SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant |X|
Filed by the Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of
|_| Definitive Proxy Statement the Commission Only (as
|_| Definitive Additional Materials permitted by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
FLEXTRONICS INTERNATIONAL LTD.
(Name of Registrant as Specified in Its Charter)
----------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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[LOGO]
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held on August 27, 1999
To our Shareholders:
You are cordially invited to attend and NOTICE IS HEREBY GIVEN of the
Annual General Meeting of FLEXTRONICS INTERNATIONAL LTD. (the "Company") which
will be held at the principal offices of the Company located at 2245 Lundy
Drive, San Jose, California, United States of America, at 9:00 a.m., California
time, on August 27, 1999 for the following purposes:
As Ordinary Business
1. To re-elect the following Directors, who will retire pursuant to Article
95 of the Articles of Association of the Company, to the Board of Directors:
(a) Michael E. Marks
(b) Tsui Sung Lam
(c) Chuen Fah Alain Ahkong
2. To receive and adopt the Audited Accounts of the Company for the fiscal
year ended March 31, 1999 together with the Reports of the Directors and
Auditors thereon.
3. To consider and vote upon a proposal to appoint Arthur Andersen as
independent Auditors for the Company for the fiscal year ending March 31, 2000,
and to authorize the Directors to fix their remuneration.
As Special Business
4. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT the authorized share capital of the Company be increased from
S$1,000,000 divided into 100,000,000 ordinary shares of $0.01 each ("Ordinary
Shares") to $2,500,000 by the creation of 150,000,000 new Ordinary Shares of
S$0.01 each.
5. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT approval be and is hereby given for the Company's 1993 Share
Option Plan (the "1993 Plan") to be amended (a) to increase the maximum number
of Ordinary Shares authorized for issuance under the 1993 Plan from 7,200,000
Ordinary Shares to 8,200,000 Ordinary Shares and that an additional 1,000,000
Ordinary Shares be reserved for issuance under the 1993 Plan, and that such
Ordinary Shares, when issued and paid for in accordance with the terms of the
1993 Plan, shall be validly issued, fully paid and nonassessable Ordinary Shares
in the capital of the Company; (b) to amend the limitation on the number of
options or separately exercisable stock appreciation rights granted under the
1993 Plan to any one participant from a limit of 1,000,000 Ordinary Shares in
the aggregate over the term of the 1993 Plan to a limit of 1,000,000 Ordinary
Shares in the aggregate annually; and (c) to amend the provision relating to the
automatic grant of a stock option to an individual who first becomes a
non-employee Board member from a grant of 30,000 Ordinary Shares to a grant for
a number of shares determined by the Plan Administrator.
6. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT approval be and is hereby given for the Company's 1997
Employee Share Purchase Plan (the "Share Purchase Plan") to be amended to
increase the maximum number of Ordinary Shares authorized for
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issuance under the Share Purchase Plan from 150,000 Ordinary Shares to 400,000
Ordinary Shares and that an additional 250,000 Ordinary Shares be reserved for
issuance under the Share Purchase Plan, and that such Ordinary Shares, when
issued and paid for in accordance with the terms of the Share Purchase Plan,
shall be validly issued, fully paid and nonassessable Ordinary Shares in the
capital of the Company.
7. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT pursuant to the provisions of Section 161 of the Companies
Act, Cap. 50, and notwithstanding the provisions of Article 46 of the Articles
of Association of the Company but subject otherwise to the provisions of that
Act and the Articles of Association of the Company, the Board of Directors be
and are hereby authorized to allot and issue, or grant options in respect of,
Ordinary Shares in the capital of the Company or to allot and issue such shares
in the capital of the Company pursuant to the exercise of any option granted in
respect thereof to such persons on such terms and conditions and with such
rights or restrictions as they may think fit to impose and as are set forth in
the Articles of Association of the Company aforesaid and that such authority
shall continue in force until the conclusion of the next Annual General Meeting
or the expiration of the period within which the next Annual General Meeting of
the Company is required by law to be held, whichever is the earlier.
8. To pass the following resolution as an Ordinary Resolution:
RESOLVED that:
(a) at the sole discretion of the Company's Board of Directors at any
time on or before 5:00 p.m., California time, June 30, 2000, a
sum of up to S$501,969.02 and, in the event that any new shares
are allotted and issued by the Company on or before 5:00 p.m.,
California time, June 30, 2000, an additional amount of S$0.01
for each new share so allotted and issued, standing to the credit
of the Company's Share Premium Account as at March 31, 1999
("Capital Sum") be capitalized and distributed amongst the
persons who, on the date specified by the Company's Board of
Directors, but no later than 5:00 p.m., California time, June 30,
2000, are the registered holders ("Shareholders") of existing
Ordinary Shares of S$0.01 each in the capital of the Company
("Shares"), on the footing that the Shareholders become entitled
to such sum as capital in terms of Article 133 of the Articles of
Association of the Company and that the whole of the Capital Sum
be applied in payment in full of the aggregate par value of up to
50,196,902 new Ordinary Shares of $0.01 each in the capital of
the Company and, in the event that any new shares are allotted
and issued by the Company on or before 5:00 p.m., California
time, June 30, 2000, an additional one (1) new Ordinary Share of
$0.01 each in the capital of the Company for each new share so
allotted and issued (together, the "Bonus Shares"), the Bonus
Shares to rank in all respects pari passu with the Shares;
(b) accordingly, the Directors of the Company be and are hereby
granted the authority to allot and issue, at their sole
discretion on or before 5:00 p.m., California time, June 30,
2000, the Bonus Shares credited as fully paid to the
Shareholders, as nearly as practicable, in the proportion of one
(1) Bonus Share for every one (1) Share then held by the
Shareholders, fractions being disregarded;
(c) the Bonus Shares, if and when allotted and issued, shall be
treated for all purposes as an increase in the nominal amount of
the issued capital of the Company and not as income;
(d) the aggregate number of Bonus Shares representing fractional
interests be disposed of by the Directors of the Company in such
manner as they may deem fit in the interests of the Company; and
(e) the Directors of the Company be and are hereby authorized to take
such steps and exercise such discretion as they may deem fit in
connection with the matters referred to in this resolution.
9. To pass the following resolution which will be proposed as a Special
Resolution:
RESOLVED THAT the Articles of Association of the Company be amended in the
following manner:
(a) By deleting Articles 6 in its entirety and by substituting
therefor the following:
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"6. (a) Except as is otherwise expressly Prohibition
permitted by the Act, the Company shall not against
give, whether directly or indirectly and financial
whether by means of the making of a loan, the assistance.
giving of a guarantee, the provision of
security, the release of an obligation or the
release of a debt or otherwise, any financial
assistance for the purpose of, or in
connection with, the acquisition or proposed
acquisition of shares or units of shares in
the Company or its holding company.
(b) The Company may, subject to and in Company may
accordance with the Act, purchase or acquire its own
otherwise acquire ordinary shares in the issued ordinary
issued share capital of the Company on such shares.
terms and in such manner as the Company may
from time to time think fit. Any share that
is so purchased or acquired by the Company
shall be deemed to be cancelled immediately
on purchase or acquisition. On the
cancellation of a share as aforesaid, the
rights and privileges attached to that share
shall expire."
(b) By deleting Articles 49 in its entirety and by substituting
therefor the following:
"49. Without prejudice to the generality of Power to reduce
the foregoing, upon cancellation of a share capital.
purchased or otherwise acquired by the
Company pursuant to these Articles and the
Act, the nominal amount of the issued share
capital of the Company shall be diminished by
the nominal amount of the share so
cancelled."
10. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT, subject to and contingent upon the passing of Resolution 9
above:
(a) for the purposes of Sections 76C and 76E of the Companies Act, Cap. 50
(the "Companies Act"), the exercise by the Directors of the Company of
all the powers of the Company to purchase or otherwise acquire issued
ordinary shares of $0.01 each fully paid in the capital of the Company
(the "Ordinary Shares") not exceeding in aggregate the Prescribed
Limit (as hereinafter defined), at such price or prices as may be
determined by the Directors from time to time up to the Maximum Price
(as hereinafter defined), whether by way of:
(i) market purchase(s) on the Nasdaq National Market or any other
stock exchange on which the Ordinary Shares may for the time
being be listed and quoted ("Other Exchange"); and/or
(ii) off-market purchase(s) (if effected otherwise than on the Nasdaq
National Market or, as the case may be, Other Exchange) in
accordance with any equal access scheme(s) as may be determined
or formulated by the Directors as they consider fit, which
scheme(s) shall satisfy all the conditions prescribed by the
Companies Act;
and otherwise in accordance with all other laws and regulations and
rules of the Nasdaq National Market or, as the case may be, Other
Exchange as may for the time being be applicable, be and is hereby
authorized and approved generally and unconditionally;
(b) unless varied or revoked by the Company in general meeting, the
authority conferred on the Directors of the Company pursuant to the
mandate contained in paragraph (a) above may be
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exercised by the Directors at any time and from time to time during
the period commencing from the date of the passing of this Resolution
and expiring on the earlier of:
(i) the date on which the next Annual General Meeting of the Company
is held; and
(ii) the date by which the next Annual General Meeting of the Company
is required by law to be held;
(c) in this Resolution:
"Prescribed Limit" means that number of issued Ordinary Shares
representing 10% of the issued ordinary share capital of the Company
as at the date of the passing of this Resolution;
"Maximum Price" in relation to Ordinary Shares to be purchased or
acquired, means the purchase price (excluding brokerage, commission,
applicable good and services tax and other related expenses) which
shall not exceed:
(i) in the case of a market purchase of an Ordinary Share, one
hundred five percent (105%) of the Average Closing Price of the
Ordinary Shares; and
(ii) in the case of an off-market purchase pursuant to an equal access
scheme, one hundred ten percent (110%) of the Average Closing
Price of the Ordinary Shares;
"Average Closing Price" means the average of the last dealt prices of
an Ordinary Share for the five consecutive trading days on which the
Ordinary Shares are transacted on the Nasdaq National Market or, as
the case may be, Other Exchange preceding the date of the market
purchase by the Company or, as the case may be, the date of the making
of the offer pursuant to the off-market purchase; and
"date of the making of the Offer" means the date on which the Company
announces its intention to make an offer for the purchase or
acquisition of Ordinary Shares from holders of Ordinary Shares,
stating therein the purchase price (which shall not be more than the
Maximum Price calculated on the foregoing basis) for each Ordinary
Share and the relevant terms of the equal access scheme for effecting
the off-market purchase; and
(d) the Directors of the Company and/or any of them be and are hereby
authorized to complete and do all such acts and things (including
executing such documents as may be required) as they and/or he may
consider expedient or necessary to give effect to the transactions
contemplated and/or authorized by this Resolution.
As Ordinary Business
11. To transact any other business as may properly be transacted at any
Annual General Meeting.
The Board of Directors has fixed the close of business on July 1, 1999 as
the record date for determining those shareholders who will be entitled to
receive copies of this Notice and accompanying Proxy Statement. However,
shareholders of record on August 27, 1999 will be entitled to vote at the Annual
General Meeting.
Notes:
(a) A shareholder (member) entitled to attend and vote at the Annual
General Meeting is entitled to appoint a proxy to attend and vote on his or her
behalf. A proxy need not also be a shareholder (member). Representation of at
least 33 1/3% of all outstanding Ordinary Shares of Flextronics International
Ltd. is required to constitute a quorum. Accordingly, it is important that your
shares be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE. An instrument appointing a proxy must be left at the
registered office of the Company located at 36, Robinson Road, #18-01, City
House, Singapore 068877 or at Boston EquiServe, P.O. Box 8040, Boston, MA
02266-8040, United States of America not less than forty-eight
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(48) hours before the time appointed for holding the meeting. Your proxy may be
revoked at any time prior to the time it is voted. (b) Only funds legally
available for purchasing or acquiring Ordinary Shares in accordance with the
Articles of Association of the Company and applicable laws of Singapore will be
utilized for the purchase or acquisition by the Company of its own issued
Ordinary Shares pursuant to the proposed Share Purchase Mandate. The amount of
financing required for the Company to purchase or acquire its Ordinary Shares
cannot be ascertained as at the date of this Notice as these will depend on the
number of Ordinary Shares purchased or acquired and the price at which such
Ordinary Shares were purchased or acquired. The net tangible assets of the
Company and the consolidated net tangible assets of the Group will be reduced by
the dollar value of the Ordinary Shares repurchased. The repurchase of up to 10%
of the issued ordinary share capital of the Company as at the date of the Annual
General Meeting will not have any material impact on the consolidated earnings
of the Company for the current financial year.
By Order of the Board of Directors,
Yap Lune Teng
Joint Secretary
Singapore
July 29, 1999
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Shareholders Should Read the Entire Proxy Statement Carefully Prior to
Returning Their Proxies
PROXY STATEMENT
FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
OF
FLEXTRONICS INTERNATIONAL LTD.
To Be Held on August 27, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Flextronics International Ltd. (the "Company") of
proxies to be voted at the Annual General Meeting which will be held at 9:00
a.m. California time on August 27, 1999 at the principal offices of the Company
located at 2245 Lundy Drive, San Jose, California in the United States of
America, or at any adjournments or postponements thereof, for the purposes set
forth in the accompanying Notice of Annual General Meeting. This Proxy Statement
and the proxy card were first mailed to shareholders of record on or about July
29, 1999. The entire cost of soliciting proxies will be borne by the Company.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The close of business on July 1, 1999 was the record date for shareholders
entitled to notice of the Annual General Meeting. As of that date, the Company
had 48,091,929 Ordinary Shares, S$0.01 par value per share (the "Ordinary
Shares"), issued and outstanding. All of the Ordinary Shares issued and
outstanding on August 27, 1999 are entitled to vote at the Annual General
Meeting, and shareholders of record on August 27, 1999 entitled to vote at the
meeting will on a poll have one (1) vote for each Ordinary Share so held on the
matters to be voted upon.
Ordinary Shares represented by proxies in the accompanying form which are
properly executed and returned to the Company will be voted at the Annual
General Meeting in accordance with the shareholders' instructions contained
therein. The affirmative vote of the holders of a majority of the issued shares
present and voting in person or by proxy at the Annual General Meeting is
required to re-elect the Directors nominated pursuant to Proposal No. 1, to
approve Proposal Nos. 2 and 3, and to approve the ordinary resolutions in
Proposal Nos. 4, 5, 6, 7, 8 and 10. The affirmative vote of the holders of a
majority of not less than three-fourths (3/4) of the issued shares present and
voting in person or by proxy at the Annual General Meeting is required to
approve the Special Resolution in Proposal No. 9. Abstentions and broker
non-votes are each included in the determination of the number of shares present
for quorum purposes. Neither abstentions nor broker non-votes are counted in
tabulations of the votes cast on proposals presented to shareholders.
In the absence of contrary instructions, shares represented by proxies will
be voted FOR Proposal Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10. Management does not
know of any matters to be presented at this Annual General Meeting other than
those set forth in this Proxy Statement and in the Notice accompanying this
Proxy Statement. If other matters should properly come before the meeting, the
proxy holders will vote on such matters in accordance with their best judgment.
Any shareholder of record has the right to revoke his or her proxy at any time
prior to voting at the Annual General Meeting by submitting a subsequently dated
proxy or by attending the meeting and voting in person. To be effective, a proxy
must be deposited at the registered office of the Company located at 36 Robinson
Road #18-01, City House, Singapore 068877 or at Boston EquiServe, P.O. Box 8040,
Boston, MA 02266-8040, United States of America, at least forty-eight (48) hours
before the time set for the Annual General Meeting.
The Company has prepared, in accordance with Singapore law, Singapore
dollar financial statements to be distributed as part of this Proxy Statement.
Except as otherwise stated herein, all monetary amounts in this Proxy Statement
have been presented in U.S. dollars.
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PROPOSAL NO. 1:
RE-ELECTION OF DIRECTORS
At each Annual General Meeting, at least one-third (1/3) of the Directors
(or, if their number is not a multiple of three (3), the number nearest to but
not less than one-third (1/3)) are required to retire from office. The Directors
required to retire in each year are those who have been in office longest since
their last re-election or appointment. As between persons who became or were
last re-elected Directors on the same day, those required to retire are (unless
they otherwise agree among themselves) determined by lot. Retiring Directors are
eligible for re-election. The first three (3) names set forth below, Messrs.
Marks, Tsui and Ahkong, are the three (3) members of the Board of Directors who
will retire by rotation in the manner stated above, are eligible for re-election
and have been nominated to stand for re-election at the 1999 Annual General
Meeting. The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees for Directors listed below. In the event any
nominee is unable or declines to serve as a Director at the time of the Annual
General Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors, in accordance with Article 100 of
the Articles of Association of the Company, to fill the vacancy. In the event
that additional persons are nominated for election as Directors, in accordance
with Article 100 of the Articles of Association of the Company, the proxy
holders intend to vote all proxies received by them for the nominees listed
below. As of the date of this Proxy Statement, the Board of Directors is not
aware of any nominee who is unable or will decline to serve as a Director.
Nominee to Board of Directors
Michael E. Marks (age 48) -- Mr. Marks has been the Company's Chief
Executive Officer since January 1994 and its Chairman of the Board since July
1993. He has been a Director of the Company since December 1991. From November
1990 to December 1993, Mr. Marks was President and Chief Executive Officer of
Metcal, Inc., a precision heating instrument company ("Metcal"). Mr. Marks
received a B.A. and M.A. from Oberlin College and an M.B.A. from the Harvard
Business School.
Tsui Sung Lam (age 49) -- Mr. Tsui has been and a Director of the Company
since 1991. Mr. Tsui served as the Company's President, Asia-Pacific from April
1997 to June 1999, From January 1994 to April 1997, he served as the Company's
President and Chief Operating Officer. From June 1990 to December 1993, he was
the Company's Managing Director and Chief Executive Officer. From 1982 to June
1990, Mr. Tsui served in various positions for Flextronics, Inc., the Company's
predecessor, including Vice President of Asian Operations. Mr. Tsui received
Diplomas in Production Engineering and Management Studies from Hong Kong
Polytechnic, and a Certificate in Industrial Engineering from Hong Kong
University.
Chuen Fah Alain Ahkong (age 51) -- 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. Mr. Ahkong also serves as a director of Power Supply
Limited.
Directors Not Standing for Re-Election
Michael J. Moritz (age 45) -- 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 a
director of Yahoo, Inc., Neomagic and several privately-held companies.
Richard L. Sharp (age 51) -- Mr. Sharp has served as a Director of the
Company since July 1993. He has been the Chairman, President, Chief Executive
Officer and a director of Circuit City Stores, Inc., a consumer electronics and
appliances retailer, since June 1986. Mr. Sharp also serves as a director of S&K
Famous Brands, Inc. and Fort James Corporation.
Patrick Foley (age 67) -- Mr. Foley has been a Director of the Company
since October 1997. Mr. Foley is Chairman and Chief Executive Officer of DHL
Airways, Inc., a global document, package and airfreight delivery
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company. He joined DHL in September 1988 with more than thirty (30) years
experience in hotel and airline industries. Mr. Foley 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 (age 40) -- 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 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.
Vote Required
The affirmative vote of the holders of a majority of the issued shares
present and voting in person or by proxy at the Annual General Meeting is
required to re-elect Messrs. Marks, Tsui and Ahkong. Abstentions and broker
non-votes are each included in the determination of the number of shares present
for quorum purposes. Neither abstentions or broker non-votes are counted in the
tabulation of the votes cast on the re-election of Messrs. Marks, Tsui and
Ahkong.
The Board recommends a vote "FOR" the re-election of Messrs. Michael E.
Marks, Tsui Sung Lam and Chuen Fah Alain Ahkong to the Board of Directors.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held a total of fifty-two (52)
meetings during fiscal 1999. During the period for which each current Director
was a Director or a committee member, all Directors except Messrs. Ahkong,
Foley, Moritz and Sharp attended at least 75% of the aggregate of (a) the total
number of meetings of the Board and (b) the total number of meetings held by all
committees of the Board on which he served.
The Board of Directors has created an Audit Committee and a Compensation
Committee of the Board. The Audit Committee is currently composed of Messrs.
Ahkong and Foley and is charged with reviewing the Company's annual audit and
meeting with the Company's independent accountants to review the Company's
internal controls and financial management practices. The Compensation
Committee, which is currently composed of Messrs. Sharp and Moritz, recommends
to the Board of Directors compensation for the Company's key employees and
administers the employee share option plans. The Audit Committee held three (3)
meetings in fiscal 1999 and the Compensation Committee held two (2) meetings in
fiscal 1999. There is no nominating committee or a committee performing the
functions of a nominating committee.
DIRECTOR REMUNERATION
Each individual who first becomes a non-employee Board member after January
24, 1994 is granted a stock option for 30,000 Ordinary Shares (as adjusted
following the Company's two-for-one stock split effected in the form of a bonus
issue effective on December 22, 1998) and thereafter, on the date of each Annual
General Meeting, each individual who is at that time serving as a non-employee
Director receives a stock option for 6,000 Ordinary Shares (as adjusted
following the Company's one-for-one bonus issue effective on December 22, 1998),
all pursuant to the automatic option grant provisions of the Company's 1993
Share Option Plan. Pursuant to this program, Messrs. Ahkong, Moritz, Sharp,
Foley and Hui each received option grants for 6,000 Ordinary Shares in fiscal
1999. In addition, all Directors receive reimbursement of reasonable
out-of-pocket expenses incurred in connection with meetings of the Board of
Directors. No non-employee Director receives any cash compensation for services
rendered as a Director. No Director who is an employee of the Company receives
compensation for services rendered as a Director.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to executive
officers of the Company.
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Name Age Position
- ---- --- --------
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
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 has served as the Company's Chief Financial
Officer since February 1997 and has served as its President, Systems Group since
April 1999. He served the Company's Senior Vice President of Finance and
Administration from February 1997 to April 1999 and as a Director of the Company
from January 1994 until August 1997. From he served as. 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
March1999, 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. Tsui Sung Lam, who left the Company in June 1999.
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
KaggSchool 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
-9-
<PAGE>
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.
-10-
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth information concerning the compensation
paid or accrued by the Company for services rendered during fiscal 1999, 1998
and 1997 by the Chief Executive Officer and each of the four most highly
compensated executive officers whose total salary and bonus for fiscal 1999
exceeded $100,000 (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------------------------------- ------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- --------------------------- ------ ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks ................ 1999 $400,000 $339,315 $ 9,617(1) 800,000 $ 7,701(4)
Chairman of the Board and 1998 $375,000 $168,750 $205,167(2) 200,000 $ 8,351(5)
Chief Executive Officer 1997 $300,000 $ 80,400 $234,052(3) 500,000 $ 8,351(6)
Michael McNamara ................ 1999 $325,000 $177,416 $ 22,611(7) 446,000 $ 5,000(10)
President, Americas Operations 1998 $250,000 $ 75,000 $ 14,576(8) 43,966 $ 3,940(10)
1997 $199,999 $ 30,642 $ 5,337(9) 21,500 $ 3,958(10)
Ronny Nilsson ................... 1999 $315,000 $148,859 $ 18,096(11) 80,000 $ 43,497(14)
President, Western 1998 $268,681 $ 88,251 $564,564(12) 110,000(13) $ 44,501(14)
European Operations
Robert R. B. Dykes .............. 1999 $300,000 $166,008 $ 25,337(16) 110,000 $ 5,000(18)
President, Systems Group and 1998 $250,000 $ 75,000 10,675(17) 137,500 $ 3,750(18)
Chief Financial Officer 1997 $ 31,250(15) -- -- 3,000 --
Humphrey Porter ................. 1999 $250,000 $149,000 $ 40,000(19) 220,000 $ 30,000(20)
President, Central/Eastern 1998 $152,000 $104,000 $ 40,000(19) 80,000 $ 18,000(20)
European Operations 1997 $128,000 $ 20,000 $ 40,000(19) -- $ 15,000(20)
</TABLE>
- ----------
(1) Represents payment for company vehicle of $9,617.
(2) Includes an auto allowance of $7,533, forgiveness of a promissory note due
to a subsidiary of the Company of $100,000 and forgiveness of interest
payment of $97,634 on the promissory note.
(3) Includes an auto allowance of $7,712, forgiveness of a promissory note due
to a subsidiary of the Company of $200,000 and forgiveness of interest
payment of $26,340 on the promissory note.
(4) Includes Company contributions to the Company's 401(k) plan of $5,000, life
and disability insurance premium payments of $2,701.
(5) Includes Company contributions to the Company's 401(k) plan of $4,750, life
and disability insurance premium payments of $3,601.
(6) Includes Company contributions to the Company's 401(k) plan of $4,750, life
and disability insurance premium payments of $3,601.
(7) Includes payment for company vehicle of $22,611.
(8) Includes an auto allowance of $7,200 and forgiveness of interest payment of
$7,376 due on a promissory note payable to a subsidiary of the Company.
-11-
<PAGE>
(9) Represents forgiveness of interest payment due on a promissory note payable
to a subsidiary of the Company.
(10) Represents Company contributions to the Company's 401(k) plan.
(11) Mr. Dykes became an employee of the Company in February 1997 and the amount
indicated represents salary paid to Mr. Dykes during fiscal 1997.
(12) Includes vehicle allowance of $10,404 and apartment allowance of $7,692.
(13) Includes payment of $413,505 pursuant to a Services Agreement dated April
30, 1997 between the Company and Mr. Nilsson and a payment of $132,322 to
pay taxes due on the payments to Mr. Nilsson under the Services Agreement.
Also includes vehicle allowance of $10,853 and housing allowance of $7,884.
(14) Includes 110,000 shares subject to previously-granted options that were
repriced in June 1997.
(15) Represents Company contributions to a pension retirement fund.
(16) Represents payment for company vehicle of $22,611.
(17) Represents payment for company vehicle of $10,675.
(18) Represents Company contributions to the Company's 401(k) plan.
(19) Includes vehicle allowance of $7,000, a housing allowance of $14,000.
(20) Represents Company contributions to a pension retirement fund.
Option Grant Table
The following table sets forth information regarding option grants during
fiscal 1999 to each of the Named Executive Officers. All options were granted
pursuant to the Company's 1993 Share Option Plan. In accordance with the rules
of the Securities and Exchange Commission, the table sets forth the hypothetical
gains or "option spreads" that would exist for the options at the end of their
respective five-year terms. These gains are based on assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted to the end of the option term.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Percentage
Number of Total Potential Realizable Value at
of Options Assumed Annual Rates of Stock
Securities Granted Exercise Price Appreciation for Option
Underlying to Price Term (3)
Options Employees Per Expiration --------------------------------
Name Granted(1) in 1999 Share (2) Date 5% 10%
- -------------------------- ---------- ---------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks ............... 800,000 23.3% $ 24.00 10/27/03 $ 5,304,576 $11,721,792
Tsui Sung Lam .................. 20,000 0.6% $ 18.94 06/02/03 $ 104,655 $ 231,261
Michael McNamara ............... 146,000 4.3% $ 18.94 06/02/03 $ 763,981 $ 1,688,207
Michael McNamara ............... 300,000 8.8% $ 24.00 10/27/03 $ 1,989,216 $ 4,395,672
Ronny Nilsson (5) .............. 20,000 0.6% $ 18.94 06/02/03 $ 104,655 $ 231,261
Ronny Nilsson (5) .............. 60,000 1.8% $ 24.00 10/27/03 $ 397,843 $ 879,134
Robert R. B. Dykes ............. 10,000 0.3% $ 18.94 06/02/03 $ 52,327 $ 115,631
Robert R. B. Dykes ............. 100,000 2.9% $ 24.00 10/27/03 $ 663,072 $ 1,465,224
Humphrey Porter ................ 100,000 2.9% $ 18.94 06/02/03 $ 523,274 $ 1,156,306
Humphrey Porter ................ 120,000 3.5% $ 24.00 10/27/03 $ 795,686 $ 1,758,269
</TABLE>
(1) The options shown in the table were granted at fair market value, are
incentive stock options and will expire five years from the date of grant,
subject to earlier termination upon termination of the optionee's
employment. The options become exercisable over a four-year period, with
25% of the shares vesting on the first anniversary of the date of grant and
1/36th of the shares vesting for each full calendar month that an optionee
renders services to the Company thereafter. Each option fully accelerates
in the event that, in the eighteen-month period following certain mergers
or acquisitions of the Company, the optionee's employment with the Company
is terminated or his duties are substantially reduced or changed. Each
option includes a limited stock appreciation right pursuant
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<PAGE>
to which the option will automatically be canceled upon the occurrence of
certain hostile tender offers, in return for a cash distribution from the
Company based on the tender offer price per share.
(2) The exercise price of the option may be paid in cash or through a cashless
exercise procedure involving a same-day sale of the purchase shares.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of share price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future Ordinary Share prices.
(4) All of the options shown in the table for Mr. Nilsson are immediately
exercisable.
Year-End Option Table
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during fiscal 1999, including
the aggregate amount of gains on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of March 31, 1999. Also reported are values of "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding stock options and $51.00 per share, which was the closing
price of the Company's Ordinary Shares as reported on the Nasdaq National Market
on March 31, 1999, the last day of trading for fiscal 1999.
Aggregated Option Exercises in Fiscal 1999 and Year-End Values
<TABLE>
<CAPTION>
Potential Realizable
Number of Securities at Assumed Annual Rates of
Shares Underlying Unexercised Stock Price Appreciation for
Acquired Options at Fiscal Year-End Option Term (2)
on Value ----------------------------- -----------------------------
Name Exercise (1) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks ............. 320,000 $ 4,136,651 62,500 937,500 $ 2,140,625 $32,109,375
Michael McNamara ............. 60,000 $ 1,910,100 90,183 515,749 $ 3,591,023 $15,515,924
Ronny Nilsson ................ 40,000 $ 895,000 260,000 -- $ 9,348,750 --
Robert R. B. Dykes ........... 60,000 $ 2,079,900 138,313 264,687 $ 5,497,074 $ 9,111,426
Humphrey Porter .............. -- -- 25,000 275,000 $ 875,000 $ 8,371,250
</TABLE>
- ----------
(1) "Value Realized" represents the fair market value of the Company's Ordinary
Shares underlying the option on the date of exercise less the aggregate
exercise price of the option.
(2) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's Ordinary Shares on March 31,
1999, the last day of trading for fiscal 1999.
Employment Agreements
In connection with the acquisition of two manufacturing facilities from
Ericsson Business Networks AB located in Karlskrona, Sweden, the Company and Mr.
Ronny Nilsson entered into an Employment and Noncompetition Agreement (the
"Employment Agreement") and a Services Agreement (the "Services Agreement"),
both dated as of April 30, 1997. Pursuant to the Employment Agreement, Mr.
Nilsson (a) was appointed as the Company's Senior Vice President, Europe for a
four-year period, (b) receives an annual salary of $250,000, and (c) is entitled
to a bonus of up to 45% of his annual salary upon the successful completion of
certain performance criteria. Pursuant to the Services Agreement, Mr. Nilsson is
to perform management consultation and guidance services to the Company in
consideration for (a) an aggregate of $775,000 which was paid between March 31,
1997 and April 15, 1998, and (b) the issuance by the Company to Mr. Nilsson of
an interest-free loan in the amount of 400,000 kronor ($415,000 as of April 15,
1997, the date of the issuance of the loan) which was repaid by Mr. Nilsson in
two installments of $210,000 and $205,000 on September 15, 1997 and April 15,
1998, respectively. In
-13-
<PAGE>
connection with Mr. Nilsson's repayment of the interest-free loan, the Company
on April 15, 1998 paid to Mr. Nilsson as compensation an amount equal to the two
installments paid by Mr. Nilsson.
On April 16, 1995, the Company's U.S. subsidiary, Flextronics International
USA, Inc. ("Flextronics USA"), loaned $500,000 to Mr. Marks, the Chairman of the
Board and Chief Executive Officer of the Company. Mr. Marks executed a
promissory note in favor of Flextronics USA which matures on April 16, 2000.
During fiscal 1997, Flextronics USA forgave a total of $200,000 of outstanding
principal amount and $26,340 in accrued interest. During fiscal 1999,
Flextronics USA forgave a total of $100,000 of outstanding principal amount and
$97,634 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 October 22, 1996, Flextronics USA loaned $136,000 to Mr. Michael
McNamara. Mr. McNamara executed a promissory note in favor of Flextronics USA
which bears interest at a rate of 7% and matures on October 22, 2001. The
remaining outstanding balance of the loan as of March 31, 1999 was $150,000
(representing $136,000 in principal and $14,000 in accrued interest).
On November 6, 1997, Flextronics USA loaned $1.5 million 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
principal balance of the loan as of March 31, 1999 was $1.5 million and all
accrued interest was paid up to March 31, 1999.
On November 25, 1998, Flextronics USA loaned $130,000 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 $133,000
(representing $130,000 in principal and $3,000 in accrued interest).
On January 15, 1999, Flextronics USA loaned $200,000 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 $203,000 (representing
$200,000 in principal and $3,000 in accrued interest).
On February 4, 1999, the Company loaned $410,000 to Mr. Ronny Nilsson. Mr.
Nilsson executed a promissory note in favor of the Company and the note matures
on March 31, 2000.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during fiscal 1999 were Mr. Sharp
and Mr. Moritz. No officers of the Company serve on the Compensation Committee.
No interlocking relationships exist between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company.
-14-
<PAGE>
Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the following Compensation Committee Report on
Executive Compensation will not be incorporated by reference into any of those
prior filings; nor will such report be incorporated by reference into any future
filings made by the Company under those statutes.
The Compensation Committee (the "Committee") of the Board of Directors sets
the base salary of the Company's executive officers and approves individual
bonus programs for executive officers. The Committee took no action with respect
to executive compensation in fiscal 1999, other than approving certain year-end
bonuses earned in accordance with a bonus plan previously adopted by the Board
of Directors and authorizing salary increases and option grants to five (5)
executive officers. Option grants to executive officers are made by the
Committee, and the Committee has complete discretion in establishing the terms
of each such grant. The following is a summary of policies of the Company that
affect the compensation paid to executive officers, as reflected in the tables
and text set forth elsewhere in this Proxy Statement.
General Compensation Policy
The Company's overall policy is to offer its executive officers cash-based
and equity-based compensation opportunities based upon their personal
performance, the financial performance of the Company and their contribution to
that performance. One of the Company's primary objectives is to have a
significant portion of each officer's compensation contingent upon the Company's
performance as well as upon his or her own level of performance. The principal
factors taken into account in establishing each executive officer's compensation
package are summarized below. Additional factors may be taken into account to a
lesser degree, and the relative weight given to each factor varies with each
individual in the discretion of the Committee. The Committee may in its
discretion apply entirely different factors, such as different measures of
financial performance, for future fiscal years.
Cash-Based Compensation. The Company sets base salary for executive
officers on the basis of personal performance and internal comparability
considerations. Bonuses are paid at the discretion of the Committee. In
determining the amount of the bonus to be paid to each executive officer,
including the Chief Executive Officer, the Company first establishes a
percentage of the officer's base salary as a target bonus. The amount of the
actual bonus paid to the officer can be greater or less than this percentage,
and depends on the Company's net income, the performance of the operations of
the Company that are under the officer's supervision and other performance
factors, each as compared to budgeted performance for the period. The Company
also has a 401(k) retirement savings plan for U.S. employees to which it can
contribute a portion of profits and such contribution is allocated to eligible
participants in proportion to their total compensation for the year relative to
the total aggregate compensation for all eligible participants. The Company
believes that all employees share the responsibility of achieving profits.
Long-Term Equity-Based Compensation. The Committee intends to make stock
option grants from time to time. Each grant is designed to align the interests
of the executive officer with those of the shareholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant
generally allows the officer to acquire the Company's Ordinary Shares at a fixed
price per share (the market price on the grant date) over a specified period of
time (up to five (5) years), thus providing a return to the officer only if he
or she remains in the employ of the Company and the market price of the shares
appreciates over the option term. The size of the option grant to each executive
officer generally is set at a level that is intended to create a meaningful
opportunity for share ownership based upon the individual's current position
with the Company, but there is also taken into account the individual's
potential for future responsibility and promotion over the option term, the
individual's personal performance in recent periods and the number of options
held by the individual at the time of grant. The relative weight given to these
factors varies with each individual in the sole discretion of the Committee.
CEO Compensation. Mr. Marks' base salary is based on the Company's
expectation of his personal performance and comparisons to the base salaries of
other executive officers of the Company. With respect to Mr. Marks' base salary,
it is the Company's intent to provide him with a level of stability and
certainty each year and not
-15-
<PAGE>
have this particular component of compensation affected to any significant
degree by short-term Company performance factors. However, in recognition of the
Company's rapid growth and corresponding expansion of Mr. Marks'
responsibilities, Mr. Marks' base salary was increased from $375,000 in fiscal
1998 to $400,000 in fiscal 1999. In fiscal 1999, the Committee granted Mr. Marks
options for 800,000 Ordinary Shares at an exercise price of $24.00 per share.
The Committee based its decision regarding the size of the option grant to Mr.
Marks on an analysis of option grants to CEOs in the industry with similar
responsibilities. The Company also provided for the acceleration of all Mr.
Marks' unvested options in the event that, following certain mergers or
acquisitions of the Company, Mr. Marks' employment with the Company is
terminated or his duties are substantially reduced or changed. In addition, on
April 16, 1995, the Company's U.S. subsidiary, Flextronics USA, loaned $500,000
to Mr. Marks. During fiscal 1999, Flextronics USA forgave a total of $100,000 of
outstanding principal amount, and $97,634 in accrued interest, on this loan. On
November 6, 1997, Flextronics USA loaned an additional $1.5 million to Mr.
Marks. This 1995 loan was forgiven in the past by the Board of Directors, and
the new loan extended, based on the Board's subjective judgment that it was
appropriate in view of Mr. Marks' performance in fiscal 1999, including his
significant role in the substantial growth in the Company's net sales and the
development and strengthening of customer relationships with leading OEMs such
as Ericsson, Cisco Systems and Microsoft Corporation, as well as his role in
recruiting several new executive officers and directors.
Deduction Limit for Executive Compensation. Section 162(m) of the Internal
Revenue Code ("Section 162(m)") limits federal income tax deductions for
compensation paid to the chief executive officer and the four other most highly
compensated officers of a public company to $1.0 million per year, but contains
an exception for performance-based compensation that satisfies certain
conditions.
The Company believes that stock options granted to its executives qualify
for the performance-based exception to the deduction limit and because it is
unlikely that other compensation payable to any Company executive would exceed
the deduction limit in the near future the Committee has not yet qualified
compensation other than options for the performance-based exception. In
approving the amount and form of compensation for Company executives, the
Committee will continue to consider all elements of cost to the Company of
providing that compensation.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Richard L. Sharp
Michael J. Moritz
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<PAGE>
Performance Graph
The following performance graph shows the percentage change in cumulative
total return to a holder of the Company's Ordinary Shares, assuming $100
invested, compared with the cumulative total return, assuming dividend
reinvestment, of the Standard & Poor's 500 Stock Index and the peer group
indicated below, during the period from March 18, 1994 (the date of the
Company's initial public offering) through March 31, 1999.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performances of the
Company's Ordinary Shares.
Notwithstanding anything to the contrary set forth in any of the Company's
prior filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate this proxy statement
by reference to future filings under those statutes, the following performance
graph will not be incorporated by reference into any of those prior filings; nor
will such graph be incorporated by reference into any future filings made by the
Company under those statutes.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
3/94 3/95 3/96 3/97 3/98 3/99
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Flextronics International, Ltd. 100 116 244 159 346 406
Peer Group 100 103 170 234 368 693
S&P 500 100 110 153 183 271 321
</TABLE>
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<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Ordinary Shares and other equity securities of the
Company. Additionally, officers, Directors and greater than ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the year ended March 31, 1999
with all Section 16(a) filing requirements applicable to the Company's officers,
Directors and greater than ten percent (10%) beneficial owners, except that the
following individuals had late filings in fiscal 1999: Michael E. Marks (Form 4
for sale of stock and Forms 5 for option grants); Tsui Sung Lam (Form 4 for sale
of stock and Form 5 for option grant); Chuen Fah Alain Ahkong (Form 5 for option
grant); Michael J. Moritz (Forms 4 for sales of stock and Form 5 for option
grant); Richard L. Sharp (Form 5 for option grant); Patrick Foley (Form 5 for
option grant); Hui Shing Leong (Forms 4 for sale of stock and gift of shares and
Forms 5 for option grants); Michael McNamara (Forms 4 for stock purchase and
sale of stock and Form 5 for option grant); Robert R.B. Dykes (Form 4 for a
stock purchase and Forms 5 for option grants); and Humphrey Porter (Forms 4 for
sales of stock and gift of shares and Forms 5 for option grants).
-18-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of July 1, 1999 regarding
the beneficial ownership of the Company's Ordinary Shares, by (a) each Director,
(b) each executive officer named in the Summary Compensation Table and (c) all
Directors and executive officers as a group. Unless otherwise indicated below,
the persons and entities named in the table have sole voting and sole investment
power with respect to all the shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Number of Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent(2)
- ------------------------------------ -------- ----------
<S> <C> <C>
Hui Shing Leong (3) ............................................. 2,072,700 4.3
Richard L. Sharp (4) ............................................ 1,505,488 3.1
Michael E. Marks (5) ............................................ 1,098,234 2.2
Michael McNamara (6) ............................................ 301,581 *
Michael J. Moritz (7) ........................................... 268,015 *
Ronny Nilsson (8) ............................................... 260,000 *
Robert R. B. Dykes (9) .......................................... 210,135 *
Tsui Sung Lam (10) .............................................. 74,458 *
Humphrey Porter (11) ............................................ 62,500 1.4
Patrick Foley (12) .............................................. 37,500 *
Chuen Fah Alain Ahkong (13) ..................................... 17,500 *
All Directors and executive officers as a group (11 persons) (14) 5,858,111 11.9
</TABLE>
* Less than 1.0%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has voting or investment power with respect to such
shares. Ordinary Shares subject to options that are currently exercisable
or exercisable within 60 days of July 1, 1999 are deemed to be outstanding
and to be beneficially owned by the person holding such options for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Percentage ownership is based upon 48,091,929 outstanding Ordinary Shares
as of July 1, 1999.
(3) Includes 1,128,800 shares beneficially owned by Great Empire Limited Trust.
Mr. Hui, the trustee of Great Empire Limited Trust, has voting and
investment power over such shares and may be deemed to beneficially own
such shares. Mr. Hui disclaims beneficial ownership of all such shares
except to the extent of his proportionate interest therein. Includes 25,000
shares subject to options exercisable within 60 days after July 1, 1999
held by Mr. Hui.
(4) Includes 370,000 shares beneficially owned by Bethany Limited Partnership.
Mr. Sharp, the general partner of Bethany Limited Partnership, has voting
and investment power over such shares and may be deemed to beneficially own
such shares. Mr. Sharp disclaims beneficial ownership of all such shares
except to the extent of his proportionate interest therein. Also includes
38,750 shares held by RLS Charitable Remainder Unitrust of which Mr. Sharp
is a co-trustee and 23,500 shares subject to options exercisable within 60
days after July 1, 1999 held by Mr. Sharp.
(5) Includes 6,000 shares held by the Justin Caine Marks Trust and 6,000 shares
held by the Amy G. Marks Trust. Also includes 457,084 shares subject to
options exercisable within 60 days after July 1, 1999 held by Mr. Marks.
(6) Includes 147,757 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr.McNamara.
(7) Includes 370,211 shares held by Sequoia Capital Growth Fund, a limited
partnership, 14,281 shares held by Sequoia Technology Partners III, a
limited partnership, 160,334 shares held by Sequoia Capital VII, a limited
partnership and 7,800 shares held by Sequoia Technology Partners VII, a
limited partnership. Sequoia Partners (CF) is the general partner of
Sequoia Capital Growth Fund and has sole voting and investment power over
such shares. Mr. Moritz is a general partner of Sequoia Partners (CF). Mr.
Moritz is a limited partner of
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<PAGE>
Sequoia Technology Partners III. The general partner of Sequoia Capital VII
and Sequoia Technology Partners VII is Sequoia Capital VII-A Management,
LLC. Mr. Moritz is a general partner of Sequoia Capital VII-A Management,
LLC. Also includes 25,500 shares subject to options exercisable within 60
days after July 1, 1999 held by Mr. Moritz.
(8) Includes 260,000 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Nilsson.
(9) Includes 169,875 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Dykes.
(10) Includes 614,454 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Tsui.
(11) Includes 62,500 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Porter.
(12) Includes 27,500 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Foley.
(13) Includes 17,500 shares subject to options exercisable within 60 days after
July 1, 1999 held by Mr. Ahkong.
(14) Includes 2,431,802 shares subject to options exercisable within 60 days
after July 1, 1999.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the only persons
who beneficially owned (to the Company's knowledge) more than 5% of the
Company's Ordinary Shares as of July 1, 1999. Unless otherwise indicated below,
the persons and entities named in the table have sole voting and sole investment
power with respect to all the shares beneficially owned, subject to community
property laws where applicable.
Number of Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent(2)
- ------------------------------------ -------- ----------
Capital Research and Management Company (3)...... 4,930,000 10.3
333 South Hope Street
Los Angeles, California 90071
Ronald Baron (4)................................. 3,367,000 7.0
c/o Baron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
New York, New York 10153
Pilgrim Baxter & Associates, Ltd. (5)............ 2,474,000 5.1
825 Duportail Road
Wayne, Pennsylvania 19087
- ----------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has voting or investment power with respect to such
shares.
(2) Percentage ownership is based upon 48,091,929 outstanding Ordinary Shares
as of July 1, 1999.
(3) Based on information supplied by Capital Research and Management Company in
a Schedule 13G filed with the Securities and Exchange Commission on
February 11, 1999.
(4) Based on information supplied by Mr. Baron in a Schedule 13G filed with the
Securities and Exchange Commission on February 13, 1998, includes 181,500
shares held by the investment advisory clients of Baron Capital Management,
Inc. ("BCM"), a wholly-owned subsidiary of Baron Capital, Inc. ("BCI"), and
1,503,000 shares held by the investment advisory clients of BAMCO, Inc.
("BAMCO") and Baron Asset Fund ("BAF"). BAF is an advisory client of BAMCO.
Pursuant to discretionary agreements, BCM and BAMCO hold the power to vote
and dispose of the shares in the advisory accounts. BCI and BAMCO are
wholly-owned subsidiaries of Baron Capital, Inc. ("BCG"). Mr. Baron owns a
controlling interest in BCG, and may be deemed to share power to voting and
dispose of such shares.
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<PAGE>
(5) Based on information supplied by Pilgrim Baxter & Associates, Ltd. in a
Schedule 13G filed with the Securities and Exchange Commission on February
8, 1999.
Certain Transactions
The Company paid approximately $112,315 to Pioneer Management Services Pte.
Ltd. ("Pioneer"), a tax consulting and planning firm, in fiscal 1999 in
connection with tax and corporate services provided to the Company related to
its Asian operations. Chuen Fah Alain Ahkong, a Director of the Company, is a
director of Pioneer.
See "Employment Agreements."
PROPOSAL NO. 2:
TO RECEIVE AND ADOPT THE AUDITED ACCOUNTS OF THE COMPANY,
INCLUDING THE REPORTS OF THE DIRECTORS AND AUDITORS
The Company's Annual Report for the fiscal year ended March 31, 1999 (the
"Annual Report") accompanies this Proxy Statement. The Annual Report includes
the Company's United States dollar financial statements prepared in conformity
with United States generally accepted accounting principles. The Company's
Singapore dollar financial statements prepared in conformity with Singapore
generally accepted accounting principles also accompany this Proxy Statement.
The United States dollar financial statements and the Singapore dollar financial
statements are referred to herein collectively as the "Financial Statements."
The Financial Statements are accompanied by Auditor's Reports of Arthur
Andersen. The Company publishes its consolidated financial statements in U.S.
dollars, which is the principal currency in which it conducts its business. The
Company's Singapore dollar financial statements have been prepared and
circulated to shareholders as a part of this Proxy Statement as required by
Singapore law.
The Board recommends a vote "FOR" the receipt and adoption of the Company's
Financial Statements, including the Directors' Report and Auditor's Reports
included therein.
PROPOSAL NO. 3:
APPOINTMENT OF INDEPENDENT AUDITORS AND
AUTHORIZATION OF BOARD TO FIX THEIR REMUNERATION
The firm of Arthur Andersen served as independent Auditors for the Company
for the fiscal year ended March 31, 1999. The Board of Directors intends to
engage Arthur Andersen as independent Auditors to audit the accounts and records
of the Company for the fiscal year ending March 31, 2000, and to perform other
appropriate services. The Company expects that a representative from Arthur
Andersen will be present at the 1999 Annual General Meeting. Such representative
will have the opportunity to make a statement if he so desires and is expected
to be available to respond to appropriate questions.
The Board recommends a vote "FOR" the appointment of Arthur Andersen as
independent Auditors for fiscal year 2000 and authorization for the Board of
Directors to fix their remuneration.
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<PAGE>
Proposal NO. 4:
Ordinary resolution to approve increase of authorized share capital
Shareholder approval is being sought for an approval, to increase in the
authorized share capital of the Company from S$1,000,000 divided into
100,000,000 Shares, S$0.01 par value per share, to S$2,500,000, by the creation
of 150,000,000 new Ordinary Shares, S$0.01 par value per share.
At July 1, 1999, 48,091,929 Ordinary Shares of the Company were issued and
outstanding and 6,460,868 Ordinary Shares were reserved for issuance upon
exercise of outstanding options. Also as of that date, an additional 1,119,629
Ordinary Shares of the Company were reserved for issuance under its existing
share purchase and share option plans. The proposed increase in the number of
authorized Ordinary Shares from 100,000,000 to 250,000,000 would result in
additional shares being available for, among other things, stock splits, stock
dividends, issuance from time to time for other corporate purposes, such as
acquisitions of companies or assets, sales of stock or securities convertible
into stock and issuances pursuant to stock options or other employee benefit
plans. The Company currently has no specific plans, arrangements or
understandings with respect to the issuance of these additional shares, and no
other change in the rights of stockholders is proposed. The Company believes
that the availability of the additional shares will provide it with the
flexibility to meet business needs as they arise, to take advantage of favorable
opportunities and to respond to a changing corporate environment.
The Board recommends a vote "FOR" the resolution approving the increase in
the authorized share capital of the Company.
PROPOSAL NO. 5
ORDINARY RESOLUTION TO APPROVE THE INCREASE OF THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE 1993 SHARE OPTION PLAN AND TO APPROVE
CERTAIN OTHER MODIFICATIONS TO THE 1993 SHARE OPTION PLAN
The Company's shareholders are being asked to approve an amendment to the
1993 Share Option Plan (which was adopted by the Board of Directors and approved
by the shareholders in 1993) (the "1993 Plan") (a) to increase the number of the
Company's Ordinary Shares authorized for issuance under the 1993 Plan by
1,000,000 shares, from 7,200,000 shares to 8,200,000 shares; (b) to amend the
limitation on the number of options or separately exercisable stock appreciation
rights granted under the 1993 Plan to any one participant from a limit of
1,000,000 Ordinary Shares in the aggregate over the term of the 1993 Plan to a
limit of 1,000,000 Ordinary Shares in the aggregate annually; and (c) to amend
the provision relating to the automatic grant of a stock option to an individual
who first becomes a non-employee Board member from a grant of 30,000 Ordinary
Shares to a grant for a number of shares determined by the Plan Administrator
(as defined below). As of July 1, 1999 there were 1,154,785 shares available for
issuance under the 1993 Plan and after this amendment 2,154,875 shares will be
available for issuance under the 1993 Plan. The Board believes the share
increase and the amendment to the limitation of grants of options or stock
appreciation rights are necessary for the Company to continue to have a
sufficient reserve of Ordinary Shares available under the 1993 Plan to attract
and retain the services of key employees and other qualified personnel essential
to the Company's long-term success and to effectively compete for qualified
personnel in its markets. The Board believes the amendment granting the Plan
Administrator the authority to determine the number of shares granted to
incoming non-employee Board members allows the Plan Administrator to consider
various factors in determining the number of shares granted, including the
current fair market value of the Ordinary Shares and the relative experience of
the incoming non-employee Board member.
INTERIM PLANS
The Company's 1997 Interim Option Plan (the "1997 Interim Plan"), 1998
Interim Option Plan (the "1998 Interim Plan") and 1999 Interim Option Plan (the
"1999 Interim Plan" and, together with the 1997 Interim Plan and the 1998
Interim Plan, the "Interim Plans") were adopted by the Board on June 5, 1997,
January 14, 1998 and December 14, 1998, respectively. The adoption of the
Interim Plans was necessitated by the internal growth of the Company and the
Company's acquisitions of Neutronics Electronic Industries Holding AG, DTM
Products, Inc.,
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<PAGE>
Energipilot AB, Altatron, Inc. and Conexao Informatica Ltda. None of these
acquired companies had broad-based equity compensation plans in place prior to
the acquisition. Subsequent to each acquisition, the Company provided
equity-based compensation opportunities for employees of the acquired company
consistent with levels provided by the Company to its existing employees to
provide incentives to such employees to improve their personal performance and
contribute to the improvement of the Company's financial performance. As a
result, the number of shares available for new option grants under the Company's
1993 Plan was nearly depleted, requiring that the Company increase the number of
shares available for issuance under the 1993 Plan in order to continue to
attract, retain, and motivate key employees and other qualified personnel.
The Board reserved an aggregate of 500,000 shares, 800,000 shares and
1,300,000 shares for issuance under the 1997 Interim Plan, the 1998 Interim Plan
and the 1999 Interim Plan, respectively. Shares subject to an option granted
pursuant to the Interim Plans that expires or terminates for any reason without
being exercised will again become available for grant and issuance pursuant to
awards under the Interim Plans. The Interim Plans provide a mechanism for the
Company to grant non-qualified stock options to certain persons without
incurring the compensation charge that would otherwise result if the Company
issued shares under the 1993 Plan subject to future shareholder approval. As the
Interim Plans do not provide for the issuance of incentive stock options,
shareholder approval of the Interim Plans is not required. Options to purchase
85,993 shares, 27,633 shares and 986,197 shares are available for grant pursuant
to the 1997 Interim Plan, 1998 Interim Plan and 1999 Interim Plan, respectively.
From inception of the 1997 Interim Plan in June 1997 to July 1, 1999,
options to purchase an aggregate of 411,003 of the Company's Ordinary Shares
were granted under the 1997 Interim Plan. From inception of the 1998 Interim
Plan in January 1998 to July 1, 1999, options to purchase an aggregate of
768,400 of the Company's Ordinary Shares were granted under the 1998 Interim
Plan. From inception of the 1999 Interim Plan in December 1998 to July 1, 1999,
options to purchase an aggregate of 460,603 of the Company's Ordinary Shares
were granted under the 1999 Interim Plan.
Non-Plan Share Option Grant
On October 28, 1998, the Company's Board of Directors granted to Michael E.
Marks, the Company's President and Chief Executive Officer, a non-qualified,
non-plan share option grant (the "Non-Plan Grant") to purchase 800,000 Ordinary
Shares of the Company at an exercise price of $24.00 per share, which was the
fair market value of an Ordinary Share on the date of grant. The Non-Plan Grant
vests over a four-year period, with 25% of the shares vesting on the first
anniversary of the date of grant and 1/36th of the shares vesting for each full
calendar month that Mr. Marks renders services to the Company thereafter and
will expire on the fifth anniversary of the date of grant. In the event that the
Company is acquired by merger or asset sale, the Non-Plan Grant will
automatically accelerate in full if it is not assumed by the successor
corporation or replaced with a comparable option to purchase shares of the
capital stock of the successor corporation. The Plan Administrator has the
discretionary authority to accelerate any options assumed or replaced in
connection with such acquisition upon the subsequent termination of Mr. Marks'
service within a designated period following the acquisition. In connection with
a hostile change in control of the Company (whether by successful tender offer
for more than fifty percent (50%) of the outstanding voting stock or by proxy
contest for the election of Board members), the Plan Administrator will have the
discretionary authority to provide for automatic acceleration of the Non-Plan
Grant either at the time of such change in control or upon the subsequent
termination of Mr. Marks' service.
The grant of the Non-Plan Grant to Mr. Marks was necessitated by the
current limitation in the 1993 Plan on the number of options or separately
exercisable stock appreciation rights granted under the 1993 Plan to any one
participant to 1,000,000 Ordinary Shares in the aggregate over the term of the
1993 Plan. As the Non-Plan Grant is a non-qualified share option grant,
shareholder approval of the Non-Plan Grant is not required.
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<PAGE>
1993 PLAN
The following is a summary of the principal features of the 1993 Plan, as
most recently amended. The summary, however, does not purport to be a complete
description of all the provisions of the 1993 Plan. Any shareholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Company at the Company's offices located at 2090 Fortune
Drive, San Jose, California 95131.
Equity Incentive Programs
The 1993 Plan contains two (2) separate equity incentive programs: (a) a
Discretionary Option Grant Program and (b) an Automatic Option Grant Program.
The Discretionary Option Grant Program will be administered, with respect to
officers and Directors, by the Primary Committee consisting of the Compensation
Committee of the Board and, with respect to all other employees, by the
Secondary Committee, currently consisting of the Chairman of the Board, Mr.
Marks. These committees (the "Plan Administrator") will have complete discretion
(subject to the provisions of the 1993 Plan) to authorize option grants under
the 1993 Plan. However, all grants under the Automatic Option Grant Program will
be made in strict compliance with the provisions of that program, and no
administrative discretion will be exercised by the Plan Administrator with
respect to the grants made thereunder.
Share Reserve
A total of 7,200,000 Ordinary Shares have been reserved for issuance over
the ten year term of the 1993 Plan. In no event may any one participant in the
1993 Plan be granted options or separately exercisable stock appreciation rights
for more than 1,000,000 Ordinary Shares in the aggregate over the term of the
1993 Plan after July 1, 1995.
In the event any change is made to the outstanding Ordinary Shares by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate and to each participant) under
the 1993 Plan and to each outstanding option.
As of March 31, 1999, 6,495,866 Ordinary Shares were subject to outstanding
options and an aggregate of 2,213,790 shares were available for option grants
under the 1993 Plan and the Interim Plans.
Eligibility
Officers and other key employees of the Company and its parent or
subsidiaries (whether now existing or subsequently established) and consultants
and independent contractors of the Company and its parent and subsidiaries are
eligible to participate in the Discretionary Option Grant Program. Non-employee
members of the Board are only eligible to participate in the Automatic Option
Grant Program. Non-employee members of the Board may not participate in the
Automatic Option Grant Program if such participation is (a) prohibited, or (b)
restricted (either absolutely or subject to various securities requirements,
whether legal or administrative, being complied with), in the jurisdiction in
which such Board member is resident under the relevant securities laws of that
jurisdiction.
As of July 1, 1999 approximately five (5) executive officers and
approximately 700 other employees were eligible to participate in the 1993 Plan,
and five (5) non-employee Board members were eligible to participate in the
Automatic Option Grant Program.
Valuation
The fair market value per Ordinary Share on any relevant date under the
1993 Plan is the closing selling price per share on that date on the Nasdaq
National Market. On July 1, 1999, the closing selling price per share was
$56.25.
Discretionary Option Grant Program
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than eighty five percent (85%) of the fair
market value per Ordinary Share on the option grant date. The
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<PAGE>
Company does not currently intend to issue options with an exercise price below
fair market value. No granted option will have a term in excess of five (5)
years.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two (2) types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company equal
in amount to the excess of (a) the fair market value of the vested Ordinary
Shares subject to the surrendered option over (b) the aggregate exercise price
payable for such shares. Such appreciation distribution may, at the discretion
of the Plan Administrator, be made in cash or in Ordinary Shares.
Limited stock appreciation rights may be granted to officers of the Company
as part of their option grants. Any option with such a limited stock
appreciation right in effect for at least six (6) months may be surrendered to
the Company upon the successful completion of a hostile take-over of the
Company. In return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option share
equal to the excess of (a) the take-over price per share over (b) the exercise
price payable for such share.
The Plan Administrator will have the authority to effect the cancellation
of outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Ordinary Shares
and to issue replacement options with an exercise price based on the market
price of Ordinary Shares at the time of the new grant.
Automatic Option Grant Program
Under the Automatic Option Grant Program, each individual who was serving
as a non-employee Board member on January 24, 1994 was automatically granted at
that time a stock option for 30,000 Ordinary Shares. Each individual who first
becomes a non-employee Board member after such date, will automatically be
granted at that time a stock option for 30,000 Ordinary Shares (as adjusted
following the Company's two-for-one stock split effected in the form of a bonus
issue effective on December 22, 1998). In addition, on the date of each Annual
General Meeting, beginning with the 1994 Annual General Meeting, each individual
who is at that time serving as a non-employee Board member, whether or not such
individual is standing for re-election, will automatically be granted an option
to purchase 6,000 Ordinary Shares (as adjusted following the Company's
two-for-one stock split effected in the form of a bonus issue effective on
December 22, 1998), provided such individual has served as a non-employee Board
member for at least six (6) months. There will be no limit on the number of such
6,000-share options which any one non-employee Board member may receive over the
period of Board service.
Each option will have an exercise price per share equal to 100% of the fair
market value per Ordinary Share on the option grant date and a maximum term of
five (5) years measured from the option grant date. Each option will become
exercisable for the option shares in twenty-four (24) equal monthly installments
over the optionee's period of Board service, with the first such installment to
become exercisable upon the completion of one (1) month of Board service
measured from the option grant date.
Each automatic option grant will automatically accelerate upon the
optionee's death or permanent disability or upon an acquisition of the Company
by merger or asset sale or a hostile change in control of the Company. In
addition, upon the successful completion of a hostile take-over, each automatic
option grant which has been outstanding for at least six (6) months may be
surrendered to the Company for a cash distribution per surrendered option share
in an amount equal to the excess of (a) the take-over price per share over (b)
the exercise price payable for such share.
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<PAGE>
General Provisions
Acceleration
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate in full. The Plan Administrator has the discretionary
authority to accelerate any options assumed or replaced in connection with such
acquisition upon the subsequent termination of the optionee's service within a
designated period following the acquisition. In connection with a hostile change
in control of the Company (whether by successful tender offer for more than
fifty percent (50%) of the outstanding voting stock or by proxy contest for the
election of Board members), the Plan Administrator will have the discretionary
authority to provide for automatic acceleration of outstanding options under the
Discretionary Option Grant Program either at the time of such change in control
or upon the subsequent termination of the optionee's service.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Financial Assistance
The Plan Administrator may permit one or more optionees to pay the exercise
of outstanding options under the 1993 Plan by delivering a promissory note
payable in installments. The Plan Administrator will determine the terms of any
such promissory note. However, the maximum amount of financing provided any
optionee may not exceed the cash consideration payable for the purchased shares
plus all applicable taxes incurred in connection with the acquisition of the
shares. Any such promissory note may be subject to forgiveness in whole or in
part, at the discretion of the Plan Administrator, over the optionee's period of
service.
Amendment and Termination
The Board may amend or modify the 1993 Plan in any or all respects
whatsoever subject to any required shareholder approval. The Board may terminate
the 1993 Plan at any time, and the 1993 Plan will in all events terminate on
November 30, 2003.
Federal Income Tax Consequences
Option Grants
Options granted under the 1993 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Stock Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised unless the optionee is subject to the
alternative minimum tax. The optionee will, however, recognize taxable income in
the year in which the purchased shares are sold or otherwise disposed of. For
Federal tax purposes, dispositions are divided into two categories: (a)
qualifying and (b) disqualifying. A qualifying disposition occurs if the sale or
other disposition is made after the optionee has held the shares for more than
two years after the option grant date and more than one (1) year after the
exercise date. Upon a qualifying disposition, the optionee will recognize
capital gain or loss. If either of these two holding periods is not satisfied,
then a disqualifying disposition will result. Upon a disqualifying disposition,
any gain up to the difference between the option exercise price and the fair
market value of the shares on the date of exercise (or, if less, the amount
realized on the sale of shares) will be treated as ordinary income. Any
additional gain will be capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (a) the fair
market value of such shares on the option exercise date over (b) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
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<PAGE>
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (a) the fair market value of the shares on the date the
repurchase right lapses over, and (b) the exercise price paid for the shares.
The optionee may, however, elect under Section 83(b) of the Internal Revenue
Code to include as ordinary income in the year of exercise of the option an
amount equal to the excess of (a) the fair market value of the purchased shares
on the exercise date over (b) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which such ordinary income
is recognized by the optionee.
New Plan Benefits
The amount of future option grants under the Discretionary Option Grant
Program of the 1993 Plan to (a) the Company's Chief Executive Officer, (b) the
Company's Named Executive Officers, (c) all current executive officers as a
group, and (d) all employees, including all officers who are not executive
officers, as a group, are not determinable because, under the terms of the
Discretionary Option Grant Program of the 1993 Plan, such grants are made in the
discretion of the Plan Administrator or its designees. Future option exercise
prices under the 1993 Plan are not determinable because they are based upon the
fair market value of the Company's Ordinary Shares on the date of grant.
The following table shows in the aggregate the options that will be granted
to non-employee Directors under the Automatic Option Grant Program of the 1993
Plan in fiscal 2000 if the shareholders approve the amendments to the 1993 Plan.
Since all current non-employee Directors are incumbent Directors, no
non-employee Director who is elected at the 1999 Annual General Meeting will
receive the automatic grant of 30,000 ordinary shares (as adjusted following the
Company's two-for-one stock split effected in the form of a bonus issue
effective on December 22, 1998).
<TABLE>
<CAPTION>
Name and Position Exercise Price (per share) Number of Shares
----------------- -------------------------- ----------------
<S> <C> <C>
All current Directors who are not executive officers
as a group (5 persons)............................... Fair market value on date of grant 15,000
</TABLE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the issued shares of
the Company present in person or by proxy at the Annual General Meeting is
required for approval of the amendment to the 1993 Plan. Abstentions and broker
non-votes are each included in the determination of the number of shares present
for quorum purposes. Abstentions are not counted in the tabulation of votes cast
on the proposal to amend the Company's 1993 Plan.
The Board recommends a vote "FOR" the approval to the amendment of the
Company's 1993 Plan.
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PROPOSAL NO. 6
ORDINARY RESOLUTION TO APPROVE THE INCREASE OF THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE 1997 EMPLOYEE SHARE PURCHASE PLAN
The Company's shareholders are being asked to approve an amendment to the
Company's 1997 Employee Share Purchase Plan, which was adopted by the Board of
Directors and approved by the shareholders in 1997 (the "Share Purchase Plan"),
to increase the number of the Company's Ordinary Shares authorized for issuance
under the Share Package Purchase Plan by 250,000 shares, from 150,000 shares to
400,000 shares. As of July 1, 1999, there were 42,741 shares available for
issuance under the Share Purchase Plan and after this amendment 292,741 shares
will be available for issuance under the Share Purchase Plan. The Board believes
the share increase is necessary for the Company to continue to have a sufficient
reserve of Ordinary Shares available under the Share Purchase Plan to attract
and retain the services of key employees and other qualified personnel essential
to the Company's long-term success and to effectively compete for qualified
personnel in its markets.
Share Purchase Plan History
The Board of Directors adopted the Share Purchase Plan in September 1997.
The purpose of the Share Purchase Plan is to provide employees of the Company
and its subsidiaries and parent corporations designated by the Board of
Directors as eligible to participate in the Share Purchase Plan ("Participating
Subsidiaries") with a convenient means to acquire an equity interest in the
Company through payroll deductions and to provide an incentive for continued
employment. The Company intends that the Share Purchase Plan will qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code").
Shares Subject to the Share Purchase Plan
The shares subject to issuance under the Share Purchase Plan consists of
the Company's authorized but unissued Ordinary Shares. An aggregate of 150,000
Ordinary Shares has been reserved by the Board of Directors for issuance under
the Share Purchase Plan. This number of shares is subject to proportional
adjustment to reflect stock splits, stock dividends and other similar events.
Administration
The Share Purchase Plan will be administered by the Board or a committee of
at least two members of the Board (the "Committee"). The interpretation or
construction by the Committee of any provisions of the Share Purchase Plan will
be final and binding on all employees.
Eligibility
All employees of the Company and any Participating Subsidiaries are
eligible to participate in an Offering Period (as defined below) under the Share
Purchase Plan, except (a) employees who are not employed by the Company or, as
the case may be, Participating Subsidiary, one month before the beginning of
such Offering Period; (b) employees who are customarily employed for 20 hours or
less per week; (c) employees who are customarily employed for five months or
less in a calendar year; (d) employees who own shares or hold options to
purchase shares or who, as a result of participation in the Share Purchase Plan,
would own shares or hold options to purchase shares, possessing five percent
(5%) or more of the total combined voting power or value of all classes of
shares of the Company; and (e) individuals who provide services to the Company
or Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any purpose other than federal income and employment
tax purposes.
As of July 1, 1999, approximately 2,400 persons were eligible to
participate in the Share Purchase Plan and 107,259 Ordinary shares had been
issued pursuant to the Share Purchase Plan. As of July 1, 1999, the closing
price of the Company's Ordinary Shares on the Nasdaq National Market was $56.25
per share.
Employees participate in the Share Purchase Plan through payroll
deductions. An employee sets the rate of such payroll deductions, which may not
be less than two percent (2%) nor more than ten percent (10%) of the employee's
compensation, including base salary, commissions, bonuses and shift premiums
before any deductions from the employee's salary pursuant to Sections 125 or
401(k) of the Code. No employee is permitted to purchase shares under the Share
Purchase Plan at a rate which, when aggregated with such employee's rights to
purchase stock
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under all similar purchase plans of the Company, exceeds $25,000 in fair market
value determined as of the Offering Date for each calendar year.
Offering Periods
Each offering of Ordinary Shares under the Share Purchase Plan is for a
period of six months (the "Offering Period"). Offering Periods are planned to
commence on December 1 and June 1 of each year and end on May 31 and November 30
of each year, respectively. Each Offering Period consists of one six-month
purchase period (a "Purchase Period") during which payroll deductions of the
employees are accumulated under the Share Purchase Plan. The Board of Directors
has the power to set the beginning of any Offering Period and to change dates or
the duration of Offering Periods or Purchase Periods without shareholder
approval (including adopting 24-month Offering Periods consisting of four
six-month Purchase Periods) if such change is announced at least fifteen (15)
days before the scheduled beginning of the first Offering Period or Purchase
Period to be affected. The first day of each Offering Period is the "Offering
Date" for such Offering Period and the last business day of each Purchase Period
is the "Purchase Date" for such Purchase Period.
Employees will participate in the Share Purchase Plan during each Offering
Period through regular payroll deductions as described above. Employees may
elect to participate in any Offering Period by enrolling as provided under the
terms of the Share Purchase Plan. Once enrolled, an employee will automatically
participate in each succeeding Offering Period unless the employee withdraws
from the Offering Period or the Share Purchase Plan is terminated. After the
rate of payroll deductions for an Offering Period has been set by an employee,
that rate will continue to be effective for the remainder of the Offering Period
(and for all subsequent Offering Periods in which the employee is automatically
enrolled) unless otherwise changed by the employee. The employee may increase or
lower the rate of payroll deductions for any subsequent Offering Period, but may
only lower the rate of payroll deductions for an ongoing Offering Period. No
more than one change may be made during a single Offering Period.
Purchase Price
The purchase price of shares that may be acquired in any Purchase Period
under the Share Purchase Plan is 85% of the lesser of: (a) the fair market value
of the shares on the Offering Date; or (b) the fair market value of the shares
on the Purchase Date. In no event may the purchase price be less than the par
value of the shares. The fair market value of the Company's Ordinary Shares is
deemed to be the closing price of the Company's Ordinary Shares on the Nasdaq
National Market on the date of determination as reported in The Wall Street
Journal.
Purchase of Shares Under the Share Purchase Plan
The number of whole shares an employee will be able to purchase in any
Purchase Period will be determined by dividing the total payroll amount withheld
from the employee during the Purchase Period pursuant to the Share Purchase Plan
by the purchase price for each share determined as described above, rounded down
to the nearest whole number. The purchase will take place automatically on the
Purchase Date of such Purchase Period.
Withdrawal
An employee may withdraw from any Offering Period. Upon withdrawal, the
accumulated payroll deductions will be returned to the withdrawn employee,
without interest, provided that the withdrawal occurs at least fifteen (15) days
before the related Purchase Date. If the withdrawal occurs less than fifteen
(15) days before such Purchase Date, payroll deductions will continue for the
remainder of that Purchase Period. No further payroll deductions for the
purchase of shares will be made for the succeeding Offering Period unless the
employee enrolls in the new Offering Period at least fifteen (15) days before
the Offering Date.
Amendment of the Share Purchase Plan
The Board of Directors may at any time amend, terminate or extend the term
of the Share Purchase Plan, except that any such termination cannot affect the
terms of subscription rights previously granted under the Share Purchase Plan,
nor may any amendment make any change in the terms of subscription rights
previously granted which would adversely affect the right of any participant,
nor may any amendment be made without shareholder approval if such amendment
would: (a) increase the number of shares that may be issued under the Share
Purchase
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Plan or (b) change the designation of the employees (or class of employees)
eligible for participation in the Share Purchase Plan.
Term of the Share Purchase Plan
The Share Purchase Plan will continue until the earlier to occur of: (a)
termination of the Share Purchase Plan by the Board of Directors; (b) the
issuance of all the Ordinary Shares reserved for issuance under the Share
Purchase Plan; or (c) September 2007, ten years after the date the Share
Purchase Plan was adopted by the Board of Directors.
Federal Income Tax Information
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT
OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND EMPLOYEES
PARTICIPATING IN THE SHARE PURCHASE PLAN. FEDERAL TAX LAWS MAY CHANGE AND THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING EMPLOYEE WILL
DEPEND UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS
BEEN AND IS ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISER REGARDING
THE TAX CONSEQUENCES OF PARTICIPATION IN THE SHARE PURCHASE PLAN.
The Share Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
Tax Treatment of Employees. Employees will not recognize income for federal
income tax purposes either upon enrollment in the Share Purchase Plan or upon
the purchase of shares. All tax consequences are deferred until an employee
sells the shares, disposes of the shares by gift or dies.
If shares are held for more than one (1) year after the date of purchase
and more than two (2) years from the beginning of the applicable Offering
Period, or if the employee dies while owning the shares, the employee realizes
ordinary income on a sale (or a disposition by way of gift or upon death) to the
extent of the lesser of: (a) 15% of the fair market value of shares at the
beginning of the Offering Period; or (b) the actual gain (the amount by which
the market value of the shares on the date of sale, gift or death exceeds the
purchase price). All additional gain upon the sale of shares is treated as
capital gain. If the shares are sold and the sale price is less than the
purchase price, there is no ordinary income and the employee has a capital loss
for the difference between the sale price and the purchase price.
If the shares are sold or are otherwise disposed of including by way of
gift (but not death, bequest or inheritance) (in any case, a "disqualifying
disposition") within either the one-year or the two-year holding periods
described above, the employee realizes ordinary income at the time of sale or
other disposition, taxable to the extent that the fair market value of the
shares at the date of purchase is greater than the purchase price. This excess
will constitute ordinary income (not currently subject to withholding) in the
year of the sale or other disposition even if no gain is realized on the sale or
if a gratuitous transfer is made. The difference, if any, between the proceeds
of sale and the aggregate fair market value of the shares at the date of
purchase is a capital gain or loss. Capital gains may be offset by capital
losses, and up to $3,000 of capital losses may be used annually against ordinary
income.
Tax Treatment of the Company. The Company will be entitled to a deduction
in connection with the disposition of shares acquired under the Share Purchase
Plan only to the extent that the employee recognizes ordinary income on a
disqualifying disposition of the shares. The Company will treat any transfer of
record ownership of shares as a disposition, unless it is notified to the
contrary. In order to enable the Company to learn of disqualifying dispositions
and ascertain the amount of the deductions to which it is entitled. employees
will be required to notify the Company in writing of the date and terms of any
disposition of shares purchased under the Share Purchase Plan.
ERISA. The Share Purchase Plan is not subject to any of the provisions of
the Employee Retirement Income Security Act of 1974 nor is it qualified under
Section 401(a) of the Code.
VOTE REQUIRED
The affirmative vote of a majority of the issued shares of the Company
present in person or by proxy at the Annual General Meeting is required for the
approval of the amendment to the 1997 Employee Share Purchase Plan,
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Abstentions and broker non-votes are each included in the determination of the
number of shares present for quorum purposes. Neither abstentions or broker
non-votes are counted in the tabulation of votes on the proposal to amend the
1997 Employee Share Purchase Plan.
The Board recommends a vote for the approval of the amendment to the 1997
Employee Share Purchase Plan.
Proposal NO. 7:
ordinary resolution to approve various matters
relating to ordinary share issuances
The Company is incorporated in the Republic of Singapore. Under Singapore
law, new Ordinary Shares may only be issued with the prior approval of the
shareholders of the Company at a general meeting. Such approval, if granted, is
effective from the date of the meeting at which it was given to the conclusion
of the next Annual General Meeting of shareholders of the Company or the
expiration of the period within which the next Annual General Meeting is
required by law to be held, whichever is the earlier. The Board believes that it
is advisable and in the best interest of the Company for the shareholders to
authorize the Directors to issue new shares for financing future transactions,
acquisitions and other proper corporate opportunities and purposes. Having
additional shares available and authorized for issuance in the future gives the
Company greater flexibility to pursue corporate opportunities and enables the
Directors to issue new shares without the expense and delay of an extraordinary
general meeting of shareholders.
The Company is seeking shareholder approval to issue new Ordinary Shares
during the period from the 1999 Annual General Meeting Date to the 2000 Annual
General Meeting Date. If obtained, shareholder approval of this proposal will
lapse on the 2000 Annual General Meeting Date or the expiration of the period
within which the 2000 Annual General Meeting is required by law to be held,
whichever is the earlier.
The Board recommends a vote "FOR" the resolution relating to Ordinary Share
issuances.
Proposal NO. 8:
Ordinary resolution to approve bonus issue of ONE (1)
ordinary share for every ONE (1) existing ordinary share
held by shareholders of the company
Under Singapore law, a company may capitalize its reserves and apply such
capitalized sum in payment for additional Ordinary Shares, which may then be
allotted and issued, to its shareholders, credited as fully paid, in a
transaction commonly referred to as a "bonus issue." A bonus issue is similar to
a stock dividend by a Delaware or California corporation. However, under the
Company's Articles of Association, the Company may allot and issue shares in a
bonus issue ("bonus shares") only upon recommendation of the Directors and with
the prior approval of the shareholders of the Company at a general meeting. The
Board believes that it is advisable and has recommended that it is in the best
interest of the Company for the shareholders that the Board be granted the
authority to allot and issue, at its sole discretion on or before 5:00 p.m.,
California time, June 30, 2000, a bonus issue of up to 50,196,902 bonus shares
and, in the event that any new shares are allotted and issued by the Company on
or before 5:00 p.m., California time, June 30, 2000, an additional one (1) bonus
share for each new share so allotted and issued, to be credited as fully paid.
The Board believes that such discretionary authority is in the best interest of
the Company for the shareholders since it provides the Board an opportunity to
review economic and financial conditions prior to making the decision as to
whether a bonus issue should be effected.
If the Board exercises its authority to allot and issue the bonus shares on
or before 5:00 p.m., California time, June 30, 2000, then the bonus shares are
to be allotted and issued to the holders of record of the Ordinary Shares on the
date specified by the Company's Board of Directors, but no later than 5:00 p.m.,
California time, June
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30, 2000, on the basis of one (1) bonus share for every one (1) Ordinary Share
then held. Fractional bonus shares will not be issued, but will be disposed of
in such a manner as the Directors deem fit. As a result, if the bonus issue is
approved at the 1999 Annual General Meeting and the Board exercises its
authority to allot and issue the bonus shares on or before 5:00 p.m., California
time, June 30, 2000, then each holder of record of Ordinary Shares on the date
specified by the Company's Board of Directors, but no later than 5:00 p.m.,
California time, June 30, 2000, would receive an additional one (1) Ordinary
Share, credited as fully paid, for every one (1) Ordinary Share then held of
record by such shareholder. If the bonus issue is approved at the 1999 Annual
General Meeting but the Board does not exercise its authority to allot and issue
the bonus shares on or before 5:00 p.m., California time, June 30, 2000, then no
bonus issue would be effected and, accordingly, no bonus shares would be
allotted and issued to shareholders.
The bonus shares, if and when allotted and issued, would rank pari passu in
all respects with the existing Ordinary Shares, and would have identical rights.
A sum of up to S$501,969.02 and, in the event that any new shares are allotted
and issued by the Company on or before 5:00 p.m., California time, June 30,
2000, an additional amount of S$0.01 for each new share so allotted and issued,
from the Share Premium Account of the Company would be capitalized and applied
in paying up in full the bonus shares to be issued. Accordingly, the issued and
paid up capital of the Company would increase by up to S$501,969.02 and, in the
event that any new shares are allotted and issued by the Company on or before
5:00 p.m., California time, June 30, 2000, an additional S$0.01 for each new
share so allotted and issued. The Company's Auditors, Arthur Andersen, have
advised the Company that the balance in the Share Premium Account of the Company
at March 31, 1999 is sufficient for the purpose of the bonus issue.
The Board recommends a vote "FOR" the resolution approving the proposed
bonus issue.
Proposal NO. 9:
SPECIAL RESOLUTION TO APPROVE AMENDMENTS TO THE ARTICLES OF ASSOCIATION
It is a requirement of the Companies Act, Cap. 50 that only Ordinary Shares
in the capital of the Company may be purchased or acquired by the Company and
that its Articles of Association must expressly permit the Company to purchase
or otherwise acquire the Ordinary Shares issued by it. Any Ordinary Shares
purchased or acquired by the Company are deemed to be cancelled immediately on
purchase or acquisition.
The Company is seeking shareholder approval for amendments to Articles 6
and 49 of the Company's Articles of Association, to provide for the purchase or
acquisition by the Company of its issued Ordinary Shares.
The resolution to be proposed at the Annual General Meeting for the
amendments to the Company's Articles of Association will be proposed as a
Special Resolution so that it has to be passed by a majority of not less than
three-fourths of the members present in person or by proxy, and voting thereon.
The Board recommends a vote "FOR" the resolution relating to the amendments
to the Articles of Association of the Company.
PROPOSAL NO. 10:
ORDINARY RESOLUTION TO APPROVE THE PROPOSED SHARE PURCHASE MANDATE
The Proposed Share Purchase Mandate
Subject to the Articles of Association of the Company being amended as
aforesaid, any purchases or acquisitions of Ordinary Shares by the Company would
have to be made in accordance with, and in the manner prescribed by, the
Companies Act, Cap. 50 (the "Companies Act"), the listing rules of the Nasdaq
National Market (the "Listing Rules") and such other laws and regulations as may
for the time being be applicable.
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It is a requirement that a company which wishes to purchase or otherwise
acquire its own shares should obtain the approval of its shareholders to do so
at a general meeting of its shareholders. Accordingly, approval is being sought
from shareholders at the Annual General Meeting for a general and unconditional
mandate (the "Share Purchase Mandate") to be given for the purchase or
acquisition by the Company of its issued Ordinary Shares. Accordingly, a
resolution will be proposed as an Ordinary Resolution pursuant to which the
Share Purchase Mandate will be given to the Directors to exercise all powers of
the Company to purchase or otherwise acquire its issued Ordinary Shares on the
terms of the Share Purchase Mandate.
If approved by shareholders at the Annual General Meeting, the authority
conferred by the Share Purchase Mandate will continue in force until the next
Annual General meeting of the Company (whereupon it will lapse, unless renewed
at such meeting) or until it is varied or revoked by the Company in general
meeting (if so varied or revoked prior to the next Annual General Meeting).
The authority and limitations placed on share purchases or acquisitions by
the Company under the proposed Share Purchase Mandate are summarized below:
(a) Maximum number of Ordinary Shares
Only Ordinary Shares which are issued and fully paid up may be
purchased or acquired by the Company. The total number of Ordinary
Shares which may be purchased or acquired by the Company is limited to
that number of Ordinary Shares representing not more than 10% of the
issued ordinary share capital of the Company as at the date of the
Annual General Meeting at which the Share Purchase Mandate is approved
(the "Approval Date").
Purely for illustrative purposes, on the basis of 48,091,929 issued
Ordinary Shares as at July 1, 1999, and assuming that no further
Ordinary Shares are issued on or prior to the Annual General Meeting,
not more than 4,809,192 issued Ordinary Shares (representing 10% of
the issued ordinary share capital of the Company as at that date) may
be purchased by the Company pursuant to the proposed Share Purchase
Mandate.
(b) Duration of authority
Purchases or acquisitions of Ordinary Shares may be made, at any time
and from time to time, on and from the Approval Date up to:
(i) the date on which the next Annual General Meeting of the Company
is held or required by law to be held; or
(ii) the date on which the authority conferred by the Share Purchase
Mandate is revoked or varied,
whichever is the earlier.
(c) Manner of purchases or acquisitions of Ordinary Shares
Purchases or acquisitions of Ordinary Shares may be made:
(i) on a stock exchange ("Market Purchases"); and/or
(ii) otherwise than on a stock exchange, in accordance with an equal
access scheme ("Off-Market Purchases").
Market Purchases refer to purchases or acquisitions of Ordinary Shares
by the Company effected on the Nasdaq National Market, or any other
stock exchange on which the Ordinary Shares may
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for the time being is listed and quoted ("Other Exchange"), through
one or more duly licensed dealers appointed by the Company for the
purpose.
Off Market Purchases refer to purchases or acquisitions of Ordinary
Shares by the Company effected pursuant to an equal access scheme or
schemes for the purchase of acquisition of Ordinary Shares from
holders of Ordinary Shares. The Directors may impose such terms and
conditions which are not inconsistent with the Share Purchase Mandate,
the Listing Rules and the Companies Act, as they consider fit in the
interests of the Company in connection with or in relation to any
equal access scheme or schemes. An equal access scheme must, however,
satisfy all the following conditions:
(1) offers for the purchase or acquisition of Ordinary Shares shall
be made to every person who holds Ordinary Shares to purchase or
acquire the same percentage of their Ordinary Shares;
(2) all of those persons shall be given a reasonable opportunity to
accept the offers made; and
(3) the terms of all the offers are the same (except that there shall
be disregarded (1) differences in consideration attributable to
the fact that offers may relate to Ordinary Shares with different
accrued dividend entitlements and (2) differences in the offers
introduced solely to ensure that each person is left with a whole
number of Ordinary Shares).
(d) Purchase price
The purchase price (excluding brokerage, commission, applicable goods
and services tax and other related expenses) to be paid for an
Ordinary Share will be determined by the Directors. The purchase price
to be paid for the Ordinary Shares as determined by the Directors must
not exceed:
(i) in the case of a Market Purchase, 105% of the Average Closing
Price of the Ordinary Shares; and
(ii) in the case of an Off-market Purchase pursuant to an equal access
scheme, 110% of the Average Closing Price of the Ordinary Shares,
in either case, excluding related expenses of the purchase or
acquisition (the "Maximum Price").
For the above purposes, "Average Closing Price" means the average
of the last dealt prices of an Ordinary Share for the five (5)
consecutive market days on which the Ordinary Shares are
transacted on the Nasdaq National Market or, as the case may be,
Other Exchange, immediately preceding the date of the Market
Purchase by the Company or, as the case may be, the date of the
making of the offer pursuant to the Off-Market Purchase and "date
of the making of the offer" means the date on which the Company
announces its intention to make an offer for the purchase or
acquisition of Ordinary Shares from holders of Ordinary Shares,
stating the purchase price (which shall not be more than the
Maximum Price calculated on the foregoing basis) for each
Ordinary Share and the relevant terms of the equal access scheme
for effecting the Off-Market Purchase.
Sources of funds
Only funds legally available for purchasing or acquiring Ordinary Shares in
accordance with the Articles of Association of the Company and applicable laws
of Singapore, shall be utilized. The Company intends to use its internal sources
of funds to finance its purchase or acquisition of Ordinary Shares. The Company
does not intend to obtain or incur any borrowings to finance its purchase or
acquisition of Ordinary Shares. The Directors do not
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propose to exercise the Share Purchase Mandate in a manner and to such extent
that the working capital requirements of the Company and its subsidiaries (the
"Group") would be materially affected.
Any purchases and acquisitions of Ordinary Shares must be made out of the
Company's distributable profits which are available for payment as dividends but
excludes any amount in the Company's share premium account and the capital
redemption reserve fund.
Status of purchased or acquired Ordinary Shares
Any Ordinary Share purchased or acquired by the Company is deemed cancelled
immediately on purchase or acquisition, and all rights and privileges to that
Ordinary Shares will expire on cancellation.
Certificates in respect of purchased or acquired Ordinary Shares will be
cancelled and destroyed by the Company as soon as reasonably practicable
following settlement of any purchase or acquisition of such Ordinary Shares.
Financial Effects
The amount by which the Company's issued share capital is diminished on
cancellation of Ordinary Shares purchased or acquired must be transferred to a
reserve called the "capital redemption reserve." In the event the Company
implements a bonus issue of shares in the future, such reserve may be applied by
the Company in paying up any unissued shares to be allotted and issued to its
Members as fully paid bonus shares.
The Company's total issued share capital will be diminished by the total
nominal amount (or par value) of the Ordinary Shares purchased or acquired by
the Company. The consideration paid by the Company for the purchase or
acquisition of Ordinary Shares (excluding related brokerage, goods and services
tax, stamp duties and clearance fees) will correspondingly reduce the amount
available for the distribution of cash dividends by the Company.
The net tangible assets of the Company and the consolidated net tangible
assets of the Group will be reduced by the dollar value of the Ordinary Shares
repurchased. The repurchase of up to 10% of the issued ordinary share capital of
the Company as at the date of the Annual General Meeting will not have any
material impact on the consolidated earnings of the Company for the current
financial year.
Rationale for the Share Purchase Mandate
The Company presently maintains listing status on the Nasdaq National
Market. The Company's need to repurchase its own Ordinary Shares reflects in
part the practices of its competitors and in part the dominance of the U.S.
capital markets for the Company. Many international companies, including those
in the United States, UK and Hong Kong are permitted by their governing
jurisdictions to buy back their own shares. Share repurchases are thus widely
available to and utilized by many other high technology companies with which the
Company competes for talent, merger partners, capital, and investor and analyst
interest.
Share repurchase programs are important because of volatility in the stock
market. A share repurchase program tends to buffer short term share price
volatility, provide additional liquidity to the market and offset the effects of
short-term speculators and investors. Minimizing unnecessary volatility bolsters
shareholder confidence and employee morale. The latter can be a critical factor
in employee retention, especially in the U.S. Silicon Valley, where the Company
has significant operations. Minimizing extreme volatility also facilitates use
of company stock for stock-for-stock acquisitions of other companies. This
enables the Company to acquire ongoing technological improvements with minimal
cash outlay.
The Board recommends a vote "FOR" the resolution relating to the proposed
Share Repurchase Mandate.
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SHAREHOLDER PROPOSALS
Shareholder proposals intended to be considered at the next Annual General
Meeting of shareholders must be received by the Company no later than March 18,
2000. Any proposals must be mailed to the Company's San Jose, California
offices, 2090 Fortune Drive, San Jose, California 95131, Attention: Chief
Executive Officer. Such proposals may be included in next year's proxy statement
if they comply with certain rules and regulations promulgated by the Securities
and Exchange Commission.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual
General Meeting other than those set forth herein and in the Notice accompanying
this Proxy Statement.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. YOU ARE, THEREFORE, URGED TO EXECUTE
PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS BEEN
ENCLOSED FOR YOUR CONVENIENCE. Shareholders who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
Yap Lune Teng
Joint Secretary
July 29, 1999
Singapore
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FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
FINANCIAL STATEMENTS
AS AT 31 MARCH 1999
TOGETHER WITH REPORTS OF DIRECTORS AND AUDITORS
<PAGE>
Auditors' Report to the Members of
Flextronics International Ltd.
We have audited the financial statements of the Company and the consolidated
financial statements of the Group set out on pages 16 to 60. These financial
statements are the responsibility of the Company's directors. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Singapore Standards on Auditing. 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 the
directors, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a) the accompanying financial statements and consolidated financial statements
are properly drawn up in accordance with the provisions of the Companies
Act and Statements of Accounting Standard and so as to give a true and fair
view of:
(i) the state of affairs of the Company and of the Group as at 31 March
1999 and of the results of the Company and of the Group and cash flows
of the Group for the year then ended; and
(ii) the other matters required by Section 201 of the Act to be dealt with
in the financial statements and consolidated financial statements;
(b) the accounting and other records and the registers required by the Act to
be kept by the Company and by those subsidiaries incorporated in Singapore
of which we are the auditors have been properly kept in accordance with the
provisions of the Act.
2
<PAGE>
Auditors' Report to the Members of
Flextronics International Ltd. (Continued)
We have considered the financial statements and auditors' reports of all
subsidiaries of which we have not acted as auditors, being financial statements
included in the consolidated financial statements. Details of these subsidiaries
are described in Note 9 to the financial statements.
We are satisfied that the financial statements of the subsidiaries that have
been consolidated with the financial statements of the Company are in form and
content appropriate and proper for the purposes of the preparation of the
consolidated financial statements and we have received satisfactory information
and explanations as required by us for those purposes.
The auditors' reports on the financial statements of the subsidiaries were not
subject to any qualification and, in respect of subsidiaries incorporated in
Singapore, did not include any comment made under Section 207 (3) of the Act.
Arthur Andersen
Certified Public Accountants
Singapore
12 July 1999
3
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
DIRECTORS' REPORT
31 MARCH 1999
(Currency - Singapore dollars unless otherwise stated)
The directors are pleased to present their report to the members together with
the audited financial statements of the Company for the financial year ended 31
March 1999.
Directors
The directors of the Company in office at the date of this report are:
Michael E. Marks
Tsui Sung Lam
Michael J. Mortiz
Richard L. Sharp
Patrick Foley
Chuen Fah Alain Ahkong
Hui Shing Leong
Principal Activities
The Company is principally engaged in investment holding. The activities of the
subsidiaries are in the product design, printed circuit board 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 Group
incorporate advanced interconnect, miniaturisation and packaging technologies
such as surface mount, multichip modules and chip-on-board technologies.
The principal activities of the subsidiaries are detailed in Note 9 to the
financial statements.
There were no significant changes in the nature of these activities during the
financial year.
4
<PAGE>
DIRECTORS' REPORT (Continued)
Results For The Financial Year
Group Company
------- -------
$'000 $'000
Profit (loss) after taxation 97,115 (13,013)
Minority interest (2,192) --
------- -------
Profit (loss) before extraordinary items 94,923 (13,013)
Extraordinary items (8,945) --
------- -------
Profit (loss) for the year transferred to
accumulated profits (losses) 85,978 (13,013)
======= =======
Transfers To or From Reserves or Provisions
Material transfers to (from) reserves during the financial year were as follows:
Group Company
------- -------
$'000 $'000
Accumulated losses
Exchange difference arising on translation 21,828 36,488
Retained profit (loss) for the year 85,978 (13,013)
Share premium
Premium on issuance of Ordinary Shares 345,671 345,671
Expenses on issuance of Ordinary Shares (3,044) (3,044)
Apart from the above, there have been no other material transfers to or from
reserves.
There were no material transfers to or from provisions during the financial year
except for normal amounts set aside for such items as depreciation of fixed
assets, provisions for stock obsolescence and income tax, and amortisations of
deferred expenditure, goodwill on consolidation and intangible assets, as
disclosed in the accompanying financial statements.
5
<PAGE>
DIRECTORS' REPORT (Continued)
Acquisition and Disposal of Subsidiaries
The following subsidiaries were acquired during the financial year:
<TABLE>
<CAPTION>
Net tangible assets/
(liabilities) at date
Name of Company Interest acquired Consideration of acquisition
- ------------------------------------- --------------------- ------------------------------- -------------------------
% US$ US$
<S> <C> <C> <C>
FICO Investment Holding Limited 50 15,000,000 6,213,665
</TABLE>
The following subsidiaries were incorporated during the financial year:
<TABLE>
<CAPTION>
Country of The Group's effective
Name of subsidiary incorporation Principal activity shareholdings
- ------------------------------------- --------------------- ------------------------------- -------------------------
%
<S> <C> <C> <C>
Held by the Company
Flextronics International
Europe BV Netherlands Investment holding 100
Sales and marketing
DTM Latin America (L) Ltd Malaysia business 100
FLX Cyprus Limited Cyprus Investment holding 100
Flextronics Hungaria Kereskedelmi
es, Kft Hungary Investment holding 100
Flextronics Manufacturing Mex, S.A. Design, assembly and
de C.V. Mexico manufacture of computer 100
industrial grade printed
circuit board assemblies
DTM Products de Mexico, S.A. de C.V. Mexico Sales and manufacture of 100
plastic material products and
its by-products
Flextronics Do Brazil Servicos Ltda# Brazil Investment holding 100
</TABLE>
# As at 31 March 1999, the company merged its operations with another
subsidiary of the Group, Conexao Informatica Ltda to operate as Flextronics
International Technologia Ltda. The cost of investment of the company is
US$15,326,000 as disclosed in Note 9 to the financial statements.
6
<PAGE>
DIRECTORS' REPORT (Continued)
Acquisition and Disposal of Subsidiaries (Continued)
<TABLE>
<CAPTION>
Country of The Group's effective
Name of subsidiary incorporation Principal activity shareholdings
- ------------------------------------- --------------------- ------------------------------- -------------------------
%
<S> <C> <C> <C>
Held by Subsidiaries
Flextronics Distribution Inc. United States of Distribution and warehousing 100
America
</TABLE>
There were no other acquisition or disposal of subsidiaries during the financial
year.
Issue of Shares and Debentures
During the financial year, the Company issued the following shares:
(a) On 22 December 1998, the Company set a record date for a 2 for 1 stock
split to be effected as a bonus issue. The distribution of 23,534,229
Ordinary Shares of par value of $0.01 for a 2 for 1 stock split occurred on
11 January 1999.
(b) 5,400,000 Ordinary Shares of par value of $0.01 for cash at US$36.25 per
share for public offering with proceeds amounting to US$194.0 million, net
of issue costs of US$1.75 million.
(c) 127,850 Ordinary Shares of par value of $0.01 as consideration for the
purchase of an additional 50% interest in FICO Investment Holding Ltd.
(d) 1,441,799 Ordinary Shares of par value of $0.01 for cash at a premium of
US$12,551,000 by virtue of the exercise of share options previously granted
and Employee Share Purchase Plan.
(e) 315,460 Ordinary Shares of par value $0.01 issued for the acquisition of
Altatron, Inc.
(f) 236,610 Ordinary Shares of par value $0.01 issued for the Conexao
Informatical Ltd.
7
<PAGE>
DIRECTORS' REPORT (Continued)
Issue of Shares and Debentures (Continued)
During the financial year, the following subsidiaries issued shares :
(a) Astron Technologies Limited. issued 50,000 Ordinary Shares of par value of
US$1.00 to the Company.
(b) Flextronics Manufacturing Mex, S.A. de C.V. issued 50,000 Ordinary Shares
of par value of 10 pesos to the Company.
(c) DTM Products de Mexico, S.A. de C.V. issued 50,000 Ordinary Shares of par
value of 10 pesos each to the Company.
(d) Flextronics International Scotland, Limited issued 59,998 Ordinary Shares
of par value of GBP1 each to Flextronics International (UK) Limited.
(e) Flextronics Hungaria Kereskedekmi es, Kft registered US$15,000 in the name
of the Company as Registered Capital.
(f) FKM (Shenzhen) Ltd. increased its registered capital by capitalisation of
intercompany loans in the name of FICO Investment Holding Limited.
There were no debentures issued by the Company or any corporation in the Group
during the financial year.
Arrangements to Enable Directors to Acquire Shares or Debentures
During the financial year ended 31 March 1999, and on that date, the Company was
not a party to any arrangement whose object was to enable the directors to
acquire benefits through the acquisition of shares in or debentures of the
Company or any other body corporate except for those disclosed under the share
options below.
8
<PAGE>
DIRECTORS' REPORT (Continued)
Directors' Interest in Shares and Debentures
According to the Register of Directors' Shareholdings, the interests of the
directors holding office at the end of the financial year in the share capital
and debentures of the Company and related corporations were as follows:
<TABLE>
<CAPTION>
Interest held as at
----------------------------------------
1 April 1998 31 March 1999
------------------- -------------------
<S> <C> <C>
The Company
Ordinary shares of $0.01 each
Michael E. Marks 257,507 641,150
Tsui Sung Lam 9,294 588
Michael J. Moritz 932,379 621,476
Richard L. Sharp 890,519 1,520,738
Patrick Foley -- 10,000
Hui Shing Leong 932,980 2,225,200
The Company
Options to acquire ordinary shares of $0.01 each
Michael E. Marks 525,000 1,530,000
Tsui Sung Lam 97,418 144,836
Michael J. Moritz 32,000 30,000
Richard L. Sharp 42,000 30,000
Patrick Foley 15,000 36,000
Chuen Fah Alain Ahkong 15,000 26,000
Hui Shing Leong 15,000 36,000
</TABLE>
Other than the significant transactions of certain directors with the Company as
disclosed in Note 33 to the financial statements, no other directors of the
Company had an interest in any shares or debentures of the Company or related
corporations either at the beginning or end of the financial year.
Directors' Contractual Benefits
Since the end of the previous financial year, no director has received or become
entitled to receive a benefit (other than as disclosed as directors'
remuneration and the significant related party transactions as explained in Note
33 in the accompanying financial statements) by reason of a contract made by the
Company or a related corporation with the director or with a firm of which he is
a member or with a company in which he has a substantial financial interest.
9
<PAGE>
DIRECTORS' REPORT (Continued)
Dividends
No dividend has been paid or declared since the end of the previous financial
year. The directors of the Company do not recommend payment of a dividend during
the financial year.
Bad and Doubtful Debts
Prior to the preparation of the financial statements, the directors took
reasonable steps to ensure that proper action had been taken in relation to
writing off bad debts and providing for doubtful debts of the Company, and
satisfied themselves that all known bad debts had been written off and that
adequate provision had been made for doubtful debts.
At the date of this report, the directors are not aware of any circumstances
which would render the amount of bad debts written off or the amount of
provision for doubtful debts in the consolidated financial statements inadequate
to any substantial extent.
Current Assets
Prior to the preparation of the financial statements, the directors took
reasonable steps to ensure that any current assets of the Company which were
unlikely to realise their book values in the ordinary course of the business had
been written down to their estimated realisable values or that adequate
provision had been made for the diminution in values of such current assets.
At the date of this report, the directors are not aware of any circumstances
which would render the values attributed to current assets in the consolidated
financial statements misleading.
Charges and Contingent Liabilities
At the date of this report, no charge on the assets of the Company or any
corporation in the Group has arisen which secures the liabilities of any other
person and no contingent liability has arisen since the end of the financial
year.
10
<PAGE>
DIRECTORS' REPORT (Continued)
Ability to Meet Obligations
No contingent or other liability of the Company or any corporation in the Group
has become enforceable, or is likely to become enforceable, within the period of
twelve months after the end of the financial year which will or may affect the
ability of the Company and the Group to meet their obligations as and when they
fall due.
Other Circumstances Affecting Financial Statements
At the date of this report, the directors are not aware of any circumstances not
otherwise dealt with in this report or the financial statements of the Company
and the Group which would render any amount stated in the financial statements
and consolidated financial statements misleading.
Material and Unusual Transactions
In the opinion of the directors, the results of the operations of the Company
and of the Group for the financial year ended 31 March 1999 have not been
substantially affected by any item, transaction or event of a material and
unusual nature except as disclosed in Note 30 of the accompanying consolidated
financial statements.
Material and Unusual Transactions After the Financial Year
In the opinion of the directors, in the interval between the end of the
financial year and the date of this report, no item, transaction or event of a
material and unusual nature, likely to affect substantially the results of the
operations of the Company and of the Group for the financial year in which this
report is made, has arisen.
11
<PAGE>
DIRECTORS' REPORT (Continued)
Share Options and Share Option Plans (Schemes)
Executives' Share Option Scheme ("SOS")
No options were granted under the SOS during the financial year ended 31 March
1999.
No Ordinary Shares in the Company were issued during the financial year by
virtue the exercise of options granted under the SOS. As at 31 March 1999, no
unissued shares of the Company remain under option under SOS.
Executives' Incentive Share Scheme ("ISS")
The ISS has lapsed and accordingly, no options were granted under the ISS during
the financial year ended 31 March 1999. No Ordinary Shares in the Company were
issued during the financial year by virtue of the exercise of options granted
under the ISS, and no unissued shares of the Company remain under option under
the ISS as at 31 March 1999.
1993 Share Option Plan (the "1993 Plan")
During the financial year ended 31 March 1999, Options over a total of 1,802,386
Ordinary Shares in the Company were granted with an exercise price ranging from
US$16.00 to US$41.375 and a weighted average exercise price of US$22.3335.
1,258,171 Ordinary Shares in the Company were issued during the financial year
by virtue of the exercise of options granted under the 1993 Plan. As at 31 March
1999, the number and class of unissued shares under option granted under the
1993 Plan was 5,086,830 Ordinary Shares, net of cancellation of options for
310,615 Ordinary shares.
1997 Share Option Plan (the "1997 Plan")
During the financial year ended 31 March 1999, options over a total of 98,500
Ordinary Shares in the Company were granted with an exercise price ranging from
US$18.4375 to US$18.9375 and a weighted average price of US$18.9045. 95,433
Ordinary Shares in the Company were issued during the financial year by virtue
of the exercise of options granted under the 1997 Plan. As at 31 March 1999, the
number and class of unissued shares under option granted under the 1997 Plan was
318,574 Ordinary Shares, net of cancellation of options for 105,283 Ordinary
Shares.
1998 Interim Option Plan (the "1998 Plan")
During the financial year ended 31 March 1999, options over a total of 413,850
Ordinary Shares in the Company were granted with an exercise price ranging from
US$12.594 to US$20.0625 and a weighted average price of US$18.3419. No Ordinary
Shares in the Company were issued during the financial year by virtue of the
exercise of options granted under the 1998 Plan. As at 31 March 1999, the number
and class of unissued shares under option granted under the 1998 Plan was
772,367 Ordinary Shares, net of cancellation of options for 41,483 Ordinary
Shares.
12
<PAGE>
DIRECTORS' REPORT (Continued)
Share Options and Share Option Plans (Schemes) (Continued)
1999 Interim Option Plan (the "1999 Plan")
During the financial year ended 31 March 1999, options over a total of 313,803
Ordinary Shares in the Company were granted with an exercise price ranging from
US$33.125 to US$49.938 and a weighted average price of US$35.5165. No Ordinary
Shares in the Company were issued during the financial year by virtue of the
exercise of options granted under the 1999 Plan. As at 31 March 1999, the number
and class of unissued shares under option granted under the 1999 Plan was
313,803 Ordinary Shares.
Non-Plan Options (the "Non-Plan")
During the financial year ended 31 March 1999, options over a total of 800,000
Ordinary Shares in the Company were granted with an exercise price US$24.00. No
Ordinary Shares in the Company were issued during the financial year by virtue
of the exercise of options granted under the Non-Plan Options. These options
were not granted under any of the Company's stock options plans.
The exercise price of incentive share options (granted under the Non-Plan, 1993,
1997, 1998 and 1999 Plans' discretionary option grant program to employees and
which qualify for favorable tax treatment under U.S. federal tax laws) and the
options granted under the Plan's automatic grant program may not be less than
100% of the fair market value of the Ordinary Shares on the date of grant. The
exercise price of non-statutory options (granted under the Non-Plan, 1993, 1997,
1998 and 1999 Plans discretionary option grant program to certain consultants of
the company or its parent, or subsidiary corporations and which do not qualify
for favorable tax treatment under U.S. Federal tax laws) must be at least 85% of
the fair market value of the Ordinary Shares on the date of grant.
No options granted under the Non-Plan, 1993, 1997 and 1998 plans may have a term
in excess of five years and no options granted under the 1999 plan may have a
term in excess of ten years and each option will be subject to earlier
termination in the event of the optionee's cessation of service with the
company. Outstanding options will not be transferable other than in connection
with the optionee's death.
In light of the substantial decline in the market price of the Company's
Ordinary Shares in the first quarter of fiscal year 1998, the Company offered to
all employees in June 1997 the opportunity to cancel existing options
outstanding under the 1993 plan with exercise price in excess of US$23.25 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
US$23.25 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 5 June 1997, the Company amended options to purchase
288,960 shares pursuant to this offer.
13
<PAGE>
DIRECTORS' REPORT (Continued)
Share Options and Share Option Plans (Schemes) (Continued)
nCHIP Share Option Plan (the "nCHIP Plan")
The nCHIP Plan was assumed by the Company consequent upon the Company's
acquisition of a 100% interest in nCHIP, Inc. in January 1995.
No options were granted under the nCHIP Plan during the financial year. 15,766
Ordinary Shares in the Company were issued during the financial year by virtue
of the exercise of options granted under the nCHIP Plan. As at 31 March 1999,
the number and class of unissued shares under option granted under the nCHIP
Plan was 4,292 Ordinary Shares and there was no cancellation of options during
financial year 1999.
Employee Share Purchase Plan (the `ESPP')
The Company's ESPP provides for issuance of up to 150,000 Ordinary Shares. The
ESPP was approved by the shareholders in October 1997. Under the ESPP, employees
may purchase, on a periodic basis, a limited number of ordinary shares 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 shares at the beginning or end of the offering period, whichever is lower. A
total of 72,430 Ordinary Shares have been issued under the ESPP as of 31 March
1999. The Company estimated the per-share weighted average fair value of
ordinary shares issued to employees under the ESPP was US$8.51 using the
Black-Scholes option pricing model with the same assumptions as those listed for
share options granted during financial year 1999.
Year 2000 Compliance
The Group 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 (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
Group's business, could result in disruption of its operations, and could
subject it to potentially significant legal liabilities.
The Group 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 Group has established geographic regional teams to follow
established policies and guidelines on the remediation of the Year 2000 issue.
The Group created an internal intra-net database to record the status and
remediation activity on all internal equipment.
14
<PAGE>
DIRECTORS' REPORT (Continued)
Year 2000 Compliance (Continued)
The Group 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 Group 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 Group is currently evaluating
the implementation of this new management information for its recent
acquisitions in Sweden.
The Year 2000 issue also could affect the Group's infrastructure and production
lines. The possibility also exists that the Group could inadvertently fail to
correct a Year 2000 problem with a mechanical equipment micro-controller. The
Group 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 Group 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 Group 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 Group is in the process of identifying and devoting
resources to verify Year 2000 compliance of these suppliers. The Group may need
to find alternative suppliers based on the results of the questionnaires. There
can be no assurance that the Group 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 Group's business and
results of operations.
The Group is currently working with many of its major customers to ensure Year
2000 compliance and has been audited by many of its customers. The Group
currently works with many of its major customers to formulate contingency plans.
These contingency plans include the movement of manufacturing production,
identification of alternative suppliers and logistics companies. The Group
intends to review its contracts with customers and suppliers with respect to
responsibility for Year 2000 issues and to seek to address such issues in future
agreements with customers and suppliers.
15
<PAGE>
DIRECTORS' REPORT (Continued)
Year 2000 Compliance (Continued)
The Group has currently incurred in excess of US$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 Group's new information system and have primarily been capitalized as fixed
assets. The Group anticipates expending an additional US$2.0 to US$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 assurance
that the cost estimates associated with the Group's Year 2000 issues will prove
to be accurate or that the actual costs will not have a material adverse effect
on the Group's results of operations and financial condition.
Although the Group 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 Group's
contingency plan is to upgrade the existing information system currently in use
by a majority of the Group's operations to a new version which the Group has
been advised is Year 2000 compliant. The Group estimates the cost to upgrade the
existing information system to be approximately US$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 Group's business, operating
results and financial condition.
Auditors
Arthur Andersen have expressed their willingness to accept re-appointment.
On behalf of the Board of Directors
/s/ Michael E. Marks /s/ Tsui Sung Lam
MICHAEL E. MARKS TSUI SUNG LAM
Singapore
16 July 1999
16
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
BALANCE SHEETS
AS AT 31 MARCH 1999
(Currency - Singapore dollars)
<TABLE>
<CAPTION>
Note Group Company
-------------------------- ---------------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
(Note 39) (Note 39)
<S> <C> <C> <C> <C> <C>
Share capital and reserves
Share capital 3 482 412 482 412
Share premium 4 685,757 334,857 629,376 278,476
Capital reserve 5 255 255 255 255
Revaluation reserve 6 -- -- 227,650 91,553
Accumulated profits (losses) 7 118,768 10,962 (23,667) (47,142)
--------- --------- --------- ---------
805,262 346,486 834,096 323,554
Minority interest 6,940 1,603 -- --
--------- --------- --------- ---------
812,202 348,089 834,096 323,554
--------- --------- --------- ---------
Represented by:
Fixed assets 8 634,721 412,239 143 --
Subsidiaries 9 -- -- 543,562 295,345
Associated companies 10 398 5,913 -- 8,388
Other investments 11 33,995 3,662 28,295 --
Goodwill on consolidation 12 38,918 26,100 -- --
Purchased Goodwill 13 13,385 -- -- --
Intangible assets 14 14,477 16,743 -- --
Deferred expenditure 15 1,095 2,037 -- --
Other non-current assets 16 18,744 19,866 10,338 11,020
Current assets
--------- --------- --------- ---------
Stocks 17 332,926 253,365 -- --
Trade debtors 18 389,962 250,217 -- --
Other debtors, deposits and
prepayments 19 107,227 61,200 7,015 1,816
Due from subsidiaries (trade) 20 -- -- 387,475 289,036
Cash and cash equivalents 35 298,761 144,185 233,724 85,774
--------- --------- --------- ---------
1,128,876 708,967 628,214 376,626
--------- --------- --------- ---------
</TABLE>
17
<PAGE>
BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
Note Group Company
---------------------- ------------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
(Note 39) (Note 39)
<S> <C> <C> <C> <C> <C>
Less:
Current liabilities
------- ------- ------- -------
Short term advances 22 58,906 47,117 -- --
Term loans - current portion 22 31,957 22,579 -- --
Trade creditors 489,441 317,780 -- --
Other creditors and accruals 21 99,039 97,788 12,984 50,211
Hire purchase creditors, current
portion 23 16,937 15,465 -- --
Due to subsidiaries (trade) 20 -- -- 109,348 75,651
Provision for taxation 16,817 6,746 -- 13
------- ------- ------- -------
713,097 507,475 122,332 125,875
------- ------- ------- -------
Net current assets 415,779 201,492 505,882 250,751
Less:
Non-current liabilities
Term loans 22 37,570 26,610 -- --
Senior subordinated notes 22 259,065 241,950 259,065 241,950
Hire purchase creditors,
non-current portion 23 40,459 37,391 -- --
Deferred taxation 24 2,850 3,636 -- --
Other payables 25 19,366 30,376 3,454 --
------- ------- ------- -------
812,202 348,089 834,096 323,554
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENTS OF PROFIT AND LOSS
FOR THE YEAR ENDED 31 MARCH 1999
(Currency - Singapore dollars)
<TABLE>
<CAPTION>
Note Group Company
---------------------------- ----------------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
(Note 39) (Note 39)
<S> <C> <C> <C> <C> <C>
Turnover 26 3,016,027 1,706,560 -- --
---------- ---------- ---------- ----------
Operating profit (loss) 27 136,278 69,250 (6,474) 6,907
Share of profits of associated
companies 1,728 1,831 -- --
Other expense, net 28 (27,927) (22,935) (6,537) (7,169)
---------- ---------- ---------- ----------
Profit (loss) before taxation 110,079 48,146 (13,011) (262)
Taxation 29 (12,964) (3,462) (2) (12)
---------- ---------- ---------- ----------
Profit (loss) after taxation 97,115 44,684 (13,013) (274)
Minority interests (2,192) (557) -- --
---------- ---------- ---------- ----------
Profit (loss) before
extraordinary items 94,923 44,127 (13,013) (274)
Extraordinary items 30 (8,945) (13,598) -- --
---------- ---------- ---------- ----------
Profit (loss) for the year
transferred to accumulated
profits (losses) 7 85,978 30,529 (13,013) (274)
========== ========== ========== ==========
Earnings per share (cents) 31
- - basic (in cents) 217.87 120.81
- - fully diluted (in cents) 205.63 115.54
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 1999
(Currency - Singapore dollars unless otherwise stated)
<TABLE>
<CAPTION>
1999 1998
$'000 $'000
<S> <C> <C>
Cash flow from operating activities
Profit (loss) before taxation 110,079 48,146
Adjustments for:
Depreciation of fixed assets 77,366 41,839
Loss (gain) on sale of fixed assets (1,076) 141
Gain on sale of associated company (167) --
Share of profit from associated company (1,728) (1,831)
Provision for stock obsolescence 6,849 4,989
Amortisation of goodwill on consolidation 3,587 3,601
Amortisation of intangible assets 4,677 5,662
Amortisation of deferred expenditure 686 836
Interest expense 36,538 27,139
Interest income (8,611) (4,204)
-------- --------
Operating profit before working capital changes 228,200 126,318
Changes in operating assets and liabilities
(net of effects of acquisition)
Decrease (increase) in accounts receivable (117,127) (69,713)
Decrease (increase) in other debtors, deposits and prepayments
(37,478) (38,115)
Increase in stocks (73,991) (49,456)
Increase in trade creditors 119,812 94,100
Increase in other creditors and accruals 11,588 11,379
Increase in trade balance due to (from) associated company -- (251)
-------- --------
Cash generated from operations 131,004 74,262
Interest received 6,739 4,204
Interest paid (25,535) (16,982)
Income taxes paid (3,856) (1,949)
-------- --------
Net cash provided by operating activities 108,352 59,535
-------- --------
</TABLE>
20
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
1999 1998
$'000 $'000
<S> <C> <C>
Cash flow from investing activities
Purchase of business, net of cash acquired (Note A) (25,028) --
Payment for additional 50% interest in FICO (Note B) (12,013) --
Effect of acquisitions on cash 632 7,288
Purchase of fixed assets (265,752) (157,066)
Investment in associate and other investment (29,277) (8,925)
Proceeds from sale of fixed assets 10,176 2,487
Proceeds from sale of associated company 954 --
Payment of Astron earnout and repayment of Astron notes payable (40,044) (17,249)
-------- --------
Net cash used in investing activities (360,352) (173,465)
-------- --------
Cash flow from financing activities
Proceeds from issuance of share capital 20,940 3,207
Net proceeds from equity offering 321,755 147,196
Net proceeds from issuance of senior subordinated note -- 223,369
Proceeds from (repayment of) bank borrowings 43,826 (137,858)
Proceeds from (repayment of) term loan 5,246 (13,121)
Proceeds from related company -- 4,571
Increase in (repayment of) finance lease 1,198 (9,701)
-------- --------
Net cash provided by financing activities 392,965 217,663
-------- --------
Net increase in cash and cash equivalents 140,965 103,733
Effect of exchange rate changes 13,611 6,628
Cash and cash equivalents at beginning of financial year 144,185 33,824
-------- --------
Cash and cash equivalents at end of financial year (Note 35) 298,761 144,185
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
A. The acquisition of ACL in 1999 financial year has been shown in the
statement as a single item. The effect on the individual assets and
liabilities is set out below:
$'000
Fixed assets 7,860
Stocks 899
In-process R&D 3,337
Goodwill 12,932
------
Cash flow on acquisition, net of cash acquired 25,028
======
B. The acquisition of FICO Investment Holding Limited in 1999 financial year
has been shown in the statement as a single item. The effect on the
individual assets and liabilities is set out below:
$'000
Trade debtors 5,623
Stocks 3,004
Other assets, debtors, deposits and prepayments 1,000
Fixed assets 17,826
Trade creditors (2,191)
Provision for taxation (430)
Capital leases (3,405)
Other creditors and accruals (1,446)
Add (less)
Minority interests (1,998)
Assets previously recognised as share of profits in associated
company (7,615)
Goodwill 13,959
Intangible assets 701
Non-cash purchase consideration
Ordinary shares issued (8,009)
Promissory notes issued (5,006)
-------
Net cash flow on acquisition of 50% interest in FICO 12,013
=======
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
31 MARCH 1999
(Currency - Singapore dollars unless otherwise stated)
The following notes are an integral part of and should be read in conjunction
with the accompanying financial statements.
1. THE COMPANY, ITS SUBSIDIARIES AND THEIR PRINCIPAL ACTIVITIES
The Company is principally engaged in investment holding. The activities of the
subsidiaries are in the product design, printed circuit board 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 Group
incorporate advanced interconnect, miniaturisation and packaging technologies
such as surface mount, multichip modules and chip-on-board technologies.
The principal activities of the subsidiaries are detailed in Note 9.
There were no significant changes in the nature of these activities during the
financial year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The accounts of the Company and the Group, which are maintained in United States
dollars, are prepared under the historical cost convention except in respect of
investment in subsidiaries which is stated at valuation based on the respective
subsidiaries' net assets at the balance sheet date as discussed in later
paragraph below. The financial statements have been prepared by translating the
United States dollar accounts to Singapore dollars at the exchange rate ruling
at the financial year-end, except for share capital and premium, capital reserve
and accumulated losses which are translated at historical rates. Exchange
differences on currency translation are taken to reserves.
The accounts are prepared in accordance with applicable accounting standards.
23
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Consolidation
The Group financial statements include the financial statements of the Company
and all its subsidiaries. The results of subsidiaries acquired or disposed of
during the year are included in or excluded from the Group financial statements
with effect from the respective dates of acquisition or disposal. Significant
intercompany balances and transactions have been eliminated on consolidation.
The acquisition of Neutronics Electronic Industries Holding A.G. ("Neutronics")
in the 1998 financial year was accounted for as a pooling of interest. Under US
GAAP, the acquisition of Neutronics is considered an acquisition that has
significant impact to the business of the Company. Accordingly, prior period
consolidated financial statements of the Group and the Company are restated to
give effect to this acquisition.
On acquisition of a subsidiary accounted for using purchase method, any excess
of the purchase consideration over the fair value of the assets acquired at the
date of acquisition is included in goodwill on consolidation and amortized on a
straight-line basis. Assets, liabilities and results of overseas subsidiaries
are translated into Singapore dollars on the basis outlined in later paragraph
below.
Revenue recognition
Revenues from the sale of manufactured products and services are recognized upon
passage of title to the customer, which generally coincides with their delivery
and passage.
Revenues from contract manufacturing are recognized on the percentage of
completion method. Any losses are provided for as they become known.
Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. The cost of an
asset comprises its purchase price and any directly attributable costs of
bringing the asset to working condition for its intended use. Expenditure for
additions, improvements and renewals are capitalized and expenditure for
maintenance and repairs are charged to the profit and loss account. When assets
are sold or retired, any gain or loss resulting from their disposal is included
in the profit and loss account.
24
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Fixed assets and depreciation (Continued)
Fixed assets are depreciated using the straight-line method to write-off the
cost over their estimated useful lives, except freehold land which is generally
not depreciated. The estimated useful lives have been taken as follows:
Years
-----
Leasehold Land 25
Building 20 to 50
Leasehold improvements 6 to 10
Plant and equipment 7 to 10
Others 2 to 10
Subsidiaries
The investments in subsidiaries are revalued by the directors at balance sheet
date at amounts equal to the attributable net assets of the subsidiaries
concerned based on their audited accounts.
An increase in carrying amounts arising from the revaluation is credited to
Revaluation Reserve. To the extent that a decrease in carrying amount offsets a
previous increase that has been charged or credited to Revaluation Reserve and
not subsequently reversed or utilized, it is charged against that Revaluation
Reserve. In all other cases, a decrease in carrying amount is charged to income.
An increase on revaluation directly related to a previous decrease in carrying
amount that was charged to income is credited to income to the extent that it
offsets the previously recorded decrease.
Where a subsidiary is acquired at the end of a financial year, there will be no
revaluation of the subsidiary in the year of acquisition.
Associated companies
An associated company is defined as a company, not being a subsidiary, in which
the Group has a long term interest of not less than 20% of the equity and in
whose financial and operating policy decisions the Group exercises significant
influence.
Investment in associated companies are stated in the Company's financial
statements at cost and provision is made where there is a decline in value that
is other than temporary.
The Group's share of the results of associated companies is included in the
consolidated profit and loss account. The Group's share of the post acquisition
reserves of associated companies is included in the investments in the
consolidated balance sheet. Where the audited accounts are not co-terminus with
those of the Group, the share of profits is arrived at from the last audited
accounts available and unaudited management accounts to the end of the
accounting period.
25
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Other investments
Quoted and unquoted investments held on a long-term basis are stated at cost.
Provision is made where there is a decline in value that is other than
temporary.
Dividend income is recorded gross on the date it is declared payable by the
investee company. Interest income is recognised on the accrual basis.
Goodwill on consolidation
Goodwill on consolidation represents the excess of the purchase price of
acquired companies over the fair value of the net assets acquired. Goodwill is
amortized on a straight-line basis over the estimated life of the benefits
received which ranges from eight to twenty-five years. On an annual basis, the
Company evaluates recorded goodwill potential impairment against the current and
estimated undiscounted future operating income before goodwill amortization of
the business to which the goodwill relates.
Purchased Goodwill
Purchased goodwill on consolidation represents the excess of the purchase price
of acquired assets over the fair value of the net assets acquired. Goodwill is
amortized on a straight-line basis over the estimated life of the benefits
received.
Intangible assets
Intangible assets comprise technical agreements, patents, trademarks, developed
technologies and identifiable assets in a subsidiary's assembled work force, its
favorable lease and its customer list.
Technical agreements are being amortized on a straight-line basis over the
periods not exceeding five years. Patents and trademarks are being amortized on
a straight-line basis over periods of up to ten years. Purchased technologies
are being amortized on a straight-line basis over periods not exceeding seven
years. The identifiable intangible assets in the subsidiaries assembled work
force, its favorable lease and its customer list are amortized on a straight
line basis over the estimated life of the benefits received of three to ten
years.
26
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Deferred expenditure
Deferred expenditure comprises preliminary expenses and is written off to profit
and loss account on a straight-line basis over a three-year period commencing
from the date of commercial operations.
Taxation
Income tax expense is determined on the basis of tax effect accounting, using
the liability method and is applied to all significant timing differences.
Deferred tax benefits are not recognised unless there is reasonable expectation
of their realisation.
Stocks
Stocks are stated at the lower of cost and net realizable value. Cost comprises
direct materials on a first-in-first-out basis and in the case of finished
products, includes direct labor and attributable production overheads based on
normal levels of activity. Net realizable value represents the estimated selling
price less anticipated cost of disposal. Provision is made for deteriorated,
damaged, obsolete and slow-moving stocks.
Hire purchase assets
Where assets are financed by hire purchase agreements that give rights
approximating to ownership (finance leases), the assets are capitalized under
fixed assets as if they had been purchased during the periods of the leases and
the corresponding lease commitments are included under liabilities. Lease
payments are treated as consisting of capital and interest elements and the
interest is charged to profit and loss accounts. Depreciation on the relevant
assets is charged to profit and loss account on the basis outlined in note
above.
Foreign currency transactions and balances
Foreign currency assets and liabilities are converted to United States dollars
at rates approximately those ruling at balance sheet date. Foreign currency
transactions are converted to United States dollars at the rates ruling at the
date of transactions. All exchange differences on conversion of foreign
currencies are dealt with in the profit and loss account.
The functional currency consolidated financial statements are translated into
the reporting currency, Singapore dollars, using the year end exchange rate to
translate assets and liabilities and average rates to translate profit and loss
statement items. Exchange differences arising therefrom are taken into reserves.
27
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Forward contracts
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.
Profits and losses on outstanding forward foreign exchange contracts and
currency swaps used for hedging purposes are computed by revaluing these
unmatured contracts at the exchange rate prevailing at year end and are dealt
with through the statement of income to match against the exchange differences
on the underlying foreign currency exposures being hedged. The premium or
discount arising on these foreign exchange contracts is recognised in the
statement of income over the period of the hedge.
Extraordinary items
These are material items, stated net of income tax, which are derived from
events or transactions outside the ordinary activities of the Company which are
not expected to recur frequently or regularly.
Prior period adjustments
All income and expenditure arising in the course of the Company's and Group's
normal business are taken into account in arriving at the result for the period.
Any prior year adjustments are shown separately and are not included in the
results for the financial year.
28
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
3. SHARE CAPITAL
<TABLE>
<CAPTION>
Group and Company
-----------------
1999 1998
$'000 $'000
<S> <C> <C>
Authorised:
- - 100,000,000 (1998:100,000,000) Ordinary Shares of $0.01 each 1,000 1,000
----- -----
Issued and fully paid
- - Balance brought forward 412 162
- - 3,861,375 Ordinary shares of $0.01 issued in the financial year 1998
-- 39
- - 6,969,649 Ordinary shares of $0.01 issued in the financial year 1999
70 --
----- -----
- - Balance as previously stated 482 201
- - retroactive adjustment for 2 for 1 bonus issue (Note 4) -- 211
----- -----
- - 48,205,493 (1998: 41,234,858) Ordinary Shares of $0.01 each 482 412
===== =====
</TABLE>
On 22 December 1998, the Company set a record date for a 2 for 1 stock split to
be effected as a bonus issue. Retroactive adjustments to reflect this bonus
issue have been made to the 1998 comparative figures.
The Company issued the following shares during the financial year 1999 with the
excess price over par value of the shares transferred to the Share Premium
account:
(a) 5,400,000 Ordinary Shares of par value of $0.01 for cash at US$36.25 per
share for public offering with proceeds amounting to US$194.0 million, net
of issue costs of US$1.75 million.
(b) 127,850 Ordinary Shares of par value of $0.01 as consideration for the
purchase of an additional 50% interest in FICO Investment Holding Ltd.
(c) 1,441,799 Ordinary Shares of par value of $0.01 for cash at a premium of
US$12,551,000 by virtue of the exercise of share options previously granted
and Employee Share Purchase Plan.
29
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
4. SHARE PREMIUM
Movements in the account are as follows:
<TABLE>
<CAPTION>
Group Company
-------------------- --------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
(Note 39) (Note 39)
<S> <C> <C> <C> <C>
Balance as previously stated 334,857 161,010 278,476 120,007
Retroactive adjustment on 2 for 1 bonus
issue (Note 3) -- (211) -- (211)
-------- -------- -------- --------
Balance brought forward 334,857 160,799 278,476 119,796
Premium on issue of Ordinary Shares 345,671 168,760 345,671 168,760
Expenses on issuance of Ordinary Shares
(3,044) (10,557) (3,044) (10,557)
Issuance of Ordinary Shares for
acquisitions of companies 8,273 15,855 8,273 --
Cost related to exercise of share options
by employees -- -- -- 477
-------- -------- -------- --------
At end of financial year 685,757 334,857 629,376 278,476
======== ======== ======== ========
</TABLE>
5. CAPITAL RESERVES
The Company, which is listed on NASDAQ in the United States of America, also
prepares accounts which comply with United States generally accepted accounting
principles. These accounts, which are in United States dollars, are filed with
the Securities and Exchange Commission ("SEC") in the United States. During the
year ended 31 March 1994, an amount of $254,885, representing the difference
between the fair market value at the date of grant of certain share options to
selected management employees and the exercise price of the options, was charged
to the profit and loss account in compliance with United States generally
accepted accounting principles. No such charge was made in the preparation of
the Singapore statutory accounts as there is no equivalent accounting standard
in Singapore. In order to reduce the revenue reserve to that reported in the
accounts prepared in compliance with United States generally accepted accounting
principles, an amount of $254,885 was transferred from revenue reserve to
capital reserve. Details of the share options granted are detailed in Note 34.
30
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
6. REVALUATION RESERVES
Company
--------------------
1999 1998
$'000 $'000
At beginning of financial year 91,553 60,683
Net adjustment during the financial year (Note 9) 136,097 30,870
------- -------
At end of financial year 227,650 91,553
======= =======
7. ACCUMULATED PROFITS (LOSSES)
This account consists of:
<TABLE>
<CAPTION>
Group Company
-------------------------- --------------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
At beginning of financial year:
As previously stated 10,962 (20,993) (47,142) (56,029)
Accumulated earnings before date of
merger -- (4,328) -- --
Neutronics fiscal year conversion -- (4,808) -- --
-------- -------- -------- --------
Balance brought forward, previously reported
10,962 (30,129) (47,142) (56,029)
Prior period adjustments (Note 32) -- -- -- (9,172)
-------- -------- -------- --------
Balance brought forward, restated 10,962 (30,129) (47,142) (65,201)
Exchange difference arising on translation
21,828 10,562 36,488 18,333
Retained profit (loss) for the year 85,978 30,529 (13,013) (274)
-------- -------- -------- --------
At end of financial year 118,768 10,962 (23,667) (47,142)
-------- -------- -------- --------
Retained by:
Company (23,667) (47,142)
Subsidiaries 139,808 57,206
Associated companies 2,627 898
-------- --------
118,768 10,962
======== ========
</TABLE>
31
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. FIXED ASSETS
<TABLE>
<CAPTION>
Group Leasehold Plant and
Land Building improvements equipment Others Total
-------- -------- ------------ ---------- -------- --------
1999 $'000 $'000 $'000 $'000 $'000 $'000
<S> <C> <C> <C> <C> <C> <C>
Cost
At beginning of financial
year 25,769 129,610 25,010 298,586 62,858 541,833
Currency re-alignment 573 9,579 1,718 15,839 3,366 31,075
Due to acquisitions of
subsidiaries -- 2,679 674 25,788 1,124 30,265
Additions 10,673 39,195 13,950 122,908 79,025 265,751
Disposals (834) (238) (644) (34,063) (9,924) (45,703)
-------- -------- -------- -------- -------- --------
At end of financial year 36,181 180,825 40,708 429,058 136,449 823,221
======== ======== ======== ======== ======== ========
Accumulated depreciation
At beginning of financial
year 258 7,957 3,654 98,830 18,895 129,594
Currency re-alignment 53 676 301 7,264 1,460 9,754
Due to acquisitions of
subsidiaries -- -- 10 3,085 1,228 4,323
Additions 974 6,991 3,185 54,023 12,193 77,366
Disposals -- (55) (202) (25,121) (7,159) (32,537)
-------- -------- -------- -------- -------- --------
At end of financial year 1,285 15,569 6,948 138,081 26,617 188,500
======== ======== ======== ======== ======== ========
Net book value
At 31.3.99 34,896 165,256 33,760 290,977 109,832 634,721
======== ======== ======== ======== ======== ========
</TABLE>
32
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. FIXED ASSETS (Continued)
<TABLE>
<CAPTION>
Group Leasehold Plant and
Land Building improvements equipment Others Total
-------- -------- ------------ -------- -------- --------
1998 $'000 $'000 $'000 $'000 $'000 $'000
<S> <C> <C> <C> <C> <C> <C>
Cost
At beginning of financial
year 8,908 42,832 21,529 103,124 38,000 214,393
Retroactive adjustments on
merger of companies (Note 2
- - "Basis of Consolidation) -- 31,559 -- 29,355 1,633 62,547
-------- -------- -------- -------- -------- --------
Balance brought forward 8,908 74,391 21,529 132,479 39,633 276,940
Currency re-alignment 1,417 7,625 3,239 27,264 6,751 46,296
Due to acquisitions of
subsidiaries 14,248 14,038 2,748 44,227 5,117 80,378
Additions 1,196 33,646 (161) 108,567 13,818 157,066
Disposals -- (90) (2,345) (13,951) (2,461) (18,847)
-------- -------- -------- -------- -------- --------
At end of financial year 25,769 129,610 25,010 298,586 62,858 541,833
======== ======== ======== ======== ======== ========
Accumulated depreciation
At beginning of financial
year 132 1,250 2,821 45,109 9,729 59,041
Retroactive adjustments on
merger of companies (Note 2
- - "Basis of Consolidation") -- 1,957 -- 7,321 -- 9,278
-------- -------- -------- -------- -------- --------
Balance brought forward 132 3,207 2,821 52,430 9,729 68,319
Currency re-alignment 25 397 516 8,449 1,839 11,226
Due to acquisitions of
subsidiaries -- 399 540 19,169 1,873 21,981
Additions 101 3,954 1,667 29,220 6,897 41,839
Disposals -- -- (1,890) (10,438) (1,443) (13,771)
-------- -------- -------- -------- -------- --------
At end of financial year 258 7,957 3,654 98,830 18,895 129,594
-------- -------- -------- -------- -------- --------
Net book value
At 31.3.98 25,511 121,653 21,356 199,756 43,963 412,239
======== ======== ======== ======== ======== ========
</TABLE>
Plant and equipment includes items with net book value of approximately
$66,144,000 (1998: $57,813,000) which were purchased under hire purchase
contracts.
Land and building with a net book value of $39,696,000 (1998: $1,848,479) are
mortgaged.
33
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8. FIXED ASSETS (Continued)
Company
Others
------
1999 $'000
Cost
At beginning of financial year --
Currency re-alignment --
Additions 143
Disposals --
-----
At end of financial year 143
=====
Accumulated depreciation
At beginning of financial year --
Currency re-alignment --
Additions --
Disposals --
-----
At end of financial year --
=====
Charge for 1998 --
=====
Net book values
At 31.3.99 143
=====
At 31.3.98 --
=====
The fixed asset in the Company was not depreciated during the year as the asset
has not been put into use as at the end of the 1999 financial year.
34
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES
(a) Subsidiaries comprise:
Company
----------------------
1999 1998
$'000 $'000
(Note 39)
At cost:
Balance at beginning of financial year 158,528 31,331
Increase investment in existing subsidiaries 37,996 127,186
Acquisitions of subsidiaries 61,623 14
Disposal (write-offs) -- (3)
-------- --------
Balance at end of financial year 258,147 158,528
-------- --------
Revaluation:
Balance at beginning of financial year 118,690 87,820
Net adjustments during the year 136,097 30,870
-------- --------
Balance at end of financial year 254,787 118,690
-------- --------
Currency re-alignment 39,023 18,127
-------- --------
Balance at end of year 551,957 295,345
======== ========
The Company's investment in subsidiaries is stated at the attributable share of
their combined net asset value. The revaluation surplus for the financial year
is $136,097,000 (1998: $30,870,000).
The subsidiaries acquired during the financial year have been stated at the cost
of investment less any provision for diminution in net asset value. It is the
directors' opinion that no provision for diminution in net asset value of these
subsidiaries is necessary in the current year.
The Company's subsidiaries operating in the People's Republic of China are
required to obtain approval from the relevant authorities when making foreign
currency payments.
35
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
(b) The Company and the Group had the following subsidiaries as at 31 March
1999:
<TABLE>
<CAPTION>
Country of Percentage of
incorporation equity held by Original cost of investment
and place of the Group by the Group
Name Principal activities business
- -------------------------- ---------------------------- ----------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by the Company
Flextronics Singapore Design, assembly and Singapore 100 100 3,977 3,977
Pte Ltd manufacture of computer
industrial grade printed
circuit board
sub-assemblies, systems
assembly and testing
Flextronics Manufacture of components Hong Kong 100 100 ** **
Manufacturing (H.K.) for computer equipment
Limited#
FICO Investment Holding Sale and manufacture of Hong Kong 90 40 20,310 5,200
Limited@@ plastic products
Flextronics Design, assembly and United States 100 100 62,168 62,168
International USA, Inc.@ manufacture of computer of America
industrial grade printer
circuit board
sub-assemblies, and
products requiring
advance electronics
packaging, marketing
and procurement
representative
Flextronics Holding UK Investment holding United Kingdom 100 100 1 1
Limited#
Flextronics Investment holding Netherlands 100 -- 20 --
International Europe BV#
</TABLE>
36
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Country of
incorporation Percentage of
and place of equity held by Original cost of investment
Name Principal activities business the Group by the Group
- -------------------------- ---------------------------- ---------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by the Company
(Continued)
FLX Cyprus Limited# Investment holding Cyprus 100 -- ** --
Flextronics Investment holding Austria 92 92 13,019 18
International GmBH
(formerly known as
"Neutronics Electronic
Industries Holding A.G")*
Parque de technologia Management of real estate Mexico 100 100 17,518 17,518
Electronics #(formerly business park
known as "Flextronics de
Mexico, S.A. de C.V.")
Flextronics Design, assembly and Mexico 100 -- 5 --
Manufacturing Mex, S.A. manufacture of computer
de C.V.# industrial grade printed
circuit board sub-assemblies,
products that require
advanced electronic
packaging, systems assembly,
testing and trading
of components
DTM Products de Mexico, Sales and manufacture of Mexico 100 -- 5 --
S.A. de C.V.# plastic material products
and its by-products
Flextronics Contract manufacturer of United Kingdom 100 100 4,057 4,057
International (UK) electronics and
Limited# telecommunication
equipment providing
turnkey manufacturing
services to its customers
</TABLE>
37
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Country of
incorporation Percentage of
and place of equity held by Original cost of investment
Name Principal activities business the Group by the Group
- -------------------------- ---------------------------- ---------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by the Company
(Continued)
Astron Technologies Sales and marketing Mauritius 100 100 9,050 50
Limited@ business
Flextronics Technology Design, assembly and China 100 100 11,333 11,333
(Zhuhai) Co., Limited manufacture of computer
(formerly known as industrial grade printed
"Zhuhai Dao Men Chao Yi circuit board
Technology Co Ltd")# sub-assemblies, systems
assembly, manufacture
miniature, gold finished
printed circuit board
Flextronics Sales and marketing Malaysia 100 100 ** **
International Latin business
America (L) Ltd#
DTM Latin America (L) Sales and marketing Malaysia 100 -- ** -
Ltd# business
Flextronics Design, assembly and United States 100 100 4 4
International Fremont, manufacture of computer of America
Inc. (formerly known as industrial grated printed
"Altatron, Inc.")@ circuit board
sub-assemblies and system
assembly
Marathon Business Park Management of real estate United States 100 100 1 1
LLC@ business park of America
Flextronics Design, assembly and Brazil 100 100 15,326 2
International manufacture of computer
Technologia Ltda. industrial grade printed
(formerly known as circuit board
"Conexao Informatica sub-assemblies and system
Ltda.")@ assembly
</TABLE>
38
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Country of
incorporation Percentage of
and place of equity held by Original cost of investment
Name Principal activities business the Group by the Group
- -------------------------- ---------------------------- ---------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by the Company
(Continued)
Hiromichi Limited@ Dormant British Virgin 100 100 2,107 2,107
Islands
Flextronics Hungaria Investment holding Hungary 100 -- 17 --
Kereskedelmi es, Kft#
Flextronics Dormant Singapore 100 100 ** **
International Singapore
Pte Ltd
Held by Subsidiaries
Flextronics Computer Dormant China 100 100 -- --
(Shekou) Ltd.#
Flextronics Industrial Design, assembly and China 100 100 -- --
(Shenzhen) Ltd.# manufacture of computer
industrial grade printed
circuit board
sub-assemblies, systems
assembly and testing
Flextronics Malaysia Design, assembly and Malaysia 100 100 -- --
Sdn. Bhd.# manufacture of computer
industrial grade printed
circuit board
sub-assemblies, system
assembly and testing
Flex International Sales and marketing Malaysia 100 100 -- --
Marketing (L) Ltd.# business
Astron Group Limited# Manufacture of miniature, Hong Kong 100 100 -- --
gold-finished printed
circuit boards
</TABLE>
39
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Country of
incorporation Percentage of
and place of equity held by Original cost of investment
Name Principal activities business the Group by the Group
- -------------------------- ---------------------------- ---------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by Subsidiaries
(Continued)
Astron Group (China) Manufacture of miniature, China 96.25 96.25 -- --
Limited# (formerly known gold finished printed
as Zhu Hai Dao Men Chao circuit boards
Yi Electronics Co Ltd)
FKM (Shenzhen) Ltd.# Sales and manufacture of China 100 40 -- --
plastic material products
and its by-products
Proactive Corporation, Procurement of components. United States 100 100 -- --
Inc.# of America
DTM Products, Inc.# Sales and manufacture of United States 100 100 -- --
plastic material products of America
and its by-products
Flextronics Distribution Distribution and United States 100 -- -- --
Inc.# warehousing of America
F.L. Tronics Holdings AB Investment holding Sweden 100 100 -- --
(aka Flextronics
Holdings AB)#
F.L. Tronics Design, assembly and Sweden 100 100 -- --
International Sweden AB manufacture of computer
(aka Flextronics industrial grade printed
International Sweden AB)# circuit board
sub-assemblies, systems
assembly and testing
Igrene AB (formerly Design, assembly and Sweden 100 100 -- --
known as "Energipilot manufacture of computer
AB")# industrial grade printed
circuit board
sub-assemblies and system
assembly
</TABLE>
40
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Country of
incorporation Percentage of
and place of equity held by Original cost of investment
Name Principal activities business the Group by the Group
- -------------------------- ---------------------------- ----------------- ----------------- ------------------------------
1999 1998 1999 1998
% % US$'000 US$'000
(Note 39)
<S> <C> <C> <C> <C> <C> <C>
Held by Subsidiaries
(Continued)
Althofen Electronics Contact manufacturer of Austria 100 100 -- --
GmbH* electronics products
HTR Technikai Contact manufacturer of Hungary 100 100 -- --
Rendezerszolgaltato Kft* electronics products
Ecoplast Muanyangipari Sales and manufacture of Hungary 100 100 -- --
Termekeket Gyarto Kft plastic material products
(formerly known as and its by-products
"Neutronics Ecoplast
Muanyagipari Termekeket
Gyarto Kft")*
Components, Kft Provision of manufacturing Hungary 100 100 -- --
(formerly known as labour services and
Neutronics Components facilities
Kft)*
Moctol AB (formerly Contract manufacturer of Sweden 100 100 -- --
known as "Energipilot cable assemblies
Component AB")#
Tolipig AB (formerly Design, assembly and Sweden 100 100 -- --
known as "Energipilot manufacture or printed
Katrineholm AB")# circuit board
sub-assemblies
Noitall AB (formerly Installation PBX Sweden 100 100 -- --
known as "Energipilot communication systems
Installation AB")#
Flextronics Manufacture of electronics Scotland 100 100 -- --
International Scotland, and telecommunications
Limited (formerly known equipment
as "Altatron (Europe)
Limited")#
</TABLE>
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
9. SUBSIDIARIES (Continued)
@ Not required to present audited financial statements for the financial year
by the laws of its country of incorporation
* Audited by a firm other than Arthur Andersen Singapore
# Audited by an associated firms of Arthur Andersen Singapore
** Amount less than $1,000
@@ Accounted for in the financial statements as an associated company in the
1998 financial year
10. ASSOCIATED COMPANIES
(a) Associated companies comprise:
<TABLE>
<CAPTION>
Group Company
----------------- -----------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Unquoted equity shares at cost 398 4,180 -- 7,280
Currency re-alignment -- -- -- 1,108
Group's share of post-acquisition
accumulated profit and reserves less losses
-- 2,350 -- --
Amounts payable on current account -- (617) -- --
------ ------ ------ ------
398 5,913 -- 8,388
====== ====== ====== ======
</TABLE>
Amounts owing to associated companies are unsecured, interest-free and have no
fixed terms of repayment.
(b) The Company and the Group had the following associated companies as at 31
March 1999:
<TABLE>
<CAPTION>
Country of Percentage of
Incorporation and equity held
Name of Company Principal Activities Place of Business by the Group
- -------------------------- --------------------------------------------- --------------------- ----------------------
1999 1998
% %
<S> <C> <C> <C> <C>
Peak Industries, Inc. Sales and manufacture of plastic material United States of -- 40
products and its by-products America
Mecha Design s.r.l. Design of moulding for plastic products Italy 55 45
</TABLE>
The Company and the Group disposed Peak Industries, Inc. during the financial
year.
41
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
11. OTHER INVESTMENTS
This represents unquoted investments in companies for which the Group's interest
is less than 20%.
12. GOODWILL ON CONSOLIDATION
Group
---------------------
1999 1998
$'000 $'000
Cost
At beginning of financial year 35,246 36,021
Currency re-alignment 2,546 6,006
Additions 14,639 --
Write off to plant closure expense -- (6,781)
------- -------
At end of financial year 52,431 35,246
------- -------
Accumulated amortisation
At beginning of financial year 9,146 6,670
Currency re-alignment 780 (119)
Amortisation for the financial year 3,587 3,601
Write off to plant closure expense -- (1,006)
------- -------
At end of financial year 13,513 9,146
------- -------
Net book value at end of financial year 38,918 26,100
======= =======
13. PURCHASED GOODWILL
Group
---------------------
1999 1998
$'000 $'000
Cost
At beginning of financial year -- --
Currency re-alignment -- --
Additions 13,385 --
Write off to plant closure expense -- --
------- -------
At end of financial year 13,385 --
======= =======
The purchased goodwill in fiscal 1999 was acquired in the ACL acquisition as
disclosed in Note 30 to the financial statements. This amount will be amortised
over 10 years with effect from April 1999.
42
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
14. INTANGIBLE ASSETS
Group
---------------------
1999 1998
$'000 $'000
Cost
At beginning of financial year 27,398 20,363
Currency re-alignment 2,242 3,017
Additions 1,215 4,400
Write off to plant closure expense (6,276) (382)
------- -------
At end of financial year 24,579 27,398
------- -------
Accumulated amortisation
At beginning of financial year 10,655 4,673
Currency re-alignment 1,046 680
Amortisation for the financial year 4,677 5,662
Write off to plant closure expense (6,276) (360)
------- -------
At end of financial year 10,102 10,655
------- -------
Net book value at end of financial year 14,477 16,743
======= =======
15. DEFERRED EXPENDITURE
Group
---------------------
1999 1998
$'000 $'000
Cost
At beginning of financial year 2,743 3,046
Currency re-alignment 117 374
Additions 52 592
Disposals (350) (1,269)
------- -------
At end of financial year 2,562 2,743
------- -------
Amortisation
At beginning of financial year 706 621
Currency re-alignment 75 93
Charge for the year 686 836
Disposals -- (844)
------- -------
At end of financial year 1,467 706
------- -------
Net book value at end of financial year 1,095 2,037
======= =======
43
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
16. OTHER NON-CURRENT ASSETS
Group Company
---------------- ----------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Loan to related party -- 4,065 -- --
Investment securities 1,846 1,613 -- --
Prepaid bank arrangement fees 7,254 8,734 6,884 7,794
Notes receivable 5,608 3,229 3,454 3,226
Others 4,036 2,225 -- --
------ ------ ------ ------
18,744 19,866 10,338 11,020
====== ====== ====== ======
17. STOCKS
Group
-------------------------
1999 1998
$'000 $'000
Finished goods 283,035 8,091
Work-in-progress 44,190 35,434
Raw materials 25,566 225,384
-------- --------
352,791 268,909
Less provision for stock obsolescence (19,865) (15,544)
-------- --------
332,926 253,365
======== ========
Movements in provision for stock obsolescence during the year are as follows:
At beginning of year 15,544 8,638
Currency re-alignment 1,823 1,449
Provision for the year 6,849 4,989
Due to acquisitions of subsidiaries -- 3,952
Written off against provision (4,351) (3,484)
------- -------
At end of year 19,865 15,544
======= =======
44
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
18. TRADE DEBTORS
Group
---------------------
1999 1998
$'000 $'000
Trade debtors 398,684 265,586
Less provision for doubtful debts (8,722) (15,369)
------- -------
389,962 250,217
======= =======
Movements in provision for doubtful debts during the year are as follows:
At beginning of the financial year 15,369 8,501
Currency re-alignment 892 1,206
(Write back)/provision during the financial year (4,311) 1,961
Due to acquisitions of subsidiaries 385 6,846
Written off against provision (3,613) (3,145)
------- -------
At end of the financial year 8,722 15,369
======= =======
19. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS
Group Company
------------------- --------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Notes receivable 31,437 25,218 1,563 --
Loan to related party 4,297 -- -- --
Prepayments 22,749 15,419 1,677 1,568
Deposits 6,105 9,172 -- --
Sales tax and duties 14,426 630 -- --
Government subsidies 8,370 -- -- --
Sundry debtors 19,843 10,761 3,775 248
------- ------- ------- -------
107,227 61,200 7,015 1,816
======= ======= ======= =======
45
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
20. TRADE BALANCE DUE FROM (TO) SUBSIDIARIES
These are unsecured, interest-free and have no fixed terms of repayment.
21. OTHER CREDITORS AND ACCRUALS
<TABLE>
<CAPTION>
Group Company
----------------- -----------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Miscellaneous creditors 13,633 6,126 798 1,931
Accruals 27,416 30,747 10,459 9,715
Deferred income 10,321 -- -- --
Customer deposits 31,604 6,584 -- --
Sales tax payable 9,981 6,983 -- --
Provision for plant closing 4,357 8,783 -- --
Due under Service Agreement -- 22,435 -- 22,435
Purchase price payable to Astron's
former shareholders -- 16,130 -- --
Purchase price payable to FICO's former
shareholders 1,727 -- 1,727 16,130
------ ------ ------ ------
99,039 97,788 12,984 50,211
====== ====== ====== ======
</TABLE>
22. TERM LOANS, SHORT TERM ADVANCES AND SENIOR SUBORDINATED NOTES
Group
---------------------
1999 1998
$'000 $'000
(a) Term loans (secured)
Total outstanding 69,527 49,189
Deduct: current portion (31,957) (22,579)
------- -------
Long term portion 37,570 26,610
------- -------
(b) Short term advances (secured) 58,906 47,117
------- -------
(c) Senior subordinated notes 259,065 241,950
======= =======
46
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
22. TERM LOANS, AMOUNT DUE TO BANKERS AND SENIOR SUBORDINATED NOTES (Continued)
Term loans, denominated mainly in US$, Euro and Malaysian ringgit bear interest
rates ranging from 4.0% to 7.0% (1998: 6.72% to 10%), with terms of up to 20
years (1998: 8 years). The term loans are primarily secured by assignment of
account receivables and assets.
Certain term loans are secured by mortgages with interest rates ranging from
6.0% to 18.25% (1998: 4.0% to 18.25%), with terms of 5 to 20 years (1998: 6 to 7
years). The net book value of the underlying properties was approximately US$23
million as at 31 March 1999.
On 31 October 1997, the Company completed the issuance of US$150 million of
senior subordinated notes which mature in 2007 with an annual interest rate of
8.75% due semi-annually. The terms of the senior subordinated notes restricts
the Company's ability to pay cash dividends.
During financial year 1999, the Company and one of its subsidiaries increased
its line of credit from US$105 million to US$120 million and amended certain
covenants and financial ratios. This line of credit is secured by substantially
all of the Company's and its subsidiary's assets and expires in January 2001.
The annual interest rate of this line of credit is U.S. prime rate or London
Interbank Offer Rate (LIBOR) plus 0.5% (5% as at 31 March 1999) (1998: 8.5%).
Under the terms of the credit facility, the Company is prohibited to pay any
cash dividends without the lenders' prior consent.
Certain subsidiaries have various lines of credit available with annual interest
rates ranging from 4.0% to 6.4% (1998: 8.0% to 9.0%). These facilities expire on
various dates through 2001.
23. HIRE PURCHASE CREDITORS
Group
---------------------
1999 1998
$'000 $'000
Minimum lease payments payable
Within 1 year 20,589 18,496
Within 2 to 5 years 37,441 33,517
After 5 years 8,888 11,642
------- -------
66,918 63,655
Less: finance charges allocated to future periods (9,522) (10,799)
------- -------
57,396 52,856
======= =======
47
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
23. HIRE PURCHASE CREDITORS (Continued)
Group
---------------------
1999 1998
$'000 $'000
The hire purchase creditors are classified as follows:
Current portion 16,937 15,465
Non-current portion 40,459 37,391
------- -------
57,396 52,856
======= =======
24. DEFERRED TAXATION
Group
---------------------
1999 1998
$'000 $'000
At beginning of financial year 3,636 (2,926)
Currency re-alignment 175 (405)
Due to acquisitions of companies -- 6,199
Provided (reversed) during the year (Note 29) (961) 768
------- -------
At end of financial year 2,850 3,636
======= =======
25. OTHER PAYABLES
<TABLE>
<CAPTION>
Group Company
----------------- ----------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Remaining purchase price payable to
former shareholders of FICO 3,454 -- 3,454 --
Provision for severance payments 10,368 9,718 -- --
Trade accounts payable 3,644 11,038 -- --
Deferred income 482 7,644 -- --
Others 1,418 1,976 -- --
------ ------ ------ -----
19,366 30,376 3,454 --
====== ====== ====== =====
</TABLE>
48
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
26. TURNOVER
Turnover of the Group represents invoiced trading sales and services to
customers. Sales is stated net of sales discounts given to customers relating to
options granted as a result of meeting the sales target. Transactions within the
Group have been excluded.
The Company in financial year 1998 disclosed the income from the sale of one
subsidiary, Energipiot AB to another subsidiary in the Group, Flextronics
International Sweden AB as turnover. In the current year, the Directors are of
the opinion that such income be classified as other income in the financial
statements for the Company.
27. OPERATING PROFIT (LOSS)
This is determined after charging (crediting) the following:
<TABLE>
<CAPTION>
Group Company
--------------------- ------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Directors' remuneration
- - directors of the Company 2,478 2,693 -- --
- - directors of subsidiaries 5,758 3,271 -- --
Auditors' remuneration
- - auditors of the Company 1,947 741 327 741
- - other auditors of subsidiaries 47 750 7 750
Professional fees paid to firms which a
director is a member 187 228 -- --
Depreciation of fixed assets 77,366 41,839 -- --
Loss (gain) on sale of fixed assets (1,076) 141 -- --
Amortisation of deferred expenditure 686 836 -- --
Amortisation of goodwill consolidation 3,587 3,601 -- --
Amortisation of intangible assets 4,677 5,662 -- --
Provision of stock obsolescence 6,849 4,989 -- --
Bad debts written off 3,491 2,990 -- --
(Write back)/provision for doubtful debts
(4,311) 1,961 -- --
Exchange (gain) loss 5,197 (2,424) (783) 266
(Gain) on sale of associated company (167) -- -- --
Loss (gain) on disposal of subsidiaries -- -- -- (14,194)
</TABLE>
49
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
28. OTHER EXPENSE, NET
Group Company
-------------------- --------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Interest expense on:
- - term loan 4,638 11,234 909 9,636
- - senior subordinated note 20,596 9,224 20,596 9,224
- - hire purchase contracts 6,889 4,454 -- --
- - bank overdraft 868 741 -- --
- - other 3,547 1,486 899 1,067
Interest income (8,611) (4,204) (15,867) (12,758)
------- ------- ------- -------
27,927 22,935 6,537 7,169
======= ======= ======= =======
29. TAXATION
Group Company
-------------------- -------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Current tax
- - current year - Singapore 2 359 2 12
- Foreign 13,923 2,335 -- --
Deferred tax (Note 24)
- - current year -- 768 -- --
- - over provision in prior year (961) -- -- --
------- ------- ------- -------
12,964 3,462 2 12
======= ======= ======= =======
The Company
The Company has a current year's tax charge during the year mainly due to
certain non-deductible items added back for tax purposes.
50
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
29. TAXATION (Continued)
The Group
The taxation charge for the Group is lower than the amount obtained by applying
the statutory income tax rate on profit before taxation mainly due to difference
in tax rates applicable to overseas subsidiaries and utilization of investment
allowance.
As at 31 March 1999, the Group's unutilised tax losses and unabsorbed capital
allowances of approximately $66,298,000 (1998: $77,058,000) available for offset
against future taxable profits, subject to agreement with the income tax
authorities and compliance with certain provisions of the tax legislation of the
respective countries in which the subsidiaries operate. The potential deferred
tax asset arising from these unutilised tax losses and unabsorbed capital
allowances has been recognised in the financial statements in accordance with
accounting policy Note 2 to the financial statements.
Certain subsidiaries have 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 operations in Shekou and Shenzhen, China are
located in a "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 subsidiary's 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 investments in its plants in Xixiang, China and Doumen,
China fall under the "Foreign Investment Scheme" that entitles the Company
to apply for a five-year tax incentive. The Company obtained the incentive
for the Doumen plant in December 1995 and the Xixiang plant in October
1996. With the approval of the Chinese tax authorities, the Company's tax
rates on income from these facilities during the incentive period will be
0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in the first
profitable year. 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 tax incentive
will be granted upon formal application in its first profitable year.
However, there can be no assurance that the five year tax incentive will be
granted.
(iv) Five-year negotiated tax holiday is granted by the Hungarian government for
its Hungarian subsidiaries. This incentive provides for the reduction of
the regular tax rate of 18% by 60% to 7.2%. The incentive expires 31
December 2003.
51
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
29. TAXATION (Continued)
A portion of the Group's sales were carried out by its two subsidiaries in
Labuan, Malaysia where the subsidiaries has opted to pay the Labuan tax
authorities a fixed amount of US$6,000 tax each year in accordance with Labuan
tax legislation.
A portion of the Group's sales was also carried out by its Mauritius subsidiary
which is taxed at 0%.
30. EXTRAORDINARY ITEMS
Group Company
-------------------- -------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Acquired in-process research and
development written off (3,337) -- -- --
Provision for plant closure (5,608) (13,598) -- --
------- ------- ------- -------
(8,945) (13,598) -- --
======= ======= ======= =======
During the financial year 1999, the Group acquired the manufacturing facility
and related assets of Advanced Component Labs HK Ltd "ACL", a Hong Kong based
advanced technology printed circuit board manufacturer. Based on an independent
valuation of certain assets of ACL and other factors, the Group determined that
the purchase price of ACL included in-process research and development costs
totaling $3,337,000 which had not reached technological feasibility and had no
probable alternative future use. Accordingly, the Group wrote off $3,337,000 of
in-process research and development in financial year 1999.
The provision for plant closure of $5,608,000 in financial year 1999 is
comprised of $3.7 million relating to the costs for consolidating the Group's
four manufacturing and administrative facilities in Hong Kong and $1.9 million
relating to the consolidation of certain U.S. facilities.
The provision for plant closure of $13,598,000 in financial year 1998 relates to
the costs incurred in closing the Wales facility. The provision includes $5.8
million for the write-off of goodwill associated with the acquisition of the
Wales facility, $2.5 million for severance payments and payments required under
the pension scheme, $3.8 million for fixed asset write-offs and factory closure
expenses and $1.5 million for required repayment of previously received
government grants.
52
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
31. EARNINGS PER SHARE
Basic earnings (loss) per share are calculated by dividing the net profit (loss)
after tax after minority interest of $94,923,000 (1998: $44,127,000) with the
weighted average of 43,569,000 Ordinary Shares (1998: 36,526,000 Ordinary
Shares) in issue during the financial year.
The fully diluted earnings per share is calculated after adjusting for those
shares not yet exercised under the share options to purchase Ordinary Shares.
The weighted average number of share and share equivalents used to compute the
fully diluted earnings per share is 46,163,000 (1998: 38,194,000).
32. PRIOR PERIOD ADJUSTMENTS
Prior period adjustments are in respect of the following:
(a) To rectify an error relating to the transfer of cost of investment of the
Astron Group Limited to its subsidiary, Flextronics Manufacturing (H.K.)
Limited in 1996 amounting of US$5,687,000.
As a result, the 1998 comparatives in the current year's financial statements
have been restated as follows:
<TABLE>
<CAPTION>
Company
--------------------------------------
1998 balance as
1998 balance as previously
restated reported
------------------ ------------------
$'000 $'000
<S> <C> <C>
Balance Sheet
Due from subsidiaries 289,036 298,208
Accumulated profits (losses) at end of financial year (47,142) (37,970)
</TABLE>
53
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
33. SIGNIFICANT RELATED PARTY TRANSACTIONS
The Group has significant transactions with related parties on terms agreed
between the parties as follows:
(a) Significant transactions entered into by the group with a company, Mayfield
International Ltd, in which Stephen J.L. Rees, a former director and Senior
Vice President of the Company, has a beneficial interest:
Group
---------------------
1999 1998
$'000 $'000
Interest received on loan made 268 290
Rent paid (317) (336)
Management fees paid -- (226)
As of 31 March 1999, US$2,520,000 was due from Mayfield under a note receivable.
(b) Prior to becoming the Company's Chief Executive Officer in January 1994,
Michael E. Marks was the President and Chief Executive Officer of Metcal,
Inc. ("Metcal"). Michael E. Marks remains a director of, and continues to
hold a beneficial interest in, Metcal. The Company had net sales of
US$1,548,000, US$1,586,000 and US$277,000 to Metcal during fiscal 1997,
1998 and 1999, respectively.
(c) On 16 April 1995, the Company's U.S. subsidiary, Flectronics International
USA, Inc. ("Flextronics USA"), loaned US$500,000 to Michael E. Marks. Mr.
Marks executed a promissory note in favour of Flextronics USA which matures
on 16 April 2000. In fiscal 1997, Flextronics USA forgave a total of
US$200,000 of outstanding principal amount and US$26,000 in accrued
interest. In fiscal 1998, Flextronics USA forgave a total of US$100,000 of
outstanding principal amount and US$73,000 in accrued interest. The
remaining outstanding balance of the loan as of 31 March 1999 was
US$217,000 (representing US$200,000 in principal and US$17,000 in accrued
interest) and bears interest at a rate of 7.21%.
(d) On 6 November 1997, Flextronics USA loaned US$1.5 million to Mr. Marks. Mr.
Marks executed a promissory note in favour of Flextronics USA which bears
interest at a rate of 7.259% and matures on 6 November 2002 (1998: 6
November 1998). The remaining balance of the loan as of 31 March 1999 was
$1,500,000 and all the interest accrued has been paid up to 31 March 1999.
This loan is secured by certain assets owned by Mr. Marks.
54
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
33. SIGNIFICANT RELATED PARTY TRANSACTIONS (Continued)
(e) On 22 October 1996, Flextronics USA loaned US$136,000 to Mr. Michael
McNamara, President of Americas operations. Mr. McNamara executed a
promissory note in favour of Flextronics USA which bears interest at a rate
of 7.0% and matures on 22 October 2001. The remaining balance of the loan
as of 31 March 1999 was US$150,000 (representing US$136,000 in principal
and US$14,000 in accrued interest).
(f) As of 31 March 1997, the Company had notes receivable due from certain
executives and officers amounting to approximately US$2.5 million. These
notes bear interest at rates ranging from 7.0% to 7.21% and have maturities
of 6 months to 5 years and are reflected in other current assets on the
accompanying balance sheet. Subsequent to 31 March 1998, US$245,000 of the
US$2.5 million was paid through forfeiture of management bonuses.
(g) On 25 November 1998, Flextronics USA loaned US$130,000 to Mr. Michael
McNamara, President of Americas operations. Mr. McNamara executed a
promissory note in favour of Flextronics USA which bears interest at a rate
of 7.25% and matures on 25 November 2003. The remaining balance of the loan
as of 31 March 1999 was US$133,000 (representing US$130,000 in principal
and US$3,000 in accrued interest).
(h) On 4 February 1999, the Company loaned US$ 410,000 to Mr. Ronny Nilsson.
Mr. Nilsson executed a promissory note in favour of the Company and the
note matures on 31 March 2000.
(i) On 15 January 1999, Flextronics USA loaned US$200,000 to Mr. Robert Dykes,
Senior Vice President of finance and administration and Chief Financial
Officer of the Company. Mr. Robert Dykes executed a promissory note in
favour of Flextronics USA which bears interest at a rate of 7.25% and
matures on 15 January 2004. The remaining outstanding balance of the loan
as of 31 March 1999 was US$203,000 (representing US$200,000 in principal
and US$3,000 in accrued interest).
55
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
34. SHARE OPTION PLANS
<TABLE>
<CAPTION>
Options outstanding
----------------------------------
Options available Exercise price
for grant Shares per share
---------- ---------- ------------------
<S> <C> <C> <C>
Balance at 31 March 1997 447,272 3,350,044
Increase in options available for grant 2,100,000 --
Options granted (2,815,008) 2,815,008 US$8.58 - US$23.68
Options exercised -- (519,416) US$0.59 - US$16.50
Options cancelled 751,558 (751,558) US$0.59 - US$22.25
---------- ----------
Balance at 31 March 1998 483,822 4,894,078
Increase in options available for grant 3,701,126 --
Options granted (3,428,539) 3,428,539 US$12.59 - US$49.93
Options exercised -- (1,369,370) US$ 0.59 - US$35.37
Options cancelled 457,381 (457,381) US$ 5.25 - US$27.56
---------- ----------
Balance at 31 March 1999 1,213,790 6,495,866
========== ==========
</TABLE>
The above options will expire between July 1999 and March 2004.
35. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of the following:
Group Company
------------------- -------------------
1999 1998 1999 1998
$'000 $'000 $'000 $'000
Cash and bank balances 73,438 102,247 8,402 43,836
Certificate of deposits 69,084 41,938 69,083 41,938
Money market funds 70,742 -- 70,742 --
Corporate debt securities 85,497 -- 85,497 --
------- ------- ------- -------
298,761 144,185 233,724 85,774
======= ======= ======= =======
56
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
36. CONTINGENT LIABILITIES AND COMMITMENTS
As at 31 March 1999, the Company does not have any contingent liabilities and
commitments outstanding.
As at 31 March 1999, the Group has the following contingent liabilities and
commitments :
(a) Contingent liabilities
Group
---------------------
1999 1998
$'000 $'000
Unsecured contingent liabilities not provided for in the
financial statements were:
- - Guarantees 3,756 4,818
===== =====
(b) Non-cancellable operating lease commitments
Group
---------------------
1999 1998
$'000 $'000
Within one year 30,497 17,751
Within 2 to 5 years 62,540 43,940
After 5 years 11,296 16,977
------- -------
104,333 78,668
======= =======
(c) Future capital expenditure
Group
---------------------
1999 1998
$'000 $'000
Capital expenditure not provided for in the
financial statements is as follows:
Commitments in respect of contracts placed 2,729 11,917
Uncommitted amounts approved by directors 5,440 25,210
------- -------
8,169 37,127
======= =======
57
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
36. CONTINGENT LIABILITIES AND COMMITMENTS (Continued)
(d) Foreign exchange commitments
Group
---------------------
1999 1998
$'000 $'000
Commitments in respect of forward foreign
currency purchase contracts 28,497 130,169
======= =======
The Group entered into forward contracts to hedge foreign currency exposures
related to foreign currency purchases.
37. GROUP SEGMENTAL REPORTING
Group
-------------------------------
1999 1998
$'000 $'000
(Note 39)
Net sales:
Asia 669,279 466,082
Americas 1,140,527 425,897
Western Europe 614,085 510,306
Central Europe 677,590 322,329
Intercompany elimination (85,454) (18,054)
---------- ----------
3,016,027 1,706,560
========== ==========
Income/(loss) before taxation after minority interests and
extraordinary item:
Asia 42,407 24,485
Americas 32,195 (6,766)
Western Europe 20,250 13,601
Central Europe 21,412 11,840
Intercompany elimination and corporate allocations (17,322) (9,169)
------- -------
98,942 33,991
======= =======
58
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
37. GROUP SEGMENTAL REPORTING (Continued)
Group
---------------------
1999 1998
$'000 $'000
(Note 39)
Fixed assets:
Asia 189,140 122,606
Americas 202,979 139,347
Western Europe 79,058 73,710
Central Europe 163,544 76,576
------- -------
634,721 412,239
======= =======
Depreciation and amortization:
Asia 24,869 20,103
Americas 24,719 8,557
Western Europe 16,869 10,728
Central Europe 19,173 11,714
------- -------
85,630 51,102
======= =======
Capital Expenditure:
Asia 67,238 52,970
Americas 88,562 65,353
Western Europe 18,343 18,555
Central Europe 96,608 20,188
------- -------
265,751 157,066
======= =======
59
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (Continued)
38. SUBSEQUENT EVENTS
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 related assets
of ABB Automation Products in Vasteras, Sweden for approximately US$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 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 US$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.
39. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with current
year's presentation. In addition, certain prior year comparatives have been
restated as disclosed in Note 32 to the financial statements.
60
<PAGE>
Statement by Directors
In the opinion of the directors, the accompanying financial statements set out
on pages 16 to 60 are drawn up so as to give a true and fair view of the state
of affairs of the Company and of the Group as at 31 March 1999 and the results
of the Company and of the Group and the cash flows of the Group for the year
then ended and at the date of this statement there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they fall
due.
On behalf of the Board of Directors
/s/ Michael E. Marks /s/ Tsui Sung Lam
MICHAEL E. MARKS TSUI SUNG LAM
Singapore
16 July 1999
61
<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
1993 SHARE OPTION PLAN
(As Amended and Restated through September 11, 1998)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1993 Share Option Plan (the "Plan") is intended to promote the
interests of Flextronics International Ltd., a Singapore corporation (the
"Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) certain non-employee members of the
Corporation's Board of Directors (the "Board") and (iii) certain consultants and
other independent contractors who provide valuable services to the Corporation
(or its parent or subsidiary corporations) with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the Corporation
(or its parent or subsidiary corporations).
B. The Plan shall become effective on December 1, 1993 upon adoption by the
Board, and such date shall accordingly constitute the Effective Date of the
Plan.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in effect:
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the Corporation
effected through either of the following transactions:
a. the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept; or
b. a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
Code: the U.S. Internal Revenue Code of 1986, as amended.
Corporate Transaction: any of the following stockholder-approved
transactions to which the Corporation is a party:
<PAGE>
a. a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Corporation is incorporated,
b. the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation in complete liquidation or dissolution of
the Corporation, or
c. any reverse merger in which the Corporation is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger.
Employee: an individual who performs services while in the employ of the
Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
Exercise Date: the date on which the Corporation shall have received
written notice of the option exercise.
Fair Market Value: the Fair Market Value per Ordinary Share determined in
accordance with the following provisions:
a. If the Ordinary Shares are not at the time listed or admitted to
trading on any U.S. national stock exchange but are traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per Ordinary Share on the date in question, as such price is reported by
the National Association of Securities Dealers through the Nasdaq National
Market or any successor system. If there is no reported closing selling
price for the Ordinary Shares on the date in question, then the closing
selling price per Ordinary Share on the last preceding date for which such
quotation exists shall be determinative of Fair Market Value.
b. If the Ordinary Shares are at the time listed or admitted to
trading on any U.S. national stock exchange, then the Fair Market Value
shall be the closing selling price per Ordinary Share on the date in
question on the U.S. exchange determined by the Plan Administrator to be
the primary market for the Ordinary Shares, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is
no reported sale of the Ordinary Shares on such exchange on the date in
question, then the Fair Market Value shall be the closing selling price per
Ordinary Share on the exchange on the last preceding date for which such
quotation exists.
c. If the Ordinary Shares are on the date in question neither listed
nor admitted to trading on any U.S. national stock exchange nor traded on
the Nasdaq National Market, then the Fair Market Value per Ordinary Share
on such date shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
Hostile Take-Over: a change in ownership of the Corporation effected
through the following transaction:
a. the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, and
b. the acceptance of more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer from holders other than
Section 16 Insiders.
2
<PAGE>
Incentive Option: a stock option which satisfies the requirements of Code
Section 422.
Initial Automatic Grant Date: January 24, 1994.
1934 Act: the U.S. Securities and Exchange Act of 1934, as amended from
time to time.
Non-Statutory Option: a stock option not intended to meet the requirements
of Code Section 422.
Optionee: any person to whom an option is granted under the Discretionary
Option Grant or Automatic Option Grant Program in effect under the Plan.
Ordinary Shares: ordinary shares of the Corporation with a par value of
S$0.01 per share.
Parent: any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing more than fifty percent (50%) of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Permanent Disability or Permanently Disabled: the inability of the Optionee
or the Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
Plan Administrator: the particular entity, whether the Primary Committee,
the Board or the Secondary Committee, which is authorized to administer the
Discretionary Option Grant Program with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions under that program with respect to the persons under its jurisdiction.
Primary Committee: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option Grant
Program with respect to Section 16 Insiders.
Secondary Committee: the committee of one (1) or more Board members
appointed by the Board to administer the Discretionary Option Grant Program with
respect to eligible persons other than Section 16 Insiders.
Service: the performance of services on a periodic basis to the Corporation
(or any parent or subsidiary corporation) in the capacity of an Employee, a
non-employee member of the Board or an independent consultant or advisor, except
to the extent otherwise specifically provided in the applicable stock option
agreement.
Section 12(g) Registration Date: the date on which the initial registration
of the Ordinary Shares under Section 12(g) of the 1934 Act becomes effective.
Section 16 Insider: an officer or director of the Corporation subject to
the short-swing profit restrictions of Section 16 of the 1934 Act.
Subsidiary: any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation
(other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing more than fifty percent (50%) of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Take-Over Price: the greater of (a) the Fair Market Value per Ordinary
Share on the date the particular option to purchase Ordinary Shares is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per Ordinary Share paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (a) price per
share.
3
<PAGE>
Underwriting Execution Date: the date on which the Underwriting Agreement
for the initial public offering of the Ordinary Shares in the U.S. is executed
and priced.
B. The following provisions shall be applicable in determining the parent
and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation shall be considered to be a parent
of the Corporation, provided each such corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
Each corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation in the
unbroken chain (other than the last corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into two (2) components: the
Discretionary Option Grant Program specified in Article Two and the Automatic
Option Grant Program specified in Article Three. Under the Discretionary Option
Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase Ordinary Shares in accordance with
the provisions of Article Two. Under the Automatic Option Grant Program,
non-employee members of the Board will receive special option grants at periodic
intervals to purchase Ordinary Shares in accordance with the provisions of
Article Three.
B. General Provisions. Unless the context clearly indicates otherwise, the
provisions of Articles One and Four shall apply to the Discretionary Option
Grant and the Automatic Option Grant Programs and shall accordingly govern the
interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant Program with respect to Section 16
Insiders. No non-employee Board member shall be eligible to serve on the Primary
Committee if such individual has, during the twelve (12)-month period
immediately preceding the date of his or her appointment to the Committee or (if
shorter) the period commencing with the Section 12(g) Registration Date and
ending with the date of his or her appointment to the Primary Committee,
received an option grant under the Plan or any other stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any parent
or subsidiary corporation), other than pursuant to the Automatic Option Grant
Program.
B. Administration of the Discretionary Option Grant Program with respect to
all other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons. The members of the Secondary Committee may be Board members who are
Employees eligible to receive discretionary option grants under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.
4
<PAGE>
D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant Program
and to make such determinations under, and issue such interpretations of the
provisions of such program and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program under its jurisdiction or any option grant
thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms and conditions of that program, and
no Plan Administrator shall exercise any discretionary functions with respect to
any option grants made under that program.
V. OPTION GRANTS
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two shall be limited to the following:
l. officers and other key employees of the Corporation (or its parent
or subsidiary corporations) who render services which contribute to the
management, growth and financial success of the Corporation (or its parent
or subsidiary corporations); and
2. those consultants or other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations) but who are not residents of Singapore.
B. Non-employee Board members shall not be eligible to participate in the
Discretionary Option Grant Program. Such individuals shall, however, be eligible
to receive automatic option grants pursuant to the provisions of Article Three,
provided such individuals are not residents of Singapore.
C. The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Discretionary Option
Grant Program, the number of Ordinary Shares to be covered by each such grant,
the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding.
VI. STOCK SUBJECT TO THE PLAN
A. The maximum number of Ordinary Shares which may be issued over the term
of the Plan shall not exceed 7,200,000* Ordinary Shares, subject to adjustment
from time to time in accordance with the provisions of this Section VI. The
Ordinary Shares reserved for issuance under the Plan shall be drawn from the
Corporation's authorized but unissued Ordinary Shares.
*Reflects two for one stock split in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998.
B. In no event may the aggregate number of Ordinary Shares for which any
one individual participating in the Plan may be granted stock options exceed
1,000,000* Ordinary Shares over the term of this Plan.
5
<PAGE>
C. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section IV
of Article Two of the Plan), then the Ordinary Shares subject to the portion of
each option not so exercised shall be available for subsequent issuance under
the Plan. Ordinary Shares subject to any option or portion thereof surrendered
in accordance with Section V of Article Two or Section III of Article Three and
all Ordinary Shares issued under the Plan shall reduce on a share-for-share
basis the number of Ordinary Shares available for subsequent issuance the Plan.
D. Should any change be made to the Ordinary Shares issuable under the Plan
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Ordinary
Shares as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one individual participating in the Plan may be granted
stock options over the term of the Plan, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made per
newly-elected or continuing non-employee Board member under the Automatic Option
Grant Program and (iv) the number and/or class of securities and price per share
in effect under each option outstanding under the Discretionary Option Grant or
Automatic Option Grant Program. Such adjustments to the outstanding options are
to be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Exercise Price.
1. The exercise price per Ordinary Share shall be fixed by the Plan
Administrator in accordance with the following provisions:
a. The exercise price per Ordinary Share subject to an Incentive
Option shall in no event be less than one hundred percent (100%) of the
Fair Market Value per Ordinary Share on the grant date.
b. The exercise price per Ordinary Share subject to a Non-Statutory
Option shall in no event be less than eighty-five percent (85%) of the Fair
Market Value per Ordinary Share on the grant date.
*Reflects two for one stock split in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998.
c. In no event may the exercise price per Ordinary Share subject to
any Incentive or Non-Statutory Option be less than the par value of such
Ordinary Share.
6
<PAGE>
2. The exercise price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Four and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
a. full payment in cash or check made payable to the Corporation's
order;
b. full payment through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide concurrent irrevocable written
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased Ordinary Shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased Ordinary Shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation in
connection with such purchase and (ii) to the Corporation to deliver the
certificates for the purchased Ordinary Shares directly to such brokerage
firm in order to complete the sale transaction; or
c. conversion of a convertible note issued by the Corporation or a
Subsidiary, the terms of which provide that it is convertible into Ordinary
Shares issuable pursuant to the 1993 Plan (with the principal amount and
any accrued interest being converted and credited dollar for dollar to the
payment of the exercise price).
B. Term and Exercise of Options. Each option granted under this
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of five (5) years measured from the grant date. The
option, together with any stock appreciation rights pertaining to such option,
shall be assignable or transferable by the Optionee. The Optionee shall be
required to comply with all applicable laws in connection with any such transfer
or assignment, and the Plan Administrator shall have the discretion to adopt
such rules as it deems necessary to ensure that any assignment or transfer is in
compliance with all applicable laws.
C. Termination of Service.
1. The following provisions shall govern the exercise period applicable to
any outstanding options held by the Optionee at the time of cessation of Service
or death.
a. Should an Optionee cease Service for any reason (including death or
Permanent Disability) while holding one or more outstanding options under
this Article Two, then none of those options shall (except to the extent
otherwise provided pursuant to subparagraph 3 below) remain exercisable for
more than a twenty-four (24)-month period (or such shorter period
determined by the Plan Administrator and set forth in the instrument
evidencing the grant) measured from the date of such cessation of Service.
b. Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution. However, the right to exercise such option shall lapse
upon the earlier of (i) the second anniversary of the date of the
Optionee's death (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) or (ii)
the specified expiration date of the option term. Accordingly, upon the
occurrence of the earlier event, the option shall terminate and cease to
remain outstanding.
c. Under no circumstances shall any such option be exercisable after
the specified expiration date of the option term.
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d. During the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of Ordinary
Shares (if any) for which that option is exercisable at the time of the
Optionee's cessation of Service. Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified expiration
date of the option term, each such option shall terminate and cease to be
outstanding with respect to any vested Ordinary Shares for which the option
has not otherwise been exercised. However, each outstanding option shall
immediately terminate and cease to be outstanding, at the time of the
Optionee's cessation of Service, with respect to any Ordinary Shares for
which the option is not otherwise at that time exercisable or in which
Optionee is not otherwise vested.
e. Should (i) the Optionee's Service be terminated for misconduct
(including, but not limited to, any act of dishonesty, willful misconduct,
fraud or embezzlement) or (ii) the Optionee make any unauthorized use or
disclosure of confidential information or trade secrets of the Corporation
or its parent or subsidiary corporations, then in any such event all
outstanding options held by the Optionee under this Article Two shall
terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise period
applicable under this paragraph C., not only with respect to the number of
vested Ordinary Shares for which each such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
subsequent installments of vested Ordinary Shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
3. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under subparagraph 1. above to such greater
period of time as the Plan Administrator shall deem appropriate. In no event,
however, shall such option be exercisable after the specified expiration date of
the option term.
D. Stockholder Rights. An optionee shall have no stockholder rights with
respect to the Ordinary Shares subject to the option until such individual shall
have exercised the option and paid the exercise price for the purchased Ordinary
Shares.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees of the Corporation. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to such terms and conditions. Except as so modified by this
Section II, the provisions of Articles One, Two and Four of the Plan shall apply
to all Incentive Options granted hereunder.
A. Dollar Limitation. The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Ordinary Shares for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Code during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Code shall be applied on the basis of the order in which such options
are granted. Should the number of Ordinary Shares for which any Incentive Option
first becomes exercisable in any calendar year exceed the applicable One Hundred
Thousand Dollar ($100,000) limitation, then that option may nevertheless be
exercised in such calendar year for the excess number of shares as a
non-statutory option under the Code.
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B. 10% Stockholder. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the exercise price per Ordinary Share shall not be less than
the greater of (i) one hundred and ten percent (110%) of the Fair Market Value
per Ordinary Share on the grant date or (ii) the par value of such Ordinary
Share.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which is at the
time outstanding under this Article Two shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable with respect to the total
number of Ordinary Shares at the time subject to such option and may be
exercised for all or any portion of such Ordinary Shares. However, an
outstanding option under this Article Two shall not so accelerate if and to the
extent: (i) such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or parent thereof or to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, (ii) such option is to be replaced with
a cash incentive program of the successor corporation which preserves the option
spread existing at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. Immediately following the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall terminate and cease to remain
outstanding, except to the extent assumed by the successor corporation or its
parent company.
C. Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion, exercisable either in
advance of any actually-anticipated Corporate Transaction or at the time of an
actual Corporate Transaction, to provide (upon such terms as it may deem
appropriate) for the automatic acceleration of one or more outstanding options
granted under the Plan which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, in the event the
Optionee's Service should subsequently terminate within a designated period
following such Corporate Transaction.
E. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two upon the
occurrence of the Change in Control. The Plan Administrator shall also have full
power and authority to condition any such option acceleration upon the
subsequent termination of the Optionee's Service within a specified period
following the Change in Control.
F. Any options accelerated in connection with the Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
G. The grant of options under this Article Two shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
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H. The portion of any Incentive Option accelerated under this Section III
in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Code only to the extent the
dollar limitation of Section II of this Article Two is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a non-statutory option under the Code.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected Optionees, the cancellation
of any or all outstanding options under this Article Two and to grant in
substitution new options under the Plan covering the same or different numbers
of Ordinary Shares but with an exercise price per Ordinary Share not less than
(i) eighty-five percent (85%) of the Fair Market Value per Ordinary Share on the
new grant date or (ii) one hundred percent (100%) of such Fair Market Value in
the case of an Incentive Option, but in no event shall the exercise price per
Ordinary Share be less than the par value of such Ordinary Share.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its discretion
to implement the stock appreciation right provisions of this Section V, one or
more Optionees may be granted the right, exercisable upon such terms and
conditions as the Plan Administrator may establish, to surrender all or part of
an unexercised option under this Article Two in exchange for a distribution from
the Corporation in an amount equal to the excess of (i) the Fair Market Value
(on the option surrender date) of the number of vested Ordinary Shares for which
the surrendered option (or surrendered portion thereof) is at the time
exercisable over (ii) the aggregate exercise price payable for such vested
Ordinary Shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in Ordinary Shares valued at Fair Market Value on the
option surrender date, in cash, or partly in Ordinary Shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of (i) five (5)
business days after the receipt of the rejection notice or (ii) the last day on
which the option is otherwise exercisable in accordance with the terms of the
instrument evidencing such option, but in no event may such rights be exercised
more than five (5) years after the date of the option grant.
D. One or more Section 16 Insiders may, in the Plan Administrator's sole
discretion, be granted limited stock appreciation rights in tandem with their
outstanding options under this Article Two. Upon the occurrence of a Hostile
Take-Over, the Section 16 Insider shall have a thirty (30)-day period in which
he or she may surrender any outstanding options with such a limited stock
appreciation right in effect for at least six (6) months to the Corporation, to
the extent such option is at the time exercisable for vested Ordinary Shares.
The Section 16 Insiders shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the vested Ordinary Shares for which each surrendered option (or surrendered
portion thereof) is at the time exercisable over (ii) the aggregate exercise
price payable for such Ordinary Shares. The cash distribution payable upon such
option surrender shall be made within five (5) days following the date the
option is surrendered to the Corporation. Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in connection with
such option surrender and cash distribution. Any unsurrendered portion of the
option shall continue to remain outstanding and become exercisable in accordance
with the terms of the instrument evidencing such grant.
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E. The Ordinary Shares subject to any option surrendered for an
appreciation distribution pursuant to this Section V shall not be available for
subsequent issuance under the Plan.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Directors. The individuals eligible to receive automatic option
grants pursuant to the provisions of this Article Three shall be limited to (i)
those individuals who are serving as non-employee Board members on the Initial
Automatic Grant Date, (ii) those individuals who are first elected or appointed
as non-employee Board members after the Initial Automatic Grant Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the Underwriting
Execution Date. In no event, however, may any non-employee Board member who is a
Singapore resident participate in this Automatic Option Grant Program. Any
non-employee Board member eligible to participate in the Automatic Option Grant
Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of the Plan.
B. Limitation. Except for the option grants to be made pursuant to the
provisions of this Automatic Option Grant Program, a non-employee Board member
shall not be entitled to receive any additional option grants or stock issuances
under this Plan or any other stock plan of the Corporation (or its parent or
subsidiaries) during his or her period of Board service.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article Three on the
dates specified below:
1. Initial Grant.
Each individual serving as an Eligible Director on the Initial Automatic
Grant Date shall automatically be granted on such date a Non-Statutory Option to
purchase 30,000 Ordinary Shares upon the terms and conditions of this Article
Three.
Each individual who first becomes an Eligible Director after the Initial
Automatic Grant Date, whether through election by the stockholders or
appointment by the Board, shall automatically be granted, at the time of such
initial election or appointment, a Non-Statutory Option to purchase 30,000
Ordinary Shares upon the terms and conditions of this Article Three.
2. Annual Grant. On the date of each Annual Stockholders Meeting held after
the Underwriting Execution Date, each individual who is at that time serving as
an Eligible Director, whether or not such individual is standing for reelection
as a Board member at that Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase an additional 3,000 Ordinary Shares upon the
terms and conditions of this Article Three, provided such individual has served
as a Board member for at least six (6) months.
B. There shall be no limit on the number of such 3,000 Ordinary Share
option grants any one Eligible Director may receive over his or her period of
Board service. The number of Ordinary Shares for which the automatic option
grants are to be made to each newly elected or continuing Eligible Director
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section VI.C. of Article One.
C. Exercise Price. The exercise price per Ordinary Share subject to each
automatic option grant made under this Article Three shall be determined as
follows:
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- For each automatic option grant made on the Initial Automatic Grant Date,
the exercise price per Ordinary Share shall be equal to the Fair Market Value
per Ordinary Share on such date as shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator deems relevant.
- For all other automatic option grants, the exercise price per Ordinary
Share shall be equal to one hundred percent (100%) of the Fair Market Value per
Ordinary Share on the automatic grant date, but in no event less than the par
value of such Ordinary Share.
D. Payment. The exercise price shall be payable in one of the alternative
forms specified below:
1. full payment in cash or check made payable to the Corporation's
order; or
2. to the extent the option is exercised for vested Ordinary Shares,
full payment through a sale and remittance procedure pursuant to which the
non-employee Board member shall provide concurrent irrevocable written
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased Ordinary Shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased Ordinary Shares and (ii) to the Corporation to deliver the
certificates for the purchased Ordinary Shares directly to such brokerage
firm in order to complete the sale transaction.
E. Option Term. Each automatic grant under this Article Three shall have a
maximum term of five (5) years measured from the automatic grant date.
F. Exercisability. Each automatic grant shall become exercisable for the
Ordinary Shares subject to that grant in a series of successive equal monthly
installments upon the Optionee's completion of each month of Board service over
the twenty-four (24) month period measured from the automatic grant date. The
exercisability of each such grant shall be subject to acceleration as provided
in Section II.G and Section III of this Article Three. In no event, however,
shall any automatic option grant become exercisable for any additional Ordinary
Shares after the Optionee's cessation of Board service.
G. Transferability. Each automatic option grant, together with the limited
stock appreciation right pertaining to such option, shall be assignable or
transferable by the Optionee. The Optionee shall be required to comply with all
applicable laws in connection with any such transfer or assignment, and the Plan
Administrator shall have the discretion to adopt such rules as it deems
necessary to ensure that any assignment or transfer is in compliance with all
applicable laws.
H. Termination of Board Service.
1. Should the Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual
shall have a six (6)-month period following the date of such cessation of
Board service in which to exercise each such option for any or all of the
option shares for which the option is exercisable at the time of such
cessation of Board service. Each such option shall immediately terminate
and cease to remain outstanding, at the time of the Optionee's cessation of
Board service, with respect to any option shares for which the option is
not otherwise at that time exercisable.
2. Should the Optionee die within six (6) months after cessation of
Board service, then any automatic option grant held by the Optionee at the
time of death may subsequently be exercised, for any or all of the option
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any option shares subsequently purchased
by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution. The right to exercise each such option shall
lapse upon the expiration of the twelve (12)-month period measured from the
date of the Optionee's death.
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3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then each automatic option grant held by such
Optionee under this Article Three shall immediately become exercisable for
all the Ordinary Shares subject to that option, and the Optionee (or the
representative of the Optionee's estate or the person or persons to whom
the option is transferred upon the Optionee's death) shall have a twelve
(12)-month period following the date of the Optionee's cessation of Board
service in which to exercise such option for any or all of those Ordinary
Shares as fully-vested shares.
4. In no event shall any automatic grant under this Article Three
remain exercisable after the expiration date of the five (5)-year option
term. Upon the expiration of the applicable post-service exercise period
under subparagraphs 1. through 3. above or (if earlier) upon the expiration
of the five (5)-year option term, the automatic grant shall terminate and
cease to be outstanding for any option shares for which the option was
exercisable at the time of the Optionee's cessation of Board service but
for which such option was not otherwise exercised.
I. Stockholder Rights. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to the
Ordinary Shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased Ordinary
Shares.
J. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form Automatic Stock Option Agreement
attached as Exhibit A.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each option at the time
outstanding under this Article Three but not otherwise fully exercisable shall,
immediately prior to the specified effective date for the Corporate Transaction,
automatically accelerate and become fully exercisable for all of the Ordinary
Shares at the time subject to that option and may be exercised for all or any
portion of those shares as fully vested Ordinary Shares. Immediately following
the consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to remain outstanding.
B. In connection with any Change in Control of the Corporation, each option
at the time outstanding under this Article Three but not otherwise fully
exercisable shall, immediately prior to the specified effective date for the
Change in Control, automatically accelerate and become fully exercisable for all
of the Ordinary Shares at the time subject to that option and may be exercised
for all or any portion of those shares as fully vested Ordinary Shares. Each
such option shall remain so exercisable for the option shares until the
expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each option held
by him or her under this Article Three for a period of at least six (6) months.
The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
Ordinary Shares at the time subject to the surrendered option (whether or not
the option is otherwise at the time exercisable for those Ordinary Shares) over
(ii) the aggregate exercise price payable for such Ordinary Shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution. The Ordinary Shares subject to each option
surrendered in connection with the Hostile Take-Over shall not be available for
subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Three shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
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A. Limited Amendments. The provisions of this Automatic Option Grant
Program, together with the automatic option grants outstanding under this
Article Three, may not be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comply with applicable
U.S. income tax laws and regulations.
ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion but subject to any
prohibition imposed by any applicable laws, assist any Optionee, to the extent
such Optionee is an Employee (including an Optionee or Participant who is an
officer of the Corporation), in the exercise of one or more stock options
granted to such Optionee under the Discretionary Option Grant Program, including
the satisfaction of any Federal, state and local income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or (ii) permitting the Optionee to pay the
exercise price for the purchased shares in installments over a period of years.
The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) shall be upon such terms as the Plan Administrator
specifies in the applicable option agreement or otherwise deems appropriate
under the circumstances. Loans or installment payments may be authorized with or
without security or collateral. However, the maximum credit available to the
Optionee may not exceed the exercise price of the acquired Ordinary Shares (less
the par value of such shares) plus any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the
acquisition of the Ordinary Shares.
B. The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
C. All financial assistance provided under this Section I of Article Four
shall be effected in compliance with the applicable provisions of Section
76(9)(b) of the Companies Act, Chapter 50 of Singapore (or any successor
statutory provision).
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan,
unless the Optionee consents to such amendment, and (ii) any amendment made to
the Automatic Option Grant Program (or any options outstanding thereunder) shall
be in compliance with the limitation of Section IV of Article Three. In
addition, the Board may not, without the approval of the Corporation's
stockholders, amend the Plan to (i) materially increase the maximum number of
Ordinary Shares issuable under the Plan or the number of Ordinary Shares for
which options may be granted per newly-elected or continuing Eligible Director
under Article Three of the Plan or the maximum number of Ordinary Shares for
which any one individual participating in the Plan may be granted stock options
over the term of the Plan, except for permissible adjustments under Section
VI.C. of Article One, (ii) materially modify the eligibility requirements for
plan participation or (iii) materially increase the benefits accruing to plan
participants.
B. Options to purchase Ordinary Shares may be granted under the
Discretionary Option Grant Program which are in excess of the number of Ordinary
Shares then available for issuance under the Plan. However, no such option shall
become exercisable in whole or in part for the excess Ordinary Shares subject to
that option until stockholder approval is obtained for a sufficient increase in
the number of Ordinary Shares available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the
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first such excess option grants are made, then such options shall terminate and
cease to be exercisable with respect to the excess number of Ordinary Shares,
and no further option grants shall be made under the Plan.
III. TAX WITHHOLDING
The Corporation's obligation to deliver Ordinary Shares upon the exercise
of stock options for such shares under the Plan shall be subject to the
satisfaction of all applicable income and employment tax withholding
requirements.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective when adopted by the Board and approved by the
stockholders in 1993. On June 8, 1995, the Board approved an amendment to the
Plan to (i) increase the aggregate number of Ordinary Shares issuable over the
term thereof from 1,800,000* shares to 3,000,000* shares and (ii) increase the
number of Ordinary Shares for which options may be granted to any one individual
from 600,000* shares to 1,000,000* shares. The shareholders approved those
amendments at the 1995 Annual Meeting.
B. In June 1996, the Board amended the Plan to (i) increase the aggregate
number of Ordinary Shares issuable over the term of the Plan from 1,500,000
Ordinary Shares to 2,000,000 Ordinary Shares. The stockholders approved such
amendment at the 1996 Annual Meeting.
C. On August 15, 1996, the Board amended and restated the Plan to
authorize, among other things, the separate but concurrent jurisdiction of the
Discretionary Option Grant Program by the Primary Committee and one or more
Secondary Committees of the Board, with the Primary Committee to have the sole
authority to administer such program with respect to Section 16 Insiders.
D. In September 1997, the Board approved an amendment to the Plan to
increase the aggregate number of Ordinary Shares issuable over the term thereof
from 4,000,000* to 5,200,000* shares. The shareholders approved those amendments
at the 1997 Annual Meeting.
*Reflects two for one stock split in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998.
E. In August 1998, the Board approved an amendment to the Plan to increase
the aggregate number of Ordinary Shares issuable over the term thereof from
5,200,000* to 7,200,000* shares. The shareholders approved this amendment at the
1998 Annual Meeting.
F. In July 1999, the Board approved an amendment to the Plan to increase
the aggregate number of Ordinary Shares issuable over the term of the Plan from
7,200,000* Ordinary Shares to 8,200,000* Ordinary Shares. Such share increase is
subject to stockholder approval at the 1999 Annual Meeting. Should stockholder
approval not be obtained, then the 1,000,000*-share increase to the Ordinary
Share reserve shall not be implemented, and any stock options granted on the
basis of that 1,000,000*-share increase shall immediately terminate without
becoming exercisable for the Ordinary Shares subject to those options, and no
additional options will be granted on the basis of such share increase.
G. The Plan shall terminate upon the earlier of (i) November 30, 2003 or
(ii) the date on which all Ordinary Shares available for issuance under the Plan
shall have been issued or cancelled pursuant to the exercise, surrender or
cash-out of the options granted under the Plan. If the date of termination is
determined under clause (i) above, then all option grants outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants.
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V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of Ordinary
Shares pursuant to option grants under the Plan shall be used for general
corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option or
stock appreciation right under the Plan, the issuance of any Ordinary Shares
upon the exercise or surrender of the stock options or stock appreciation rights
granted hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options and stock appreciation rights granted under it
and the Ordinary Shares issued pursuant to it.
B. No Ordinary Shares or other assets or securities shall be issued or
delivered under this Plan unless and until there shall have been compliance with
(i) all applicable requirements of U.S. and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the Ordinary
Shares issuable under the Plan, (ii) all applicable listing requirements of any
securities exchange on which the Ordinary Shares are then listed for trading and
(iii) all applicable requirements of Singapore law.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or any parent or subsidiary corporation) for any
period of specific duration, and the Corporation (or any parent or subsidiary
corporation retaining the services of such individual) may terminate such
individual's Service at any time and for any reason, with or without cause.
VIII. MISCELLANEOUS PROVISIONS
A. Except to the extent otherwise expressly provided in the Plan, the right
to acquire Ordinary Shares or other assets or securities under the Plan may not
be assigned, encumbered or otherwise transferred by any Optionee.
*Reflects two for one stock split in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998.
B. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Participants and
Optionees, the legal representatives of their respective estates,
their respective heirs or legatees and their permitted assignees.
16
<PAGE>
FLEXTRONICS INTERNATIONAL LTD. 1997 EMPLOYEE SHARE PURCHASE PLAN
As Adopted September 10, 1997
1. Establishment of Plan. Flextronics International Ltd. (the "Company")
proposes to grant options for purchase of the Company's Ordinary Shares to
eligible employees of the Company and its Participating Subsidiaries (as
hereinafter defined) pursuant to this Employee Share Purchase Plan (this
"Plan"). For purposes of this Plan, "Parent Corporation" and "Subsidiary"
(collectively, "Participating Subsidiaries") shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
"Participating Subsidiaries" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "Board") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 150,000* Ordinary Shares of the Company are reserved for issuance under
this Plan. Such number shall be subject to adjustments effected in accordance
with Section 14 of this Plan.
2. Purpose. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. Administration. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the "Committee"
shall mean either such committee or the Board if no committee has been
established. Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of this Plan shall be determined by the Committee
and its decisions shall be final and binding upon all participants. Members of
the Committee shall receive no compensation for their services in connection
with the administration of this Plan, other than standard fees as established
from time to time by the Board for services rendered by Board members serving on
Board committees. All expenses incurred in connection with the administration of
this Plan shall be paid by the Company.
4. Eligibility. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or Participating
Subsidiaries one month before the beginning of such Offering Period;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or less
in a calendar year;
(d) employees who, together with any other person whose shares would
be attributed to such employee pursuant to Section 424(d) of the Code, own
shares or hold options to purchase shares possessing five percent (5%) or
more of the total combined voting power or value of all classes of shares
of the Company or any of its Participating Subsidiaries or who, as a result
of being granted an option under this Plan with respect to such Offering
Period, would own shares or hold options to purchase shares possessing five
percent (5%) or more of the total combined voting power or value of all
classes of shares of the Company or any of its Participating Subsidiaries;
and
*Reflects two for one stock split in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998.
<PAGE>
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified
as common law employees for any purpose other than federal income and
employment tax purposes.
5. Offering Dates. The offering periods of this Plan (each, an "Offering
Period") shall be of six (6) months duration commencing on December 1 and June 1
of each year and ending on May 31 and November 30 of each year. Each Offering
Period shall consist of one (1) six-month purchase period (a "Purchase Period")
during which payroll deductions of the participants are accumulated under this
Plan. The first Offering Period shall begin on December 1, 1997. The first
business day of each Offering Period is referred to as the "Offering Date". The
last business day of each Purchase Period is referred to as the "Purchase Date".
The Board shall have the power to change the duration of Offering Periods or
Purchase Periods with respect to offerings (and specifically shall have the
power to change the duration of Offering Periods from six (6) months to
twenty-four (24) months) without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period or Purchase Period to be affected.
6. Participation in this Plan. Eligible employees may become participants
in an Offering Period under this Plan on the first Offering Date after
satisfying the eligibility requirements by delivering a subscription agreement
to the Company's treasury department (the "Treasury Department") not later than
fifteen (15) days before such Offering Date unless a later time for filing the
subscription agreement authorizing payroll deductions is set by the Committee
for all eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Treasury
Department by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Treasury Department not later than fifteen (15) days
preceding a subsequent Offering Date. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of whole Ordinary Shares of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of an Ordinary Share of the
Company on the Offering Date (but in no event less than the par value of the
Company's Ordinary Shares), or (ii) eighty-five percent (85%) of the fair market
value of an Ordinary Share of the Company on the Purchase Date (but in no event
less than the par value of the Company's Ordinary Shares) and rounding down to
the nearest whole number, provided, however, that the number of Ordinary Shares
of the Company subject to any option granted pursuant to this Plan shall not
exceed the lesser of (a) the maximum number of shares set by the Committee
pursuant to Section 10(c) below with respect to the applicable Purchase Date, or
(b) the maximum number of shares which may be purchased pursuant to Section
10(b) below with respect to the applicable Purchase Date. The fair market value
of the Company's Ordinary Shares shall be determined as provided in Section 8
hereof.
8. Purchase Price. The purchase price per share at which an Ordinary Share
of the Company will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
Notwithstanding the foregoing, in no event may the purchase price of an
Ordinary Share of the Company be less than the par value. For purposes of this
Plan, the term "Fair Market Value" means, as of any date, the value of an
Ordinary Share of the Company determined as follows:
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<PAGE>
(a) if such Ordinary Shares are then quoted on the Nasdaq National Market,
the closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
(b) if such Ordinary Shares are publicly traded and are then listed on a
national securities exchange, the closing price on the date of
determination on the principal national securities exchange on which
the Ordinary Shares are listed or admitted to trading as reported in
The Wall Street Journal;
(c) if such Ordinary Shares are publicly traded but are not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices
on the date of determination as reported in The Wall Street Journal;
(d) if none of the foregoing is applicable, by the Board in good faith.
9. Payment Of Purchase Price; Changes In Payroll Deductions; Issuance Of
Shares.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean base salary, commissions,
bonuses, and shift premiums not to exceed $250,000 per year, provided however,
that for purposes of determining a participant's base salary, any election by
such participant to reduce his or her regular cash remuneration under Sections
125 or 401(k) of the Code shall be treated as if the participant did not make
such election. Payroll deductions shall commence on the first payday following
the Offering Date and shall continue to the end of the Offering Period unless
sooner altered or terminated as provided in this Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Offering Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
fifteen (15) days before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to his or
her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(d) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole Ordinary
Shares of the Company reserved under the option granted to such participant with
respect to the Offering Period to the extent that such option is exercisable on
the Purchase Date. The purchase price per share shall be as specified in Section
8 of this Plan. Any cash remaining in a participant's account after such
purchase of shares shall be refunded to such participant in cash, without
interest; provided, however that any amount remaining in such participant's
account on a Purchase Date which is less than the amount necessary to purchase a
full Ordinary Share of the Company shall be carried forward, without interest,
into the next Purchase Period or Offering Period, as the case may be. In the
event that this Plan has been oversubscribed, all funds not used to purchase
shares on the Purchase Date shall be returned to the participant, without
interest. No
3
<PAGE>
Ordinary Shares shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company shall
issue shares for the participant's benefit representing the shares purchased
upon exercise of his or her option.
(f) During a participant's lifetime, such participant's option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. Limitations on Shares to be Purchased.
(a) No participant shall be entitled to purchase shares under this Plan at
a rate which, when aggregated with his or her rights to purchase shares under
all other employee share purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of an
Ordinary Share of the Company on the Offering Date as the denominator may be
purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty (30) days prior to the commencement of any Offering Period, the Committee
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the "Maximum
Share Amount"). Until otherwise determined by the Committee, there shall be no
Maximum Share Amount. In no event shall the Maximum Share Amount, if any, exceed
the amounts permitted under Section 10(b) above. If a new Maximum Share Amount
is set, then all participants must be notified of such Maximum Share Amount
prior to the commencement of the next Offering Period. Once the Maximum Share
Amount is set, it shall continue to apply with respect to all succeeding
Purchase Dates and Offering Periods unless revised by the Committee as set forth
above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected
thereby.
(e) Any payroll deductions accumulated in a participant's account which are
not used to purchase shares due to the limitations in this Section 10 shall be
returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under this Plan
by signing and delivering to the Treasury Department a written notice to that
effect on a form provided for such purpose. Such withdrawal may be elected at
any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or her
interest in this Plan shall terminate. In the event a participant voluntarily
elects to withdraw from this Plan, he or she may not resume his or her
participation in this Plan during the same Offering Period, but he or she may
participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.
4
<PAGE>
(c) If the purchase price on the first day of any current Offering Period
in which a participant is enrolled is higher than the purchase price on the
first day of any subsequent Offering Period, the Company will automatically
enroll such participant in the subsequent Offering Period. Any funds accumulated
in a participant's account prior to the first day of such subsequent Offering
Period will be applied to the purchase of shares on the Purchase Date
immediately prior to the first day of such subsequent Offering Period. A
participant does not need to file any forms with the Company to automatically be
enrolled in the subsequent Offering Period
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event a participant's interest in
this Plan is terminated by withdrawal, termination of employment or otherwise,
or in the event this Plan is terminated by the Board, the Company shall promptly
deliver to the participant all payroll deductions credited to such participant's
account. No interest shall accrue on the payroll deductions of a participant in
this Plan.
14. Capital Changes. Subject to any required action by the shareholders of
the Company, the number of Ordinary Shares covered by each option under this
Plan which has not yet been exercised and the number of Ordinary Shares which
have been authorized for issuance under this Plan but have not yet been placed
under option (collectively, the "Reserves"), as well as the price of each
Ordinary Share covered by each option under this Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued and outstanding Ordinary Shares of the Company resulting from a
stock split or the payment of a stock dividend (but only on the Ordinary Shares)
or any other increase or decrease in the number of issued and outstanding
Ordinary Shares effected without receipt of any consideration by the Company;
provided, however, that (a) conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration" and (b) no such adjustment shall be made if as a result, the
purchase price for each Ordinary Share shall fall below the par value thereof
and if such adjustment would but for this paragraph (b) result in the purchase
price being less than the par value of an Ordinary Share, the purchase price
payable shall be the par value of an Ordinary Share. Such adjustment shall be
made by the Committee, whose determination shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Ordinary Shares subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that the
options under this Plan shall terminate as of a date fixed by the Committee and
give each participant the right to exercise his or her option as to all of the
optioned shares, including shares which would not otherwise be exercisable. In
the event of (i) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative share holdings and the options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) a merger in which the Company is the
surviving corporation but after which the shareholders of the Company
immediately prior to such merger (other than any shareholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iii)
the sale of substantially all of the assets of the Company, or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, each option under this Plan may
be assumed or an equivalent option may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. In the
event such surviving corporation refuses to assume or substitute options under
this
5
<PAGE>
Plan, (i) this Plan will terminate upon the consummation of such transaction,
unless otherwise provided by the Committee, and (ii) the Committee may declare
that the options under this Plan shall terminate as of a date fixed by the
Committee, and give each Participant the right to exercise such participant's
option as to all of the optioned shares. If the Committee makes an option fully
exercisable in the event of a merger, consolidation or sale of assets, the
Committee shall notify the participant that the option shall be fully
exercisable for a certain period, and the option and this Plan will terminate
upon the expiration of such period.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Ordinary Shares covered by each outstanding option, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of its outstanding Ordinary Shares,
or in the event of the Company being consolidated with or merged into any other
corporation, provided however, that no such adjustment shall be made if as a
result, the purchase price for each Ordinary Share would fall below the par
value thereof and if such adjustment would result in the purchase price being
less than the par value of an Ordinary Share, the purchase price payable shall
be the par value of an Ordinary Share.
15. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will or the laws of descent and
distribution) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be void and without effect.
16. Reports. Individual accounts will be maintained for each participant in
this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company if the
participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. Equal Rights And Privileges. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Term; Shareholder Approval. This Plan will become effective on the date
that it is adopted by the Board. This Plan shall be approved by the shareholders
of the Company, in any manner permitted by applicable corporate law, within
twelve (12) months before or after the date this Plan is adopted by the Board.
No purchase of shares pursuant to this Plan shall occur prior to such
shareholder approval. This Plan shall continue until the earlier to
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<PAGE>
occur of (a) termination of this Plan by the Board (which termination may be
effected by the Board at any time), (b) issuance of all of the Ordinary Shares
reserved for issuance under this Plan, or (c) ten (10) years from the adoption
of this Plan by the Board.
22. Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange or automated quotation system upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
23. Applicable Law. The Plan shall be governed by the substantive laws of
Singapore.
24. Amendment or Termination of this Plan. The Board may at any time amend,
terminate or extend the term of this Plan, except that any such termination
cannot affect options previously granted under this Plan, nor may any amendment
make any change in an option previously granted which would adversely affect the
right of any participant, nor may any amendment be made without approval of the
shareholders of the Company obtained in accordance with Section 21 hereof within
twelve (12) months of the adoption of such amendment (or earlier if required by
Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
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<PAGE>
FLEXTRONICS INTERNATIONAL LTD.
2090 Fortune Drive
San Jose, California 95131
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned being a member of Flextronics International Ltd. hereby
appoints Michael E. Marks or Tsui Sung Lam as Proxy of the undersigned and
hereby authorizes the Proxy to represent and to vote, as designated on the
reverse side, all of the Ordinary Shares of Flextronics International Ltd., held
of record by the undersigned on July 1, 1999, at the Annual General Meeting of
Flextronics International Ltd. to be held August 27, 1998, or at any adjournment
thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Annual Meeting and any adjournments thereof in the manner described
herein. If no contrary indication is made, the proxy will be voted FOR the Board
of Director nominees, FOR Proposals 2, 3, 4, 5, 6, 7, 8, 9 and 10 and in
accordance with the judgment of the persons named as proxies herein on any other
matters that may properly come before the Annual General Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
---------------------
SEE REVERSE SIDE
---------------------
<PAGE>
<TABLE>
<S> <C> <C>
|X| Please mark votes as in this
example.
The Board of Directors unanimously recommends a vote FOR Proposals 1, 2, 3, 4,
5, 6, 7, 8, 9 and 10. This Proxy, when properly executed, will be voted as
specified below. This Proxy will be voted FOR Proposal Nos. 1, 2, 3, 4, 5, 6, 7,
8, 9 and 10 if no specification is made.
Election of Directors.
1. |_| FOR all nominees listed below except as marked. |_| WITHHOLD AUTHORITY to vote for all nominees.
To withhold authority to vote for any individual nominee, strike a line through that nominee's name:
Michael E. Marks, Tsui Sung Lam and Chuen Fah Alain Ahkong
2. To receive and adopt the Directors' Report, Auditors' Report and
Audited FOR AGAINST ABSTAIN Accounts for the fiscal year ended March
31, 1999.
|_| |_| |_|
3. To appoint Arthur Andersen as independent Auditors of the Company for FOR AGAINST ABSTAIN
the fiscal year ended March 31, 2000.
|_| |_| |_|
4. To approve an Ordinary Resolution to increase the authorized share FOR AGAINST ABSTAIN
capital to 250,000,000 Ordinary Shares.
|_| |_| |_|
5. To approve an Ordinary Resolution to increase the number of shares FOR AGAINST ABSTAIN
authorized under the 1993 Share Option Plan to 8,200,000 Ordinary Shares
and to approve certain other modifications to the 1993 Share Option Plan. |_| |_| |_|
6. To approve an Ordinary Resolution to increase the number of shares FOR AGAINST ABSTAIN
authorized under the 1997 Employee Share Purchase Plan to 400,000
Ordinary Shares. |_| |_| |_|
7. To approve an Ordinary Resolution relating to Ordinary Share issuances. FOR AGAINST ABSTAIN
|_| |_| |_|
8. To approve an Ordinary Resolution relating to bonus shares issuances. FOR AGAINST ABSTAIN
|_| |_| |_|
9. To approve a Special Resolution relating to an amendment to the Company's FOR AGAINST ABSTAIN
Articles of Association relating to acquisitions by the Company of its
own issued Ordinary Shares. |_| |_| |_|
10. To approve an Ordinary Resolution relating to acquisitions by the Company FOR AGAINST ABSTAIN
of its own issued Ordinary Shares.
|_| |_| |_|
In their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting.
This Proxy must be signed exactly as your name appears hereon. If more than one
name appears, all persons so designated should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If the
signer is a corporation, please print full corporate name and indicate capacity
of duly authorized officer executing on behalf of the corporation. If the signer
is a partnership, please print full partnership name and indicate capacity of
duly authorized person executing on behalf of the partnership.
Signature: _____________________________________ Date: __________________, 1999
Signature: _____________________________________ Date: __________________, 1999
(Reverse Side)
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE ENCLOSED ENVELOPE.
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