FLEXTRONICS INTERNATIONAL LTD, 10-K, 1999-06-29

FLEXTRONICS INTERNATIONAL LTD
10-K, 1999-06-29
PRINTED CIRCUIT BOARDS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
(MARK ONE)

{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.

FOR THE FISCAL YEAR ENDED MARCH 31, 1999.

{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM
_______________ TO
_______________.

COMMISSION FILE NUMBER: 0-21272

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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

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

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

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)

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

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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes {X} No { }

Indicate by check mark if disclosures of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate value of voting stock held by non-affiliates of the Registrant was
approximately $2,737 million, based upon the closing price of the Registrant's
Common Stock reported for such date on the Nasdaq National Market. Shares of
Common Stock held by each executive officer and director and by each person who
owns 10% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. The determination of affiliate status is
not necessarily a conclusive determination for other purposes. As of June 15,
1999, the Registrant had 48,122,058 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information is incorporated into Part III of this report by
reference to the Proxy Statement for the Registrant's 1998 annual general
meeting of shareholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this Form 10-K.

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FLEXTRONICS INTERNATIONAL LIMITED
1999 FORM 10-K
TABLE OF CONTENTS

Part I

Item 1. Business .............................................................4
Item 2. Facilities...........................................................17
Item 3. Legal Proceedings....................................................19
Item 4. Submission of Matters to a Vote of Security Holders..................19

Part II

Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.........................................20
Item 6. Selected Financial Data..............................................21
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations...................................23
Item 8. Financial Statements and Supplementary Data..........................38
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure....................................67

Part III

Item 10. Directors and Executive Officers of the Registrant...................67
Item 11. Executive Compensation...............................................69
Item 12. Security Ownership of Certain Beneficial Owners and Management.......69
Item 13. Certain Relationships and Related Transactions.......................69

Part IV

Item 14. Exhibits and Financial Statement Schedules...........................70

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PART I

Except for historical information contained herein, the matters discussed
in this annual report Form 10-K 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 "Item 1-Business--Risk
Factors," that could cause future results to differ materially from historical
results or those anticipated.

Item 1. BUSINESS

Flextronics International Ltd. is a leading provider of advanced
electronics manufacturing services to original equipment manufacturers ("OEM"")
in the telecommunications, networking, computer, consumer electronics and
medical device industries. We provide a wide range of integrated services, from
initial product design to volume production and fulfillment. Our manufacturing
services range from printed circuit board fabrication and assembly to complete
product assembly and test. We believe that we have developed particular
strengths in advanced interconnect, miniaturization and packaging technologies.
In addition, we provide advanced engineering services, including product design,
PCB layout, quick-turn prototyping and test development. Throughout the
production process, we offer logistics services, such as materials procurement,
inventory management, packaging and distribution.

Through a combination of internal growth and acquisitions, we have become
the fourth largest provider of electronics manufacturing services with revenues
of $1.8 billion in fiscal 1999. We believe that our size, global presence and
expertise enable us to win large outsourced manufacturing programs from leading
multinational OEMs. We offer a complete and flexible manufacturing solution that
provides accelerated time-to-market and time-to-volume production, as well as
reduced production costs. By working closely with customers throughout the
design, manufacturing and distribution process, and by offering highly
responsive services, we believe that we can become an integral part of their
operations.

Our customers include industry leaders such as Alcatel, Bay Networks,
Cisco, Compaq, Ericsson, Hewlett-Packard, Microsoft, Nokia, Philips, Sony and
3Com. In addition, we recently entered into relationships with a number of new
customers, including Kodak, Intel, Qualcomm, Lucent and Rockwell. Due to our
focus on high growth technology sectors, our prospects are influenced by certain
major trends, such as the buildout of the communications and Internet
infrastructure, the proliferation of wireless devices and other trends in
electronics technologies. In addition, our growth is driven by the accelerating
pace at which leading OEMs are adopting outsourcing as a core business strategy.

We have established an extensive network of manufacturing facilities in the
world's major electronics markets - Asia, the Americas and Europe - to serve the
increased outsourcing needs of both multinational and regional OEMs. We
strategically locate facilities near our customers' end markets and have located
fully integrated, high volume manufacturing facilities in low cost regions
worldwide. We have established industrial parks in China, Hungary and Mexico and
are planning an industrial park in Brazil. These self-contained facilities
provide a total manufacturing and fulfillment solution from a single site by

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locating manufacturing and distribution operations and suppliers together. This
integrated approach to production and distribution benefits our customers by
reducing logistical barriers and costs, improving supply-chain management,
increasing flexibility, lowering transportation costs and reducing turnaround
times.

Industry Overview

Many OEMs in the electronics industry are increasingly utilizing
electronics manufacturing service providers 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 electronics manufacturing
service providers, thereby enabling OEMs to concentrate on their core
competencies, such as product development, marketing and sales. OEMs utilize
electronics manufacturing service providers to enhance their competitive
position by:

o reducing production costs;

o accelerating time-to-market and time-to-volume production;

o accessing advanced manufacturing and design capabilities;

o reducing capital investment requirements and fixed overhead costs;

o improving inventory management and purchasing power; and

o accessing worldwide manufacturing capabilities.

As a result of these factors, industry sources estimate that the overall
market for electronic manufacturing services has grown at an average annual rate
of 25% from 1988 to 1997, reaching an estimated $73 billion in 1997.

Strategy

Our objective is to enhance our position as a top tier provider of advanced
electronics manufacturing services. Our strategy to meet this objective includes
the following key elements:

Serve Major Markets From Strategic, Low Cost Regions. We have established
an extensive network of manufacturing facilities in the world's major
electronics markets - Asia, the Americas and Europe - to serve the increased
outsourcing needs of both multinational and regional OEMs. We strategically
locate facilities near our customers' end markets and have located fully
integrated, high volume manufacturing facilities in low cost regions worldwide.
By operating in low cost areas, we are able to realize savings in lower labor,
overhead, tax and transportation costs, which we can pass on to our customers.

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Capitalize on Industrial Park Strategy. We have established large,
strategically located industrial parks in China, Hungary and Mexico, designed
for high volume production, and are planning a new industrial park in Brazil.
These self-contained facilities provide a total manufacturing and fulfillment
solution from a single site by locating manufacturing and distribution
operations and suppliers together. This integrated approach to production and
distribution benefits our customers by reducing logistical barriers and costs,
improving supply-chain management, increasing flexibility, lowering
transportation costs and reducing turnaround times.

Establish Close Relationships with Customers. We believe we can become an
integral part of our customers' operations by working closely with them
throughout the design, manufacturing and distribution process, and by offering
flexible, highly responsive services. We believe we develop strong customer
relationships through a management approach which fosters rapid decision-making
and a customer service orientation that responds quickly to frequently changing
customer design specifications and production requirements. In many cases, we
closely integrate our information systems with those of our customers. This
customer-focused approach allows us to accelerate our customers' time-to-market
and time-to-volume production and helps them to respond quickly to change.

Deliver Complete Manufacturing Solution. We believe OEMs are increasingly
requiring a wider range of advanced engineering and manufacturing services in
order to reduce their costs and accelerate their time to market. Building on our
integrated engineering and manufacturing capabilities, we provide services from
initial product design and test to final product assembly and distribution to
the OEM's customers. In addition, our global network of industrial parks,
manufacturing and technology centers, regional manufacturing facilities and
product introduction centers provides customers with a scalable, flexible
solution to support their needs as their products move from design and initial
introduction to high volume production and distribution.

Leverage Advanced Technological Capabilities. Our strengths in advanced
miniaturization, packaging and interconnect technologies enable us to offer
customers advanced design, technology and manufacturing solutions for their
leading-edge products. Our product introduction centers are located in North
America and Europe and provide a high level of engineering expertise to the
customer. Our technological capabilities help our customers to shrink product
size, improve product performance and reduce costs.

There can be no assurance that our 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
telecommunications, networking, 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 telecommunications,
networking and consumer industries. In fiscal 1998 and fiscal 1999, the
Company's five largest customers accounted for approximately 57% and 62%,
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

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on Electronics Industry" and "-- Variability of Customer Requirements and
Operating Results."

The following table lists in alphabetical order the Company's largest
customers in fiscal 1999 and the products for which the Company provides
manufacturing services.

CUSTOMER END PRODUCTS
- ------------------------------------------- -----------------------------------
3Com/US Robotics........................... Pilot electronic organizers
Advanced Fibre Communications.............. Local line loop carriers
Alcatel ................................... Business telecommunications systems
Cisco ..................................... Data communications products
Ericsson................................... Business telecommunications system
Hewlett Packard ........................... Printers
Lifescan (a Johnson & Johnson company)..... Portable glucose monitoring system
Microsoft.................................. Computer peripheral devices and
internet access devices
Nortel Networks............................ Data communications products
Philips.................................... Consumer electronics products

In addition, the Company recently began manufacturing products for a number
of new customers, including Intel (mother boards), Kodak (reusable cameras),
Lucent (data communications products), Qualcomm (cellular phones) and Rockwell
(modems). None of these customers represent more than 10% of the Company's net
sales in fiscal 1999.

The Company's largest customers during fiscal 1999 were Philips, Ericsson,
and Cisco accounting for approximately 18%, 16% and 13%of consolidated net
sales, respectively. No other customer accounted for more than 10% of
consolidated net sales in fiscal 1999.

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. The Company's Asian sales offices are located in Singapore and
Hong Kong. In North America, the Company maintains sales offices in California,
Florida and Massachusetts. In Europe, the Company maintains sales offices in
England, France, Germany, the Netherlands and Sweden. In addition to its sales
force, the Company's executive staff plays an integral role in the Company's
marketing efforts.

Services

Flextronics offers a broad range of integrated services, providing
customers with a total solution to take a product from initial design through
volume production, test and distribution into post-sales service and support.

Engineering Services. Our product introduction centers coordinate and
integrate our worldwide design, prototype, test development and other
engineering capabilities. Through these product introduction centers, we provide
a broad range of engineering services and, in certain locations, dedicated
production lines for prototypes. These services strengthen our relationships
with manufacturing customers and attract new customers requiring advanced
engineering services.

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To assist customers with initial design, we provide CAE and CAD-based
design, engineering for manufacturability, circuit board layout and test
development. We also coordinate industrial design and tooling for product
manufacturing. After product design, we provide quick-turn prototyping. During
this process, we assist with the transition to high volume production. By
participating in product design and prototype development, we can reduce
manufacturing costs and accelerate the time to high volume production.

Materials Procurement and Management. Materials procurement and management
consists of the planning, purchasing, expediting and warehousing of components
and materials. Our inventory management expertise and volume procurement
capabilities contribute to cost reductions and reduce total cycle time. Our
industrial parks in China, Hungary and Mexico include providers of many of the
custom components that we use, thus reducing material and transportation costs,
simplifying logistics and facilitating inventory management.

Assembly and Manufacturing. Our assembly and manufacturing operations
include PCB assembly, assembly of subsystems and systems that incorporate PCBs
and complex electromechanical components. A substantial portion of our net sales
is derived from the manufacture and assembly of complete products. Flextronics
employs just-in-time, ship-to-stock and ship-to-line programs, continuous flow
manufacturing, demand flow processes and statistical process control. As OEMs
seek to provide greater functionality in smaller products, they increasingly
require more sophisticated manufacturing technologies and processes. Our
investment in advanced manufacturing equipment and our experience and expertise
in innovative miniaturization, packaging and interconnect technologies (such as
chip scale packaging, chip-on-board, ball grid array and thermal vias) enable us
to offer a variety of advanced manufacturing solutions. In addition, we
manufacture miniature gold-finished PCBs and develop and produce
injection-molded plastic components.

Test. We offer computer-aided testing of assembled PCBs, subsystems and
systems, which contributes significantly to our ability to deliver high-quality
products on a consistent basis. We work with our customers to develop
product-specific test strategies. Our test capabilities include management
defect analysis, in-circuit tests and functional tests. We either custom design
test equipment and software ourselves or use test equipment and software
provided by our customers. In addition, we also provide environmental stress
tests of board or system assemblies.

Distribution. We offer our customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with customers'
inventory requirements. Increasingly, we ship products directly into customers'
distribution channels or directly to the end-user. We believe that this service
can provide our customers with a more comprehensive solution and enable them to
be more responsive to market demands.

Competition

The electronics manufacturing services 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
electronics manufacturing services providers, and current and prospective
customers also evaluate the Company's capabilities against the merits of
internal production. In addition, in recent years the electronics manufacturing
industry has attracted a significant number of new entrants, including large

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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 electronics 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, SCI Systems and Celestica, have substantially
greater manufacturing, financial, research and development and marketing
resources than the Company. 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
electronics manufacturing services 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.

Employees

As of March 31, 1999, the Company employed approximately 18,147 persons.
The Company has never experienced a work stoppage or strike and 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. See "- Risk Factors -- Dependence of Key Personnel."

Recent Acquisitions

In June 1999, Flextronics entered into an agreement to acquire Kyrel EMS
Oyj, a provider of electronics manufacturing services with two facilities in
Finland and one in Luneville, France. Kyrel employs approximately 900 people and
its 1998 revenues were $230 million. Flextronics expects to issue approximately
1.9 million shares in the acquisition. Government approval is required in
Finland and the transaction is expected to close in the second quarter of fiscal
2000. The acquisition of Kyrel Ems Oyj will be accounted for as a
pooling-of-interests.

In May 1999, Flextronics purchased the manufacturing facilities and related
assets of ABB Automation Products in Vasteras, Sweden for approximately $25.9
million. This facility provides printed circuit board assemblies and other
electronic equipment. Flextronics has also offered employment to 575 ABB
personnel who were previously employed by ABB Automation Products. In connection
with the acquisition of certain fixed assets, the Company has also entered into
a manufacturing service agreement with ABB Automation Products.

In April 1999, Flextronics entered into an agreement to purchase the
manufacturing facilities and related assets of Ericsson's Visby, Sweden
operations. Ericsson's Visby facility manufactures mobile systems
infrastructure, primarily radio base stations. Under the terms of the agreement,
Flextronics will acquire the facility, including equipment and materials. In
connection with the acquisition of assets, the Company has also entered into a
manufacturing service agreement with Ericsson. The asset transfer is expected to
close during the second quarter of fiscal 2000.

On March 1, 1999, Astron, a subsidiary of the Company, acquired the
manufacturing facilities and related assets of Advanced Component Labs HK Ltd.
("ACL"), a Hong Kong based advanced technology printed

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circuit board manufacturer for $15.0 million cash. The Company believes the
acquisition of ACL will enhance Astron's advanced packaging substrate technology
to meet growing market demands for small handheld telecommunication and personal
computing devices and plans to consolidate the operations of both Astron and
ACL.

On March 1, 1999, the Company increased its ownership of FICO Investment
Holding Ltd. ("FICO") to 90% by acquiring an additional 50% of its equity
interests for (i)$7.2 million cash, (ii)127,850 Ordinary Shares issued at
closing valued at $4.8 million (iii)$3.0 million in 2% promissory notes due $1.0
million each in year 2000 through year 2002. FICO is a plastics injection
molding company located in China.

The ability of the Company to obtain the benefits of its recent
acquisitions are 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 - Risk of Acquisitions" and "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview.

RISK FACTORS

Risks of Expansion of Operations

We have grown rapidly in recent periods, and this growth may not continue.
Internal growth will require us to develop new customer relationships and expand
existing ones, improve our operational and information systems and further
expand our manufacturing capacity.

We plan to further expand our manufacturing capacity by expanding our
facilities and by adding new equipment. Such expansion involves significant
risks. For example:

o we may not be able to attract and retain the management personnel and
skilled employees necessary to support expanded operations;

o we may not efficiently and effectively integrate new operations, expand
existing ones and manage geographically dispersed operations;

o we may incur cost overruns;

o we may encounter construction delays, equipment delays or shortages, labor
shortages and disputes and production start-up problems that could
adversely affect our growth and our ability to meet customers' delivery
schedules; and

o we may not be able to obtain funds for this expansion, and we may not be
able to obtain loans or operating leases with attractive terms.

In addition, we expect to incur new fixed operating expenses associated
with our expansion efforts, including substantial increases in depreciation
expense and rental expense, that will increase our cost of sales. If our
revenues do not increase sufficiently to offset these expenses, our operating
results would be adversely affected. Our expansion, both through acquisitions
and internal growth, has contributed to our incurring significant accounting
charges and

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experiencing volatility in our operating results. We may continue to experience
volatility in operating results in connection with future expansion efforts.

Risks of Acquisitions

Acquisitions have represented a significant portion of the Company's growth
strategy, and the Company intends to continue to pursue attractive acquisitions
opportunities. Our acquisitions during the last two fiscal years represented a
significant expansion of our operations. Acquisitions involve a number of risks
and challenges, including:

o diversion of management's attention; o the need to integrate acquired
operations;

o potential loss of key employees and customers of the acquired companies;

o lack of experience operating in the geographic market of the acquired
business; and

o an increase in our expenses and working capital requirements.

To integrate acquired operations, we must implement our management
information systems and operating systems and assimilate and manage the
personnel of the acquired operations. The difficulties of this integration may
be further complicated by geographic distances. The integration of acquired
businesses may not be successful and could result in disruption to other parts
of our business.

Any of these and other factors could adversely affect our ability to
achieve anticipated levels of profitability at acquired operations or realize
other anticipated benefits of an acquisition. Furthermore, any future
acquisitions may require additional debt or equity financing, which could
increase our leverage or be dilutive to our existing shareholders. No assurance
can be given that we will consummate any acquisitions in the future.

Variability of Customer Requirements and Operating Results

Electronics manufacturing service providers must provide increasingly rapid
product turnaround for their customers. We generally do not obtain firm,
long-term purchase commitments from our customers, and over the past few years
we have experienced reduced lead-times in customer orders. Customers may cancel
their orders, change production quantities or delay production for a number of
reasons. Cancellations, reductions or delays by a significant customer or by a
group of customers would adversely affect our results of operations. In addition
to the variable nature of our operating results due to the short-term nature of
our customers' commitments, other factors may contribute to significant
fluctuations in our results of operations. These factors include:

o the timing of customer orders;

o the volume of these orders relative to our capacity;

o market acceptance of customers' new products;

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o changes in demand for customers' products and product obsolescence;

o the timing of our expenditures in anticipation of future orders;

o our effectiveness in managing manufacturing processes;

o changes in the cost and availability of labor and components;

o changes in our product mix;

o changes in economic conditions;

o local factors and events that may affect our production volume (such as
local holidays); and

o seasonality in customers' product requirements.

One of our significant end-markets is the consumer electronics market. This
market exhibits particular strength towards the end of the year in connection
with the holiday season. As a result, we have experienced relative strength in
our revenues in the third fiscal quarter.

We make significant decisions, including the levels of business that we
will seek and accept, production schedules, component procurement commitments,
personnel needs and other resource requirements, based on our estimates of
customer requirements. The short-term nature of our customers' commitments and
the possibility of rapid changes in demand for their products reduces our
ability to estimate accurately future customer requirements. On occasion,
customers may require rapid increases in production, which can stress our
resources and reduce margins. Although we have increased our manufacturing
capacity and plan further increases, there can be no assurance we will have
sufficient capacity at any given time to meet our customers' demands. In
addition, because many of our costs and operating expenses are relatively fixed,
a reduction in customer demand can adversely affect our gross margins and
operating income.

Customer Concentration; Dependence on Electronics Industry

Our five largest customers accounted for approximately 62% of consolidated
net sales in fiscal 1999 and 57% in fiscal 1998. Our largest customers during
fiscal 1999 were Philips, Ericsson and Cisco accounting for approximately 18%,
16% and 13% of consolidated net sales, respectively. Sales to our five largest
customers had represented a majority of our net sales in recent periods. The
identity of our principal customers has varied from year to year, and our
principal customers may not continue to purchase services from us at current
levels, if at all. Significant reductions in sales to any of these customers, or
the loss of major customers, would have a material and adverse effect on us. We
can not assure the timely replacement of expired, canceled, or reduced contracts
with new business. See "--Variability of Customer Requirements and Operating
Results."

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Factors affecting the electronics industry in general could have a material
adverse effect on our customers and, as a result on us. Such factors include:

o the inability of our customers to adapt to rapidly changing technology and
evolving industry standards, which results in short product life cycles;

o the inability of our customers to develop and market their products, some
of which are new and untested. If customers' products become obsolete or
fail to gain widespread commercial acceptance, our business may be
materially and adversely affected; and;

recessionary periods in our customers' markets.

Risk of Increased Taxes

We have structured our 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. Our taxes could increase if these
tax incentives are not renewed upon expiration, or tax rates applicable to us
are increased. Substantially all of the products manufactured by our Asian
subsidiaries are sold to customers based in North America and Europe. We believe
that profits from our Asian operations are not sufficiently connected to
jurisdictions in North America or Europe to give rise to income taxation there.
However, tax authorities in jurisdictions in North America and Europe could
challenge the manner in which profits are allocated among our subsidiaries, and
we may not prevail in any such challenge. If our Asian profits became subject to
income taxes in such other jurisdictions, our worldwide effective tax rate could
increase.

Significant Leverage

Our level of indebtedness presents risks to investors, including:

o the possibility that we may be unable to generate cash sufficient to pay
the principal of and interest on the indebtedness when due;

o making us more vulnerable to economic downturns;

o limiting our ability to pursue new business opportunities; and

o reducing our flexibility in responding to changing business and economic
conditions.

Risks of Competition

The electronics manufacturing services industry is extremely competitive
and includes hundreds of companies, several of which have achieved substantial
market share. Current and prospective customers also evaluate our capabilities
against the merits of internal production. Certain of our competitors, including
Solectron and SCI Systems, have substantially greater market shares than us, and
substantially greater manufacturing, financial, research and development and
marketing resources. In recent years, many participants in the industry,
including us, have substantially expanded their manufacturing capacity. If
overall demand for electronics manufacturing services

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should decrease, this increased capacity could result in substantial pricing
pressures, which could adversely affect our operating results.

Risks of International Operations

The geographical distances between Asia, the Americas and Europe create a
number of logistical and communications challenges. Our manufacturing operations
are located in a number of countries, including Austria, Brazil, China, Hungary,
Malaysia, Mexico, Sweden, the United Kingdom and the United States. As a result,
we are affected by economic and political conditions in those countries,
including:

o fluctuations in the value of currencies; o changes in labor conditions;

o longer payment cycles;

o greater difficulty in collecting accounts receivable;

o burdens and costs of compliance with a variety of foreign laws;

o political and economic instability;

o increases in duties and taxation;

o imposition of restrictions on currency conversion or the transfer of funds;

o limitations on imports or exports;

o expropriation of private enterprises; and

o reversal of the current policies (including favorable tax and lending
policies) encouraging foreign investment or foreign trade by our host
countries.

The attractiveness of our services to our U.S. customers can be affected by
changes in 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
addition, some countries in which we operate, such as Brazil, Mexico and
Malaysia, have experienced periods of slow or negative growth, high inflation,
significant currency devaluations and limited availability of foreign exchange.
Furthermore, in countries such as Mexico and China, governmental authorities
exercise significant influence over many aspects of the economy, and their
actions could have a significant effect on Flextronics. Finally, we could be
adversely affected by inadequate infrastructure, including lack of adequate
power and water supplies, transportation, raw materials and parts in countries
in which we operate.

Risks Relating to China. Under its current leadership, the Chinese
government has been pursuing economic reform policies. There can be no assurance
that the Chinese government will continue to pursue such policies, or that such
policies will be successful if pursued. In addition, China does not have a
comprehensive and highly developed system of laws, and enforcement of laws and
contracts is uncertain. The United States annually reconsiders the

14
<PAGE>

renewal of most favored nation trading status of China. China's loss of most
favored nation status could adversely affect us by increasing the cost to U.S.
customers of products manufactured by us in China.

Risks relating to Mexico. The Mexican government exercises significant
influence over many aspects of the Mexican economy and its action 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 devaluation of the peso and limited
availability of foreign exchange.

Risks Relating to Hungary. Hungary has undergone significant political and
economic change in recent years. Political, economic, social and other
developments, and changes in laws could have a material and adverse effect on
our business. Annual inflation and interest rates in Hungary have historically
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. Laws
and regulations in Hungary have been, and continue to be, substantially revised
during its transition to a market economy. As a result, 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.

Risks Relating to Brazil. During the past several years, the Brazilian
economy has been affected by significant intervention by the Brazilian
government. The Brazilian government has changed monetary, credit, tariff and
other policies to influence the course of Brazil's economy. The Brazilian
government's actions to control inflation and effect other policies have often
involved wage, price and exchange controls as well as other measures such as
freezing bank accounts and imposing capital controls.

Risks of Currency Fluctuations and Hedging Operations

With the recent acquisitions of operations in Sweden, Austria and Brazil, a
significant portion of our business is conducted in the Swedish kronor, European
Euro and Brazilian real. In addition, some of our costs, such as payroll and
rent, are denominated in currencies such as the Singapore dollar, the Hong Kong
dollar, the Malaysian ringgit, the Hungarian forint, the Mexican peso, and the
British pound, as well as the kronor, the euro and the real. In recent years,
the Hungarian forint, Brazilian real and Mexican peso have experienced
significant devaluations, and in January 1999 the Brazilian real experienced
further significant devaluations. Changes in exchange rates between these and
other currencies and the U.S. dollar will affect our cost of sales and operating
margins. We cannot predict the impact of future exchange rate fluctuations. We
use financial instruments, primarily forward purchase contracts, to hedge
certain fixed Japanese yen, European Euro, U.S. dollar, and other foreign
currency commitments arising from trade accounts payable and fixed purchase
obligations. Because we hedge only fixed obligations, we do not expect that
these hedging activities will have a material effect on our results of
operations or cash flows. However, our hedging activities may be unsuccessful,
and we may change or reduce our hedging activities in the future.

Dependence of Key Personnel

Our success depends to a larger extent upon the continued services of our
key executives and skilled personnel. Generally our employees are not bound by

15
<PAGE>

employment or non-competition agreements, and there can be no assurance that we
will retain our officers and key employees. We could be materially and adversely
affected by the loss of such personnel.

Limited Availability of Components

A substantial majority of our net sales are derived from turnkey
manufacturing in which we are responsible for procuring materials, which
typically results in our bearing the risk of component price increases. At
various times, there have been shortages of certain electronic components.
Component shortages could result in manufacturing and shipping delays or higher
prices, which could have a material adverse effect on us.

Environmental Compliance Risks

We are subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals. Although we believe
that our facilities are currently in material compliance with applicable
environmental laws, there can be no assurances that violations will not occur.
The costs and penalties that could result from a violation of environmental laws
could materially and adversely affect us.

Volatility of Market Price of Ordinary Shares

The stock market in recent years have experienced significant price and
volume fluctuations that have affected the market prices of technology
companies. Such fluctuations have often been unrelated to or disproportionately
impacted by the operating performance of such companies. The market for the
Ordinary Shares may be subject to similar fluctuations. Factors such as
fluctuations in our operating results, 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 price of the Ordinary Shares.

16
<PAGE>

Item 2. FACILITIES

Our facilities consist of a global network of industrial parks,
manufacturing and technology centers, providing a total of over 3.5 million
square feet of capacity. Our industrial parks, each incorporating approximately
300,000 square feet of facilities, are designed for fully integrated, high
volume manufacturing. These industrial parks offer manufacturing and
distribution operations and suppliers that are located together at one site in
low cost areas close to major electronics markets. Manufacturing and technology
centers are facilities that have both medium and high volume manufacturing and
product introduction centers and, as a result, are where we focus on launching
customers' new products and transitioning them to volume production. Each center
features advanced technological competency. Regional manufacturing facilities
range from approximately 50,000 to 165,000 square feet and provide medium and
high volume production in locations close to strategic markets. Product
introduction centers provide a broad range of advanced engineering services and
prototype and low volume production capabilities. All of our manufacturing
facilities are registered to the quality requirements of the International
Organization for Standardization (ISO 9002) or are in the process of final
certification.

Certain information about the Company's manufacturing and engineering
facilities as of March 31, 1999 is set forth below:

<TABLE>
<CAPTION>
YEAR TYPE OF APPROXIMATE OWNED/
LOCATION COMMENCED(1) FACILITY(2) SQUARE FEET LEASED(3) SERVICES
-------- ------------ ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Althofen, Austria (4)..... 1997 M,P 153,000 Owned Full system manufacturing; PCB
assembly; design, prototype and
engineering services.
Sarvar, Hungary (4)....... 1997 I 298,000 Leased(5) Full system manufacturing; PCB
assembly; plastic injection
molding.
Tab, Hungary (4).......... 1997 R 150,000 Owned Full system manufacturing; PCB
assembly.
Zalaegerszeg, Hungary (4). 1997 I 205,000 Owned Full system manufacturing; PCB
assembly.
Sao Paulo, Brazil (6)..... 1998 R 18,849 Leased Complex, high value-added PCB
assembly.
Sao Paulo, Brazil (6)..... 1998 R 39,431 Leased Full system manufacturing; PCB
assembly.
Sao Paulo, Brazil (6)..... 1998 R 18,953 Leased Full system manufacturing; PCB
assembly.
Sao Paulo, Brazil (6)..... 1998 R 18,480 Leased Repair center.
Shenzhen, China.......... 1995 R 254,390 Leased High volume PCB assembly.
Shenzhen, China (7)...... 1995 R 71,558 Leased Plastic injection molding.
Shenzhen, China (7)...... 1998 R 92,786 Owned Plastic injection molding.
Hong Kong, China (8)...... 1996 M 37,883 Leased Fabrication of high density
PCB.
Doumen, China (8)......... 1996 I 199,491(9) Owned(9) Fabrication of high density,
miniaturized PCBs, high volume
PCB assembly.
Hong Kong, China (10)..... 1999 M 73,738 Leased Fabrication of high density
PCB.
Johore, Malaysia.......... 1991 R 90,000 Owned Full system manufacturing; PCB
assembly.
Guadalajara, Mexico....... 1997 R 219,701 Owned High volume PCB assembly.
Guadalajara, Mexico....... 1998 I 77,396 Owned Warehousing.
Guadalajara, Mexico....... 1998 I 87,864 Owned Plastic injection molding.
Guadalajara, Mexico....... 1999 I 51,732 Owned High volume PCB assembly.
Karlskrona, Sweden........ 1997 M,P 419,640 Owned(11) Assembly and test of complex
PCBs and systems and design and
prototype services.
Karlskrona, Sweden........ 1998 M 25,286 Leased Tooling and distribution
services.
Stockholm, Sweden......... 1997 M 73,244 Leased Installation services and
and assembly of cables.
Stockholm, Sweden......... 1998 P 21,950 Leased Design and prototype services.
Katrineholm, Sweden....... 1998 M 33,248 Leased Assembly of cables and full
system assembly.
</TABLE>

17
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Hamilton, Scotland (12)... 1998 R,P 46,000 Leased Complex, high value-added PCB
assembly and engineering services.
Fremont, California (12).. 1998 M 48,000 Leased Complex, high value-added PCB
assembly.
Fremont, California (12).. 1998 M 83,480 Owned Complex, high value-added PCB
assembly.
Fremont, California (12).. 1998 M 41,968 Owned Complex, high value-added PCB
assembly.
San Jose, California...... 1994 M 65,000 Leased Full system manufacturing; PCB
assembly.
San Jose, California...... 1996 M 33,000 Leased Complex, high value-added PCB
assembly.
San Jose, California...... 1997 M 73,000 Owned Complex, high value-added PCB
assembly.
San Jose, California...... 1999 M 40,000 Owned Complex, high value-added PCB
assembly.
San Jose, California...... 1998 M 22,000 Leased PCBA and full system assembly.
San Jose, California...... 1998 M 24,000 Leased PCBA and full system assembly.
San Jose, California...... 1998 M 64,000 Leased Warehousing.
San Jose, California...... 1996 P 72,000 Leased Engineering services and
corporate functions.
Niwot, Colorado (13)...... 1997 M,P 37,055 Leased Plastic injection molding and
engineering services.
Richardson, Texas......... 1995 R,P 47,000 Leased Test, development, procurement,
warehousing and engineering
services.
Westford, Massachusetts... 1987 P 36,200 Leased Design and prototype services.
Monza, Italy (4).......... 1997 P --(14) -- Engineering services.
</TABLE>

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

(2) "I" designates Industrial parks.

"M" designates Manufacturing and technology centers.

"R" designates Regional manufacturing facilities.

"P" designates Product introduction centers.

(3) The leases for our leased facilities expire between the years 1999 and
2051.

(4) Acquired in fiscal 1998 in connection with the Neutronics acquisition.

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

(6) Acquired in fiscal 1998 in connection with the Conexao acquisition.

(7) Acquired in fiscal 1999 in connection with the FICO acquisition.

(8) Acquired in fiscal 1996 in connection with the Astron acquisition.

(9) Excludes approximately 446,163 square feet used for dormitories,
infrastructure and other functions. The Company has land use rights for
this facility through 2042.

(10) Acquired in fiscal 1999 in connection with the ACL acquistion.

(11) Ericsson has retained certain rights with respect to the Company's use and
disposition of the Karlskrona Facilities.

(12) Acquired in fiscal 1998 in connection with the Altatron acquisition.

(13) Acquired in fiscal 1998 in connection with the DTM acquisition.

18
<PAGE>

(14) A subsidiary has 55% ownership in this facility in Monza, Italy.

The campus facilities in China, Hungary, and Mexico are designed to be
integrated facilities that can produce certain 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. This enables Flextronics to provide customers
with a more complete, cost-effective manufacturing solution.

Since March 31, 1997, we have increased overall capacity by approximately
2.1 million square feet through internal growth and acquisitions. As a result,
we have grown to approximately 3.5 million square feet of capacity on four
continents. We plan to further expand our facilities and add new equipment.
There can be no assurance that the Company will not encounter unforeseen
difficulties, costs or delays in expanding its facilities. See "Item 1 -
Business - Risk Factors - Risks of Expansion of Operations."

Item 3. LEGAL PROCEEDINGS

Not applicable.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1999.

19
<PAGE>

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

PRICE RANGE OF ORDINARY SHARES

The Company's Ordinary Shares are traded on the Nasdaq National Market
under the symbol "FLEX". The following table shows the high and low closing
sale prices of the Company's Ordinary Shares since the beginning of the
Company's 1998 fiscal year (giving effect to our December 1999 two-for-one stock
split).

HIGH LOW
------ -------
Fiscal 1998
First Quarter.................................... $13 1/2 $ 8 3/4
Second Quarter................................... $23 13/16 $13 3/16
Third Quarter.................................... $24 1/16 $16 1/4
Fourth Quarter................................... $23 15/16 $14 7/8
Fiscal 1999
First Quarter.................................... $25 9/16 $18 3/16
Second Quarter................................... $23 1/2 $11 5/16
Third Quarter.................................... $42 13/16 $14 9/16
Fourth Quarter................................... $51 $33 1/8

On June 15, 1999, there was 48,122,058 holders of record and the closing
sale price of the Ordinary Shares was $56.875 per share.

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 "Item 7 - 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.

20
<PAGE>

Item 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the fiscal years
ended March 31, 1995, 1996, 1997, 1998 and 1999. 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>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS, except per share amounts)
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ................................... $ 292,149 $ 572,045 $ 640,007 $ 1,113,071 $ 1,807,628
Cost of sales ............................... 265,426 517,732 575,142 1,004,170 1,652,891
----------- ----------- ----------- ----------- -----------
Gross margin ................................ 26,723 54,313 64,865 108,901 154,737
Selling, general and administrative ......... 15,771 28,138 36,277 53,695 68,121
Goodwill and intangible amortization ........ 762 1,296 2,648 3,659 3,622
Provision for excess facilities ............. -- 1,254(1) 5,868(2) 8,869(3) 3,361(4)
Acquired in-process research and development 91 29,000(1) -- -- 2,000(4)
----------- ----------- ----------- ----------- -----------
Income (loss) from operations ............... 10,099 (5,375) 20,072 42,678 77,633
Merger-related expenses ..................... (816) -- -- (7,415)(3) --
Other expense, net .......................... (1,814) (4,924) (6,425) (13,092) (18,333)
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes ........... 7,469 (10,299) 13,647 22,171 59,300
Provision for income taxes .................. 1,588 3,847 2,027 2,258 7,770
----------- ----------- ----------- ----------- -----------
Net income (loss) ........................... $ 5,881 $ (14,146) $ 11,620 $ 19,913 $ 51,530
=========== =========== =========== =========== ===========
Diluted net income (loss) per share ......... $ 0.20 $ (0.46) $ 0.34 $ 0.52 $ 1.12
=========== =========== =========== =========== ===========
Weighted average Ordinary Shares and
equivalents outstanding -- diluted ........ 29,764 30,872 34,656 38,194 46,163

FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS)
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total current assets ........................ $ 128,681 $ 182,296 $ 254,396 $ 439,534 $ 654,032
Property and equipment, net ................. $ 47,258 $ 91,792 $ 149,015 $ 255,573 $ 367,507
Goodwill and other non-current assets ....... $ 9,247 $ 35,179 $ 42,881 $ 49,016 $ 72,840
Total assets ................................ $ 185,186 $ 309,267 $ 446,292 $ 744,123 $ 1,094,379
Total current liabilities ................... $ 91,945 $ 156,769 $ 284,641 $ 314,998 $ 412,887
Long-term debt and capital leases, excluding
current portion ........................... $ 18,278 $ 31,894 $ 29,128 $ 189,678 $ 197,179
Other non-current liabilities ............... $ 6,530 $ 35,033 $ 33,178 $ 24,638 $ 18,062
Total liabilities ........................... $ 116,753 $ 223,696 $ 346,947 $ 529,314 $ 628,128
Total Shareholders' equity .................. $ 68,433 $ 85,571 $ 99,345 $ 214,809 $ 466,251
Total liabilities and shareholders' equity .. $ 185,186 $ 309,267 $ 446,292 $ 744,123 $ 1,094,379
Working capital ............................. $ 36,737 $ 25,527 $ (30,245) $ 124,536 $ 241,145
Long-term debt and capital leases,
including current portion.................. $ 23,055 $ 75,566 $ 165,916 $ 242,474 $ 261,072

Cash Flows Data:
Depreciation and amortization ............... $ 7,183 $ 13,864 $ 18,140 $ 30,948 $ 50,407
Cash flow from operations ................... $ (5,243) $ 2,418 $ 54,369 $ 38,286 $ 65,379
Capital expenditures ........................ $ 21,848 $ 23,520 $ 37,503 $ 98,617 $ 147,865

</TABLE>

21
<PAGE>

(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 to
$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.

(3) In fiscal 1998, the Company incurred plant closing expenses aggregating to
$8.9 million in connection with closing its manufacturing facility in
Wales, UK. The Company also incurred $7.4 million of merger-related costs
as a result of the acquisitions of Neutronics, DTM, Energipilot, Altatron
and Conexao in fiscal 1998.

(4) In fiscal 1999, the Company incurred plant closing expenses aggregating to
$3.4 million in connection with consolidating its manufacturing facilities
in Hong Kong after the acquisition of ACL and restructuring some of its
U.S. manufacturing facilities. The Company also wrote off $2.0 million of
in-process research and development associated with the acquisition of ACL.

22
<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

In recent years, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, through both
acquisitions and internal growth. See "Item 1 - Business - Risk Factors -- Risks
of Expansion of Operations," "Item 1 - Business - Risk Factors -- Risks of
Acquisitions" and Note 11 of Notes to Consolidated Financial Statements.

In June 1999, Flextronics entered into an agreement to acquire Kyrel EMS
Oyj, a provider of electronics manufacturing services with two facilities in
Finland and one in Luneville, France. Kyrel employs approximately 900 people and
its 1998 revenues were $230 million. Flextronics expects to issue approximately
1.9 million shares in the acquisition. Government approval is required in
Finland and the transaction is expected to close in the second quarter of fiscal
2000. The acquisition of Kyrel EMS Oyj will be accounted for as a
pooling-of-interests.

On March 1, 1999, the Company acquired the manufacturing facility and
related assets of Advanced Component Labs HK Ltd. ("ACL"), a Hong Kong based
advanced technology printed circuit board manufacturer for $15.0 million cash.
The transaction has been accounted for under the 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. As of the date of acquisition, $7.8
million of the purchase price was allocated to goodwill and which is amortized
over 10 years and $2.0 million of the purchase price was 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 $2.0 million on the date of acquisition as
a charge to operations. ACL's in-process research and development projects were
initiated to address the rapid technological change associated with the
miniaturized printed circuit board market. The incomplete projects include
developing technology for a low cost Ball Grid Array package, developing thermal
vias, and developing new methods that enable the use of extremely thin 1.5 mil
technology. The Company believes the efforts to complete the acquired in-process
research and development projects will consist of internally staffed engineering
costs over the next fiscal year. These costs are estimated to be approximately
$1.1 million to complete the research and development. There can be no assurance
that the Company will succeed in making commercially viable products from the
ACL research and development projects.

23
<PAGE>

On March 1, 1999, the Company increased its ownership of FICO to 90% by
acquiring an additional 50% of its equity interests for (i)$7.2 million cash,
(ii)127,850 Ordinary Shares issued at closing valued at $4.8 million (iii)$3.0
million in 2% promissory notes due $1.0 million each in year 2000 through year
2002. This transaction has been accounted for under the purchase method and
accordingly, the results of operations for FICO have been included in the
accompanying consolidated statements of operations since March 1, 1999. The
acquisition of this additional 50% interest resulted in additional goodwill and
intangible assets of $8.5 million and $420,000 which were being amortized over 8
and 3 years, respectively.

On March 31, 1998, the Company acquired Conexao, a Brazil-based electronics
manufacturing service provider, in exchange for a total of 843,186 Ordinary
Shares, of which 236,610 Ordinary Shares were to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 236,610 Ordinary Shares were issued on March 1999. On March 31, 1998, the
Company also acquired Altatron, an electronics manufacturer service provider
headquartered in Fremont, California, with facilities in Fremont, California;
Richardson, Texas; and Hamilton, Scotland in exchange for 1,577,300 Ordinary
Shares, of which 315,460 Ordinary Shares are to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 315,460 Ordinary Shares were issued subsequent to fiscal 1999. The
acquisitions of Conexao and Altatron have been accounted for as a
pooling-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 of operations. Accordingly, the
balance sheets of Conexao and Altatron as of March 31, 1998 were included in the
Company's consolidated balance sheet as of March 31, 1998 and the results of
operations for Conexao and Altatron are included in the Company's results of
operations beginning in the first quarter of fiscal 1999.

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 504,938 Ordinary Shares, and acquired Energipilot AB, a Swedish
company principally engaged in providing cables and engineering services for
Northern European OEMs, in exchange for 459,980 Ordinary Shares. The
acquisitions of DTM and Energipilot have been accounted for as a
pooling-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. Accordingly, the results of
operations for DTM and Energipilot beginning in December 1, 1997 are included in
the Company's consolidated statement of operations.

On October 30, 1997, the Company acquired 92% of the outstanding shares of
Neutronics, an Austrian electronics manufacturing service provider with
operations in Austria and Hungary for 5,612,000 Ordinary Shares of the Company.
The acquisition was accounted for as a pooling-of-interests and accordingly, the
Company has restated its prior period financial statements to give effect to
this acquisition.

On March 27, 1997, the Company acquired the facilities in Karlskrona,
Sweden from Ericsson 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 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.

24
<PAGE>

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 acquisitions will not materially affect the Company. See
"Item 1 - Business - Risk Factors - Risks of Acquisitions."

In fiscal 1999, the Company wrote off $2.0 million of in-process research
and development associated with the acquisition of ACL. The Company also
incurred $3.4 million associated with the consolidation of excess facilities in
Hong Kong and United States. At the completion of the Hong Kong consolidation
process, all the Hong Kong facilities will occupy 60,000 square feet of
manufacturing space with approximately 300 employees. The provision for excess
facilities of $3.4 million in fiscal 1999 is comprised of $2.2 million relating
to the costs for consolidating the Company's four manufacturing and
administrative facilities in Hong Kong and $1.2 million relating to the
consolidation of certain U.S. facilities.

The Company incurred merger-related expenses of $7.4 million in fiscal 1998
associated with the acquisitions of Neutronics, DTM, Energipilot, Altatron and
Conexao, including $4.0 million associated with the Neutronics, DTM, and
EnergiPilot acquisitions and the cancellation of Neutronics' planned initial
public offering.

The Company incurred costs of $8.9 million in fiscal 1998 associated with
the consolidation of excess facilities in the United Kingdom. The recent
acquisition of Altatron's Scotland facility resulted in duplicative facilities
in Wales and Scotland. The provision for the closure of the Wales facility
includes the write-off of $3.8 million in goodwill, $1.6 million in severance
payments and pension scheme, $2.4 million in factory disposal related expenses,
and $1.1 million in government grant reimbursements and legal fees.

RESULTS OF OPERATIONS

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

FISCAL YEAR ENDED
MARCH 31,
--------------------------
1997 1998 1999
------ ------ ------
Net sales ........................................ 100.0 100.0 100.0
Cost of sales .................................... 89.9 90.2 91.4
------ ------ ------
Gross margin ..................................... 10.1 9.8 8.6
Selling, general and administrative .............. 5.7 4.8 3.8
Goodwill and intangible amortization ............. 0.4 0.3 0.2
Provision for excess facilities .................. 0.9 0.8 0.2
Acquired in-process research and development ..... -- -- 0.1
------ ------ ------
Income from operations ........................... 3.1 3.9 4.3
Merger-related expenses .......................... -- (0.7) --
Interest and other expense, net .................. (1.0) (1.2) (1.0)
------ ------ ------
Income before income taxes ....................... 2.1 2.0 3.3
Provision for income taxes ....................... 0.3 0.2 0.4
------ ------ ------
Net income ....................................... 1.8 1.8 2.9
====== ====== ======

25
<PAGE>

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 fiscal 1999 increased 62.4% to $1.8 billion from $1.1 billion
in fiscal 1998. The increase in sales for fiscal 1999 was primarily due to
increase in sales to certain existing customers, including Philips, Ericsson and
Cisco.

The Company's largest customers during fiscal 1999 were Philips, Ericsson
and Cisco accounting for approximately 18%, 16% and 13% of consolidated net
sales, respectively. No other customer accounted for more than 10% of
consolidated net sales in fiscal 1999. See "Item 1 - Business - Risk Factors --
Customer Concentration; Dependence on Electronics Industry".

Net sales for fiscal 1998 increased 73.9% to $1.1 billion from $640.0
million in fiscal 1997. The increase in sales for fiscal 1998 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, Cisco, Microsoft and Braun/Thermoscan
and (iii) sales to certain new customers including Bay Networks and Auspex
Systems. This increase was partially offset by reduced sales to certain
customers, including Minebea, Visioneer, 3Com/US Robotics and Global Village.
See "Item 1 - Business - Risk Factors --Customer Concentration; Dependence on
Electronics Industry".

Gross Profit

Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, product life cycles, unit volumes,
startup, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin decreased to 8.6%
for fiscal 1999 from 9.8% in fiscal 1998. The decrease in gross margin was
primarily due to the increases in higher volume projects, which typically have a
lower gross profit and startup expenses associated with new projects.

Gross profit margin decreased to 9.8% for fiscal 1998 from 10.1% in fiscal
1997. The gross profit margin in fiscal 1998 was adversely affected by changes
in customer and product mix and costs associated with the startup of new
facilities in Doumen, China and Guadalajara, Mexico. 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. See "Item 1 - Business - Risk Factors - Risks of Expansion of
Operations."

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for fiscal 1999
increased to $68.1 million from $53.7 million in fiscal 1998 but decreased as a
percentage of net sales to 3.8% in fiscal 1999 from 4.8% in fiscal 1998. The
dollar increase in SG&A was mainly due to (i) investment in infrastructure such
as personnel and other related corporate and administrative expenses and
information systems to support the expansion of the Company's business and (ii)
the addition of new sales personnel in the Asia, Europe and the United States.
The Company anticipates its SG&A expenses will continue to increase in dollars

26
<PAGE>

in the future. However, to the extent that net sales continue to grow faster
than SG&A expenses, those expenses would continue to decline as a percentage of
net sales.

SG&A for fiscal 1998 increased to $53.7 million from $36.3 million in
fiscal 1997 but decreased as a percentage of net sales to 4.8% in fiscal 1998
from 5.7% in fiscal 1997. The dollar increase was mainly due to (i) the addition
of new sales personnel in the United States and Europe; (ii) the inclusion of
the operations of the Karlskrona Facilities and (iii) investment in
infrastructure such as personnel and other related corporate and administrative
expenses and information systems to support the expansion of the Company's
business.

Goodwill and Intangible Assets Amortization

Goodwill 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 in fiscal 1999
decreased slightly to $3.6 million from $3.7 million in fiscal 1998. In March
1999, the Company acquired an additional 50% equity interest in FICO increasing
its ownership of FICO to 90% and recorded $8.5 million in goodwill and $420,000
in intangible assets and is amortized over 8 and 3 years, respectively. The
Company also recorded another $7.8 million goodwill from the acquisition of ACL
which is amortized over 10 years. As a result of these acquisitions, goodwill
and intangible asset amortization expense per quarter will increase by
approximately $501,000 starting in the first quarter of fiscal 2000. See Note 2
of Notes to Consolidated Financial Statements.

Goodwill and intangible assets amortization in fiscal 1998 increased to
$3.7 million from $2.6 million in fiscal 1997. 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 increased the Company's amortization expense per
quarter by approximately $279,000, beginning in the second quarter of fiscal
1998.

Provision for Excess Facilities

The provision for excess facilities of $3.4 million in fiscal 1999 is
comprised of $2.2 million relating to the costs for consolidating the Company's
four manufacturing and administrative facilities in Hong Kong and $1.2 million
relating to the consolidation of certain U.S. facilities. The provision for
excess facilities are comprised of $1.5 million for the reduction of certain
personnel due to consolidation of certain operations, $1.5 million for the
write-off of equipment and assets related to the operations the Company has
exited, and $400 related to the consolidation of facilities. In connection with
the provision for excess facilities, the Company terminated approximately 250
employees in the areas of finance, engineering, operations, production and
purchasing. The Company anticipates the consolidation of facilities will be
substantially complete by November 1999.

The provision for excess facilities of $8.9 million in fiscal 1998 relates
to the costs incurred in closing the Wales facility. This charge consists
primarily of the write-off of goodwill and intangible assets of $3.8 million,
severance payments, reimbursement of government grants, and costs associated
with the disposal of the factory. This closure is a result of the Company's

27
<PAGE>

acquisition of Altatron, which resulted in duplicative facilities in the United
Kingdom. See Note 9 of Notes to Consolidated Financial Statements.

The provision for excess facilities of $5.9 million in fiscal 1997 consists
of the costs incurred in downsizing 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 Texas facility was primarily dedicated to production for Global Village
Communications and Apple Computer, to whom the Company is no longer making
sales. 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 Singapore manufacturing facilities were
downsized in connection with the shift of manufacturing operations to lower cost
manufacturing locations.

Acquired In-Process Research and Development

Based on an independent valuation of certain of the assets of ACL and other
factors, the Company determined that the purchase price of ACL included
in-process research and development costs totaling $2.0 million which had not
reached technological feasibility and had no probable alternative future use.
Accordingly, the Company wrote-off $2.0 million of in-process research and
development in fiscal 1999.

Merger Expenses

In fiscal 1998, the Company incurred $7.4 million of merger expenses
associated with the acquisitions of Neutronics, EnergiPilot, DTM, Altatron and
Conexao. The Neutronics merger expenses included $2.2 million in cost associated
with the cancellation of Neutronics's public offering and $900,000 in other
legal and accounting fees. The remaining $4.3 million consists of a $3.1 million
brokerage and finders fees incurred in the Altatron acquisition and $1.2 million
in legal and accounting fees for all of the fiscal 1998 acquisitions.

Interest and other expense, net

Interest and other expense, net increased to $18.3 million in fiscal 1999
from $13.1 million in fiscal 1998. The following table sets forth information
concerning the components of other income and expense.

FISCAL YEAR ENDED
MARCH 31,
(IN THOUSANDS)
----------------------------------
1997 1998 1999
-------- -------- --------
Interest expense ........................ $ (6,426) $(17,700) $(21,899)
Interest income ......................... 706 2,742 5,161
Foreign exchange gain(loss) ............. 1,665 1,581 (3,115)
Equity in earnings of associated
companies ............................. 133 1,194 1,036
Permanent impairment in investment ...... (3,200) -- --
Bank commitment fees .................... (750) -- --
Gain on sale of subsidiary's stock ...... 1,027 -- --
Minority interest ....................... (394) (363) (1,313)
Other income(expense), net .............. 814 (546) 1,797
-------- -------- --------
$ (6,425) $(13,092) $(18,333)
======== ======== ========

28
<PAGE>

Net interest expense increased to $16.7 million in fiscal 1999 from $15.0
million in fiscal 1998. The increase was primarily due to increased bank
borrowings to finance the capital expenditures and expansion of the Company's
facilities in Sweden, Hungary, Mexico and China. The Company anticipates that
its interest expense will increase in future periods as a result of borrowings
under its credit facility.

Net interest expense increased to $15.0 million in fiscal 1998 from $5.7
million in fiscal 1997. The increase was primarily increased bank borrowings to
finance the acquisition of the Karlskrona Facilities, capital expenditures and
the issuance of the $150.0 million 8.75% Senior Subordinated Notes in October
1997.

In fiscal 1999, there was $3.1 million of foreign exchange loss compared to
$1.6 million foreign exchange gain in fiscal 1998. The foreign exchange loss in
fiscal 1999 mainly relates to foreign currency monetary liabilities in Austria,
Brazil and Hungary. Foreign exchange gain decreased to $1.6 million from $1.7
million gain in fiscal 1997. The foreign exchange gain for fiscal 1998 was
mainly due to the strengthening of the U.S. dollar against Asian currencies. See
Note 2 of Notes to Consolidated Financial Statements."

Equity in earnings of associated companies for fiscal 1999 decreased to
$1.0 million from $1.2 million in fiscal 1998. The equity in earnings of
associated companies results primarily from the Company's 40% investment in
FICO. In March 1999, the Company acquired an additional 50% interest in FICO and
accordingly, the Company has consolidated the balance sheets and the results of
operations of FICO from March 1999 onward.

Equity in earnings of associated companies for fiscal 1998 increased to
$1.2 million from $133,000 in fiscal 1997. The equity in earnings of associated
companies results primarily from the Company's original 40% 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.

The Company recognized a permanent impairment in an investment 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.
In fiscal 1997, bank commitment fees represented $750,000 of commitment fees
written off in March 1997 when the bank's commitment expired unused.

Gain on sale of subsidiary of $1.0 million in fiscal 1997 was due to a gain
from the sale of a Hungarian subsidiary by Neutronics.

Minority interest expense for fiscal 1999 was comprised primarily of the 8%
minority interest in Neutronics and 10% minority interest in FICO not acquired
by the Company in March 1999.

Minority interest expense for fiscal 1997 and 1998 was comprised primarily
of the 8% minority interest in Neutronics not acquired by the Company in October

29
<PAGE>

1997 and the 4.1% minority interest in Ecoplast, a subsidiary of Neutronics held
by a third party.

Other income (expense), net was an income of $1.8 million in fiscal 1999
compared to an expense of $546,000 in fiscal 1998. The other income in fiscal
1999 comprised mainly of gain from disposal of land in Mexico. Other income
(expense), net was an expense of $546,000 in fiscal 1998 compared to an income
of $814,000 in fiscal 1997. Other expense, net in fiscal 1998 primarily
consisted of the write-off of fixed assets. Other expense, net in fiscal 1997
includes $898,000 of income received under the Company's business interruption
insurance policy as a result of an April 1996 fire at its facilities in Doumen,
China.

Provision for Income Taxes

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Austria, Brazil, China,
Hungary, Malaysia, Mauritius, Mexico, The Netherlands, Singapore, Sweden, the
United Kingdom, and the United States. These subsidiaries are subject to
taxation in the country in which they have been formed. The Company's Asian and
Hungarian manufacturing subsidiaries have, at various times, been granted
certain tax relief in each of these countries, resulting in lower 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. The ordinary corporate tax rates for calendar 1999
were 34%, 28%, 26%, 18%, 16% and 15% in Austria, Sweden, 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 subsidiaries are located. The
Company's Hungarian subsidiaries have been on a tax holiday that expired on
December 31, 1998. Effective January 1, 1999, 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 1999 through 2003 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 30% respectively. However, these tax rates did
not have any material impact on the Company's taxes in fiscal 1999 due to the
operating loss carry forwards benefited in this period.

The Company's consolidated effective tax rate was 13.1% for fiscal year
1999 compared to 10.2% for fiscal year 1998. The increase in the effective tax
rate was due to the expansion of operations and increase in profitability in
countries with higher tax rates.

At March 31, 1999, the Company had operating loss carryforwards of
approximately $15,208 for U.S. federal income tax purposes which will expire
between 2003 and 2012 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

30
<PAGE>

operating loss carryforwards such that they would not be available to offset
future taxable income of the U.S. subsidiary.

At March 31, 1999, the Company had operating loss carryforwards of
approximately $9,867, $6,765 and $6,547 in U.K., Austria and Hong Kong,
respectively with various loss carryforward lives pursuant to local county tax
laws. 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.

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
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 and 15.0% thereafter. The Company has transferred its
offshore marketing and distribution functions to marketing subsidiaries located
in Labuan, Malaysia, where the tax rate is de minimis and Mauritius, where the
tax rate is 0%. 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. A significant portion of the products manufactured by the Company's
Asian subsidiaries are sold to customers based in other jurisdictions in North
America and Europe. While the Company believes that profits from its Asian
operations are not sufficiently connected to such other jurisdictions to give
rise to income taxation in such other jurisdictions, there can be no assurance
that 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 income taxes in such other
jurisdictions, the Company's taxes would increase and its results of operations
and cash flows would be adversely affected. The expansion by the Company of its
operations in the Americas and countries in Western Europe that have higher tax
rates is expected to increase its worldwide effective tax rate. See "Item 1 -
Business - Risk Factors -- Risk of Increased Taxes."

Quarterly Results

The following table contains selected unaudited quarterly financial data
for 1998 and 1999 fiscal years. In the opinion of management, this information
has been presented on the same basis as the annual audited consolidated
financial statements appearing elsewhere, and all necessary adjustments
(consisting of normal recurring adjustments) have been included in the amounts
stated below to present fairly the unaudited quarterly results when read in
conjunction with the audited consolidated financial statements of the Company.
The Company's results of operations have varied and may continue to fluctuate
significantly from quarter to quarter. Results of operations in any period

31
<PAGE>

should not be considered indicative of the results to be expected from any
future period.

<TABLE>
<CAPTION>
(UNAUDITED)
FISCAL YEAR ENDED MARCH 31, 1998 FISCAL YEAR ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------ ------------------------------------------------
First Second Third Fourth First Second Third Fourth
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales .................. $ 235,545 $ 251,468 $ 295,000 $ 331,058 $ 376,079 $ 422,948 $ 499,901 $ 508,700
Cost of sales .............. 212,517 226,786 266,192 298,675 343,023 386,042 457,068 466,758
--------- --------- --------- --------- --------- --------- --------- ---------
Gross margin ............... 23,028 24,682 28,808 32,383 33,056 36,906 42,833 41,942
Selling, general and
administrative ........... 12,564 11,806 13,773 15,552 14,355 16,555 17,397 19,814
Goodwill and intangible
amortization ............. 744 1,009 951 955 880 881 879 982
Provision for excess
facilities ............... -- -- -- 8,869 -- -- -- 3,361
Acquired in-process
research and
development .............. -- -- -- -- -- -- -- 2,000
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations ..... 9,720 11,867 14,084 7,007 17,821 19,470 24,557 15,785
Merger-related expenses .... -- -- (4,000) (3,415) -- -- -- --
Interest and other
expense, net ............. (2,428) (4,333) (2,946) (3,385) (4,577) (4,853) (6,938) (1,966)
--------- --------- --------- --------- --------- --------- --------- ---------
Income before income
taxes .................... 7,292 7,534 7,138 207 13,245 14,617 17,619 13,819
Income tax expense
(benefit) ................ 746 912 1,197 (597) 1,588 1,754 2,126 2,302
--------- --------- --------- --------- --------- --------- --------- ---------
Net income ................. $ 6,546 $ 6,622 $ 5,941 $ 804 $ 11,656 $ 12,863 $ 15,493 $ 11,517
========= ========= ========= ========= ========= ========= ========= =========

Diluted earnings
per share ................ $ 0.19 $ 0.18 $ 0.15 $ 0.02 $ 0.27 $ 0.30 $ 0.34 $ 0.22
========= ========= ========= ========= ========= ========= ========= =========
Weighted average Ordinary
Shares and equivalents
outstanding - diluted ... 34,984 35,942 40,606 41,598 43,496 43,150 46,061 51,680
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

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, 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 net sales
may fluctuate throughout the year as a result of local factors and other events
that may affect production volumes. 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 "Item 1 -

32
<PAGE>

Business - Risk Factors -- Variability of Customer Requirements and Operating
Results."

BACKLOG

Although the Company obtains firm purchase orders from its customers, OEM
customers typically do not make firm orders for delivery of products more than
30 to 90 days in advance. The Company does not believe that the backlog of
expected product sales covered by firm purchase orders is a meaningful measure
of future sales since orders may be rescheduled or canceled.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations from the proceeds of public offerings
of equity securities and debt offerings, cash and cash equivalents generated
from operations, bank debt and lease financing of capital equipment. In December
1998, the Company issued 5.4 million Ordinary Shares for net proceeds of $194.0
million. In October 1997, the Company issued $150.0 million principal amount of
Senior Subordinated Notes due in 2007 for net proceeds of $145.7 million and
issued 4,370,000 Ordinary Shares for net proceeds of $96.2 million. At March 31,
1999 the Company had cash and cash equivalents balances totaling $173.0 million,
total bank and other debts amounting to $261.1 million and $99.1 million
available for borrowing under its credit facilities subject to compliance with
certain financial ratios.

Cash provided by operating activities was $65.4 million, $38.3 million and
$54.4 million in fiscal 1999, 1998 and 1997, respectively. Cash provided by
operating activities increased in fiscal 1999 from fiscal 1998 because of the
increase in net income, depreciation and amortization and accounts payable,
partially offset by increases in accounts receivables and inventories. Cash
provided by operating activities decreased in fiscal 1998 from fiscal 1997
because of the increase in accounts receivable and inventories, partially offset
by increases in accounts payables, increases in depreciation and amortization
expenses of $30.9 million in fiscal 1998 from $18.1 million in fiscal 1997 and
the increase in profitability in fiscal 1998.

Accounts receivable, net of allowance for doubtful accounts increased to
$225.8 million at March 31, 1999 from $155.1 million at March 31, 1998. The
increase in accounts receivable was primarily due to a 62.4% increase in sales
in fiscal 1999.

Inventories increased to $192.8 million at March 31, 1999 from $157.1
million at March 31, 1998. The increase in inventories was primarily the results
of increased purchases of material to support the growing sales.

Cash used in investing activities was $204.6 million, $104.7 million and
$117.6 million in fiscal 1999, 1998 and 1997, respectively. Cash used in
investing activities in fiscal 1999 were primarily related to (i)$147.9 million
of capital expenditures to purchase equipment and expand manufacturing
facilities in Brazil, China, Hungary, Mexico, United States and Sweden.
(ii)$15.0 million for acquisition of ACL, (iii) $7.2 million for acquisition of
FICO, (iv) $24.0 million for the former shareholders of Astron for the remaining
purchase price relating to the acquisition of Astron, (v) $17.5 million for
minority investment in the stocks of various technology companies in software
and related industries. Cash used in investing activities in fiscal 1998 were
primarily related to capital expenditures of $98.6 million. Capital expenditures
in fiscal 1998 related to the purchase of equipment and construction of new

33
<PAGE>

facilities in Doumen, China, Guadalajara, Mexico, San Jose, California and
Karlskrona, Sweden. Cash used in investing activities in fiscal 1997 consisted
primarily of $82.4 million paid for the acquisition of the Karlskrona Facilities
and $37.5 million in capital expenditures.

Cash provided by financing activities was $224.8 million, $133.1 million
and $79.0 million in fiscal 1999, 1998, and 1997, respectively. Cash provided by
financing activities in fiscal 1999 resulted primarily from the Company's equity
offering of 5.4 million Ordinary Shares in December 1998 with net proceeds of
$194.0 million. Cash provided by financing activities in fiscal 1998 resulted
primarily from net proceeds of the issuance of senior subordinated notes of
$145.7 million and net proceeds from the equity offering of $96.2 million,
partially offset by $108.6 million of net repayments of bank borrowings, capital
leases, long-term debts and payment of $5.0 million notes due to Astron's former
shareholders. Cash provided by financing activities in fiscal 1997 consisted
primarily of net bank borrowings and proceeds from long term debt of $97.0
million.

The Company maintains a credit facility with a syndicate of banks. This
facility provides for revolving credit borrowings by Flextronics and a number of
its subsidiaries of up to $120.0 million, subject to compliance with certain
financial covenants and the satisfaction of customary borrowing conditions. The
credit facility consists of two separate credit agreements, one providing for up
to $62.9 million principal amount of revolving credit loans to the Company and
designated subsidiaries and one providing for up to $57.1 million principal
amount of revolving credit loans to the Company's United States subsidiary.
Loans under the credit facility will terminate in January 2001. See Note 4 of
Notes to Consolidated Financial Statements. The Company anticipates that it will
from time to time borrow revolving credit loans to fund its operations and
growth.

The Company anticipates that its working capital requirements will increase
in order to support anticipated increases in business capacity. In addition, the
Company anticipates incurring significant capital expenditures and operating
lease commitments in order to support its anticipated expansions of these
facilities in China, Hungary, Mexico and Brazil. Future liquidity needs will
depend on fluctuations in levels of inventory, the timing of expenditures by the
Company on new equipment, 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 and
amounts available under the credit facility, will be sufficient to fund its
operations through fiscal 1999. However, to the extent that the Company's
operations significantly expand, the Company may be required to obtain
additional debt or equity financing. See "Item 1 - Business - Risk Factors --
Risks of Expansion of Operations."

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

A portion of the Company's exposure to market risk for changes in interest
rates relates to the Company's investment portfolio. The Company does not use
derivative financial instruments in its investment portfolio. The Company
invests in high-credit quality issuers and, by policy, limits the amount of
credit exposure to any one issuer. As stated in its policy, the Company ensures
the safety and preservation of its invested principal funds by limiting default

34
<PAGE>

risk, market risk and reinvestment risk. The Company mitigates default risk by
investing in safe and high-credit quality securities and by constantly
positioning its portfolio to respond appropriately to a significant reduction in
a credit rating of any investment issuer, guarantor or depository. The portfolio
includes only marketable securities with active secondary or resale markets to
ensure portfolio liquidity. Maturities of short-term investments are timed,
whenever possible, to correspond with debt payments and capital investments. As
of March 31, 1999, the outstanding amount in the investment portfolio was $130.5
million, with an average maturity of 71 days and an average return of 5.05%.

The Company also has exposure to interest rate risk with certain variable
rate lines of credit. These credit lines are located throughout the world and
are based on a spread over that country's inter-bank offering rate. The Company
primarily enters into debt obligations to support general corporate purposes
including capital expenditures and working capital needs. As of March 31, 1999,
the outstanding short-term debt, including capitalized leases was $63.9 million.
The following table presents principal cash flows and related interest rates by
fiscal year of maturity for debt obligations. The variable interest rate for
future years assumes the same rate as March 31, 1999.

Expected Fiscal Year of Maturity
(in thousands)

<TABLE>
<CAPTION>
There-
Debt 2000 2001 2002 2003 2004 after Total
- --------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Sr. Subordinated Notes ................ -- -- -- -- -- 150,000 150,000
Average interest rate ............. 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75%

Fixed Rate ............................ 11,711 9,344 6,388 4,143 2,788 11,341 45,715
Average interest rate .............. 7.2% 7.2% 6.6% 7.4% 6.6% 7.7% 7.6%

Variable Rate ......................... 52,182 4,027 2,634 2,635 1,788 2,091 65,357
Average interest rate .............. 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1%
</TABLE>

Foreign Currency Exchange Risk

The Company transacts business in various foreign countries. The Company
manages its foreign currency exposure by borrowing in various foreign currencies
and by entering into foreign exchange forward contracts only with respect to
transaction exposure. The Company's policy is to maintain a fully hedged
position for all certain, known transactions exposures. These exposures are
primarily, but not limited to, vendor payments and inter-company balances in
currencies other than the functional unit of the operating entity. The Company
will first evaluate and, to the extent possible, use non-financial techniques,
such as currency of invoice, leading and lagging payments, receivable management
or local borrowing to reduce transaction exposure before taking steps to
minimize remaining exposure with financial instruments. As of March 31, 1999,
the total cumulative outstanding amounts of forward contracts in French Franc,
Japanese Yen, Swedish Kronor and United States dollar was approximately $16.5
million.

YEAR 2000 COMPLIANCE

The Company is aware of the issues associated with programming code in
existing computer systems as the Year 2000 approaches. The Year 2000 computer
issue refers to a condition in computer software where a two digit field rather
than a four digit field is used to distinguish a calendar year. Unless
corrected, some computer programs could be unable to function on January 1, 2000

35
<PAGE>

(and thereafter until corrected), as they will be unable to distinguish the
correct date. Such an uncorrected condition could significantly interfere with
the conduct of the Company's business, could result in disruption of its
operations, and could subject it to potentially significant legal liabilities.

The Company has been addressing the Year 2000 issues with a project plan
divided into major initiatives: Enterprise wide applications, networks and
telecommunications, systems hardware and software, personal computer hardware
and software, manufacturing and related equipment and facilities and
infrastructure. The Company has established geographic regional teams to follow
established policies and guidelines on the remediation of the Year 2000 issue.
The Company created an internal intra-net database to record the status and
remediation activity on all internal equipment.

The Company is primarily addressing the Year 2000 issues concerning
enterprise wide applications by replacing its management information system with
a new enterprise management information system that is designed to provide
enhanced functionality. We have been advised that our new enterprise management
information system is Year 2000 compliant. However, there can be no assurance
that the new system will be Year 2000 compliant or that it will be implemented
by January 1, 2000. The new system will significantly affect many aspects of our
business, including our manufacturing, sales and marketing and accounting
functions. In addition, the successful implementation of this system will be
important to our future growth. The Company currently has implemented this new
information system in a majority of its facilities in Asia, Central Europe,
Western Europe, and the Americas and anticipates that the installation of the
new system will be completed in August 1999. The Company is currently evaluating
the implementation of this new management information for its recent
acquisitions in Sweden.

The Year 2000 issue also could affect the Company's infrastructure and
production lines. The possibility also exists that the Company could
inadvertently fail to correct a Year 2000 problem with a mechanical equipment
micro-controller. The Company believes the impact of such an occurrence would be
minor, as substantial Year 2000 compliant equipment additions and upgrades have
occurred in recent years. The Company has been in contact with the manufacturers
of mechanical equipment to fully validate the readiness of its microprocessors.
Additional testing is planned during fiscal 2000 to reasonably ensure their Year
2000 readiness.

The Company has sent a Year 2000 Readiness Questionnaire to most of its
critical and significant suppliers. These critical suppliers have been
classified into risk categories and the Company is in the process of identifying
and devoting resources to verify Year 2000 compliance of these suppliers. The
Company may need to find alternative suppliers based on the results of the
questionnaires. Their can be no assurance that the Company will be able to find
suitable alternative suppliers and contract with them on reasonable prices and
terms, and such inability could have a material and adverse impact on the
Company's business and results of operations.

The Company is currently working with many of its major customers to ensure
year 2000 compliance and has been audited by many of its customers. The Company
currently works with many of its major customers to formula contingency plans.
These contingency plans include the movement of manufacturing production,
identification of alternative suppliers and logistics companies. The Company
intends to review its contracts with customers and suppliers with respect to

36
<PAGE>

responsibility for Year 2000 issues and to seek to address such issues in future
agreements with customers and suppliers.

The Company has currently incurred in excess of $16.0 million in total
hardware, software, and system related costs in connection with remediation of
Year 2000 issues. These costs are primarily costs associated with the
implementation of the Company's new information system and have primarily been
capitalized as fixed assets. The Company anticipates expending an additional
$2.0 to $4.0 million before January 1, 2000 to complete the implementation of
the new information system and address any Year 2000 compliance issues. There
can be no assurances that the cost estimates associated with the Company's Year
2000 issues will prove to be accurate or that the actual costs will not have a
material adverse effect on the Company's results of operations and financial
condition.

Although the Company currently anticipates the installation of the new
system will be completed by August 1999, it could be delayed until later.
Implementation of the new system could cause significant disruption in
operations. In the event the new information system is not implemented by
September 1999, the Company's contingency plan is to upgrade the existing
information system currently in use by a majority of the Company's operations to
a new version which the Company has been advised is Year 2000 compliant. The
Company estimates the cost to upgrade the existing information system to be
approximately $500,000. There can be no assurance that such measures will
prevent the occurrence of Year 2000 problems, which can have a material adverse
effect upon the Company's business, operating results and financial condition.

37
<PAGE>

Item 8. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders' of Flextronics International Ltd :

We have audited the accompanying consolidated balance sheets of Flextronics
International Ltd. and subsidiaries (a Singapore company) as of March 31, 1998
and 1999 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended March 31,
1999. 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 revenues of 23 percent of
the consolidated totals for the year ended March 31, 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Flextronics International Ltd. and
subsidiaries as of March 31, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1999 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
April 21, 1999

38
<PAGE>

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.

25 June 1999

39
<PAGE>

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31
---------------------------------
1998 1999
----------- -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................ $ 89,390 $ 172,984
Accounts receivable, less allowances
for doubtful accounts of $9,528 and $5,050 ........................................ 155,125 225,790
Inventories .......................................................................... 157,077 192,766
Other current assets ................................................................. 37,942 62,492
----------- -----------
Total current assets ......................................................... 439,534 654,032
----------- -----------
Property and equipment, net ............................................................ 255,573 367,507
Goodwill and other intangibles, net .................................................... 26,561 38,666
Other assets ........................................................................... 22,455 34,174
----------- -----------
Total assets ................................................................. $ 744,123 $ 1,094,379
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank borrowings and current portion of long-term debt ................................ $ 43,209 $ 54,086
Capital lease obligations ............................................................ 9,587 9,807
Accounts payable ..................................................................... 177,084 251,796
Accrued liabilities .................................................................. 85,118 91,222
Deferred revenue ..................................................................... -- 5,976
----------- -----------
Total current liabilities .................................................... 314,998 412,887
----------- -----------
Long-term debt, net of current portion ................................................. 166,497 173,753
Capital lease obligations, net of current portion ...................................... 23,181 23,426
Deferred income taxes .................................................................. 4,812 4,831
Other long-term liabilities ............................................................ 18,832 9,213
Minority interest ...................................................................... 994 4,018
----------- -----------
Total long-term liabilities .................................................. 214,316 215,241
----------- -----------
Commitments (Note 6)
SHAREHOLDERS' EQUITY:
Ordinary Shares, S$.01 par value; Authorized -- 100,000,000 shares;
issued and outstanding - 41,234,858 and 48,205,493 as of March
31, 1998 and 1999, respectively ................................................... 260 299
Additional paid-in capital ........................................................... 214,340 425,652
Retained earnings .................................................................... 6,934 58,464
Cumulative translation adjustment .................................................... (6,725) (18,164)
----------- -----------
Total shareholders' equity ................................................... 214,809 466,251
----------- -----------
Total liabilities and shareholders' equity ................................... $ 744,123 $ 1,094,379
=========== ===========
</TABLE>

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

40
<PAGE>

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------------------
1997 1998 1999
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net Sales ........................................................ $ 640,007 $ 1,113,071 $ 1,807,628
Cost of Sales .................................................... 575,142 1,004,170 1,652,891
----------- ----------- -----------
Gross margin ........................................... 64,865 108,901 154,737
----------- ----------- -----------
Operating Expenses:
Selling, general and administrative ............................ 36,277 53,695 68,121
Goodwill and intangibles amortization .......................... 2,648 3,659 3,622
Provision for excess facilities ................................ 5,868 8,869 3,361
Acquired in-process research and development ................... -- -- 2,000
----------- ----------- -----------
Total operating expenses ............................... 44,793 66,223 77,104
----------- ----------- -----------
Income from operations ................................ 20,072 42,678 77,633
Other Expense:
Merger-related expenses ........................................ -- (7,415) --
Interest and other expense, net ................................ (6,425) (13,092) (18,333)
----------- ----------- -----------
Income before income taxes .............................. 13,647 22,171 59,300
Provision for Income Taxes ....................................... 2,027 2,258 7,770
----------- ----------- -----------
Net income .............................................. $ 11,620 $ 19,913 $ 51,530
=========== =========== ===========

Earnings Per Share
Basic ....................................................... $ 0.35 $ 0.55 $ 1.18
=========== =========== ===========
Diluted ..................................................... $ 0.34 $ 0.52 $ 1.12
=========== =========== ===========
Shares used for earnings per share
Basic ....................................................... 33,408 36,526 43,569
=========== =========== ===========
Diluted ..................................................... 34,656 38,194 46,163
=========== =========== ===========
</TABLE>

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

41
<PAGE>

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income .......................................................... $ 11,620 $ 19,913 $ 51,530
Other comprehensive loss, net of tax :
Foreign currency translation adjustment ........................... (685) (5,773) (9,940)
-------- -------- --------
Comprehensive income ................................................ $ 10,935 $ 14,140 $ 41,590
======== ======== ========
</TABLE>

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

42
<PAGE>

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
ORDINARY SHARES ADDITIONAL RETAINED CUMULATIVE TOTAL
----------------------- PAID-IN EARNINGS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1996 ................... 32,038 $ 207 $ 104,517 $ (19,659) $ 506 $ 85,571
Issuance of Ordinary Shares for
acquisition of Fine line ............... 446 2 195 1,019 -- 1,216
Exercise of stock options ................. 480 3 1,739 -- -- 1,742
Net Income ................................ -- -- -- 11,620 -- 11,620
Foreign currency translation .............. -- -- -- -- (804) (804)
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 1997 ................... 32,964 212 106,451 (7,020) (298) 99,345
Adjustment to conform fiscal year
of pooled entity ....................... -- -- -- (3,136) -- (3,136)
Issuance of Ordinary Shares for
acquisition of DTM ..................... 505 3 1,031 (1,481) -- (447)
Issuance of Ordinary Shares for
acquisition of Energipilot ............. 460 2 256 549 -- 807
Issuance of Ordinary Shares for
acquisition of Altatron ................ 1,576 9 41 4,132 -- 4,182
Issuance of Ordinary Shares for
acquisition of Conexao ................. 842 5 8,492 (6,023) -- 2,474
Exercise of stock options ................. 518 4 1,944 -- -- 1,948
Sale of shares in public offering,
net of $6,545 in offering costs ........ 4,370 25 96,125 -- -- 96,150
Net income ................................ -- -- -- 19,913 -- 19,913
Foreign currency translation .............. -- -- -- -- (6,427) (6,427)
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 1998 ................... 41,235 260 214,340 6,934 (6,725) 214,809
Sale of shares in public offering,
net of $1,750 in offering cost ......... 5,400 29 193,971 -- -- 194,000
Issuance of Ordinary Shares for
acquisition of FICO .................... 128 1 4,799 -- -- 4,800
Exercise of stock options ................. 1,370 8 11,377 -- -- 11,385
Ordinary Shares issued under
Employee Stock Purchase Plan ........... 72 1 1,165 -- -- 1,166
Net income ................................ -- -- -- 51,530 -- 51,530
Foreign currency translation .............. -- -- -- -- (11,439) (11,439)
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 1999 ................... 48,205 $ 299 $ 425,652 $ 58,464 $ (18,164) $ 466,251
========= ========= ========= ========= ========= =========
</TABLE>

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

43
<PAGE>

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................... $ 11,620 $ 19,913 $ 51,530
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization .............................................. 18,140 30,948 50,407
Gain on sale of subsidiary ................................................. (1,027) -- --
Provision for doubtful accounts ............................................ 3,091 1,218 (2,584)
Provision for inventories .................................................. 4,228 3,249 4,105
Equity in earnings of associated companies ................................. (133) (1,194) (1,036)
In-process research and development ........................................ -- -- 2,000
Provision for excess facilities ............................................ 5,308 8,869 3,361
Minority interest expense and other non-cash expenses ...................... 1,302 413 569
Changes in operating assets and liabilities (net of effect of
acquisitions):
Accounts receivable ................................................... 4,290 (46,685) (67,615)
Inventories ........................................................... (8,400) (32,258) (44,346)
Other current assets .................................................. (10,581) (22,476) (21,818)
Accounts payable and accrued liabilities .............................. 25,719 74,973 91,068
Deferred revenue ...................................................... 1,788 317 314
Deferred income taxes ................................................. (976) 999 (576)
--------- --------- ---------
Net cash provided by operating activities ....................................... 54,369 38,286 65,379
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........................................... (37,503) (98,617) (147,865)
Proceeds from sale of property and equipment .................................. 4,827 1,622 6,099
Proceeds from sale of subsidiaries ............................................ 1,012 -- --
Investment in associated company .............................................. (3,116) (2,200) --
Proceeds from disposal of investment in associated company .................... -- -- 572
Other investments ............................................................. (25) (3,621) (17,546)
Payment for Astron earnout and remaining purchase price
related to the acquisition of Astron ........................................ -- (6,250) (24,000)
Effect of acquisitions on cash ................................................ -- 4,363 379
Net cash paid for acquired businesses ......................................... (82,354) -- (22,200)
Repayments from (loans to) related party ...................................... (469) 35 --
--------- --------- ---------
Net cash used in investing activities ........................................... (117,628) (104,668) (204,561)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and proceeds from long-term debt .............................. 160,940 160,438 148,122
Repayment of bank borrowings and long-term debt ............................... (63,957) (258,910) (118,711)
Borrowings from (payments to) related company ................................. (4,403) 2,946 --
Equipment refinanced under capital leases ..................................... 3,509 -- --
Repayment of capital lease obligations ........................................ (7,991) (10,152) (11,133)
Proceeds from exercise of stock options and Employee
Stock Purchase Plan ......................................................... 1,362 1,948 12,551
Payments on notes payable ..................................................... (10,463) (5,000) --
Gross proceeds from issuance of Senior Subordinated Notes ..................... -- 150,000 --
Expenses related to the issuance of Senior Subordinated
notes ....................................................................... -- (4,313) --
Gross proceeds from sales of Ordinary Shares .................................. -- 102,695 195,750
Expenses related to sales of Ordinary Shares .................................. -- (6,545) (1,750)
--------- --------- ---------
Net cash provided by financing activities ....................................... 78,997 133,107 224,829
--------- --------- ---------
Effect of exchange rate changes ................................................. (226) (1,883) (2,053)
Effect of Neutronics fiscal year conversion ..................................... -- 389 --
--------- --------- ---------
Increase (decrease) in cash and cash equivalents ................................ 15,512 65,231 83,594
Cash and cash equivalents, beginning of period .................................. 8,647 24,159 89,390
--------- --------- ---------
Cash and cash equivalents, end of period ........................................ $ 24,159 $ 89,390 $ 172,984
========= ========= =========
</TABLE>

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

44
<PAGE>

1. ORGANIZATION OF THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") is
incorporated in the Republic of Singapore. Flextronics provides advanced
electronics manufacturing services to sophisticated original equipment
manufacturers ("OEMs") in the telecommunications, networking, 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 acquired 92% of the
outstanding shares of Neutronics Electronics Industries Holding A.G.
("Neutronics") on October 30, 1997. The acquisition 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 operated under a calendar year end prior to merging with
Flextronics, and accordingly, Neutronics' statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1996 has
been combined with the corresponding Flextronics consolidated statements for the
fiscal years ended March 31, 1997. During fiscal 1998, Neutronics' fiscal year
end was changed from December 31 to March 31 to conform to the Company's fiscal
year-end. Accordingly, Neutronics' operations for the three months ended March
31, 1997, which included net sales of $34.9 million and net loss of $3.1 million
have been excluded from the consolidated results and have been reported as an
adjustment to retained earnings in the first quarter of fiscal 1998.

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

Reclassifications

Certain prior years' balances have been reclassified to conform with the
current year's presentation.

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 translated 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 translated at the average exchange rate prevailing
during the period. Gains and losses resulting from the translation of these
subsidiaries' financial statements are included in the accompanying consolidated
statements of operations.

45
<PAGE>

The financial position and results of operations of the Company's Swedish,
UK, Austrian, Brazilian 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 translation of these
subsidiaries' financial statements are reported as a separate component of
shareholders' equity. On January 1, 1999, the Company's Austrian and Hungarian
subsidiaries adopted the Euro as its functional currency.

Cash and cash equivalents

Cash and cash equivalents consisted of the following as of March 31:

1998 1999
-------- --------
Cash ................................... $ 63,390 $ 42,521
Certificates of deposit ................ 26,000 40,000
Money market funds ..................... -- 40,960
Corporate debt securities .............. -- 49,503
-------- --------
Cash and cash equivalents .......... $ 89,390 $172,984
======== ========

For the purposes of the statement of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or less to
be cash equivalents. Cash equivalents consist of investments in certificates of
deposit, money market funds, and corporate debt securities with original
maturity of three months or less. The Company classifies its investments in
corporate debt securities as available-for-sale and are reported at fair market
value in accordance with SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities". As of March 31, 1999, the fair value of the
investments in corporate debt securities approximated amortized cost and, as
such, unrealized holding gains and losses were insignificant. The fair value of
the Company's investments was determined based on quoted market prices at the
reporting date for those instruments.

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, if shorter.
Repairs and maintenance costs are expensed as incurred. Property and equipment
was comprised of the following as of March 31:

1998 1999
--------- ---------
Machinery and equipment .................... $ 185,113 $ 248,430
Land ....................................... 15,976 20,949
Buildings .................................. 80,352 104,698
Leasehold improvements ..................... 15,506 23,570
Computer equipment and software ............ 19,857 35,464
Furniture, fixtures and vehicles ........... 19,111 43,539
--------- ---------
335,915 476,650
Accumulated depreciation and amortization .. (80,342) (109,143)
--------- ---------
Property and equipment, net ................ $ 255,573 $ 367,507
========= =========

46
<PAGE>

Concentration of credit risk

Financial instruments, which potentially subject the Company to
concentration of credit risk, are primarily accounts receivable and cash
equivalents. The Company performs ongoing credit evaluations of its customers'
financial 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 that management believes to be
high credit quality. 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:

1997 1998 1999
------ ------ ------
Ericsson .............. --% 25.6% 16.4%
Philips ............... 18.8 12.5 18.0
Cisco ................. 1.1 3.2 12.8
Lifescan .............. 10.2 5.0 --

Prior to the company's acquisition of Neutronics, 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 $120 million, $139 million, and
$325 million in fiscal 1997, 1998 and 1999, respectively. Neutronics also
purchased raw materials from Philips totaling $30 million, $53 million and $153
million in fiscal 1997, 1998 and 1999, respectively.

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

Goodwill and other intangibles

Any excess of cost over net assets acquired (goodwill) is amortized by the
straight-line method over estimated lives ranging from eight to twenty-five
years.

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 ten years.

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

1998 1999
-------- --------
Goodwill ................................. $ 21,850 $ 37,315
Other intangibles ........................ 16,986 13,840
-------- --------
38,836 51,155
Accumulated amortization ................. (12,275) (12,489)
-------- --------
Goodwill and other intangibles, net ...... $ 26,561 $ 38,666
======== ========

47
<PAGE>

Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of property and equipment is measured by
comparison of its carrying amount, including the unamortized portion of goodwill
allocated to the property and equipment, to future net cash flows the property
and equipment are expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property and equipment, including the allocated goodwill,
if any, exceeds its fair market value. The Company assesses the recoverability
of enterprise level goodwill and intangible assets as well as long-lived assets
by determining whether the unamortized balances can be recovered through
undiscounted future results of the operation or asset. The amount of enterprise
level long lived asset impairment, if any, is measured based on projected
discounted future results using a discount rate reflecting the Company's average
cost of funds. To date, the Company has made no adjustments to the carrying
value of its long-lived assets.

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:

1998 1999
-------- --------
Raw materials .................... $130,868 $153,193
Work-in-process .................. 21,536 24,964
Finished goods ................... 4,673 14,609
-------- --------
$157,077 $192,766
======== ========

Accrued liabilities

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

1998 1999
------- -------
Income taxes payable ................................... $ 4,183 $ 9,737
Accrued payroll ........................................ 19,928 31,593
Accrued loan interest .................................. 6,016 6,056
Provision for excess facilities (see note 9) ........... 5,445 2,523
Purchase price payable to former Astron's Shareholders . 10,000 --
Amount due under the Service Agreement ................. 13,909 --
Customer deposits ...................................... 4,121 18,299
Sales tax payable ...................................... 4,347 5,779
Other accrued liabilities .............................. 17,169 17,235
------- -------
$85,118 $91,222
======= =======

48
<PAGE>

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.

Interest and other expense, net

Interest and other expense, net was comprised of the following for the
years ended March 31:

1997 1998 1999
-------- -------- --------
Interest expense ......................... $ (6,426) $(17,700) $(21,899)
Interest income .......................... 706 2,742 5,161
Foreign exchange gain (loss) ............. 1,665 1,581 (3,115)
Equity in earnings of associated companies 133 1,194 1,036
Permanent impairment in investment ....... (3,200) -- --
Bank commitment fees ..................... (750) -- --
Gain on sale of subsidiary ............... 1,027 -- --
Minority interest ........................ (394) (363) (1,313)
Other income(expense), net ............... 814 (546) 1,797
-------- -------- --------
Total other expense, net ....... $ (6,425) $(13,092) $(18,333)
======== ======== ========

Net income per share

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.

The Company set a record date of December 22, 1998 for a two-for-one stock
split to be effected as a bonus issue (the Singapore equivalent of a stock
dividend). The distribution of Ordinary Shares occurred on January 11, 1999. All
share and per share amounts have been retroactively restated to reflect the
stock split.

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

49
<PAGE>

1997 1998 1999
------- ------- -------
Ordinary Shares issued and outstanding(1) .... 32,438 35,606 43,569
Ordinary Shares due to Astron(2) ............. 970 920 --
------- ------- -------
Weighted average Ordinary Shares -- basic .... 33,408 36,526 43,569
Ordinary Share equivalents -- stock options(3) 1,248 1,668 2,594
------- ------- -------
Weighted average Ordinary Shares and
equivalents -- diluted ..................... 34,656 38,194 46,163
======= ======= =======
Net income ................................... $11,620 $19,913 $51,530
======= ======= =======
Basic earnings per share ..................... $ 0.35 $ 0.55 $ 1.18
======= ======= =======
Diluted earnings per share ................... $ 0.34 $ 0.52 $ 1.12
======= ======= =======

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

(2) Ordinary Shares to be issued as purchase price due to Astron's former
shareholders in June 1998.

(3) Stock options of the Company calculated based on the treasury stock method
using average market price for the period, if dilutive. Options to purchase
495,610, 173,792 and 56,329 weighted shares outstanding during fiscal 1997,
1998, and 1999, respectively, were excluded from the computation of diluted
earnings per share because the options exercise price was greater than the
average market price of the Company's Ordinary Shares during those years.

Comprehensive Income

The Company adopted SFAS No. 130, "Comprehensive Income" in the first
quarter of fiscal 1999. SFAS No. 130 requires companies to report an additional
measure of income on the income statement referred to as "comprehensive income"
or to create a separate financial statement that reflects comprehensive income.
The Company's comprehensive income includes net income and foreign currency
translation adjustments.

The following table sets forth the components of other comprehensive loss
net of income tax for the years ended March 31:

<TABLE>
<CAPTION>
1997 1998 1999
------------------------------- ------------------------------- ------------------------------
Tax Tax Tax
Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax
Amount or Benefit Amount Amount or Benefit Amount Amount or Benefit Amount
------- -------- ------- ------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other comprehensive
loss :
Foreign currency
translation
adjustment ................. $ (804) $ 119 $ (685) $(6,427) $ 654 $ (5,773) $(11,439) $ 1,499 $(9,940)
</TABLE>

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133") which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments imbedded in other contracts and for hedging activities. It requires
that companies recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.

50
<PAGE>

The Company expects to adopt SFAS No. 133 the first quarter of fiscal 2001 and
anticipates that SFAS No. 133 will not have a material impact on its
consolidated financial statements.

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>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Cash paid for:
Interest ............................................... $ 4,927 $11,076 $15,304
Income taxes ........................................... 1,717 1,271 2,311
Non-cash investing and financing activities:
Equipment acquired under capital lease obligations ..... 14,783 9,094 11,851
Earnout of $6.25 million payable to Astron's
shareholders less reduction in amount due under
the Services Agreement ............................ 5,250 -- --
Issuance of 127,850 Ordinary Shares valued at $37.54 for
acquisition of FICO ............................... -- -- 4,800
</TABLE>

4. BANK BORROWINGS AND LONG-TERM DEBT

The Company has $150 million in unsecured Senior Subordinated Notes due in
2007 outstanding with an annual interest rate of 8.75% due semi-annually. The
fair value of the unsecured Senior Subordinated Notes based on broker trading
prices was 103% of the face value on March 31, 1999. In addition, during fiscal
1999, the Company increased its credit facility to $120.0 million and amended
certain covenants and financial ratios. As of March 31, 1999, the Company has
borrowed $20.9 million under the credit facility line of credit. The Credit
Facility is secured by substantially all of the Company's assets and expires in
January 2001. Borrowings under the credit facility bear interest, at the
Company's option, of the United States prime rate or the London interbank
offering rate (LIBOR) plus 0.5% (5.0% as of March 31, 1999). As of March 31,
1999, the Company has $99.1 million available under its Credit Facility line of
credit.

Certain subsidiaries of the Company have various lines of credit available
with annual interest rates ranging from 4.0% to 6.4%. These lines of credit
expire on various dates through 2001. The Company has term loans with annual
interest rates generally ranging from 4% to 7% with terms of up to 20 years.
These lines of credit and term loans are primarily secured by assignment of
account receivables and assets.

The Company has financed the purchase of certain facilities with mortgages.
The mortgages generally have terms of 5 to 20 years and annual interest rates
ranging from 6.0% to 18.25% and are secured by the underlying properties with a
net book value of approximately $23 million.

In addition, the Company had notes payable for purchase price due to the
former shareholders of FICO for the additional 50% interest acquired in March
1999. The notes were unsecured for a total of $3 million and bear interest at
2%.

51
<PAGE>

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

1998 1999
--------- ---------
Senior Subordinated Notes .............. $ 150,000 $ 150,000
Outstanding under lines of credit ...... 23,010 13,193
Credit Facility ........................ -- 20,914
Mortgages .............................. 12,848 15,630
Term loans and other debt .............. 23,848 28,102
--------- ---------
209,706 227,839
Current portion ...................... (43,209) (54,086)
--------- ---------
Non-current portion .................. $ 166,497 $ 173,753
========= =========

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

2000.............................................. $ 54,086
2001.............................................. 5,539
2002.............................................. 4,119
2003.............................................. 3,026
2004.............................................. 2,049
Thereafter........................................ 159,020
---------
$ 227,839
=========

5. FINANCIAL INSTRUMENTS

The value of the Company's cash and cash equivalents, accounts receivable
and accounts payable carrying amount approximates fair value. The fair value of
the Company's long-term debt (see Note 4) is determined based on current broker
trading prices. The Company's cash equivalents are comprised of investment grade
certificates of deposits, money market accounts, and corporate debt securities
(see Note 2). The Company's investment policy limits the amount of credit
exposure to 10% of the total investment portfolio in any single issuer. All of
the Company's investments have an original maturity of 90 days or less.

The Company enters into forward exchange contracts to hedge underlying
transactional currency exposures and does not engage in foreign currency
speculation. The credit risk of these forward contracts is minimal since the
contracts are with large financial institutions. The Company hedges committed
exposures and these forward contracts generally do not subject the Company to
risk of accounting losses. The gains and losses on forward contracts generally
offset the gains and losses on the asset, liabilities and transactions hedged.
The Company's off-balance sheet financial instruments consist of $80.7 million
and $16.5 million of aggregate foreign currency forward contracts outstanding at
the end of fiscal year 1998 and 1999, respectively. These foreign exchange
contracts expire in less than three months and will settle in French Franc,
Japanese Yen, Swedish Kronor and United States dollar.

6. COMMITMENTS

As of March 31, 1998 and 1999, the Company has financed a total of $49,606
and $52,295, respectively in machinery and equipment purchases with capital
leases. Accumulated amortization for property and equipment under capital leases
totals $13,764 and $13,997 at March 31, 1998 and 1999, respectively. These
capital leases have interest rates ranging from 1.7% to 16.6%. The Company also
leases certain of its facilities under non-cancelable operating leases. The

52
<PAGE>

capital and operating leases expire in various years through 2008 and require
the following minimum lease payments for the years ended March 31:

CAPITAL OPERATING
------- ---------
2000.................................................. $11,921 $18,278
2001.................................................. 8,592 17,563
2002.................................................. 5,715 13,049
2003.................................................. 4,402 4,942
2004.................................................. 2,971 1,929
Thereafter............................................ 5,145 6,770
------- -------
Minimum lease payments................................ 38,746 $62,531
=======
Amount representing interest.......................... (5,513)
-------
Present value of minimum lease payments............... 33,233
Current portion....................................... (9,807)
-------
Capital lease obligations, net of current
portion............................................. $23,426
=======

Total rent expense was $3,144, $8,188 and $17,033 for the years ended March
31, 1997, 1998 and 1999, respectively.

7. INCOME TAXES

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

1997 1998 1999
-------- -------- --------
Singapore ............ $ (392) $ (9,346) $ (8,159)
Foreign .............. 14,039 31,517 67,459
-------- -------- --------
$ 13,647 $ 22,171 $ 59,300
======== ======== ========

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

1997 1998 1999
------- ------- -------
Current :
Singapore ............. $ 1,608 $ 226 $ --
Foreign ............... 1,395 4,364 8,346
------- ------- -------
$ 3,003 $ 4,590 $ 8,346
======= ======= =======

Deferred :
Singapore ............. $ (559) $ (451) $ --
Foreign ............... (417) (1,881) (576)
------- ------- -------
(976) (2,332) (576)
------- ------- -------
$ 2,027 $ 2,258 $ 7,770
======= ======= =======

53
<PAGE>

The Singapore statutory income tax rate was 26% for the years ended March
31, 1997, 1998 and 1999. The reconciliation of the 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>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income taxes based on Singapore statutory
rates ...................................... $ 3,548 $ 5,764 $ 15,418
Losses from non-incentive Singapore operations 498 2,707 3,098
Tax exempt income ............................ -- -- (549)
Effect of foreign operations taxed at various
rates ...................................... (3,368) (3,443) (6,003)
Amortization of goodwill and intangibles ..... 436 946 942
Merger costs ................................. -- 398 --
Benefit from realized deferred tax assets .... -- (2,829) (5,229)
Joint venture losses ......................... -- (310) (269)
Bank commitment fees ......................... 382 -- --
Other ........................................ 531 (975) 362
-------- -------- --------
Provision for income taxes ......... $ 2,027 $ 2,258 $ 7,770
======== ======== ========
Effective tax rate .......................... 14.9% 10.2% 13.1%
</TABLE>

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

1998 1999
-------- --------
Deferred tax liabilities:
Depreciation ........................................... $ (855) $ (4,314)
Intangible assets ...................................... (2,405) (2,059)
Fixed assets ........................................... -- (515)
Exchange losses ........................................ -- (857)
Others ................................................. (1,552) (1,097)
-------- --------
Total deferred tax liability ................... $ (4,812) $ (8,842)
-------- --------
Deferred tax assets:
Depreciation ........................................... $ 471 $ 598
Provision for inventory obsolescence ................... 3,117 2,869
Provision for doubtful accounts ........................ 1,100 1,600

Net operating loss carryforwards ....................... 17,525 15,107
General accruals and reserves .......................... 1,540 3,555
Unabsorbed capital allowance carryforwards ............. 239 --
Leasing - interest and exchange ........................ -- 771
Others ................................................. 220 1,330
-------- --------
24,212 25,829
Valuation allowance .................................... (21,626) (18,637)
-------- --------
Net deferred tax asset ............................ $ 2,586 $ 7,192
-------- --------
Net deferred tax liability ............................. $ (2,226) $ (1,650)
======== ========

The net deferred tax liability is classified as follows:
Long-term liability .............................. $ (4,812) $ (4,831)
Current and non-current assets ................... 2,586 3,181
-------- --------
$ (2,226) $ (1,650)
======== ========

The deferred tax asset arises substantially from available tax loss
carryforwards. 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

54
<PAGE>

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
change, including the amount of taxable income or the mix of taxable income
between subsidiaries, differ from management's estimates.

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, or any other foreign subsidiaries,
because earnings of foreign subsidiaries are to be reinvested indefinitely.

Due to a change in the tax assessment system of Malaysia, the income for
the year ended March 31, 1999 was not subject to Malaysian tax.

The Company has been granted the following tax incentives:

(i) Pioneer status for various products were granted to one of its
Malaysian subsidiaries under the Promotion of Investment Act. The pioneer
status for the various products expire on various dates ranging from
January 4, 1998 to January 12, 2000. This incentive provides for
full/partial tax exemption on manufacturing income from the various Pioneer
products for this subsidiary.

(ii) Product Export Enterprise incentive for the Shekou and Shenzhen, China
facilities. The Company's operation in Shekou and Shenzhen, China are
located in "Special Economic Zone" and are 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.

(iii) The Company's investment in its plants in Xixiang, China and Doumen,
China fall under the "Foreign Investment Scheme" that entitles the Company

55
<PAGE>

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.
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. The Company has another plant in Doumen which commenced
operations in the fiscal year 1998. The plant which falls under the
"Foreign Investment Scheme" is confident that the five year incentive will
be granted upon formal application in its first profitable year. However,
there can be no assurance that the five year incentive will be granted.

(iv) Five year negotiated tax holiday with the Hungarian government for its
Hungarian subsidiaries. This incentive provides for the reduction of the
regular tax rate by 60% to 7.2%. The incentive expires December 31, 2003.

A portion of the Company's sales were carried out by its two subsidiaries
in Labuan, Malaysia where the Company has opted to pay the Labuan tax
authorities a fixed amount of $6 tax each year in accordance with Labuan tax
legislation.

A portion of the Company's sales was carried out by its Mauritius
subsidiary which is taxed at 0%.

8. SHAREHOLDERS' EQUITY

Issuance of non-employee stock options

In June 1996, the Company issued 40,000 stock options with an exercise
price of $15.62 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
was recorded as a sales discount in the accompanying consolidated statement of
operations for fiscal 1997.

Secondary offerings

In October 1997, the Company completed an offering of its Ordinary Shares.
A total of 4,370,000 shares were sold at a price of $23.50 per share resulting
in net proceeds to the Company of $96.2 million.

In December 1998, the Company completed another offering of its Ordinary
Shares. A total of 5,400,000 shares were sold at a price of $36.25 per share
resulting in net proceeds to the Company of $194.0 million.

Stock split

The Company set a record date of December 22, 1998 for a 2:1 stock split to
be effected as a bonus issue (the Singapore equivalent of a stock dividend). The
distribution of 23,534,229 Ordinary Shares occurred on January 11, 1999. The
Company has accounted for this transaction as a stock split and all share and
per share amounts have been retroactively restated to reflect the 2:1 stock
split.

56
<PAGE>

Stock-based compensation

The Company's 1993 Share Option Plan (the "Plan") provides for the grant of
up to 7,200,000 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, 1999, the Company had 113,967 Ordinary Shares available
for future option grants 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 the Plan generally vest over 4 years and expire 5 years from the
date of grant.

The Company's 1997, 1998 and 1999 Interim Option Plans provide for grants
of up to 500,000, 786,000, and 1,300,000 respectively. These plans provide
grants of non-statutory options to employees and other qualified individuals to
purchase Ordinary Shares of the Company. Options under these plans can not be
granted to executive officers and directors. The Company's 1997, 1998 and 1999
Interim Option Plans had 85,993, 27,633, and 986,197 Ordinary Shares available
for future option grants respectively. All Interim Option Plans have an exercise
price of not less than 85% of fair market 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 following table presents the activity for options outstanding under all
of the stock option plans as of March 31 ("Price" reflects the weighted average
exercise price):

<TABLE>
<CAPTION>
1997 1998 1999
----------------- ------------------ ------------------
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----- --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year....... 2,631,940 $6.30 3,350,044 $9.31 4,894,078 $12.02
Granted.............................. 1,446,628 12.55 2,815,008 14.53 3,428,539 22.96
Exercised............................ (479,266) 2.93 (519,416) 3.75 (1,369,370) 8.37
Forfeited............................ (249,258) 8.91 (751,558) 15.06 (457,381) 13.98
--------- --------- ---------
Outstanding, end of year............. 3,350,044 $9.31 4,894,078 $12.02 6,495,866 $18.37
========= ========= =========
Exercisable, end of year............. 1,199,531 1,631,152 1,625,520
========= ========= =========
Weighted average fair value per
option granted................... $6.09 $6.96 $13.22
========= ========= =========
</TABLE>

57
<PAGE>

The following table presents the composition of options outstanding and
exercisable as of March 31, 1999 ("Price" and "Life" reflect the weighted
average exercise price and weighted average contractual life unless otherwise
noted):

OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
RANGE OF EXERCISE ----------------------------- ------------------
PRICES AMOUNT PRICE LIFE AMOUNT PRICE
- ---------------------- --------- ------ ---- --------- ------
$ 0.60 -- $11.63 1,807,865 $11.04 3.26 1,083,413 $10.74
11.88 -- 16.75 1,505,426 16.07 3.93 350,867 15.82
16.81 -- 23.69 1,139,172 19.27 4.10 131,240 20.64
24.00 -- 24.00 1,663,000 24.00 4.58 60,000 24.00
24.91 -- 49.94 380,403 35.04 4.85 -- --
--------- ---------
Total, March 31, 1999 6,495,866 $18.37 3.99 1,625,520 $13.13
========= =========

Options reserved for future issuance under all stock options plans was
1,213,790 as of March 31, 1999.

The Company's employee stock purchase plan (the "Purchase Plan") provides
for issuance of up to 150,000 Ordinary Shares. The Purchase Plan was approved by
the stockholders in October 1997. Under the Purchase Plan, employees may
purchase, on a periodic basis, a limited number of shares of common stock
through payroll deductions over a six month period up to 10% of each
participant's compensation. The per share purchase price is 85% of the fair
market value of the stock at the beginning or end of the offering period,
whichever is lower. A total of 72,430 Ordinary Shares have been issued under the
Purchase Plan as of March 31, 1999. The Company estimated the per-share weighted
average fair value of stock issued to employees in the Purchase Plan was $8.51
using the Black-Scholes option pricing model with the same assumptions as those
listed for stock options granted during fiscal 1999.

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 employee stock purchase 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. 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 1997, 1998, and 1999 net income
and earnings per share would have been adjusted to the pro-forma amounts
indicated below:

1997 1998 1999
---------- ---------- ----------
Net income:
As reported .............. $ 11,620 $ 19,913 $ 51,530
Pro-forma ................ 9,449 14,242 38,941

Basic earnings per share:
As reported .............. $ 0.35 $ 0.55 $ 1.18
Pro-forma ................ 0.28 0.39 0.89

Diluted earnings per share:
As reported .............. $ 0.34 $ 0.52 $ 1.12
Pro-forma ................ 0.27 0.37 0.84

58
<PAGE>

In accordance with the disclosure provisions of SFAS No. 123, the fair
value of employee stock options granted during fiscal 1997, 1998 and 1999 was
estimated at the date of grant using the Black-Scholes model and the following
weighted average assumptions:

Years Ended March 31,
1997 1998 1999
---- ---- ----
Volatility ................................ 67% 66% 64%
Risk-free interest rate range ............. 5.9% 5.9% 5.0%
Dividend yield ............................ 0% 0% 0%
Expected lives ............................ 4.1 yrs 4.0 yrs 4.0 yrs

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 and net income per share
disclosures may not reflect the associated fair value of the outstanding
options.

Option Repricing

In light of the substantial decline in the market price of the Company's
Ordinary Shares in the first quarter of fiscal 1998, in June 1997 the Company
offered to all employees the opportunity to cancel existing options outstanding
with exercise price in excess of $11.63 per share, the fair market value of the
Company's Ordinary Shares at that time, and to have such options replaced with
options that have the lower exercise price of $11.63 per share. Employees
electing to have options repriced were required to accept an extension of their
vesting schedule. The other terms of the options remained unchanged. On June 5,
1997, the Company repriced options to purchase 577,920 shares pursuant to this
offer.

9. PROVISION FOR EXCESS FACILITIES

The provision for excess facilities of $3.4 million in fiscal 1999 is
comprised of $2.2 million relating to the costs for consolidating the Company's
four manufacturing and administrative facilities in Hong Kong and $1.2 million
relating to the consolidation of certain U.S. facilities. The provision for
excess facilities consists of $1.5 million for the reduction of certain
personnel due to consolidation of certain operations, $1.5 million for the
write-off of equipment and assets related to the operations the Company has
exited, and $400 related to the consolidation of facilities. In connection with
the provision for excess facilities, the Company terminated approximately 250
employees in the areas of finance, engineering, operations, production and
purchasing. The Company anticipates the consolidation of facilities will be
substantially complete by November 1999.

The provision for excess facilities of $8.9 million in fiscal 1998 relates
to the costs incurred in closing the Wales facility. The provision includes $3.8
million for the write-off of goodwill associated with the acquisition of the
Wales facility, $1.6 million for severance payments and payments required under
the pension scheme, $2.4 million for fixed asset write-offs and factory closure
expenses and $1.1 million for required repayment of previously received
government grants.

The provision for excess facilities of $5.9 million 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

59
<PAGE>

Singapore manufacturing operations. The provision includes $2.0 million for
severance payments and $0.5 million for the write-off of fixed assets in the
Singapore manufacturing facilities. An additional amount of $2.9 million
associated with certain obsolete equipment at the Company's nChip and Texas
facilities has been written-off. The provision also includes severance payments
amounting to $0.5 million 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 following table summarizes the Company's components of the provision
for excess facilities during the years ended in fiscal 1997, 1998 and 1999:

<TABLE>
<CAPTION>
Severance Fixed Factory
and benefits Assets Closure Goodwill Other Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ -- $ 1,254 $ -- $ -- $ -- $ 1,254
1997 provision ........ 2,560 3,308 -- -- -- 5,868
Cash charges .......... (560) -- -- -- -- (560)
Non-cash charges ...... -- (1,254) -- -- -- (1,254)
-----------------------------------------------------------------------------
Balance at March 31, 1997 2,000 3,308 -- -- -- 5,308
1998 provision ........ 1,636 807 1,565 3,769 1,092 8,869
Cash charges .......... (1,655) -- -- -- -- (1,655)
Non-cash charges ...... -- (3,308) -- (3,769) -- (7,077)
-----------------------------------------------------------------------------
Balance at March 31, 1998 1,981 807 1,565 -- 1,092 5,445
1999 provision ........ 1,471 1,455 385 -- 50 3,361
Cash charges .......... (923) -- -- -- (937) (1,860)
Non-cash charges ...... (673) (2,149) (1,446) -- (155) (4,423)
-----------------------------------------------------------------------------
Balance at March 31, 1999 $ 1,856 $ 113 $ 504 $ -- $ 50 $ 2,523
=============================================================================
</TABLE>

10. RELATED PARTY TRANSACTIONS AND NOTES PAYABLES TO SHAREHOLDERS

Stephen Rees, a former Director and Senior Vice President of the Company,
holds a beneficial interest in both Mayfield International Ltd. ("Mayfield") and
Croton Ltd. ("Croton"). During fiscal 1998, the Company paid $140 to Croton for
management services and $208 to Mayfield for the rental of certain office space.
Additionally, as of March 31, 1999, $2,520 was due from Mayfield under a note
receivable. The note is included in other current assets on the accompanying
balance sheet.

On April 16, 1995, the Company's U.S. subsidiary, Flextronics International
USA, Inc. ("Flextronics USA"), loaned $500 to Michael E. Marks. Mr. Marks
executed a promissory note in favor of Flextronics USA which matures on April
16, 2000. In fiscal 1997, Flextronics USA forgave a total of $200 of outstanding
principal amount and $26 in accrued interest. In fiscal 1998, Flextronics USA
forgave a total of $100 of outstanding principal amount and $73 in accrued
interest. The remaining outstanding balance of the loan as of March 31, 1999 was
$217 (representing $200 in principal and $17 in accrued interest) and bears
interest at a rate of 7.21%.

On November 6, 1997, Flextronics USA loaned $1,500 to Mr. Marks. Mr. Marks
executed a promissory note in favor of Flextronics USA which bears interest at a
rate of 7.259% and matures on November 6, 2002. This loan is secured by certain
assets owned by Mr. Marks. The remaining outstanding balance of the loan as of

60
<PAGE>

March 31, 1999 was $1,500 and all interest accrued has been paid up to March 31,
1999.

On October 22, 1996, Flextronics USA loaned $136 to Mr. Michael McNamara.
Mr. McNamara executed a promissory note in favor of Flextronics USA which bears
interest at a rate of 7.0% and matures on October 22, 2001. The remaining
outstanding balance of the loan as of March 31, 1999 was $150 (representing $136
in principal and $14 in accrued interest).

On November 25, 1998, Flextronics USA loaned $130 to Mr. Michael McNamara.
Mr. McNamara executed a promissory note in favor of Flextronics USA which bears
interest at a rate of 7.25% and matures on November 25, 2003. The remaining
outstanding balance of the loan as of March 31, 1999 was $133 (representing $130
in principal and $3 in accrued interest).

On January 15, 1999, Flextronics USA loaned $200 to Mr. Robert Dykes. Mr.
Dykes executed a promissory note in favor of Flextronics USA which bears
interest at a rate of 7.25% and matures on January 15, 2004. The remaining
outstanding balance of the loan as of March 31, 1999 was $203 (representing $200
in principal and $3 in accrued interest).

On February 4, 1999, the Company loaned $410 to Mr. Ronny Nilsson. Mr.
Nilsson executed a promissory note in favor of the Company and the note matures
on March 31, 2000.

The Company also purchases materials from FICO Investment Holdings
("FICO"), an associated company in which the Company held a 40% interest through
March 1999.(see Note 11). At March 31, 1998, the amount due to FICO for these
purchases was $382. On March 1, 1999, the Company acquired an additional 50% of
FICO and the results of FICO have been consolidated in the accompanying
financial statements since this date (see Note 11 below).

11. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS

Advanced Component Labs HK Ltd.

On March 1, 1999, the Company acquired the manufacturing facilities and
related assets of Advanced Component Labs HK Ltd. ("ACL"), a Hong Kong based
advanced technology printed circuit board manufacturer for $15 million cash. The
transaction has been accounted for under the purchase method and accordingly,
the results of ACL was included in the Company's consolidated statements of
operations from March 1, 1999. Comparative pro-forma information has not been
presented as the results of operations for ACL are not material to the Company's
financial statements. The goodwill associated with this acquisition is amortized
over ten years.

The purchase price of $15 million was allocated to the net assets acquired
based on their estimated fair values at the date of acquisition as follows:

ACL's net assets at fair value ....................... $ 5,250
In-process research and development .................. 2,000
Goodwill ............................................. 7,750
------
$15,000
======

As of the date of acquisition, the $2 million of purchase price allocated
to in-process research and development related to development projects which had

61
<PAGE>

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. ACL's in-process research and
development projects were initiated to address the rapid technological change
associated with the miniaturized printed circuit board market. The incomplete
projects include developing technology for a low cost Ball Grid Array ("BGA")
package, developing thermal vias, and developing new methods that enable the use
of extremely thin 1.5 mil technology.

The Company believes the efforts to complete the in-process research and
development projects will consist of internally staffed engineers and will be
completed during fiscal year 2000. The estimated cost to complete the research
and development is approximately $1,100. There is substantial risk associated
with the completion of each project and there is no assurance that any of the
projects will meet with technological or commercial success.

FICO Investment Holding Ltd.

On December 20, 1996, the Company acquired an initial 40% of FICO, a
plastic injection molding company located in Shenzhen, China for $5.2 million of
which $3.0 million was paid in December 1996. The remaining $2.2 million
purchase price was paid in June 1997. Goodwill and other intangibles resulting
from this initial purchase totaled $3.2 million and are being amortized over ten
years. The Company accounted 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 December 20, 1996
through February 28, 1999. On March 1, 1999, the Company acquired an additional
50% of FICO for (i)$7.2 million cash, (ii)127,850 Ordinary Shares issued at
closing valued at $4.8 million (iii)$3.0 million in 2% promissory notes due $1.0
million each in year 2000 through year 2002. This transaction has been accounted
for under the purchase method and accordingly, the results of operations for
FICO have been included in the accompanying consolidated statements of
operations since March 1, 1999. The acquisition of the additional 50% interest
resulted in additional goodwill and intangible assets of $8.5 million and
$420,000 which were being amortized over 8 and 3 years, respectively.

Conexao Informatical Ltd. and Altatron, Inc.

On March 31, 1998 the Company acquired Conexao, a Brazil-based electronics
manufacturing service provider, in exchange for a total of 843,186 Ordinary
Shares, of which 236,610 Ordinary Shares to be issued upon resolution of certain
general and specific contingencies. The contingencies were resolved and the
236,610 Ordinary Shares were issued in March 1999. On March 31, 1998, the
Company also acquired Altatron, an electronics manufacturer service provider
headquartered in Fremont, California, with facilities in Fremont, California;
Richardson, Texas; and Hamilton, Scotland in exchange for 1,577,300 Ordinary
Shares, of which 315,460 Ordinary Shares are to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 315,460 Ordinary Shares were issued in March 1999. These acquisitions were
accounted for as a pooling-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 the Company's consolidated results. Accordingly,
the results of the acquired companies are included in the Company's consolidated
statements of operations from the date of acquisition.

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<PAGE>

DTM Products, Inc. and Energipilot AB

On December 1, 1997, the Company 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 504,938 and 459,980 Ordinary Shares, respectively. These
acquisitions were accounted for as a pooling-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 the Company's consolidated
results. Accordingly, the results of the acquired companies are included in the
Company's consolidated statements of operations from the date of acquisition
onward.

Neutronics Holdings A.G.

On October 30, 1997, the Company acquired Neutronics Holdings A.G.
("Neutronics"), an electronics manufacturing services provider with operations
located in Austria and Hungary. The acquisition was accounted for as a
pooling-of-interests and the Company has issued 5,612,000 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. Neutronics operated under a calendar year end prior to merging with
Flextronics, and accordingly, Neutronics' statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1996 has
been combined with the corresponding Flextronics consolidated statements for the
fiscal years ended March 31, 1997. During fiscal 1998, Neutronics' fiscal year
end was changed from December 31 to March 31 to conform to the Company's fiscal
year-end. Accordingly, Neutronics' operations for the three months ended March
31, 1997, which included net sales of $34.9 million and net loss of $3.1 million
have been excluded from the consolidated results and have been reported as an
adjustment to retained earnings in the first quarter of fiscal 1998.

Separate results of operations for the periods presented are as follows for
the years ended March 31, 1997:

Net sales:
Previously reported...................... $ 490,585
Neutronics............................... 149,422
---------
As restated.............................. $ 640,007
=========
Net income(loss):
Previously reported...................... $ 7,463
Neutronics............................... 4,157
---------
As restated.............................. $ 11,620
=========

Ericsson Business Networks AB

On March 27, 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 net assets acquired based on their estimated fair market values
at the date of acquisition. There was no material purchase price in excess of
the fair value of the net assets acquired. The results of operations of the
Karlskrona Facilities have been included in the consolidated

63
<PAGE>

results of the Company since the date of acquisition and such results of these
facilities were immaterial for March 27, 1997 to March 31, 1997.

Fine Line Printed Circuit Design Inc.

On November 25, 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 446,642 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.

12. SEGMENT REPORTING

The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" during the fourth quarter of fiscal 1999.
SFAS No. 131 establishes standards for reporting information about operating
segments in financial statements. Operating segments are defined as components
of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or chief decision
making group, in deciding how to allocate resources and in assessing
performance. Mr. Michael Marks, the Chairman and chief executive officer, is the
Company's chief decision maker. The Company operates and is managed internally
by four geographic business segments. The operating segments include Asia,
Americas, Western Europe and Central Europe. Each operating segment has a
regional president that reports to Mr. Michael Marks.

Information about segments for the years ended March 31:

<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales:
Asia .................... $ 307,545 $ 303,993 $ 401,126
Americas ................ 160,860 277,783 683,564
Western Europe .......... 22,560 332,837 368,046
Central Europe .......... 149,042 210,233 406,107
Intercompany eliminations -- (11,775) (51,215)
----------- ----------- -----------
$ 640,007 $ 1,113,071 $ 1,807,628
=========== =========== ===========

Income(Loss) before Income Tax:
Asia .................... $ 25,974 $ 15,970 $ 25,416
Americas ................ (3,973) (4,413) 19,296
Western Europe .......... (2,487) 8,871 12,137
Central Europe .......... 4,598 7,723 12,833
Intercompany eliminations,
corporate allocations
and non-recurring
charges (10,465) (5,980) (10,382)
----------- ----------- -----------
$ 13,647 $ 22,171 $ 59,300
=========== =========== ===========

Long Lived Assets:
Asia .................... $ 52,702 $ 76,011 $ 109,513
Americas ................ 20,601 86,390 117,526
Western Europe .......... 37,662 45,698 45,775
Central Europe .......... 38,050 47,474 94,693
----------- ----------- -----------
$ 149,015 $ 255,573 $ 367,507
=========== =========== ===========
</TABLE>

64
<PAGE>

1997 1998 1999
-------- -------- --------
Depreciation and Amortization:
Asia ....................... $ 8,004 $ 12,690 $ 15,321
Americas ................... 2,873 5,703 14,815
Western Europe ............. 929 7,298 10,110
Central Europe ............. 6,334 5,257 10,161
-------- -------- --------
$ 18,140 $ 30,948 $ 50,407
======== ======== ========

Capital Expenditure:
Asia ....................... $ 15,729 $ 34,549 $ 37,418
Americas ................... 11,562 38,799 46,427
Western Europe ............. 586 12,102 10,850
Central Europe ............. 9,626 13,167 53,170
-------- -------- --------
$ 37,503 $ 98,617 $147,865
======== ======== ========

For purposes of the preceding tables, "Asia" includes China, Malaysia, and
Singapore, "Americas" includes U.S, Mexico, and Brazil, "Western Europe"
includes Sweden, Scotland and United Kingdom and "Central Europe" includes
Austria and Hungary.

Geographic revenue transfers are based on selling prices to unaffiliated
companies, less discounts. Income before tax is net sales less operating
expenses, interest or other expenses, but prior to income taxes.

1997 1998 1999
---- ---- ----
Net Sales:
China ..................... 22% 19% 17%
United States ............. 25% 24% 27%
Sweden .................... -- 27% 18%
Hungary ................... 13% 13% 17%
All others ................ 40% 17% 21%

Long Lived Assets:
China ..................... 25% 26% 27%
United States ............. 11% 23% 19%
Sweden .................... 22% 16% 11%
Hungary ................... 19% 14% 18%
All others ................ 23% 21% 25%

13. SUBSEQUENT EVENTS (UNAUDITED)

In April 1999, Flextronics entered into an agreement to purchase the
manufacturing facility and related assets of Ericsson's Visby, Sweden
operations. Ericsson's Visby facility manufactures mobile systems
infrastructure, primarily radio base stations. Under the terms of the agreement,
Flextronics will acquire the facility, including equipment and materials. In
connection with the acquisition of assets, the Company has also entered into a
manufacturing service agreement with Ericsson. The asset transfer is expected to
close during the second quarter of fiscal 2000.

In May 1999, Flextronics purchased the manufacturing facility and realted
assets of ABB Automation Products in Vasteras, Sweden for approximately $25.9
million. This facility provides printed circuit board assemblies and other
electronic equipment. Flextronics has also offered employment to 575 ABB
personnel who were previously employed by ABB Automation Products. In connection
with the acquisition of certain fixed assets, the Company has also entered into
a manufacturing service agreement with ABB Automation Products.

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<PAGE>

In June 1999, Flextronics entered into an agreement to acquire Kyrel EMS
Oyj, a provider of electronics manufacturing services with two facilities in
Finland and one in Luneville, France. Kyrel employs approximately 900 people and
its 1998 revenues were $230 million. Flextronics expects to issue approximately
1.9 million shares in the acquisition. Government approval is required in
Finland and the transaction is expected to close in the second quarter of fiscal
2000. The acquisition of Kyrel EMS Oyj will be accounted for as a
pooling-of-interests.

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<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

None

PART III

Item 10. DIRECTORS AND OFFICERS

The names, ages and positions of the Company's Directors and officers as of
March 31, 1999 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- --- ------------------------------------------------
<S> <C> <C>
Michael E. Marks 48 Chairman and Chief Executive Officer
Robert R. B. Dykes 49 President, Systems Group and
Chief Financial Officer
Ash Bhardwaj 35 President, Asia Pacific Operations
Michael McNamara 42 President, Americas Operations
Ronny Nilsson 50 President, Western European Operations
Humphrey Porter 51 President, Central/Eastern European Operations
Chuen Fah Alain Ahkong 51 Director
Patrick Foley 67 Director
Hui Shing Leong 40 Director
Michael J. Moritz 48 Director
Richard L. Sharp 51 Director
</TABLE>

Michael E. Marks -- Mr. Marks has been the Company's Chief Executive
Officer since January 1994 and is 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.

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.

Ash Bhardwaj -- Mr. Bhardwaj joined Flextronics in 1988 and has served as
President, Asia pacific Operations since April 1999. Previously, he served as
Vice President for the China region for Flextronics from April 1997 to March
1999, with responsibility for all Flextronics operations in China. Prior to
that, Mr. Bhardwaj oversaw the implementation of Flextronics' manufacturing
operation in Xixiang, People's Republic of China and was general manager for the
Flextronics plant in Shekou, China. Mr. Bhardwaj has a degree in electrical
engineering from Thapar Institute of Engineering and Technology in India and
earned an MBA from the Southeastern Louisiana University, Hammond, LA. Mr.
Bhardwaj succeeds Mr. S.L.Tsui, who is leaving the company in June 1999.

67
<PAGE>

Michael McNamara -- Mr. McNamara has served as President of Americas
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
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.

Ronny Nilsson -- Mr. Nilsson has served as the Company's President, Western
European Operations 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.

Humphrey Porter -- Mr. Porter has served as President of Central and
Eastern European Operations since October 1997. From July 1994 to October 1997,
he was President and Chief Executive Officer of Neutronics Electronics
Industries Holding, AG, which was acquired by the Company in October 1997. Prior
to joining Neutronics, Mr. Porter worked for over 27 years for the Philips
organization. Between 1989 and 1994, he was Industrial Director for Philips
Audio Austria and between 1984 and 1989, he was Managing Director of the Philips
Audio factory in Penang, Malaysia. Prior to this, Mr. Porter held various
management and technical staff positions in Hong Kong, Holland, the United
States and the U.K. Mr. Porter has a B.Sc. degree in production engineering from
Trent University in Nottingham, England.

Chuen Fah 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.

68
<PAGE>

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.

Hui Shing Leong -- 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.
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.

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.

Item 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
information under the caption "Executive Compensation" of the Registrants
definitive Proxy Statement and notice of the Company's Annual Meeting of
shareholders to be held on August 12, 1999 which the Company will file with the
Securities and Exchange Commission within 120 days after the end of the fiscal
year covered by this report.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" of the Registrants definitive Proxy Statement and notice of the
Company's Annual Meeting of shareholders to be held on August 12, 1999 which the
Company will file with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this report.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information with required by this item is incorporated by reference to
the information under the caption "Certain Relationships and Related
Transactions" of the Registrants definitive Proxy Statement and notice of the
Company's Annual Meeting of shareholders to be held on August 12, 1999 which the
Company will file with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this report.

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<PAGE>

Part IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------------------------------------------------------

2.1 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.)

2.2 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.)

2.3 Exchange Agreement dated as of June 11, 1999 among the
Registrant, Flextronics Holding Finland Oyj and Seppo
Parhankangas.

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.)

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 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.)

10.4* 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.)

10.5 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.)

10.6 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.)

10.7 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.)

10.8 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.)

10.9 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.)

70
<PAGE>

10.10* 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.)

10.11 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.)

10.12 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.)

10.13 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.)

10.14 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.)

10.15 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.)

10.16 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.)

10.17 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.)

10.18 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.)

10.19 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.)

10.20 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.)

10.21 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.)

10.22 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.)

71
<PAGE>

10.23 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.)

10.24 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.)

10.25 Second amendment to the amended and restated revolving credit
agreement dated as of June 26, 1998 among Flextronics
International USA, Inc. Bankboston, N.A. and the lending
institutions listed on Schedule 1 thereto. (Incorporated by
reference to Exhibit 10.1 of the Company's Report on Form 10-Q
for the quarterly period ended December 31, 1998.)

10.26 Second amendment to the amended and restated revolving credit
agreement dated as of June 26, 1998 among Flextronics
International Ltd., Bankboston, N.A. and the lending institutions
listed on Schedule 1 thereto. (Incorporated by reference to
Exhibit 10.2 of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1998.)

10.27 Third amendment to the amended and restated revolving credit
agreement dated as of September 29, 1998 among Flextronics
International USA, Inc. Bankboston, N.A. and the lending
institutions listed on Schedule 1 thereto. (Incorporated by
reference to Exhibit 10.3 of the Company's Report on Form 10-Q
for the quarterly period ended December 31, 1998.)

10.28 Third amendment to the amended and restated revolving credit
agreement dated as of September 29, 1998 among Flextronics
International Ltd., Bankboston, N.A. and the lending institutions
listed on Schedule 1 thereto. (Incorporated by reference to
Exhibit 10.4 of the Company's Report on Form 10-Q for the
quarterly period ended December 31, 1998.)

10.29 Fourth amendment to the amended and restated revolving credit
agreement dated as of February 5, 1999 among Flextronics
International Ltd., Bankboston, N.A. and the lending institutions
listed on Schedule 1 thereto.

10.30 Promissory Note dated February 4, 1999 executed by Ronny Nilsson
in favor of Flextronics International Ltd.

21.1 Subsidiaries of Registrant.

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Moore Stephens.

- ----------------
* Confidential treatment requested for portions of agreement.

72
<PAGE>

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

YEARS ENDED MARCH 31, 1997, 1998 AND 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT EFFECT CHARGED TO CHARGED BALANCE AT
BEGINNING OF OF COSTS AND TO OTHER DEDUCTIONS/ END OF
PERIOD ACQUISITIONS EXPENSES ACCOUNTS WRITE-OFFS PERIOD
------------ ------------ ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable:
Period
Year ended March 31, 1997 3,766 -- 3,091 -- (785) 6,072
Year ended March 31, 1998 6,072 4,188 1,218 -- (1,950) 9,528
Year ended March 31, 1999 9,528 223 (2,584) -- (2,117) 5,050

Provision for excess facilities:
Period
Year ended March 31, 1997 1,254 -- 5,868 -- (1,814) 5,308
Year ended March 31, 1998 5,308 -- 8,869 -- (8,732) 5,445
Year ended March 31, 1999 5,445 -- 3,361 -- (6,283) 2,523
</TABLE>

73
<PAGE>

SIGNATURES

Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereto duly authorized.

Date : June 25, 1999
FLEXTRONICS INTERNATIONAL LTD.

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

POWER OF ATTORNEY

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ MICHAEL E. MARKS Chairman of the Board, and Chief June 25, 1999
- ----------------------- Executive Officer (principal
Michael E. Marks executive officer)

/s/ ROBERT R.B. DYKES President, Systems Group and June 25, 1999
- ----------------------- Chief Financial Officer (principal
Robert R.B. Dykes financial and accounting officer)

Director June 25, 1999
- -----------------------
Tsui Sung Lam

Director June 25, 1999
- -----------------------
Michael J. Moritz

/s/ RICHARD L. SHARP Director June 25, 1999
- -----------------------
Richard L. Sharp

/s/ PATRICK FOLEY Director June 25, 1999
- -----------------------
Patrick Foley

/s/ Alain Ahkong Director June 25, 1999
- -----------------------
Alain Ahkong

Director June 25, 1999
- -----------------------
Hui Shing Leong

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (this "Agreement") is entered into as of June 11,
1999, by and among Flextronics International Ltd., a company organized under the
laws of Singapore ("Acquiror"), acting through Flextronics Holding Finland Oy, a
company organized under the laws of Finland and a wholly-owned subsidiary of
Acquiror ("Flextronics Finland"), Kyrel EMS Oyj, a company organized under the
laws of Finland ("Target") and Seppo Parhankangas (the "Shareholder").

R E C I T A L S

A. Acquiror and Target are engaged in the business of providing, among
other things, contract electronic manufacturing services.

B. The parties intend that, subject to the terms and conditions hereinafter
set forth, Flextronics Finland will acquire 100% of the outstanding Target
Shares from the Shareholder pursuant to the terms and conditions set forth
herein in exchange for Acquiror's Ordinary Shares (as defined below).

C. The foregoing transactions are intended to be accounted for as a
"pooling of interests" for accounting purposes.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. CERTAIN DEFINITIONS

1.1 "Acquiror Average Price Per Share" means the average of the bid and ask
price per share of Acquiror Ordinary Shares (in U.S. dollars) as quoted on the
Nasdaq National Market (or such other exchange or quotation system on which
Acquiror Ordinary Shares are then traded or quoted) and reported in The Wall
Street Journal averaged over the twenty (20) trading days prior to the date five
(5) trading days before the Closing Date.

1.2 "Acquiror Ordinary Shares" means the Ordinary Shares, S$0.01 par value
of Acquiror.

1.3 "Additional Acquiror Ordinary Shares" means any Acquiror Ordinary
Shares issued as a result of, or issued upon the conversion or exercise of any
security issued as a result of, any stock dividend, reclassification, stock
split, subdivision or combination of shares, recapitalization, or similar events
made with respect to Acquiror Ordinary Shares from the Closing Date until the
Final Release Date.

1.4 "Charter Documents" of an entity means the Articles of Association and
By-Laws or Memorandum of Association of such entity or any equivalent corporate
documents (yhtiojarjestys and kaupparekisteriote in Finland).

<PAGE>

1.5 "Claim" means a claim, damage or legal action or proceeding giving rise
to indemnification rights under this Agreement.

1.6 "Closing" means the closing of the Exchange pursuant to Section 7.

1.7 "Closing Date" has the meaning set forth in Section 7.1.

1.8 "Estimated Claim Amount" means the sum of the values of (i) all Damages
with respect to any all uncontested Claims, plus (ii) all Damages with respect
to any contested Claims that have been resolved in favor of the Acquiror as of
the Final Release Date, plus (iii) Acquiror's good faith estimate of the Damages
claimed under any contested Claim unresolved as of the Final Release Date, in
each case for which the Shareholder has not indemnified Acquiror in cash as of
the Final Release Date and as to which the Acquiror has elected to proceed under
Section 12.1.

1.9 "Exchange" means, collectively, the exchange of all of the outstanding
Target Shares for the Acquiror Ordinary Shares contemplated by Section 2 below.

1.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

1.11 "Exchange Number" means 90% of the quotient obtained by dividing (i)
the Transaction Shares by (ii) the Target Fully Diluted Number.

1.12 "Final Release Date" means the date 365 days after the Closing Date.

1.13 "Finnish GAAP" means generally accepted accounting principles in
Finland.

1.14 "Hold-Back Shares" means that number of Acquiror Ordinary Shares which
is initially equal to 10% of the total number of Transaction Shares, rounded
down to the nearest whole Acquiror Ordinary Share, and shall be adjusted
proportionately in the event of any issuance of Additional Acquiror Ordinary
Shares.

1.15 "Material Adverse Effect" with respect to an entity means any
circumstance, change in, or effect on such entity or any of its Subsidiaries
that, individually or in the aggregate with any other circumstances, changes in,
or effects on such entity or any of its Subsidiaries, (i) is or is reasonably
likely to be materially adverse to the condition (financial or otherwise),
business, properties, results of operations or prospects of such entity and its
Subsidiaries, taken as a whole, or (ii) could adversely affect the ability of
such entity to consummate the transactions contemplated hereby.

1.16 "SEC" means the U.S. Securities and Exchange Commission.

1.17 "Subsidiary" of an entity means a corporation or other business entity
in which such entity owns, directly or indirectly, at least a fifty percent
(50%) interest or that is otherwise, directly or indirectly, controlled by such
entity.

2
<PAGE>

1.18 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

1.19 "Target Fully Diluted Number" means that number that is equal to the
sum of: (a) the total number of Target Shares that are issued and outstanding
immediately prior to the Closing; plus (b) the total number of Target Shares
that are issuable by Target upon the exercise of all Target options or
convertible securities that are issued and outstanding immediately prior to the
Closing.

1.20 "Target Shares" means the capital stock of Target.

1.21 "Transaction Shares" means 1,938,775 Acquiror Ordinary Shares;
provided that (i) if the product of the Acquiror Average Price Per Share and
1,938,775 exceeds $100,000,000, then the number of Transaction Shares shall
equal $100,000,000 divided by the Acquiror Average Price Per Share, and (ii) if
the product of the Acquiror Average Price Per Share and 1,938,775 is less than
$90,000,000, then the number of Transaction Shares shall equal $90,000,000
divided by the Acquiror Average Price Per Share, in each case rounded down to
the nearest whole Acquiror Ordinary Share.

1.22 "U.S. GAAP" means generally accepted accounting principles of the
United States of America.

1.23 In this Agreement, references to "$" are to United States of America
currency, references to "S$" are to Singapore currency and references to "FIM"
are to Finnish currency.

2. THE EXCHANGE

2.1 Exchange of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, the Shareholder shall transfer all of his Target
Shares to Flextronics Finland, and in exchange for each such Target Share,
Acquiror shall issue to the Shareholder that number of Acquiror Ordinary Shares
equal to the Exchange Number, subject to the provisions of Section 2.2 regarding
the elimination of fractional shares.

2.2 Fractional Shares. No fractional Acquiror Ordinary Shares will be
issued in connection with the Exchange, but in lieu thereof, if the Shareholder
would otherwise be entitled to receive a fraction of an Acquiror Ordinary Share,
he will receive from Acquiror, promptly after the Closing or the Final Release
Date (as the case may be), an amount of cash equal to the per share market value
of Acquiror Ordinary Shares (based on the Acquiror Average Price Per Share)
multiplied by the fraction of an Acquiror Ordinary Share to which the
Shareholder would otherwise be entitled.

2.3 Pooling of Interests. The parties intend that the Exchange be treated
as a "pooling of interests" for accounting purposes.

2.4 Full Satisfaction. All Acquiror Ordinary Shares and cash in lieu of
fractional shares delivered upon the surrender of Target Shares in accordance
with the terms

3
<PAGE>

hereof will be deemed to have been delivered in full satisfaction of all rights
pertaining to such Target Shares.

2.5 Hold-Back. On the Final Release Date Acquiror will issue to the
Shareholder that number of Acquiror Ordinary Shares equal to the Hold-Back
Shares, reduced, as provided in Section 12.1, by the quotient of (a) the
Estimated Claim Amount divided by (b) the closing price of the Acquiror Ordinary
Shares as quoted on The Nasdaq National Market on the Closing Date (the "Closing
Price")) rounded down to the nearest whole number of shares (the "Final Release
Shares"). The Hold-Back Shares will not be represented by certificates and will
remain unissued Acquiror Ordinary Shares until the Final Release Date (or such
other time as determined in Section 12).

3. REPRESENTATIONS AND WARRANTIES
OF TARGET AND THE SHAREHOLDER

Target and the Shareholder, jointly and severally, hereby represent and
warrant that:

3.1 Organization and Good Standing. Target is a company duly organized,
validly existing and in good standing under the laws of Finland, has the power
and authority to own, operate and lease its properties and to carry on its
business as now conducted and is duly qualified to do business and is in good
standing in each jurisdiction where the character of its properties owned or
leased or the nature of its activities make such qualification necessary (each
such jurisdiction being listed on Schedule 3.1).

3.2 Power, Authorization and Validity.

3.2.1 Target and the Shareholder have the right, power, legal capacity
and authority to enter into and perform their respective obligations under
this Agreement. This Agreement has been duly and validly approved by the
directors of Target.

3.2.2 No filing, authorization, consent or approval, governmental or
otherwise, or filing with any governmental authority or court is necessary
to enable Target and the Shareholder to enter into, and to perform its
obligations under, this Agreement, except for (a) such filings as may be
required to comply with all applicable securities laws, (b) consents
required under contracts disclosed in Schedule 3.5, and (c) the Finnish
competition filing.

3.2.3 This Agreement is a valid and binding obligation of Target
enforceable against Target and the Shareholder (as applicable) in
accordance with its terms.

3.3 Capitalization.

(a) Outstanding Shares. A total of 2,000 Target Shares, FIM 1,500 par
value, are issued and outstanding as of the date of this Agreement and will
be issued and outstanding as of the Closing Date, all of which are held of
record and owned by the Shareholder. The Shareholder holds good and
marketable title to such Target Shares, free and clear of all liens,
agreements, voting trusts, proxies and other arrangements or restrictions
of any kind whatsoever. All issued and outstanding Target Shares have been
duly authorized and validly issued, are fully paid and nonassessable, are
not subject to any right of rescission and have been offered, issued, sold
and delivered by Target in compliance with all requirements of applicable
laws. The shareholders of Target and its subsidiaries are listed in
Schedule 3.3.

4
<PAGE>

(b) Options/Rights. There are no stock appreciation rights, options,
warrants, calls, rights, commitments, conversion privileges or preemptive
or other rights or agreements outstanding to purchase or otherwise acquire
any of Target's Shares or any securities or debt convertible into or
exchangeable for Target Shares or obligating Target to grant, extend or
enter into such option, warrant, call, commitment, conversion privileges or
preemptive or other right or agreement. There is no liability for dividends
accrued but unpaid. There are no voting agreements, registration rights,
rights of first refusal, preemptive rights or other restrictions applicable
to any of Target's outstanding securities.

3.4 Subsidiaries. Except as set forth in Schedule 3.4, Target does not have
any Subsidiaries or any equity interest, direct or indirect, in, or loans to,
any corporation, partnership, joint venture, limited liability company or other
business entity. Each of the Subsidiaries listed on Schedule 3.4 is a duly
organized, validly existing and in good standing (or appropriately recognized as
legally in existence and active under the laws of its jurisdiction) under the
laws of the jurisdiction identified in Schedule 3.4, and has the requisite power
and authority to conduct its business as it is presently being conducted. No
other corporate proceedings on the part of any Subsidiary are necessary to
authorize this Agreement and the transactions contemplated hereby. Schedule 3.4
contains a true, correct and complete list of all jurisdictions in which each
Subsidiary is qualified to do business. Each of the Subsidiaries is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make
such qualification necessary. Copies of the Charter Documents of each Subsidiary
heretofore delivered to Acquiror are accurate and complete. Target owns of
record and beneficially all of the issued and outstanding capital or other stock
of each Subsidiary free and clear of any encumbrances.

3.5 No Violation of Articles or Existing Agreements. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
provided for herein, will conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation of, (a)
any provision of the Charter Documents of Target, as currently in effect, (b)
any instrument, contract, agreement, permit, mortgage or license to which Target
or any of its Subsidiaries is a party or by which Target or any of its
Subsidiaries or any of their assets is bound or (c) any judgment, writ, decree,
order, statute, rule or regulation applicable to Target or any of its
Subsidiaries or any of their assets or properties. Except as set forth in
Schedule 3.5, the Exchange will not require the consent of any third party and
will not have any Material Adverse Effect upon any such rights, licenses,
franchises, leases or agreements pursuant to the terms of those agreements.

3.6 Litigation. Except as set forth on Schedule 3.6, there is no action,
proceeding or investigation pending or, to the best of Target's knowledge,
threatened against Target or any of its Subsidiaries before any court or
administrative agency that, if determined adversely to Target, may reasonably be
expected to have a Material Adverse Effect on Target or in which the adverse
party or parties seek to recover in excess of $50,000 against Target or any of
its Subsidiaries. There is no basis for any person, firm, corporation or entity
to assert a claim against Target or any of its Subsidiaries based upon: (a)
ownership or rights to ownership of any Target Shares, (b) any rights as a
Target securities holder, including, without limitation, any option or other
right to acquire any Target securities, any preemptive rights or any rights to
notice

5
<PAGE>

or to vote, or (c) any rights under any agreement between Target and any Target
securities holder or former Target securities holder in such holder's capacity
as such.

3.7 Target Financial Statements. Target has delivered to Acquiror Target's
audited balance sheet as of December 31, 1997 and December 31, 1998, Target's
audited income statement and cash flows for the years then ended (collectively,
the "Target Financial Statements"), a copy of each of which is included as
Schedule 3.7. The Target Financial Statements (a) are in accordance with the
books and records of Target and (b) fairly and accurately represent the
financial condition of Target at the respective dates specified therein and the
results of operations for the respective periods specified therein in conformity
with Finnish GAAP applied on a consistent basis. Target has not incurred any
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, except for those
reflected in the Target Financial Statements or those incurred after December
31, 1998 (the "Balance Sheet Date") in the ordinary course of Target's business,
consistent with past practice that are not material in amount either
individually or collectively.

3.8 Target Financial Projections. Target has delivered to Acquiror Target's
financial projections for each quarter in the period from January 1, 1999 to
March 31, 2000 (the "Financial Projections"), a copy of which is included as
Schedule 3.8. The Financial Projections have been prepared in good faith by
Target based upon reasonable assumptions and represent Target's best good faith
estimates as to its future results of operations.

3.9 Taxes. Target and each of its Subsidiaries have filed all tax and
information returns required to be filed prior to the date of this Agreement,
has paid all taxes required to be paid in respect of all periods prior to the
date hereof for which returns have been filed, has made all necessary estimated
tax payments, and has no liability for taxes in excess of the amount so paid,
except to the extent adequate reserves have been established in the Target
Financial Statements. Except as set forth on Schedule 3.9, neither Target nor
any of its Subsidiaries is delinquent in the payment of any tax or in the filing
of any tax returns, and no deficiencies for any tax have been threatened,
claimed, proposed or assessed which have not been settled or paid. Except as set
forth on Schedule 3.9, no tax return of Target or any of its Subsidiaries has
ever been audited by the Verohallinto or any other taxing agency or authority.
For the purposes of this Section 3.9, the terms "tax" and "taxes" include all
income, gains, franchise, excise, property, sales, use, employment, license,
payroll, social contribution, services, occupation, recording, value added or
transfer taxes, governmental charges, fees, levies or assessments (whether
payable directly or by withholding), and, with respect to such taxes, any
estimated tax, interest and penalties or additions to tax and interest on such
penalties and additions to tax. Target has no current or deferred tax
liabilities and will not as a result of the transactions contemplated herein
become liable for any tax not adequately reserved against on the Financial
Statements. If Target or any of its Subsidiaries were to become subject to an
audit by the Verohallinto or any other taxing agency or authority for tax years
or periods prior to Closing, Target and the Shareholder will use all reasonable
efforts to resolve all such audits in a manner consistent with the intentions of
the parties as expressed in this Agreement.

3.10 Title to Properties; Condition of Equipment. Except as set forth on
Schedule 3.10, Target and each of its Subsidiaries has good and marketable title
to all of its assets used in its business or as shown on the balance sheet as of
the Balance Sheet Date included

6
<PAGE>

in the Target Financial Statements, free and clear of all liens, charges,
encumbrances or restrictions (other than for taxes not yet due and payable and
Permitted Liens as defined below), other than such assets, set forth on Schedule
3.10, as were sold by Target in the ordinary course of business since the
Balance Sheet Date or which are subject to capitalized leases. Such assets are
sufficient for the continued operation of the business of Target and each of its
Subsidiaries consistent with current practice. "Permitted Liens" means any lien,
mortgage, encumbrance or restriction which is reflected in the Target Financial
Statements and is not in excess of $100,000 and which does not materially
detract from the value or materially interfere with the use, as currently
utilized, of the properties subject thereto or affected thereby or otherwise
materially impair the business operations being conducted thereon. All leases of
real or personal property to which Target or any of its Subsidiaries are a party
are fully effective and afford Target and each of its Subsidiaries peaceful and
undisturbed possession of the subject matter of the lease. Neither Target nor
any of its Subsidiaries is in violation of any material zoning, building, safety
or environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties, and Target has not
received any notice of such violation with which it has not complied. The
machinery and equipment (the "Equipment") owned or leased by Target or any of
its Subsidiaries is (i) suitable for the uses to which it is currently employed,
(ii) in generally good operating condition, (iii) regularly and properly
maintained, (iv) not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of business, and (v)
free from any material defects known to Target.

3.11 Absence of Certain Changes. Since the Balance Sheet Date, Target and
each of its Subsidiaries has carried on its business in the ordinary course
substantially in accordance with the procedures and practices in effect on the
Balance Sheet Date, and except as set forth in Schedule 3.11, since the Balance
Sheet Date there has not been with respect to Target or any of its Subsidiaries:

(a) any change in the financial condition, properties, assets,
liabilities, business, results of operations or prospects of Target, which
change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or can reasonably
be expected to have a Material Adverse Effect on Target or its ability to
conduct its business as presently conducted;

(b) any contingent liability incurred as guarantor or surety with
respect to the obligations of others;

(c) any mortgage, encumbrance or lien placed on any of its properties
or granted with respect to any of its assets which exceeds $100,000;

(d) any material obligation or liability incurred by Target or any
Subsidiary other than in the ordinary course of business;

(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of
the properties or assets of Target or its Subsidiaries other than sales of
inventory in the ordinary course of business;

(f) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
business of Target or any Subsidiary;

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(g) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock of
Target, any split, stock dividend, combination or recapitalization of the
capital stock of Target or any direct or indirect redemption, purchase or
other acquisition by Target of the capital stock of Target;

(h) any labor dispute or claim of material unfair labor practices;

(i) any change with respect to the officers or management or
supervisory employees of Target or any Subsidiary (the officers and
management and supervisory employees of Target and its Subsidiaries are
listed on Schedule 3.11(i) hereof);

(j) any material modification of the benefits payable or to become
payable to any of its directors or employees, or any increase in the
compensation payable or to become payable to any of the directors or
employees of Target or any Subsidiary, or any bonus payment or arrangement
made to or with any of such directors or employees, except salary increases
(not in excess of 10% for any individual) in the ordinary course of
business consistent with past practice or as disclosed in Schedule 3.11;

(k) any increase in or modification of any bonus, pension, insurance
or other employee benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its employees, except in
the ordinary course of business consistent with past practice or as
disclosed in Schedule 3.11;

(l) any making of any loan, advance or capital contribution to, or
investment in, any person other than (A) travel loans or advances made in
the ordinary course of business of Target and (B) other loans and advances
in an aggregate amount which does not exceed $100,000 outstanding at any
time;

(m) any entry into, amendment of, relinquishment, termination or
nonrenewal by Target of any contract, lease transaction, commitment or
other right or obligation other than in the ordinary course of business,
but in no event involving obligations (contingent or otherwise) of, or
payments to Target in excess of $100,000 individually or in the aggregate;

(n) any payment or discharge of a material lien or liability thereof,
which lien or liability was not either (i) shown on the balance sheet as of
the Balance Sheet Date included in the Target Financial Statements or (ii)
incurred in the ordinary course of business after the Balance Sheet Date;
or

(o) any obligation or liability incurred by Target to any of its
officers, directors or shareholders, or any loans or advances made to any
of its officers, directors, shareholders or affiliates, except normal
compensation and expense allowances payable to officers.

3.12 Agreements and Commitments. Except as set forth in Schedule 3.12,
neither Target nor any of its Subsidiaries is a party or subject to any oral or
written executory agreement, contract, obligation or commitment that is material
to Target or its Subsidiaries, its financial condition, business or prospects,
including but not limited to the following:

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(a) any contract, commitment, letter agreement, quotation or purchase
order providing for payments by or to Target in an aggregate amount of (i)
$100,000 or more in the ordinary course of business or (ii) $250,000 or
more not in the ordinary course of business;

(b) any license agreement under which Target or any of its
Subsidiaries is licensor; or under which Target or any of its Subsidiaries
is licensee (except for standard "shrink wrap" licenses for off-the-shelf
software products);

(c) any agreement by Target or any of its Subsidiaries to encumber,
transfer or sell rights in or with respect to any Target Intellectual
Property (as defined in Section 3.13 below);

(d) any agreement for the sale or lease of real or personal property
involving more than $100,000 per year;

(e) any dealer, distributor, sales representative, original equipment
manufacturer, value added remarketer, volume purchase agreement or other
agreement for the distribution or sale of Target's products (other than
individual purchase orders in the ordinary course of business);

(f) any franchise agreement;

(g) any stock redemption or purchase agreement;

(h) any joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other persons or the payment of
royalties to any other person;

(i) any instrument evidencing indebtedness for borrowed money or
guarantees thereof;

(j) any contract containing covenants purporting to limit Target's
freedom to compete in any line of business in any geographic area;

(k) any agreement of indemnification other than standard warranties in
connection with the sale of products and/or services in the ordinary course
of business;

(l) any agreement, contract or commitment relating to capital
expenditures and which involves future payments in excess of $100,000;

(m) any agreement, contract or commitment relating to the disposition
or acquisition of any assets (other than Inventory, as defined in Section
3.26) by Target or any of its Subsidiaries or any Target Intellectual
Property, which involves payments individually in excess of $100,000 or in
the aggregate in excess of $250,000; or

(n) any purchase order or contract for the purchase of raw materials
which involves payments individually in excess of $100,000 or in the
aggregate in excess of $250,000.
All agreements, contracts, obligations and commitments listed
in Schedules 3.12, 3.13, 3.16.1, 3.16.2 or 3.16.4 (collectively "Material
Agreements"), are valid and in full force and effect. Neither Target nor any of
its Subsidiaries nor, to the knowledge of Target, any other party is in breach
of or default under any material term of any such agreement, obligation or
commitment, nor will Target nor, to Target's knowledge, any other party be in
breach of or default under any such term after giving effect to the Exchange. To
the knowledge of Target, no

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party to any such contract, agreement or instrument intends to cancel, withdraw,
modify or amend such contract, agreement or arrangement.

Except as disclosed in Schedule 3.12, neither Target nor any of its
Subsidiaries is a party to any Material Agreement or any other agreement,
contract or instrument with any customer, supplier, landlord or labor union or
association that (i) contains any provision that is or could reasonably be
expected to become materially burdensome to Target or such Subsidiary, other
than provisions that are in the ordinary course of Target's and its
Subsidiaries' business and are consistent with industry practice; (ii) provides
for the reduction of prices charged by Target or any of its Subsidiaries to any
Significant Customer (as defined in Section 3.24) for its products or services
other than price reductions that are proportionate to reductions in the related
costs, (but including, without limitation, any "most favored customer"
provisions); (iii) provides for any increases in the prices to be paid by Target
or any of its Subsidiaries to any Significant Supplier (as defined in Section
3.25) for any products or services; or (iv) provides for any warranty or similar
obligations with respect to products or services other than an obligation to
repair or replace products in the event of defective workmanship or materials
provided by Target or such Subsidiary.

3.13 Intellectual Property. Target and each of its Subsidiaries owns all
right, title and interest in, or has the right to use, sell or license all
patent applications, patents, trademark applications, trademarks, service marks,
trade names, copyright applications, copyrights, trade secrets, know-how,
technology, customer lists, proprietary processes and formulae, all source and
object code, algorithms, inventions, development tools and all documentation and
media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records and other intellectual property and
proprietary rights used in or reasonably necessary or required for the conduct
of its respective business as presently conducted ("Target Intellectual
Property"). Set forth on Schedule 3.13 is a true and complete list of all
copyright and trademark registrations and applications and all patents and
patent applications for Target Intellectual Property owned by Target and each of
its Subsidiaries. Target is not aware of any material loss, cancellation,
termination or expiration of any such registration or patent. The business of
Target and each of its Subsidiaries does not cause Target or any of its
Subsidiaries to infringe or violate any of the patents, trademarks, service
marks, trade names, mask works, copyrights, trade secrets, proprietary rights or
other intellectual property of any other person, and neither Target nor any of
its Subsidiaries has received any written or oral claim or notice of
infringement or potential infringement of the intellectual property of any other
person. There are no royalties, fees or other payments payable by Target or any
of its Subsidiaries to any person by reason of the ownership, use, license, sale
or disposition of the Target Intellectual Property (other than as set forth in
Schedule 3.13). Neither the manufacture, marketing, sale or intended use of any
product currently licensed or sold by Target or currently under development by
Target violates any license or agreement between Target and any third party.
Target and each of its Subsidiaries has taken reasonable and practicable steps
designed to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material Target Intellectual Property. Target is not
aware of any infringement of any Target Intellectual Property by any third
party.

3.14 Compliance with Laws. Target and each of its Subsidiaries have
complied and are as of the Closing Date in compliance with all applicable laws,
ordinances, regulations

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and rules, and all orders, writs, injunctions, awards, judgments and decrees,
applicable to Target or any of its Subsidiaries or to the assets, properties and
business of Target or any of its Subsidiaries. Target and each of its
Subsidiaries has received all permits and approvals from, and has made all
filings with, third parties, including government agencies and authorities, that
are necessary to the conduct of its business as presently conducted, and there
exists no current default under or violation of any such permit or approval.
Schedule 3.14 includes a summary of all violations of, or conflicts with, any
applicable statute, law, rule, regulation, ruling, order, judgment or decree,
and all allegations of any such violations, of which Target has received notice
from such governmental entity since December 31, 1995.

3.15 Certain Transactions and Agreements. No person who is an officer,
director or Shareholder of Target or any of its Subsidiaries, or a member of any
officer's, director's or Shareholder's immediate family, (a) has any direct or
indirect ownership interest in or any employment or consulting agreement with
any firm or corporation that competes with Target or Acquiror (except with
respect to any interest in less than 1% of the outstanding voting shares of any
corporation whose stock is publicly traded), (b) is directly or indirectly
interested in any material contract or informal arrangement with Target, except
for compensation for services as an officer, director or employee of Target or
any of its Subsidiaries as listed in Schedule 3.16.5, (c) has any interest in
any property, real or personal, tangible or intangible, used in the business of
Target or any of its Subsidiaries, except for the normal rights of a
shareholder, or (d) has had, either directly or indirectly, a material interest
in: (i) any person or entity which purchases from or sells, licenses or
furnishes to Target or any of its Subsidiaries any goods, property, technology
or intellectual or other property rights or services; or (ii) any contract or
agreement to which Target is a party or by which it may be bound or affected.

3.16 Employees.

3.16.1 Target is subject to a collective bargaining agreement with
respect to its employees and Target is in compliance with the terms and
conditions of such agreement and has no current labor dispute. Target has
good labor relations, and Target has no knowledge of any facts indicating
that the consummation of the transactions provided for herein (other than
the contemplated reductions in force associated therewith) will have a
Material Adverse Effect on its labor relations, and has no knowledge that
any of its officers or management or supervisory employees, or any
significant number or other employees, intends to leave its employ. Between
December 31, 1998 and the date of this Agreement, to Target's knowledge, no
management or supervisory employee of Target, or significant number of
other employees of Target, has given notice to Target that such employee
intends to terminate his or her employment with Target. There are no
activities or proceedings of any labor union to organize any employees of
Target and there are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any employees of Target.
Since December 31, 1995, Target and each of its Subsidiaries have been in
compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and
hours.

3.16.2 Schedule 3.16.2 contains a list of all employment and
consulting agreements, pension, retirement, disability, medical, dental or
other health plans, life insurance or other death benefit plans, profit
sharing, deferred compensation agreements, stock, option, bonus or other
incentive plans, vacation, sick, holiday or other paid leave plans,
severance plans or

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other similar employee benefit plans maintained by Target and its
Subsidiaries (the "Employee Plans"). Target has delivered true and complete
copies or descriptions of all the Employee Plans to Acquiror and Acquiror's
counsel. Each of the Employee Plans, and its operation and administration,
is, in all material respects, in compliance with all applicable laws and
ordinances, orders, rules and regulations. No employee of Target or any of
its Subsidiaries and no person subject to any Target health plan has made
medical claims through such health plan during the twelve months preceding
the date hereof for more than $100,000 or more in the aggregate for which
Target or any Subsidiary is responsible, or has any catastrophic illness.

3.16.3 No employee of Target or any of its Subsidiaries is in material
violation of any term of any employment contract or any other contract or
agreement, or any restrictive covenant, relating to the right of any such
employee to be employed by Target or to use trade secrets or proprietary
information of others, and the employment of any employee of Target does
not subject Target to any liability to any third party.

3.16.4 Except as set forth in Schedule 3.16.4, neither Target nor any
of its Subsidiaries is a party to any (a) agreement with any executive
officer or other key employee of Target (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Target in the nature of any of the
transactions contemplated by this Agreement, (ii) providing any term of
employment or compensation guarantee or (iii) providing severance benefits
or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment, or (b)
agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits
of which will be materially increased, or the vesting of benefits of which
will be materially accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.

3.16.5 A list of all employees and officers of Target and their
current compensation and benefits as of the date of this Agreement is set
forth on Schedule 3.16.5.

3.16.6 All contributions due from Target or any of its Subsidiaries
with respect to any of the Employee Plans and all employee social security
contributions have been made or accrued on the Target Financial Statements,
and no further contributions will be due or will have accrued thereunder as
of the Closing Date, other than contributions accrued in the ordinary
course of business after the Balance Sheet Date as a result of operations
of Acquiror after the Balance Sheet Date, all of which have been paid.

3.17 Corporate Documents. Target has provided to Acquiror complete and
correct copies of all documents identified in the Schedules to this Agreement
including, without limitation, the following: (a) copies of Target's Charter
Documents as currently in effect; (b) copies of the Material Agreements, and all
amendments thereto; and (c) all permits, orders and consents issued by any
regulatory agency with respect to Target, or any securities of Target, and all
applications for such permits, orders and consents.

3.18 No Brokers. Except as disclosed on Schedule 3.18, neither Target nor
any of its Subsidiaries is obligated for the payment of fees or expenses of any
investment banker,

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broker or finder in connection with the origin, negotiation or execution of this
Agreement in connection with any transaction provided for herein.

3.19 Disclosure. This Agreement, its exhibits and schedules, and any of the
certificates or documents to be delivered by Target to Acquiror under this
Agreement, taken together, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading.

3.20 Books and Records. The books, records and accounts of Target and its
Subsidiaries (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of Target and
(d) accurately and fairly reflect the basis for the Target Financial Statements.
Target has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with Finnish GAAP, and (ii) to maintain accountability
for assets, and (c) the amount recorded for assets on the books and records of
Target is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

3.21 Insurance. Target maintains fire, casualty and liability insurance as
listed on Schedule 3.21. All premiums heretofore payable under all such policies
and bonds have been paid and Target is otherwise in full compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Target does not know of any
threatened termination of, or premium increase with respect to, any of such
policies.

3.22 Environmental, Health, and Safety Matters.

3.22.1 Each of Target, its Subsidiaries, its predecessors and
affiliates has complied and is in compliance with all Environmental,
Health, and Safety Requirements. For purposes of this Agreement,
"Environmental, Health, and Safety Requirements" shall mean all statutes,
regulations, ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations, all
contractual obligations and all law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each
as amended and as now or hereafter in effect.

3.22.2 Neither Target, its Subsidiaries nor their respective
predecessors or affiliates has received any written or oral notice, report
or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), including any

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<PAGE>

investigatory, remedial or corrective obligations, relating to any of them
or its facilities arising under Environmental, Health, and Safety
Requirements.

3.22.3 None of the following exists at any property or facility owned
or operated by Target: (a) underground storage tanks, (b)
asbestos-containing material in any form or condition, (c) materials or
equipment containing polychlorinated biphenyls, or (d) landfills, surface
impoundments, or disposal areas.

3.22.4 None of Target, its Subsidiaries, or their respective
predecessors or affiliates has treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or owned
or operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would
give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to any Environmental, Health,
and Safety Requirements.

3.22.5 Neither Target, its Subsidiaries nor its predecessors or
affiliates has, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person or entity relating to
Environmental, Health, and Safety Requirements.

3.22.6 To the best knowledge of Target and the Shareholder, no facts,
events or conditions relating to the past or present facilities, properties
or operations of each of Target, its Subsidiaries, its and their respective
predecessors and affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.

3.23 Product and Service Warranties. Between December 31, 1998 and the date
of this Agreement, Target has not experienced any product or service warranty
claims materially greater than the same type of claims reflected in the Target
Financial Statements for a comparable period in the previous fiscal year ended
December 31, 1998. Target's obligations with respect to defects in materials or
workmanship is limited to an obligation to repair or replace the product in
question.

3.24 Customers; Backlog; Returns and Complaints. Neither Target nor any of
its Subsidiaries has outstanding material disputes concerning its goods and/or
services with any customer who, in the year ended December 31, 1998, was one of
the twenty largest sources of revenues for Target, based on amounts paid (a
"Significant Customer") and Target has no knowledge of any dissatisfaction on
the part of any Significant Customer. Target has not received any information
from any current Significant Customer that such customer will not continue as a
customer of Target after the Closing or that any such customer intends to
terminate or materially modify existing contracts or arrangements with Target.
Target has not had any of

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its products returned by a purchaser thereof except for normal warranty returns
consistent with past history and those returns that would not result in a
reversal of any revenue by Target.

3.25 Suppliers. Neither Target nor its Subsidiaries have any outstanding
material disputes concerning goods or services provided by any supplier who, in
the year ended December 31, 1998, was one of the twenty largest suppliers of
goods and services to Target, based on amounts paid ("Significant Supplier").
Target has not received any written notice of a termination or interruption of
any existing contracts or arrangements with any Significant Suppliers. Target
has access, on commercially reasonable terms, to all goods and services
reasonably necessary to them to carry on their business as currently conducted
and Target has no knowledge of any reason why Target will not continue to have
such access on commercially reasonable terms.

3.26 Inventory. The inventory of Target and its Subsidiaries reflected in
the Target Financial Statements (the "Inventory") was valued at cost (determined
on a first-in, first-out basis) or market, whichever is lower. The Inventory is
in all material respects of good and merchantable quality and is readily usable
and salable in the ordinary course of Target's businesses, except for items of
obsolete materials and materials of below standard quality, substantially all of
which have been written down to realizable market value, or for which adequate
reserves have been provided, in the Target Financial Statements. All items
included in such Inventory are owned by Target or its Subsidiaries free and
clear of all liens and encumbrances, except for inventory sold by Target in the
ordinary course of business subsequent to the Balance Sheet Date. All Inventory
materially in excess of reasonable estimated requirements for Target based on
current operations for the next six months are set forth on Schedule 3.26. For
Inventory manufactured to customer specifications effectively rendering the
Inventory salable only to that customer, the terms of the sales contracts
applicable thereto require the customer to acquire such Inventory (to the extent
of the quantity limits specified in such sales contracts) if it is manufactured
and delivered in accordance with such sales contracts.

3.27 Accounts Receivable. The receivables shown on the balance sheet on the
Balance Sheet Date arose in the ordinary course of business and have been
collected or are collectible in the book amounts thereof, less an amount not in
excess of the allowance for doubtful accounts provided for in the balance sheet
on the Balance Sheet Date. Allowances for doubtful accounts and warranty returns
are adequate and have been prepared in accordance with Finnish GAAP consistently
applied and in accordance with the past practices of Target. The receivables of
Target and its Subsidiaries arising after the Balance Sheet Date and prior to
the Closing Date arose or will arise in the ordinary course of business and have
been collected or are collectible in the book amounts thereof, less allowances
for doubtful accounts and warranty returns determined in accordance with the
past practices of Target. To the best knowledge of Target, none of the
receivables of Target and its Subsidiaries is subject to any material claim of
offset, recoupment, setoff or counter-claim and Target has no knowledge of any
specific facts or circumstances (whether asserted or unasserted) that could give
rise to any such claim. No material amount of receivables are contingent upon
the performance by Target or any Subsidiary of any obligation or contract other
than normal warranty repair and replacement. No person has any lien on any of
such receivables and no agreement for deduction or discount has been made with
respect to any of such receivables. Schedule 3.27 sets forth an aging of
accounts receivable

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of Target in the aggregate and by customer, and indicates the amounts of
allowances for doubtful accounts and warranty returns and the amounts of
accounts receivable which are subject to asserted warranty claims. Schedule 3.27
sets forth such amounts of accounts receivable which are subject to asserted
warranty claims by customers and reasonably detailed information regarding
asserted warranty claims made within the last year, including the type and
amounts of such claims.

3.28 Accounting Matters. To the best of Target's knowledge, neither Target,
its Subsidiaries nor the Shareholder have taken, or agreed to take, any action
that would prevent Acquiror from accounting for the Exchange as a "pooling of
interests" under generally accepted accounting principles. Target is autonomous
and has never been a subsidiary or division or another corporation or other
entity. Except as disclosed in Schedule 3.28, Target has not (i) issued any
shares of its capital stock since December 31, 1995, (ii) paid any dividends or
effected any other distributions to its shareholders since December 31, 1995,
(iii) reacquired or purchased any Shares of its capital stock from December 31,
1995, (iv) changed any of its equity interests after December 31, 1995 or (v)
sold significant assets since December 31, 1995 in contemplation of a merger;
and the Shareholder does not have any controlling interest or significant
influence in a business similar to Acquiror or which is dependent on employees,
assets or other resources of Target.

3.29 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon Target or which has or could reasonably
be expected to have the effect of prohibiting or impairing any business practice
of Target, any acquisition of property by Target or the conduct of business of
Target as currently conducted or as currently proposed to be conducted.

3.30 Shareholder's Representations.

3.30.1 Information. The Shareholder acknowledges that he has received,
read and understands the Acquiror Disclosure Package (as defined in Section
4.6 of this Agreement).

3.30.2 Access to Other Information. The Shareholder recognizes that
Acquiror has made available to such Shareholder the opportunity to examine
such additional documents from Acquiror and to ask questions of, and
receive full answers from, Acquiror concerning, among other things,
Acquiror, its financial condition, its management, its prior activities and
any other information which the Shareholder considers relevant or
appropriate in connection with entering into this Agreement. The
Shareholder further represents that the oral information provided by
Acquiror's management, if any, has been consistent with the information set
forth in the Acquiror Disclosure Package.

3.30.3 Risks of Investment. The Shareholder acknowledges that the
Acquiror Ordinary Shares issued in connection with the Exchange (the
"Restricted Securities") are unregistered and may not be resold publicly
for a period of at least one year under Rule 144 unless the shares are
registered with the SEC. The Shareholder accepts and is able to bear the
risks of holding such shares indefinitely and the other risks set forth in
the Acquiror Disclosure

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Package. The Shareholder, together with his advisors, is capable of
assessing the risks of an investment in Acquiror Ordinary Shares and is
fully aware of the economic risks thereof.

3.30.4 Investment Intent. The Shareholder is receiving the Restricted
Securities in the Exchange for investment for such Shareholder's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act, other than
pursuant to an effective registration statement under the Securities Act.

3.30.5 Restricted Securities; Registration Rights. The Shareholder
acknowledges and understands that the terms of the Exchange have not been
reviewed by the SEC or by any state securities authorities, that the
Acquiror Ordinary Shares received by the Shareholder pursuant to the
Exchange has not been registered under the Securities Act and constitutes
"restricted securities" under Rule 144(d) of the Securities Act, and has
been issued in reliance on the exemptions for non-public offerings provided
by Rule 506 and Section 4(2) of the Securities Act, which exemptions depend
upon, among other things, the representations made and information
furnished by the Shareholder, including the bona fide nature of the
Shareholder's investment intent as expressed above. The Shareholder
acknowledges that he has certain rights to register such Restricted
Securities as set forth in the Registration Rights Agreement (as defined in
Section 8.9) and that they may not be sold or transferred except in
accordance with such provisions. The Shareholder further acknowledges and
understands that Acquiror is obligated to register the Restricted
Securities to be issued to the Shareholder only as provided in the
Registration Rights Agreement.

3.30.6 Legends. The Shareholder also understands and agrees that there
will be placed on the certificates evidencing the ownership of the
Restricted Securities, the following legends, in addition to any legends
required by applicable state laws:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED,
EXCHANGED OR TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT (AND CURRENT PROSPECTUS) IS IN EFFECT AS TO THE SECURITIES,
OR (2) AN EXEMPTION FROM REGISTRATION IS AVAILABLE, OR (3) THE SECURITIES
ARE SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE OR
OTHER NATIONAL SECURITIES LAWS. FURTHERMORE, THE SECURITIES MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED OR TRANSFERRED UNTIL SUCH TIME AS RESULTS
COVERING AT LEAST 30 DAYS OF COMBINED OPERATIONS OF THE ISSUER AND TARGET
HAVE BEEN PUBLISHED BY THE ISSUER IN A PUBLIC FILING OR ANNOUNCEMENT.

3.30.7 Stop Transfer Instructions; No Requirement to Transfer. The
Shareholder agrees that, in order to ensure compliance with the
restrictions referred to herein,

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Acquiror may issue appropriate "stop transfer" instructions to its transfer
agent. Acquiror shall not be required (i) to transfer or have transferred
on its books any Acquiror Ordinary Shares that has been sold or otherwise
transferred in violation of any of the provisions of this Agreement or the
Registration Rights Agreement or (ii) to treat as owner of such Acquiror
Ordinary Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Acquiror Ordinary Shares shall
have been so transferred in violation of any provision of this Agreement or
the Registration Rights Agreement. Acquiror agrees that such stop transfer
instructions and legends will be promptly removed if the provisions of the
Registration Rights Agreement and the Securities Act are complied with.

3.31 Certain Payments. Since December 31, 1995, neither Target, its
Subsidiaries, the Shareholder nor any representative thereof, has offered, paid,
promised to pay, or authorized payment of, or given any money, gift or anything
of value to (i) any governmental official or employee, (ii) political party or
candidate thereof or (iii) any person while knowing that all or a portion of
such money or thing of value will be given or offered to any governmental
official or employee or political party or candidate thereof; with the purpose
of influencing any act or decision of the recipient in his or her official
capacity or to induce the recipient to use his or her influence to affect an act
or decision of a government official or employee.

3.32 Bank Accounts. Schedule 3.32 sets forth the names and locations of all
banks, trust companies, savings and loan associations, and other financial
institutions at which Target or any of its Subsidiaries maintains accounts of
any nature and the names of all persons authorized to draw thereon or make
withdrawals therefrom.

3.33 Other Entities' Liabilities. Neither Target nor any of its
Subsidiaries has any liabilities, contingent or otherwise with respect to the
operations, transactions, liabilities or obligations of any other entity.

4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR

Acquiror hereby represents and warrants, that, except as set forth on the
Schedules attached hereto:

4.1 Organization. Acquiror is duly organized and validly existing under the
laws of the jurisdiction of its incorporation, and has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as proposed to be conducted, and is qualified to do
business in each jurisdiction in which such qualification is required.

4.2 Power, Authorization and Validity.

4.2.1 Acquiror has the right, power, legal capacity and authority to
enter into and perform its obligations under this Agreement and the
Registration Rights Agreement. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement have been duly and
validly approved and authorized by all necessary corporate and shareholder
action on the part of Acquiror.

4.2.2 No filing, authorization or approval, governmental or otherwise,
is necessary to enable Acquiror to enter into, and to perform its
obligations under, this Agreement

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and the Registration Rights Agreement, except for such post-closing filings
as may be required to comply with federal and state securities laws.

4.2.3 This Agreement and the Registration Rights Agreement are, or
when executed by Acquiror will be, valid and binding obligations of
Acquiror enforceable in accordance with their respective terms, except as
to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law governing
specific performance, injunctive relief and other equitable remedies and
(c) the enforceability of provisions requiring indemnification in
connection with the offering, issuance or sale of securities.

4.3 No Violation of Existing Agreements. Neither the execution and delivery
of this Agreement nor the Registration Rights Agreement, nor the consummation of
the transactions contemplated hereby, will conflict with or (with or without
notice or lapse of time, or both) result in a termination, breach, impairment or
violation of (a) any provision of the Articles of Association or Memorandum of
Association of Acquiror, as currently in effect, (b) in any material respect,
any material agreement, instrument or contract to which Acquiror is a party or
by which Acquiror is bound, or (c) except as would not have a Material Adverse
Effect on Acquiror, any national, provincial, local or foreign judgment, writ,
decree, order, statute, rule or regulation application to Acquiror or its assets
or properties.

4.4 Litigation. Except as set forth in the Acquiror Disclosure Package (as
defined in Section 4.6), there is no action, proceeding or investigation pending
or, to Acquiror's actual knowledge, threatened against Acquiror before any court
or administrative agency that, if determined adversely to Acquiror, may
reasonably be expected to have a Material Adverse Effect on Acquiror.

4.5 Absence of Certain Changes. Since December 31, 1998, there has not been
any change in the financial condition, properties, assets, liabilities, business
or results of operations of Acquiror, which change by itself or in conjunction
with all other such changes, whether or not arising in the ordinary course of
business, has had or can reasonably be expected to have a Material Adverse
Effect on Acquiror.

4.6 Disclosure. Acquiror has made available to Target an investor
disclosure package consisting of Acquiror's Annual Report on Form 10-K, as
amended, for its fiscal year ended March 31, 1998, all Forms 10-Q and 8-K, as
amended, filed by Acquiror with the SEC since March 31, 1998 and up to the date
of this Agreement and all proxy materials distributed to Acquiror's shareholders
since March 31, 1998 and up to the date of this Agreement (the "Acquiror
Disclosure Package"). The documents in the Acquiror Disclosure Package (i)
conform, as of the dates of their respective filing with the SEC, in all
material respects, to the requirements of the Securities Act and the Exchange
Act, and (ii) when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. Except as set forth in Schedule 4.6, Acquiror has met
all reporting requirements under the Exchange Act in a timely fashion and, at
the time of their filing with the SEC, all such reports were true and complete
and were prepared in accordance with the requirements under the Exchange Act.

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5. TARGET PRECLOSING COVENANTS

During the period from the date of this Agreement until the Closing Date,
Target (which term, for purposes of this Section 5 shall include each of its
Subsidiaries) and the Shareholder covenant and agree with Acquiror as follows:

5.1 Advice of Changes. Target and the Shareholder will promptly advise
Acquiror's Senior Vice-President of Finance and Administration in writing, to
the extent of the knowledge of any of Target's officers, (a) of any event
occurring subsequent to the date of this Agreement that would render any
representation or warranty of Target or the Shareholder contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (b) of any Material Adverse
Effect with respect to Target.

5.2 Maintenance of Business. The parties hereto understand and acknowledge
that it is their intent to work closely together during the period from the date
hereof until the Closing Date. If Target or the Shareholder become aware of a
material deterioration in the relationship with any material customer, supplier
or key employee, Target or the Shareholder will promptly bring such information
to the attention of Acquiror in writing and, if requested by Acquiror, will
exert all reasonable efforts to restore the relationship.

5.3 Conduct of Business. Target will continue to conduct its business in
the ordinary course consistent with the manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
its current business organization, keep available the services of its current
officers and employees and preserve its relationship with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it.
Without limiting the foregoing, Target will not enter into any transaction or
agreement or take any action out of the ordinary course without the prior
written consent of the President or Senior Vice-President of Finance and
Administration of Acquiror, including, without limitation:

(a) borrow any money other than for the purchase of capital equipment
and payment of customs fees for such equipment; provided that the aggregate
principal amount of such borrowings under this Section 5.3 shall not exceed
the aggregate amount of $5,000,000 after the date of this Agreement;

(b) enter into any transaction, or make any payment or capital
expenditure, that is not in the ordinary course of business or that is
inconsistent with past practice, or enter into any transaction, or make any
payment or commitment, involving an expense of Target or capital
expenditure by Target in excess of $100,000;

(c) encumber or permit to be encumbered any of its assets except in
the ordinary course of its business consistent with past practice and to an
extent which is not material;

(d) dispose of any of its assets except in the ordinary course of
business consistent with past practice;

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(e) enter into any material lease or contract for the purchase or sale
of any property, real or personal, tangible or intangible, except in the
ordinary course of business consistent with past practice, or enter into
any Material Agreement;

(f) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to the
date of this Agreement, subject only to ordinary wear and tear;

(g) pay any bonus, royalty, increased salary or special remuneration
to any officer, employee or consultant or enter into any new employment or
consulting agreement with any such person, or enter into any new agreement
or plan of the type described in Section 3.16.2;

(h) change accounting methods;

(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock;

(j) amend or terminate any contract, agreement or license to which it
is a party except those amended or terminated in the ordinary course of
business, consistent with past practice, and which are not material in
amount or effect;

(k) lend any amount to any person or entity, other than advances to
employee for travel and expenses which are incurred in the ordinary course
of business consistent with past practice, not material in amount, which
travel and expenses shall be documented by receipts for the claimed
amounts;

(l) guarantee or act as a surety for any obligation except for the
endorsement of checks and other negotiable instruments in the ordinary
course of business, consistent with past practice which are not material in
amount;

(m) waive or release any material right or claim except in the
ordinary course of business, consistent with past practice;

(n) issue or sell any shares of its capital stock of any class or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, stock appreciation rights
or other commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;

(o) split or combine the outstanding shares of its capital stock of
any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other
of its securities;

(p) except for the Exchange, merge, consolidate or reorganize with, or
acquire any entity;

(q) amend its Charter Documents;

(r) agree to any audit assessment by any tax authority or file any
income or franchise tax return unless copies of such returns have been
delivered to Acquiror for its review prior to filing;

(s) license any of the Target Intellectual Property;

(t) change any insurance coverage;

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(u) terminate the employment of any management or supervisory
personnel;

(v) agree to do any of the things described in the preceding clauses
5.3(a) through 5.3(u).

5.4 Regulatory Approvals. Target and the Shareholder will execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body which may be reasonably required, or which Acquiror may
reasonably request, in connection with the consummation of the transactions
provided for in this Agreement, including, without limitation, the Finnish
competition filing. Target will use all reasonable efforts to obtain or assist
Acquiror in obtaining all such authorizations, approvals and consents.

5.5 Necessary Consents. Target and the Shareholder will each use their best
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate, in addition to those set forth in Section 5.4, to
facilitate and allow the consummation of the transactions provided for herein
and to facilitate and allow Acquiror to carry on Target's business after the
Closing.

5.6 Litigation. Target will notify Acquiror in writing promptly after
learning of any action, suit, proceeding or investigation by or before any
court, board or governmental agency, initiated by or against Target or
threatened against it.

5.7 No Other Negotiations. From the date hereof until the termination of
this Agreement (provided such termination is not in breach of this Agreement) or
the consummation of the Exchange, Target and the Shareholder will not, and will
not authorize any officer, director, employee or affiliate of Target, or any
other person, on its or their behalf, directly or indirectly, to (a) solicit,
facilitate, discuss or encourage any offer, inquiry or proposal received from
any party other than Acquiror, concerning the possible disposition of all or any
substantial portion of Target's business, assets or capital stock by merger,
sale or any other means or to otherwise solicit, facilitate, discuss or
encourage any such disposition (other than the Exchange), or (b) provide any
confidential information to or negotiate with any third party other than
Acquiror in connection with any offer, inquiry or proposal concerning any such
disposition. Target will immediately notify Acquiror of any such offer, inquiry
or proposal.

5.8 Access to Information. Until the Closing Date, and subject to the terms
and conditions hereof relating to the confidentiality and use of confidential
and proprietary information, Target will provide Acquiror and its agents with
full access to the files, books, records and offices of Target, including,
without limitation, any and all information relating to Target's taxes,
commitments, contracts, leases, licenses, real, personal and intangible
property, and financial condition reasonably necessary for Acquiror to complete
its diligence review of Target's products and business. Target will cause its
accountants to cooperate with Acquiror and its agents in making available all
financial information reasonably requested, including without limitation the
right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.

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5.9 Satisfaction of Conditions Precedent. Target and the Shareholder will
use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 9, and Target and the
Shareholder will use all reasonable efforts to cause the transactions provided
for in this Agreement to be consummated, and, without limiting the generality of
the foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
provided for herein.

5.10 Retention of Employees. Target will use its best efforts to secure for
employment after the Closing by Acquiror, the employees listed in Schedule
3.11(i), and Target will promptly notify Acquiror if any of Target's officers
becomes aware that any of the employees listed in Schedule 3.11(i) intends to
leave its employ.

5.11 Pooling of Interests Accounting. Target and the Shareholder shall use
all reasonable efforts to cause the business combination to be effected by the
Exchange to be accounted for as a "pooling of interests." Target and the
Shareholder shall use all reasonable efforts to cause Target's affiliates not to
take any action that would adversely affect the ability of Acquiror to account
for the business combination to be effected by the Exchange as a "pooling of
interests." Target has no persons or entities that own any of its shares, or
rights to acquire its shares, other than Shareholder.

5.12 Environment Studies. Target will (a) conduct, and will permit Acquiror
and its agents to conduct, such surveys and studies of environmental pollution
and contamination, and compliance with Environmental, Health, and Safety
Requirements, at the operations of Kyrel EMS France S.A. and at any property
owned or used by Kyrel EMS France S.A., as may be requested by Acquiror,
including, if requested by Acquiror, surveys and studies regarding the presence
of groundwater contamination, soil contamination, asbestos, polychlorinated
biphenyls and hazardous substances, (b) use all reasonable efforts to cause
written reports summarizing the findings of any environmental or engineering or
other firm that has conducted, or is now conducting, any such surveys or studies
to be completed and delivered to Acquiror within 20 days after the date hereof,
and (c) provide Acquiror and its agents with full access to the properties,
records and facilities of Target and Kyrel EMS France S.A. as Acquiror may
require in order to complete its diligence review of the compliance of Target's
French operations with all Environmental, Health, and Safety Requirements.

6. ACQUIROR PRECLOSING COVENANTS

During the period from the date of this Agreement until the Closing Date,
Acquiror covenants to and agrees as follows:

6.1 Regulatory Approvals. Acquiror will execute and file, or join in the
execution and filing, of any application or other document that may be necessary
in order to obtain the authorization, approval or consent of any governmental
body which may be reasonably required, or which Target may reasonably request,
in connection with the consummation of the transactions provided for in this
Agreement. Acquiror will use all reasonable efforts to obtain all such
authorizations, approvals and consents.

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6.2 Satisfaction of Conditions Precedent. Acquiror will use all reasonable
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Section 8, and Acquiror will use all reasonable efforts to
cause the transactions provided for in this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions provided for herein.

6.3 Advice of Changes. Acquiror will promptly advise Target in writing, to
the extent of the knowledge of Acquiror's President, Chief Executive Officer or
Senior Vice President of Finance and Administration, (a) of any event occurring
subsequent to the date of this Agreement that would render any representation or
warranty of Acquiror contained in this Agreement, if made on or as of the date
of such event or the Closing Date, untrue or inaccurate in any material respect
and (b) of any material adverse change in Acquiror's financial condition,
properties, assets, liabilities, business or results of operations.

6.4 Litigation. Acquiror will notify Target in writing promptly after
learning of any action, suit, proceeding or investigation by or before any
court, board or governmental agency, initiated by or against Acquiror or
threatened against it.

6.5 Pooling Accounting. Acquiror shall use all reasonable efforts to cause
the business combination to be effected by the Exchange to be accounted for as a
"pooling of interests." Acquiror shall use all reasonable efforts to cause its
Affiliates not to take any action that would adversely affect the ability of
Acquiror to account for the business combination to be effected by the Exchange
as a "pooling of interests."

6.6 Acquiror Affiliates Agreements. To ensure that the Exchange will be
accounted for as a "pooling of interests," Acquiror will cause each of its
Affiliates to sign and deliver to Acquiror, on or prior to the Closing Date, a
written agreement (the "Acquiror Affiliates Agreement"), in the form of Exhibit
6.6.

7. CLOSING MATTERS

7.1 The Closing. Subject to termination of this Agreement as provided in
Section 10 below, the Closing will take place at the offices of
Roschier-Holmberg & Waselius in Helsinki, Finland on July 1, 1999, or, if all
conditions to closing have not been satisfied or waived by such date, on the
third business day after all such conditions have been satisfied or waived (the
"Closing Date").

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7.2 Exchanges at the Closing.

7.2.1 At the Closing, the Shareholder will deliver to Acquiror (a)
certificates representing all of the Target Shares owned by such
Shareholder, together with such stock powers, assignments or other
instruments as may be reasonably required by Acquiror to provide for the
transfer of all its Target Shares to Flextronics Finland; and (b) any other
documentation required to effectuate the transfer under applicable law.

7.2.2 Upon receipt of the documents described in Section 7.2.1,
Acquiror will deliver to the Shareholder a share certificate or
certificates issued in the name of the Shareholder for the number of
Acquiror Ordinary Shares determined as provided in Section 2.1.

7.2.3 Promptly after the Closing, Acquiror will deliver to the
Shareholder any cash due in lieu of fractional shares as provided for in
Section 2.2.

7.2.4 At the Closing, the Shareholder, Flextronics Finland and
Acquiror will each execute a Share Transfer Agreement in the form of
Exhibit 7.2.4.

8. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER

The Shareholder's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by the Shareholder, but only in a writing
signed by the Shareholder):

8.1 Accuracy of Representations and Warranties. The representations and
warranties of Acquiror set forth in Section 4 shall be true and accurate in
every material respect on and as of the Closing.

8.2 Covenants. Acquiror shall have performed and complied in all material
respects with all of its covenants contained in Section 6 on or before the
Closing.

8.3 Closing Certificate. The Shareholder shall receive a certificate to the
effect that the requirements of Sections 8.1 and 8.2 have been satisfied signed
by a duly authorized officer of Acquiror.

8.4 Compliance with Law. There shall be no order, decree, or ruling by any
court or governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.

8.5 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the Exchange by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
securities laws.

8.6 No Litigation. No litigation or proceeding shall be pending for the
purpose or with the probable effect of enjoining or preventing the consummation
of any of the

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transactions contemplated by this Agreement or which would have a Material
Adverse Effect on Acquiror.

8.7 Documents. The Shareholder shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by their legal counsel to consummate the transactions contemplated
hereby.

8.8 Opinion of Acquiror's Counsel. The Shareholder shall have received from
Allen & Gledhill, Singapore counsel to Acquiror, an opinion substantially in the
form of Exhibit 8.8.

8.9 Registration Rights Agreement. Acquiror shall have executed and
delivered to the Shareholder a Registration Rights Agreement (the "Rights
Agreement") substantially in the form attached as Exhibit 11.5.

9. CONDITIONS TO OBLIGATIONS OF ACQUIROR

The obligations of Acquiror hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Acquiror, but only in a writing signed on
behalf of Acquiror by its Chief Executive Officer or Senior Vice President of
Finance and Administration):

9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Target and the Shareholder set forth in Section 3 shall be
true and accurate in every material respect on and as of the Closing.

9.2 Covenants. The Shareholder and Target shall have performed and complied
in all material respects with all of their covenants contained in Section 5 on
or before the Closing.

9.3 Closing Certificate. Acquiror shall receive a certificate to the effect
that the requirements of Sections 9.1 and 9.2 have been satisfied signed by the
Shareholder and Target.

9.4 Compliance with Law. There shall be no order, decree, or ruling by any
court or governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the transactions provided
for in this Agreement.

9.5 Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the Exchange by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable Finnish securities laws.

9.6 Opinion of Shareholder's and Target's Counsel. Acquiror shall have
received from Mr. Rauno Ruotsalainen, counsel to Target, an opinion
substantially in the form of Exhibit 9.6 including, among other things an
opinion on the capitalization of Target.

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9.7 Consents. Acquiror shall have received duly executed copies of all
material third-party consents, approvals, assignments, waivers, authorizations
or other certificates contemplated by this Agreement or reasonably deemed
necessary by Acquiror's legal counsel to provide for the continuation in full
force and effect of any and all Material Agreements and any other material
contracts and leases of Target and for Acquiror to consummate the transactions
contemplated hereby in form and substance reasonably satisfactory to Acquiror.

9.8 No Litigation. No litigation or proceeding shall be pending which will
have the probable effect of enjoining or preventing the consummation of any of
the transactions provided for in this Agreement. No litigation or proceeding
shall be pending which could reasonably be expected to have a Material Adverse
Effect on Target.

9.9 Managing Director's Agreement. Simo Parhankangas shall have executed
and delivered to Acquiror a Managing Director's Agreement in the form attached
as Exhibit 9.9.

9.10 Satisfactory Form of Legal and Accounting Matters. The form, scope and
substance of all legal and accounting matters contemplated hereby and all
closing documents and other papers delivered hereunder shall be reasonably
acceptable to Acquiror's counsel.

9.11 Share Transfer Agreements. Acquiror shall have received share transfer
agreements from each shareholder of Kyrel EMS France (other than Roland
Gabriel-Robez and Fred Motzkin) in form reasonably acceptable to Acquiror
providing for the transfer of any shares of capital stock of Kyrel EMS France to
such person as may be designated by Acquiror without the payment of any further
compensation to such shareholder.

9.12 Opinion of Acquiror's Accountant. Acquiror shall have received from
(a) Arthur Anderson, its independent public accountant, an opinion that the
Exchange qualifies for pooling of interest accounting under U.S. GAAP and (b)
from KPMG LLP, Target's independent public accountant, a "poolability letter",
in form reasonably acceptable to Acquiror (and which may be addressed to
Target), confirming the absence of circumstances pertaining to Target and the
Shareholder that could prevent the Exchange from qualifying for pooling of
interests accounting.

9.13 Environmental Review. Target shall have complied with all of its
covenants contained in Section 5.12, and shall have delivered to Acquiror
written reports summarizing the findings of Bureau Veritas and any other
environmental or engineering or other firm that has conducted, or is conducting,
any surveys or studies of the type referred to in Section 5.12, including the
study of Bureau Veritas with respect to soil contamination at the facilities of
Kyrel France; and Acquiror shall not have reasonably concluded, based on such
reports and on any other studies or surveys referred to in (or contemplated by)
Section 5.12, that any conditions exist with respect to the facilities and
property of Kyrel France that would both (a) cost in excess of $1,000,000 to
correct or remediate or be impractical or impossible to correct or remediate,
and (b) prevent or limit continued compliance with Environmental, Health, and
Safety Requirements, give rise to any remedial or corrective obligations
pursuant to Environmental, Health, and Safety Requirements, or give rise to any
other liabilities (whether accrued, absolute, contingent or otherwise) pursuant
to Environmental, Health, and Safety Requirements.

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10. TERMINATION OF AGREEMENT

10.1 Termination. This Agreement may be terminated at any time prior to the
Closing:

(a) by the mutual written consent of Acquiror and Target;

(b) by Target, if there has been a breach by Acquiror of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of Acquiror, or if any representation of Acquiror will have
become untrue, in either case which has or can reasonably be expected to
have a Material Adverse Effect on Acquiror and which Acquiror fails to cure
within a reasonable time, not to exceed thirty (30) days after written
notice thereof (except that no cure period will be provided for a breach by
Acquiror which by its nature cannot be cured);

(c) by Acquiror, if there has been a breach by Target of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of Target, or if any representation of Target will have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on Target and which Target fails to cure within a
reasonable time not to exceed thirty (30) days after written notice thereof
(except that no cure period will be provided for a breach by Target which
by its nature cannot be cured); or

(d) by either party, if (i) the Exchange shall not have been
consummated by September 1, 1999 for any reason; provided, however, that
the right to terminate this Agreement under this Section 10.1(d)(i) shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Exchange to occur on
or before such date if such action or failure to act constitutes a breach
of this Agreement; or (ii) a permanent injunction or other order by any
Finnish or Swedish court which would make illegal or otherwise restrain or
prohibit the consummation of the Exchange will have been issued and will
have become final and nonappealable.

Any termination of this Agreement under this Section 10.1 will be effective
by the delivery of written notice of the terminating party to the other party
hereto.

10.2 Certain Continuing Obligations. Following any termination of this
Agreement pursuant to this Section 10, the parties hereto will continue to
perform their respective obligations under Section 13 but will not be required
to continue to perform their other covenants under this Agreement.

11. CONTINUING COVENANTS

11.1 Survival of Representations. All representations and warranties of the
Shareholder and Target set forth in this Agreement will remain operative and in
full force and effect (but only as of the date they were made and as of the
Closing Date) after the Closing, regardless of any investigation made or on
behalf of the parties to this Agreement; provided, however, that no claim for
violations of any representation and warranty (absent fraud or deliberate
malfeasance) shall be made unless Acquiror gives written notice thereof to the
Shareholder on or prior to the Final Release Date. Acquiror's representations
and warranties set forth in this Agreement shall terminate as of the Closing.

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11.2 Shareholder Agreement to Indemnify.

11.2.1 Indemnification by Shareholder. Subject to the limitations set
forth in this Section 11.2, the Shareholder will indemnify and hold
harmless Acquiror and its respective officers, directors, agents and
employees, and each person, if any, who controls or may control Acquiror
(hereinafter in this Section 11.2 referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and
against any and all claims, demands, actions, causes of action, losses,
costs, damages, liabilities and expenses including, without limitation,
reasonable legal fees (collectively, "Damages") directly or indirectly
caused by or arising out of any misrepresentation or breach of or default
in connection with any of the representations, warranties or covenants to
be performed pre or post-closing given or made by Target or the Shareholder
in this Agreement or any document delivered by Target or by the Shareholder
as an Exhibit hereto.

In seeking indemnification for Damages under this Section, the
Indemnified Persons shall make no claim for Damages unless and until such
Damages aggregate at least $50,000 (including legal fees), in which event
such Indemnified Person may make claims for all Damages (including the
first $50,000 thereof).

11.2.2 Aggregate Liability of the Shareholder. The aggregate liability
of the Shareholder (absent fraud or deliberate malfeasance) under Section
11.2.1 shall be limited to the product of (i) ten percent of the aggregate
number of Transaction Shares, multiplied by (ii) the Closing Price
(including the dollar amount of any Damages for which the number of
Hold-Back Shares is reduced pursuant to Section 12.1).

11.2.3 Survival and Settlement of Claims. Notwithstanding anything to
the contrary in this Agreement, if, prior to the expiration of a particular
representation or warranty an Indemnified Person makes a claim for
indemnification under either this Agreement with respect to a
misrepresentation or breach of such representation or warranty, then the
Indemnified Person's rights to indemnification under this Section 11.2 for
such claim shall survive any expiration of such representation or warranty;
provided, however, that the parties hereby agree to use their best efforts
to settle all claims for breach of a representation or warranty prior to
the Final Release Date.

11.2.4 Indemnification Procedures. Promptly after the receipt by
Acquiror of notice or discovery of any Claim, Acquiror will give the
Shareholder written notice of such Claim in accordance with Section 11.2.6.
Acquiror may assert a Claim at any time prior to the Final Release Date.
Within ten days of delivery of such written notice, the Shareholder may, at
his expense, elect to take all necessary steps properly to contest any
Claim involving third parties or to prosecute such Claim to conclusion or
settlement satisfactory to the Shareholder, using counsel reasonably
acceptable to Acquiror. If the Shareholder makes the foregoing election,
Acquiror will have the right to participate at its own expense in all
proceedings. If the Shareholder does not make such election, Acquiror shall
be free to handle the prosecution or defense of any such Claim, will take
all necessary steps to contest the Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to Acquiror,
and will notify the Shareholder of the progress of any such Claim, will
permit the Shareholder, at the sole cost of the Shareholder, to participate
in such prosecution or defense and will provide the Shareholder with
reasonable access to all relevant information and documentation relating to
the Claim and Acquiror's prosecution or defense thereof. In any case, the
party not in control of the

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<PAGE>

Claim will cooperate with the other party in the conduct of the prosecution
or defense of such Claim. Neither party will compromise or settle any such
Claim without the written consent of either Acquiror (if the Shareholder
defends the Claim) or the Shareholder (if Acquiror defends the Claim), such
consent not to be unreasonably withheld.

11.2.5 Subrogation. In the event that the Shareholder shall be
obligated to indemnify any Indemnified Person pursuant to this Agreement,
the Shareholder shall, upon payment of such indemnity in full, be
subrogated to all rights of such Indemnified Person with respect to the
claim to which such indemnification relates.

11.2.6 Notice of Claim. Each notice of a Claim by Acquiror pursuant to
Section 11.2 (the "Notice of Claim") will be in writing and will contain
the following information to the extent it is reasonably available to
Acquiror:

(a) Acquiror's good faith estimate of the reasonably foreseeable
maximum amount of the alleged Damages (which amount may be the amount of
damages claimed by a third party plaintiff in an action brought against
Acquiror or Target based on alleged facts, which if true, would constitute
a breach of Target's representations and warranties); and

(b) A brief description in reasonable detail of the facts,
circumstances or events giving rise to the alleged Damages based on
Acquiror's good faith belief thereof, including, without limitation, the
identity and address of any third-party claimant (to the extent reasonably
available to Acquiror) and copies of any formal demand or complaint.

11.2.7 Resolution of Notice of Claim. Any Notice of Claim received by
the Shareholder pursuant to Section 11.2.6 above will be resolved as
follows:

(a) Uncontested Claims. In the event that the Shareholder does not
contest a Notice of Claim in writing to the Acquiror and does not pay the
amount demanded within 30 calendar days after the Notice of Claim
containing a statement of the claimed Damages is delivered pursuant to
Section 11.2.6 above (or, if earlier, by the Final Release Date), such
amount of claimed Damages specified in the Notice of Claim shall be added
to the Estimated Claim Amount.

(b) Contested Claims. In the event that the Shareholder gives written
notice contesting all, or a portion of, a Notice of Claim to Acquiror (a
"Contested Claim") within the 30-day period provided above (or, if earlier,
by the Final Release Date), matters that are subject to third party claims
brought against Acquiror or Target in a litigation or arbitration will
await the final decision, award or settlement of such litigation or
arbitration, while other matters that are not otherwise resolved by the
parties shall be resolved by the courts of Sweden as provided in Section
13.1. Any portion of the Notice of Claim that is not contested will be
resolved as set forth above in Section 11.2.7(a).

11.3 Securities Act Matters. The Shareholder agrees not to sell, transfer
or otherwise dispose of any Acquiror Ordinary Shares unless such sale, transfer
or disposition is made pursuant to an effective registration statement under the
Securities Act or in a transaction that, in the opinion of counsel reasonably
acceptable to Acquiror, is exempt from registration thereunder, and the
Shareholder understands that the Acquiror Ordinary Shares issued in the

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Exchange will bear appropriate legends setting forth the restrictions on
transfer contained in this Section 11.3 and in Section 11.4.

11.4 Shareholder Representations and Covenants Relating to "Pooling of
Interests" Accounting.

11.4.1 The Shareholder has not in contemplation of the Exchange,
engaged, and will not, after the Closing, until such time as results
covering at least 30 days of combined operations of the Acquiror and Target
have been published by Acquiror, in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a report to
the SEC on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations, engage, in
any sale, exchange, transfer, pledge, disposition of or grant of any
option, establish any "short" or put-equivalent position with respect to or
the entry into any similar transaction intended to reduce the risk of the
Shareholder's ownership of or investment in, any of the following:

(a) any Acquiror Ordinary Shares which the Shareholder may acquire in
connection with the Exchange, or any securities which may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and
other securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;

(b) any capital stock of Target; or

(c) any Target Shares or other Target equity securities which the
Shareholder purchases or otherwise acquires after the execution of this
Agreement.

11.4.2 As promptly as practicable following the Closing, Acquiror
shall publish results covering at least 30 days of combined operations of
the Acquiror and Target in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations; provided, however, that
Acquiror shall be under no obligation to publish any such financial
information other than with respect to a fiscal quarter of Acquiror.

11.5 Registration of Acquiror Ordinary Shares. Following the Closing,
Acquiror shall take such action with respect to the registration for resale the
Acquiror Ordinary Shares and Hold-Back Shares received or to be received by the
Shareholder pursuant to the Exchange. Such registration shall be made in
accordance with the terms and conditions set forth in Exhibit 11.5.

11.6 Agreement Not to Compete.

11.6.1 For the three years after the Closing Date (the "Noncompetition
Term") the Shareholder shall not, without the written consent of Acquiror,
directly or indirectly, individually or as an employee, partner, officer,
director or shareholder or in any other capacity whatsoever of or for any
person, firm, partnership, company or corporation other than Acquiror or
its Subsidiaries (other than as a holder of less than 5% of the outstanding
capital stock of a publicly-traded company):

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(a) Own, manage, operate, sell, control or participate in the
ownership, management, operation, sales or control of or be connected in
any manner with any business engaged in printed circuit board design or
assembly or electronics contract manufacturing or that is otherwise
substantially similar to or competitive with any services or products
created, distributed or under development by Acquiror, or any of its
Subsidiaries;

(b) Recruit, attempt to hire, solicit, assist others in recruiting or
hiring, or refer to others concerning employment, any person who is or was
an employee of Acquiror, or any of its Subsidiaries, or induce or attempt
to induce any such employee to terminate his employment with the Acquiror,
or any of its Subsidiaries (as the case may be);

(c) Induce or attempt to induce any person or entity to curtail or
cancel any business or contracts that such person or entity had with
Acquiror, or any of its Subsidiaries; or

(d) Contact, solicit or call upon any customer or supplier of
Acquiror, or any of its Subsidiaries, on behalf of any other person or
entity for the purpose of selling or providing any services or products of
the type normally sold or provided by Acquiror, or any of its Subsidiaries.

11.6.2 The agreements set forth in this Section 11.6 include within
their scope all cities, counties, provinces and states of Finland, France
and other countries in which Acquiror or any of its Subsidiaries has
engaged in manufacturing or sales or otherwise conducted business or
selling or licensing efforts at any time during the two years prior to the
Closing Date hereof or during the Noncompetition Term. The Shareholder
acknowledges that the scope and period of restrictions and the geographical
area to which the restriction imposed in this Section 11.6 shall apply are
fair and reasonable and are reasonably required for the protection of
Acquiror and that Section 11.6.1(a) accurately describes the business to
which the restrictions are intended to apply.

11.6.3 It is the desire and intent of the parties that the provisions
of this Section 11.6 shall be enforced to the fullest extent permissible
under applicable law. If any particular provision or portion of this
Section 11.6 shall be adjudicated to be invalid or unenforceable, this
Section 11.6 shall be deemed amended to revise those provisions or portions
to the minimum extent necessary to render them enforceable. Such amendment
shall apply only with respect to the operation of this paragraph in the
particular jurisdiction in which such adjudication was made.

11.6.4 The Shareholder acknowledges that any breach of the covenants
of Section 11.6 will result in immediate and irreparable injury to Acquiror
and, accordingly, consents to the application of injunctive relief and such
other equitable remedies for the benefit of Acquiror as may be appropriate
in the event such a breach occurs or is threatened. The foregoing remedies
shall be in addition to all other legal remedies to which Acquiror may be
entitled hereunder, including, without limitation, monetary damages.

12. HOLD-BACK ARRANGEMENT

12.1 Reduction of Hold-Back Shares. Provided the procedures in

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Sections 11.2.4, 11.2.6 and 11.2.7 are followed, the Acquiror may elect, in lieu
of receiving indemnification in cash pursuant to Section 11 for any Damages,
reduce the number of Hold-Back Shares issuable to the Shareholder by a number
equal to the quotient of (a) the Estimated Claim Amount divided by (b) the
Closing Price (as defined in Section 2.5). In the event that the number of
Hold-Back Shares is reduced as a result of any Claim which the Shareholder
shall, on the Final Release Date, be disputing pursuant to Section 11.2.7(b).
Upon resolution of such dispute the Acquiror will issue to the Shareholder the
number of Hold-Back Shares, if any, that the Shareholder would have been
entitled to receive had such dispute been resolved prior to the Final Release
Date, but which were not issued to the Shareholder on the Final Release Date as
a result of the preceding sentence. Subject to Section 11.2.2, the Acquiror
shall be entitled to indemnification in cash under Section 11.2 to the extent
the amount of Damages exceeds the product of (i) the number of shares by which
the Hold-Back Shares have been so reduced multiplied by (ii) the Closing Price.

12.2 Allotment and Issuance of Shares. Acquiror will allot and issue the
Final Release Shares (as defined in Section 2.5) on the Final Release Date to
the Shareholder. Acquiror will take such action as may be necessary to cause
share certificates to be issued in the name of the Shareholder and deliver such
share certificates to the Shareholder within three business days of the Final
Release Date. Cash will be paid in lieu of fractions of Acquiror Ordinary Shares
as provided in Section 2.2. Within five business days after written request from
the Shareholder, Acquiror will submit a certified schedule of the cash amounts
payable for fractional shares and will deliver such funds to the Shareholder.

13. GENERAL PROVISIONS

13.1 Governing Law.

THE INTERNAL LAWS OF SWEDEN SHALL GOVERN AND BE USED TO CONSTRUE THIS AGREEMENT,
WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. TARGET AND THE
SHAREHOLDER AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF SWEDEN.

13.2 Assignment; Binding upon Successors and Assigns. Neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto; provided however that Flextronics Finland
shall have the right to assign its rights hereunder, including its right to
receive Target Shares, to one or more direct or indirect Subsidiaries of
Acquiror. Any purported assignment in violation of this Section shall be void.
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

13.3 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable

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<PAGE>

provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.

13.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.

13.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.

13.6 Amendment and Waivers. The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. Any term or provision of this
Agreement may be amended, either retroactively or prospectively, only by an
agreement in writing signed by Acquiror, Target and the Shareholder.

13.7 No Waiver. The failure of any party to enforce any of the provisions
hereof will not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.

13.8 Expenses. Each party will bear its respective expenses and fees of its
own accountants, attorneys, investment bankers and other professionals incurred
with respect to this Agreement and the transactions contemplated hereby;
provided that the Shareholder shall be responsible for the investment banking,
legal and accounting fees and expenses incurred by Target. If payment for such
fees and expenses of Target is not made by the Shareholder, Acquiror will pay
such fees or expenses, in which event Acquiror will be entitled to be reimbursed
by the Shareholder for such payment and, if not so reimbursed, Acquiror will be
entitled to treat the amount of payment as Damages recoverable under Section
11.2.

13.9 Attorneys' Fees. Should any arbitration or other suit be brought to
enforce or interpret any part of this Agreement, the prevailing party will be
entitled to recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court or other trier of fact
(including, without limitation, costs, expenses and fees on any appeal). The
prevailing party will be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.

13.10 Notices. Any notice or other communication required or permitted to
be given under this Agreement will be in writing, will be delivered personally
or by registered or certified mail, postage prepaid, and will be deemed given
upon delivery, if delivered personally, or three days after deposit in the
mails, if mailed, to the following addresses:

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(i) If to Acquiror:

Flextronics International, Ltd.
2090 Fortune Drive
San Jose, CA 95131
Telecopy: (408) 428-1300
Attention: Senior Vice President, Finance
and Administration

with a copy to:

Fenwick & West, LLP
Two Palo Alto Square, Suite 800
Palo Alto, CA 94306
Telecopy: (415) 494-1417
Attention: David Michaels

(ii) If to Target:
Kyrel EMS Oyj
Jaakonte 1,
39200 Kyroskoski,
Finland
Telecopy: 358-3-371-6177
Attention: Managing Director

(iii) If to the Shareholder:
Seppo Parhankangas
Laivataival 74,
39200 Kyroskoski,
Finland
Telecopy: (358-3-371-6458)

with a copy to:

Suomen Yritysnotariaatti Oy,
Pohjanpellontie 18D
00870 Helsinki
Finland
Telecopy: 358-9-351-1377
Attention: Mr. Rauno Ruotsalainen

or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 13.10.

13.11 Stamp Duty. The Acquiror shall pay any stamp duty levied on the
Exchange under the laws of Finland.

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<PAGE>

13.12 Statement of Intentions. It is the intention of Acquiror's management
to maintain the operations at Target in a manner that will allow the company to
interface with its customers and employees in a similar fashion to how the
company currently operates. This intention encompasses a number of actions, as
follows:

(a) the Managing Director of Target is expected to continue to manage
the company as before, running both the Finland and French operations,
being responsible for all employee management issues and operating
decisions, and to be responsible for developing his region, subject to the
general direction of the Board of Directors.

(b) the Managing Director of Target is expected to continue to be
responsible for all current customer interfaces, and to call upon
additional Acquiror resources as required.

(c) Acquiror desires to have the Kyrel name eventually be replaced by
the Flextronics name to insure that customers recognize all aspects of the
company as being unified. However, the Managing Director of Target, in
conjunction with the Managing Director of Flextronics International Sweden
AB or President of Flextronics International Western Europe, shall
determine the time frame and manner in which this is best accomplished.

(d) Acquiror's management does not intend to move business from
Target's factories to existing Flextronics factories, without the agreement
of the Managing Director of Flextronics International Sweden AB or
President of Flextronics International Western Europe and the Managing
Director of Target, and as consistent with the needs of the customers.

13.13 Construction of Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an exhibit
will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole. The use of the expression "$" in Sections 3, 5.3,
and 11 refers to U.S. dollars and should the need arise to express such amounts
in other currencies the exchange rate used shall be the prevailing exchange rate
as of the date of such conversion. All United States dollar amounts set forth in
Section 3 of this Agreement shall be deemed to include the Finnish equivalent
for purposes of this Agreement.

13.14 No Joint Venture. Nothing contained in this Agreement will be deemed
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status is,
and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.

13.15 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such

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<PAGE>

further written assurances as may be reasonably requested by any other party to
evidence and reflect the transactions described herein and contemplated hereby
and to carry into effect the intents and purposes of this Agreement.

13.16 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof will be personal solely between the parties
to this Agreement.

13.17 Public Announcement. Upon execution of this Agreement, Acquiror and
Target will issue a press release approved by both parties announcing the
Exchange. Thereafter, Acquiror may issue such press releases, and make such
other disclosures regarding the Exchange, as it reasonably and in good faith
determines are required under applicable securities laws or regulatory rules.

13.18 Confidentiality. The Shareholder, Target and Acquiror each recognize
that they have received and will receive confidential information concerning the
other during the course of the Exchange negotiations and preparations.
Accordingly, Acquiror, the Shareholder and Target each agrees (a) to use its
respective best efforts to prevent the unauthorized disclosure of any
confidential information concerning the other that was or is disclosed during
the course of such negotiations and preparations, and is clearly designated in
writing as confidential at the time of disclosure, and (b) to not make use of or
permit to be used any such confidential information other than for the purpose
of effectuating the Exchange and related transactions. The obligations of this
Section will not apply to information that (i) is or becomes part of the public
domain, (ii) is disclosed by the disclosing party to third parties without
restrictions on disclosure, (iii) is received by the receiving party from a
third party without breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law. If this Agreement is terminated, all
copies of documents containing confidential information shall be returned by the
receiving party to the disclosing party.

13.19 Entire Agreement. This Agreement and the exhibits, schedules and
appendices hereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof, subject to provisions
of law applicable to this Agreement and the transactions provided for herein,
and supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.

[Rest of this page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

FLEXTRONICS INTERNATIONAL LTD. KYREL EMS OYJ

By: ___________________________ By: ___________________________
Name: __________________________ Name: __________________________
Title: _________________________ Title: _________________________

FLEXTRONICS HOLDING FINLAND OY

By: ___________________________
Name: __________________________
Title: _________________________

SHAREHOLDER:

_______________________________________
Seppo Parhankangas

[SIGNATURE PAGE TO EXCHANGE AGREEMENT]

<PAGE>

List of Attachments

Exhibit 6.6 Acquiror Affiliates Agreement

Exhibit 7.2.4 Share Transfer Agreement

Exhibit 8.8 Form of Opinion of Acquiror's Counsel

Exhibit 9.6 Form of Opinions of Shareholder's and Target's Counsel

Exhibit 9.9 Managing Director's Agreement

Exhibit 11.5 Registration Rights Agreement

Disclosure Schedules

<PAGE>

EXHIBIT 6.6

Acquiror Affiliates Agreement

<PAGE>

TO: Flextronics International Ltd.
2090 Fortune Drive
San Jose, California 95151

FLEXTRONICS INTERNATIONAL LTD.
AFFILIATES AGREEMENT

This Affiliates Agreement (this "Agreement") is being delivered in
connection with the Exchange Agreement dated as of June 11, 1999 (the "Exchange
Agreement") among Flextronics International Ltd., a company organized under the
laws of Singapore ("Flextronics"), Flextronics Holding Finland Oy, an indirect
wholly-owned subsidiary of Flextronics ("Flextronics Finland"), Kyrel EMS Oyj
("Kyrel"), and the shareholder of Kyrel. The Exchange Agreement provides that
Flextronics Finland will acquire all of the outstanding capital stock of Kyrel
in exchange for Flextronics Ordinary Shares (the "Exchange"). Unless otherwise
defined herein, the capitalized terms in this Agreement have the meanings given
to them in the Exchange Agreement.

The undersigned understands that, since the Exchange is expected to be
accounted for using the "pooling-of-interests" method of financial accounting
and the undersigned may be an "affiliate" of Flextronics (within the meaning of
Rule 405 promulgated under the Securities Act of 1933, as amended), the
Flextronics Securities (as defined below) which the undersigned owns may be
disposed of only in conformity with the limitations described herein. The
undersigned has been informed that the treatment of the Exchange as a
pooling-of-interests for financial accounting purposes is dependent upon the
accuracy of certain of the representations and warranties and the compliance
with certain of the agreements set forth herein. The undersigned further
understands that the representations, warranties and agreements set forth herein
will be relied upon by Flextronics and its counsel and accounting firm.

1. Representations, Warranties and Covenants of the Undersigned. The
undersigned represents, warrants and agrees with Flextronics as follows:

(a) Authority; Affiliate Status. The undersigned has full power and
authority to enter into, execute, deliver and perform the undersigned's
obligations under this Agreement, to make the representations, warranties and
covenants herein contained and to perform the undersigned's obligations
hereunder. The undersigned further understands and agrees that the undersigned
may be deemed to be an "affiliate" of Flextronics within the meaning of Rule
405.

(b) Flextronics Securities Owned. Attachment 1 hereto sets forth all
Flextronics Ordinary Shares and any other securities of Flextronics owned by the
undersigned as of the Effective Time, including all securities of Flextronics as
to which the undersigned has sole or shared voting or investment power, and all
rights, options and warrants to acquire Flextronics Ordinary Shares or other
securities of Flextronics (such Flextronics Ordinary Shares, other securities of
Flextronics and rights, options and warrants to acquire Flextronics Ordinary
Shares and other securities of Flextronics are hereinafter collectively referred
to as the "Flextronics Securities").

<PAGE>

sell, transfer or otherwise dispose of any of the Flextronics Securities or
offer or agree to sell, transfer or otherwise dispose of, or in any other way
reduce the undersigned's risk of ownership or investment in, any of such
Flextronics Securities: (i) in the 30-day period immediately preceding the
Closing of the Exchange; or (ii) after the Closing of the Exchange until
Flextronics shall have publicly released a report including the combined
financial results of Flextronics and Kyrel for a period of at least 30 days of
post- Exchange combined operations of Flextronics and Kyrel.

2. Stop-Transfer Instructions. The undersigned also understands that
stop-transfer instructions will be given to Flextronics' transfer agent with
respect to certificates evidencing the Flextronics Securities. Such
stop-transfer instructions will be promptly rescinded upon the publication of
the financial report referred to in Section l(c)(ii) above.

3. Binding Agreement. This Agreement will inure to the benefit of and be
binding upon and enforceable against the parties and their successors and
assigns, including administrators, executors, representatives, heirs, legatees
and devisees of the undersigned and any pledgee holding Flextronics Securities
as collateral.

4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.

Dated: _____________, 1999 Very truly yours,

By: _______________________

Agreed to and accepted:

FLEXTRONICS INTERNATIONAL LTD.

By: ________________________________________
Robert R.B. Dykes
Senior Vice President of Finance and

Administration and Chief Financial Officer

<PAGE>

Attachment 1 to Flextronics International Ltd. Affiliates Agreement

Flextronics Securities

Number of Flextronics Ordinary Shares
beneficially owned by the undersigned: __________________

Number of Flextronics Ordinary Shares
subject to options beneficially
owned by the undersigned: __________________

<PAGE>

EXHIBIT 7.2.4

Share Transfer Agreement

<PAGE>

SHARE TRANSFER AGREEMENT

Seller: Mr. Seppo Parhankangas (soc. sec. - )

Purchaser: Flextronics Holding Finland Oy

Object of Purchase: 100 % of the shares in Kyrel EMS Oyj, reg.no. 359.337.
Shares Nos [ - ] (the "Shares")

Purchase Price: [-value of exchange shares at Closing-]

Terms of Payment: The payment of the Purchase Price [ ] ([ ])
for the Shares is acknowledged by the signing of
this Agreement.

Transfer of Title: Full and unrestricted title
to the Shares shall pass to the
Purchaser against payment of the
Purchase Price. Share certificates
corresponding to the Shares have duly
been transported to the Purchaser and
is acknowledged by the signing of this
Agreement.

Payment of Transfer Tax: The transfer tax relating to the transfer hereunder
shall be paid by the Purchaser.

Other Terms: In accordance with the Exchange Agreement, dated
June 11, 1999 between the Seller and the Purchaser.

Helsinki, [ ], 1999

FLEXTRONICS HOLDING FINLAND OY SEPPO PARHANKANGAS

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

<PAGE>

EXHIBIT 8.8

Form of Opinion of Acquiror's Counsel

<PAGE>

[On the letterhead of Allen & Gledhill]

Dear Sirs:

1. We have been asked to render this opinion in connection with an Exchange
Agreement dated June 11, 1999 (the "Agreement") made between (1) Flextronics
International Ltd. (the "Company"), (2) Flextronics Holding Finland Oy, and (3)
Seppo Parhankangas (the "Shareholder") relating to the acquisition by the
Company of all of the issued and outstanding capital stock of Kyrel EMS Oyj from
the Shareholder, in consideration for which the Company will allot and issue
ordinary shares of S$0.01 each in the capital of the Company, credited as fully
paid, to the Shareholder, in accordance with the terms and conditions set forth
in the Agreement (the "Flextronics Ordinary Shares"). This opinion is being
rendered to you pursuant to Section 8.8 of the Agreement. Terms defined and
references construed in the Agreement have the same meaning and construction in
this opinion.

2. For the purpose of rendering this opinion, we have examined:

(i) a copy of the executed Agreement together with the exhibits and
schedules thereto as provided to us on [________________], 1999;

(ii) a copy of the executed Registration Rights Agreement dated June
11, 1999 (the "Registration Rights Agreement") made between (1)
the Company and (2) the Shareholder, relating to the Flextronics
Ordinary Shares as provided to us on [________________], 1999;

(iii) in relation to the Company, a copy of each of its Memorandum and
Articles of Association, its Certificate of Incorporation of
Private Company, its Certificate of Incorporation on Conversion
to a Public Company and its Certificate of Incorporation on
Change of Name of Company;

(iv) copies or faxed copies of all resolutions of the Board of
Directors of the Company and of the shareholders of the Company
passed since the date of incorporation of the Company up to
[________________], 1999 relating to the authorization for the
issue of and the allotment and issue of the ordinary shares in
the capital of the Company (the "Company's Resolutions");

(v) faxed copies of the resolutions of the Board of Directors of the
Company passed on [__________________], 1999, and
[__________________], 1999 (the "Company's Board Resolutions");
and

(vi) such other documents as we have considered necessary or desirable
to examine in order that we may give this opinion.

3. We have assumed:

(i) that each of the Agreement and the Registration Rights Agreement
(together, the "Exchange Agreements") is within the capacity and
powers

<PAGE>

of, and has been validly authorized by, each party thereto (other
than the Company) and has been validly executed and delivered by
the Senior Vice President - Finance and Administration of the
Company on behalf of the Company and by or on behalf of each such
other party thereto:

(ii) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all
copy or other specimen documents submitted to us;

(iii) the correctness of all facts stated in the Exchange Agreements;

(iv) that the copies of the Company's Memorandum and Articles of
Association, Certificate of Incorporation of Private Company,
Certificate of Incorporation on Conversion to a Public Company
and Certificate of Incorporation on Change of Name of Company
submitted to us for examination are true, complete and up-to-date
copies;

(v) that copies of the Company's Resolutions and the Company's Board
Resolutions submitted to us for examination are true, complete
and up-to-date copies and that the Company's Resolutions and the
Company's Board Resolutions have not been rescinded or modified
and they remain in full force and effect and that no other
resolution or other action has been taken which could affect the
validity of the Company's Resolutions and the Company's Board
Resolutions;

(vi) that the information disclosed by the search made on
[__________________], 1999 at the Registry of Companies in
Singapore against the Company is true and complete and that such
information has not since then been materially altered and that
such search did not fail to disclose any material information
which had been delivered for filing but did not appear on the
public file at the time of the search;

(vii) that the information disclosed by the search made on
[__________________], 1999 of the Cause Book kept at the Supreme
Court of Singapore against the Company is true and complete and
that such information has not since then been materially altered
and that such search did not fail to disclose any material
information which had been delivered for filing but was not
disclosed at the time of the search;

(viii) that each of the Exchange Agreements constitutes legal, valid,
binding and enforceable obligations of the parties thereto for
all purposes under the laws of the jurisdiction by which each
such Exchange Agreement is expressed to be governed;

(ix) that there are no provisions of the laws of any jurisdiction
other than Singapore which would be contravened by the execution
or delivery of any of the Exchange Agreements and that, in so far
as any obligation expressed

<PAGE>

to be incurred or performed under any of the Exchange Agreements
falls to be performed in or is otherwise subject to the laws of
any jurisdiction other than Singapore, its performance will not
be illegal by virtue of the laws of that jurisdiction;

(x) that the choice of the internal laws of Sweden as the governing
law of the Exchange Agreements has been made in good faith and
will be regarded as a valid and binding selection which will be
upheld in courts in Sweden, as a matter of the laws of Sweden,
and all other relevant laws except the laws of Singapore;

(xi) that all consents, approvals, authorizations, licenses,
exemptions, or orders required from any governmental or other
regulatory authorities outside Singapore and all other
requirements outside Singapore for the legality, validity and
enforceability of the Exchange Agreements have been duly obtained
or fulfilled and are and will remain in full force and effect and
that any conditions to which they are subject have been
satisfied;

(xii) that the number of Flextronics Ordinary Shares which are to be
issued and delivered by the Company to the Shareholder on the
Closing Date (as defined in the Agreement) (less the Hold-Back
Shares (as defined in the Agreement)) will be determined in
accordance with the Agreement, and that such Flextronics Ordinary
Shares (less the Hold-Back Shares (as defined in the Agreement))
will be issued and delivered in accordance with the terms of the
Agreement; and

(xiii) that the total issued and paid-up share capital of the Company
consequent upon the issue by the Company of the Flextronics
Ordinary Shares on the Closing Date (as defined in the Agreement)
will not exceed the authorized share capital of the Company as at
the Closing Date (as defined in the Agreement).

4. A search made on [__________________], 1999 at the Registry of Companies
and at the Supreme Court of Singapore revealed no order or resolution for the
winding-up of the Company and no notice of appointment of a receiver or judicial
manager for the Company. It should noted that such a search is not capable of
revealing whether or not a winding-up petition has been presented. Notice of a
winding-up order made or resolution passed or a receiver or judicial manager
appointed may not be filed with the Registry of Companies immediately. A search
made on [__________________], 1999 at the Supreme Court of Singapore revealed no
petition for the winding-up of the Company or for the appointment of a judicial
manager for the Company. However, it should be noted that information may not be
entered into the index books of the Registries immediately.

5. Based upon and subject to the foregoing, and subject to the
qualifications set forth below and any matters not disclosed to us, we are of
the opinion that:

(i) the Company has been duly incorporated and is validly existing in

<PAGE>

Singapore as a public company under the Companies Act, Chapter
50;

(ii) the Company has the necessary corporate power and authority under
the laws of Singapore to own its own properties;

(iii) the Company has taken all necessary corporate action required
under its Memorandum and Articles of Association and under the
laws of Singapore to authorize the execution and performance by
it of the Exchange Agreements, and the [Senior Vice President -
Finance and Administration] of the Company is duly authorized to
execute and deliver the Exchange Agreements for and on behalf of
the Company;

(iv) the Exchange Agreements constitute binding and enforceable
obligations of the Company under the laws of Singapore (except
that enforceability may be limited as set out in paragraph 7,
below and except as to those provisions relating to indemnity or
contribution for liabilities arising under the United States
Securities Act of 1933, as amended, as to which we express no
opinion);

(v) the execution and performance of the Exchange Agreements by the
Company do not violate its Memorandum and Articles of Association
or any decree, statute or governmental rule applicable in
Singapore; and

(vi) the Flextronics Ordinary Shares to be allotted and issued on the
Closing Date (as defined in the Agreement) (less the Hold-Back
Shares (as defined in the Agreement)) to the Shareholder have
been duly authorized, and when the share certificates in respect
of such Flextronics Ordinary Shares are issued by Boston
Equiserve L.P., the Transfer Agent of the Company, in accordance
with the Articles of Association of the Company and the terms of
the Agreement on the Closing Date (as defined in the Agreement),
will be validly issued and credited as fully paid.

6. This opinion only relates to the laws of general application of
Singapore as at the date hereof and as currently applied by the Singapore
courts, and is given on the basis that it will be governed by and construed in
accordance with the laws of Singapore. We have made no investigation of, and do
not express or imply any views on, the laws of any country other than Singapore.
In respect of the Exchange Agreements, we have assumed due compliance with all
matters concerning Swedish laws, United States federal, California laws and the
laws of all other relevant jurisdictions other than Singapore. As to matters of
fact material to this opinion we have relied on the statements of responsible
officers of the Company and Boston Equiserve L.P., the Transfer Agent of the
Company.

7. The qualifications to which this opinion is subject are as follows:

(i) enforcement of the obligations of the Company under any of the
Exchange Agreements may be affected by prescription or lapse of
time, bankruptcy, insolvency, liquidation, reorganization,
reconstruction or similar laws generally affecting creditors'
rights;

<PAGE>

(ii) the power of the Singapore courts to grant equitable remedies
such as injunction and specific performance is discretionary and
accordingly a Singapore court might make an award of damages
where an equitable remedy is sought;

(iii) where under any of the Exchange Agreements, any person is vested
with a discretion or may determine a matter in its opinion,
Singapore law may require that such discretion is exercised
reasonably or that such opinion is based upon reasonable grounds;

(iv) by virtue of the Limitation Act, Chapter 163 of Singapore,
failure to exercise a right of action for more than six years
will operate as a bar to the exercise of such right and failure
to exercise such a right for a lesser period may result in such
right being waived;

(v) a Singapore court may stay proceedings if concurrent proceedings
are brought elsewhere;

(vi) where obligations are to be performed in a jurisdiction outside
Singapore, they may not be enforceable in Singapore to the extent
that performance would be illegal or contrary to public policy
under the laws of that jurisdiction;

(vii) provisions in any of the Exchange Agreements as to severability
may not be binding under the laws of Singapore and the question
of whether or not provisions which are illegal, invalid or
unenforceable may be severed from other provisions in order to
save such other provisions depends on the nature of the
illegality, invalidity or unenforceability in question and would
be determined by a Singapore court at its discretion; and

(viii) a Singapore court may refuse to give effect to clauses in any
of the Exchange Agreements in respect of the costs of
unsuccessful litigation brought before a Singapore court or where
the court has itself made an order for costs.

8. Our opinion is addressed solely to yourselves and is strictly limited to
the matters stated herein and is not to be read as extending by implication to
any other matter in connection with the Exchange Agreements or otherwise
including, but without limitation, any other document signed in connection
therewith. Further, our opinion is not to be transmitted to, nor is it to be
relied upon by, any other person or quoted or referred to in any public document
or filed with any governmental authority or agency without our prior written
consent.

Yours faithfully,

<PAGE>

EXHIBIT 9.6

Form of Opinion of Shareholder's and Target's Counsel

<PAGE>

[OPINION OF COUNSEL TO TARGET AND THE SHAREHOLDER]

Gentlemen,

We have acted as Finnish counsel for the purpose of rendering an opinion in
connection with the Exchange Agreement dated June 11, 1999 ("the Agreement")
among Kyrel EMS Oyj (the "Target"), Seppo Parhankangas (the "Shareholder"),
Flextronics Holding Finland Oy and Flextronics International Ltd. (the
"Acquiror").

All capitalized terms used herein which are defined in the Agreement shall,
whenever used herein, have the meanings set forth in the Agreement.

In connection herewith, we have examined the laws of Finland and examined and
relied upon the following documents:

(1) An executed copy of the Agreement dated June 11, 1999;

(2) Flextronics International Affiliates Agreement dated ________,1999;

(3) Registration Rights Agreement dated June 11, 1999;

(4) Disclosure Schedule of the Agreement.

In addition, we have reviewed such other documents and matters as we have
considered necessary for purposes of this opinion.

This opinion is subject to the following qualifications

A. We are admitted to the Bar of Finland and our opinion is limited to the law
of Finland.

B. We have assumed (i) the genuineness of all signatures and seals (if any)
appearing on each such document (other than signatures of the Shareholder
and officers of Target), (ii) the genuineness of each original document
inspected by us, (iii) that all documents have been duly authorized by all
parties thereto other than the Target and the Shareholder, and (iv) that
all documents are binding on and enforceable against all parties thereto
other

<PAGE>

than the Target and the Shareholder.

C. We have assumed the due organization and valid existence of each of the
parties to the Agreement other than the Target.

D. Where any party to the Agreement is vested with discretion or may determine
a matter in its opinion, Finnish law may require that such discretion be
exercised reasonably or that such opinion be based on reasonable grounds
and that such party does not act arbitrarily or that the exercise of any
rights is adequate under the then prevailing circumstances.

F. Our opinion as regards the validity under Finnish law of the obligations of
the Shareholder under the Agreement is subject to (i) all limitations
arising from bankruptcy, insolvency, liquidation, moratorium,
reorganization or similar laws generally affecting the rights of creditors
and (ii) the application, whether in law or in equity, of equitable
principles as well as the application of concepts of reasonableness, good
faith and fair dealing in the exercise of rights and remedies and in the
performance of obligations by the parties thereunder.

Based upon and subject to the foregoing and the qualifications hereinafter set
forth, we are of the opinion that

1. Target has been duly organized and is validly existing under the laws of
Finland, has the corporate power and authority under such laws to own or
lease, as the case may be, and operate its properties and to carry on its
business. Each Subsidiary identified in the Agreement is wholly-owned by
Target, and to the best of our knowledge after reasonable inquiries Target
does not have any other Subsidiaries.

2. Other than the Shareholder, no other person owns or has the right to own
any equity interest in Target. As of the date hereof, the authorized and
issued capital of the Target is as set forth in Section 3.4 of the
Agreement. All outstanding shares of capital stock have been validly issued
and are fully paid and non-assessable, and are owned by the Shareholder.
Except as disclosed in the Disclosure Schedule to the Agreement, there are
no options, warrants, conversion privileges or other rights or agreements
outstanding to

<PAGE>

purchase any Target's authorized but unissued capital stock or any
securities convertible into or exchangeable for capital stock of Target or
obligating Target to grant, extend, or enter into any such option, warrant,
conversion privilege or other right, and there is no liability for
dividends accrued but unpaid.

3. The Shareholder and Target each have the right, power and authority to
enter into and perform their obligations under the Agreement. The execution
of the Agreement and the consummation of the transactions contemplated by
the Agreement have been duly and validly approved and authorized by all
necessary corporate and shareholder action on the part of Target.

4. Neither the execution and delivery of the Agreement nor the consummation of
the transactions contemplated by the Agreement will conflict with or (with
or without notice or lapse of time or both), result in a termination,
breach, impairment or violation of any provision of the Charter Documents
of Target, as currently in effect, or an order, statute, rule or regulation
applicable to Target. Except as disclosed in the Disclosure Schedule, the
consummation of the Exchange will not require the consent of any third
party.

5. To the best of our knowledge after reasonable inquiries there is no action,
proceeding, claim or investigation, pending against Target before any court
or administrative agency in Finland that if determined adversely to Target
may reasonably be expected to have a material adverse effect on the present
or future operations or financial condition of Target.

6. The Shareholder holds valid title to the shares of Target capital stock
being exchanged under the Agreement by the Shareholder and to the best of
our knowledge said shares are free and clear of any liens, security
interests, restrictions, options and encumbrances. Upon delivery by
Acquiror to the Shareholder of Acquiror Ordinary Shares in the amount
provided in Section 2.1 of the Agreement, Acquiror shall hold good and
valid title to all of the outstanding shares of capital stock of Target.

7. Finnish courts will enforce the choice of Swedish law set forth in Section
13.1 of the Agreement, the agreement to arbitrate set forth in Section
13.19 of the Agreement and the determinations of any arbitration pursuant
to Section 13.19.

<PAGE>

This opinion is specific to the transaction and the documents referred to
herein, the documents examined by us and the law at the date hereof Therefore,
this opinion may not be quoted or relied upon by, nor may copies be delivered
to, persons other than the addressees hereof and should not be assumed to state
general principle of law applicable to transactions of this kind.

Very truly yours,

Suomen Yritysnotariaatti Oy
Rauno Ruotsalainen

<PAGE>

EXHIBIT 9.9

MANAGING DIRECTOR'S AGREEMENT

<PAGE>

MANAGING DIRECTOR'S AGREEMENT

This Agreement has been made on the date set out below.

BETWEEN

Kyrel EMS Oyj Org. no. 359 337, hereafter "the Company", whose address is
Jaakontie 1, 39200 Kyroskoski, Finland

AND

Simo Parhankangas, social security no. 270965-067L, whose address is Kivimaentie
12, 39200 Kyroskoski, Finland

1. Form of employment and position

1.1 The employee is hereby employed as Managing Director in the Company.

1.2 The parties agree that the position entails duties and conditions of
employment such that the employee shall be deemed to occupy a Managing
Director's position.

2. Work duties

As Managing Director, the employee shall manage the Company's operations
pursuant to the provisions of the Companies Act and according to the
guidelines and instructions provided by the Board of Directors.

3. Work hours and vacation

The employee shall devote all of his work time to his post pursuant to this
Agreement.

Vacation shall consist of four weeks plus one week vacation days per year.

4. Work outside the Flextronics Group

The employee may not hold another employment or be engaged in another
business without the express approval of the Chairman of the Board of
Directors of the Company.

<PAGE>

5. Salary et cetera

5.1 Cash salary at the salary level applicable for 1999 shall be 720. 000 FIM
per year, payable in twelve payments in arrears. In addition the employee
is entitled to holiday pay and a 1/2 months salary as holiday return pay. A
review of salary and benefits shall normally be made April 1 each year,
with the first review by April 1, 2000.

5.2 No salary for overtime work shall be payable.

6. Bonus

6.1 Bonus shall be made pursuant to the scheme annually established by the
Board of Directors. For the years 1999 and 2000, such remuneration shall be
paid to the employee on a quarterly basis according to a scheme which will
be decided from time to time, but in no case shall the remuneration
annually exceed 25 per cent of the annual salary.

6.2 Bonus payments shall be attested to by the Board's chairman.

6.3 The employee is entitled to participate in the Stock Option Program of the
Flextronics Group. The terms of this program should be settled in a
separate agreement.

7. Pension and sickness benefits, et cetera.

7.1 The Company shall, in favour of the employee, subscribe for compulsory
insurance, including pension.

7.2 The Company shall also contract and bear the cost of a medical expenses
insurance in favour of the employee.

8. Business trips and car supplied by the Employer

8.1 In connection with business trips, the employee shall receive compensation
according to the Company's travel and subsistence allowance rules. In
connection with such trips, the employee shall comply with the provisions
on travel and accommodation expenditures contained in those rules.

8.2 For business trips and private trips, the employee shall enjoy free of
charge a car in a price class of FIM 250.000 - 300.000. The car may also be
used by family members.

<PAGE>

9. Telephone, telefax etc

The Company shall supply during the period of employment a mobile
telephone, personal computer as well as a telephone and telefax in the home
of the employee. All costs for such equipment shall be borne by the
Company.

10. Period of Agreement and notice of termination

10.1 This agreement shall apply as of closing and indefinitely thereafter. The
agreement may be terminated upon observance of a period of notice of
termination of twelve (12) months by the Company and six (6) months by the
employee.

10.2 Upon termination, the Company is entitled to remove the employee from the
conduct of the Company's affairs during the period of notice or part
thereof. In such a case, the employee is entitled to assume other
employment or to conduct his own business with no other restriction than
that which appears in the provision on non-competition and non-solicitation
in Article 13 of this Agreement. The remaining sum of salary for the
remaining period of notice is paid to the employee immediately at the time
of removal of conduct of the Company's affairs.

10.3 If the employee is removed from his conduct of the Company's affairs, then
all property which the employee uses in connection with the employment
shall be returned to the Company within thirty (30) days, however in no
case later than the Date of the employment's termination.

11. Summary dismissal

The Company is entitled to summarily dismiss the employee, effective
immediately, if the employee has grossly neglected his statutory or
contractual obligations. In the event of such summary dismissal, the
employee forfeits any right to salary and other employment benefits during
period of notice, if any.

12. Secrecy

12.1 The employee agrees without any limitation in time not to disclose to third
parties confidential information concerning the Company and its business
activities.

12.2 "Confidential information", as used in this provision, means any
information - technical, commercial or of any other nature - regardless of
whether or not the

<PAGE>

information is documented, with the exception of information which is or
becomes generally known or which has come or comes to general knowledge
other than through the employee's breach of this provision.

13. Non-competition and Non-solicitation

13.1 The employee agrees that during the period of employment and for a period
of three (3) years after termination of the employment, not to, either
directly or indirectly, conduct or in any manner further activities which
compete with the business activities of the Company. This undertaking
includes not to conduct solicitation among the employees of the company or
customers.

14. Amendments

Only those amendments and additions to this Agreement that are made in
writing and signed by the parties are valid.

15. Integration

The Agreement and its appendices constitute the parties' complete
regulation of all questions which the agreement concerns. All written or
oral undertakings or understandings which have preceded the agreement are
superseded by the contents of this Agreement and its appendices.

16. Arbitration

16.1 Any dispute, controversy or claim arising out of or in connection with this
contract, or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the Rules of the Arbitration
Institute of the Helsinki Chamber of Commerce. The arbitration board shall
consist of one arbitrator appointed by the Institute.

16.2 The arbitration proceedings shall be conducted in the English language and
take place in Helsinki.

16.3 This Agreement shall be governed by Finnish law.

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

This agreement has been executed in two copies of which the parties have taken
one each.

Kyroskoski, June 11, 1999

- ----------------------- ---------------------
Ronny Nilsson Simo Parhankangas

<PAGE>

EXHIBIT 11.5

Registration Rights Agreement

<PAGE>

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 11, 1999 by and between Flextronics International Ltd., a
Singapore company ("Flextronics") and Seppo Parhankangas (the "Holder").

RECITALS

A. This Agreement is entered into pursuant to that certain Exchange
Agreement dated as of June 8, 1999 (the "Exchange Agreement") by and among
Flextronics, Flextronics Holding Finland Oy, an indirect wholly-owned subsidiary
of Flextronics ("Flextronics Finland"), Kyrel EMS Oyj ("Kyrel"), and the Holder.

B. As an inducement for the Holder to enter into the Exchange Agreement,
Flextronics desires to grant the registration rights to the Holder as contained
herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:

1. Definitions and References.

Unless otherwise defined herein, the capitalized terms in this Agreement
have the same meanings given to them in the Exchange Agreement. For purposes of
this Agreement, in addition to the definitions set forth elsewhere herein, the
following terms shall have the following respective meanings:

"Affiliate" of the Holder shall mean a person who controls, is controlled
by or is under common control with the Holder or, the spouse or children (or a
trust exclusively for the benefit of a spouse and/or children) of the Holder.

"Register," "registered" and "registration" shall refer to a registration
effected by preparing and filing a Registration Statement or similar document in
compliance with the Securities Act of 1933, as amended (the "1933 Act") and the
declaration or ordering of effectiveness of such Registration Statement or
document by the United States Securities and Exchange Commission (the "SEC").

"Registrable Stock" shall mean (a) the Flextronics Ordinary Shares issued
to the Holder pursuant to the Exchange Agreement; and (b) any Ordinary Shares
issued as (or issuable upon the conversion or exercise of any warrant, right,
option or other convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, such
Flextronics Ordinary Shares. For purposes of this Agreement, any Registrable
Stock shall cease to be Registrable Stock when (x) a Registration Statement
covering such Registrable Stock has been declared effective and such Registrable
Stock has been disposed of pursuant to such effective Registration Statement, or
(y) such Registrable Stock is sold by a person in a transaction in which the
rights under the provisions of this Agreement are not assigned.

2. "Shelf" Registration. As soon as practicable following the Closing, but
in no event later than the date forty-five (45) days following the Closing,
Flextronics shall file with the

<PAGE>

SEC a "shelf" registration statement for the public resale by the Holder of the
Registrable Stock on a continuous or delayed basis pursuant to Rule 415(a)(1)
under the 1933 Act (the "Registration Statement"). Flextronics shall use all
reasonable efforts to cause the Registration Statement to be declared effective
under the 1933 Act as promptly as possible after the filing thereof, and shall
use all reasonable efforts to keep the Registration Statement continuously
effective under the 1933 Act until the earlier of (a) the date which is two (2)
years after the date hereof, (b) such date, at least one year after the date
hereof, on which the Registrable Stock represents less than one percent (1%) of
the Flextronics' outstanding Ordinary Shares or (c) the date when all
Registrable Shares covered by such Registration Statement have been sold or may
be sold without volume restrictions pursuant to Rule 144(k) promulgated under
the 1933 Act (or any similar provision then in force) as determined by counsel
to Flextronics pursuant to a written opinion letter to such effect, addressed
and acceptable to Flextronics' transfer agent.

3. Obligations of Flextronics. Flextronics shall:

(a) use all reasonable efforts to cause the Registration Statement to
become effective as soon as practicable after the filing thereof, and
remain effective for the period set forth in Section 2 hereof;

(b) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith
as may be necessary to comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Stock covered by the
Registration Statement;

(c) furnish to the Holder such numbers of copies of the Registration
Statement and the prospectus included therein (including each preliminary
prospectus and any amendments or supplements thereto in conformity with the
requirements of the 1933 Act) and such other documents and information as
they may reasonably request;

(d) use all reasonable efforts to register or qualify the Registrable
Stock covered by the Registration Statement under the securities or blue
sky laws of such jurisdiction within the United States and Puerto Rico as
shall be reasonably requested by the Holder for the distribution of the
Registrable Stock covered by the Registration Statement; provided, however,
that Flextronics shall not be required in connection therewith or as a
condition thereto to qualify to do business in or to file a general consent
to service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph (d) be obligated to do so; and provided,
further, that Flextronics shall not be required to qualify such Registrable
Stock in any jurisdiction in which the securities regulatory authority
requires that the Holder submit any of his Registrable Stock to the terms,
provisions and restrictions of any escrow, lockup or similar agreement(s)
for consent to sell Registrable Stock in such jurisdiction unless the
Holder agrees to do so;

(e) notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act of the happening of any
event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, and at the request of the Holder
promptly prepare and furnish to the Holder a reasonable

<PAGE>

number of copies of a supplement to or an amendment of such prospectus, or
a revised prospectus, as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made;
provided, that in the event of a material development or transaction
affecting Flextronics that has not yet been publicly disclosed, if
Flextronics shall determine in good faith that it would be adversely
affected by such disclosure, Flextronics may so notify the Holder (such
notice being referred to herein as a "Deferral Notice"), and shall
thereafter be entitled to defer preparing and furnishing such supplement or
amendment until such time as it would not be so adversely affected, at
which time it shall so notify the Holder and shall prepare and furnish to
the Holder any such supplement or amendment as may then be required
(provided that Flextronics shall only be entitled to deliver a Deferral
Notice to the Holder if it shall have delivered a comparable notice, or
taken equivalent action, with respect to any other of its shareholders
holding shares that are then registered for resale on an effective
registration statement filed by Flextronics pursuant to registration rights
that are subject at such time to similar suspension or deferral). Following
receipt of any supplement or amendment to any prospectus, the Holder shall
deliver such amended, supplemental or revised prospectus in connection with
any offers or sales of Registrable Stock, and shall not deliver or use any
prospectus not so supplemented, amended or revised. Following receipt of a
Deferral Notice, the Holder shall not make any further sales of Registrable
Stock pursuant to the Registration Statement until the Holder receives such
notice, and any such amendment or supplement, from Flextronics. If
Flextronics issues a Deferral Notice, Flextronics will extend the period of
effectiveness of the Registration Statement for an amount of time equal to
the length of the deferral period;

(f) take such other actions as are reasonably required in order to
facilitate the disposition of the Registrable Stock to be so included in
the Registration Statement;

(g) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, but not later than eighteen
(18) months after the effective date of the Registration Statement, an
earnings statement covering the period of at least twelve (12) months
beginning with the first full month after the effective date of such
Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the 1933 Act; and

(h) use all reasonable efforts to list the Registrable Stock covered
by such Registration Statement with any securities exchange or
over-the-counter market on which the Flextronics Ordinary Shares are then
listed or traded.

4. Furnish Information. It shall be a condition precedent to the
obligations of Flextronics to take any action pursuant to this Agreement that
the Holder shall furnish to Flextronics such information regarding himself, the
Registrable Stock held by him, and the intended method of disposition of such
securities as Flextronics shall reasonably request and as shall be required in
connection with the actions to be taken by Flextronics hereunder.

5. Expenses. All expenses incurred in connection with the registration
pursuant to this Agreement, excluding underwriters' discounts and commissions,
but including without

<PAGE>

limitation all registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees, listing fees, messenger and delivery
expenses, all fees and expenses of complying with state securities or blue sky
laws, and the fees and disbursements of counsel for Flextronics, shall be paid
by Flextronics. The Holder shall bear and pay the underwriting commissions and
discounts and brokerage fees applicable to securities offered for his or her
account in connection with any registrations, filings and qualifications made
pursuant to this Agreement.

6. Rule 144 Information. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the sale
of the Registrable Stock to the public without registration, at all times
Flextronics agrees to:

(a) make and keep public information available, as provided in Rule
144(c)(1) under the 1933 Act;

(b) use all reasonable efforts to file with the SEC in a timely manner
all reports and other documents required of Flextronics under the 1933 Act
and the Exchange Act; and

(c) furnish to the Holder forthwith upon his or her request a written
statement by Flextronics as to its compliance with the current public
information requirements of Rule 144(c)(1), a copy of the most recent
annual or quarterly report of Flextronics, and such other reports and
documents so filed by Flextronics as the Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing the Holder to
sell any Registrable Stock without registration.

7. Transfer of Registration Rights. The registration rights of the Holder
under this Agreement with respect to any Registrable Stock may be transferred or
assigned to (a) any transferee or assignee of such Registrable Stock who, after
such transfer or assignment, holds at least 100,000 shares of Registrable Stock
previously held by the Holder or (b) an Affiliate of the Holder or a member of
the Holder's immediate family, or a trust for the benefit of any such family
members; provided, however, that (i) the Holder shall give Flextronics written
notice prior to the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which the rights under
this Agreement are being transferred; (ii) such transferee shall agree in
writing, in form and substance reasonably satisfactory to Flextronics, to be
bound as a Holder by the provisions of this Agreement; and (iii) immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act.

8. Indemnification. In the event any Registrable Stock is included in a
Registration Statement under this Agreement:

(a) Flextronics shall indemnify and hold harmless the Holder, each
person who participates in the offering of such Registrable Stock,
including underwriters (as defined in the 1933 Act), and each person, if
any, who controls any such participating person within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the 1933 Act or otherwise,
insofar as such losses, claims,

<PAGE>

damages or liabilities (or proceedings in respect thereof) arise out of or
are based on any untrue or alleged untrue statement of any material fact
contained in the Registration Statement on the effective date thereof
(including any prospectus filed under Rule 424 under the 1933 Act or any
amendments or supplements thereto) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and shall reimburse the Holder and such participating person or
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Flextronics; provided,
further, that Flextronics shall not be liable to the Holder, or any such
participating person or controlling person in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in connection with the Registration
Statement, preliminary prospectus, final prospectus or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by the Holder, or any such participating person or controlling
person; and provided, further, that Flextronics shall not be liable to the
Holder or any such participating person or controlling person in any such
case for any such loss, claim, damage, liability or action to the extent
that it arises out of an offer or sale by the Holder in violation of any of
the Holder's obligations under Section 3(e). Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of the Holder, or any such participating person or controlling person, and
shall survive the transfer of such securities by the Holder, and any
termination of this Agreement.

(b) The Holder shall indemnify and hold harmless Flextronics, each of
its directors and officers, each person, if any, who controls Flextronics
within the meaning of the 1933 Act, and each agent and any underwriter for
Flextronics (within the meaning of the 1933 Act) against any losses,
claims, damages or liabilities, joint or several, to which Flextronics or
any such director, officer, controlling person, agent or underwriter may
become subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise
solely out of or are based solely upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement (including any prospectus filed under Rule 424 under the 1933 Act
or any amendments or supplements thereto) or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by or on behalf of the Holder
expressly for use in connection with such registration; and the Holder
shall reimburse any legal or other expenses reasonably incurred by
Flextronics or any such director, officer, controlling person, agent or
underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder; and provided,
further, that the liability of the

<PAGE>

Holder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that
the net proceeds from the sale of the shares sold by the Holder under such
Registration Statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by the Holder from the sale of Registrable Stock covered by such
Registration Statement.

(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party;
provided, however, that an indemnified party shall have the right to retain
its own counsel, with all fees and expenses thereof to be paid by such
indemnified party, and to be apprised of all progress in any proceeding the
defense of which has been assumed by the indemnifying party. The failure to
notify an indemnifying party promptly of the commencement of any such
action, if and to the extent prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section.

(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

9. General Provisions.

(a) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, transmitted by facsimile, delivered by
nationally recognized overnight courier or if

<PAGE>

deposited in the U.S. mail by registered or certified mail, return receipt
requested, postage prepaid, as follows. If to the Holder, the notice shall
be delivered at the address set forth in the Exchange Agreement. If to
Flextronics, the notice shall be delivered to Flextronics International
Ltd., 2090 Fortune Drive, San Jose, California 95131, attention: Chief
Executive Officer, Facsimile No. (408) 428-0859. Any party hereto may by
notice so given change its address or facsimile number for future notices
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner set forth
above.

(b) Entire Agreement; Independence of Obligations. This Agreement
constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties
or obligations between the parties respecting the subject matter hereof. In
the event of any conflict between this Agreement and the Exchange
Agreement, the terms of this Agreement shall control.

(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California without
regard to conflicts of law principles.

(d) Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be
enforceable in accordance with its terms.

(e) Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.

(f) Successors And Assigns. Subject to the provisions of Section 7,
the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties
hereto.

(g) Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.

(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.

(i) Costs And Attorneys' Fees. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement
or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and attorneys' fees incurred in each such
action, suit or other proceeding, including any and all appeals or
petitions therefrom.

<PAGE>

(j) Adjustments for Stock Splits, Etc. Wherever in this Agreement
there is a reference to a specific number of Flextronics Ordinary Shares,
then, upon the occurrence of any subdivision, combination or share dividend
of such class of shares, the specific number of shares so referenced in
this Agreement shall automatically be proportionally adjusted to reflect
the effect on the outstanding shares of such class or series of shares by
such subdivision, combination or share dividend.

[Remainder of page intentionally left blank.]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

FLEXTRONICS INTERNATIONAL LTD. HOLDER

By: _____________________________ __________________________________
(Seppo Parhankangas)
Name: ___________________________

[Signature Page to Registration Rights Agreement]

<PAGE>

DISCLOSURE SCHEDULES

<PAGE>

List Of Schedules

Schedule 3.1 Jurisdictions where qualification to do business is
necessary due to the nature of activities or character of
properties owned or leased.

Schedule 3.3 List of shareholders of Target and its subsidiaries.

Schedule 3.4 List of all Subsidiaries or equity interests, direct or
indirect, in, or loans to, any corporation, partnership,
joint venture, limited liability company or other business
entity. Such schedule should also indicate all jurisdictions
in which each Subsidiary is qualified to do business.

Schedule 3.5 List of consents of any third party required for the
Exchange and effects upon any rights, licenses, franchises,
leases or agreements caused by the Exchange.

Schedule 3.6 List of actions, proceedings or investigation pending, or to
the best of Target's knowledge, threatened against Target or
any of its Subsidiaries before any court or administrative
agency that, if determined adversely to Target, may
reasonably be expected to have a Material Adverse Effect on
Target or in which the adverse party or parties seek to
recover in excess of USD 50,000 against Target or any of its
Subsidiaries.

Schedule 3.7 Target's audited balance sheet as of December 31, 1997 and
December 31, 1998 as well as Target's audited income
statement and cash flows for the years then ended.

Schedule 3.8 Target's financial projections for the period January 1,
1999 to March 31, 2000.

Schedule 3.9 Information on delinquent in the payment of any tax or in
the filing of any tax returns and on deficiencies for any
tax that have been threatened, claimed, proposed or assessed
and that have not been settled or paid. Information on
audits by the Finnish Revenue or Tax Agency or any other
taxing agency or authority made on Target's or any of its
Subsidiaries tax return.

Schedule 3.10 Information on liens, charges, encumbrances and other
restrictions on the title to the assets used in the Business
or otherwise included in the financial statements of Target.

Schedule 3.11 List of changes in certain circumstances of the Target and
its Subsidiaries (see Exchange Agreement Section 3.11).

Schedule 3.11(i) List of officers and management and supervisory employees of
Target and its Subsidiaries.

<PAGE>

Schedule 3.12 List of oral or written executory agreements, contracts,
obligations and commitments that are material to Target or
its Subsidiaries, its financial condition, business or
prospects (see Exchange Agreement Section 3.12).

<PAGE>

Schedule 3.12 Information on any agreement or instrument that is or could
reasonably be expected to become burdensome for any of the
Target or any of its Subsidiaries (such as unproportionate
price reductions to customers, increases in prices paid by
the Target or any of its Subsidiaries, warranty or similar
obligations with respect to products or services other than
normal obligation to repair or replace products).

Schedule 3.13 List of all patents, service marks, copy rights, trade
marks, design and model rights, trade or brand names owned
or used in the Business, including applications as well as
royalties or other payments payable by the Target or any of
its Subsidiaries for such.

Schedule 3.14 Summary of all violations of, or conflicts with, any
applicable statute, law, rule, regulation, ruling, order,
judgement or degree, and all allocations of any such
violations, of which Target has received notice from
governmental entity since December 31, 1995.

Schedule 3.16.1 Employment contract or consulting agreement currently in
affect that can not be terminated at will.

Schedule 3.16.2 List of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health
plans, life insurance or other death benefit plans, profit
sharing, differed compensation agreements, stock, option,
bonus or other incentive plans, location, sick, holiday or
other paid leave plans, severance plans or other similar
employee benefit plans maintained by Target and its
Subsidiaries.

Schedule 3.16.4 List of certain agreements with any executive officer or
other key employee of Target or agreement or plan related to
the contemplated Exchange (see Exchange Agreement Section
3.16.4).

Schedule 3.16.5 List of all employees and officers of Target and their
current compensation and benefits as of the date of the
Exchange Agreement.

Schedule 3.18 Obligations of Target or its Subsidiaries to pay fees or
expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of the
Exchange Agreement or related agreements or in connection
with any transaction provided for therein.

Schedule 3.21 List on fire, casualty and liability insurance held by the
Target.

Schedule 3.26 All inventory materially in excess of reasonable estimated
requirements for Target based on current operations for the
next six months.

<PAGE>

Schedule 3.27 Aging of accounts receivable of Target in the aggregate and
by customer, indicating the amounts of allowance for
doubtful accounts and warranty returns and amounts of
accounts receivable which are subject to asserted warranty
claims. The schedule should set forth such amount of
accounts receivable which are subject to asserted warranty
claims by customer and reasonable detailed information
regarding asserted warranty claims made within the last
year, including the type of amounts of such claims.

Schedule 3.28 Information on (i) issue of shares of the Target's capital
stock since December 31, 1995, (ii) payment of dividends or
any other distribution to Target's shareholders since
December 31, 1995, (iii) reacquirement or purchase of any
shares of the Target's capital stock since December 31,
1995, (iv) changes of Target's equity interests after
December 31, 1995, and (iv) sales of significant assets
since December 31, 1995, in contemplation of a merger.

Schedule 3.32 List of names and locations of all banks, trust companies,
savings and loan associations, and other financial
institutions at which the Target or any of its Subsidiaries
maintain accounts of any nature and the names of all persons
authorized to draw thereon or may make withdraws therefrom.

- --------------------------------------------------------------------------------
FOURTH AMENDMENT
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
- --------------------------------------------------------------------------------

Fourth Amendment dated as of February 5, 1999 to Amended and Restated
Revolving Credit Agreement (the "Fourth Amendment"), by and among FLEXTRONICS
INTERNATIONAL LTD., a company incorporated in Singapore (the "Borrower"),
BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) and the
other lending institutions listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) (collectively, the "Banks"), amending certain provisions of
the Amended and Restated Revolving Credit Agreement dated as of January 14, 1998
(as amended and in effect from time to time, the "Credit Agreement") by and
among the Borrower, the Banks and BankBoston, N.A. as agent for the Banks (the
"Agent"). Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.

WHEREAS, the Borrower and the Banks have agreed to modify certain other
terms and conditions of the Credit Agreement as specifically set forth in this
Fourth Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

ss.1. Amendment to Section 1 of the Credit Agreement. Section 1.1 of the
Credit Agreement is hereby amended by inserting the following definition in the
appropriate alphabetical order:

Accounts Receivable. All rights of the Company or any of its
Subsidiaries to payment for goods sold, leased or otherwise marketed in the
ordinary course of business and all rights of the Company and its
Subsidiaries to payment for services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, except for that portion of the sum of
money or other proceeds due thereon that relate to sales, use or property
taxes in conjunction with such transactions, recorded on books of account
in accordance with generally accepted accounting principles.

ss.2. Amendment to Section 10 of the Credit Agreement. Section 10 of the
Credit Agreement is hereby amended as follows:

(a) Section 10.5.2 of the Credit Agreement is hereby amended by deleting
ss.10.5.2 in its entirety and restating it as follows:

10.5.2. Disposition of Assets. The Borrowers will not, and will not
permit any of their Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (a) the disposition of assets
in the ordinary course of business, consistent with past practices
(including, without limitation, (i) revolving sales of Accounts Receivable
for cash pursuant to a factoring or other similar receivables sales
program, and (ii) the disposition of equipment which a Borrower or such
Subsidiary replaces with similar equipment within ninety (90) days of such
disposition); (b) the disposition of the assets of Flextronics Sweden to
Ericsson pursuant to Section M.1 of the Ericsson General Purchase Agreement
(provided,

<PAGE>

-2-

however, such a disposition shall constitute an Event of Default
hereunder); (c) the disposition of assets set forth on Schedule 10.5.2; and
(d) other dispositions of assets to any Person in an arms-length
transaction for fair and reasonable value so long as after giving effect to
each such disposition the Company has demonstrated to the satisfaction of
the Agent that the aggregate amount of assets so disposed of in any fiscal
year does not exceed five percent (5%) of the Consolidated Total Assets of
the Company and its Subsidiaries as set forth on the most recent fiscal
quarter's financial statements delivered to the Agent and the Banks;
provided, that, prior to making any dispositions set forth in this
ss.10.5.2(d), the Company shall have delivered to the Agent on the date of
any such sale or disposition a certificate signed by an authorized officer
of the Company and evidence satisfactory to the Agent showing that no
Default or Event of Default has occurred and is continuing at the time of
such sale or disposition and no such Default or Event of Default will exist
after giving effect to such sale or disposition and evidence satisfactory
to the Agent that after giving effect to such sale or disposition, the
aggregate value of all Accounts Receivable still owned by the Company and
its Subsidiaries in which the Agent either has a perfected first priority
security interest or which Accounts Receivable are not otherwise encumbered
in any respect is not less than $75,000,000.

Notwithstanding anything to the contrary contained in this ss.10.5.2, (a)
the Borrowers and their Subsidiaries shall not be permitted to dispose of
any assets or take (or omit to take) any action in connection with any
Asset Sale or other disposition or engage in any other transaction which
action (or omission) would require any repayment, repurchase or redemption
(or any mandatory offer to repay, repurchase or redeem) by the Company or
any of its Subsidiaries of the Subordinated Notes or any other Subordinated
Debt pursuant to the Subordinated Indenture or similar agreement prior to
the repayment in full in cash of all the Obligations and the termination of
the Total Commitment to zero, or would violate the provisions of the
Subordinated Indenture or similar agreement; (b) the Borrowers shall not
directly or indirectly sell or otherwise dispose of all or substantially
all of their assets; and (c) except as expressly permitted in this
ss.10.5.2, neither the Borrowers nor their Subsidiaries shall sell or
otherwise dispose of any capital stock of any Person which is either a
Borrower or a Guarantor or is an entity the capital stock of which is
pledged under the Loan Documents by such Borrower or any Guarantor, except
for transfers to a Borrower or another Guarantor (with each such transfer
to a Borrower or another Guarantor to be subject to the Agent's security
interest therein for the benefit of the Agent and the Banks).

(b) Section 10.6 of the Credit Agreement is hereby amended by deleting the
reference to ss.10.5.2(c) contained therein and substituting in place thereof
the reference to ss.10.5.2(d).

ss.3. Conditions to Effectiveness. This Fourth Amendment shall not become
effective until the Agent receives a counterpart of this Fourth Amendment,
executed by the Borrower, the Guarantors and the Majority Banks.

ss.4. Representations and Warranties. The Borrower hereby repeats, on and
as of the date hereof, each of the representations and warranties made by it in
ss.8 of the Credit Agreement, and such representations and warranties remain
true as of the date hereof (except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Credit Agreement shall refer to
such Credit Agreement as amended hereby. In addition, the Borrower hereby
represents and warrants that the execution and

<PAGE>

-3-

delivery by the Borrower of this Fourth Amendment and the performance by the
Borrower of all of its agreements and obligations under the Credit Agreement as
amended hereby are within the corporate authority of each the Borrower and has
been duly authorized by all necessary corporate action on the part of the
Borrower.

ss.5. Ratification, Etc. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Fourth Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.

ss.6. No Waiver. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Agent or the Banks consequent thereon.

ss.7. Counterparts. This Fourth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

ss.8. Governing Law. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO CONFLICT OF LAWS).

<PAGE>

-4-

IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as a document under seal as of the date first above written.

FLEXTRONICS INTERNATIONAL LTD.

By:____________________________________
Title:

BANKBOSTON, N.A.

By:____________________________________
Title:

ABN AMRO BANK N.V.

By: ___________________________________
Name:
Title:

THE BANK OF NOVA SCOTIA

By: ___________________________________
Name:
Title:

BANQUE NATIONALE DE PARIS, SAN
FRANCISCO BRANCH

By: ___________________________________
Name:
Vice President

PARIBAS

By: ___________________________________
Name:
Title:

<PAGE>

-5-

THE INDUSTRIAL BANK OF JAPAN, LIMITED

By: ___________________________________
Name:
Title:

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION

By: ___________________________________
Name:
Title:

<PAGE>

RATIFICATION OF GUARANTY

Each of the undersigned guarantors hereby acknowledges and consents to the
foregoing Fourth Amendment as of February 5, 1999, and agrees that each of the
Guarantees dated as of January 14, 1998 from each of the undersigned Guarantors
remain in full force and effect, and each of the Guarantors confirms and
ratifies all of its obligations thereunder.

FLEXTRONICS INTERNATIONAL USA, INC.

By:____________________________________
Title:

FLEXTRONICS INTERNATIONAL (UK) LTD.

By:____________________________________
Title:

FLEXTRONICS MANUFACTURING (HK) LTD.

By:____________________________________
Title:

FLEXTRONICS SINGAPORE PTE. LTD.

By:____________________________________
Title:

FLEXTRONICS HOLDING (UK) LTD.

By:____________________________________
Title:

<PAGE>

-7-

FLEXTRONICS MALAYSIA SDN BHD

By:____________________________________
Title:

FLEXTRONICS INTERNATIONAL
MARKETING (L) LTD.

By:___________________________________
Title:

FLEXTRONICS HOLDINGS AB

By:____________________________________
Title:

FLEXTRONICS INTERNATIONAL
SWEDEN AB

By:____________________________________
Title:

ASTRON GROUP LIMITED

By:____________________________________
Title:

DTM PRODUCTS CORPORATION

By:___________________________________
Title:

FLEXTRONICS MEXICO, S.A. de C.V.

By:___________________________________
Title:

Promissory Note

SEK 3.200.000 San Jose, California
1999-02-04

FOR VALUE RECEIVED, Ronny Nilsson ( "Borrower"), intending to be legally
bound hereby, promises to pay to FLEXTRONICS INTERNATIONAL LIMITED (HONG KONG
BRANCH), the principal sum of Three Million and Two Hundred Thousand Swedish
Kronor ( 3.200.000 ) in accordance with the following schedule of payment dates:

(i) SEK 3.200.000 on March 31, 2000

Borrower shall have the right to prepay the all or any portion of the
amount outstanding hereunder at any time without penalty.

If Borrower shall fail to pay the amounts due on each of the payment dates,
Payee shall be entitled to exercise its remedies under this Note or otherwise
available to it at law or equity. The remedies of Payee shall be cumulative and
concurrent, and may be persued singly, successively or together at the sole
discretion of Payee, and may be exercised as often as occasion therefor shall
occur; and the failure to exercise any such right or remedy shall in no event be
construed as a waiver or release thereof.

In any action brought by Payee to enforce payment hereunder or to enforce
or defend any provision hereof, Borrower agrees to reimburse Payee for all costs
incurred in connection therewith, including attorneys' fees and disbursements.

This Note is executed by the Borrower in conjunction with the Services
Agreement by and between Borrower and Payee in effect on the date of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of California. This Note may not be assigned to any third party.

IN WITNESS WHEREOF, Borrower intending to be legally bound hereby, has
caused this Note to be executed as of the day and year first above written.

_______________________
Ronny Nilsson

EXHIBIT INDEX
SUBSIDIARIES OF REGISTRANT

EXHIBIT 21.1

Subsidiary Domiciled
- ----------- ---------
Althofen Electronics GmbH Austria
Flextronics International, Gmbh Austria
Flextronics International Tecnologia Ltda. Brazil
FLX Cyprus Limited Cyprus
Flextronics Holding Finland Oyj Finland
Astron Group Limited Hong Kong
Flextronics Manufacturing (HK) Ltd. Hong Kong
Ecoplast Muanyagipari Termekeket Gyarto Kft. Hungary
Components, Kft Hungary
HTR Technikai Rendezerszolgaltato Kft. Hungary
Flextronics Hungaria Kereskedelmi es, Kft Hungary
Flextronics International Latin America (L) Ltd. Malaysia
Flextronics Malaysia Sdn. Bhd. Malaysia
Flex International Marketing (L) Ltd. Malaysia
DTM Latin America (L) Ltd Malaysia
Astron Technologies Ltd. Mauritius
Flextronics Manufacturing Mex, S.A. de C.V. Mexico
DTM Products de Mexico, S.A. de C.V. Mexico
Parque de Technologies Electronics, S.A. de C.V. Mexico
Flextronics International Europe BV Netherlands
Flextronics Computer (Shekou) Ltd. Peoples' Republic of China
Flextronics Industrial (Shenzhen) Co., Ltd. Peoples' Republic of China
Flextronics Technology (Zhuhai)Co., Limited Peoples' Republic of China
Zhuhai Dao Mon Choa Yi Electronics Co., Ltd. Peoples' Republic of China
FICO Investment Holding Ltd Peoples' Republic of China
FKM (Shenzhen) Ltd Peoples' Republic of China
Flextronics Singapore Pte Ltd. Singapore
Flextronics International Singapore Pte Ltd. Singapore
F.L. Tronics Holdings AB
(aka Flextronics Holdings AB) Sweden
F.L. Tronics International Sweden AB
(aka Flextronics International Sweden AB) Sweden
Igrene AB Sweden
Moctol AB Sweden
Tolipig AB Sweden
Noitall AB Sweden
Flextronics Holding UK Limited United Kingdom
Flextronics International (UK) Ltd. United Kingdom
Flextronics International Scotland Ltd. United Kingdom
Flextronics International Fremont, Inc., Inc. United States of America
DTM Products, Inc. United States of America
Flextronics Distributing, Inc. United States of America
Flextronics International USA, Inc. United States of America
Marathon Business Park, LLC. United States of America
Proactive Corporation United States of America

CONSENT OF ARTHUR ANDERSEN LLP

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this annual report on Form 10-K, into the
Company's previously filed Registration Statements Nos. 333-42255 and 333-71049
on Form S-8.

ARTHUR ANDERSEN LLP

San Jose, California
June 25, 1999

CONSENT OF MOORE STEPHENS

EXHIBIT 23.2

Date: June 24, 1999

Flextronics International Limited,
2090 Fortune Drive,
San Jose,
CA 95131,
USA.

FLEXTRONICS INTERNATIONAL LIMITED
FORM 10-K

As independent public accountants, we hereby consent to the use of our reports
(and all references to our Firm) included in or made a part of the above noted
registration statement.

/s/ MOORE STEPHENS
- ----------------------------------------
Moore Stephens

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1999 (AUDITED) AND THE STATEMENTS OF INCOME FOR THE YEAR
ENDED MARCH 31, 1999 (AUDITED) AND IS QUALIFIED IN ITS INTEGRITY BY REFERNCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 172,984
<SECURITIES> 0
<RECEIVABLES> 230,840
<ALLOWANCES> 5,050
<INVENTORY> 192,766
<CURRENT-ASSETS> 654,032
<PP&E> 476,650
<DEPRECIATION> 109,143
<TOTAL-ASSETS> 1,094,379
<CURRENT-LIABILITIES> 412,887
<BONDS> 0
0
0
<COMMON> 299
<OTHER-SE> 465,952
<TOTAL-LIABILITY-AND-EQUITY> 1,094,379
<SALES> 1,807,628
<TOTAL-REVENUES> 1,807,628
<CGS> 1,652,891
<TOTAL-COSTS> 1,652,891
<OTHER-EXPENSES> 77,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,738
<INCOME-PRETAX> 59,300
<INCOME-TAX> 7,770
<INCOME-CONTINUING> 51,530
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,530
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.12

</TABLE>