<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
[FLEXITRONICS LOGO]
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 21, 2000
To our shareholders:
You are cordially invited to attend and NOTICE IS HEREBY GIVEN of the
Annual General Meeting of FLEXTRONICS INTERNATIONAL LTD. which will be held at
our principal offices located at 2090 Fortune Drive, San Jose, California,
United States of America, at 9:00 a.m., California time, on September 21, 2000
for the following purposes:
AS ORDINARY BUSINESS
1. To re-elect the following Directors, who will retire pursuant to Article 95
of our Articles of Association, to the Board of Directors:
(a) Michael J. Moritz
(b) Patrick Foley
2. To receive and adopt our Audited Accounts for the fiscal year ended March 31,
2000 together with the Reports of the Directors and Auditors thereon.
3. To consider and vote upon a proposal to appoint Arthur Andersen as our
independent auditors for the fiscal year ending March 31, 2001, and to
authorize the Directors to fix their remuneration.
AS SPECIAL BUSINESS
4. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT our authorized share capital be increased from S$2,500,000
divided into 250,000,000 Ordinary Shares of S$0.01 each to S$15,000,000
divided into 1,500,000,000 Ordinary Shares of S$0.01 each, by the creation of
1,250,000,000 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 our 1993 Share Option Plan,
which we refer to as the 1993 Plan, to be amended to:
(a) increase the maximum number of Ordinary Shares authorized for issuance
under the 1993 Plan from 20,400,000 Ordinary Shares to 25,400,000
Ordinary Shares and that an additional 5,000,000 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
our capital;
(b) eliminate the provision that provides for the adjustment of the number of
securities underlying the automatic option grants to individuals who
first become non-employee directors or to continuing directors under the
Automatic Option Grant Program under the 1993 Plan in the event of
certain stock splits, recapitalizations or other changes affecting our
outstanding Ordinary Shares and to
<PAGE> 3
amend the provisions relating to the Automatic Option Grant Program to
provide that individuals who first become non-employee directors shall
automatically receive an option to subscribe for 15,000 Ordinary Shares
and eligible continuing directors shall automatically annually receive an
option to subscribe for 3,000 Ordinary Shares rather than the 60,000
ordinary shares and 12,000 ordinary shares, respectively, currently
provided for under the 1993 Plan;
(c) in order to conform to recent changes in Singapore law, amend the
provisions relating to the term of options to provide that the term of
options granted under the 1993 Plan is ten years, rather than the five
year term currently provided for under the 1993 Plan, except that the
term of options granted to persons who are not our employees or those of
our related corporations will not exceed five years; and
(d) add a provision that prohibits the repricing, replacement or regranting
of any previously granted share option, through cancellation or by
lowering the exercise price of such share option, unless our shareholders
first approve such repricing, replacement or regranting.
6. To pass the following resolution as an Ordinary Resolution:
RESOLVED THAT approval be and is hereby given for our 1997 Employee Share
Purchase Plan, which we refer to as the Share Purchase Plan, to be amended to
increase the maximum number of Ordinary Shares authorized for issuance under
the Share Purchase Plan from 800,000 Ordinary Shares to 1,200,000 Ordinary
Shares and that an additional 400,000 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 our
capital.
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 our Articles of
Association but subject otherwise to the provisions of that Act and our
Articles of Association, the Board of Directors be and are hereby authorized
to allot and issue Ordinary Shares in our capital and/or to make or grant
offers, agreements or options in respect of our Ordinary Shares, whether such
offers, agreements or options would or might require our Ordinary Shares to
be issued after the expiration of this authority or otherwise, to and/or with
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 our
Articles of Association aforesaid and that such authority shall continue in
force until the conclusion of our next Annual General Meeting or the
expiration of the period within which our next Annual General Meeting 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 our Board of Directors at any time after the
date of this Meeting, but on or before 5:00 p.m., California time, August
31, 2001, a sum of up to S$2,002,880.06 and, in the event that any new
shares are allotted and issued by us after the close of business on July
26, 2000, which we refer to as the Record Date, but on or before 5:00
p.m., California time, August 31, 2001, an additional amount of S$0.01
for each new share so allotted and issued, standing to the credit of our
Share Premium Account as at March 31, 2000, which we refer to as the
First Capital Sum, be capitalized and distributed amongst the persons
who, on a date specified by our Board of Directors after the date of this
Meeting, but no later than 5:00 p.m., California time, August 31, 2001,
are the registered holders, whom we refer to as the First Registered
Shareholders, of existing Ordinary Shares of S$0.01 each in our capital,
on the footing that the First Registered Shareholders become entitled to
such sum as capital in terms of Article 133 of our Articles of
Association. The whole of the First Capital Sum shall be applied in
payment in full of the aggregate par value of up to 200,288,006 new
Ordinary Shares of S$0.01 each in our capital and, in the event that any
new shares are allotted and issued by us after the Record Date but on or
before 5:00 p.m., California time, August 31, 2001, an additional one new
Ordinary Share of S$0.01 each in our capital for each new share so
allotted and
<PAGE> 4
issued, which shares together we refer to as the First Bonus Shares. The
First Bonus Shares will rank in all respects pari passu with our existing
Ordinary Shares;
(b) at the sole discretion of our Board of Directors at any time after the
date of allotment and issue of the First Bonus Shares, which we refer to
as the First Bonus Issue Date, but on or before 5:00 p.m., California
time, August 31, 2001, a sum of up to twice the amount of the First
Capital Sum and, in the event that any new shares are allotted and issued
by us after the record date in relation to the First Bonus Issue Date,
but on or before 5:00 p.m., California time, August 31, 2001, an
additional amount of S$0.01 for each new share so allotted and issued,
standing to the credit of our Share Premium Account as at March 31, 2000,
which we refer to as the Second Capital Sum, be capitalized and
distributed amongst the persons who, on the date specified by the Board
of Directors after the First Bonus Issue Date, but on or before 5:00
p.m., California time, August 31, 2001, are the registered holders, whom
we refer to as the Second Registered Shareholders, of existing Ordinary
Shares of S$0.01 each in our capital, on the footing that the Second
Registered Shareholders become entitled to such sum as capital in terms
of Article 133 of our Articles of Association. The whole of the Second
Capital Sum shall be applied in payment in full of the aggregate par
value of up to twice the number of the First Bonus Shares and, in the
event that any shares are allotted and issued by us after the record date
in relation to the First Bonus Issue Date, but on or before 5:00 p.m.,
California time, August 31, 2001, an additional one new Ordinary Share of
S$0.01 each in our capital for each new share so allotted and issued,
which together we refer to as the Second Bonus Shares. The Second Bonus
Shares will rank in all respects pari passu with the existing Ordinary
Shares;
(c) accordingly, the Directors be and are hereby granted the authority to
allot and issue, at their sole discretion:
(i) after the date of this Meeting, but on or before 5:00 p.m.,
California time, August 31, 2001, the First Bonus Shares credited as
fully paid to the First Registered Shareholders, as nearly as
practicable, in the proportion of one First Bonus Share for every
one existing Ordinary Share then held by the First Registered
Shareholders, fractions being disregarded; and
(ii) after the First Bonus Issue Date, but on or before 5:00 p.m.,
California time, August 31, 2001, the Second Bonus Shares credited
as fully paid to the Second Registered Shareholders, as nearly as
practicable, in the proportion of one Second Bonus Share for every
one existing Ordinary Share then held by the Second Registered
Shareholders, fractions being disregarded;
(d) the First Bonus Shares and the Second Bonus Shares, if and when allotted
and issued, shall be treated for all purposes as an increase in the
nominal amount of our issued capital and not as income;
(e) the aggregate number of First Bonus Shares or, as the case may be, Second
Bonus Shares, representing fractional interests be disposed of by the
Directors in such manner as they may deem fit to be in our interests; and
(f) the Directors 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.
AS ORDINARY BUSINESS
9. To transact any other business as may properly be transacted at any Annual
General Meeting.
<PAGE> 5
The Board of Directors has fixed the close of business on July 26, 2000 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 September 21, 2000 will be entitled to vote at the
Annual General Meeting.
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 our
registered office located at 36, Robinson Road, #18-01, City House, Singapore
068877 or at EquiServe L.P., P.O. Box 8040, Boston, MA 02266-8040, United States
of America not less than 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.
By Order of the Board of Directors,
Yap Lune Teng
Joint Secretary
Singapore
August 23, 2000
SHAREHOLDERS SHOULD READ THIS ENTIRE PROXY STATEMENT CAREFULLY PRIOR TO
RETURNING THEIR PROXIES.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proxy Statement for the 2000 Annual Meeting of Shareholders:
Proposal No. 1 -- Re-election of Directors................ 2
Executive Officers..................................... 4
Executive Compensation................................. 6
Summary Compensation Table........................... 6
Option Grants in Fiscal 2000......................... 7
Aggregated Option Exercises in Fiscal 2000 and Option
Values at March 31, 2000............................ 7
Employment Agreements with Executive Officers........ 8
Compensation Committee Interlocks and Insider
Participation....................................... 8
Compensation Committee Report on Executive
Compensation.......................................... 9
Performance Graph...................................... 11
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 12
Security Ownership of Certain Beneficial Owners and
Management............................................ 13
Certain Relationships and Related Transactions......... 15
Proposal No. 2 -- Receive and Adopt Audited Accounts...... 16
Proposal No. 3 -- Ratification of Selection of Independent
Auditors............................................... 16
Proposal No. 4 -- Increase in Authorized Share Capital and
Creation of New Shares................................. 16
Proposal No. 5 -- Amendment to 1993 Share Option Plan..... 17
Proposal No. 6 -- Amendment to 1997 Employee Share
Purchase Plan.......................................... 22
Proposal No. 7 -- Authorization of Board of Grant Shares
and Options............................................ 26
Proposal No. 8 -- Authorization of Distribution of Bonus
Shares................................................. 26
Shareholder Proposals for the 2001 Annual Meeting of
Shareholders........................................... 28
Other Matters............................................. 28
Financial Statements........................................ S-1
</TABLE>
<PAGE> 7
PROXY STATEMENT
FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
OF
FLEXTRONICS INTERNATIONAL LTD.
TO BE HELD ON SEPTEMBER 21, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Flextronics International Ltd. of proxies to be voted
at the Annual General Meeting, which will be held at 9:00 a.m. California time
on September 21, 2000 at our principal offices located at 2090 Fortune 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 included proxy card were
first mailed to shareholders of record on or about August 28, 2000. The entire
cost of soliciting proxies will be borne by us. We have retained Corporate
Investors Communications, an independent proxy solicitation firm, to assist in
soliciting proxies at an estimated fee of $7,000 plus reimbursement of
reasonable expenses.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The close of business on July 26, 2000 was the record date for shareholders
entitled to notice of the Annual General Meeting. As of that date, we had
200,288,006 Ordinary Shares, S$0.01 par value per share, issued and outstanding.
All of the Ordinary Shares issued and outstanding on September 21, 2000 are
entitled to vote at the Annual General Meeting, and shareholders of record on
September 21, 2000 entitled to vote at the meeting will on a poll have one 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 us will be voted at the Annual General Meeting
in accordance with the shareholders' instructions contained therein. The
affirmative vote by a show of hands of a simple majority of the shareholders
present and voting at the Annual General Meeting, or if a poll is demanded by
the chair or by any 10% or greater shareholder, a simple majority of the shares
voting 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, 7 and 8. The affirmative
vote of a majority of the shares voting at the Annual General Meeting is
required to approve Proposal Nos. 5 and 6. 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 and 8. 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 our registered office located at 36 Robinson Road #18-01, City
House, Singapore 068877 or at EquiServe L.P., P.O. Box 8040, Boston, MA
02266-8040, United States of America, at least 48 hours before the time set for
the Annual General Meeting.
We have 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.
<PAGE> 8
PROPOSAL NO. 1:
RE-ELECTION OF DIRECTORS
At each Annual General Meeting, at least one-third of the Directors, or, if
their number is not a multiple of three, then the number nearest to but not less
than one-third of the Directors, 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. Messrs. Moritz, Foley and Hui,
are the three members of the Board of Directors who will retire by rotation in
the manner stated above. Messrs. Moritz and Foley have been nominated to stand
for re-election at the 2000 Annual General Meeting; however, Hui Shing Leong
will not be standing for re-election at the 2000 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 our Articles
of Association, to fill the vacancy. In the event that additional persons are
nominated for election as Directors, in accordance with Article 100 of our
Articles of Association, 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.
NOMINEES TO BOARD OF DIRECTORS
Michael J. Moritz (age 45) -- Mr. Moritz has served as a member of our
Board of Directors 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, Etoys, Webvan, Saba Software, Agile
Software, PlanetRx.com and several privately-held companies.
Patrick Foley (age 68) -- Mr. Foley has been a member of our Board of
Directors since October 1997. Until January 2000, Mr. Foley served in various
positions with DHL Corporation, Inc. and its major subsidiary, DHL Airways,
Inc., a global document, package and airfreight delivery company, most recently
as Chairman, President and Chief Executive Officer. He joined DHL in September
1988 with more than thirty years experience in the 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.
DIRECTORS NOT STANDING FOR RE-ELECTION
Michael E. Marks (age 49) -- Mr. Marks has been our Chief Executive Officer
since January 1994 and our Chairman of the Board since July 1993. He has been a
member of our Board of Directors 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. 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 50) -- Mr. Tsui has been a member of our Board of
Directors since 1991. Mr. Tsui served as our President, Asia-Pacific from April
1997 to June 1999. From January 1994 to April 1997, he served as our President
and Chief Operating Officer. From June 1990 to December 1993, he was our
Managing Director and Chief Executive Officer. From 1982 to June 1990, Mr. Tsui
served in various positions for Flextronics, Inc., our 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 52) -- Mr. Ahkong has served as a member of our
Board of Directors since October 1997. Mr. Ahkong is a founder of Pioneer
Management Services Pte. Ltd., a Singapore-based
2
<PAGE> 9
consultancy firm, and has been the Managing Director of Pioneer since 1990.
Pioneer provides advice to us, and other multinational corporations, on matters
related to international taxation.
Richard L. Sharp (age 53) -- Mr. Sharp has served as a member of our Board
of Directors since July 1993. He has been the Chief Executive Officer of Circuit
City Stores, Inc. since 1986 and Chairman of the Board since 1994. He also
served as President from June 1984 to March 1997. He has been a director of
Circuit City Stores, Inc. since 1983. Mr. Sharp also serves as a director of
Fort James Corporation.
RETIRING DIRECTOR
Hui Shing Leong (age 41) -- Mr. Hui has served as a member of our Board of
Directors 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 a simple majority of the votes cast at the Annual
General Meeting is required to re-elect Messrs. Moritz and Foley. 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. Moritz
and Foley.
THE BOARD RECOMMENDS A VOTE "FOR" THE RE-ELECTION
OF MESSRS. MICHAEL J. MORITZ AND PATRICK FOLEY TO THE BOARD OF DIRECTORS.
BOARD AND COMMITTEE MEETINGS
Our Board of Directors held a total of 21 administrative meetings and 3
regularly scheduled meetings during fiscal 2000. During the period for which
each current director was a director or a committee member, all directors
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 an Audit Committee, a Compensation Committee,
and a Finance Committee. The Board of Directors does not have a nominating
committee or a committee performing the functions of a nominating committee.
The Audit Committee is currently composed of Messrs. Ahkong, Foley and
Moritz. The Audit Committee is charged with reviewing our annual audit and
meeting with our independent accountants to review our internal controls and
financial management practices. The Audit Committee held 3 meetings in fiscal
2000.
The Compensation Committee is currently composed of Messrs. Sharp and
Moritz. The Compensation Committee recommends to the Board of Directors
compensation for our key employees and administers the employee share option
plans. The Compensation Committee held 3 meetings in fiscal 2000.
The Finance Committee is currently composed of Messrs. Marks and Tsui. The
Finance Committee reviews and approves the various financial matters that are
not reserved to the Board of Directors. The Finance Committee held 24 meetings
in fiscal 2000.
DIRECTOR COMPENSATION
Each individual who first becomes a non-employee Board member is granted a
stock option to subscribe for 60,000 Ordinary Shares. After this initial grant,
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 to subscribe for
12,000 Ordinary Shares, all pursuant to the automatic option grant provisions of
our 1993 Share Option Plan.
3
<PAGE> 10
Pursuant to this program, Messrs. Ahkong, Moritz, Sharp, Foley and Hui each
received option grants for 12,000 Ordinary Shares in fiscal 2000. If Proposal
No. 5 is approved by our shareholders, following the effective date of the
amendment to the 1993 Plan, the initial grant to non-employee directors will be
a stock option to subscribe for 15,000 Ordinary Shares and subsequent grants
will be stock options to subscribe for 3,000 Ordinary Shares.
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 our employee receives compensation
for services rendered as a director.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to our executive
officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael E. Marks............... 49 Chairman of the Board and Chief Executive Officer
Robert R.B. Dykes.............. 51 President, Systems Group and Chief Financial Officer
Ronny Nilsson.................. 51 President, Western European Operations
Michael McNamara............... 43 President, Americas Operations
Ash Bhardwaj................... 36 President, Asia Pacific Operations
Humphrey Porter................ 52 President, Central/Eastern European Operations
Steven C. Schlepp.............. 44 President, Multek
Ronald R. Snyder............... 43 President, Flextronics Semiconductor
Thomas J. Smach................ 40 Vice President of Finance
</TABLE>
Michael E. Marks -- Mr. Marks has been our Chief Executive Officer since
January 1994 and has been Chairman of the Board since July 1993. He has been a
member of our Board of Directors 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. 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 our Chief Financial Officer
since February 1997 and has served as our President, Systems Group since April
1999. He served as our Senior Vice President of Finance and Administration from
February 1997 to April 1999 and as a member of our Board of Directors from
January 1994 until September 1997. From 1988 to February 1997, Mr. Dykes served
as Executive Vice President, Worldwide Operations and Chief Financial Officer of
Symantec Corporation, an application and system software products company. Mr.
Dykes is on the board of directors of Symantec Corporation. Mr. Dykes received a
Bachelor of Commerce and Administration degree from Victoria University in
Wellington, New Zealand.
Ronny Nilsson -- Mr. Nilsson has served as our President, Western European
Operations since April 1997. From May 1995 to April 1997, he was Vice President
and General Manager, Supply & Distribution and Vice President, Procurement, of
Ericsson Business Networks where he was responsible for facilities in Sweden,
Austria, China, the Netherlands, Mexico and Australia. From January 1991 to May
1995, he was Director of Production at the EVOX+RIFA Group, a manufacturer of
components, and Vice President of RIFA AB where he was responsible for factories
in Sweden, Finland, Singapore and Indonesia. Mr. Nilsson received a certificate
in Mechanical Engineering from the Lars Kagg School in Kalmar, Sweden and
certificates from the Swedish Management Institute and the Ericsson Management
Program.
Michael McNamara -- Mr. McNamara has served as our 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 we acquired 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
4
<PAGE> 11
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.
Ash Bhardwaj -- Mr. Bhardwaj joined Flextronics in 1988 and has served as
our President, Asia Pacific Operations since April 1999. Previously, he served
as our Vice President for the China region from April 1997 to March 1999, with
responsibility for all of our operations in China. Prior to that, Mr. Bhardwaj
oversaw the implementation of our manufacturing operation in Xixiang, People's
Republic of China and was general manager for our 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.
Humphrey Porter -- Mr. Porter has served as our 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 us in October 1997. Prior to
joining Neutronics, Mr. Porter worked for over 27 years for the Philips
organization. Between 1989 and 1994, he was Industrial Director for Philips
Audio Austria and between 1984 and 1989, he was Managing Director of the Philips
Audio factory in Penang, Malaysia. Prior to that, 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.
Steven C. Schlepp -- Mr. Schlepp has served as our President, Multek since
April 2000 following our acquisition of The DII Group, Inc., which we refer to
in this section as DII. From June 1996 to April 2000, Mr. Schlepp served as
Senior Vice President of DII and President of Multilayer Technology, Inc. From
January 1991 until June 1996, Mr. Schlepp served as President of Toppan West
Incorporated, a wholly owned subsidiary of Toppan Printing Ltd.
Ronald R. Snyder -- Mr. Snyder has served as our President, Flextronics
Semiconductor since April 2000 following our acquisition of DII. From May 1998
to April 2000, Mr. Snyder served as Senior Vice President of DII and President
of DII Semiconductor. From March 1994 until May 1998, Mr. Snyder served as
Senior Vice President of Sales and Marketing of DII. From March 1993 to March
1994, Mr. Snyder served as President of Dovatron Manufacturing Colorado, a
division of Dovatron International, Inc.
Thomas J. Smach -- Mr. Smach has served as our Vice President, Finance
since April 2000 following our acquisition of DII. From August 1997 to April
2000, Mr. Smach served as Senior Vice President, Chief Financial Officer, and
Treasurer of DII. From March 1994 to August 1997, Mr. Smach served as Corporate
Controller and Vice President of DII. From 1982 to March 1994, Mr. Smach served
as a certified public accountant with KPMG LLP.
5
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued by us for services rendered during fiscal 2000, 1999 and 1998 by the
Chief Executive Officer and each of our four most highly compensated executive
officers whose total salary and bonus for fiscal 2000 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------- 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............. 2000 $450,000 $363,750 $231,525(1) 300,000 $ 8,350(12)
Chairman and Chief 1999 400,000 339,315 9,617(2) 1,600,000 7,701(13)
Executive Officer 1998 375,000 168,750 205,167(3) 400,000 8,351(14)
Michael McNamara............. 2000 375,000 201,250 3,867(4) 300,000 4,750(15)
President, 1999 325,000 177,416 22,611(2) 892,000 5,000(15)
Americas Operations 1998 250,000 75,000 14,576(5) 175,864 3,940(15)
Robert R.B. Dykes............ 2000 337,500 156,000 4,599(4) 120,000 3,500(15)
President, Systems Group 1999 300,000 166,008 25,337(2) 220,000 5,000(15)
and Chief Financial Officer 1998 250,000 75,000 10,675(2) 550,000 3,750(15)
Ronny Nilsson................ 2000 317,684 129,563 17,436(6) 80,000 34,884(16)
President, Western 1999 315,000 148,859 18,096(7) 160,000 43,497(16)
European Operations 1998 268,681 88,251 564,564(8) 440,000(11) 44,501(16)
Humphrey Porter.............. 2000 300,000 195,000 20,000(9) 80,000 36,000(17)
President, Central/Eastern 1999 250,000 149,000 21,000(10) 440,000 30,000(16)
European Operations 1998 152,000 104,000 21,000(10) 160,000 18,000(16)
</TABLE>
---------------
(1) Includes a vehicle allowance of $3,868 and forgiveness of $226,517 of
principal and accrued interest under a promissory note due to one of our
subsidiaries.
(2) Represents payment for a company vehicle.
(3) Includes a vehicle allowance of $7,533, forgiveness of $197,634 of
principal and accrued interest under a promissory note due to one of our
subsidiaries.
(4) Represents a vehicle allowance.
(5) Includes a vehicle allowance of $7,200 and forgiveness of $7,376 of accrued
interest under a promissory note due to one of our subsidiaries.
(6) Represents a vehicle allowance of $10,166 and a housing allowance of
$7,270.
(7) Includes a vehicle allowance of $10,404 and an apartment allowance of
$7,692.
(8) Includes payment of $413,505 pursuant to a Services Agreement dated April
30, 1997 between us 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 a vehicle allowance of $10,853 and a housing allowance of $7,884.
(9) Includes a vehicle allowance of $6,000 and a housing allowance of $8,000.
(10) Includes a vehicle allowance of $7,000 and a housing allowance of $14,000.
(11) Includes 220,000 shares subject to previously-granted options that were
repriced in June 1997.
(12) Includes our contributions to our 401(k) plan of $4,750, and life and
disability insurance premium payments of $3,600.
(13) Includes our contributions to our 401(k) plan of $5,000, and life and
disability insurance premium payments of $2,701.
(14) Includes our contributions to our 401(k) plan of $4,750, and life and
disability insurance premium payments of $3,601.
6
<PAGE> 13
(15) Represents our contributions to our 401(k) plan.
(16) Represents our contributions to a pension retirement fund.
(17) Includes our contributions to a pension retirement fund of $24,000 and life
insurance premium payments of $12,000.
OPTION GRANTS IN FISCAL 2000
The following table sets forth information regarding option grants during
fiscal 2000 to our Chief Executive Officer and each of our four other most
highly compensated executive officers. All options were granted pursuant to our
1993 Share Option Plan.
The options shown in the table were granted at fair market value, are
incentive stock options (to the extent permitted under the Internal Revenue
Code) 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 1/36 of the shares vesting for each full
calendar month that an optionee renders services to us thereafter. Each option
fully accelerates in the event that, in the 18-month period following certain
mergers or acquisitions of us, the optionee's employment with us is terminated
or his duties are substantially reduced or changed. Each option includes a
limited stock appreciation right pursuant to which the option will automatically
be canceled upon the occurrence of certain hostile tender offers, in return for
a cash distribution from us based on the tender offer price per share. The
exercise price of each option may be paid in cash or through a cashless exercise
procedure involving a same-day sale of the purchase shares.
In accordance with the rules of the Securities and Exchange Commission, the
table presents the potential realizable values that would exist for the options
at the end of their respective five-year terms. These values 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. Potential realizable
values are computed by:
- multiplying the number of Ordinary Shares subject to a given option by
$70.44 per share, which was the closing price per Ordinary Share as
reported on the Nasdaq National Market on March 31, 2000, the last day of
trading for fiscal 2000;
- assuming that the aggregate option exercise price derived from the
calculation compounds at the annual 5% or 10% rates should in the table
for the entire five year term of the option; and
- subtracting from that result the aggregate option exercise price.
The assumed 5% and 10% rates of share price appreciation are mandated by
rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future Ordinary Share prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO PRICE OPTION TERM
OPTIONS EMPLOYEES PER EXPIRATION -------------------------
NAME GRANTED IN FISCAL 2000 SHARE DATE 5% 10%
---- ---------- ------------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks...... 300,000 6% $29.00 09/30/2004 $18,270,382 $25,333,297
Michael McNamara...... 300,000 6 29.00 09/30/2004 18,270,382 25,333,297
Robert R.B. Dykes..... 120,000 3 29.00 09/30/2004 7,308,153 10,133,319
Ronny Nilsson......... 80,000 2 29.00 09/30/2004 4,872,102 6,755,546
Humphrey Porter....... 80,000 2 29.00 09/30/2004 4,872,102 6,755,546
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND OPTION VALUES AT MARCH 31, 2000
The following table presents information concerning the exercise of options
during fiscal 2000 by our Chief Executive Officer and each of our four other
most highly compensated executive officers, including the aggregate amount of
gains on the date of exercise. The amounts set forth in the column entitled
"Value
7
<PAGE> 14
Realized" represent the fair market value of the Ordinary Shares underlying the
option on the date of exercise less the aggregate exercise price of the option.
In addition, the table includes the number of shares covered by both
exercisable and unexercisable stock options as of March 31, 2000. Also reported
are values of "in-the-money" options that represent the positive spread between
the respective exercise prices of outstanding stock options and $70.44 per
share, which was the closing price per Ordinary Share as reported on the Nasdaq
National Market on March 31, 2000, the last day of trading for fiscal 2000.
These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT MARCH 31, 2000 MARCH 31, 2000
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
---- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Marks..... 575,488 $23,376,199 1,109,512 1,675,000 $78,151,252 $117,982,813
Michael McNamara..... 40,000 1,420,000 551,408 920,456 38,839,801 64,834,620
Robert R.B. Dykes.... 12,000 280,876 509,709 432,291 35,902,628 30,449,497
Ronny Nilsson........ 250,000 14,046,875 350,000 -- 24,653,125 --
Humphrey Porter...... 233,000 9,322,750 29,500 417,500 2,077,906 29,407,656
</TABLE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Mr. Nilsson. In connection with the acquisition of two manufacturing
facilities from Ericsson Business Networks AB located in Karlskrona, Sweden, we
entered into an Employment and Noncompetition Agreement and a Services Agreement
with Mr. Ronny Nilsson, each dated as of April 30, 1997.
Pursuant to the Employment Agreement, Mr. Nilsson:
- was appointed as our Senior Vice President, Europe for a four-year
period;
- is entitled to receive an annual salary of $250,000; and
- 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 us in consideration for:
- an aggregate of $775,000 which was paid between March 31, 1997 and April
15, 1998; and
- the issuance by us 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 on September 15, 1997 and $205,000 on April 15, 1998.
In connection with Mr. Nilsson's repayment of the interest-free loan, on
April 15, 1998 we paid to Mr. Nilsson as compensation an amount equal to the two
installments paid by Mr. Nilsson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of our Board of Directors during
fiscal 2000 were Messrs. Sharp and Moritz. None of our officers serve on our
compensation committee. No interlocking relationships exist between our Board of
Directors or compensation committee and the board of directors or compensation
committee of any other company.
8
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of our previous
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 Compensation
Committee Report on Executive Compensation will not be incorporated by reference
into any of those previous filings; nor will such report be incorporated by
reference into any future filings made by us under those statutes.
The Compensation Committee of the Board of Directors, which we refer to in
this section as the Committee, sets the base salary of our executive officers
and approves individual bonus programs for executive officers. The Committee
took no action with respect to executive compensation in fiscal 2000, other than
approving certain year-end bonuses earned in accordance with a bonus plan
previously adopted by our Board of Directors and authorizing salary increases
and option grants to five 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 our
policies 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. Our overall policy is to offer our executive
officers cash-based and equity-based compensation opportunities based upon their
personal performance, our financial performance and their contribution to that
performance. One of our primary objectives is to have a significant portion of
each officer's compensation contingent upon our 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. We set base salary for executive officers on the
basis of personal performance and internal and industry comparability
considerations. Bonuses are generally 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, we first establish 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 our net
income, the performance of our operations that are under the officer's
supervision and other performance factors, each as compared to budgeted
performance for the period. We also have 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. We believe 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 our Ordinary Shares at a fixed price per
share (the market price on the grant date) over a specified period of time (up
to five years and up to ten years if Proposal No. 5 is approved), thus providing
a return to the officer only if he or she remains in the our employ 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 us, 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 our expectation of his
personal performance and comparisons to the base salaries of our other executive
officers and in the industry.
9
<PAGE> 16
With respect to Mr. Marks' base salary, it is our intent to provide him
with a level of stability and certainty each year and not have this particular
component of compensation affected to any significant degree by short-term
company performance factors. However, in recognition of our rapid growth and
corresponding expansion of Mr. Marks' responsibilities, Mr. Marks' base salary
was increased from $400,000 in fiscal 1999 to $450,000 in fiscal 2000. In fiscal
2000, the Committee granted Mr. Marks an option to purchase 300,000 Ordinary
Shares at an exercise price of $29.00 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. We also
provided for the acceleration of all Mr. Marks' unvested options in the event
that, following certain mergers or acquisitions by us, Mr. Marks' employment
with us is terminated or his duties are substantially reduced or changed. In
addition, on April 16, 1995, our principal U.S. subsidiary loaned $500,000 to
Mr. Marks. During fiscal 2000, this U.S. subsidiary forgave the remaining
outstanding principal amount on this loan of $200,000, plus $26,517 in accrued
interest on this loan. This forgiveness of the 1995 loan was based on the
Board's subjective judgment that it was appropriate in view of Mr. Marks'
performance in fiscal 2000, including his significant role in the substantial
growth in our 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 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.
We believe that stock options granted to our executives qualify for the
performance-based exception to the deduction limit and because it is unlikely
that other compensation payable to any of our executives 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 our executives, the Committee
will continue to consider all elements of cost to us of providing that
compensation.
Submitted by the Compensation
Committee
of our Board of Directors:
Richard L. Sharp
Michael J. Moritz
10
<PAGE> 17
PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of our previous
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 previous filings;
nor will such performance graph be incorporated by reference into any future
filings made by us under those statutes.
The graph below compares the cumulative total shareholder return on our
Ordinary Shares, the Standard & Poor's 500 Stock Index and a peer group that
includes The DII Group, Inc., Jabil Circuit, Inc., Sanmina Corp., SCI Systems,
Inc. and Solectron Corp. The graph assumes that $100 was invested in our
Ordinary Shares, in the Standard & Poor's 500 Stock Index and in the peer group
described above on March 31, 1995 and reflects the annual return through March
31, 2000, assuming dividend reinvestment.
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 our
Ordinary Shares.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG FLEXTRONICS INTERNATIONAL LTD., THE S & P 500 INDEX
AND A PEER GROUP
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
FLEXTRONICS INTERNATIONAL STANDARD & POORIS 500
LTD. PEER GROUP STOCK INDEX
------------------------- ---------- ---------------------
<S> <C> <C> <C>
3/95 100.00 100.00 100.00
3/96 221.82 165.26 132.11
3/97 144.55 227.19 158.30
3/98 314.09 358.63 234.27
3/99 741.82 678.17 277.52
3/00 2049.11 1402.69 327.32
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------
3/95 3/96 3/97 3/98 3/99 3/00
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Flextronics International
Ltd........................ $100.00 $221.82 $144.55 $314.09 $741.82 $2,049.11
Peer Group................... 100.00 165.26 227.19 358.63 678.17 1,402.69
Standard & Poor's 500 Stock
Index...................... 100.00 132.11 158.30 234.27 277.52 327.32
</TABLE>
11
<PAGE> 18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires our
directors and officers, and persons who own more than 10% of a registered class
of our equity securities to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the Nasdaq
National Market. Such persons are required by Securities and Exchange Commission
regulations to furnish us with copies of all Section 16(a) forms that they file.
Based solely on our review of the copies of such forms furnished to us and
written representations from our executive officers and directors, we believe
that all Section 16(a) filing requirements for the fiscal year ended March 31,
2000 were met, except that the following individuals had late filings in fiscal
2000: Michael Marks filed late reports on Form 4 for August 1999, October 1999
and February 2000; Robert R.B. Dykes filed a late report on Form 4 for July
1999; Ash Bhardwaj filed a late report on Form 3; Humphrey Porter filed a late
report on Form 4 for February 1999; and Hui Shing Leong filed a late report on
Form 4 for October 1999.
12
<PAGE> 19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 30, 2000 regarding
the beneficial ownership of the our Ordinary Shares, by
- each shareholder known to us to be the beneficial owner of more than 5%
of our Ordinary Shares;
- each director;
- each executive officer named in the Summary Compensation Table; and
- all directors and executive officers as a group.
This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the Securities and
Exchange Commission. Where information regarding shareholders is based on
Schedules 13D and 13G, the number of shares owned is as of the date for which
information was provided in such schedules.
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 June 30, 2000 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. 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.
In the table below, percentage ownership is based upon 198,465,868 Ordinary
Shares outstanding as of June 30, 2000.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT
------------------------------------ ---------------- -------
<S> <C> <C>
5% SHAREHOLDERS
Marsh & McLennan Companies, Inc.(1)......................... 13,408,516 6.8%
1166 Avenue of the Americas
New York, New York 10036
Pilgrim Baxter & Associates, Ltd.(2)........................ 9,896,000 5.0
825 Duportail Road
Wayne, Pennsylvania 19087
EXECUTIVE OFFICERS AND DIRECTORS
Hui Shing Leong(3).......................................... 3,966,900 2.0
Richard L. Sharp(4)......................................... 3,094,976 1.5
Michael E. Marks(5)......................................... 2,492,865 1.2
Michael McNamara(6)......................................... 978,197 *
Robert R. B. Dykes(7)....................................... 591,823 *
Michael J. Moritz(8)........................................ 549,530 *
Ronny Nilsson(9)............................................ 350,000 *
Tsui Sung Lam(10)........................................... 176,334 *
Patrick Foley(11)........................................... 97,500 *
Humphrey Porter(12)......................................... 92,000 *
Chuen Fah Alain Ahkong(13).................................. 37,500 *
All 15 directors and executive officers as a group(14)...... 13,526,350 6.7%
========== ===
</TABLE>
---------------
* Less than 1%.
(1) Based on information supplied by Marsh & McLennan Companies, Inc. ("Marsh")
in an amended Schedule 13G filed with the Securities and Exchange
Commission on March 10, 2000, includes 27,028
13
<PAGE> 20
shares with respect to which The Putnam Advisory Company, Inc. ("PAC") and
Putnam Investments, Inc. ("PI") have sole investment power. In addition,
PAC beneficially owns 448,268 shares, PI beneficially owns 13,408,516
shares, and Putnam Investment Management, Inc. ("PIM") beneficially owns
12,960,248 shares. PI, a wholly owned subsidiary of Marsh, wholly owns PAC
and PI. PAC and PI have depository power over these shares as investment
managers.
(2) Based on information supplied by Pilgrim Baxter & Associates, Ltd. in a
Schedule 13G filed with the Securities and Exchange Commission on February
8, 1999.
(3) Includes 2,257,600 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 6,000
shares subject to options exercisable within 60 days after June 30, 2000
held by Mr. Hui.
(4) Includes 740,000 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
77,500 shares held by RLS Charitable Remainder Unitrust of which Mr. Sharp
is a co-trustee and 41,500 shares subject to options exercisable within 60
days after June 30, 2000 held by Mr. Sharp.
(5) Includes 12,000 shares held by the Justin Caine Marks Trust and 12,000
shares held by the Amy G. Marks Trust. Also includes 1,435,683 shares
subject to options exercisable within 60 days after June 30, 2000 held by
Mr. Marks.
(6) Includes 671,393 shares subject to options exercisable within 60 days after
June 30, 2000 held by Mr. McNamara.
(7) Includes 577,917 shares subject to options exercisable within 60 days after
June 30, 2000 held by Mr. Dykes.
(8) Includes 320,668 shares held by Sequoia Capital VII, a limited partnership
and 15,600 shares held by Sequoia Technology Partners VII, a limited
partnership. 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 41,500 shares subject to options exercisable within 60 days after
June 30, 2000 held by Mr. Moritz.
(9) Represents 350,000 shares subject to options exercisable within 60 days
after June 30, 2000 held by Mr. Nilsson.
(10) Includes 175,158 shares subject to options exercisable within 60 days after
June 30, 2000 held by Mr. Tsui.
(11) Includes 77,500 shares subject to options exercisable within 60 days after
June 30, 2000 held by Mr. Foley.
(12) Represents 92,000 shares subject to options exercisable within 60 days
after June 30, 2000 held by Mr. Porter.
(13) Represents 37,500 shares subject to options exercisable within 60 days
after June 30, 2000 held by Mr. Ahkong.
(14) Includes 4,148,007 shares subject to options exercisable within 60 days
after June 30, 2000.
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<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described in "Executive Compensation," and the transactions described below,
during fiscal 2000, there was not, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than 5% of our
Ordinary Shares or any member of their immediate family had or will have
a direct or indirect material interest.
LOANS TO EXECUTIVE OFFICERS
Mr. Marks. On April 16, 1995, our principal U.S. subsidiary, Flextronics
International (USA), Inc., which we refer to in this section as Flextronics USA,
loaned $500,000 to Mr. Michael Marks, our Chairman of the Board and Chief
Executive Officer. Mr. Marks executed a promissory note in favor of Flextronics
USA that matured 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. During fiscal
2000, Flextronics USA forgave the remaining balance of $200,000 of outstanding
principal and $26,517 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 that 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. During fiscal 2000, Mr. Marks paid $1,500,000
in principal and $64,700 in accrued interest.
Mr. McNamara. On October 22, 1996, Flextronics USA loaned $136,000 to Mr.
Michael McNamara. Mr. McNamara executed a promissory note in favor of
Flextronics USA that bears interest at a rate of 7% and matures on October 22,
2001. The remaining outstanding balance of the loan as of March 31, 2000 was
$169,818 (representing $135,900 in principal and $33,918 in accrued interest).
On November 25, 1998, Flextronics USA loaned $130,000 to Mr. McNamara. Mr.
McNamara executed a promissory note in favor of Flextronics USA that 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, 2000 was $142,530 (representing
$130,000 in principal and $12,530 in accrued interest).
Mr. Nilsson. On February 4, 1999, we loaned $410,000 to Mr. Ronny Nilsson.
Mr. Nilsson executed a promissory note in favor of us. This note matured on
March 31, 2000, and at that time Mr. Nilsson executed a second promissory note
in favor of us that bears interest at a rate of 4.5% and matures on March 31,
2001.
Mr. Dykes. On January 15, 1999, Flextronics USA loaned $200,000 to Mr.
Robert Dykes. Mr. Dykes executed a promissory note in favor of Flextronics USA
that 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, 2000 was $217,243
(representing $200,100 in principal and $17,143 in accrued interest).
Mr. Smach. In April 2000, Flextronics USA loaned $1,000,000 to Mr. Thomas
J. Smach. Mr. Smach executed a Loan and Security Agreement and a promissory note
in favor of Flextronics USA that matures on termination of employment.
Mr. Snyder. In April 2000, Flextronics USA loaned $1,000,000 to Mr. Ronald
R. Snyder. Mr. Snyder executed a Loan and Security Agreement and a promissory
note in favor of Flextronics USA that matures upon the termination of Mr.
Snyder's employment with us.
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PROPOSAL NO. 2:
TO RECEIVE AND ADOPT OUR AUDITED ACCOUNTS,
INCLUDING THE REPORTS OF THE DIRECTORS AND AUDITORS
Our Annual Report for the fiscal year ended March 31, 2000 accompanies this
Proxy Statement. The Annual Report includes our United States dollar financial
statements prepared in conformity with United States generally accepted
accounting principles. Our 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, our independent auditors.
We publish our consolidated financial statements in U.S. dollars, which is the
principal currency in which we conduct our business. Our 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
OUR 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 our independent auditors for the
fiscal year ended March 31, 2000. The Board of Directors intends to engage
Arthur Andersen as independent auditors to audit our accounts and records for
the fiscal year ending March 31, 2001, and to perform other appropriate
services. We expect that a representative from Arthur Andersen will be present
at the 2000 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 2001 AND
AUTHORIZATION FOR THE BOARD OF DIRECTORS TO FIX THEIR REMUNERATION.
PROPOSAL NO. 4:
ORDINARY RESOLUTION TO APPROVE INCREASE OF AUTHORIZED SHARE CAPITAL
Shareholder approval is being sought for an increase in our authorized
share capital from S$2,500,000 divided into 250,000,000 Ordinary Shares, S$0.01
par value per share, to S$15,000,000 divided into 1,500,000,000 Ordinary Shares,
S$0.01 par value per share, by the creation of 1,250,000,000 new Ordinary
Shares, S$0.01 par value per share.
At July 26, 2000, 199,996,519 of our Ordinary Shares were issued and
outstanding and 3,395,147 Ordinary Shares were reserved for issuance upon
exercise of outstanding options. Also as of that date, an additional 447,636 of
our Ordinary Shares were reserved for issuance under our existing share purchase
and share option plans. The proposed increase in the number of authorized
Ordinary Shares from 250,000,000 to 1,500,000,000 would result in additional
shares being available for, among other things, stock splits, bonus issues,
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. We are
seeking shareholder approval of up to two bonus issues in fiscal 2001, and have
announced our intention to proceed with one of the bonus issues at the 2000
Annual General Meeting. We currently have no other specific plans, arrangements
or understandings with respect to the issuance of these additional shares, and
no other change in the rights of shareholders is proposed. We believe that the
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<PAGE> 23
availability of the additional shares will provide us 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 OUR AUTHORIZED SHARE CAPITAL.
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
Our 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, and which we refer to as the 1993 Plan, to:
(a) increase the maximum number of Ordinary Shares authorized for
issuance under the 1993 Plan from 20,400,000 Ordinary Shares to 25,400,000
Ordinary Shares and to reserve an additional 5,000,000 Ordinary Shares 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 our
capital;
(b) eliminate the provision that provides for the adjustment of the
number of securities underlying automatic option grants to individuals who
first become non-employee directors or to continuing directors under the
Automatic Option Grant Program under the 1993 Plan in the event of certain
stock splits, recapitalizations or other changes affecting our outstanding
Ordinary Shares and to amend the provisions relating to the Automatic
Option Grant Program to provide that individuals who first become non-
employee directors shall automatically receive an option to subscribe for
15,000 Ordinary Shares and eligible continuing directors shall
automatically annually receive an option to subscribe for 3,000 Ordinary
Shares;
(c) in order to conform to recent changes in Singapore law, amend the
provisions relating to the term of options to provide that the term of
options granted under the 1993 Plan is ten years, except that the term of
options granted to persons who are not our employees or those of our
related corporations will not exceed five years; and
(d) add a provision that prohibits the repricing, replacement or
regranting of any previously granted share option, through cancellation or
by lowering the exercise price of such share option, unless our
shareholders first approve such repricing, replacement or regranting.
As of July 26, 2000, there were 2,127,472 shares available for issuance
under the 1993 Plan and if this Proposal No. 5 is approved, 7,127,472 shares
will be available for issuance under the 1993 Plan. Options may be granted under
the Discretionary Option Grant Program at an exercise price per share not less
than 85% of the fair market value per Ordinary Share on the option grant date.
We do not currently intend to issue options with an exercise price below fair
market value.
The Board believes the increase in the number of shares available under the
1993 Plan is necessary for us 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 our long-term
success and to effectively compete for qualified personnel in our markets. We
have grown rapidly, both internally and through multiple acquisitions. As a
result of this growth there has been a significant increase in the number of key
employees to whom it is important to provide equity-based compensation. In
addition, many of the companies we have acquired did not have broad-based equity
compensation plans in place prior to the acquisition. Subsequent to each
acquisition, we provide equity-based compensation opportunities for employees of
the acquired company consistent with levels provided by us to our existing
employees to provide incentives to such employees to improve their personal
performance and contribute to the improvement of our financial performance. As a
result, the number of shares available for new option grants under our 1993 Plan
has been
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<PAGE> 24
nearly depleted, requiring that we 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.
INTERIM PLANS
Our 1997 Interim Option Plan, which we refer to as the 1997 Interim Plan,
our 1998 Interim Option Plan, which we refer to as the 1998 Interim Plan and our
1999 Interim Option Plan, which we refer to as the 1999 Interim Plan, were
adopted by the Board on June 5, 1997, January 14, 1998 and December 14, 1998,
respectively. The adoption of these interim plans was necessitated by our
internal growth and our multiple acquisitions.
The Board reserved an aggregate of 1,000,000 shares, 1,600,000 shares and
2,600,000 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 these 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. These interim plans provide a
mechanism for us to grant non-qualified stock options to certain persons without
incurring the compensation charge that would otherwise result if we 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.
From inception of the 1997 Interim Plan in June 1997 to July 26, 2000,
options to purchase an aggregate of 1,085,860 of our Ordinary Shares were
granted under the 1997 Interim Plan. From inception of the 1998 Interim Plan in
January 1998 to July 26, 2000, options to purchase an aggregate of 1,599,700 of
our Ordinary Shares were granted under the 1998 Interim Plan. From inception of
the 1999 Interim Plan in December 1998 to July 26, 2000, options to purchase an
aggregate of 1,702,456 of our Ordinary Shares were granted under the 1999
Interim Plan. Options to purchase 243,014 shares, 80,317 shares and 944,344
shares are available for grant pursuant to the 1997 Interim Plan, 1998 Interim
Plan and 1999 Interim Plan, respectively.
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 who wishes
to obtain a copy of the actual plan document may do so upon written request to
us at our offices located at 2090 Fortune Drive, San Jose, California 95131.
EQUITY INCENTIVE PROGRAMS
The 1993 Plan contains two separate equity incentive programs, including a
Discretionary Option Grant Program and 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, which we refer to together as 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 20,400,000 Ordinary Shares have been reserved for issuance over
the ten year term of the 1993 Plan. If Proposal No. 5 is approved, a total of
25,400,000 ordinary shares will be reserved under 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 2,000,000 Ordinary Shares in
the aggregate over the term of the 1993 Plan after July 1, 1995.
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<PAGE> 25
In the event any change is made to the outstanding Ordinary Shares by
reason of any recapitalization, bonus issue, stock split, combination of shares,
exchange of shares or other change in corporate structure effected without our
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, 2000, 19,997,215 Ordinary Shares were subject to
outstanding options and an aggregate of 3,395,147 shares were available for
option grants under the 1993 Plan and the interim plans.
ELIGIBILITY
Our officers and other key employees and our parent or subsidiaries,
whether now existing or subsequently established, and consultants and
independent contractors to us and our 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 prohibited or 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 26, 2000 approximately five executive officers and approximately
1,700 other employees were eligible to participate in the 1993 Plan, and five
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 26, 2000, the closing selling price per share was
$79.88.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than 85% of the fair market value per Ordinary
Share on the option grant date. We do 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 years. If Proposal No. 5 is approved, the term of granted options
will not exceed ten 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 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 us 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 our officers as part of
their option grants. Any option with such a limited stock appreciation right in
effect for at least six months may be surrendered to us upon the successful
completion of a hostile take-over of us. In return for the surrendered option,
the officer will be entitled to a cash distribution from us 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.
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<PAGE> 26
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. This authority will be
eliminated if Proposal No. 5 is approved.
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 60,000 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 60,000 Ordinary Shares. 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 subscribe for 12,000 Ordinary Shares,
provided such individual has served as a non-employee Board member for at least
six months. There will be no limit on the number of such 12,000-share options
which any one non-employee Board member may receive over the period of Board
service. If Proposal No. 5 is approved, individuals who first become
non-employee Board members automatically will be granted an option to subscribe
for 15,000 Ordinary Shares, and continuing non-employee Board members
automatically will be granted an option to subscribe for 3,000 Ordinary Shares.
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 years measured from the option grant date. Each option will become
exercisable for the option shares in 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 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 us by merger
or asset sale or a hostile change in control of us. In addition, upon the
successful completion of a hostile take-over, each automatic option grant which
has been outstanding for at least six months may be surrendered to us 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.
GENERAL PROVISIONS
Acceleration. In the event that we are 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 our company, whether by successful tender offer for more than 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 us 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 us.
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
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<PAGE> 27
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 any
event terminate on November 30, 2003.
FEDERAL INCOME TAX CONSEQUENCES OF 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 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 we 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 we be allowed a deduction with respect to
the optionee's disposition of the purchased shares.
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 us 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 our 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.
We 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 our taxable
year 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. We 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.
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NEW PLAN BENEFITS
The amount of future option grants under the Discretionary Option Grant
Program of the 1993 Plan to (a) our Chief Executive Officer, (b) the four other
most highly compensated executive officers whose salary for the fiscal year
exceeded $100,000, (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
our 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 2001, assuming that this Proposal No. 5 is approved by our
shareholders. Since all current non-employee Directors are incumbent Directors,
no non-employee Director who is elected at the 2000 Annual General Meeting will
receive the automatic initial grant of Ordinary Shares.
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF
NAME AND POSITION (PER SHARE) 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 our issued shares
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 our 1993 Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE AMENDMENT OF OUR 1993 PLAN.
PROPOSAL NO. 6:
ORDINARY RESOLUTION TO APPROVE THE INCREASE OF THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE 1997 EMPLOYEE SHARE PURCHASE PLAN
Our shareholders are being asked to approve an amendment to our 1997
Employee Share Purchase Plan, which was adopted by the Board of Directors and
approved by the shareholders in 1997 and which we refer to as the Share Purchase
Plan, to increase the number of our Ordinary Shares authorized for issuance
under the Share Purchase Plan by 400,000 shares, from 800,000 shares to
1,200,000 shares.
As of July 26, 2000, there were 447,636 shares available for issuance under
the Share Purchase Plan and if this Proposal No. 6 is approved, 847,636 shares
will be available for issuance under the Share Purchase Plan. The Board believes
the share increase is necessary for us 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 our
long-term success and to effectively compete for qualified personnel in our
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 our employees and our
subsidiaries and parent corporations designated by the Board of Directors as
eligible to participate in the Share Purchase Plan, which we refer to as
Participating Subsidiaries, with a convenient means to acquire an equity
interest in us through payroll deductions and to provide an incentive for
continued employment. We intend 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.
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SHARES SUBJECT TO THE SHARE PURCHASE PLAN
The shares subject to issuance under the Share Purchase Plan consists of
our authorized but unissued Ordinary Shares. An aggregate of 800,000 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, bonus issues 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, which we refer to in this section as 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 of our employees and those of any of our 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 us or, as the case
may be, by a 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 5% or more of the total
combined voting power or value of all classes of our shares; and (e) individuals
who provide services to us 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 26, 2000, approximately 15,000 persons were eligible to
participate in the Share Purchase Plan and no shares had been issued pursuant to
the Share Purchase Plan. As of July 26, 2000, the closing price of our Ordinary
Shares on the Nasdaq National Market was $79.88 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 2% nor more than 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 Internal Revenue
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
under all of our similar purchase plans, 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, which we refer to as an 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 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 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
23
<PAGE> 30
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 our Ordinary Shares is deemed to
be the closing price of our 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 may 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 15 days before
the related Purchase Date. If the withdrawal occurs less than 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 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 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 US 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
24
<PAGE> 31
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 Internal Revenue 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 year after the date of purchase and
more than two 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. We 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. We will treat any transfer of record ownership of shares as a
disposition, unless it is notified to the contrary. In order to enable us to
learn of disqualifying dispositions and ascertain the amount of the deductions
to which it is entitled, employees will be required to notify us 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 Internal Revenue Code.
VOTE REQUIRED
The affirmative vote of a majority of our issued shares 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. 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.
25
<PAGE> 32
PROPOSAL NO. 7:
ORDINARY RESOLUTION TO APPROVE VARIOUS MATTERS
RELATING TO ORDINARY SHARE ISSUANCES
We are incorporated in the Republic of Singapore. Under Singapore law, new
Ordinary Shares may only be issued with the prior approval of our shareholders
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 our shareholders 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 our best interest for
our 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 us 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.
We are seeking shareholder approval to issue new Ordinary Shares during the
period from the 2000 Annual General Meeting Date to the 2001 Annual General
Meeting Date. If obtained, shareholder approval of this proposal will lapse on
the 2001 Annual General Meeting Date or the expiration of the period within
which the 2001 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 UP TO TWO BONUS ISSUES OF ONE
ORDINARY SHARE FOR EVERY ONE EXISTING ORDINARY SHARE
HELD BY OUR SHAREHOLDERS
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 our
Articles of Association, we may allot and issue shares in a bonus issue, which
we refer to as bonus shares, only upon recommendation of the Directors and with
the prior approval of our shareholders at a general meeting. The Board believes
that it is advisable and has recommended that it is in the best interest for our
shareholders that the Board be granted the authority to allot and issue, at its
sole discretion:
- after the date of the 2000 Annual General Meeting, but on or before 5:00
p.m., California time, August 31, 2001, a bonus issue of up to an
aggregate of 200,288,006 bonus shares and, in the event that any new
shares are allotted and issued by us after the close of business on July
26, 2000, which date we refer to in this section as the Record Date, but
on or before 5:00 p.m., California time, August 31, 2001, an additional
one bonus share for each new share so allotted and issued, to be credited
as fully paid, which we refer to as the First Bonus Shares; and
- after the date of allotment and issue of the First Bonus Shares, which
date we refer to as the First Bonus Issue Date, but on or before 5:00
p.m., California time, August 31, 2001, a second bonus issue of up to an
aggregate of twice the number of the First Bonus Shares and, in the event
that any new shares are allotted and issued by us after the record date
in relation to the First Bonus Issue Date, but on or before 5:00 p.m.,
California time, August 31, 2001, an additional one bonus share for each
new share so allotted and issued, to be credited as fully paid, which we
refer to as the Second Bonus Shares.
The Board believes that such discretionary authority is in the best interest of
our 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.
26
<PAGE> 33
If the Board exercises its authority to allot and issue the First Bonus
Shares and Second Bonus Shares after the date of the 2000 Annual General Meeting
but on or before 5:00 p.m., California time, August 31, 2001, then the First
Bonus Shares and Second Bonus Shares are to be allotted and issued to the
holders of record of the Ordinary Shares on the respective dates specified by
our Board of Directors after the date of the 2000 Annual General Meeting, but no
later than 5:00 p.m., California time, August 31, 2001, on the basis of one
bonus share for every one 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 issues are approved at the 2000 Annual General
Meeting and the Board exercises its authority to allot and issue the First Bonus
Shares and Second Bonus Shares after the date of the 2000 Annual General
Meeting, but on or before 5:00 p.m., California time, August 31, 2001, then each
holder of record of Ordinary Shares on the respective record dates specified by
our Board of Directors after the date of the 2000 Annual General Meeting, but no
later than 5:00 p.m., California time, August 31, 2001, would receive an
additional one Ordinary Share, credited as fully paid, for every one Ordinary
Share then held by such shareholder. If the bonus issues are approved at the
2000 Annual General Meeting but the Board does not exercise its authority to
allot and issue the First Bonus Shares and Second Bonus Shares after the date of
the 2000 Annual General Meeting, but on or before 5:00 p.m., California time,
August 31, 2001, then no bonus issue would be effected and, accordingly, no
bonus shares would be allotted and issued to shareholders. It is to be wholly
within the discretion of our Board as to whether one or two bonus issues will be
effected.
The First Bonus Shares and Second 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$2,002,880.06 and, in the event
that any new shares are allotted and issued by us after the Record Date, but on
or before 5:00 p.m., California time, August 31, 2001, an additional amount of
S$0.01 for each new share so allotted and issued, from our Share Premium Account
as at March 31, 2000, which sum we refer to as the First Capital Sum, would be
capitalized and applied in paying up in full the First Bonus Shares to be
issued. Accordingly, our issued and paid up capital would increase by up to
S$2,002,880.06 after the allotment and issuance of the First Bonus Shares and,
in the event that any new shares are allotted and issued by us after the Record
Date but on or before 5:00 p.m., California time, August 31, 2001, an additional
amount of $0.01 each for each new share so allotted and issued. A sum of up to
twice the amount of the First Capital Sum and, in the event that any new shares
are allotted and issued by us after the record date in relation to the First
Bonus Issue Date, but on or before 5:00 p.m., California time, August 31, 2001,
an additional amount of $0.01 for each new share so allotted and issued from our
Share Premium Account as at March 31, 2000 would be capitalized and applied in
paying up in full the Second Bonus Shares to be issued. Accordingly, our issued
and paid up capital would increase by up to twice the amount of the First
Capital Sum after the allotment and issuance of the Second Bonus Shares and, in
the event that any new shares are allotted and issued by us after the record
date in relation to the First Bonus Issue Date, but on or before 5:00 p.m.,
California time, August 31, 2001, an additional amount of S$0.01 for each new
share so allotted and issued. Our independent auditors, Arthur Andersen, have
advised us that the balance in our Share Premium Account at March 31, 2000 is
sufficient for the purpose of both the bonus issues.
THE BOARD RECOMMENDS A VOTE "FOR" THE RESOLUTION
APPROVING THE PROPOSED BONUS ISSUE.
27
<PAGE> 34
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL GENERAL MEETING
Shareholder proposals intended to be considered at the 2001 Annual General
Meeting of shareholders must be received by us no less 120 days prior to August
28, 2001. Any proposals must be mailed to our 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
August 23, 2000
Singapore
28
<PAGE> 35
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AS AT 31 MARCH 2000
TOGETHER WITH REPORTS OF DIRECTORS AND AUDITORS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ S-1
Directors' Report........................................... S-2
Balance Sheets as at 31 March 2000.......................... S-10
Statements of Profit and Loss for the Year Ended 31 March
2000...................................................... S-11
Consolidated Statement of Cash Flow for the Year Ended 31
March 2000................................................ S-12
Notes to the Financial Statements........................... S-14
Statement by Directors...................................... S-42
</TABLE>
<PAGE> 36
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 S-10 to S-41.
These financial statements comprise the balance sheets of the Company and the
Group as at 31 March 2000 and the statements of profit and loss of the Company
and the Group and the statement of cashflows of the Group for the year then
ended. 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 in Singapore
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
2000 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.
We have considered the financial statements and auditors' reports of all
subsidiaries except for Flextronics International France S.A. ("Flextronics
France") 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.
The financial statements and auditors' reports of Flextronics France were
not available at the date of this report and accordingly these financial
statements have been excluded from the consolidated financial statements. The
financial impact on the consolidated financial statements, without incorporating
the financial statements of Flextronics France are disclosed in Note 39 to the
financial statements.
We are satisfied that the financial statements of the subsidiaries except
for the financial statements of Flextronics France 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.
[/s/ ARTHUR ANDERSEN]
Arthur Andersen
Certified Public Accountants
Singapore
4 August 2000
S-1
<PAGE> 37
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
DIRECTORS' REPORT
31 MARCH 2000
(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 and the Group for the
financial year ended 31 March 2000.
DIRECTORS
The directors of the Company in office at the date of this report are:
Michael E. Marks
Tsui Sung Lam
Michael J. Moritz
Richard L. Sharp
Patrick Foley
Chuen Fah Alain Ahkong
Hui Shing Leong
PRINCIPAL ACTIVITIES
The Company, which is listed on NASDAQ in the United States of America, 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.
At the date of this report, the directors having taken all such steps as
are reasonably available to them, are unable to obtain the audited statutory
financial statements of Flextronics International France SA ("Flextronics
France") while the directors have prepared the consolidated financial statements
of the Group, the impact of the consolidated statements, without incorporating
the financial statements of Flextronics France are disclosed in Note 39 to the
financial statements.
RESULTS FOR THE FINANCIAL YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
------- -------
$'000 $'000
<S> <C> <C>
Profit after taxation....................................... 192,399 26,641
Minority interest........................................... (3,658) --
------- ------
Profit before extraordinary items........................... 188,741 26,641
------- ------
Profit for the year transferred to accumulated profits...... 188,741 26,641
======= ======
</TABLE>
S-2
<PAGE> 38
TRANSFERS TO OR FROM RESERVES OR PROVISIONS
Material transfers to (from) reserves during the financial year were as
follows:
<TABLE>
<CAPTION>
GROUP COMPANY
--------- ---------
$'000 $'000
<S> <C> <C>
ACCUMULATED LOSSES
Exchange difference arising on translation.................. 19,367 39,658
Retained profit for the year................................ 188,741 26,641
SHARE PREMIUM
Premium on issuance of Ordinary Shares...................... 1,686,171 1,686,171
Expenses on issuance of Ordinary Shares..................... (53,967) (53,967)
Issuance of Ordinary Shares for acquisitions of Companies... 179,866 302,501
Impact of immaterial pooling of interest acquisitions....... 2,779 --
Tax benefit on employee stock plans......................... 2,907 --
</TABLE>
Apart from the above, there have been no other material transfers to or
from reserves.
There were no material transfers to or from provisions during the financial
year except for normal amounts set aside for such items as depreciation of fixed
assets, provisions for stock obsolescence, doubtful debts and income tax, as
disclosed in the accompanying financial statements.
ACQUISITION AND DISPOSAL OF SUBSIDIARIES
The following subsidiaries were acquired during the financial year:
<TABLE>
<CAPTION>
NET TANGIBLE ASSETS/
INTEREST (LIABILITIES) AT
NAME OF COMPANY ACQUIRED CONSIDERATION DATE OF ACQUISITION
--------------- -------- ------------- --------------------
% US$'000 US$'000
<S> <C> <C> <C>
HELD BY THE COMPANY
Circuit Board Assemblers, Inc............................ 100 14,100 (200)
EMC International, Inc................................... 100 14,100 (200)
Summit Manufacturing, Inc................................ 100 14,100 (200)
HELD BY SUBSIDIARY
Kyrel EMS Oyj............................................ 100 217,900 15,595
Vastbright PCB Co. Ltd................................... 100 18,000 4,300
PCB Assembly, Inc........................................ 100 72,100 39,400
</TABLE>
S-3
<PAGE> 39
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 Technology Sdn Malaysia Design, assembly and 100
Bhd manufacture of computer
industrial grade printed
circuit board assemblies
HELD BY SUBSIDIARIES
PCB Holding Corporation, United States Investment holding 100
Inc. of America
Flextronics Consulatoria Portugal Investment holding 100
Services Ltda
Flextronics Technology Switzerland Investment holding 100
Holding GmbH
Flextronics Technology Switzerland Design, assembly and 100
Switzerland GmbH manufacture of computer
industrial grade printed
circuit board assemblies
Flextronics Holding Finland Finland Investment holding 100
Oy
Flextronics Holding Germany Germany Investment holding 100
GmbH
Flextronics General Partner Germany Investment holding 100
GmbH
Flextronics International Germany Design, assembly and 100
Germany GmbH & Co. KG. manufacture of computer
industrial grade printed
circuit board assemblies
Flextronics International Denmark Investment holding 100
Denmark Aps
</TABLE>
The following subsidiary was liquidated during the financial year:
<TABLE>
<CAPTION>
INTEREST THE GROUP'S EFFECTIVE
NAME OF SUBSIDIARY DISPOSED OF CONSIDERATION SHAREHOLDINGS
------------------ ----------- ------------- ---------------------
US$'000
<S> <C> <C> <C>
HELD BY THE COMPANY
Hiromichi Limited................................. 100% -- 2,107
</TABLE>
There were no other acquisitions or disposals of subsidiaries during the
financial year.
ISSUE OF SHARES AND DEBENTURES
During the financial year,
(i) the Company increased the authorised share capital from $1,000,000
divided into 100,000,000 ordinary shares of $0.01 each to $2,500,000 by
the creation of 150,000,000 new ordinary shares of $0.01 each.
(ii) the Company issued the following shares:
(a) On 8 December 1999, the Company set a record date for a 2 for 1
stock split to be effected as a bonus issue. The distribution of
57,497,204 Ordinary Shares of par value of $0.01 for a 2 for 1 stock
split occurred on 22 December 1999.
(b) 8,600,000 and 13,800,000 Ordinary Shares of par value of $0.01 for
cash at US$59 and US$33.84 respectively per share for public
offering with proceeds amounting to US$943 million, net of issue
costs of US$31 million.
S-4
<PAGE> 40
(c) 2,597,133 Ordinary Shares of par value of $0.01 for cash at a
premium of US$19,821,000 net of expenses of US$552,000, by virtue of
the exercise of share options previously granted and Employee Share
Purchase Plan.
(d) 503,188 Ordinary Shares of par value $0.01 issued for the
acquisition of EMC International, Inc., Summit Manufacturing, Inc.
and Circuit Board Assemblers, Inc.
(e) 3,279,284 Ordinary Shares of par value $0.01 issued at a premium of
US$106,559,000 for the acquisition of Kyrel EMS Oyj which was held
by Flextronics Holding Finland Oy, a wholly owned subsidiary of the
Company.
(f) 976,109 Ordinary Shares of par value $0.01 issued for the
acquisition of PCB Assembly Inc., which was sold to PCB Holding
Corporation, Inc. at a premium of US$70,884,000.
During the financial year, the following subsidiaries issued shares:
(a) Flextronics KFT issued 1,050 Ordinary Shares of par value of US$1.00
to the Company.
(b) Flextronics International Singapore Pte Ltd issued 999,998 Ordinary
Shares of par value $1 to the Company.
(c) Flextronics Manufacturing Mex S.A. de C.V. issued 21,895,300 shares of
par value 10 Mexico Pesos each to the Company.
(d) Flextronics International U.K. Ltd. issued 3,000,000 shares of par
value GBP 1 each to the Company.
(e) Parque de Technologia Electronica, S.A. de C.V. issued 11,135,541
shares of par value 10 Mexico Pesos each to the Company.
(f) FKM Shenzhen increased its registered capital by capitalisation of
intercompany loans.
(g) DTM Products de Mexico, S.A. de C.V. issued 6,722,890 shares of par
value 10 Mexico Pesos each to the Company.
(h) Flextronics International Technologia Ltda issued 20,999,359 shares of
par value BR$1 to the Company.
(i) Flextronics International Denmark Aps issued 1,250 shares at Dkk 100
each to Flextronics Holdings U.K. Ltd.
(j) Flextronics Consulatoria Services Ltda issued 1 share of par value
5000 Euro to Flextronics Group Sweden AB.
(k) Flextronics Technology Holding GmbH issued 1 share at CHF 1000 and 1
share at CHF 19,000.
(l) Flextronics Technology Switzerland GmbH issued 1 share at CHF 1000 and
1 share at CHF 1,999,000.
(m) Flextronics Holding Germany GmbH and Flextronics General Partners
issued 1 share at Euro 25,000 and 1 share at Euro 75,000.
(n) Flextronics International Germany GmbH & Co. KG issued 1 share at Euro
50,000.
(o) Flextronics Holding Finland Oy issued 8 shares at Euro 1,000 each.
(p) PCB Holding Corporation, Inc. issued 83.85 shares at US$40.9 million
to the Company.
There were no other shares or debentures issued by the Company or any
corporation in the Group during the financial year.
S-5
<PAGE> 41
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES
During the financial year ended 31 March 2000, 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.
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 1999# 31 MARCH 2000
------------- -------------
<S> <C> <C>
THE COMPANY
Ordinary shares of $0.01 each
Michael E. Marks....................................... 641,150 1,056,582
Tsui Sung Lam.......................................... 588 1,176
Michael J. Moritz...................................... 621,476 501,030
Richard L. Sharp....................................... 1,520,738 3,053,476
Patrick Foley.......................................... 10,000 20,000
Hui Shing Leong........................................ 2,225,200 3,960,900
</TABLE>
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 1999# 31 MARCH 2000
------------- -------------
<S> <C> <C>
THE COMPANY
Options to acquire ordinary shares of $0.01 each
Michael E. Marks....................................... 1,530,000 4,300,000
Tsui Sung Lam.......................................... 144,836 229,672
Michael J. Moritz...................................... 30,000 48,000
Richard L. Sharp....................................... 30,000 60,000
Patrick Foley.......................................... 36,000 84,000
Chuen Fah Alain Ahkong................................. 26,000 44,000
Hui Shing Leong........................................ 36,000 12,500
</TABLE>
Other than as disclosed above, 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.
# Number of shares before 2 for 1 stock split as disclosed in Note 3 to the
financial statements.
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 fees in the accompanying financial statements and except for
emoluments received from related corporations) 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 except for any professional fees paid to a firm of which the director
is a member as shown in the financial statements.
S-6
<PAGE> 42
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.
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 2000 have not
been substantially affected by any item, transaction or event of a material and
unusual nature.
MATERIAL AND UNUSUAL TRANSACTIONS AFTER THE FINANCIAL YEAR
In the opinion of the directors, except as disclosed in Note 38 of the
accompanying consolidated financial statements, 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.
S-7
<PAGE> 43
SHARE OPTIONS AND SHARE OPTION PLANS (SCHEMES)
1993 Share Option Plan (the "1993 Plan")
During the financial year ended 31 March 2000, Options over a total of
3,609,653 Ordinary Shares in the Company were granted with an exercise price
ranging from US$22.06 to US$70.44 and a weighted average exercise price of
US$33.42. 1,840,851 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 2000, the number and class of unissued shares under option
granted under the 1993 Plan was 9,679,139 Ordinary Shares, net of cancellation
of options for 259,318 Ordinary shares. The expiration dates range from 10 April
2000 to 5 June 2007.
1997 Interim Option Plan (the "1997 Plan")
During the financial year ended 31 March 2000, no options were granted
under the 1997 plan. 98,028 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 2000, the number and class of unissued shares under option
granted under the 1997 Plan was 471,218 Ordinary Shares, net of cancellation of
options for 59,257 Ordinary Shares. The expiration dates range from 5 June 2002
to 2 June 2003.
1998 Interim Option Plan (the "1998 Plan")
During the financial year ended 31 March 2000, no options were granted
under the 1998 plan. 491,099 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 2000, the number and class of unissued shares under option
granted under the 1998 Plan was 1,000,584 Ordinary Shares, net of cancellation
of options for 25,050 Ordinary Shares. The expiration dates range from 11
December 2002 to 10 December 2003.
1999 Interim Option Plan (the "1999 Plan")
During the financial year ended 31 March 2000, options over a total of
1,065,950 Ordinary Shares in the Company were granted with an exercise price
ranging from US$21.13 to US$31.50 and a weighted average price of US$22.85.
11,293 Ordinary Shares in the Company were issued during the financial year by
virtue of exercise of options granted under the 1999 Plan. As at 31 March 2000,
the number and class of unissued shares under option granted under the 1999 Plan
was 1,630,463 Ordinary Shares, net of cancellation of options for 42,300
Ordinary Shares. The expiration dates range from 15 December 2003 to 7 September
2004.
Non-Plan Options (the "Non-Plan")
During the financial year ended 31 March 2000, no options were granted
under the Non Plan. 3,958 Ordinary Shares in the Company were issued during the
financial year by virtue of the exercise of options granted under the Non-Plan
Options.
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.
S-8
<PAGE> 44
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.
Employee Share Purchase Plan (the "ESPP")
During the financial year, the Company increased the total number of shares
reserved for issuance under the ESPP from 150,000 to 400,000 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 280,448 Ordinary Shares have been issued under the ESPP as at 31 March
2000. 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 2000.
AUDITORS
Arthur Andersen has expressed their willingness to accept re-appointment.
ON BEHALF OF THE BOARD OF DIRECTORS
MICHAEL E. MARKS TSUI SUNG LAM
Singapore
4 August 2000
S-9
<PAGE> 45
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
BALANCE SHEETS
AS AT 31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS)
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
$'000 $'000 $'000
(NOTE 39) (NOTE 38) $'000 (NOTE 38)
<S> <C> <C> <C> <C> <C>
SHARE CAPITAL AND RESERVES
Share capital.......................................... 3 1,257 966 1,257 966
Share premium.......................................... 4 2,503,078 685,322 2,563,599 628,894
Capital reserve........................................ 5 255 255 255 255
Revaluation reserve.................................... 6 -- -- 354,793 227,650
Accumulated profits (losses)........................... 7 308,499 144,804 42,632 (23,667)
--------- --------- --------- -------
2,813,089 831,347 2,962,536 834,098
MINORITY INTEREST...................................... 5,975 6,940 -- --
--------- --------- --------- -------
2,819,064 838,287 2,962,536 834,098
========= ========= ========= =======
Represented by:
FIXED ASSETS........................................... 8 1,017,218 652,315 -- 143
SUBSIDIARIES........................................... 9 1,470 -- 947,203 551,957
ASSOCIATED COMPANIES................................... 10 -- 398 -- --
OTHER INVESTMENTS...................................... 11 36,809 33,995 27,344 28,295
GOODWILL ON CONSOLIDATION.............................. 12 198,310 38,918 -- --
PURCHASED GOODWILL..................................... 13 65,060 13,385 -- --
INTANGIBLE ASSETS...................................... 14 14,055 14,477 -- --
DEFERRED EXPENDITURE................................... 15 282 1,095 -- --
OTHER NON-CURRENT ASSETS............................... 16 167,602 18,744 137,032 10,338
DUE FROM SUBSIDIARIES
(NON TRADE)............................................ 17 -- -- 617,508 103,620
CURRENT ASSETS
Stocks................................................. 18 1,430,908 383,169 -- --
Trade debtors.......................................... 19 1,022,269 440,326 -- --
Other debtors, deposits and Prepayments................ 20 210,334 108,399 11,922 7,006
Due from subsidiaries (trade).......................... 44,740 -- 681,895 283,866
Due from subsidiaries (non trade)...................... 22 2,611 -- 87,396 --
Cash and cash equivalents.............................. 34 1,070,142 315,425 726,103 233,724
Other short term investments........................... 11 33,844 -- 33,844 --
--------- --------- --------- -------
3,814,848 1,247,319 1,541,160 524,596
Less:
CURRENT LIABILITIES
Short term advances.................................... 23 377,595 58,906 -- --
Term loans -- current portion.......................... 23 32,114 31,957 -- --
Trade creditors........................................ 1,379,784 587,494 -- --
Other creditors and accruals........................... 21 247,227 108,629 18,964 12,984
Hire purchase creditors, current portion............... 24 26,156 16,937 -- --
Due to subsidiaries (trade)............................ 7,467 -- 27,517 109,348
Provision for taxation................................. 35,976 18,544 -- --
--------- --------- --------- -------
2,106,319 822,467 46,481 122,332
NET CURRENT ASSETS..................................... 1,708,529 424,852 1,494,679 402,264
Less:
NON-CURRENT LIABILITIES
TERM LOANS............................................. 23 49,935 37,570 -- --
SENIOR SUBORDINATED NOTES.............................. 23 259,500 259,065 259,500 259,065
HIRE PURCHASE CREDITORS,NON-CURRENT PORTION............ 24 54,514 40,459 -- --
DEFERRED TAXATION...................................... -- 2,850 -- --
OTHER PAYABLES......................................... 25 26,322 19,948 1,730 3,454
--------- --------- --------- -------
2,819,064 838,287 2,962,536 834,098
========= ========= ========= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-10
<PAGE> 46
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENTS OF PROFIT AND LOSS
FOR THE YEAR ENDED 31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS)
<TABLE>
<CAPTION>
GROUP COMPANY
--------------------- -----------------
2000 1999 2000 1999
--------- --------- ------- -------
$'000 $'000 $'000
(NOTE 39) (NOTE 38) $'000
<S> <C> <C> <C> <C> <C>
Turnover........................................... 26 7,004,286 3,332,765 -- --
========= ========= ======= =======
Operating profit (loss)............................ 27 252,171 150,018 (18,213) (6,474)
Share of profits of associated companies........... -- 1,728 -- --
Other (expense) income, net........................ 28 (31,740) (27,540) 44,857 (6,537)
--------- --------- ------- -------
Profit (loss) before taxation...................... 220,431 124,206 26,644 (13,011)
Taxation........................................... 29 (28,032) (12,964) (3) (2)
--------- --------- ------- -------
Profit (loss) after taxation....................... 192,399 111,242 26,641 (13,013)
Minority interests................................. (3,658) (2,192) -- --
--------- --------- ------- -------
Profit (loss) before extraordinary items........... 188,741 109,050 26,641 (13,013)
Extraordinary items................................ 30 -- (8,945) -- --
--------- --------- ------- -------
Profit (loss) for the year transferred to
accumulated profits (losses)..................... 7 188,741 100,105 26,641 (13,013)
========= ========= ======= =======
Earnings per share (cents)......................... 31
- basic (in cents)................................. 173.43 123.61
- fully diluted (in cents)......................... 159.58 116.74
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-11
<PAGE> 47
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
2000 1999
---------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation...................................... 220,431 124,206
Adjustments for:
Depreciation of fixed assets............................ 126,907 80,118
Loss (gain) on sale of fixed assets..................... 4,672 (1,099)
Gain on sale of associated company...................... -- (167)
Fixed assets written off................................ 5,543 32
Share of profit from associated company................. -- (1,728)
Provision for stock obsolescence........................ 55,034 10,714
Amortisation of purchased goodwill...................... 2,663 --
Amortisation of goodwill on consolidation............... 13,502 3,587
(Writeback) provision for doubtful debts................ 12,050 (1,056)
Amortisation of intangible assets....................... 3,505 4,677
Amortisation of deferred expenditure.................... 42 686
Interest expense........................................ 56,637 36,643
Interest income......................................... (28,479) (9,103)
---------- --------
Operating profit before working capital changes............. 472,507 247,510
Increase in:
Trade debtors........................................... (494,296) (140,693)
Other debtors, deposits and prepayments................. (117,267) (37,912)
Stocks.................................................. (776,925) (108,728)
Due from subsidiaries (trade)........................... (36,588)
Due from subsidiaries (non-trade)....................... (2,564)
Increase in:
Trade creditors......................................... 798,360 178,697
Other creditors and accruals............................ 68,924 11,588
---------- --------
Cash (used in) generated from operations.................... (87,849) 150,462
Interest received........................................... 21,419 6,739
Interest paid............................................... (53,583) (25,535)
Income taxes paid........................................... (11,713) (3,856)
---------- --------
Net cash (used in) generated from operating activities...... (131,726) 127,810
---------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of business, net of cash acquired (Note A)......... (393,746) (25,028)
Payment for additional 10% (1999: 50%) interest in FICO..... (7,642) (12,013)
Effect of acquisitions on cash (Note B(i)).................. 2,166 632
Acquisition of subsidiaries, net of cash acquired (Note
B(ii)).................................................... (31,131) --
Purchase of fixed assets.................................... (461,171) (276,357)
Investment in associate and other investment................ (161,793) (29,277)
Proceeds from sale of fixed assets.......................... 54,646 10,176
Proceeds from sale of associated company.................... -- 954
Payment of Astron earnout and repayment of Astron notes
payable................................................... -- (40,044)
---------- --------
Net cash used in investing activities....................... (998,671) (370,957)
---------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of shares............................ 1,632,454 342,695
Dividend paid to former shareholders of PCB Assembly Inc.... (40,679) (10,649)
Proceeds from bank borrowings............................... 367,764 44,387
(Repayment of) Proceeds from term loan...................... (83,558) 5,246
(Repayment of) Proceeds from finance lease.................. 2,943 1,198
---------- --------
Net cash provided by financing activities................... 1,878,924 382,877
---------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 748,527 139,730
EFFECT OF EXCHANGE RATE CHANGES............................. 6,190 13,971
CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR.... 315,425 161,724
---------- --------
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR (NOTE
34)....................................................... 1,070,142 315,425
========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-12
<PAGE> 48
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
A. During the financial year, the Company purchased the manufacturing facilities
and related assets of
(i) Cabletron Systems Inc. in Rochester, New Hampshire and Limerick,
Ireland,
(ii) Fujitsu Siemens Computer in Paderbron, Germany,
(iii) Ericsson Business Network in Visby, Sweden, and
(iv) ABB Automation Products in Vasteras, Sweden.
The acquisition of the manufacturing facilities has been shown in the
statement as a single item. The effect on the individual assets and
liabilities is set out below:
<TABLE>
<CAPTION>
$'000
<S> <C>
Stocks...................................................... 309,122
Other debtors, deposits and prepayments..................... 8,863
Fixed assets................................................ 73,245
Intangible assets........................................... 2,984
Purchased goodwill.......................................... 34,962
Other creditors and accruals................................ (22,673)
Other payables.............................................. (12,757)
-------
Cashflow on acquisition, net of cash acquired............... 393,746
=======
</TABLE>
B. The acquisition of all the subsidiaries during the financial year have been
shown in the statement as a single item. The effect on the individual assets
and liabilities is set out below:
(i)
<TABLE>
<CAPTION>
$'000
<S> <C>
Trade debtors............................................... 112,326
Stocks...................................................... 52,632
Other assets, debtors, deposits and prepayments............. 14,737
Fixed assets................................................ 58,100
Other non-current assets.................................... 1,513
Short-term advances......................................... (1,858)
Term loans.................................................. (83,835)
Hire purchase creditors..................................... (30,371)
Trade creditors............................................. (86,590)
Other creditors and accruals................................ (17,488)
Other non-current liabilities............................... (48)
Purchased goodwill.......................................... 2,296
--------
Total net assets acquired................................... 21,414
Total purchase consideration satisfied via the issue of
4,146,798 ordinary shares of $0.01 each at a premium of
US$106,559................................................ (179,866)
Goodwill on consolidation................................... 159,392
Effect of exchange rate changes............................. 1,226
--------
2,166
========
</TABLE>
(ii) Trade debtors
<TABLE>
<CAPTION>
$'000
------
<S> <C>
Trade debtors............................................... 5,460
Stocks...................................................... 2,957
Other assets, debtors, deposits and prepayments............. 17
Fixed assets................................................ 4,133
Trade creditors............................................. (3,582)
Other creditors and accruals................................ (1,336)
Purchased goodwill.......................................... 23,482
Cash and cash equivalents................................... 4,444
------
Total Purchase Consideration................................ 35,575
Cash and cash equivalents................................... (4,444)
------
Cashflow from acquisition of subsidiaries, net of cash
acquired.................................................. 31,131
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-13
<PAGE> 49
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
31 MARCH 2000
(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
moulding, 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.
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 PCB Assembly, Inc. ("PCB Assembly") in the 2000
financial year was accounted for as a pooling of interests. Accordingly, prior
period consolidated financial statements of the Group and the financial
statements of 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.
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.
S-14
<PAGE> 50
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
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.
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:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Leasehold Land..................................... 25
Building........................................... 20 to 50
Leasehold improvements............................. 6 to 10
Plant and equipment................................ 7 to 10
Others............................................. 2 to 10
</TABLE>
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.
S-15
<PAGE> 51
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
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 of ten to fourteen years.
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.
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.
S-16
<PAGE> 52
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
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 approximating 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.
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.
S-17
<PAGE> 53
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
3. SHARE CAPITAL
<TABLE>
<CAPTION>
GROUP AND COMPANY
------------------
2000 1999
----- ---------
$'000
$'000 (NOTE 38)
<S> <C> <C>
Authorised:
-- 250,000,000 (1999:100,000,000) Ordinary Shares of $0.01
each...................................................... 2,500 1,000
===== =====
Issued and fully paid
-- Balance brought forward.................................. 966 408
-- 6,969,649 Ordinary shares of $0.01 issued in the
financial year 1999....................................... -- 70
-- 29,143,931 Ordinary shares of $0.01 issued in the
financial year 2000....................................... 291 --
----- -----
-- Balance as previously stated............................. 1,257 478
-- retroactive adjustment for 2 for 1 bonus issue (Note
4)........................................................ -- 478
retroactive adjustment on merger of companies (Note
2 -- "Consolidation", 2nd paragraph)...................... -- 10
----- -----
-- 125,697,596 (1999: 96,553,665) ordinary shares of $0.01
each...................................................... 1,257 966
===== =====
</TABLE>
During the financial year,
(i) the Company increased the authorised share capital from $1,000,000
divided into 100,000,000 ordinary shares of $0.01 each to $2,500,000 by
the creation of 150,000,000 new ordinary shares of $0.01 each.
(ii) the Company issued the following shares:
(a) On 8 December 1999, the Company set a record date for a 2 for 1
stock split to be effected as a bonus issue. The distribution of
57,497,204 Ordinary Shares of par value of $0.01 for a 2 for 1 stock
split occurred on 22 December 1999.
(b) 8,600,000 and 13,800,000 Ordinary Shares of par value of $0.01 for
cash at US$59 and US$33.84 respectively per share for public
offering with proceeds amounting to US$943 million, net of issue
costs of US$31 million.
(c) 2,597,133 Ordinary Shares of par value of $0.01 for cash at a
premium of US$19,821,000 net of expenses of US$552,000, by virtue
of the exercise of share options previously granted and Employee
Share Purchase Plan.
(d) 503,188 Ordinary Shares of par value $0.01 issued for the
acquisition of EMC International, Inc., Summit Manufacturing, Inc.
and Circuit Board Assemblers, Inc.
(e) 3,279,284 Ordinary Shares of par value $0.01 issued at a premium of
US$106,559,000 for the acquisition of Kyrel EMS Oyj which was held
by Flextronics Holding Finland Oy, a wholly owned subsidiary of the
Company.
(f) 976,109 Ordinary Shares of par value $0.01 issued for the
acquisition of PCB Assembly Inc., which was sold to PCB Holding
Corporation, Inc. at a premium of US$70,884,000.
S-18
<PAGE> 54
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
4. SHARE PREMIUM
Movements in the account are as follows:
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
$'000 $'000
$'000 (NOTE 38) $'000 (NOTE 38)
<S> <C> <C> <C> <C>
Balance as previously stated.................... 685,322 334,857 628,894 278,476
Retroactive adjustment on 2 for 1 bonus issue
(Note 3)...................................... -- (478) -- (478)
Retroactive adjustment on merger of companies
(Note 2 -- "Consolidation", 2nd paragraph).... -- 47 -- --
--------- ------- --------- -------
Balance brought forward......................... 685,322 334,426 628,894 277,998
Premium on issue of Ordinary Shares............. 1,686,171 345,671 1,686,171 345,671
Expenses on issuance of Ordinary Shares......... (53,967) (3,048) (53,967) (3,048)
Issuance of Ordinary Shares for acquisitions of
companies..................................... 179,866 8,273 302,501 8,273
Impact of immaterial pooling of interest
acquisitions.................................. 2,779 -- -- --
Tax benefit on employee stock plans............. 2,907 -- -- --
--------- ------- --------- -------
At end of financial year........................ 2,503,078 685,322 2,563,599 628,894
========= ======= ========= =======
</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 33.
6. REVALUATION RESERVES
<TABLE>
<CAPTION>
COMPANY
------------------
2000 1999
------- -------
$'000 $'000
<S> <C> <C>
At beginning of financial year.............................. 227,650 91,553
Net adjustment during the financial year (Note 9)........... 127,143 136,097
------- -------
At end of financial year.................................... 354,793 227,650
======= =======
</TABLE>
S-19
<PAGE> 55
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
7. ACCUMULATED PROFITS (LOSSES)
This account consists of:
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ------------------
2000 1999 2000 1999
--------- --------- ------- -------
$'000 $'000
(NOTE 39) (NOTE 38) $'000 $'000
<S> <C> <C> <C> <C>
At beginning of financial year:
As previously stated............................. 144,804 10,962 (23,667) (47,142)
Retroactive adjustment for acquisition of
companies (Note 2 -- "Consolidation", 2nd
paragraph).................................... -- 22,556 -- --
------- ------- ------- -------
Balance brought forward............................ 144,804 33,518 (23,667) (47,142)
Impact of immaterial pooling of interests
acquisitions..................................... (3,734) -- --
Exchange difference arising on translation......... 19,367 21,828 39,658 36,488
Retained profit (loss) for the year................ 188,741 100,105 26,641 (13,013)
Dividend issued to former shareholder of PCB
Assembly, Inc.................................... (40,679) (10,647) -- --
------- ------- ------- -------
At end of financial year........................... 308,499 144,804 42,632 (23,667)
======= ======= ======= =======
This account consists of:
Retained by:
Company............................................ 42,632 (23,667)
Subsidiaries....................................... 265,867 165,844
Associated companies............................... -- 2,627
------- -------
308,499 144,804
======= =======
</TABLE>
S-20
<PAGE> 56
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
8. FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND
LAND BUILDING IMPROVEMENTS EQUIPMENT OTHERS TOTAL
------ -------- ------------ --------- ------- -------------
$'000
$'000 $'000 $'000 $'000 $'000 (NOTE 38, 39)
<S> <C> <C> <C> <C> <C> <C>
COST
At beginning of financial year..... 36,181 180,825 40,708 429,058 136,449 823,221
Retroactive adjustment on merger of
companies (Note 2 --
"Consolidation", 2nd
paragraph)....................... -- -- 8,119 15,023 2,365 25,507
------ ------- ------- ------- ------- ---------
Balance brought forward............ 36,181 180,825 48,827 444,081 138,814 848,728
Currency re-alignment.............. (67) (14,724) 2,630 (35,674) (7,822) (55,657)
Due to acquisitions of
subsidiaries..................... 1,260 37,384 3,905 127,645 11,305 181,499
Additions.......................... 22,345 113,358 50,158 171,763 103,548 461,172
Disposals.......................... (215) (1,804) (24,226) (35,621) (25,708) (87,574)
------ ------- ------- ------- ------- ---------
At end of financial year........... 59,504 315,039 81,294 672,194 220,137 1,348,168
====== ======= ======= ======= ======= =========
ACCUMULATED DEPRECIATION
At beginning of financial year..... 1,285 15,569 6,948 138,081 26,617 188,500
Retroactive adjustment on merger of
companies (Note 2 --
"Consolidation", 2nd
paragraph)....................... -- -- 195 7,718 -- 7,913
------ ------- ------- ------- ------- ---------
Balance brought forward............ 1,285 15,569 7,143 145,799 26,617 196,413
Currency re-alignment.............. 3 (1,263) (57) (16,279) (2,329) (19,925)
Due to acquisitions of
subsidiaries..................... -- 2,383 1,619 47,449 3,999 55,450
Additions.......................... 138 6,149 9,671 81,370 29,579 126,907
Disposals.......................... (895) (277) (3,375) (16,401) (6,947) (27,895)
------ ------- ------- ------- ------- ---------
At end of financial year........... 531 22,561 15,001 241,938 50,919 330,950
====== ======= ======= ======= ======= =========
Depreciation charge for 1999....... 974 6,991 3,269 56,415 12,469 80,118
====== ======= ======= ======= ======= =========
NET BOOK VALUES
At 31.3.2000....................... 58,973 292,478 66,293 430,256 160,218 1,017,218
====== ======= ======= ======= ======= =========
At 31.3.99......................... 34,896 165,256 41,684 298,282 112,197 652,315
====== ======= ======= ======= ======= =========
</TABLE>
Plant and equipment includes items with net book value of approximately
$47,625,000 (1999: $66,144,000) which were purchased under hire purchase
contracts.
Land and building with a net book value of $26,016,000 (1999: $39,696,000)
are mortgaged.
S-21
<PAGE> 57
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
COMPANY 2000
<TABLE>
<CAPTION>
OTHERS
------
$'000
<S> <C>
COST
At beginning of financial year.............................. 143
Currency re-alignment....................................... 3
Additions................................................... --
Disposals................................................... (146)
----
At end of financial year.................................... --
====
ACCUMULATED DEPRECIATION
At beginning of financial year.............................. --
Currency re-alignment....................................... --
Additions................................................... --
Disposals................................................... --
----
At end of financial year.................................... --
====
Charge for 1999............................................. --
====
NET BOOK VALUES
At 31.3.2000................................................ --
====
At 31.3.1999................................................ 143
====
</TABLE>
9. SUBSIDIARIES
(a) Subsidiaries comprise:
<TABLE>
<CAPTION>
COMPANY
--------------------
2000 1999
------- ---------
$'000
$'000 (NOTE 39)
<S> <C> <C>
At cost:
Balance at beginning of financial year.................... 258,147 158,528
Increase investment in existing subsidiaries.............. 155,247 37,996
Acquisitions of subsidiaries.............................. 115,573 61,623
Subsidiary liquidated..................................... (3,645) --
------- -------
Balance at end of financial year.......................... 525,322 258,147
======= =======
Revaluation:
Balance at beginning of financial year.................... 254,787 118,690
Net adjustments during the year........................... 127,143 136,097
------- -------
Balance at end of financial year.......................... 381,930 254,787
------- -------
Currency re-alignment..................................... 39,951 39,023
------- -------
Balance at end of year.................................... 947,203 551,957
======= =======
</TABLE>
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 $127,143,000 (1999: $136,097,000).
S-22
<PAGE> 58
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
The subsidiaries acquired during the financial year have been stated at the
cost of investment less any provision for diminution in net asset value. It is
the directors' opinion that no provision for diminution in net asset value of
these subsidiaries is necessary in the current year.
The Company's subsidiaries operating in the People's Republic of China are
required to obtain approval from the relevant authorities when making foreign
currency payments.
(b) The Company and the Group had the following subsidiaries as at 31 March
2000:
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL COST OF
COUNTRY OF EQUITY HELD BY INVESTMENT
INCORPORATION THE GROUP BY THE GROUP
AND PLACE OF --------------- -------------------
NAME PRINCIPAL ACTIVITIES BUSINESS 2000 1999 2000 1999
---- -------------------- -------------- ------ ------ ------- ---------
% % US$'000 US$'000
<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 Hong Kong 100 100 ** **
Manufacturing (H.K.) components for computer
Limited # equipment
FICO Investment Sale and manufacture of Hong Kong 100 90 23,310 20,310
Holding Limited plastic products
("FICO") #
Flextronics Design, assembly and United States 100 100 62,168 62,168
International manufacture of computer of America
USA, Inc. @ industrial grade printer
circuit board sub-
assemblies, and products
requiring advance
electronics packaging,
marketing and
procurement
representative
Flextronics Holdings Investment holding United Kingdom 100 100 1 1
UK Limited #
Flextronics Investment holding Netherlands 100 100 20 20
International
Europe BV #
Circuit Board Design, assembly and United States 100 -- 1 --
Assemblers, Inc. @ manufacture of computer of America
industrial grade printed
circuit board sub-
assemblies, systems
assembly and testing
EMC International, Inc. Electro-magnetic United States 100 -- 2 --
@ interference testing of America
Summit Manufacturing, Contract manufacturer of United States 100 -- 1 --
Inc. @ cable assemblies of America
PCB Holding Investing holding United States 100 -- 40,890 --
Corporation, Inc. @ of America
Flextronics Technology Design, assembly and Malaysia 100 -- ** --
Sdn Bhd *** manufacture of computer
industrial grade printed
circuit board sub-
assemblies, systems
assembly and testing
</TABLE>
S-23
<PAGE> 59
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL COST OF
COUNTRY OF EQUITY HELD BY INVESTMENT
INCORPORATION THE GROUP BY THE GROUP
AND PLACE OF --------------- -------------------
NAME PRINCIPAL ACTIVITIES BUSINESS 2000 1999 2000 1999
---- -------------------- -------------- ------ ------ ------- ---------
% % US$'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
FLX Cyprus Limited # Investment holding Cyprus 100 100 7 **
Flextronics Investment holding Austria 92 92 13,019 13,019
International
GmBH (formerly known
as "Neutronics
Electronic
Industries Holding A.G")
#
Parque de technologia Management of real Mexico 100 100 24,618 17,518
Electronics # estate business park
(formerly known as
"Flextronics de Mexico,
S.A. de C.V.")
Flextronics Design, assembly and Mexico 100 100 23,005 5
Manufacturing Mex, manufacture of computer
S.A. 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 Sales and manufacture of Mexico 100 100 43,605 5
Mexico, S.A. de C.V. # plastic material
products and its
by-products
Flextronics Contract manufacturer of United Kingdom 100 100 8,831 4,057
International electronics and
(UK) Limited # telecommunication
equipment providing
turnkey manufacturing
services to its
customers
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 sub-
Technology Co Ltd") # assemblies, systems
assembly, manufacture
miniature, gold-finished
printed circuit boards
Flextronics Sales and marketing Malaysia 100 100 ** **
International business
Latin America (L) Ltd #
DTM Latin America (L) Sales and marketing Malaysia 100 100 ** **
Ltd # business
Flextronics Design, assembly and United States 100 100 4 4
International manufacture of computer of America
Fremont, Inc. industrial grade printed
(formerly known as circuit board sub-
"Altatron, Inc.") @ assemblies and systems
assembly
Marathon Business Park Management of real United States 100 100 1 1
LLC @ estate business park of America
</TABLE>
S-24
<PAGE> 60
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL COST OF
COUNTRY OF EQUITY HELD BY INVESTMENT
INCORPORATION THE GROUP BY THE GROUP
AND PLACE OF --------------- -------------------
NAME PRINCIPAL ACTIVITIES BUSINESS 2000 1999 2000 1999
---- -------------------- -------------- ------ ------ ------- ---------
% % US$'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
Flextronics Design, assembly and Brazil 100 100 22,983 15,326
International manufacture of computer
Technologies Ltda industrial grade printed
(formerly known as circuit board sub-
"Conexao Informatica assemblies and systems
Ltda") @ assembly
Hiromichi Limited @ Dormant British Virgin -- 100 -- 2,107
Islands
Flextronics Hungaria Investment holding Hungary 100 100 17 17
Kereskedelmi es, Kft #
Flextronics Design, assembly and Singapore 100 100 609 **
International manufacture of computer
Singapore Pte Ltd industrial grade printed
circuit board sub-
assemblies, system
assembly and testing and
performing procurement
and logistic functions
on behalf of related
parties
F.L. Tronics Design, assembly and Sweden 100 -- 25,907 --
International Sweden manufacture of computer
AB (aka Flextronics industrial grade printed
International Sweden circuit board sub-
AB) # assemblies, system
assembly and testing
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 Hong Kong 100 100 -- --
miniature, gold-finished
printed circuit boards
Astron Group (China) Manufacture of China 96.25 96.25 -- --
Limited # miniature, gold-finished
(formerly known as Zhu printed circuit boards
Hai Dao Men Chao Yi
Electronics Co Ltd)
FKM (Shenzhen) Ltd. # Sales and manufacture of China 100 100 -- --
plastic material
products and its
by-products
</TABLE>
S-25
<PAGE> 61
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL COST OF
COUNTRY OF EQUITY HELD BY INVESTMENT
INCORPORATION THE GROUP BY THE GROUP
AND PLACE OF --------------- -------------------
NAME PRINCIPAL ACTIVITIES BUSINESS 2000 1999 2000 1999
---- -------------------- -------------- ------ ------ ------- ---------
% % US$'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
Proactive Corporation, Procurement of United States 100 100 -- --
Inc. # components. of America
DTM Products, Inc. # Sales and manufacture of United States 100 100 -- --
plastic material of America
products and its
by-products
Flextronics Distribution Distribution and United States 100 100 -- --
Inc. # warehousing of America
Flextronics Group Investment holding Sweden 100 100 -- --
Sweden AB (formerly
known as F.L. Tronics
Holdings AB) #
Flextronics Design, assembly and France 100 -- -- --
International manufacture of computer
France S.A. # industrial grade printed
circuit board sub-
assemblies, systems
assembly and testing
Igrene AB Design, assembly and Sweden 100 100 -- --
(formerly known as manufacture of computer
"Energipilot AB") # industrial grade printed
circuit board sub-
assemblies and system
assembly
Althofen Electronics Contract manufacturer of Austria 100 100 -- --
GmbH # electronics products
Flextronics Contract manufacturer of Hungary 100 100 -- --
International electronics products
Kft (formerly known as
"HTR Technikai
Rendezerszolgaltato
Kft") #
Ecoplast Muanyangipari Sales and manufacture of Hungary 100 100 -- --
Termekeket Gyarto Kft plastic material
(formerly known as products and its
"Neutronics Ecoplast by-products
Muanyangipari
Termekeket Gyarto Kft")
#
Components, Kft Provision of Hungary 100 100 -- --
(formerly known as manufacturing labour
Neutronics Components services and 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 of printed
Katrineholm circuit board sub-
AB") # assemblies
Noitall AB Installation PBX Sweden 100 100 -- --
(formerly known as communication systems
"Energipilot
Installation AB") #
</TABLE>
S-26
<PAGE> 62
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL COST OF
COUNTRY OF EQUITY HELD BY INVESTMENT
INCORPORATION THE GROUP BY THE GROUP
AND PLACE OF --------------- -------------------
NAME PRINCIPAL ACTIVITIES BUSINESS 2000 1999 2000 1999
---- -------------------- -------------- ------ ------ ------- ---------
% % US$'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
Flextronics Manufacture of Scotland 100 100 -- --
International electronics and
Scotland, Limited telecommunications
(formerly known as equipment
"Altatron (Europe)
Limited") #
PCB Assembly Inc. @ Design, assembly and United States 100 -- -- --
manufacture of computer of America
industrial grade printed
circuit board sub-
assemblies and systems
assembly
Flextronics Consulatoria Investment holding Portugal 100 -- -- --
Services Ltda ***
Flextronics Technology Investment holding Switzerland 100 -- -- --
Holding GmbH ***
Flextronics Technology Design, assembly and Switzerland 100 -- -- --
Switzerland GmbH *** manufacture of computer
industrial grade printed
circuit board assemblies
Flextronics Holding Investment holding Finland 100 -- -- --
Finland Oy #
Flextronics Germany Investment holding Germany 100 -- -- --
Holding GmbH ***
Flextronics General Investment holding Germany 100 100
Partner GmbH
Flextronics Design, assembly and Germany 100 100
International manufacture of computer
Germany GmbH & Co. industrial grade printed
KG circuit board assemblies
Flextronics Investment holding Denmark 100 100
International
Denmark Aps
Mecha Design s.r.l @@ Design of moulding for Italy 85 55 -- --
plastic products
</TABLE>
---------------
@ Not required to present audited financial statements for the financial year
by the laws of its country of incorporation
# Audited by an associated firm of Arthur Andersen Singapore
+ Audited by another firm of auditors
** Amount less than $1,000
@@ Accounted for in the financial statements as an associated company in the
1999 financial year
## Not required to present audited financial statements for the financial year
as the liquidation process commenced subsequent to the financial year end.
*** Not required to present audited financial statements, being its first year
of incorporation.
S-27
<PAGE> 63
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
10. ASSOCIATED COMPANIES
(a) Associated companies comprise:
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
2000 1999 2000 1999
----- ----- ----- -----
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Unquoted equity shares at cost............................ 398 398 -- --
Reclassed to subsidiaries................................. (398) -- -- --
---- --- --- ---
-- 398 -- --
---- --- --- ---
</TABLE>
During the financial year, the Company and the Group acquired 100% of the
interest in the associated company.
11. OTHER INVESTMENTS
<TABLE>
<CAPTION>
GROUP COMPANY
----------------- -----------------
2000 1999 2000 1999
------- ------ ------- ------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Short-term investments, at cost
Quoted investments.................................... 33,844 -- 33,844 --
======= ====== ======= ======
Market value of Quoted investments.................... 121,937 -- 121,937 --
======= ====== ======= ======
Long-term investments, at cost
Unquoted investments.................................. 36,809 33,995 27,344 28,295
======= ====== ======= ======
</TABLE>
12. GOODWILL ON CONSOLIDATION
<TABLE>
<CAPTION>
GROUP
-----------------
2000 1999
------- ------
$'000 $'000
<S> <C> <C>
COST
At beginning of financial year.............................. 52,431 35,246
Currency re-alignment....................................... (379) 2,546
Additions................................................... 173,483 14,639
------- ------
At end of financial year.................................... 225,535 52,431
======= ======
ACCUMULATED AMORTISATION
At beginning of financial year.............................. 13,513 9,146
Currency re-alignment....................................... 210 780
Amortisation for the financial year......................... 13,502 3,587
------- ------
At end of financial year.................................... 27,225 13,513
------- ------
Net book value at end of financial year..................... 198,310 38,918
======= ======
</TABLE>
S-28
<PAGE> 64
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
13. PURCHASED GOODWILL
<TABLE>
<CAPTION>
GROUP
----------------
2000 1999
------ ------
$'000 $'000
<S> <C> <C>
COST
At beginning of financial year.............................. 13,385 --
Currency re-alignment....................................... (23) --
Additions................................................... 54,538 13,385
------ ------
At end of financial year.................................... 67,900 13,385
====== ======
ACCUMULATED AMORTISATION
At beginning of financial year.............................. -- --
Currency re-alignment....................................... 177 --
Amortisation for the financial year......................... 2,663 --
------ ------
At end of financial year.................................... 2,840 --
------ ------
Net book value at end of financial year..................... 65,060 13,385
====== ======
</TABLE>
14. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
GROUP
----------------
2000 1999
------ ------
$'000 $'000
<S> <C> <C>
COST
At beginning of financial year.............................. 24,579 27,398
Currency re-alignment....................................... (101) 2,242
Additions................................................... 3,796 1,215
Write off to plant closure expense.......................... -- (6,276)
Reclassification............................................ (1,093) --
------ ------
At end of financial year.................................... 27,181 24,579
====== ======
ACCUMULATED AMORTISATION
At beginning of financial year.............................. 10,102 10,655
Currency re-alignment....................................... 73 1,046
Amortisation for the financial year......................... 3,505 4,677
Write off to plant closure expense.......................... -- (6,276)
Reclassification............................................ (554) --
------ ------
At end of financial year.................................... 13,126 10,102
------ ------
Net book value at end of financial year..................... 14,055 14,477
====== ======
</TABLE>
S-29
<PAGE> 65
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
15. DEFERRED EXPENDITURE
<TABLE>
<CAPTION>
GROUP
---------------
2000 1999
------ -----
$'000 $'000
<S> <C> <C>
COST
At beginning of financial year.............................. 2,562 2,743
Currency re-alignment....................................... (78) 117
Additions................................................... -- 52
Disposals................................................... (2,093) (350)
------ -----
At end of financial year.................................... 391 2,562
====== =====
AMORTISATION
At beginning of financial year.............................. 1,467 706
Currency re-alignment....................................... (4) 75
Charge for the year......................................... 42 686
Disposals................................................... (1,396) --
------ -----
At end of financial year.................................... 109 1,467
------ -----
Net book value at end of financial year..................... 282 1,095
====== =====
</TABLE>
16. OTHER NON-CURRENT ASSETS
<TABLE>
<CAPTION>
GROUP COMPANY
----------------- -----------------
2000 1999 2000 1999
------- ------ ------- ------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Investment securities................................. -- 1,846 -- --
Prepaid bank arrangement fees......................... 5,658 7,254 5,552 6,884
Notes receivable...................................... 143,175 5,608 131,480 3,454
Others................................................ 18,769 4,036 -- --
------- ------ ------- ------
167,602 18,744 137,032 10,338
======= ====== ======= ======
</TABLE>
Notes receivable relates to an unsecured subordinated debt, bearing
interest at 13% per annum, and due in 2007.
17. DUE FROM SUBSIDIARIES (NON-TRADE)
These balances are unsecured, bear interest at rates ranging from 0% to
9.6%, renewable after 60 months from the date of commencement.
S-30
<PAGE> 66
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
18. STOCKS
<TABLE>
<CAPTION>
GROUP
----------------------
2000 1999
--------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
Raw materials............................................... 1,198,854 321,116
Work-in-progress............................................ 194,379 57,354
Finished goods.............................................. 104,438 30,027
--------- -------
1,497,671 408,497
Less: Provision for obsolescence............................ (66,763) (25,328)
--------- -------
1,430,908 383,169
========= =======
</TABLE>
Movements in provision for stock obsolescence during the year are as
follows:
<TABLE>
<CAPTION>
GROUP
----------------------
2000 1999
--------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
At beginning of year, as previously stated.................. 25,328 15,369
Retroactive adjustment on merger of companies (Note
2 -- "Consolidation", 2nd paragraph)...................... -- 1,638
------- -------
Balance brought forward..................................... 25,328 17,007
Currency re-alignment....................................... 1,272 1,958
Provision for the year...................................... 55,034 6,852
Retroactive adjustment on merger of companies (Note
2 -- "Consolidation", 2nd paragraph)...................... -- 3,862
Due to acquisitions of subsidiaries......................... 4,123 --
Written off against provision............................... (18,994) (4,351)
------- -------
66,763 25,328
======= =======
</TABLE>
19. TRADE DEBTORS
<TABLE>
<CAPTION>
GROUP
----------------------
2000 1999
--------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
Trade debtors............................................... 1,045,180 453,509
Less provision for doubtful debts........................... (22,910) (13,183)
--------- -------
1,022,269 440,326
========= =======
</TABLE>
S-31
<PAGE> 67
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
Movements in provision for doubtful debts during the year are as follows:
<TABLE>
<CAPTION>
GROUP
----------------------
2000 1999
--------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
At beginning of the financial year, as previously stated.... 13,183 15,369
Retroactive adjustment for acquisition of companies (Note
2 -- "Consolidation", 2nd paragraph)...................... -- 1,092
------- -------
Balance brought forward..................................... 13,183 16,461
Currency re-alignment....................................... 963 1,006
(Write back)/provision during the financial year............ 12,050 (4,311)
Retroactive adjustment for acquisition of companies (Note
2 -- "Consolidation", 2nd paragraph)...................... -- 3,255
Due to acquisitions of subsidiaries......................... 1,868 385
Written off against provision............................... (5,154) (3,613)
------- -------
22,910 13,183
======= =======
</TABLE>
20. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ---------------
2000 1999 2000 1999
--------- --------- ------ -----
$'000 $'000 $'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C> <C> <C>
Notes receivable...................................... 41,594 31,437 1,536 1,563
Loan to related party................................. -- 4,297 -- --
Prepayments........................................... 42,152 22,749 5,063 1,677
Deposits.............................................. 1,563 6,096 -- --
Sales tax and duties.................................. 49,156 14,426 -- --
Government subsidies.................................. -- 8,370 -- --
Sundry debtors........................................ 75,869 21,024 5,323 3,766
------- ------- ------ -----
210,334 108,399 11,922 7,006
======= ======= ====== =====
</TABLE>
21. OTHER CREDITORS AND ACCRUALS
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ----------------
2000 1999 2000 1999
--------- --------- ------ ------
$'000 $'000 $'000
(NOTE 39) (NOTE 38) $'000
<S> <C> <C> <C> <C>
Miscellaneous creditors.............................. -- 13,633 -- 798
Accruals............................................. 211,998 36,840 17,234 10,459
Deferred income...................................... 6,742 10,321 -- --
Customer deposits.................................... 6,128 31,604 -- --
Sales tax payable.................................... 19,018 10,147 -- --
Provision for plant closing.......................... 1,611 4,357 -- --
Due under Service Agreement.......................... -- -- -- --
Purchase price payable to FICO's former
shareholders....................................... 1,730 1,727 1,730 1,727
------- ------- ------ ------
247,227 108,629 18,964 12,984
======= ======= ====== ======
</TABLE>
S-32
<PAGE> 68
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
22. DUE FROM SUBSIDIARIES (NON-TRADE)
The Company balances are unsecured, bear interest at rates ranging from
5.85% to 8.5% per annum renewable after twelve months from the date of
commencement.
23. TERM LOANS, SHORT TERM ADVANCES AND SENIOR SUBORDINATED NOTES
<TABLE>
<CAPTION>
GROUP
--------------------
2000 1999
--------- -------
$'000
(NOTE 39) $'000
<S> <C> <C>
(a) Term loans (secured)
Total outstanding....................................... 82,049 69,527
Deduct: current portion................................. (32,114) (31,957)
--------- -------
Long term portion....................................... 49,935 37,570
========= =======
(b) Short term advances (secured)........................... 377,595 58,906
========= =======
</TABLE>
<TABLE>
<CAPTION>
GROUP AND COMPANY
------------------
2000 1999
------- -------
$'000 $'000
<S> <C> <C>
(c) Senior subordinated notes............................... 259,500 259,065
======= =======
</TABLE>
Term loans, denominated mainly in US$, Euro and Malaysian ringgit bear
interest rates ranging from 1.5% to 9.0% (1999: 4.0% to 7.0%), with terms of up
to 20 years (1999: 20 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 7.4% to 10.0% (1999: 6.0% to 18.25%), with terms of 5 to 10 years (1999: 5
to 20 years). The net book value of the underlying properties was approximately
US$23 million as at 31 March 2000.
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 restrict the
Company's ability to pay cash dividends.
The Company maintained a credit facility with a syndicate of banks. This
facility provided for revolving credit borrowings by Flextronics and a number of
its subsidiaries of up to $200 million, subject to compliance with certain
financial covenants and the satisfaction of customary borrowing conditions. The
Credit Facility is unsecured, and contains certain restrictions on the Company's
ability to (i) incur certain debt, (ii) make certain investments and (iii) make
certain acquisitions of other entities. The Credit Facility requires that the
Company maintain certain financial covenants, including, among other things, a
maximum ratio of total indebtedness to EBITDA (earnings before interest, taxes,
depreciation, and amortization) and a minimum ratio of fixed charge coverage, as
defined, during the term of the Agreement. As at 31 March 2000, there were $137
million in borrowings outstanding under the revolving credit loans and the
weighted-average interest rate for the Company's borrowings under the revolving
credit loans was 6.87%.
Subsequent to the financial year, the Company replaced its $200 million
credit facility with a $500 million Revolving Credit Facility, with a syndicate
of domestic and foreign banks.
Certain subsidiaries have various lines of credit available with annual
interest rates ranging from 3.3% to 8.5% (1999: 4.0% to 6.4%). These facilities
expire on various dates through 2001.
S-33
<PAGE> 69
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
24. HIRE PURCHASE CREDITORS
<TABLE>
<CAPTION>
GROUP
-------------------
2000 1999
--------- ------
$'000
(NOTE 39) $'000
<S> <C> <C>
Minimum lease payments payable
Within 1 year............................................... 27,360 20,589
Within 2 to 5 years......................................... 57,005 37,441
After 5 years............................................... -- 8,888
------ ------
84,365 66,918
Less: finance charges allocated to future periods........... (3,695) (9,522)
------ ------
80,670 57,396
====== ======
</TABLE>
<TABLE>
<CAPTION>
GROUP
-------------------
2000 1999
--------- ------
$'000
(NOTE 39) $'000
<S> <C> <C>
The hire purchase creditors are classified as follows:
Current portion............................................. 26,156 16,937
Non-current portion......................................... 54,514 40,459
------ ------
80,670 57,396
====== ======
</TABLE>
25. OTHER PAYABLES
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- --------------
2000 1999 2000 1999
--------- --------- ----- -----
$'000 $'000 $'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C> <C> <C>
Remaining purchase price payable to former shareholders
of FICO.............................................. 1,730 3,454 1,730 3,454
Provision for severance payments....................... 23,111 10,368 -- --
Trade accounts payable................................. 1,114 3,644 -- --
Deferred income........................................ -- 482 -- --
Others................................................. 367 2,000 -- --
------ ------ ----- -----
26,322 19,948 1,730 3,454
====== ====== ===== =====
</TABLE>
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.
S-34
<PAGE> 70
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
27. OPERATING PROFIT (LOSS)
This is determined after charging (crediting) the following:
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- --------------
2000 1999 2000 1999
--------- --------- ----- -----
$'000 $'000 $'000
(NOTE 39) (NOTE 38) $'000
<S> <C> <C> <C> <C>
Directors' remuneration
-- directors of the Company............................ 1,783 2,478 -- --
-- directors of subsidiaries........................... 8,952 5,758 -- --
Auditors' remuneration
-- auditors of the Company............................. 1,467 959 1,467 959
-- other auditors of subsidiaries...................... 61 47 -- 7
Professional fees paid to firms which a director is a
member............................................... 50 187 -- --
Depreciation of fixed assets........................... 126,907 80,118 -- --
Loss (gain) on sale of fixed assets.................... 4,672 (1,099) -- --
Fixed assets written off............................... 5,543 32 -- --
Amortisation of deferred expenditure................... 42 686 -- --
Amortisation of goodwill on consolidation.............. 13,502 3,587 -- --
Amortisation of purchased goodwill..................... 2,663 -- -- --
Amortisation of intangible assets...................... 3,505 4,677 -- --
Provision of stock obsolescence........................ 55,034 10,714 -- --
Bad debts written off.................................. -- 3,613 -- --
Bad debts recovered.................................... (5,059) -- -- --
(Write back)/provision for doubtful debts.............. 7,096 (1,056) -- --
Exchange (gain) loss................................... 2,815 5,197 688 (783)
</TABLE>
28. OTHER EXPENSE (INCOME), NET
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- --------------------
2000 1999 2000 1999
--------- --------- ------- ---------
$'000 $'000 $'000 $'000
(NOTE 39) (NOTE 38) (NOTE 39)
<S> <C> <C> <C> <C>
Interest expense on:
-- term loan...................................... 9,749 4,638 1,902 909
-- senior subordinated note....................... 23,128 20,596 23,128 20,596
-- hire purchase contracts........................ 4,638 6,889 -- --
-- bank overdraft................................. 15,046 868 -- --
-- other.......................................... 3,436 3,652 98 899
Interest income
-- third parties.................................. (28,479) (9,103) (19,871) (11,639)
-- subsidiaries................................... -- -- (29,187) (4,228)
Royalty income from subsidiaries.................. -- -- (12,917) --
Others............................................ 4,222 -- (8,010) --
------- ------ ------- -------
31,740 27,540 (44,857) 6,537
======= ====== ======= =======
</TABLE>
S-35
<PAGE> 71
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
29. TAXATION
<TABLE>
<CAPTION>
GROUP COMPANY
------------------- --------------
2000 1999 2000 1999
--------- ------ ----- -----
$'000 $'000 $'000 $'000
(NOTE 39)
<S> <C> <C> <C> <C>
Current tax
-- current year...........................................
-- Foreign................................................ 497 2 -- --
-- Singapore.............................................. 29,205 13,923 3 2
Deferred tax
-- current year........................................... -- -- -- --
-- over provision in prior year........................... (1,670) (961) -- --
------ ------ -- --
28,032 12,964 3 2
====== ====== == ==
</TABLE>
THE COMPANY
The current year tax charge of the Company is lower than the amount
obtained by applying the statutory income tax rate on profit before taxation
mainly due to non-taxable income adjusted for tax purpose.
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 2000, the Group's unutilised tax losses and unabsorbed
capital allowances of approximately $138,400,000 (1999: $66,298,000) 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) 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 subsidiaries exporting
more than 70% of its total value of products manufactured in China.
The subsidiaries' status as a Product Export Enterprise is reviewed
annually by the Chinese government.
(ii) The Company's investments in its plants in Xixiang, China and Doumen,
China fall under the "Foreign Investment Scheme" that entitles the
subsidiaries to apply for a five-year tax incentive. The subsidiaries
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 subsidiaries' 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
S-36
<PAGE> 72
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
formal application in its first profitable year. However, there can
be no assurance that the five year tax incentive will be granted.
(iii) Ten-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 to zero percent, beginning
January 1, 2000.
A portion of the Group's sales was also carried out by its Mauritius
subsidiary which is taxed at 0%.
30. EXTRAORDINARY ITEMS
<TABLE>
<CAPTION>
GROUP COMPANY
--------------- --------------
2000 1999 2000 1999
----- ------ ----- -----
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Acquired in-process research and development written
off.................................................... -- (3,337) -- --
Provision for plant closure.............................. -- (5,608) -- --
----- ------ ----- -----
-- (8,945) -- --
===== ====== ===== =====
</TABLE>
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.
31. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit after
tax after minority interest of $188,741,000 (1999: $109,050,000) with the
weighted average of 108,827,000 Ordinary Shares (1999: 88,223,000 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 118,274,000 (1999: 93,411,000).
32. SIGNIFICANT RELATED PARTY TRANSACTIONS
The Group has significant transactions with related parties on terms agreed
between the parties as follows:
<TABLE>
<CAPTION>
COMPANY
-----------------
2000 1999
------- ------
$'000 $'000
<S> <C> <C>
Management fees to subsidiaries............................. 7,489 4,306
Interest income from subsidiaries........................... 19,562 4,228
Royalty income from subsidiaries............................ 12,917 --
</TABLE>
S-37
<PAGE> 73
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
33. SHARE OPTION PLANS
<TABLE>
<CAPTION>
OPTIONS
AVAILABLE FOR EXERCISE PRICE
GRANT SHARES PER SHARE
------------- ---------- -------------------
<S> <C> <C> <C>
Balance at 31 March 1999 as previously
stated................................... 1,213,790 6,495,866
Retroactive adjustment on merger of
companies (Note 2 -- "Consolidation", 2nd
paragraph)............................... 1,213,790 6,495,866
Increase in options available for grant.... 9,000,872 --
Options granted............................ (4,675,603) 4,675,603 US$16.07 - US$70.44
Options exercised.......................... -- (2,457,729) US$ 2.94 - US$27.75
Options cancelled.......................... 408,160 (408,160) US$ 4.19 - US$27.06
---------- ----------
Balance at 31 March 2000................... 7,161,009 14,801,446
========== ==========
</TABLE>
34. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of the following:
<TABLE>
<CAPTION>
GROUP COMPANY
---------------------- ------------------
2000 1999 2000 1999
--------- --------- ------- -------
$'000 $'000 $'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C> <C> <C>
Cash and bank balances.......................... 325,019 90,102 21,662 8,402
Certificate of deposits......................... 55,405 69,084 -- 69,083
Money market funds.............................. 200,507 70,742 200,507 70,742
Corporate debt securities....................... 489,211 85,497 503,934 85,497
--------- ------- ------- -------
1,070,142 315,425 726,103 233,724
========= ======= ======= =======
</TABLE>
35. CONTINGENT LIABILITIES AND COMMITMENTS
As at 31 March 2000, the Company does not have any contingent liabilities
and commitments outstanding.
As at 31 March 2000, the Group has the following contingent liabilities and
commitments:
(a) CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
GROUP
--------------
2000 1999
----- -----
$'000 $'000
<S> <C> <C>
Unsecured contingent liabilities not provided for in the
financial statements were:
-- Guarantees 3,756 3,756
===== =====
</TABLE>
S-38
<PAGE> 74
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
(b) NON-CANCELLABLE OPERATING LEASE COMMITMENTS
<TABLE>
<CAPTION>
GROUP
------------------
2000 1999
------- -------
$'000 $'000
<S> <C> <C>
Within one year 86,552 30,497
Within 2 to 5 years 204,255 62,540
After 5 years 23,496 11,296
------- -------
314,303 104,333
======= =======
</TABLE>
(c) FUTURE CAPITAL EXPENDITURE
<TABLE>
<CAPTION>
GROUP
----------------
2000 1999
------- -----
$'000 $'000
<S> <C> <C>
Capital expenditure not provided for in the financial
statements is as follows:
Commitments in respect of contracts placed 30,330 2,729
Uncommitted amounts approved by directors 120,358 5,440
------- -----
150,688 8,169
======= =====
</TABLE>
(d) FOREIGN EXCHANGE COMMITMENTS
<TABLE>
<CAPTION>
GROUP
-------------------
2000 1999
--------- ------
$'000
(NOTE 39) $'000
<S> <C> <C>
Commitments in respect of forward foreign currency purchase
contracts 64,731 28,497
====== ======
</TABLE>
The Group entered into forward contracts to hedge foreign currency
exposures related to foreign currency purchases.
S-39
<PAGE> 75
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
36. GROUP SEGMENTAL REPORTING
<TABLE>
<CAPTION>
GROUP
----------------------
2000 1999
--------- ---------
$'000 $'000
(NOTE 39) (NOTE 38)
<S> <C> <C>
NET SALES:
Asia........................................................ 1,150,444 669,279
Americas.................................................... 2,981,735 1,457,265
Western Europe.............................................. 1,578,864 614,085
Central Europe.............................................. 1,405,313 677,590
Intercompany elimination.................................... (112,070) (85,454)
--------- ---------
7,004,286 3,332,765
========= =========
INCOME/(LOSS) BEFORE TAXATION AFTER MINORITY INTERESTS AND
EXTRAORDINARY ITEM:
Asia........................................................ 75,568 42,406
Americas.................................................... 74,033 46,323
Western Europe.............................................. 11,598 20,250
Central Europe.............................................. 32,161 21,412
Intercompany elimination and corporate allocations.......... 23,413 (17,322)
--------- ---------
216,773 113,069
========= =========
FIXED ASSETS:
Asia........................................................ 232,759 189,141
Americas.................................................... 437,607 220,571
Western Europe.............................................. 139,961 79,058
Central Europe.............................................. 206,891 163,544
--------- ---------
1,017,218 652,314
========= =========
DEPRECIATION AND AMORTIZATION:
Asia........................................................ 39,652 24,870
Americas.................................................... 37,124 27,470
Western Europe.............................................. 44,559 16,869
Central Europe.............................................. 25,284 19,859
--------- ---------
146,619 89,068
========= =========
CAPITAL EXPENDITURE:
Asia........................................................ 70,963 62,238
Americas.................................................... 245,589 99,166
Western Europe.............................................. 31,009 18,343
Central Europe.............................................. 113,610 96,608
--------- ---------
461,171 276,355
========= =========
</TABLE>
37. SUBSEQUENT EVENTS
In April 2000, the Company established Slalom Acquisition Corp., a
wholly-owned subsidiary, which merged with and into The DII Group, Inc. and in
consideration for the acquisition by statutory merger of The DII Group, Inc.,
the Company allotted and issued to stockholders of The DII Group, Inc.,
62,768,139 ordinary shares of S$0.01 each in the capital of the Company for all
of the outstanding shares of Common
S-40
<PAGE> 76
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
Stock of The DII Group, Inc. based upon the exchange ratio of 1.61 Flextronics
Ordinary shares for each share of Common Stock of The DII Group, Inc., resulting
in the DII stockholders owning approximately 33% of the issued and paid-up share
capital of the Company.
In April 2000, the Company acquired (a) all of the issued shares (of any
class or series) of Palo Alto Products International Pte. Ltd. ("PAPI"), (b) all
of the shares of capital stock (of any class or series) of Palo Alto
Manufacturing (Thailand) Limited ("PAMT"), and (c) all of the shares of capital
stock (of any class or series) of Palo Alto Plastic (Thailand) Limited ("PAPT"),
and in consideration therefore, the Company allotted and issued 3,153,920
ordinary shares of $0.01 each in the capital of the Company to the shareholders
of each of PAPI, PAMT and PAPT.
In May 2000, Flextronics Holding, Finland Oy, a wholly-owned subsidiary of
the Company, acquired all of the outstanding capital stock of Sample Rate
Systems Oy, and in consideration therefore, the Company allotted and issued
88,657 ordinary shares of $0.01 each in the capital of the Company to the
shareholders of Sample Rate Systems Oy.
In May 2000, the Company acquired all of the outstanding capital stock of
San Marco Engineering Sri and in consideration therefore, the Company allotted
and issued 275,000 ordinary shares of $0.01 each in the capital of the Company
to the shareholders of San Marco Engineering Sri.
In May 2000, the Group acquired the manufacturing facility and related
assets from Bosch Telecom Gmbh for approximately US$98.3 million and
simultaneously entered into manufacturing agreements to provide electronics
design, assembly and test services to Bosch Telecom Gmbh.
In May 2000, the Group incorporated in Changzhou, China, Flextronics
International Changzhou Ltd.
In May 2000, the Group acquired Sample Rate Systems Oy; and San Marco
Engineering via the issue of 88,657 and 275,000 ordinary shares respectively.
In June 2000, the Group incorporated in Singapore Flextronics International
Holding Pte Ltd.
In June 2000, the Group acquired all of the outstanding capital stock of
Cumex Electronics, SA. De C.V. via a purchase consideration of US$10 million.
In June 2000, the Company completed an equity offering of 5.5 million
Ordinary Shares at US$71.25 per share with net proceeds of US$376 million. The
net proceeds from the offering are used to fund the further expansion of its
business including additional working capital and capital expenditures, and for
other general corporate purposes. A portion of the proceeds may be used for
future strategic acquisitions and investments.
In June 2000, the Company issued approximately US$645.0 million of senior
subordinated notes, consisting of US$500.0 million of 9.875% notes and euros
150.0 million of 9.75%. Interest is payable on July 1 and January 1 of each year
and the notes mature on July 1, 2010. The Company may redeem the notes on or
after September 15, 2002. The indenture contains certain covenants that, among
other things, limit the ability of the Company and certain of its subsidiaries
to (i) incur additional debt, (ii) issue or sell stock of certain subsidiaries,
(iii) engage in asset sales, (iv) incur layered debt, (v) create liens on its
properties and assets, and (vi) make distributions or pay dividends.
38. 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 2 to the financial statements.
S-41
<PAGE> 77
FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 MARCH 2000
(CURRENCY -- SINGAPORE DOLLARS UNLESS OTHERWISE STATED)
39. IMPACT ON THE CONSOLIDATED FINANCIAL STATEMENTS, WITHOUT INCORPORATING THE
FINANCIAL STATEMENTS OF FLEXTRONICS INTERNATIONAL FRANCE S.A.
The financial statements and auditors' report of a subsidiary, Flextronics
International France S.A. ("Flextronics France") were not available at the date
of this report and accordingly these financial statements have been excluded
from the consolidated financial statements. The financial impact on the
consolidated financial statements, without incorporating the financial
statements of Flextronics France is as follows:
<TABLE>
<CAPTION>
31 MARCH BALANCE 31 MARCH BALANCE
WITHOUT INCORPORATING INCORPORATING FINANCIAL
FINANCIAL STATEMENTS OF STATEMENTS OF
FLEXTRONICS FRANCE FLEXTRONICS FRANCE
$'000 $'000
----------------------- -----------------------
<S> <C> <C>
BALANCE SHEETS
Accumulated profits...................................... 308,499 312,414
Fixed assets............................................. 1,017,218 1,036,855
Subsidiaries............................................. 1,470 --
Current assets........................................... 3,814,848 3,872,522
Current liabilities...................................... 2,106,319 2,170,638
Term loans............................................... 49,935 50,684
Hire purchase creditors, non-current portion............. 54,514 61,294
Other payables........................................... 26,322 26,426
STATEMENTS OF PROFIT AND LOSS
Turnover................................................. 7,004,286 7,176,169
Operating profits........................................ 252,171 261,925
Profit before tax........................................ 220,431 230,601
Profit after taxation.................................... 192,399 198,338
CONSOLIDATED STATEMENTS OF CASH FLOWS
Net cash used in operating activities.................... (131,726) (96,954)
Net cash used in investing activities.................... (998,671) (1,012,549)
Net cash used in financing activities.................... 1,878,924 1,858,033
</TABLE>
S-42
<PAGE> 78
STATEMENT BY DIRECTORS
In the opinion of the directors, the accompanying financial statements set
out on pages S-10 to S-41 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 2000 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
MICHAEL E. MARKS TSUI SUNG LAM
Singapore
4 August 2000
S-43
<PAGE> 79
FLEXTRONICS INTERNATIONAL LTD.
1993 SHARE OPTION PLAN
(AS AMENDED AND RESTATED THROUGH MARCH 30, 2000)
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.
1
<PAGE> 80
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
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
2
<PAGE> 81
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.
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.
3
<PAGE> 82
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the clause (a) price per share.
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> 83
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 20,400,000 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.
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
2,000,000* Ordinary Shares annually.
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
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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.
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.
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
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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.
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
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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.
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.
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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.
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.
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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.
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.
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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 12,000* 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 12,000* 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:
- 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
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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.
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.
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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
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
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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 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 3,600,000* shares to 6,000,000* shares and (ii) increase
the number of Ordinary Shares for which options may be granted to any one
individual from 1,200,000* shares to 2,000,000* shares. The shareholders
approved those amendments at the 1995 Annual Meeting.
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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
3,000,000 Ordinary Shares to 4,000,000 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 8,000,000* to 10,400,000* shares. The shareholders approved those
amendments at the 1997 Annual Meeting.
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 10,400,000* to 14,400,000* 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
14,400,000* Ordinary Shares to 16,400,000* Ordinary Shares. The shareholders
approved this amendment at the 1999 Annual Meeting.
G. In November 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 16,400,000* Ordinary Shares to 20,400,000* Ordinary Shares. The
shareholders approved this amendment at the 2000 Extraordinary General Meeting.
H. 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.
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
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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.
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.
*Reflects two for one stock splits in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998 and December 22, 1999.
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FLEXTRONICS INTERNATIONAL LTD. 1997 EMPLOYEE SHARE PURCHASE PLAN
As Adopted September 10, 1997
As Amended August 27, 1999
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 800,000* 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
(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.
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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:
(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;
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<PAGE> 97
(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 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.
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<PAGE> 98
(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.
(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
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<PAGE> 99
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 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.
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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 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
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<PAGE> 101
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.
*Reflects two for one stock splits in the form of a bonus issue (the equivalent
of a stock dividend) effective December 22, 1998 and December 22, 1999.
7
<PAGE> 102
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 26, 2000, at the Annual General Meeting of
Flextronics International Ltd. to be held September 21, 2000, 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 and 8 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
--------------------------------------------------------------------------------
[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 and 8. 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
and 8 if no specification is made.
1. Election of Directors.
Nominees:
(01) Michael J. Moritz
(02) Patrick Foley
FOR WITHHELD
[ ] [ ]
[ ] _______________________________________
FOR all nominees except as noted above.
2. To receive and adopt the Directors' Report, Auditors' Report and Audited
Accounts for the fiscal year ended March 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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<PAGE> 103
3. To appoint Arthur Andersen as independent auditors at the Company for
the fiscal year ending March 31, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve an Ordinary Resolution to increase the authorized share
capital to 1,250,000,000 Ordinary Shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To approve an Ordinary Resolution to increase the number of shares
authorized under the 1993 Share Option Plan to 25,400,000 Ordinary
Shares and to approve certain other modifications to the 1993 Share
Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To approve an Ordinary Resolution to increase the number of shares
authorized under the 1997 Employee Share Purchase Plan to 1,200,000
Ordinary Shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To approve an Ordinary Resolution relating to Ordinary Share issuances.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. To approve an Ordinary Resolution relating to issuances of bonus shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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: __________________, 2000
Signature: ___________________________________ Date: __________________, 2000
(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.
2
