXPENSES:
Selling, general and administrative
expenses................................... 13,773 9,333 38,143 26,101
Goodwill and intangibles amortization......... 951 749 2,704 2,152
Provision for plant closings.................. -- 2,321 -- 2,321
--------- --------- --------- ---------
Operating income(loss)................ 14,084 231 35,670 15,282
OTHER INCOME AND EXPENSE:
Merger related expenses.................... 4,000 -- 4,000 --
Other expense, net......................... 2,946 173 9,705 2,434
--------- --------- --------- ---------
Income before taxes............................. 7,138 58 21,965 12,848
Provision for income taxes...................... 1,197 281 2,856 2,029
--------- --------- --------- ---------
Net income (loss)............................... 5,941 (223) 19,109 10,819
========= ========= ========= =========
Diluted earnings per share...................... $ 0.29 $ (0.01) $ 1.03 $ 0.62
========= ========= ========= =========
Basic earnings per share........................ $ 0.31 $ (0.01) $ 1.07 $ 0.65
========= ========= ========= =========
Weighted average ordinary shares and equivalents
outstanding -- diluted........................ 20,379 16,792 18,631 17,358
========= ========= ========= =========
Weighted average ordinary shares and equivalents
outstanding -- basic.......................... 19,361 16,792 17,842 16,706
========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-28
<PAGE> 89

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
----------------------
1997 1996
--------- --------
<S> <C> <C>
Net cash provided by operating activities............................. $ 4,435 $ 42,078
--------- --------
Investing activities:
Purchases of property and equipment................................. (65,944) (24,557)
Proceeds from sale of property and equipment........................ 1,095 1,279
Proceeds from disposal of subsidiary................................ -- 1,341
Payment for Astron earn-out......................................... (6,250) --
Payment to FICO for 40% interest.................................... (2,200) (3,000)
Minority investment................................................. (2,756) (87)
Effect of Energipilot and DTM acquisitions.......................... 1,504 --
--------- --------
Net cash used in investing activities................................. (74,551) (25,024)
--------- --------
Financing activities:
Repayments of long term debt and bank borrowings.................... (120,750) (8,693)
Refinancing of lease assets......................................... -- 1,031
Repayment of capital lease obligations.............................. (7,298) (5,882)
Source of long term debt............................................ 3,220 1,524
Repayment of loan from related party................................ -- 1,381
Loan from (to) related party........................................ 2,975 (1,938)
Repayment of notes payable.......................................... (108) (286)
Net proceeds from issuance of share capital......................... 1,136 1,205
Net proceeds from issuance of Senior Subordinated Notes............. 145,687 --
Net proceeds from equity offering................................... 95,297 --
--------- --------
Net cash provided (used) by financing activities...................... 120,159 (11,658)
--------- --------
Effect of exchange rate changes on cash............................... (869) (186)
--------- --------
Net increase in cash.................................................. 49,174 5,210
Cash, beginning of period............................................. 24,159 8,647
--------- --------
Cash, end of period................................................... $ 73,333 $ 13,857
========= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-29
<PAGE> 90

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 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 nine month period
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending March 31, 1998.

On October 30, 1997 the Company acquired 92% of the outstanding shares of
Neutronics Electronics Industries Holding AG ("Neutronics"), an Austrian PCB
assembly company with operations in Austria and Hungary, in exchange for
2,806,000 Ordinary Shares of the Company.

This transaction was accounted for as a pooling-of-interests and
accordingly, the accompanying condensed consolidated financial statements have
been restated to reflect the merger as if it occurred at the beginning of the
first period presented. Neutronics' fiscal year ends on December 31. The
condensed consolidated income statements combine Neutronics' results for the
nine months and three months ended December 31, 1997 with Flextronics results
for the nine months and three months ended December 31, 1997. The condensed
balance sheets as of March 31, 1997 and December 31, 1997 include Neutronics'
balance sheets as of December 31, 1996 and 1997, respectively. Neutronics net
loss of $3.2 million for the three months ended March 31, 1997 has been recorded
as an adjustment to retained earnings. A reconciliation of previously reported
results for the three and nine months ended December 31, 1996 to the results in
this form 10-Q is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Net sales:
Previously reported..................... $121,525 $ 361,884
Neutronics.............................. 39,723 105,903
-------- --------
As restated............................. $161,248 $ 467,787
======== ========
Net income:
Previously reported..................... $ (309) $ 9,029
Neutronics.............................. 86 1,790
-------- --------
As restated............................. $ (223) $ 10,819
======== ========
</TABLE>

NOTE B -- INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials........................................ $118,034 $ 80,010
Work-in-process...................................... 26,524 16,665
Finished goods....................................... 2,557 27,687
-------- --------
Total...................................... $147,115 $ 124,362
======== ========
</TABLE>

F-30
<PAGE> 91

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 (CONTINUED)
(UNAUDITED)

NOTE B -- INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1997 1997
----------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials........................................ $ 118,034 $ 80,010
Work-in-process...................................... 26,524 16,665
Finished goods....................................... 2,557 27,687
-------- --------
Total...................................... $ 147,115 $124,362
======== ========
</TABLE>

NOTE C -- RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

NOTE D -- NET INCOME PER SHARE

Diluted net income per share for each period is calculated in accordance
with SFAS No. 128 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.

F-31
<PAGE> 92

REPORT OF INDEPENDENT AUDITORS

The Management and Supervisory Boards and Shareholders at
Neutronics Electronic Industries Holding A.G.

We have audited the accompanying consolidated balance sheets (not presented
herein) of Neutronics Electronic Industries Holdings A.G. and its subsidiaries
(the 'Group') as at December 31, 1996, 1995 and 1994 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the periods then ended (not presented herein). These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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 (not presented
herein) present fairly, in all material respects the financial position of the
Group as at December 31, 1996, 1995 and 1994, and the results of its operations
and its cash flows for the periods then ended in conformity with United States
Generally Accepted Accounting Principles.

/s/ MOORE STEPHENS
Moore Stephens
Registered Auditors
St. Paul's House
Warwick Lane
London EC4P 4BN.

Friday 13th February 1998

F-32
<PAGE> 93

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Summary............................... 4
Risk Factors.......................... 5
Enforcement of Civil Liabilities...... 15
Dividends............................. 15
Price Range of Ordinary Shares........ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 32
Management............................ 44
Executive Compensation................ 46
Description of the Credit Facility.... 49
Principal and Selling Shareholders.... 51
Plan of Distribution.................. 54
Description of Capital Shares......... 55
Taxation.............................. 58
Legal Matters......................... 59
Consolidated Financial Statements..... F-1
</TABLE>

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

LOGO
------------------------------
PROSPECTUS
------------------------------

FEBRUARY 26, 1998

======================================================
<PAGE> 94

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

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

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In February 1996, the Company acquired Astron Group Limited in exchange for
(i) $13.4 million in cash, (ii) $15.0 million in 8% promissory notes ($10.0
million of which was paid in February 1997 and $5.0 million of which is payable
in February 1998, (iii) 238,684 Ordinary Shares issued at closing, and (iv)
Ordinary Shares with a value of $10.0 million to be issued on June 30, 1998. On
November 25, 1996, the Company acquired Fine Line for an aggregate of 223,321
Ordinary Shares. On October 30, 1997, the Company acquired 92% of the
outstanding ordinary shares of Neutronics, an Austrian contract manufacturer
with operations in Austria and Hungary, for 2,806,000 Ordinary Shares of the
Company. On December 1, 1997, the Company acquired DTM, a Colorado-based
producer of injection molded plastics for North American OEMs, in exchange for
252,469 Ordinary Shares, and Energipilot, a Swedish company principally engaged
in providing cables and engineering services for Northern European OEMs, in
exchange for 229,990 Ordinary Shares. The Ordinary Shares issued in connection
with these acquisitions were issued pursuant to an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994 among the
Registrant, nCHIP Acquisition Corporation and nCHIP (the "Reorganization
Agreement"). Certain Disclosure Schedules of nCHIP and the Registrant setting
forth various exceptions to the representations and warranties pursuant to the
Reorganization Agreement have been omitted. The Company agrees to furnish
supple=mentally a copy of any omitted schedule to the Commission upon request.
(Incorporated by reference to Exhibits 2.1 through 2.6 of the Registrant's
registration statement on Form S-4, No. 33-85842.)
</TABLE>

II-1
<PAGE> 95

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December 8, 1994
among the Registrant, nCHIP Acquisition Corporation and nCHIP. (Incorporated by
reference to Exhibit 2.7 of the Registrant's registration statement on Form
S-4. No. 3385842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the Registrant, A&A
and all of the shareholders of A&A. (Incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K for the event reported on April
12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker Sdn. Bhd. and
Flextronics Malaysia Sdn. Bhd. (Incorporated by reference to Exhibit 10.19 of
the Registrant's registration statement on Form S-4, No. 33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales
Limited dated as of January 6, 1996. (Incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K for the event reported on
February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and Flextronics
International Sweden AB dated as February 12, 1997. Certain schedules have been
omitted. The Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request. (Incorporated by reference to Exhibit
2.6 of the Registrant's registration statement on Form S-3, No. 333-21715.)
2.7 Exchange Agreement dated October 19, 1997 by and among Registrant, Neutronics
Electronic Industries Holding A.G. and the named Shareholders of Neutronics
Electronic Industries Holding A.G. (Incorporated by reference to Exhibit 2 of
the Registrant's Current Report on Form 8-K for event reported on October 30,
1997.)
3.1 Memorandum of Association of the Registrant. (Incorporated by reference to
Exhibit 3.1 of the Registrant's registration statement on Form S-1, No.
33-74622.)
3.2 Articles of Association of the Registrant. (Incorporated by reference to
Exhibit 3.2 of the Registrant's registration statement on Form S-4, No.
33-85842.)
4.1 Indenture dated as of October 15, 1997 between Registrant and State Street Bank
and Trust Company of California, N.A., as trustee. (Incorporated by reference
to Exhibit 10.1 of the Registrant's Current Report on Form 8-K for event
reported on October 15, 1997.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary Shares
being registered.
10.1 Form of Indemnification Agreement between the Registrant and its Directors and
certain officers. (Incorporated by reference to Exhibit 10.1 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.2 1993 Share Option Plan. (Incorporated by reference to Exhibit 10.2 of the
Company's registration statement on Form S-1, No. 33-74622.)
10.3 Executives' Share Option Scheme, as amended. (Incorporated by reference to
Exhibit 10.3 of the Company's registration statement on Form S-1, No.
33-74622.)
10.4 Executives' Incentive Share Scheme, as amended. (Incorporated by reference to
Exhibit 10.4 of the Company's registration statement on Form S-1, No.
33-74622.)
10.5 nCHIP, Inc. Amended and Restated 1988 Stock Option Plan. (Incorporated by
reference to Exhibit 10.5 of the Company's registration statement on Form S-4,
No. 33-85842.)
10.6* Agreement to Grant Options dated as of June 9, 1995 between the Company and
Lifescan. (Incorporated by reference to Exhibit 10.7 of the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995.)
10.7 Lease Agreement dated as of October 1, 1994 among Shenzhen Xinan Industrial
Shareholdings Limited, Flextronics Industrial (Shenzhen) Limited and
Flextronics Singapore Pte Ltd. (Incorporated by reference to Exhibit 10.25 of
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1995.)
</TABLE>

II-2
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
10.8 Lease Agreement dated as of January 2, 1995 between Shenzhen Xinan Industrial
Shareholdings Limited and Flextronics Industrial (Shenzhen) Limited.
(Incorporated by reference to Exhibit 10.25 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995.)
10.9 Services Agreement between the Registrant and Stephen Rees dated as of January
6, 1996. (Incorporated by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K for the event reported on February 2, 1996.)
10.10 Supplemental Services Agreement between Astron and Stephen Rees dated as of
January 6, 1996. (Incorporated by reference to Exhibit 10.2 of the Company's
Current Report on Form 8-K for the event reported on February 2, 1996.)
10.11 Promissory Note dated April 17, 1995 executed by Michael E. Marks in favor of
Flextronics Technologies, Inc. (Incorporated by reference to Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1995.)
10.12 Service Agreement dated July 8, 1993 between the Registrant and Dennis P.
Stradford. (Incorporated by reference to Exhibit 10.36 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.13 Service Agreement dated July 8, 1993 between the Registrant and Tsui Sung Lam.
(Incorporated by reference to Exhibit 10.37 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.14 Service Agreement dated July 8, 1993 between the Registrant and Goh Chan Peng.
(Incorporated by reference to Exhibit 10.38 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.15* Printed Circuit Board Assembly Services Agreement between Lifescan Inc., a
Johnson & Johnson Company, and the Registration dated November 1, 1992.
(Incorporated by reference to Exhibit 10.41 of the Company's registration
statement on Form S-1, No. 33-74622.)
10.16 Tenancy of Flatted Factory Unit dated February 28, 1996 between Jurong Town
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.44 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1990.)
10.17 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong Town
Corporation and the Registrant. (Incorporated by reference to Exhibit 10.45 of
the Company's registration statement on Form S-1, No. 33-74622.)
10.18 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference to Exhibit
10.52 of the Company's registration statement on Form S-1, No. 33-74622.)
10.19 Acquisition and Subscription Agreement dated June 30, 1993 between FI
Liquidating Company, Inc., Asian Oceanic Nominees and Custodians Limited, N.T.
Butterfield Trustee (Bermuda) Limited, Overseas Asset Holdings, Inc., JF Asia
Select Limited, the Executive Representative, Flex Holdings Pte Limited, CLG
Partners, L.P. and the Liquidators of Asian Oceanic Nominees and Custodians
Limited. (Incorporated by reference to Exhibit 10.53 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.20 Amended and Restated Revolving Credit Agreement dated as of January 14, 1998
among Flextronics International USA, Inc., BankBoston, N.A. and the lending
institutions listed on Schedule 1 attached thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon request.
(Incorporated by reference to Exhibit 10.1 of the Company's Report on Form 10-Q
for the quarterly period ended December 31, 1997.)
</TABLE>

II-3
<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
10.21 Amended and Restated Revolving Credit Agreement dated as of January 14, 1998
among Flextronics International Ltd., BankBoston, N.A. and the lending
institutions listed on Schedule 1 attached thereto and BankBoston, N.A. as
agent with BancBoston Securities Inc. as arranger. The Company agrees to
furnish a copy of the omitted schedules to the Commission upon request.
(Incorporated by reference to Exhibit 10.2 of the Company's Report on Form 10-Q
for the quarterly period ended December 31, 1997.)
10.22 Employment and Noncompetition Agreement dated as of April 30, 1997 between
Flextronics International Sweden AB and Ronny Nilsson. (Incorporated by
reference to Exhibit 10.29 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.23 Services Agreement dated as of April 30, 1997 between Flextronics International
USA, Inc. and Ronny Nilsson. (Incorporated by reference to Exhibit 10.30 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.24 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in favor of
Flextronics International USA, Inc. (Incorporated by reference to Exhibit 10.31
of the Company's Annual Report on Form 10-K for fiscal year ended March 31,
1997.)
10.25 Letter Agreement dated March 27, 1997 among the Company, Astron Technologies
Limited, Croton Technology Ltd. and Stephen Rees regarding the termination of
the Services Agreement. (Incorporated by reference to Exhibit 10.32 of the
Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.26 Letter Agreement dated March 27, 1997 between Astron Group Limited and Stephen
Rees regarding the termination of the Supplemental Services Agreement.
(Incorporated by reference to Exhibit 10.33 of the Company's Annual Report on
Form 10-K for fiscal year ended March 31, 1997.)
10.27 Services Agreement between Flextronics Singapore Pte Limited and Goh Chan Peng
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.34 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.28 Services Agreement between Astron Technologies Limited and Goh Chan Peng
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.35 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.29 Services Agreement between Astron Technologies Limited and Tsui Sung Lam
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.36 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.30 Services Agreement between Flextronics Singapore Pte Limited and Tsui Sung Lam
effective as of April 1, 1997. (Incorporated by reference to Exhibit 10.37 of
the Company's Annual Report on Form 10-K for fiscal year ended March 31, 1997.)
10.31 Loan Agreement between Flextronics International USA, Inc. as lender, and
Michael E. Marks, as borrower dated November 6, 1997. (Incorporated by
reference to Exhibit 10.35 of the Company's Registration Statement on Form S-4,
No. 333-41293.)
10.32 Secured Full Recourse Promissory Note, dated November 6, 1997, executed by
Michael E. Marks in favor of Flextronics International USA, Inc. (Incorporated
by reference to Exhibit 10.36 to the Company's Registration Statement on Form
S-4, No. 333-41293.)
11.1** Statement regarding computation of earnings per share.
21.1** Subsidiaries of Registrant.
23.1** Consent of Arthur Andersen.
23.2** Consent of Moore Stephens.
23.3** Consent of Allen & Gledhill (included in Exhibit 5.1).
</TABLE>

II-4
<PAGE> 98

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------------------------
<S> <C>
24.1** Power of Attorney.
</TABLE>

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

* Confidential treatment requested for portions of agreement.

** Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

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

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

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

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

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

II-5
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in San Jose,
State of California on this 26th day of February, 1998.

FLEXTRONICS INTERNATIONAL LTD.

By: /s/ MICHAEL E. MARKS
------------------------------------
Michael E. Marks

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

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

/s/ MICHAEL E. MARKS Chairman of the Board, and Chief February 26, 1998
- ------------------------------------ Executive Officer (principal
Michael E. Marks executive officer)

/s/ TSUI SUNG LAM* President, Asia Pacific Operations February 26, 1998
- ------------------------------------ and Director
Tsui Sung Lam

/s/ ROBERT R.B. DYKES Senior Vice President of Finance and February 26, 1998
- ------------------------------------ Administration and Chief Financial
Robert R.B. Dykes Officer (principal financial and
accounting officer)

/s/ MICHAEL J. MORITZ* Director February 26, 1998
- ------------------------------------
Michael J. Moritz

/s/ STEPHEN J.L. REES* Senior Vice President, February 26, 1998
- ------------------------------------ Worldwide Sales and Marketing
Stephen J.L. Rees and Director

/s/ RICHARD L. SHARP* Director February 26, 1998
- ------------------------------------
Richard L. Sharp

/s/ PATRICK FOLEY* Director February 26, 1998
- ------------------------------------
Patrick Foley

/s/ ALAIN AHKONG* Director February 26, 1998
- ------------------------------------
Alain Ahkong

/s/ SHING LEONG HUI* Director February 26, 1998
- ------------------------------------
Shing Leong Hui
</TABLE>

*By /s/ MICHAEL E. MARKS
----------------------------
Michael E. Marks,
Attorney-in-fact

II-6
<PAGE> 100

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994
among the Registrant, nCHIP Acquisition Corporation and nCHIP (the
"Reorganization Agreement"). Certain Disclosure Schedules of nCHIP
and the Registrant setting forth various exceptions to the
representations and warranties pursuant to the Reorganization
Agreement have been omitted. The Company agrees to furnish
supple=mentally a copy of any omitted schedule to the Commission
upon request. (Incorporated by reference to Exhibits 2.1 through 2.6
of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December
8, 1994 among the Registrant, nCHIP Acquisition Corporation and
nCHIP. (Incorporated by reference to Exhibit 2.7 of the Registrant's
registration statement on Form S-4. No. 3385842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the
Registrant, A&A and all of the shareholders of A&A. (Incorporated by
reference to Exhibit 2.1 of the Registrant's Current Report on Form
8-K for the event reported on April 12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker
Sdn. Bhd. and Flextronics Malaysia Sdn. Bhd. (Incorporated by
reference to Exhibit 10.19 of the Registrant's registration
statement on Form S-4, No. 33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac
Sales Limited dated as of January 6, 1996. (Incorporated by
reference to Exhibit 2.1 of the Registrant's Current Report on Form
8-K for the event reported on February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and
Flextronics International Sweden AB dated as February 12, 1997.
Certain schedules have been omitted. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon
request. (Incorporated by reference to Exhibit 2.6 of the
Registrant's registration statement on Form S-3, No. 333-21715.)
2.7 Exchange Agreement dated October 19, 1997 by and among Registrant,
Neutronics Electronic Industries Holding A.G. and the named
Shareholders of Neutronics Electronic Industries Holding A.G.
(Incorporated by reference to Exhibit 2 of the Registrant's Current
Report on Form 8-K for event reported on October 30, 1997.)
3.1 Memorandum of Association of the Registrant. (Incorporated by
reference to Exhibit 3.1 of the Registrant's registration statement
on Form S-1, No. 33-74622.)
3.2 Articles of Association of the Registrant. (Incorporated by
reference to Exhibit 3.2 of the Registrant's registration statement
on Form S-4, No. 33-85842.)
4.1 Indenture dated as of October 15, 1997 between Registrant and State
Street Bank and Trust Company of California, N.A., as trustee.
(Incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K for event reported on October 15, 1997.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary
Shares being registered.
</TABLE>
<PAGE> 101

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

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
10.15* Printed Circuit Board Assembly Services Agreement between Lifescan
Inc., a Johnson & Johnson Company, and the Registration dated
November 1, 1992. (Incorporated by reference to Exhibit 10.41 of the
Company's registration statement on Form S-1, No. 33-74622.)
10.16 Tenancy of Flatted Factory Unit dated February 28, 1996 between
Jurong Town Corporation and the Registrant. (Incorporated by
reference to Exhibit 10.44 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1990.)
10.17 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong
Town Corporation and the Registrant. (Incorporated by reference to
Exhibit 10.45 of the Company's registration statement on Form S-1,
No. 33-74622.)
10.18 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference to
Exhibit 10.52 of the Company's registration statement on Form S-1,
No. 33-74622.)
10.19 Acquisition and Subscription Agreement dated June 30, 1993 between
FI Liquidating Company, Inc., Asian Oceanic Nominees and Custodians
Limited, N.T. Butterfield Trustee (Bermuda) Limited, Overseas Asset
Holdings, Inc., JF Asia Select Limited, the Executive
Representative, Flex Holdings Pte Limited, CLG Partners, L.P. and
the Liquidators of Asian Oceanic Nominees and Custodians Limited.
(Incorporated by reference to Exhibit 10.53 of the Company's
registration statement on Form S-1, No. 33-74622.)
10.20 Amended and Restated Revolving Credit Agreement dated as of January
14, 1998 among Flextronics International USA, Inc., BankBoston, N.A.
and the lending institutions listed on Schedule 1 thereto and
BankBoston, N.A. as agent with BancBoston Securities Inc. as
arranger. The Company agrees to furnish a copy of the omitted
schedules to the Commission upon request. (Incorporated by refer-
ence to Exhibit 10.1 of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1997.)
10.21 Amended and Restated Revolving Credit Agreement dated as of January
14, 1998 among Flextronics International Ltd., BankBoston, N.A. and
the lending institutions listed on Schedule 1 thereto and
BankBoston, N.A. as agent with BancBoston Securities Inc. as
arranger. The Company agrees to furnish a copy of the omitted
schedules to the Commission upon request. (Incorporated by reference
to Exhibit 10.2 of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1997.)
10.22 Employment and Noncompetition Agreement dated as of April 30, 1997
between Flextronics International Sweden AB and Ronny Nilsson.
(Incorporated by reference to Exhibit 10.29 of the Company's Annual
Report on Form 10-K for fiscal year ended March 31, 1997.)
10.23 Services Agreement dated as of April 30, 1997 between Flextronics
International USA, Inc. and Ronny Nilsson. (Incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.24 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in
favor of Flextronics International USA, Inc. (Incorporated by
reference to Exhibit 10.31 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
</TABLE>
<PAGE> 103

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ------ -------------------------------------------------------------------- -------------
<C> <S> <C>
10.25 Letter Agreement dated March 27, 1997 among the Company, Astron
Technologies Limited, Croton Technology Ltd. and Stephen Rees
regarding the termination of the Services Agreement. (Incorporated
by reference to Exhibit 10.32 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.26 Letter Agreement dated March 27, 1997 between Astron Group Limited
and Stephen Rees regarding the termination of the Supplemental
Services Agreement. (Incorporated by reference to Exhibit 10.33 of
the Company's Annual Report on Form 10-K for fiscal year ended March
31, 1997.)
10.27 Services Agreement between Flextronics Singapore Pte Limited and Goh
Chan Peng effective as of April 1, 1997. (Incorporated by reference
to Exhibit 10.34 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)
10.28 Services Agreement between Astron Technologies Limited and Goh Chan
Peng effective as of April 1, 1997. (Incorporated by reference to
Exhibit 10.35 of the Company's Annual Report on Form 10-K for fiscal
year ended March 31, 1997.)
10.29 Services Agreement between Astron Technologies Limited and Tsui Sung
Lam effective as of April 1, 1997. (Incorporated by reference to
Exhibit 10.36 of the Company's Annual Report on Form 10-K for fiscal
year ended March 31, 1997.)
10.30 Services Agreement between Flextronics Singapore Pte Limited and
Tsui Sung Lam effective as of April 1, 1997. (Incorporated by
reference to Exhibit 10.37 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)
10.31 Loan Agreement between Flextronics International USA, Inc. as
lender, and Michael E. Marks, as borrower dated November 6, 1997.
(Incorporated by reference to Exhibit 10.35 of the Company's
Registration Statement on Form S-4, No. 333-41293.)
10.32 Secured Full Recourse Promissory Note, dated November 6, 1997,
executed by Michael E. Marks in favor of Flextronics International
USA, Inc. (Incorporated by reference to Exhibit 10.35 of the
Company's Registration Statement on Form S-4, No. 333-41293.)
11.1** Statement regarding computation of earnings per share.
21.1** Subsidiaries of Registrant.
23.1** Consent of Arthur Andersen.
23.2** Consent of Moore Stephens.
23.3** Consent of Allen & Gledhill (included in Exhibit 5.1).
24.1** Power of Attorney.
</TABLE>

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

* Confidential treatment requested for portions of agreement.

** Previously filed.
<PAGE> 104

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED MARCH 31, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER DEDUCTIONS/ END OF
PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
------------ ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable:
Period
Year ended March 31, 1995...... 549(a) 1,296 0 (85) 1,760
Year ended March 31, 1996...... 1,903 2,170 0 (307) 3,766
Year ended March 31, 1997...... 3,766 3,091 0 (785) 6,072
</TABLE>

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

(a) The opening balances have been restated to reflect the acquisition in
December 1994 of net assets of Flex Tracker Sdn Bhd.

S-1